-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QcohuSsz9SRgk5SO3wAW4n5Q8yOEUprjD0Z0q66gBzZXOVAdoobyBc+YaJ9xvBY/ KjuDjqpQilzT2JO6YyK0xA== 0000950149-02-000631.txt : 20020415 0000950149-02-000631.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950149-02-000631 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20020402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOOD GUYS INC CENTRAL INDEX KEY: 0000785931 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 942366177 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-85398 FILM NUMBER: 02600361 BUSINESS ADDRESS: STREET 1: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 BUSINESS PHONE: 4156155000 MAIL ADDRESS: STREET 1: 7000 MARINA BLVD STREET 2: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 S-3 1 f80469as-3.txt REGISTRATION STATEMENT FOR FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 2002 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- GOOD GUYS, INC. (EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER) DELAWARE 94-2366177 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 1600 HARBOR BAY PARKWAY, SUITE 200 ALAMEDA, CALIFORNIA 94502-1840 TELEPHONE: 510/747-6000 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) ------------------- DAVID A. CARTER GOOD GUYS, INC. 1600 HARBOR BAY PARKWAY, SUITE 200 ALAMEDA, CALIFORNIA 94502-1840 TELEPHONE: 510/747-6000 (Name, address, including zip code and telephone number, including area code, of agent for service) ------------------- Copies to: RICHARD W. CANADY, ESQ. HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A PROFESSIONAL CORPORATION THREE EMBARCADERO CENTER, SUITE 700 SAN FRANCISCO, CA 94111 TELEPHONE: 415/434-1600 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] -------------------
CALCULATION OF REGISTRATION FEE ============================================================================================================= Proposed Proposed Amount maximum maximum Title of each class of to be offering price aggregate Amount of securities to be registered registered per share offering price(2) registration fee - ------------------------------------------------------------------------------------------------------------- Common Stock, $0.01 par value per share 3,080,000 $ 2.68(1) $8,254,400 (1) $ 760 =============================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based upon the average of the high and low sale prices per share of the registrant's common stock on March 27, 2002, as reported on the Nasdaq National Market. ------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. PROSPECTUS GOOD GUYS, INC. 3,080,000 SHARES OF COMMON STOCK This prospectus covers 3,080,000 shares of Good Guys, Inc. common stock, par value $.001 per share, which may be offered for sale by the Selling Shareholders who have acquired or will acquire such shares in transactions not involving a public offering, including 280,000 shares which may be offered for sale by the Selling Shareholders who may acquire such shares pursuant to the exercise of warrants granted to them covering such shares. The Selling Shareholders received their shares of common stock and warrants in a private placement of our shares completed in March 2002. The warrants provide for appropriate anti-dilutive adjustments in the number of shares of common stock issuable upon their exercise, and any additional shares of common stock issued pursuant to such adjustments will also be shares whose resale is covered by this prospectus. We are registering the shares, including the shares underlying the warrants, under the Securities Act of 1933, as amended, on behalf of the Selling Shareholders, pursuant to agreements entered into with them at the time of their acquisitions of the shares and warrants, in order to permit the public sale or other distribution of the shares. The shares may be offered and sold from time to time by the Selling Shareholders through ordinary brokerage transactions, in privately negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices. We will not realize any proceeds from the sale of the shares by the Selling Shareholders. Our common stock trades on the Nasdaq National Market under the symbol "GGUY." On April 1, 2002, the last reported sale price of the common stock was $3.00. - -------------------------------------------------------------------------------- SEE NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued under this prospectus or determined if this prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. THE DATE OF THIS PROSPECTUS IS ____________, 2002. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. TABLE OF CONTENTS
PAGE THE COMPANY..........................................................................3 NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS...........................4 USE OF PROCEEDS......................................................................7 SELLING SHAREHOLDERS.................................................................7 PLAN OF DISTRIBUTION.................................................................9 DESCRIPTION OF SECURITIES...........................................................10 LEGAL MATTERS.......................................................................11 EXPERTS.............................................................................11 WHERE YOU CAN FIND MORE INFORMATION.................................................11
2 THE COMPANY We are a leading specialty retailer of consumer electronics products. We were incorporated in California in 1976. On March 4, 1992, we changed our state of incorporation from California to Delaware by merging into a wholly owned Delaware subsidiary formed for that purpose. In September 1995, we transferred substantially all of our assets and liabilities to Good Guys California, Inc., our wholly-owned operating subsidiary. Our principal executive offices and corporate headquarters are located at 1600 Harbor Bay Parkway, Suite 200, Alameda, California 94502-1840, where our telephone number is 510/747-6000. RECENT DEVELOPMENTS Until December 2001, we operated 79 stores in California, Washington, Oregon and Nevada. We are now in various stages of closing eight unprofitable stores: three located in Washington, two located in Oregon, two located in Nevada and one located in California. We currently estimate that the store closing charge for the fiscal quarter ended February 28, 2002 will be in the range of $15 million to $20 million. In early March 2002, we completed a private placement of our securities to certain accredited investors, including members of our management team. In the private placement, the investors purchased 2,800,000 restricted shares of our common stock at a price of $2.00 per share and received warrants exercisable for five years to purchase 280,000 additional shares of our common stock at a price of $3.00 per share. The net proceeds of approximately $5,100,000 will be used to fund initiatives including the retirement of expensive operating leases, remodeling several of our older, high-profit stores, accelerating the lease terminations at one or more of the unprofitable stores we are in the process of closing and further improving store operations. The Company maintains a three-year $100 million revolving credit facility which expires in September 2002. The amount of borrowing allowed under the credit agreement is based on a formula related to the Company's inventory balances and a sales tax reserve requirement. At February 28, 2002, the Company had borrowings of $23.2 million outstanding under the revolving credit agreement and $23.8 million of the credit line was reserved under a financing agreement. At February 28, 2002, based on inventory levels and the sales tax reserve requirement in effect at that time, $4 million was available to borrow under the credit facility. We are currently in negotiations with our existing lender and others to renew or obtain a substitute credit facility before September 2002. We have received a written renewal offer from our current lender and written proposals from two other parties, which offer financing on terms which are comparable to those governing our current facility. The renewal offer from our current lender and the proposals from the other parties each offers at least a three year facility. While we are confident that we will be able to obtain a new credit facility, any failure to obtain such a facility could have a material adverse effect on our future operations. 3 NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS This prospectus and the documents incorporated in this prospectus by reference may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may" and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements reflect our current expectations and are based upon currently available data. There are a variety of factors and risks that could cause actual results experienced to differ materially from the anticipated results or other expectations expressed in the forward-looking statements or affect the decision to invest in our securities, including, but not limited to those set forth in our Transition Report on Form 10-K for the transition period from October 1, 2000 to February 28, 2001, and the following: FAILURE TO RETURN TO PROFITABILITY COULD MATERIALLY AFFECT OUR VENDER AND LENDER RELATIONSHIPS. We have experienced operating losses for the fiscal years ended September 30, 2000 and 1999 aggregating approximately $17.3 million and $39.9 million, respectively. We reported an operating profit of $1.3 million for the transition period from October 1, 2000 to February 20, 2001, which included the profitable December holiday shopping period. For the nine months ended November 30, 2001, we reported an operating loss of $22.7 million. Excluding a charge that will be taken in the fourth quarter ended February 28, 2002 with respect to our store closing program, our operating profit for that quarter is expected to be in the range of $1.5 million to $2.5 million; the store closing charge for the quarter is currently estimated to be in the range of $15 million to $20 million. Although we believe we will be able to successfully implement our turn-around strategy and return to profitability, there can be no assurance that we will be able to do so. Failure to return to profitability could have a material adverse effect on our relationships with our vendors and lenders. CONTINUED NEGATIVE SAME STORE SALES WOULD DELAY OUR RETURN TO PROFITABILITY. For the quarter ended February 28, 2002, comparable store sales declined 7%; sales for the quarter improved sequentially month-to-month and culminated in positive comparable store sales for the month of February. Continued negative same store sales will result in lower sales and gross profit than budgeted and could delay our planned return to profitability. Should sales continue to decrease for an extended period of time we might have to close additional stores or make additional reductions in operating expenses to meet our obligations. LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Our success depends upon the active involvement of senior management personnel, particularly Kenneth A. Weller, our Chairman and Chief Executive Officer, and Peter Hanelt, our Chief Operating Officer. The loss of the full-time services of Kenneth A. Weller, Peter Hanelt or other members of our senior management team could have a material adverse effect on our results of operations and financial condition. 