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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended September 30, 1995
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-14134
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THE GOOD GUYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2366177
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
7000 Marina Boulevard, Brisbane, California 94005-1840
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 615-5000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $123,837,769 as of December 15, 1995.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On December 15, 1995, there were 13,581,416 shares of common stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Shareholders for fiscal year ended
September 30, 1995. (Part II of Form 10-K)
(2) Portions of definitive proxy statement filed with Securities and
Exchange Commission relating to the Company's 1996 Annual Meeting of
Shareholders. (Part III of Form 10-K)
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PART I
ITEM 1. BUSINESS
General
THE GOOD GUYS! is a leading specialty retailer of consumer
electronics products. The Company currently operates 70 stores: In California,
18 stores are located in the San Francisco Bay area, 24 in the greater Los
Angeles/Orange County metropolitan area, 3 in Sacramento, 7 in San Diego, and
one each in Bakersfield, Fresno, Modesto and Stockton. In Washington, Oregon and
Nevada, THE GOOD GUYS! operates 8 stores, 3 stores and 3 stores, respectively.
The Good Guys, Inc. was incorporated in California in 1976. On
March 4, 1992, the Company changed its state of incorporation from California to
Delaware by merging into a wholly-owned Delaware subsidiary formed for that
purpose. In September 1995, The Good Guys, Inc. transferred substantially all of
its assets and liabilities to The Good Guys - California, Inc., its wholly-owned
operating subsidiary. Unless the context otherwise requires, the terms "THE GOOD
GUYS!" and "Company" refer to The Good Guys, Inc., together with its operating
subsidiary.
Business Strategy
THE GOOD GUYS! goal is to be a leading consumer electronics
retailer in each of its targeted markets. The cornerstones of its business
strategy include:
Customer Service. THE GOOD GUYS! believes that superior service is
the single most important factor in overall customer satisfaction, and that the
Company differentiates itself from other consumer electronics retailers by
providing superior customer service. The Company believes that friendly and
knowledgeable sales associates are critical to satisfying customers interested
in middle to high-end electronics products. The Company's objective is to
generate long-term repeat business from its customers.
Merchandising. The Company's merchandising strategy is to provide
customers with a broad and compelling selection of brand name consumer
electronics with an emphasis on middle to high-end merchandise. Merchandise is
offered at competitive prices, which are backed by a low price guarantee.
Marketing. The Company aggressively uses newspaper, direct mail,
radio and television advertising to build name recognition, to position THE GOOD
GUYS! in its markets, and to increase store traffic. Stores are designed to be
exciting and easy to shop and are located in high visibility and high traffic
commercial areas.
Expansion. The Company plans to continue to expand its store base.
Successful expansion will depend, among other things, on the Company's ability
to continue to locate suitable store sites and to hire and train skilled
personnel. It will also depend on the Company's ability to open new stores
quickly in new markets, to
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achieve economies of scale in advertising and distribution, and to continue to
gain market share from established competitors.
Customer Service
The Company believes that knowledgeable and friendly sales
associates are critical to providing superior customer service. As of September
30, 1995, the Company had over 2,100 highly trained part-time and full-time
sales associates. Sales associates are paid under an incentive compensation
program with a salary guarantee that is applied against incentives earned.
Incentives are based on the gross profit realized, the amount of "repeat"
business the sales associate generates, product returns, performance against
sales goals and peer ranking. The Company believes this incentive structure
creates long-term repeat customers for THE GOOD GUYS!.
All sales associates attend a full-time, in-house initial training
program. The Company's training program is continually updated and is designed
to develop good sales practices and techniques and to help sales associates
explain and demonstrate to customers the use and operation of store merchandise.
This training enables sales associates to better understand customer needs and
to help them select products with which they are satisfied.
The Company generally holds meetings daily at each store to keep
sales associates trained in Company procedures and policies and to update them
on competitive information, current product introductions, product availability
and pricing. Manufacturers also conduct in-store training sessions to
familiarize sales associates with existing and new products.
The Company hosts a product show annually. All sales associates
attend the product show and are required to participate in training sessions
focused on product knowledge and selling skills. Manufacturers are in attendance
with product displays and are available to answer questions. Additionally,
regional training workshops are conducted twice a year to enhance the sales
associates' product knowledge. These sessions are conducted by a combination of
manufacturers, corporate trainers and the corporate buyers. Customer service and
sales techniques are also incorporated into these training workshops.
In recent years, THE GOOD GUYS! has eliminated cashiers and
customer pickup windows, enabling sales associates to assist customers
throughout the entire sales transaction. This allows sales associates to spend
more time assessing the customer's needs, and provides customers with a
smoother, more efficient and more enjoyable shopping experience.
The Company's satisfaction guaranteed policy provides that a
product generally may be returned within 30 days of purchase for a full refund
or in exchange for another product. When purchasing a product from the Company,
customers may elect to purchase a Premier Performance Guarantee under which a
third party provides extended service coverage beyond the period covered by the
manufacturer's warranty.
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All merchandise purchased from THE GOOD GUYS! and in need of
repair may be returned to any of the Company's stores for service. Such
merchandise is sent to either a Company-operated or an independent factory
authorized repair facility and is returned to the store after repair. The
Company has its own regional service facilities, which service all of its
stores. The Company also operates car audio and car cellular phone installation
facilities at almost all of its locations.
The majority of the Company's sales are made through credit cards.
The Company currently honors MasterCard, VISA, American Express and various
other credit cards, as well as THE GOOD GUYS! "Preferred Customer Card" issued
by an independent third party. Because of the relatively high cost of many of
the consumer electronics products sold by the Company, its business could be
affected by consumer credit availability.
The Company places emphasis on developing the skills of its
employees in order to provide a source of quality management personnel for
current and future stores. The Company has been able to fill many sales
managerial positions by promoting sales associates and, similarly, to fill many
store management positions by promoting sales managers.
Merchandising
The Company offers its customers a broad range of high quality
consumer electronics products supplied primarily by manufacturers of nationally
known brands. This selection comprises approximately 4,400 products from over
240 vendors and is intended to cover all of the popular price points within each
product category. The Company does not carry private label products. In
addition, the Company continually introduces and evaluates new and complementary
product lines. For example, in 1994 the Company commenced selling personal
computers and peripheral equipment in all of its stores.
The following table shows the approximate percentage of sales for
each major product category for the last three fiscal years. Historical
percentages may not be indicative of percentages in future years.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------
Category 1995 1994 1993
- -------- ---- ---- ----
<S> <C> <C> <C>
Video . . . . . . . . . . . . . . . . . . . . . . . . 36% 36% 36%
Audio and cellular phones . . . . . . . . . . . . . . 30% 33% 35%
Home office . . . . . . . . . . . . . . . . . . . . . 17% 12% 9%
Other (accessories, installation,
photo, premier performance
guarantee, repair service,
video games and other) . . . . . . . . . . . . . . 17% 19% 20%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
For the year ended September 30, 1995, the Company's three leading
suppliers for video products were, in alphabetical order, Mitsubishi, Panasonic
and
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Sony and for audio and cellular products were, in alphabetical order, Motorola,
Panasonic and Sony. The three leading suppliers of home office products were, in
alphabetical order, Apple, Packard Bell and Panasonic.
Marketing
The Company believes that its advertising activities have resulted
in significant name recognition in its markets and have increased the number of
qualified potential customers visiting its stores. The Company's advertising
vehicles include newspaper, direct mail, television and radio.
All of the Company's print and direct mail advertisements, and
most of its television ads, are created, produced and placed by the Company's
advertising staff. The Company believes that the use of its own personnel
maximizes its control over advertising effectiveness, increases its flexibility,
allows quick response to changing market conditions, and enables it to purchase
media on advantageous terms.
The Company's advertisements promote the Company as an
"audio-video specialist" and emphasize competitive prices, extensive selection,
and superior customer service from knowledgeable sales associates.
Expansion
Since the end of fiscal 1985, the Company has grown from 7 to 70
stores. Over the past five years the Company has expanded its store base at a
compound rate of approximately 20% per year. During fiscal 1995, THE GOOD GUYS!
opened 14 new stores, continuing to penetrate its current markets by opening one
store in the San Diego area and two stores in the Los Angeles/Orange County
area, and entering two new states by opening seven stores in Washington and
three stores in Oregon. The Company also opened WOW!, MULTIMEDIA SUPERSTORE, in
Las Vegas, Nevada, a concept store jointly operated with Tower Records. The
Company will continue to expand within its current four-state market during
fiscal 1996, with plans to open 12-14 stores during the fiscal year.
