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
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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 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇, 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.
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(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
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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.
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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
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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
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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
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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.]
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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:
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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:
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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.
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