4 COMPETITIVE FACTORS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The retail consumer electronics industry is highly competitive. We currently compete against a diverse group of retailers, including several national and regional large format merchandisers and superstores, such as Circuit City and Best Buy. Those competitors sell, among other products, audio and video consumer electronics products similar and often identical to those we sell. Certain of these competitors have substantially greater financial resources than we have. A number of different competitive factors could have a material adverse effect on our results of operations and financial condition, including, but not limited to: o Increased operational efficiencies of competitors; o Competitive pricing strategies; o Expansion by existing competitors; o Entry by new competitors into markets in which we are currently operating; and o Adoption by existing competitors of innovative store formats or retail sales methods. OUR SALES FLUCTUATE SEASONALLY AND QUARTERLY. Like many retailers, seasonal shopping patterns affect our business. Our fourth calendar quarter includes the December holiday shopping period, which has historically contributed, and is expected to continue to contribute, a substantial portion of our operating income for the entire fiscal year. As a result, any factors negatively affecting us during such calendar quarter of any year could have a material adverse effect on results of operations for this entire year. More generally, our quarterly results of operations also may fluctuate based upon such factors as: o Competition; o General regional and national economic conditions; o Consumer trends; o Changes in our product mix; o Timing of promotional events; o New product introductions; and o Our ability to execute our business strategy effectively. 5 CHANGES IN CONSUMER DEMAND MAY LOWER OUR SALES OR PROFITS. Our success depends on our ability to anticipate and respond in a timely manner to consumer demand and preferences regarding audio and video consumer products and changes in such demand and preferences. Consumer spending patterns, particularly discretionary spending for products such as those we offer, are affected by, among other things, prevailing economic conditions. In addition, the periodic introduction and availability of new products and technologies at price levels which generate wide consumer interest stimulate the demand for audio and video consumer electronics products. It is possible that these products or other new products will never achieve widespread consumer acceptance. Furthermore, the introduction or expected introduction of new products or technologies may depress sales of existing products and technologies. Significant deviations from the projected demand for products we sell would have a materially adverse effect on our results of operations and financial condition, either from lost sales or lower margins if we should need to mark down excess inventory to stimulate sales. ADDITIONAL TERRORIST ATTACKS COULD NEGATIVELY IMPACT OUR SALES. The September 11th terrorist attacks caused substantial economic damage to the United States. In addition to the actual damage, many consumers were reluctant to purchase products such as the large ticket items that we sell. While consumer sentiment has rebounded since September 11th, additional attacks on U.S. citizens or property could have a substantial negative impact on our sales. LOSS OF KEY SUPPLIERS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The success of our business and growth strategy depends to a significant degree upon our maintaining a good relationship with our suppliers, particularly brand-name suppliers of audio and video equipment such as JVC, Mitsubishi and Sony. The loss of any of these key vendors or our failure to establish and maintain relationships with these or other vendors could have a material adverse effect on our results of operations and financial condition. A CHANGE IN VENDOR CREDIT TERMS WOULD ADVERSELY IMPACT US. We rely on credit from vendors to purchase our products. As of February 28, 2002, we had $41.1 million in Accounts Payable and $101.1 million in Merchandise Inventories. A substantial change in the credit terms from vendors or vendors' willingness to extend credit to us would reduce our ability to obtain the higher-end merchandise that we sell. WE DEPEND UPON FOREIGN VENDORS. We purchase a significant portion of our inventory from overseas vendors, particularly vendors headquartered in Japan. Although substantially all of our merchandise inventory purchases are domestically sourced and denominated in U.S. dollars, changes in trade regulations, currency fluctuations or other factors may increase the cost of items we purchase from foreign vendors or create shortages of such items, which could in turn have a material adverse effect on our results of operations and financial condition. Conversely, significant reductions in the cost of such items in U.S. dollars may cause a significant reduction in retail price levels of those products and 6 may limit or eliminate our ability to successfully differentiate Good Guys, Inc. from other competitors, thereby resulting in an adverse effect on our sales, margin or competitive position. THE SUCCESS OF OUR STORE CLOSING PROGRAM COULD AFFECT OUR RETURN TO PROFITABILITY. Any failure to successfully implement our store closing program could result in an adverse effect on our ability to return to profitability. SALE OF SHARES ELIGIBLE FOR FUTURE SALE UNDER OPTIONS OR WARRANTS MAY ADVERSELY AFFECT STOCK PRICE. As of February 28, 2002, we have outstanding stock options and warrants to purchase an aggregate of 7,681,591 shares of common stock at exercise prices ranging from $1.84 to $15.00 of which options and warrants to purchase 5,435,111 shares are exercisable now. As of February 28, 2002, the Company had 30,000 outstanding restricted shares. The sale of restricted shares and shares covered by such options or warrants by the holders thereof, pursuant to existing registration statements or registrations statements filed upon exercise of registration rights given them or pursuant to exemptions from registration could have an adverse effect on the market price for our common stock. USE OF PROCEEDS We will not receive any proceeds from the sale of any shares of common stock, including the shares underlying warrants by the Selling Shareholders, but will pay all expenses related to the registration of the shares, including the shares underlying warrants. We could receive up to $840,000 from the exercise of the warrants covered by this prospectus. SELLING SHAREHOLDERS The following table sets forth information concerning the beneficial ownership of our common stock and warrants by the Selling Shareholders as of the date of this prospectus, the number of shares, including the shares underlying warrants, included for sale in the offering and the beneficial ownership of common stock by such Selling Shareholders after the offering (assuming sale of all of the shares offered by all of the Shareholders). Such information was furnished to us by the Selling Shareholders. The Selling Shareholders received 2,800,000 shares and warrants covering 280,000 shares in a private placement made by us and such shares including the shares underlying the warrants are being registered herein. Other than Mr. Weller, the Chairman and Chief Executive Officer of Good Guys and Mr. Hanelt, Chief Operating Officer of Good Guys, to our knowledge, none of the Selling Shareholders has had, within the last three years, any material relationship with us. 7
Percentage Of Shares Owned Shares To Be Shares To Be Shares To Be Prior To The Sold In The Owned After the Owned After The Name Offering Offering Offering Offering - ---------------------------------- ---------------- --------------- ------------------- ------------------ Columbus Capital Partners, L.P. 1,116,500 1,116,500 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Columbus Capital Offshore, LTD. 533,500 533,500 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Kenneth R. Weller (1) 1,250,333 165,000 1,085,333 4.0% - ---------------------------------- ---------------- --------------- ------------------- ------------------ Peter G. Hanelt 82,500 82,500 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Garrison Master Fund 106,040 106,040 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ ZCM Asset Holding Company LLC 12,100 12,100 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Sabre Institutional Partners 19,360 19,360 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Granite Capital, LP 936,300 442,750 493,550 1.8% - ---------------------------------- ---------------- --------------- ------------------- ------------------ Granite Capital II, LP 55,430 34,980 20,450 * - ---------------------------------- ---------------- --------------- ------------------- ------------------ Granite Capital Overseas Limited 41,880 17,930 23,950 * - ---------------------------------- ---------------- --------------- ------------------- ------------------ U.S. Bank as Custodian for 353,890 164,340 189,550 * Granum Value Fund - ---------------------------------- ---------------- --------------- ------------------- ------------------ The Karl L. Matthies Separate 214,100 165,000 49,100 * Property Trust - ---------------------------------- ---------------- --------------- ------------------- ------------------ Karl L. Matthies and Deborah N. Matthies as Trustees for the Karl & Deborah Matthies Living Trust 55,000 55,000 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------ Michael Apatoff 165,000 165,000 0 0 - ---------------------------------- ---------------- --------------- ------------------- ------------------