Store Operations
With the exception of WOW!, MULTIMEDIA SUPERSTORE, the Company's
stores range in size from approximately 9,000 to 27,000 square feet. Most of the
newer stores reflect the ongoing evolution in the Company's store design and are
approximately 18,000 to 20,000 square feet in size. All of the Company's stores
are located in high visibility, high traffic commercial areas and are open seven
days a week, including most holidays.
THE GOOD GUYS! stores are designed to reinforce the Company's
merchandising philosophy and its desire to provide a pleasant shopping
experience. Merchandise is generally displayed by category to facilitate
comparison of brands, models and prices. During fiscal 1995, the Company
introduced a new store design, called "Generation 21". These stores are larger
and brighter stores that feature interactive displays, easily accessible
merchandise and vibrant graphics.
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In August 1995, the Company opened WOW!, MULTIMEDIA SUPERSTORE, in
Las Vegas, Nevada. This concept store, which is jointly operated with Tower
Records, provides the full range of consumer electronics offered at all THE GOOD
GUYS! stores, as well as a full range of music, video, computer software and
books and magazines offered by Tower Records. THE GOOD GUYS! occupies
approximately half of the 62,000 square foot store.
Each store generally has one store manager, one assistant manager,
two sales managers, and an operations manager. Some store managers are
responsible for two or more stores. The assistant store manager oversees the
store's operations and the sales managers supervise the sales associates. Sales
associates are specialized by product category. Sales associates handle all
aspects of the customer interface: providing customers with the information
necessary to determine the best product for their specific need, tendering the
invoice and handling the payment, and bringing the goods from the stockroom to
the customer.
Store operations are overseen by a senior management team which
holds frequent meetings with the store managers. Merchandising and store
operation policies for all stores are established by senior management.
Distribution
The Company operates a 460,000 square foot operations center in
Hayward, California, which has the capacity to handle deliveries to more than
100 stores in the Western United States. Deliveries are generally made to each
store six or seven days a week, as ordered by the Company's automatic
replenishment system. The Company believes that this frequency of delivery
maximizes availability of merchandise at the stores while minimizing store level
and overall inventories.
Management Information Systems
The Company's management information system is a distributed,
on-line network of computers that links all stores, delivery locations, service
centers, credit providers, the distribution facility and the corporate offices
into a fully integrated system. Each store has its own system which allows store
management to track sales and inventory at the product, customer or sales
associate level. The Company's point of sale system allows the capture of sales
data and customer information and allows the tracking of merchandising trends
and inventory levels on a daily basis. Management believes that its current
systems are adequate to support THE GOOD GUYS! anticipated growth.
Competition
The business of the Company is highly competitive. The Company
competes primarily with other specialty stores, independent electronics and
appliance stores, department stores, mass merchandisers, discount stores and
catalog showrooms. To some extent, the Company also competes with drugstores,
supermarkets and others that make incidental sales of electronics products.
Competitors of the Company include Circuit City Stores, Best Buy, Sears,
Incredible
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Universe, Montgomery Ward, Target, several smaller electronics chains and
independent stores.
The Company's strategy is to compete by being a value-added
retailer, offering a broad selection of top national brand name merchandise sold
at competitive prices by a friendly, knowledgeable and motivated team of
associates.
Seasonality
As is the case with many other retailers, the Company's sales are
higher during the Christmas season than during other periods of the year.
Employees
At September 30, 1995, the Company employed approximately 4,000
persons, of whom 450 were salaried, 1,450 were hourly non-selling associates and
2,100 were salespeople on commission against a minimum guarantee. At September
30, 1995, over 340 of its employees were employed in the Company's executive
offices; the balance were employed in its stores, distribution center, home
delivery center, and service centers. There are no collective bargaining
agreements covering any of the Company's employees. The Company has never
experienced a strike or work stoppage and management believes that relations
with its employees are excellent.
Trademarks and Service Marks
The Company has registered the name "THE GOOD GUYS!" as a
trademark with the United States Patent and Trademark Office and the State of
California. Federal registration of the trademark extends through 2000 and is
renewable indefinitely. The Company has registered "THE GOOD GUYS!" as a service
mark through 1999, which is renewable indefinitely. The Company's name is an
integral part of its advertising and is important to its business.
ITEM 2. PROPERTIES
Of the Company's stores in California, 18 are located in the San
Francisco Bay area, 24 in the greater Los Angeles/Orange County metropolitan
area, 3 in Sacramento, 7 in San Diego; and one each in Bakersfield, Fresno,
Modesto and Stockton, California. In addition, THE GOOD GUYS! operates 8 stores
in the State of Washington, 3 stores in Oregon and 3 stores in Nevada. All of
the stores are leased under leases that have expiration dates (assuming that
lease options are exercised) in years ranging from 1999 to 2038.
The Company's operations center is located in a 460,000 square
foot facility in Hayward, California under a lease, the term of which expires
(assuming that lease options are exercised) in 2011.
The Company also maintains executive offices in Brisbane,
California at 7000 Marina Boulevard under a lease, the term of which expires
(assuming that lease options are exercised) in 2004.
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ITEM 3. LEGAL PROCEEDINGS
On March 31, 1992, Alan J. Story and his wife, Janice Story, filed
a complaint against the Company and others in Solano County Superior Court,
based on Mr. Story being held hostage and shot in the Company's Florin Mall
store in Sacramento by individuals unrelated to the Company. Also named as
defendants in the complaint are the individuals (or their legal representatives)
who allegedly took the hostages and shot Mr. Story, the store (Big R Country
West Stores, which is unrelated to the Company) where the individuals allegedly
purchased the weapons used in the incident, the Sacramento County Sheriff's
Department which responded to the incident, and the County of Sacramento. The
causes of the action in the complaint are as follows: (1) "Assault and Battery,"
(2) "Premises Liability," (3) "Negligence--Law Enforcement Hostage
Negotiations," (4) "Negligence--Sales of Firearms," (5) "Negligence--Parental
Supervision," and (6) "Loss of Consortium." No specific amount of damages has
been requested to date. The principal causes of action alleged against the
Company are for premises liability and loss of consortium. Similar lawsuits have
been filed on behalf of certain other plaintiffs who allege that they also were
hostages and victims. The Company does not believe that it has any liability in
connection with the litigation; however, should liability exist, the Company
believes that it has adequate insurance to cover such liability. The Company's
insurance carriers have accepted coverage of this litigation and have retained
counsel for the Company.
On August 11, 1993, an unincorporated association known as
Cellular Agents Association and six small retail agents of LA Cellular in the
Los Angeles and Orange County area filed an action against the Company and three
of its store managers entitled Cellular Agents Association v. The Good Guys,
Inc., et al, Los Angeles Superior Court No. YC017055. The Complaint alleges
three principal claims: below-cost pricing of cellular telephones in violation
of the California Unfair Practices Act; "bundling" of cellular telephones and
service in violation of Public Utility Commission rules and the California
Cartwright Act; and false advertising. Plaintiffs have dismissed this action,
subject to an agreement that they may refile the action in Orange County
Superior Court and seek to have it consolidated with the Cellular Activators
case described below. Plaintiffs have refiled the action in Orange County, and
the two cases have now been consolidated. The Company believes that it has
meritorious defenses to the claims alleged in this lawsuit and intends to defend
the action vigorously.
On May 5, 1994, Cellular Activators, a general partnership
consisting of Richard Hansen and Jacque Coon, and several other individuals and
entities, filed a complaint against the Company and seven other named defendants
entitled Cellular Activators, et al. v. Los Angeles Cellular Telephone Company,
et al., Orange County Superior Court Case No. 729278. The named defendants are
Los Angeles Cellular Telephone Company, Los Angeles SMSA Limited Partnership,
PacTel Cellular, PacTel Corporation, AirTouch Communications, AirTouch Cellular,
Circuit City Stores, and the Company. The complaint alleges a wide variety of
antitrust and fraud-related claims against the carrier defendants, including
alleged conspiracy to fix cellular telephone prices. Only two of the several
plaintiffs allege claims against the Company (although, as noted above, the
claims in the Cellular Agents case have now been consolidated with this case).
Those claims are for below cost pricing in violation of the California Unfair
Practices Act, bundling of cellular telephones and service, and
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conspiracy to engage in bundling and below-cost pricing. Plaintiffs have filed a
Second Amended Complaint, and the case is now scheduled for trial on April 22,
1996. Discovery is ongoing, but it is too early to be able to express an opinion
as to the likely outcome of this matter. The Company believes that it has
meritorious defenses to the claims alleged in this lawsuit and intends to defend
the action vigorously.
On March 7, 1995, the Company filed a lawsuit for trademark
infringement against Good Guys Stereo Warehouse, an Oregon corporation offering
retail consumer electronics services out of two stores in the Corvallis, Oregon
area. The Good Guys, Inc. v. Good Guys Stereo Warehouse, Inc., et al.,
No.95-283-HA (D. Ore.). On March 27, 1995, Defendant filed an Answer and
Counterclaim for injunctive and declaratory relief for trademark infringement.
The issues raised by Defendant's counterclaim are essentially coextensive with
the issues raised by the Company's underlying lawsuit. On July 14, 1995, the
court granted the Company's request for a preliminary injunction, thus
provisionally validating the Company's position. The Company believes that it
has no liability for trademark infringement and intends vigorously to defend
against the counterclaim.
The Company has been named as a defendant in two purported class
actions, entitled Long v. Packard Bell Electronics, et al., Case. No. 7515706,
filed in Orange County Superior Court on August 21, 1995, and Sutter v. Acer
America Corporation, et al., Case No. 95A505027, filed in Sacramento County
Superior Court on September 7, 1995. In both cases, plaintiffs have named a
large number of computer manufacturers, wholesalers and retailers, alleging that
since 1986 the defendants have misrepresented to the public the screen size of
certain computer monitors. In addition to these two cases, there are numerous
other cases pending around the State of California (and in other parts of the
country) making essentially the same allegations against a variety of computer
manufacturers, wholesalers and retailers. All of the California cases have now
been coordinated in a single court in San Francisco. The cases are at an early
stage, discovery has not yet commenced, and it is too early to be able to
express any opinion as to the likely outcome of the matter. The Company believes
it has meritorious defenses to the claims alleged in the lawsuit and intends to
defend the action vigorously. The Company also believes it has meritorious
claims for indemnification from certain computer manufacturers from which it has
purchased computer equipment.
The Company has recently been named as a defendant in an action
known as Levy v. Circuit City Stores, Inc., et al., Case No. 971872, filed in
San Francisco Superior Court on August 18, 1995. The plaintiff is an individual
named Carol Levy, who claims to be suing on her own behalf and on behalf of the
general public. The defendants, in addition to the Company, are Circuit City
Stores, Inc., Wireless Depot, Inc., Tandy Corporation, Cellular Warehouse, Bay
Area Cellular Telephone Company, and GTE Mobilnet of California. The First
Amended Complaint alleges various violations of the California Unfair Practices
Act and the Unfair Competition Statute, including failure to post certain signs
in connection with the sale of cellular telephones, bundling of cellular
telephone equipment and service, unlawful loss leader sales of cellular
telephone equipment, and unfair and deceptive advertising of cellular telephone
equipment and service. The plaintiff seeks injunctive relief and restitution.
The case is at a very early stage, and it is too soon to be able to express an
opinion as to the likely outcome of the matter. The Company believes it has
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meritorious defenses to the claims alleged in the lawsuit and intends to defend
the case vigorously.
The Company has been named as a defendant in another purported
class action entitled Littau v. Circuit City Stores, Inc., et al., Case No.
973978, filed in San Francisco Superior Court on November 14, 1995. Plaintiffs
are two individuals named James A. Littau and Frederick Goldberg, who claim to
be suing in their own behalf and on behalf of all those similarly situated. The
defendants, in addition to the Company, are Circuit City Stores West Coast,
Inc., Sears Roebuck & Co., Tandy Corp. dba Radio Shack, Whole Earth Access Co.,
COMPUSA, Inc., Best Buy Co. and Fry's Electronics, Inc. The Complaint alleges
violations of the California Unfair Practices, Unfair Competition and Consumer
Legal Remedies Acts, and causes of action for fraud, negligent misrepresentation
and breach of contract in connection with the sale of "bundled software
packages" included with personal computer systems. Plaintiffs seek an
injunction, restitution, damages and attorneys fees. The case is at a very early
stage, and therefore we cannot express any opinion as to the probable outcome.
The Company believes it has meritorious defenses to the claims alleged in the
lawsuit and intends vigorously to defend the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their respective ages
and positions with the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ronald A. Unkefer 51 Chairman
Robert A. Gunst 47 President and Chief Executive Officer
Robert E. Baird 47 Senior Vice President, Marketing and
Merchandising
Thomas A. Hannah 50 Senior Vice President, Operations
Brad S. Bramy 43 Vice President, Advertising
William C. Curley 52 Vice President, Management Information
Services and Operations
John G. Duken 35 Vice President, Store Operations
William B. Perlstein 45 Vice President, Stores
Gregory L. Steele 48 Vice President, Real Estate
</TABLE>
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<TABLE>
<S> <C> <C>
Geradette M. Vaz 43 Vice President, Human Resources
</TABLE>
All executive officers are elected by and serve at the discretion
of the Board of Directors.
Ronald A. Unkefer founded the Company's business in 1973, has been
the Chairman of the Board of the Company since it was incorporated in 1976, and
was its Chief Executive Officer until his resignation from that position in
January 1993.
Robert A. Gunst became the President and Chief Operating Officer
of the Company in May 1990 and its Chief Executive Officer in January 1993.
Robert E. Baird joined the Company as Vice President, Marketing in
February 1994 and was named Senior Vice President, Marketing and Merchandising
in May 1995. From August 1989 to February 1994 he was the General Manager of the
Northern California Division of Circuit City Stores, Inc.
Thomas A. Hannah joined the Company as Senior Vice President,
Stores in June 1993 and was named Senior Vice President, Operations, in May
1995. From November 1982 to March 1993 he was Assistant Vice President, Circuit
City Stores, Inc., and General Manager of three separate operating divisions
located in Richmond, San Francisco and Dallas.
Brad S. Bramy was named Vice President, Advertising in May 1995.
Prior to holding this position, Mr. Bramy served in various positions in the
advertising department since joining the Company in 1983.
William C. Curley joined the Company as Vice President, Management
Information Services and Distribution in October 1990 and became Vice President,
Management Information Services and Operations in November 1991.
John G. Duken joined the Company in September 1993 as General
Manager of Store Operations and was named Vice President, Store Operations in
June 1994. From June 1988 to August 1993 he held several positions with Circuit
City Stores, Inc., including Divisional Operations Manager of the Northern
California Division and General Operations Manager of the Midwest Division.
William B. Perlstein joined the Company as Regional Sales Manager
in March 1987, was named Vice President, Store Operations in January 1993, and
was named Vice President, Stores in June 1993.
Gregory L. Steele has served as Vice President, Real Estate since
April 1986.
Geradette M. Vaz joined the Company in July 1986 as Vice
President, Human Resources, and has served in that position to the present.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Incorporated by reference from page 20 of the Company's 1995
Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from page 12 of the Company's 1995
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from pages 10 through 11 of the
Company's 1995 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from pages 13 through 19 of the
Company's 1995 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to directors of the Company required to
be furnished pursuant to this item is incorporated by reference from portions of
the Company's definitive Proxy Statement for its annual meeting of shareholders
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days after September 30, 1995 (the "Proxy Statement") under the
caption "Election of Directors." Certain information relating to executive
officers of the Company is set forth in Item 4A of Part I of this Form 10-K
under the caption "Executive Officers of Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from portions of the Proxy Statement
under the captions "Compensation of Directors and Executive Officers" and
"Certain Relationships and Related Transactions."
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from portions of the Proxy Statement
under the captions "Certain Shareholders" and "Compensation of Directors and
Executive Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from portions of the Proxy Statement
under the caption "Compensation of Directors and Executive Officers" and
"Certain Relationships and Related Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
Included in Part II of this report by incorporation by
reference from the 1995 Annual Report to Shareholders:
Independent Auditors' Report (page 19 of the 1995
Annual Report to Shareholders)
Consolidated statements of income for each of the
three years in the period ended September 30, 1995
(page 14 of the 1995 Annual Report to Shareholders)
Consolidated balance sheets as of September 30, 1995
and 1994 (page 13 of the 1995 Annual Report to
Shareholders)
Consolidated statements of shareholders' equity for
each of the three years in the period ended September
30, 1995 (page 14 of the 1995 Annual Report to
Shareholders)
Consolidated statements of cash flows for each of the
three years in the period ended September 30, 1995
(page 15 of the 1995 Annual Report to Shareholders)
Notes to consolidated financial statements (pages 16
through 19 of the 1995 Annual Report to Shareholders)
(A)2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not required, or are not
applicable, or the information is included in the financial
statements.