- -------- * less than 1% (1) Includes 583,333 shares underlying options and warrants (exclusive of shares underlying 8 warrants acquired in the March 2002 private placement) which are exercisable within 60 days of the date hereof. PLAN OF DISTRIBUTION We are registering the shares, including shares underlying warrants, on behalf of the Selling Shareholders. All costs, expenses and fees in connection with the registration of the shares, including the shares underlying warrants, offered hereby will be borne by us. Brokerage commissions and similar selling expenses, if any, attributable to the sale of shares, including the shares underlying warrants, will be borne by the Selling Shareholders. Any or all of the shares offered by the Selling Shareholders may be offered for sale and sold by, or on behalf of, the Selling Shareholders from time to time in varying amounts, including in block transactions, on the Nasdaq Stock Market, or the over-the-counter market, in privately negotiated transactions, or otherwise, at prices prevailing in such market or as may be negotiated at the time of the sale. The shares may be sold by the Selling Shareholders directly to one or more purchasers, through agents designated from time to time or to or through broker-dealers designated from time to time. In the event the shares publicly offered through broker-dealers or agents, the Selling Shareholders may enter into agreements with respect thereto. Such broker-dealers or agents may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders, and any such broker-dealers or agents that participate in the distribution of the shares may be deemed to be underwriters within the meaning of the Securities Act, and any profit on the sale of the shares by them and any discounts and commissions might be deemed to be underwriting discounts or commissions under the Securities Act. Any such broker-dealers and agents may engage in transactions with, and perform services for, the Company. At the time a particular offer of shares is made by the Selling Shareholders, to the extent required, a prospectus supplement will be distributed which will set forth the aggregate number of shares being offered, and the terms of the offering, including the public offering price thereof, the name or names of any broker-dealers or agents, any discounts, commissions and other items constituting compensation from, and the resulting net proceeds to, the Selling Shareholders. In order to comply with the securities laws of certain states, sales of shares offered hereby to the public in such states may be made only through broker-dealers who are registered or licensed in such states. Sales of shares offered hereby must also be made by the Selling Shareholders in compliance with other applicable state securities laws and regulations. The Selling Shareholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriter or coordinating broker acting in connection with the proposed sale of shares by Selling Shareholders. Because Selling Shareholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, the Selling Shareholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the Selling Shareholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market. 9 We have agreed to indemnify each of the Selling Shareholders against certain liabilities, including liabilities arising under the Securities Act. The Selling Shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. Selling Shareholders also may resell all or a portion of the shares, including shares underlying warrants, in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet its criteria and conform to its requirements. DESCRIPTION OF SECURITIES Common Stock. We have authorized in our Certificate of Incorporation 40,000,000 shares of common stock, $.001 par value per share, 23,450,075 shares of which are issued and outstanding on February 28, 2002. All of our outstanding shares of common stock are fully paid and non-assessable. Subject to the prior rights to the holders of preferred stock which may be issued in the future, the holders of common stock are entitled to received dividends if and when declared by the Board of Directors out of funds legally available therefor and in the event of our dissolution, to share ratably in all assets remaining after payment of liabilities and satisfaction of the liquidation preferences of the holders of such preferred stock. Each holder of common stock is entitled to one vote for each share held of record on all matters presented to a vote at a shareholders meeting, including the election of directors. Holders of common stock have no cumulative voting rights or preemptive rights to purchase or subscribe for any stock or other securities and there are no conversion rights or redemption or sinking fund provisions with respect to such stock. Additional shares of authorized common stock may be issued without shareholder approval. Our Transfer Agent and Registrar is ChaseMellon Shareholder Services, 85 Challenger Road, Ridgefield, New Jersey 07660. Preferred Stock. We have authorized in our Certificate of Incorporation 2,000,000 shares of preferred stock, $.001 par value per share, none of which has been issued. Authorized but unissued preferred stock is available for issuance from time to time at the discretion of our board of directors without shareholder approval. Our board of directors has the authority to prescribe for each series of preferred stock that it establishes the number, designation, preferences, limitations and relative rights of the shares of such series, subject to applicable law and provisions of any outstanding series of preferred stock. The terms of any series of preferred stock, including, but not limited to, dividend rate, redemption price, liquidation rights, sinking fund provisions, conversion rights and voting rights, and any corresponding effect on other shareholders, will be dependent largely on factors existing at the time of issuance. Such terms and effects could include restrictions on dividends on the common stock if dividends on the preferred stock are in arrears, dilution of the voting power of other shareholders to the extent a series of the preferred stock has voting rights and reduction of amounts available on liquidation as a result of any liquidation preference granted to any series of preferred stock. Warrants. The warrants issued in March 2002, covering 280,000 shares of our common stock, are exercisable from time to time, for any number of shares covered thereby, during the 10 period that commenced on March 11, 2002 and will end on March 11, 2007, at an exercise price of $3.00 per share covered by the warrants. The number of shares and exercise price covered by the warrants is subject to adjustment in the event of stock dividends, subdivisions and combinations of our shares of common stock, reclassifications exchanges or substitutions of common stock by us or reorganizations, mergers, consolidations or sales of our assets. A warrant may be exercised at anytime on any business day by the warrant by surrendering the warrant at our principal office at 1600 Harbor Bay Parkway, Suite 200, Alameda, California, 94502-1840 (or at such other office in the United States as we may designate from time to time by notice in writing to the holder of the warrants), with the subscription form attached thereto fully executed, together with payment in cash or immediately available funds in the amount equal to the purchase price. LEGAL MATTERS The legality of the common stock and warrants offered hereby will be passed upon for us by Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation. EXPERTS The consolidated financial statements and related consolidated financial statement schedule incorporated in this registration statement by reference from the Company's Transition Report on Form 10-K for the period from October 1, 2000 to February 28, 2001 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the Securities Exchange Commission. You may read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0300 for further information on the public reference rooms. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information filed with the SEC will update and supersede this information. We incorporate by reference our Transition Report on Form 10-K for the transition period from October 1, 2000 to February 28, 2001, our Reports on Form 10-Q for the quarters ended May 31, 2001, August 31, 2001, and November 30, 2001 and our Report on Form 8-K dated January 7, 2002. All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the termination of the offering of the common stock offered hereby shall be deemed to be incorporated by reference in this prospectus on the date of filing such documents. Any statement contained in a document or information incorporated or deemed to be incorporated herein by reference shall be deemed to be 11 modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any subsequently filed document that also is, or is deemed to be, incorporated by reference, 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 prospectus. The making of a modifying or superseding statement shall not be deemed an admission that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. We will furnish without charge to each person to whom this prospectus is delivered, on the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference, except for the exhibits to such documents. Request should be made to: David A. Carter Acting Chief Financial Officer Good Guys, Inc. 1600 Harbor Bay Parkway, Suite 200 Alameda, California 94502-1840 510/747-6000 12 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Expenses payable in connection with the issuance and distribution of the securities being registered (estimated except in the case of the registration fee) are as follows:
Amount SEC registration.............................................. $ 760 ------ Legal fees and expenses....................................... $ 25,000 ------ Accounting fees and expenses.................................. $ 40,000 ------ Miscellaneous................................................. $ 4,240 ------ Total......................................................... $ 70,000 ------
The above fees will be payable by the Company. Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. As permitted by sections 102 and 145 of the Delaware General Corporation Law, the Registrant's certificate of incorporation eliminates a director's personal liability for monetary damages to the Registrant and its stockholders arising from a breach or alleged breach of a director's fiduciary duty except for liability under section 174 of the Delaware General Corporation Law or liability for any breach of the director's duty of loyalty to the Registrant or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or for any transaction from which the director derived an improper personal benefit. The effect of this provision in the certificate of incorporation is to eliminate the rights of the Registrant and its stockholders (through stockholders' derivative suits on behalf of the Registrant) to recover monetary damages against a director for breach of fiduciary duty as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described above. The Registrant's bylaws provide for indemnification of its directors, officers and agents, and the Company has entered into an indemnification agreement with each of its officers and directors (an "Indemnity"). Under the bylaws and such indemnification agreements, the Registrant must indemnify an Indemnity to the fullest extent permitted by Delaware law for losses and expenses incurred in connection with actions in which the Indemnity is involved by reason of having been a director or officer of the Registrant. In certain circumstances, the Registrant is also obligated to advance expenses an Indemnity may incur in connection with such actions before any resolution of the action, and the Indemnity may sue to enforce his or her right to indemnification or advancement of expenses. The Registrant also maintains an insurance policy insuring its directors and officers against liability for certain acts and omission while acting in their official capacities. II-1 ITEM 17. UNDERTAKINGS. (a) The undersigned 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; (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 hereof) which, individually or in the aggregate, represent a fundamental change in the information in this Registration Statements. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee" table in the effective 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 with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, 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 the termination of the offering. (b) The undersigned 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 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 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 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense II-2 of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant ill, 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. II-3 ITEM 18. EXHIBITS
EXHIBIT NO. EXHIBIT TITLE ----------- ------------- 4.1 Registration Rights Agreement, dated as of March 7, 2002 between the Company and the Selling Shareholders 4.2 Form of Warrant Agreement, dated as of March 7, 2002, entered into by the Company and each of the Selling Shareholders 5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation 23.1 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation (Included in Exhibit 5.01) 23.2 Consent of Deloitte & Touche LLP, Independent Auditors 24.1 Power of Attorney
- -------------------------------------------------------------------------------- II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Company certifies that it has reasonable grounds to believe that it meets all requirements of filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alameda, California on this 1 day of April, 2002. GOOD GUYS, INC. By: /s/ Kenneth R. Weller ----------------------------- Kenneth R. Weller, Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. /s/ Kenneth R. Weller Chairman and Chief April , 2002 - --------------------------- Executive Officer (Kenneth R. Weller) (Principal Executive Officer) /s/ David A. Carter Acting Chief Financial April , 2002 - --------------------------- Officer (Principal (David A. Carter) Financial and Accounting Officer) *CATHY A. STAUFFER Vice President, April , 2002 - --------------------------- Merchandising and (Cathy A. Stauffer) Director *RUSSELL M. SOLOMON Director April , 2002 - --------------------------- (Russell M. Solomon) *JOHN E. MARTIN Director April , 2002 - --------------------------- (John E. Martin)
II-5 *JOSEPH P. CLAYTON Director April 1, 2002 - --------------------------- (Joseph P. Clayton)
*By: /s/ David A. Carter ---------------------- David A. Carter Attorney-in-Fact II-6 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT TITLE ----------- ------------- 4.1 Form of Registration Rights Agreement, dated as of March 7, 2002 between the Company and the persons listed on Schedule A thereto 4.2 Form of Warrant Agreement, dated as of March 7, 2002, entered into by the Company and each of the Selling Shareholders 5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation 23.1 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation (Included in Exhibit 5.01) 23.2 Consent of Deloitte & Touche LLP, Independent Auditors 24.1 Power of Attorney
II-7 EX-4.1 3 f80469aex4-1.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.1 FORM OF REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of March 7, 2002, by and among GOOD GUYS, INC., a Delaware corporation (the "Company"), and those purchasers of the Company's Common Stock and Warrants set forth on Schedule I hereto (the "Purchasers"). This Agreement is made pursuant to the Stock Purchase Agreement, dated as of March 7, 2002 (the "Stock Purchase Agreement"), by and between the Company and the Purchasers, pursuant to which the Company is issuing and selling up to 4,090,901 shares of its common stock, $.001 par value per share (the "Common Stock" or "Common Shares") and warrants to purchase up to 409,091 shares of the Common Stock (the "Warrants") to the Purchasers. The Common Shares and Warrants are being offered and sold to the Purchasers without registration under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, and the provisions of Rule 506 of Regulation D, promulgated under the Securities Act. In order to induce the Purchasers to enter into the Stock Purchase Agreement, the Company has agreed to provide to the Purchasers (and their direct and indirect transferees, if any) the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing (the "Closing") under the Stock Purchase Agreement. In consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. REGISTRATION RIGHTS (a) Filing of Form S-3 "Resale" Registration Statement. As soon as practical and, within fifteen (15) business days after the closing under the Stock Purchase Agreement, the Company shall file with the Securities and Exchange Commission (the "SEC" or the "Commission") a "resale" registration statement on Form S-3 pursuant to Rule 415 under the Securities Act, or, in the event that Form S-3 is unavailable to the Company, a registration statement on such other SEC Form that is available to the Company (together with any exhibits, amendments or supplements thereto, and any documents incorporated by reference therein, the "Registration Statement"), with respect to the Common Shares and the shares of Common Stock issuable pursuant to the exercise of the Warrants (the "Warrant Shares"), and any securities of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Shares or the Warrant Shares. The securities described in the preceding sentence are collectively referred to herein as the "Registrable Securities"; provided that the term "Registrable Securities" shall not include securities subject to the Registration Statement or transferred to a person other than a Permitted Transferee, as defined herein. 1 The Registration Statement may not include securities of the Company other than Registrable Securities. (b) Effectiveness of Registration Statement. The Company shall, subject to Section 6 hereof, use its commercially reasonable best efforts to cause the Registration Statement to become effective within 90 days after the filing thereof, and shall use its commercially reasonable best efforts to keep the Registration Statement continuously effective from the date such Registration Statement becomes effective until the earlier of (i) the date on which all Securities have been resold under such Registration Statement, and (ii) the date on which all Registrable Securities may be resold pursuant to SEC Rule 144(k). In the event that the Registration Statement is not effective on or before the 100th day following the closing under the Stock Purchase Agreement (such date, the "Additional Warrant Date"), then the Company shall issue and deliver to each Purchaser additional Warrants to purchase a number of whole shares of Common Stock equal to the product of: (i) .01, and (ii) the number of shares of Common Stock purchased by such Purchaser pursuant to the Stock Purchase Agreement, as set forth on Schedule I hereto, with any fractional shares resulting from such calculation to be disregarded. In addition, with respect to each 30 day period after the Additional Warrant Date that the Registration Statement is not effective, the Company shall issue and deliver to the Purchasers additional Warrants to purchase a number of whole shares of Common Stock equal to the product of: (i) .01, and (ii) the number of shares of Common Stock purchased by such Purchaser pursuant to the Stock Purchase Agreement, as set forth on Schedule I hereto, with any fractional shares resulting from such calculation to be disregarded. Notwithstanding the foregoing provisions of this Section 1(b), but provided that the Registration Statement has been timely filed and the Company has used its commercially reasonable best efforts to cause such Registration Statement to become effective, the Company shall not be required to issue any additional Warrants under this Agreement with respect to any period of time during which the Registration Statement is not effective if the Company's failure to make the Registration Effective during such period directly results from any of the following events: (i) any banking moratorium declared by any United States federal or state authorities or other applicable authorities, including, without limitation, regulatory authorities; or (ii) any outbreak or escalation of hostilities, any declaration of war by the United States or any other national or international calamity, crisis or emergency, or any act or acts of terrorism. (c) Supplements; Amendments. Subject to Section 6 hereof, the Company shall supplement or amend the Registration Statement, (i) as required by Form S-3, including, without limitation, the instructions applicable to Form S-3, or by the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and regulations promulgated under the Securities Act or the Exchange Act, respectively, and (ii) to include in the Registration Statement any additional securities that become Registrable Securities by operation of the definition thereof. The Company shall furnish to the holders of the Registrable Securities, 2 or their permitted transferees, as appropriate (collectively, the "Holders"), to which the Registration Statement relates copies of any such supplement or amendment sufficiently in advance (but in no event less than five (5) business days in advance) of its use and/or filing with the Commission to allow the Holders a meaningful opportunity to comment thereon with respect to the information contained therein regarding the Holders and any plan for resale of the Registrable Securities. The Holders acknowledge that they have supplied the information regarding themselves and their plan of resale in the Registration Statement to be filed within five (5) business days of the Closing and hereby waive any notice of the initial filing of the Registration Statement, and that such Holders and their successors and assigns will promptly notify the Company of any changes in such information. 2. EXPENSES The Company shall bear all expenses, fees and costs incurred in connection with the preparation, filing, distribution and effectiveness of the Registration Statement and any supplements or amendments thereto, whether or not the Registration Statement becomes effective, and whether all, none or some of the Registrable Securities are sold pursuant to the Registration Statement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and state securities, or "blue sky," fees and expenses and the expense of any special audits incident to or required by, or in connection with the filing and effectiveness of the Registration Statement (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company), and the Holder shall pay all selling commissions, brokerage fees and stock transfer taxes applicable to the securities sold by such Holder. 