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<PAGE> 15
(A)3. EXHIBITS
3.1 Certificate of Incorporation. (Exhibit 3.1 to the Company's Form 8-K
Report for March 4, 1992; incorporated herein by reference.)
3.2 Bylaws. (Exhibit 3.2 to the Company's Form 8-K Report for March 4,
1992; incorporated herein by reference.)
10.1 1985 Stock Option Plan, as amended.* (Exhibit 10.1 to the Company's
Form 8-K Report for March 4, 1992; incorporated herein by reference.)
10.2 Form of Nonqualified Stock Option Agreements.* (Exhibit 4.3 to the
Company's Registration Statement on Form S-8 as filed on January 28,
1991, registration number 33-38749; incorporated herein by reference.)
10.3 THE GOOD GUYS! Profit-Sharing Plan, as amended and restated as of
December 20, 1990.* (Exhibit 10.4 to the Company's Form 10-K Annual
Report for its fiscal year ended September 30, 1991; incorporated
herein by reference.)
10.4 THE GOOD GUYS! Deferred Pay Plan.* (Exhibit 4.1 to the Company's
Registration Statement on Form S-8 as filed on March 12, 1991,
registration number 33-39421; incorporated herein by reference.)
10.5 THE GOOD GUYS! Deferred Pay Plan Amendment No. 1.* (Exhibit 4.6 to the
Company's Registration Statement on Form S-8 as filed on March 12,
1991, registration number 33-39421; incorporated herein by reference.)
10.6 Letter Agreement with Robert A. Gunst, dated March 30, 1990.* (Exhibit
10.14 to the Company's Form 10-K Annual Report for its fiscal year
ended September 30, 1990; incorporated herein by reference.)
10.7 Employee Stock Purchase Plan, as amended.* (Exhibit 10.7 to the
Company's Form 10-K Annual Report for its fiscal year ended September
30, 1994; incorporated herein by reference.)
10.8 THE GOOD GUYS! Deferred Pay Plan Amendment No. 2.* (Exhibit 10.27 to
the Company's Form 10-K Annual Report for its fiscal year ended
September 30, 1992; incorporated herein by reference.)
10.9 Credit Agreement dated June 28, 1993 between Bank of America National
Trust & Savings Association, the Bank of California, N.A. and The Good
Guys, Inc. (Exhibit 10.9 to the Company's Form 10-K Annual Report for
its fiscal year ended September 30, 1993, incorporated herein by
reference.)
- ----------------------
*Compensatory plan or arrangement.
-15-
<PAGE> 16
10.10 Letter Agreement with Thomas A. Hannah, dated June 1, 1993.* (Exhibit
10.10 to the Company's Form 10-K Annual Report for its fiscal year
ended September 30, 1993, incorporated herein by reference.)
10.11 Incentive Plan for Chief Executive Officer for fiscal year ending
September 30, 1996.*
10.12 Incentive Plan for Senior Vice Presidents for fiscal year ending
September 30, 1996.*
10.13 Incentive Plan for Vice President, Store Operations for fiscal year
ending September 30, 1996.*
10.14 Incentive Plan for Vice President, Sales for fiscal year ending
September 30, 1996.*
10.15 Incentive Plan for Vice President, Real Estate for fiscal year ending
September 30, 1996.*
10.16 Incentive Plan for other Vice Presidents for fiscal year ending
September 30, 1996.*
10.17 1994 Stock Incentive Plan.* (Exhibit 10.6 to the Company's Form 10-K
Annual Report for its fiscal year ended September 30, 1994;
incorporated herein by reference.)
10.18 Assignment and Assumption Agreement, dated September 26, 1995, by and
between The Good Guys, Inc. and The Good Guys - California, Inc.
10.19 Credit Agreement, dated as of September 26, 1995, by and among Bank of
America National Trust & Savings Association, The Bank of California,
N.A. and The Good Guys-California, Inc.
10.20 Operating Agreement, dated effective as of April 15, 1995, between
MTS, Inc., a California corporation, dba Tower Records/Book/Video, and
The Good Guys, Inc., a Delaware corporation.
10.21 Non-Committed Line of Credit Agreement, dated October 27, 1995, by
and between The Bank of California, N.A. and The Good
Guys-California, Inc.
10.22 Non-Committed Line of Credit Agreement, dated July 24, 1995, by and
between The Dai-Ichi Kangyo Bank, Limited and The Good Guys, Inc.
11.1 Statement re Computation of Per Share Earnings.
- ----------------------
*Compensatory plan or arrangement.
-16-
<PAGE> 17
13.1 Annual Report to Shareholders for fiscal year ended September 30, 1995
(pages incorporated by reference).
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney.
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the quarter ended September 30,
1995.
-17-
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: December 21, 1995 THE GOOD GUYS, INC.
By /s/ ROBERT A. GUNST
----------------------------------
Robert A. Gunst
President 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 on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ ROBERT A. GUNST Director, President and December 21, 1995
- ---------------------------- Chief Executive Officer
(Robert A. Gunst) (Principal Executive Officer and
Principal Financial Officer)
/s/ LESLIE S. BENSON Controller (Principal December 21, 1995
- ---------------------------- Accounting Officer)
(Leslie S. Benson)
/s/ RONALD A. UNKEFER* Chairman of the Board December 21, 1995
- ----------------------------
(Ronald A. Unkefer)
/s/ STANLEY R. BAKER* Director December 21, 1995
- ----------------------------
(Stanley R. Baker)
/s/ RUSSELL M. SOLOMON* Director December 21, 1995
- ----------------------------
(Russell M. Solomon)
/s/ JOHN E. MARTIN* Director December 21, 1995
- ----------------------------
(John E. Martin)
/s/ W. HOWARD LESTER* Director December 21, 1995
- ----------------------------
(W. Howard Lester)
*By /s/ ROBERT A. GUNST
------------------------
Attorney-in-Fact
</TABLE>
-18-
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
10.11 Incentive Plan for Chief Executive Officer for fiscal year
ending September 30, 1996.
10.12 Incentive Plan for Senior Vice Presidents for fiscal year
ending September 30, 1996.
10.13 Incentive Plan for Vice President, Store Operations for
fiscal year ending September 30, 1996.
10.14 Incentive Plan for Vice President, Sales for fiscal year
ending September 30, 1996.
10.15 Incentive Plan for Vice President, Real Estate for fiscal
year ending September 30, 1996.
10.16 Incentive Plan for other Vice Presidents for fiscal year
ending September 30, 1996.
10.18 Assignment and Assumption Agreement, dated September 26,
1995, by and between The Good Guys, Inc. and The Good Guys -
California, Inc.
10.19 Credit Agreement, dated as of September 26, 1995, by and
among Bank of America National Trust & Savings Association,
The Bank of California, N.A. and The Good Guys-California,
Inc.
10.20 Operating Agreement, dated effective as of April 15, 1995,
between MTS, Inc., a California corporation, dba Tower
Records/Book/Video, and The Good Guys, Inc., a Delaware
corporation.
10.21 Non-Committed Line of Credit Agreement, dated October 27,
1995, by and between The Bank of California, N.A. and The
Good Guys-California, Inc.
10.22 Non-Committed Line of Credit Agreement, dated July 24, 1995,
by and between The Dai-Ichi Kangyo Bank, Limited and The
Good Guys, Inc.
11.1 Statement re Computation of Per Share Earnings.
13.1 Annual Report to Shareholders for fiscal year ended
September 30, 1995 (pages incorporated by reference).
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney.
</TABLE>
<PAGE> 1
Exhibit 10.11
<TABLE>
<CAPTION>
INCENTIVE PLAN FOR CHIEF EXECUTIVE OFFICER FOR
FISCAL YEAR ENDING SEPTEMBER 30, 1996
---------------------------------------------------------------
EPS AS A % OF BUDGET* BONUS AS A % OF SALARY*
--------------------- -----------------------
<S> <C>
75% and below 0.0%
---------------------------------------------------------------
80% 10.0%
---------------------------------------------------------------
85% 20.0%
---------------------------------------------------------------
90% 30.0%
---------------------------------------------------------------
95% 40.0%
---------------------------------------------------------------
100% 50.0%
---------------------------------------------------------------
105% 60.0%
---------------------------------------------------------------
112.5% and above 75.0%
===============================================================
* Pro rata interpolation between points
===============================================================
</TABLE>
<PAGE> 1
Exhibit 10.12
1996 KEY MANAGEMENT INCENTIVE PLAN: SENIOR VICE PRESIDENT
------------------------------------------------------------
PLAN OBJECTIVES This plan is designed to provide incentive, and to reward
the participant based upon a combination of the Company's
overall performance and individual performance.
Effective Date: This plan is effective for the fiscal year
starting October 1, 1995 and ending September 30, 1996.
------------------------------------------------------------
PARTICIPANT The Senior Vice President (or an equivalent position as
ELIGIBILITY determined by the President) is eligible to participate in
the plan. The criteria may be changed from year to year.
All bonuses are at the discretion of the Board of Directors.
------------------------------------------------------------
PRELIMINARY The preliminary bonus amount, which is recommended to the
BONUS Compensation Committee of the Board of Directors, is
CALCULATION determined by the Company's performance against an Earnings
Per Share (EPS) matrix. EPS as a percent of budget must
exceed 75% before any bonus will be payable.
Where EPS as a percentage of budgeted EPS falls between the
percentages shown on the EPS matrix, the preliminary bonus
percentage will be prorated accordingly.
This plan is targeted to pay a bonus equal to 40% OF BASE
SALARY, should the company achieve 100% of its EPS goal,
and should the associate achieve 100% of his/her individual
performance multiplier (see below).
The salary used for calculation of the bonus is the
participant's base annual compensation in effect as of
September 30, 1996.
-----------------------------------------------------
<TABLE>
<CAPTION>
EPS PRELIMINARY BONUS
AS A PERCENT AS A PERCENT
OF BUDGET OF SALARY
--------------------------------------------------
<S> <C>
75% and below 0.0%
--------------------------------------------------
100% 40.0
--------------------------------------------------
125% and above 75.0
--------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
<PAGE> 2
----------------------------------------------------------------
INDIVIDUAL The individual's overall performance, including but not limited
PERFORMANCE to achievement of performance objectives, serves as a multiplier
MULTIPLIER against Company performance.
------------------------------------------------------
INDIVIDUAL PERFORMANCE LEVEL PERFORMANCE MULTIPLIER
------------------------------------------------------
Outstanding 100% - 125%
------------------------------------------------------
Highly Effective 100%
------------------------------------------------------
Effective 50% - 100%
------------------------------------------------------
Does Not Meet Requirements 0%
------------------------------------------------------
The President will assign an "individual performance multiplier"
based on individual performance as described above. The decision
of the President on your performance level and "individual
performance multiplier" will be final. It will be based on an
overall assessment of performance, including but not limited to
achievement of performance objectives during the fiscal year,
and will take into account all factors that are deemed to be
relevant. Performance evaluations will not automatically
determine performance level for purposes of the bonus plan.
For the performance multiplier to be in excess of 100%,
individual performance must be truly exceptional.
----------------------------------------------------------------
PAYMENT OF Bonuses are paid annually based on achieving annual targets. All
BONUSES bonuses will be paid as soon as possible after results have been
audited for the bonus period.
Participants must be actively employed by THE GOOD BUYS! in a
bonus eligible position on the date the bonus is paid to be
eligible to earn a bonus payment. An associate who terminates
for any reason prior to the date the bonus is paid does not earn
a bonus.
As an additional condition to the receipt of a bonus, the Board
of Directors must approve the funding of the bonus plan based on
economic and business conditions. Unless and until the board
approves the payment of a bonus, no bonus will be deemed earned
under this plan.
----------------------------------------------------------------
2
<PAGE> 3
--------------------------------------------------------------
NEWLY HIRED OR Newly hired eligible associates must be in position for a
PROMOTED minimum of six months, or by April 1st, to participate in the
ELIGIBLE plan. If an eligible associate has six or more months in
ASSOCIATES position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position. If an associate has been in position less than six
months (i.e. in position after April 1st), no bonus is earned
for that year.
Newly promoted eligible associates must be in position for a
minimum of three months, or by July 1st, to participate in the
plan. If an eligible associate has three or more months in
position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position.
If an associate has been in position less than three months
(i.e. in position after July 1st), no bonus is earned for that
year. In no case shall a newly promoted associate be eligible
to participate in the plan if he/she was not employed by
THE GOOD GUYS! prior to April 1st of the plan year.
A full month is defined as a calendar month, beginning on the
first and ending on the last day of the calendar month.
If an associate's change in position and responsibilities
results in his/her participation in two different incentive
plans during a plan year, the bonus payment will be prorated
to reflect the number of months worked under each plan.
--------------------------------------------------------------
PLAN This plan will be administered by the Vice President of Human
ADMINISTRATION Resources, with direction provided by the President. The
President will be responsible for making a recommendation on
each participant's overall performance, contribution, attitude
and accomplishment of objectives, and recommending the
multiplier factor.
--------------------------------------------------------------
EMPLOYMENT This plan does not create or evidence a contract between THE
RIGHTS GOOD GUYS! and any participant and does not create or
evidence any employment rights for the participant. Both THE
GOOD GUYS! and participants reaffirm that participant
employment is at will and may be terminated by either
participant or THE GOOD GUYS! at any time for any reason. The
plan does not restrict THE GOOD GUYS! from terminating the
employment of any participant.
--------------------------------------------------------------
3
<PAGE> 4
--------------------------------------------------------------
AMENDMENT This plan may be amended or terminated at any time, in whole
AND or in part, by the President. The President retains the right
TERMINATION to reduce or eliminate payment to a participant if the
President, in his discretion, considers the participant's
performance to be unsatisfactory.
Associates who receive a "needs improvement" or "unsatisfactory"
rating on their annual Performance Appraisal, or receive written
progressive counseling during the plan year, may be disqualified
from participating in this plan until such a time as their
performance improves to an effective or better level.
--------------------------------------------------------------
4
10/19/95
<PAGE> 1
Exhibit 10.13
1996 KEY MANAGEMENT INCENTIVE PLAN: VICE PRESIDENT OF STORE OPERATIONS
---------------------------------------------------------------
PLAN OBJECTIVES This plan is designed to provide incentive and to reward the
participant based upon a combination of the Company's overall
performance and the Stores Department's performance.
Effective Date: This plan is effective for the fiscal year
starting October 1, 1995 and ending September 30, 1996.
---------------------------------------------------------------
PARTICIPANT The Vice President of Store Operations (or an equivalent
ELIGIBILITY position as determined by the President) is eligible to
participate in the plan. The criteria may be changed from year
to year.
All bonuses are at the discretion of the Board of Directors.
---------------------------------------------------------------
BONUS PLAN The bonus plan has a combined target of 33% of salary, 50%
OVERVIEW based on Company Earnings Per Share (EPS) performance, and 50%
based on Sales Controllable Profit results. Each component has
been given a weight of 50%.
The combined target assumes that both the Stores Department,
the Company and the individual meet their objectives.
---------------------------------------------------------------
PART I: The Company believes the most important indicator for
CORPORATE assessing the Company's performance is Earnings Per Share
EARNINGS PER (EPS). The preliminary bonus amount is determined by the
SHARE Company's performance against EPS matrix. EPS as a percent of
budget must exceed 75% before any bonus will be payable.
Where EPS as a percentage of budgeted EPS falls between the
percentages shown on the EPS chart, the preliminary bonus
percentage will be prorated accordingly.
This component of the plan is targeted to pay a bonus equal to
16 1/2% OF BASE SALARY, should the company achieve 100% of its
EPS goal. The salary used for calculation of the bonus is the
participant's base annual compensation in effect as of
September 30, 1996.
---------------------------------------------------------------
Continued on next page
<PAGE> 2
PART I: CORPORATE EARNINGS PER SHARE (continued)
--------------------------------------------------------------
EPS AS A PERCENT OF BUDGET PRELIMINARY BONUS AS A
PERCENT OF SALARY
--------------------------------------------------------------
75% and below 0.0%
--------------------------------------------------------------
100% 16.5
--------------------------------------------------------------
125% and above 30.0
--------------------------------------------------------------
---------------------------------------------------------------
PART II: SALES Store Controllable Profit is defined as store sales less related
CONTROLLABLE cost of sales and controllable expenses (as defined within the
PROFIT Profit and Loss statement) for the year.