3. REGISTRATION PROCEDURES The Company will advise the Holders as to the status of the preparation, filing and effectiveness of the Registration Statement and, at the Company's expense, will: (a) furnish to each Holder copies of the Registration Statement (including all exhibits thereto) and any prospectus forming a part thereof and any amendments and supplements thereto (including all documents incorporated or deemed incorporated by reference therein prior to the effectiveness of the Registration Statement and including each preliminary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, which documents, other than documents incorporated or deemed incorporated by reference, will be subject to the review of the Holders for a period of at least three (3) business days, and the Company shall not file the Registration Statement or such prospectus or any amendment or supplement to the Registration Statement or prospectus if any Holder shall reasonably object within three (3) business days after the receipt thereof; a Holder shall be deemed to have reasonably objected to such filing only if the Registration Statement, amendment, prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission with respect to such Holder or its plan of resale; 3 (b) furnish to each Holder one conformed copy of the Registration Statement and of each amendment and supplement thereto (in each case including all exhibits) and such number of copies of the prospectus forming a part of the Registration Statement (including each preliminary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, including, without limitation, documents incorporated or deemed to be incorporated by reference prior to the effectiveness of such Registration Statement, as each of the Holders, from time to time may reasonably request; (c) to the extent practicable, promptly upon the filing of any document that is to be incorporated by reference into the Registration Statement or prospectus forming a part thereof subsequent to the effectiveness thereof, and in any event no later than five (5) business days after such document is filed with the Commission, provide copies of such document to the Holders, if requested, and make representatives of the Company available for discussion of such document and other customary due diligence matters; and provide promptly to the Holders upon request any document filed by the Company with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act; (d) use its commercially reasonable best efforts (i) to register or qualify all Registrable Securities covered by the Registration Statement under state securities, or "blue sky," laws of such States of the United States of America as the Holders of Registrable Securities covered by the Registration Statement shall reasonably request, (ii) to keep such registration or qualification in effect for so long as the Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Holders to consummate the disposition in such jurisdictions of the securities to be sold by the Holders, consistent with the plan of distribution described in the prospectus included in the Registration Statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder; (e) subject to Section 6 hereof, promptly notify each Holder of Registrable Securities covered by the Registration Statement (i) upon discovery that, or upon the happening of any event as a result of which, the prospectus forming a part of the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of proceedings for that purpose, (iii) of any request by the Commission for (A) amendments to the Registration Statement or any document incorporated or deemed to be incorporated by reference in the 4 Registration Statement, or (B) supplements to the prospectus forming a part of the Registration Statement, or (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and at the request of any such Holder promptly prepare and file an amendment to the Registration Statement or a supplement to the prospectus as the Company may deem necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and furnish to each Holder a reasonable number of copies of such supplement to, or amendment of, such prospectus, and, in the event of a stop order, use its commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any the Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction; (f) if reasonably requested by any Holder or if required by law or SEC rule or regulation, promptly incorporate in the Registration Statement by filing a Form 8-K, or file a supplement to the prospectus, to reflect any change in the information regarding the Holder; (g) otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; and (h) use its commercially reasonable best efforts to cause all Registrable Securities included in the Registration Statement to be listed on each securities exchange on which securities of the same class are then listed, or, if not then listed on any securities exchange, to be eligible for trading in any over-the-counter market or trading system in which securities of the same class are then traded. 4. INDEMNIFICATION (a) Indemnification by the Company. The Company will indemnify: (i) each of the Holders, as applicable, (ii) each of its officers, directors, members and partners, and 5 (iii) each individual, partnership, joint stock company, corporation, trust, unincorporated organization, government agency or political subdivision (each of the foregoing, a "Person") controlling each of the Holders, with respect to the Registration Statement, against all expenses, claims, losses, damages and liabilities (or actions, investigations or proceedings in respect thereof) (collectively, a "Claim") arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement or any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to the registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each of the Holders, each of its officers, directors, members and partners, and each Person controlling each of the Holders, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such Claim; provided, however, that the Company will not be liable in any such case to the extent that any such Claim arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by the Holders or their Representatives and stated to be specifically for use therein. (b) Indemnification by the Holders. Each of the Holders will, if Registrable Securities held by it are included in the securities as to which such Registration Statement is being effected, indemnify the Company, each of its directors and officers, and each Person who controls the Company, against all Claims arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, prospectus, offering circular or other document made by or on behalf of such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by or on behalf of such Holder therein not misleading, and will reimburse the Company, its directors, officers, partners, members or control Persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such Claim, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in the Registration Statement, prospectus, offering memorandum or other document in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Holders hereunder shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein. (c) Procedures. Each party entitled to indemnification under this Agreement (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any Claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such Claim; provided that counsel for the Indemnifying Party, who shall conduct 6 the defense of such Claim, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of one such counsel for all Indemnified Parties shall be at the expense of the Indemnifying Party), and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the investigation or defense of any such Claim shall, except with the consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement or compromise which does not include an unconditional release of the Indemnifying Party from all liability in respect to such Claim. Each Indemnified Party shall furnish such information regarding itself or the Claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the investigation and defense of such Claim. (d) Contribution. If the indemnification provided for in this Agreement is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any Claim, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 5. PROVISION OF INFORMATION BY THE HOLDERS Each of the Holders whose Registrable Securities are included in the Registration Statement shall furnish to the Company such information regarding such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement, and shall promptly notify the Company if such information becomes incorrect or misleading, or requires amendment or updating. Each of the Holders agrees that the plan of distribution included in any prospectus relating to the Registrable Securities shall be as set forth on Schedule III hereto and that such Holder will not resell any Registrable Securities in any manner other than as provided therein or herein. The information regarding the Holders, other than the plan of distribution (which is set forth on Schedule III hereto) required for the initial filing of the Registration Statement has been provided by each Holder on Schedule II, and each Holder represents, warrants and covenants to the Company that such information is accurate and complete in all material respects consistent with Commission Regulation S-K, Items 507 and 508. 7 6. HOLDBACK; POSTPONEMENT Notwithstanding the other provisions of this Agreement, if (a) there is material non-public information regarding the Company which the Company's Board of Directors reasonably and in good faith determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (b) there is a extraordinary business opportunity (including but not limited to the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar extraordinary transaction not in the ordinary course of business) available to the Company which the Company's Board of Directors reasonably and in good faith determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 45 days, provided that the Company may not postpone or suspend filing or effectiveness of a registration statement for more than 90 days in the aggregate during any 365-day period and there shall be an aggregate of not more than two (2) suspensions during any 365-day period; provided, however that no postponement or suspension shall be permitted for consecutive 45 day periods arising out of the same set of facts, circumstances or transactions. 