This component of the plan is targeted to pay a bonus equal to
16 1/2% OF BASE SALARY. The preliminary bonus calculation
according to the attached chart shall be paid out as a percent
of the participant's base annual compensation as of September
30, 1996.
----------------------------------------------------------------
INDIVIDUAL The individual's overall performance, including but not limited
PERFORMANCE to achievement of performance objectives, serves as a multiplier
MULTIPLIER against both Part I and Part II of the incentive plan.
The Senior Vice President of Operations will assign one of the
following performance levels as the "individual performance
multiplier":
----------------------------------------------------------------
INDIVIDUAL PERFORMANCE LEVEL PERFORMANCE MULTIPLIER
--------------------------------------------------------------
Outstanding 100% - 125%
--------------------------------------------------------------
Highly Effective 100%
--------------------------------------------------------------
Effective 50% - 100%
--------------------------------------------------------------
Does Not Meet Requirements 0%
--------------------------------------------------------------
INDIVIDUAL The decision of the President on performance level and
PERFORMANCE "individual performance multiplier" will be final. It will be
MULTIPLIER, based on an overall assessment of performance, including but not
CONTINUED limited to achievement of performance objectives during the
fiscal year, and will take into account all factors that are
deemed to be relevant. Performance evaluations will not
automatically determine performance level for purposes of the
bonus plan. For the performance multiplier to be in excess of
100%, individual performance must be truly exceptional.
----------------------------------------------------------------
2
<PAGE> 3
--------------------------------------------------------------
PAYMENT OF Bonuses are paid annually based on achieving annual targets.
BONUS All bonuses will be paid as soon as possible after results have
been audited for the bonus period.
Participants must be actively employed by THE GOOD GUYS! in a
bonus eligible position on the date the bonus is paid to be
eligible to earn a bonus payment. An associate who terminates
for any reason prior to the date the bonus is paid does not earn
a bonus.
As an additional condition to the receipt of a bonus, the Board
of Directors must approve the funding of the bonus plan based on
economic and business conditions. Unless and until the board
approves the payment of a bonus, no bonus will be deemed earned
under this plan.
--------------------------------------------------------------
NEWLY HIRED OR Newly hired eligible associates must be in position for a
PROMOTED minimum of six months, or by April 1st, to participate in the
ELIGIBLE plan. If an eligible associate has six or more months in
ASSOCIATES position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position. If an associate has been in position less than six
months (i.e. in position after April 1st), no bonus is earned
for that year.
Newly promoted eligible associates must be in position for a
minimum of three months, or by July 1st, to participate in the
plan. If an eligible associate has three or more months in
position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position.
--------------------------------------------------------------
NEWLY HIRED OR If an associate has been in position less than three months
PROMOTED (i.e. in position after July 1st), no bonus is earned for that
ELIGIBLE year. In no case shall a newly promoted associate be eligible
ASSOCIATES, to participate in the plan if he/she was not employed by THE
CONTINUED GOOD GUYS! prior to April 1st of the plan year.
A full month is defined as a calendar month, beginning on the
first and ending on the last day of the calendar month.
If an associate's change in position and responsibilities
results in his/her participation in two different incentive
plans during a plan year, the bonus payment will be prorated to
reflect the number of months worked under each plan.
--------------------------------------------------------------
3
<PAGE> 4
----------------------------------------------------------------
PLAN This plan will be administered by the Vice President of Human
ADMINISTRATION Resources, with direction provided by the President. The
President will be responsible for making a recommendation on
each participant's overall performance, contribution, attitude
and accomplishment of objectives, and recommending the
multiplier factor.
----------------------------------------------------------------
EMPLOYMENT This plan does not create or evidence a contract between THE
RIGHTS GOOD GUYS! and any participant and does not create or evidence
any employment rights for the participant. Both THE GOOD GUYS!
and participants reaffirm that participant employment is at will
and may be terminated by either participant or THE GOOD GUYS! at
any time for any reason. The plan does not restrict THE GOOD
GUYS! from terminating the employment of any participant.
----------------------------------------------------------------
AMENDMENT This plan may be amended or terminated at any time, in whole or
AND in part, by the President. The President retains the right to
TERMINATION reduce or eliminate payment to a participant if the President,
in his discretion, considers the participant's performance to
be unsatisfactory.
Associates who receive a "needs improvement" or
"unsatisfactory" rating on their annual Performance Appraisal,
or receive written progressive counseling during the plan year,
may be disqualified from participating in this plan until such
a time as their performance improves to an effective or better
level.
----------------------------------------------------------------
10/19/95
4
<PAGE> 5
VICE PRESIDENT OF STORE OPERATIONS
SALES CONTROLLABLE PROFIT DOLLARS
CONTROLLABLE
PROFIT $ ANNUAL
AS A % OF GOAL BONUS
-------------------------------
94% 0.0%
95% 2.8%
96% 5.5%
97% 8.3%
98% 11.0%
99% 13.8%
100% 16.5%
101% 18.8%
102% 21.0%
103% 23.3%
104% 25.5%
105% 27.8%
106% 30.0%
<PAGE> 1
Exhibit 10.14
1996 KEY MANAGEMENT INCENTIVE PLAN: VICE PRESIDENT OF SALES
----------------------------------------------------------------
PLAN This plan is designed to provide incentive, and to reward the
OBJECTIVES participant based upon a combination of the Company's overall
performance and the Stores Department's performance.
Effective Date: This plan is effective for the fiscal year
starting October 1, 1995 and ending September 30, 1996.
----------------------------------------------------------------
PARTICIPANT The Vice President of Sales (or an equivalent position as
ELIGIBILITY determined by the President) is eligible to participate in the
plan. The criteria may be changed from year to year.
All bonuses are at the discretion of the Board of Directors.
----------------------------------------------------------------
BONUS PLAN The bonus plan has a combined target of 33% of salary, 50% based
OVERVIEW on Company Earnings Per Share (EPS) performance, and 50% based
on Sales Controllable Profit results. Each component has been
given a weight of 50%.
The combined target assumes that both the Stores Department, the
Company and the individual meet their objectives.
----------------------------------------------------------------
PART I: The company believes the most important indicator for assessing
CORPORATE the Company's performance is Earnings Per Share (EPS). The
EARNINGS PER preliminary bonus amount is determined by the Company's
SHARE performance against EPS matrix. EPS as a percent of budget must
exceed 75% before any bonus will be payable.
Where EPS as a percentage of budgeted EPS falls between the
percentages shown on the EPS chart, the preliminary bonus
percentage will be prorated accordingly.
This component of the plan is targeted to pay a bonus equal to
16 1/2% OF BASE SALARY, should the company achieve 100% of its
EPS goal. The salary used for calculation of the bonus is the
participant's base annual compensation in effect as of September
30, 1996.
----------------------------------------------------------------
Continued on next page
<PAGE> 2
PART I: CORPORATE EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------
EPS AS A PRELIMINARY BONUS
PERCENT OF AS A PERCENT OF
BUDGET SALARY
----------------------------------------------------------------
<S> <C>
75% and below 0.0%
----------------------------------------------------------------
100 16.5
----------------------------------------------------------------
125% and above 30.0
----------------------------------------------------------------
</TABLE>
----------------------------------------------------------------
PART II: SALES Store Controllable Profit is defined as store sales less
CONTROLLABLE related cost of sales and controllable expenses (as defined
PROFIT within the Profit and Loss statement) for the year.
This component of the plan is targeted to pay a bonus equal to
16 1/2% OF BASE SALARY. The preliminary bonus calculation
according to the attached chart shall be paid out as a percent
of the participant's base annual compensation as of
September 30, 1996.
----------------------------------------------------------------
INDIVIDUAL The individual's overall performance, including but not limited
PERFORMANCE to achievement of performance objectives, serves as a multiplier
MULTIPLIER against both Part I and Part II of the incentive plan.