7. RULE 144 REPORTING (a) With a view to making available the benefits of certain rules and regulation of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, until the second anniversary of this Agreement, the Company will: (i) make and keep public information available, as those terms are understood and defined in Rule 144 of the Securities Act ("Rule 144"); (ii) use its commercially reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) so long as a Holder owns any Registrable Securities, furnish the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of, or reasonably obtainable by, the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 8 8. MISCELLANEOUS (a) Assignment. The registration rights set forth herein may be assigned, in whole or in part, to any transferee of Registrable Securities permitted in accordance with the Stock Purchase Agreement, which transferee, upon registration on the Company's or its transfer agent's books and records as a holder of record of Registrable Securities, shall be considered thereafter to be a Holder (provided that any transferee who is not an affiliate of a Purchaser shall be a Holder only with respect to such Registrable Securities so acquired and any stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such Registrable Securities) and shall be bound by all obligations and limitations of this Agreement and the Stock Purchase Agreement. (b) Interpretation. (i) Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (ii) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (iii) Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. (c) Notices. (i) All communications under this Agreement shall be in writing and shall be delivered by facsimile or by hand or mailed by overnight courier or by registered or certified mail, postage prepaid: (A) if to the Company, to 1600 Harbor Bay Parkway, Alameda, California, 94502, (510) 747-6000, Attention: Kenneth R. Weller, or at such other address as it may have furnished in writing to the Purchasers; (B) if to the Purchasers, at the addresses listed on Schedule I hereto, or at such other addresses as may have been furnished the Company in writing. (ii) Any notice so addressed shall be deemed to be given (A) if delivered by hand, on the date of such delivery, (B) if sent by overnight mail service, on the first business day following the date of such mailing, (C) if delivered by facsimile, on the date of such facsimile, or (D) if mailed by registered or certified mail, on the third business day after the date of such mailing. 9 (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. (e) Entire Agreement; Amendment and Waiver. This Agreement constitutes the entire understanding of the parties hereto and supersedes all prior understanding among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, only with the written consent of the Company and the Holders of a majority of the then outstanding Registrable Securities. (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. (g) Remedies. Each Holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way impaired thereby, and shall remain in full force and effect, it being intended and understood that all of the rights and privileges of each of the Holders shall be enforceable to the fullest extent permitted by law. (i) Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Holders, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any wavier of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a Holder of any breach or default under this Agreement, or any waiver by a Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in the writing, and that all remedies, either under this Agreement, or by law or otherwise afforded to a Holder, shall be cumulative and not alternative. (j) Attorney's Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 10 IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have executed this Agreement as of the date first set forth above. GOOD GUYS, INC. By: ___________________________________ Name: ____________________________ Title: ____________________________ PURCHASERS: __________________________________ By: ___________________________________ Name: ____________________________ Title: ____________________________ __________________________________ By: ___________________________________ Name: ____________________________ Title: ____________________________ __________________________________ By: ___________________________________ Name: ____________________________ Title: ____________________________ 11 SCHEDULE I SCHEDULE OF PURCHASERS
Name and Address No. of Common Shares Purchase Price ---------------- -------------------- -------------- _______________________ ____________________ ___________________ _______________________ _______________________ Facsimile #(__) _______ _______________________ ____________________ ___________________ _______________________ _______________________ Facsimile #(__) _______ $__________________
12 SCHEDULE II Pursuant to the Registration Rights Agreement, please provide us with the following information: 1. The exact name that your Shares are to be registered in (this is the name that will appear on your stock certificate(s)). You may use a nominee name if appropriate: __________________________________ 2. The relationship between the Purchaser of the Shares and the Registered Holder listed in response to item 1 above: __________________________________ 3. The mailing address of the Registered Holder listed in response to item 1 above: __________________________________ __________________________________ __________________________________ 4. The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: __________________________________ 13 SCHEDULE III PLAN OF DISTRIBUTION Any or all of the shares offered by the selling shareholders may be offered for sale and sold by, or on behalf of, the selling shareholders from time to time in varying amounts, including in block transactions, on the Nasdaq Stock Market, or the over-the-counter market, in privately negotiated transactions, or otherwise, at prices prevailing in such market or as may be negotiated at the time of the sale. The shares may be sold by the selling shareholders directly to one or more purchasers, through agents designated from time to time or to or through broker-dealers designated from time to time. In the event the shares publicly offered through broker-dealers or agents, the selling shareholders may enter into agreements with respect thereto. Such broker-dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling shareholders, and any such broker-dealers or agents that participate in the distribution of the shares may be deemed to be underwriters within the meaning of the Securities Act, and any profit on the sale of the shares by them and any discounts and commissions might be deemed to be underwriting discounts or commissions under the Securities Act. Any such broker-dealers and agents may engage in transactions with, and perform services for, the Company. At the time a particular offer of shares is made by the selling shareholders, to the extent required, a prospectus supplement will be distributed which will set forth the aggregate number of shares being offered, and the terms of the offering, including the public offering price thereof, the name or names of any broker-dealers or agents, any discounts, commissions and other items constituting compensation from, and the resulting net proceeds to, the selling shareholders. In order to comply with the securities laws of certain states, sales of shares offered hereby to the public in such states may be made only through broker-dealers who are registered or licensed in such states. Sales of shares offered hereby must also be made by the selling shareholders in compliance with other applicable state securities laws and regulations. 14 EX-4.2 4 f80469aex4-2.txt FORM OF WARRANT AGREEMENT EXHIBIT 4.2 FORM OF WARRANT AGREEMENT THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE OFFERED, RESOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, ONLY (1) (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) OR (D) TO THE COMPANY, AND (2) IN EACH CASE, IN ACCORDANCE WITH APPLICABLE BLUE SKY LAWS AND THE SECURITIES LAWS OF ANY OTHER APPLICABLE DOMESTIC OR FOREIGN JURISDICTION. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT THAT THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE FOREGOING RESALE RESTRICTIONS. THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER STATE SECURITIES, OR "BLUE SKY," LAWS, AND WILL BE RESTRICTED IN THE SAME MANNER AS THESE SECURITIES. SUCH SHARES ARE ENTITLED TO THE BENEFIT OF A REGISTRATION RIGHTS AGREEMENT, DATED AS OF MARCH 7, 2002, BY AND AMONG THE ISSUER AND THE PURCHASERS NAMED THEREIN, THAT COVERS THE RESALE OF THE SHARES ACQUIRED UPON EXERCISE OF THESE WARRANTS. A COPY OF THE REGISTRATION RIGHTS AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE ISSUER. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF GOOD GUYS, INC. DATE OF INITIAL ISSUANCE: March __, 2002 1 THIS CERTIFIES THAT, for value received, _____________________________ (the "Holder") is entitled to purchase, subject to the exercise and other provisions of this Warrant, from Good Guys, Inc., a Delaware corporation (the "Company") at any time on or prior to 5:00 P.M. Eastern Time on March __, 2007 (the "Expiration Date"), up to _______________ shares (as such number of shares may be adjusted in accordance with Section 2 hereof, the "Warrant Shares") of the Company's common stock, par value $.001 per share (the "Common Stock"), at any time and from time to time, in whole or in part, at an exercise price per share of $3.00 (subject to adjustment as provided in Section 2 hereof, the "Exercise Price"). This Warrant shall expire on March __, 2007, and shall become void thereafter. WHEREAS, the Company proposes to sell, pursuant to a Stock Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), by and among the Company, the Holder and the other Purchasers named therein, an aggregate of up to 4,090,909 shares of the Company's Common Stock and, as an inducement for the Purchasers to purchase such shares, the Company also proposes to grant to the Purchasers Warrants to purchase an aggregate of up to 409,091 shares of the Company's Common Stock; NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. EXERCISE OF WARRANT. 1.1. Vesting. The Holder's rights under this Warrant are fully vested as of the date hereof. 1.2. Exercisability. This Warrant shall be exercisable, in whole or in part, at any time from the date hereof until the Expiration Date (such period, the "Exercise Period"). 1.3. Procedure for Exercise of Warrant. (a) To exercise this Warrant in whole or in part, the Holder shall deliver to the Company, at 1600 Harbor Bay Parkway, Alameda, California 94502, Facsimile No. (510) 747-6290, Attention: Chief Financial Officer, at any time prior to the Expiration Date: (i) a completed and signed Notice of Exercise (including the Substitute Form W-9, which forms a part thereof), as attached hereto as Schedule A; (ii) cash or a certified or official bank check, payable to the order of the Company in the amount of the aggregate Exercise Price for the Warrant Shares being purchased; and (iii) this Warrant. Upon irrevocable payment in good collected funds of the aggregate Exercise Price (rounded up to the nearest cent) for the Warrant Shares being purchased, the Holder shall be deemed to be the holder of record of such Warrant Shares, notwithstanding that the stock transfer books of the Company may then be closed or that certificates representing such Warrant Shares may not then be actually delivered to the Holder. 2 (b) The Company shall, as promptly as practicable after completion of the actions specified in Section 1.3(a) above, and in no event later than five (5) business days after the completion of such actions, cause to be executed, and deliver to the Holder a certificate representing the aggregate number of Warrant Shares specified in the Notice of Exercise. Each stock certificate so delivered shall be in such denomination as may be requested by the Holder and shall be registered in the name of the Holder. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of said stock certificate or certificates, deliver to the Holder a new Warrant evidencing the right of the Holder to purchase the remaining Warrant Shares covered by this Warrant. The Company shall pay all expenses, stock transfer taxes and other charges payable in connection with the preparation, execution and delivery of such stock certificates. 1.4. Restrictive Legend. Each certificate for Warrant Shares shall contain the following legend: THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE OFFERED, RESOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, ONLY (1) (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) OR (D) TO THE COMPANY, AND (2) IN EACH CASE, IN ACCORDANCE WITH APPLICABLE BLUE SKY LAWS AND THE SECURITIES LAWS OF ANY OTHER APPLICABLE DOMESTIC OR FOREIGN JURISDICTION. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT THAT THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE FOREGOING RESALE RESTRICTIONS." The certificates shall also bear any additional legends that are required by, or are appropriate with respect to the rules and regulation of, any state, local, foreign or other securities authorities. The Company's transfer agent and registrar will maintain stop transfer instructions on record for the Warrant Shares until it has been notified by the Company, upon the advice of counsel, that such instructions may be waived. Such stop transfer instructions will limit the method of sale of the Warrant Shares, consistent with Rule 144 or other available exemptions from registration under the Securities Act of 1933, as amended. Any transfers other than 3 pursuant to Rule 144 will require an opinion of counsel reasonably satisfactory to the Company and its counsel prior to such transfers. 1.5. Character of Warrant Shares. The Company represents and warrants that all Warrant Shares shall be duly authorized, validly issued, and, upon payment of the Exercise Price therefor, fully paid and nonassessable, and free from all taxes, liens, hypothecations, security interests, adverse claims or interests and charges created in respect of the issue thereof. Each person in whose name any such certificate for Warrant Shares is issued shall for all purposes be deemed to have become the holder of record of the Common Stock represented thereby on the Exercise Date of the Warrants resulting in the issuance of such shares, irrespective of the date of issuance or delivery of such certificate. 1.6 No Fractional Shares. The Company shall have no obligation to issue fractional shares, or scrip representing fractional shares, of its Common Stock under this Warrant, and, to the extent that the Holder would otherwise be entitled to purchase and/or receive fractional shares of Common Stock hereunder, such fractional shares shall instead be disregarded and shall be of no value or consequence. SECTION 2. CERTAIN ADJUSTMENTS. 2.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (a) establish a record date for the determination of holders of record of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of the Company's Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (1) the Warrant Shares for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Exercise Price shall be adjusted to equal (x) the Exercise Price multiplied by the Warrant Shares for which this Warrant is exercisable immediately prior to the adjustment divided by (y) the Warrant Shares for which this Warrant is exercisable immediately after such adjustment. 4 2.2. Adjustment Procedures. The following provisions shall be applicable to adjustments to be made pursuant to Section 2.1 hereof: (a) When Adjustments to be Made. The adjustments required by this Section 2 shall be made whenever and as often as any event requiring an adjustment shall occur. For the purpose of any such adjustment, any event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Fractional Interests. In computing adjustments under this Section 2, fractional interests in the Common Stock shall be taken into account to the nearest 1/10th of a share. In no event, however, shall fractional shares or scrip representing fractional shares be issued upon the exercise of this Warrant. (c) When Adjustment Not Required. If the Company shall establish a record date for the determination of the holders of record of the Common Stock for the purpose of entitling such holders to receive a dividend payable in Common Stock and shall, thereafter and before the distribution to shareholders thereof, legally abandon its plan to pay or deliver such dividend, then no adjustment shall be required by reason of the establishment of such record date and any such adjustment previously made in respect thereof shall be rescinded and annulled. 2.3. Reorganization, Reclassification, Merger, Consolidation or Share Exchange. If the Company at any time reorganizes or reclassifies the outstanding shares of Common Stock (other than a change in par value, or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination) or consolidates with, merges into, or effects a share exchange with, another corporation (where the Company is not the continuing corporation after such merger or consolidation), then the Holder shall thereafter be entitled to receive upon exercise of this Warrant in whole or in part, the same kind and number of shares of stock and other securities, cash or other property (and upon the same terms and with the same rights) as would have been distributed to the Holder upon such reorganization, reclassification, consolidation, merger or share exchange had the Holder exercised this Warrant immediately prior to such reorganization, reclassification, consolidation, merger or share exchange (subject to subsequent adjustments under this Section 2), and the Exercise Price shall be adjusted appropriately to reflect such action and adjustment. If any such reorganization, reclassification, consolidation, merger or share exchange results in a cash distribution in excess of the Exercise Price provided by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price, and in such case the Company or its successors and assigns shall, upon distribution to such Holder, consider the Exercise Price to have been paid in full, and in making settlement to such Holder, shall deduct an amount equal to the Exercise Price from the amount payable to such Holder. Notwithstanding anything herein to the contrary, the Company will not effect any such reorganization, reclassification, merger, consolidation or share exchange unless prior to the consummation thereof, the corporation that may be required to deliver any stock, securities or other assets upon the exercise of this Warrant shall agree by an instrument in writing to deliver such stock, cash, securities or other assets to the Holder. A sale, transfer or lease of all or 5 substantially all of the assets of the Company to another person shall be deemed a reorganization, reclassification, consolidation, merger or share exchange for the foregoing purposes. 2.4. Officer's Certificate. Upon each adjustment of the Exercise Price and the Warrant Shares issuable upon the exercise of this Warrant, and in the event of any change in the rights of the Holder by reason of other events herein set forth, then and in each such case, the Company will promptly prepare a certificate of a responsible officer of the Company, stating the adjusted Exercise Price, the adjusted number of Warrant Shares so issuable, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Company will promptly mail a copy of such certificate to the Holder. Such calculation shall be final and binding on the parties and shall be conclusive evidence of the correctness of the computation with respect to any such adjustment of the Exercise Price and any such change in the number of Warrant Shares so issuable, absent manifest error. 2.5 Notice of Certain Proposed Actions. In the event the Company shall propose to take any action of the types described in Sections 2.1 or 2.3 above, then the Company shall forward, at the same time and in the same manner, to the Holder such notice and related proxy or other materials, if any, that the Company gives to the holders of the Common Stock. Failure to give such notice, or any defect therein, however, shall not affect the legality or validity of any such action. SECTION 3. OWNERSHIP AND TRANSFER. 3.1. Ownership. The Company may deem and treat the person in whose name this Warrant is registered as the Holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary until presentation of this Warrant to the Company for registration of transfer. 3.2. Transfers. Upon the sale, disposition, transfer or conveyance of this Warrant, the purchaser, transferee or other recipient hereof shall, together with the previous Holder hereof, promptly notify the Company of such sale, disposition, transfer or conveyance and shall provide such recipient's name, address and capacity in which this Warrant is held, and present such other information as the Company may reasonably request, and such recipient will thereafter be subject to, and bound by, the terms and provisions of, this Warrant to the same extent as the previous Holder. 3.3. Replacement. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft or destruction of this Warrant, and of indemnity or security reasonably satisfactory to it, or upon surrender of this Warrant if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any transfer or replacement. Except as otherwise provided above in the case of the loss, theft or destruction of a Warrant, the Company shall pay all expenses, taxes and other charges payable in connection with any transfer or replacement of this Warrant. Applicants for such substitute Warrants shall also comply with such other reasonable regulations and pay such other reasonable charges incidental thereto as the Company may reasonably prescribe. Any such new Warrant shall constitute an 6 original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall at any time be presented. 3.4 Cancellation of Warrant. Any Warrant surrendered upon exercise or for split up, combination, exchange or transfer, or purchased or otherwise acquired by the Company, shall be cancelled and shall not be reissued by the Company; and, except as provided herein in the case of the purchase of less than all of the Warrant Shares that the Holder may purchase hereunder or in the case of a split up, combination, exchange or transfer, no Warrant shall be issued hereunder in lieu of such cancelled Warrant. Any Warrant so cancelled shall be marked cancelled and destroyed by the Company. SECTION 4. MISCELLANEOUS. 