The Senior Vice President of Operations will assign one of the
following performance levels as the "individual performance
multiplier":
----------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL PERFORMANCE LEVEL PERFORMANCE MULTIPLIER
----------------------------------------------------------------
<S> <C>
Outstanding 100% - 125%
----------------------------------------------------------------
Highly Effective 100%
----------------------------------------------------------------
Effective 50% - 100%
----------------------------------------------------------------
Does Not Meet Requirements 0%
----------------------------------------------------------------
</TABLE>
----------------------------------------------------------------
Continued on next page
2
<PAGE> 3
----------------------------------------------------------------
INDIVIDUAL The decision of the President on performance level and
PERFORMANCE "individual performance multiplier" will be final. It will be
MULTIPLIER, based on an overall assessment of performance, including but
CONTINUED not limited to achievement of performance objectives during the
fiscal year, and will take into account all factors that are
deemed to be relevant. Performance evaluations will not
automatically determine performance level for purposes of the
bonus plan. For the performance multiplier to be in excess of
100%, individual performance must be truly exceptional.
----------------------------------------------------------------
PAYMENT OF Bonuses are paid annually based on achieving annual targets. All
BONUS bonuses will be paid as soon as possible after results have been
audited for the bonus period.
Participants must be actively employed by THE GOOD GUYS! in a
bonus eligible position on the date the bonus is paid to be
eligible to earn a bonus payment. An associate who terminates
for any reason prior to the date the bonus is paid does not earn
a bonus.
As an additional condition to the receipt of a bonus, the Board
of Directors must approve the funding of the bonus plan based
on economic and business conditions. Unless and until the board
approves the payment of a bonus, no bonus will be deemed earned
under this plan.
----------------------------------------------------------------
NEWLY HIRED Newly hired eligible associates must be in position for a
OR PROMOTED minimum of six months, or by April 1st, to participate in the
ELIGIBLE plan. If an eligible associate has six or more months in
ASSOCIATES position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position. If an associate has been in position less than six
months (i.e. in position after April 1st), no bonus is earned
for that year.
Newly promoted eligible associates must be in position for a
minimum of three months, or by July 1st, to participate in the
plan. If an eligible associate has three or more months in
position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position.
----------------------------------------------------------------
continued on next page
3
<PAGE> 4
----------------------------------------------------------------
NEWLY HIRED OR If an associate has been in position less than three months
PROMOTED (i.e., in position after July 1st), no bonus is earned for
ELIGIBLE that year. In no case shall a newly promoted associate be
ASSOCIATES, eligible to participate in the plan if he/she was not employed
CONTINUED by THE GOOD GUYS! prior to April 1st of the plan year.
A full month is defined as a calendar month, beginning on the
first and ending on the last day of the calendar month.
If an associate's change in position and responsibilities
results in his/her participation in two different incentive
plans during a plan year, the bonus payment will be prorated to
reflect the number of months worked under each plan.
----------------------------------------------------------------
PLAN This plan will be administered by the Vice President of Human
ADMINISTRATION Resources, with direction provided by the President. The
President will be responsible for making a recommendation on
each participant's overall performance, contribution, attitude
and accomplishment of objectives, and recommending the
multiplier factor.
----------------------------------------------------------------
EMPLOYMENT This plan does not create or evidence a contract between THE
RIGHTS GOOD GUYS! and any participant and does not create or evidence
any employment rights for the participant. Both THE GOOD GUYS!
and participants reaffirm that participant employment is at will
and may be terminated by either participant or THE GOOD GUYS!
at any time for any reason. The plan does not restrict THE GOOD
GUYS! from terminating the employment of any participant.
----------------------------------------------------------------
AMENDMENT This plan may be amended or terminated at any time, in whole or
AND in part, by the President. The President retains the right to
TERMINATION reduce or eliminate payment to a participant if the President,
in his discretion, considers the participant's performance to be
unsatisfactory.
Associates who receive a "needs improvement" or "unsatisfactory"
rating on their annual Performance Appraisal, or receive written
progressive counseling during the plan year, may be disqualified
from participating in this plan until such a time as their
performance improves to an effective or better level.
----------------------------------------------------------------
10/19/95
4
<PAGE> 5
VICE PRESIDENT OF SALES
SALES CONTROLLABLE PROFIT DOLLARS
CONTROLLABLE
PROFIT $ ANNUAL
AS A % OF GOAL BONUS
-------------------------------
94% 0.0%
95% 2.8%
96% 5.5%
97% 8.3%
98% 11.0%
99% 13.8%
100% 16.5%
101% 18.8%
102% 21.0%
103% 23.3%
104% 25.5%
105% 27.8%
106% 30.0%
<PAGE> 1
Exhibit 10.15
1996 KEY MANAGEMENT INCENTIVE PLAN: VICE PRESIDENT REAL ESTATE
----------------------------------------------------------------
PLAN This plan is designed to provide incentive, and to reward Vice
OBJECTIVES Presidents of THE GOOD GUYS! based upon a combination of the
Company's overall performance and their individual performance.
Effective Date: This plan is effective for the fiscal year
starting October 1, 1995 and ending September 30, 1996.
----------------------------------------------------------------
PARTICIPANT A Vice President (or an equivalent position as determined by the
ELIGIBILITY President) is eligible to participate in the plan. The criteria
may be changed from year to year.
All bonuses are at the discretion of the Board of Directors.
----------------------------------------------------------------
PRELIMINARY The preliminary bonus amount, which is recommended to the
BONUS Compensation Committee of the Board of Directors, is determined
CALCULATION by the Company's performance against an Earnings Per Share (EPS)
matrix. EPS as a percent of budget must exceed 75% before any
bonus will be payable.
Where EPS as a percentage of budgeted EPS falls between the
percentages shown on the EPS matrix, the preliminary bonus
percentage will be prorated accordingly.
This plan is targeted to pay a bonus equal to 33% OF BASE
SALARY, should the company achieve 100% of its EPS goal, and
should the associate achieve 100% of his/her individual
performance multiplier (see below).
The salary used for calculation of the bonus is the
participant's base annual compensation in effect as of September
30, 1996.
<TABLE>
<CAPTION>
--------------------------------------------------------------
EPS AS A PERCENT OF BUDGET PRELIMINARY BONUS AS A
PERCENT OF SALARY
--------------------------------------------------------------
<S> <C>
75% and below 0.0%
--------------------------------------------------------------
100% 33.0
--------------------------------------------------------------
125% and above 60.0
--------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
<PAGE> 2
--------------------------------------------------------------
INDIVIDUAL The individual's overall performance, including but not limited
PERFORMANCE to achievement of performance objectives, serves as a
MULTIPLIER multiplier against Company performance.
INDIVIDUAL PERFORMANCE LEVEL PERFORMANCE MULTIPLIER
Outstanding 100% - 125%
Highly Effective 100%
Effective 50% - 100%
Does Not Meet Requirements 0%
The President will assign an "individual performance multiplier"
based on individual performance as described above. The decision
of the President on your performance level and "individual
performance multiplier" will be final. It will be based on an
overall assessment of performance, including but not limited to
achievement of performance objectives during the fiscal year,
and will take into account all factors that are deemed to be
relevant. Performance evaluations will not automatically
determine performance level for purposes of the bonus plan. For
the performance multiplier to be in excess of 100%, individual
performance must be truly exceptional.
--------------------------------------------------------------
NEW STORE The participant will also be eligible for an additional
OPENINGS separate bonus of $2,000 for each new store opened on schedule
as defined in the fiscal year's MBOs.
--------------------------------------------------------------
PAYMENT OF Bonuses are paid annually based on achieving annual targets.
BONUSES All bonuses will be paid as soon as possible after results have
been audited for the bonus period.
Participants must be actively employed by THE GOOD GUYS! in a
bonus eligible position on the date the bonus is paid to be
eligible to earn a bonus payment. An associate who terminates
for any reason prior to the date the bonus is paid does not earn
a bonus.
As an additional condition to the receipt of a bonus, the Board
of Directors must approve the funding of the bonus plan based on
economic and business conditions. Unless and until the board
approves the payment of a bonus, no bonus will be deemed earned
under this plan.
--------------------------------------------------------------
NEWLY HIRED Newly hired eligible associates must be in position for a
ELIGIBLE minimum of six months, or by April 1st, to participate in the
ASSOCIATES plan. If an eligible associate has six or more months in
position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position.
If an associate has been in position less than six months
(i.e. in position after April 1st), no bonus is earned for that
year.
--------------------------------------------------------------
<PAGE> 3
----------------------------------------------------------------
NEWLY PROMOTED Newly promoted eligible associates must be in position for
ELIGIBLE a minimum of three months, or by July 1st, to participate in
ASSOCIATES the plan. If an eligible associate has three or more months
in position, the bonus payable after the end of the fiscal
year will be prorated based on the number of full months in the
position.