4.1 Reservation of Shares. The Company covenants that, at all times during the Exercise Period, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant, as well as for the issuance of Common Stock pursuant to any other outstanding warrants, options or other instruments convertible or exercisable into the Company's Common Stock, and with respect to any employee benefit or similar plans. 4.2 No Rights as Shareholder; Limitation of Liability. This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of Company shareholders, prior to exercise of this Warrant and irrevocable payment in good, collected funds of the Exercise Price therefor. 4.3 Amendment. This Warrant may only be modified or amended and any provision hereof may only be waived by a writing executed by the Company and the Holder of this Warrant. 4.4 Successors and Assigns. This Warrant shall be binding upon, and inure to the benefit of, the parties hereto and their respective success and assigns permitted hereunder, and no other parties shall have any rights hereunder. The Company will not merge or consolidate with or into any other corporation or other entity or sell or otherwise transfer its property, assets and business substantially as an entirety to a successor corporation or other entity, unless the corporation or other entity resulting from such merger, consolidation, sale or transfer (if not the Company) shall expressly assume, by supplemental agreement, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 4.5 Governing Law. This Warrant shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. 4.6 Entire Agreement; Other Benefits. The Holder is entitled, with respect to his ownership of this Warrant and/or the Warrant Shares to the benefits of the Purchase Agreement and the Registration Rights Agreement, dated as of the date hereof (the "Registration Rights 7 Agreement"), by and among the Company, the Holder and the other Purchasers named in the Purchase Agreement. Except as otherwise expressly provided herein, this Warrant (including the Purchase Agreement, the Registration Rights Agreement and any other agreements, instruments and other documents referred to herein or therein) constitutes the entire agreement among the parties hereto with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral. 4.7 Standing. Nothing in this Warrant is intended, or shall be construed, to confer upon, or give to, any person other than the Company and the Holder any right, remedy or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise or agreement contained herein. All covenants, conditions, stipulations, promises and agreements contained in this Warrant shall be for the sole and exclusive benefit of the Company and its successors, and the Holder, and no other person shall have any other rights or interests herein, whether as third party beneficiaries or otherwise. 4.8 Headings, etc. The descriptive headings of the articles and sections of this Warrant are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof. As under herein, the singular shall include the plural and the terms "include" and "including" shall mean without limitation by way of enumeration or otherwise. 4.9 Counterparts. This Warrant may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [Signatures on following page.] 8 IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first written above. GOOD GUYS, INC. By: ___________________________________ Name: Title: THE HOLDER ____________________________ Name: 9 SCHEDULE A NOTICE OF EXERCISE OF WARRANT TO PURCHASE COMMON STOCK OF GOOD GUYS, INC. To: Good Guys, Inc. The undersigned, the registered owner of this Warrant, hereby irrevocably elects to exercise the purchase rights represented thereby for, and to purchase thereunder, _________ shares of Common Stock of Good Guys, Inc. and herewith makes payment of $__________ therefor, and requests that the certificates evidencing such shares be issued in the name of and be delivered to: Name: ____________________________________ Address: ____________________________________ ____________________________________ ____________________________________ Social Security or Tax I.D. Number: __________________________________ and if such shares shall not be all of the shares purchasable hereunder, that a new Warrant of like tenor for the balance of the shares purchasable hereunder be delivered to the undersigned. Dated: __________________ THE HOLDER By: _______________________________ Name: 10 SUBSTITUTE FORM W-9 Under the penalties of perjury, I certify that: (1) the Social Security Number or Taxpayer Identification Number given below is correct; and (2) I am not subject to backup withholding either because I have not been notified that I am subject to backup withholding as a result of a failure to report all interest or dividends, or because the Internal Revenue Service has notified me that I am no longer subject to backup withholding. IMPORTANT INSTRUCTIONS: You must cross out #2 above if you have been notified by the Internal Revenue Service that you are subject to backup withholding because of under reporting interest or dividends on your tax return and if you have not received a notice from the Internal Revenue Service advising you that backup withholding due to notified payee under reporting has terminated. For additional instructions, please refer to the attached "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9." SIGNATURE*: ___________________________________ DATE: _______________________, - -------------- * If a corporation, please sign in full corporate name by president or other authorized officer. When signing as officer, attorney, custodian, trustee, administrator, guardian, etc., please give your full title as such. In case of joint tenants, each person must sign. THIS NOTICE OF EXERCISE SHALL NOT BE GIVEN EFFECT BY THE COMPANY UNLESS THE HOLDER OF THE UNDERLYING WARRANT HAS PROPERLY COMPLETED AND SIGNED BOTH THE NOTICE OF EXERCISE FORM AND THE SUBSTITUTE FORM W-9. 11 EX-5.1 5 f80469aex5-1.txt OPINION OF HOWARD , RICE, NEMEROVSKI, CANADY, FALK EXHIBIT 5.1 [Letterhead of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation] April 1, 2002 Good Guys, Inc. 1600 Harbor Bay Parkway, Suite 200 Alameda, California 94502 Re: Good Guys, Inc. Dear Ladies and Gentlemen: You have requested our opinion as counsel for Good Guys, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder of 3,080,000 shares of Good Guys, Inc. Common Stock, par value $.001 per share (the "Shares"), which may be offered for sale by certain shareholders of the Company (the "Selling Shareholders"), who have acquired shares or rights to acquire shares in transactions not involving a public offering which may be offered for sale by public offering, which include 280,000 shares which may be offered for sale by Selling Shareholders who may acquire such shares pursuant to the exercise of warrants covering such shares (the "Warrants") granted them. We have examined the Company's Registration Statement on Form S-3 in the form to be filed with the Securities and Exchange Commission on the date of this opinion (the "Registration Statement"). We further have examined the Certificate of Incorporation of the Company as certified by the Secretary of State of the State of Delaware and the Bylaws of the Company. In addition, we have examined such corporate records, certificates and other documents (of which we are aware) and such questions of law as we have considered necessary or appropriate for the purposes of this opinion. Based on the foregoing examination, we are of the opinion that the Shares and the Warrants have been duly authorized by appropriate corporate action of the Company, and when the Shares have been duly issued and/or sold as described in the Registration Statement, any amendment thereto, the prospectus and any supplement thereto, the Shares will be legally issued, fully paid and non-assessable. Good Guys, Inc. April 1, 2002 Page 2 In connection with this opinion we have assumed the following: (a) the authenticity of original documents and the genuineness of all signatures; (b) the conformity to the originals of all documents submitted to us as copies; (c) the truth, accuracy and completeness of the information, representations and warranties contained in the instruments, documents, records and certificates we have reviewed; (d) the due authorization, execution and delivery on behalf of the respective parties thereto of the documents referred to herein and, except with respect to such parties; and (e) the absence of any evidence extrinsic to the provisions of the written agreements between the parties that the parties intended a meaning contrary to that expressed by those provisions. We have not independently verified such assumptions. We express no opinion as to laws other than the substantive laws of the State of California (without regard to conflicts-of-laws or choice-of-law principles), the General Corporation Law of the State of Delaware and the federal laws of the United States of America, in each case to the extent applicable and not excepted from the scope of the opinions expressed above. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name wherever it appears in the Registration Statement, any amendment thereto, the prospectus and any supplement thereto. Very truly yours, Howard, Rice, Nemerovski, Canady, Falk & Rabkin A Professional Corporation /s/ Joseph B. Hershenson Joseph B. Hershenson EX-23.2 6 f80469aex23-2.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Good Guys, Inc. on Form S-3 of our reports dated April 13, 2001, appearing in the Transition Report on Form 10-K of Good Guys, Inc. for the transition period from October 1, 2000 to February 28, 2001 and to the reference to us under the heading "Experts" in this Registration Statement. DELOITTE & TOUCHE LLP San Francisco, California March 27, 2002 EX-24.1 7 f80469aex24-1.txt POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Kenneth R. Weller and David L. Carter, and each of them, his or her attorneys-in-fact and agents, each with the power of substitution, for him and in his or her name, place and stead, in any and all capacities to sign a Registration Statement on Form S-3 (and any and all amendments thereto, including post-effective amendments) covering 3,080,000 shares of Common Stock of this Corporation (including 280,000 shares of Common Stock underlying warrants) issued to various Selling Shareholders in a private placement consummated in March 2002 and to sign any registration statement for the offerings covered by such registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange 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 or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in any number of counterparts. Dated: March 6, 2002 /s/ Cathy A. Stauffer --------------------------------------- Cathy A. Stauffer /s/ Russell M. Solomon --------------------------------------- Russell M. Solomon /s/ John E. Martin --------------------------------------- John E. Martin /s/ Joseph P. Clayton --------------------------------------- Joseph P. Clayton -----END PRIVACY-ENHANCED MESSAGE-----