If an associate has been in position less than three months
(i.e. in position after July 1st), no bonus is earned for that
year. In no case shall a newly promoted associate be eligible
to participate in the plan if he/she was not employed by THE
GOOD GUYS! prior to April 1st of the plan year.
A "full month" is defined as a calendar month, beginning on the
first and ending on the last day of the calendar month.
If an associate's change in position and responsibilities
results in his/her participation in two different incentive
plans during a plan year, the bonus payment will be prorated to
reflect the number of months worked under each plan.
----------------------------------------------------------------
PLAN This plan will be administered by the Vice President of Human
ADMINISTRATION Resources, with direction provided by the President. The
President will be responsible for making a recommendation on
each participant's overall performance, contribution, attitude
and accomplishment of objectives, and recommending the
multiplier factor.
----------------------------------------------------------------
EMPLOYMENT This plan does not create or evidence a contract between THE
RIGHTS GOOD GUYS! and any participant and does not create or evidence
any employment rights for the participant. Both THE GOOD GUYS!
and participants reaffirm that participant employment is at will
and may be terminated by either participant or THE GOOD GUYS! at
any time for any reason. The plan does not restrict THE GOOD
GUYS! from terminating the employment of any participant.
----------------------------------------------------------------
AMENDMENT AND This plan may be amended or terminated at any time, in whole
TERMINATION or in part, by the President.
The President retains the right to reduce or eliminate payment
to a participant if the President, in his discretion, considers
the participant's performance to be unsatisfactory.
Associates who receive a "needs improvement" or "unsatisfactory"
rating on their annual Performance Appraisal, or receive written
progressive counseling during the plan year, may be
disqualified from participating in this plan until such a time
as their performance improves to an effective or better level.
----------------------------------------------------------------
10/19/95
3
<PAGE> 1
Exhibit 10.16
1996 KEY MANAGEMENT INCENTIVE PLAN: VICE PRESIDENT
----------------------------------------------------------------
PLAN OBJECTIVES This plan is designed to provide incentive, and reward to Vice
Presidents of THE GOOD GUYS! based upon a combination of the
Company's overall performance and their individual performance.
Effective Date: This plan is effective for the fiscal year
starting October 1, 1995 and ending September 30, 1996.
----------------------------------------------------------------
PARTICIPANT A Vice President (or an equivalent position as determined by
ELIGIBILITY the President) is eligible to participate in the plan. The
criteria may be changed from year to year.
All bonuses are at the discretion of the Board of Directors.
----------------------------------------------------------------
PRELIMINARY The preliminary bonus amount, which is recommended to
BONUS the Compensation Committee of the Board of Directors, is
CALCULATION determined by the Company's performance against an Earnings
Per Share (EPS) matrix. EPS as a percent of budget must exceed
75% before any bonus will be payable.
Where EPS as a percent of budgeted EPS falls between the
percentages shown on the EPS matrix, the preliminary bonus
percentage will be prorated accordingly.
This plan is targeted to pay a bonus equal to 33% OF BASE
SALARY, should the company achieve 100% of its EPS goal, and
should the associate achieve 100% of his/her individual
performance multiplier (see below).
The salary used for calculation of the bonus is the
participant's base annual compensation in effect as of September
30, 1996.
----------------------------------------------------------------------------
EPS AS A PERCENT OF BUDGET PRELIMINARY BONUS AT A PERCENT OF SALARY
----------------------------------------------------------------------------
75% and below 0.0%
----------------------------------------------------------------------------
100% 33.0
----------------------------------------------------------------------------
125% and above 60.0
----------------------------------------------------------------------------
------------------------------------------------------------------
<PAGE> 2
----------------------------------------------------------------
INDIVIDUAL The individual's overall performance, including but not limited
PERFORMANCE to achievement of performance objectives, serves as a multiplier
MULTIPLIER against Company performance.
<TABLE>
<CAPTION>
----------------------------------------------------------------
INDIVIDUAL PERFORMANCE LEVEL PERFORMANCE MULTIPLIER
----------------------------------------------------------------
<S> <C>
Outstanding 100% - 125%
----------------------------------------------------------------
Highly Effective 100%
----------------------------------------------------------------
Effective 50% - 100%
----------------------------------------------------------------
Does Not Meet Requirements 0%
----------------------------------------------------------------
</TABLE>
The President will assign an "individual performance multiplier"
based on individual performance as described above. The
decision of the President on your performance level and
"individual performance multiplier" will be final. It will be
based on an overall assessment of performance, including but not
limited to achievement of performance objectives during the
fiscal year, and will take into account all factors that are
deemed to be relevant. Performance evaluations will not
automatically determine performance level for purposes of the
bonus plan. For the performance multiplier to be in excess of
100%, individual performance must be truly exceptional.
----------------------------------------------------------------
PAYMENT OF Bonuses are paid annually based on achieving annual targets. All
BONUS bonuses will be paid as soon as possible after results have been
audited for the bonus period.
Participants must be actively employed by THE GOOD GUYS! in a
bonus eligible position on the date the bonus is paid to be
eligible to earn a bonus payment. An associate who terminates
for any reason prior to the date the bonus is paid does not
earn a bonus.
As an additional condition to the receipt of a bonus, the Board
of Directors must approve the funding of the bonus plan based
on economic and business conditions. Unless and until the
board approves the payment of a bonus, no bonus will be deemed
earned under this plan.
----------------------------------------------------------------
NEWLY HIRED Newly hired eligible associates must be in position for a
ELIGIBLE minimum of six months, or by April 1st, to participate in the
ASSOCIATES plan. If an eligible associate has six or more months in
position, the bonus payable after the end of the fiscal year
will be prorated on the number of full months in the position.
If an associate has been in position less than six months
(i.e. in position after April 1st), no bonus is earned for
that year.
----------------------------------------------------------------
2
<PAGE> 3
----------------------------------------------------------------
NEWLY Newly promoted eligible associates must be in position for a
PROMOTED minimum of three months, or by July 1st, to participate in the
ELIGIBLE plan. If an eligible associate has three or more months in
ASSOCIATES position, the bonus payable after the end of the fiscal year
will be prorated based on the number of full months in the
position.
If an associate has been in position less than three months
(i.e. in position after July 1st), no bonus is earned for that
year. In no case shall a newly promoted associate be eligible to
participate in the plan if he/she was not employed by THE GOOD
GUYS! prior to April 1st of the plan year.
A "full month" is defined as a calendar month, beginning on the
first and ending on the last day of the calendar month.
If an associate's change in position and responsibilities
results in his/her participation in two different incentive
plans during a plan year, the bonus payment will be prorated to
reflect the number of months worked under each plan.
----------------------------------------------------------------
PLAN This plan will be administered by the Vice President of Human
ADMINISTRATION Resources, with direction provided by the President. The
President will be responsible for making a recommendation on
each participant's overall performance, contribution, attitude
and accomplishment of objectives, and recommending the
multiplier factor.
----------------------------------------------------------------
EMPLOYMENT This plan does not create or evidence a contract between THE
RIGHTS GOOD GUYS! and any participant and does not create or evidence
any employment rights for the participant. Both THE GOOD GUYS!
and participants reaffirm that participant employment is at will
and may be terminated by either participant or THE GOOD GUYS! at
any time for any reason. The plan does not restrict THE GOOD
GUYS! from terminating the employment of any participant.
----------------------------------------------------------------
AMENDMENT This plan may be amended or terminated at any time, in whole or
AND in part, by the President.
TERMINATION
The President retains the right to reduce or eliminate payment
to a participant if the President, in his discretion, considers
the participant's performance to be unsatisfactory.
Associates who receive a "Needs Improvement" or "Unsatisfactory"
rating on their annual Performance Appraisal, or receive written
progressive counseling during the plan year, may be disqualified
from participating in this plan until such a time as their
performance improves to an effective or better level.
----------------------------------------------------------------
3
<PAGE> 1
Exhibit 10.18
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is
entered into effective as of September 26, 1995, by and between THE GOOD GUYS,
INC., a Delaware corporation ("Assignor"), and THE GOOD GUYS - CALIFORNIA,
INC., a California corporation ("Assignee").
RECITALS
A. Assignor desires to assign substantially all of its
assets, rights, properties, claims and contracts used in its business (the
"Business") to Assignee, subject to the assumption by Assignee of all
liabilities and obligations of Assignor relating to such assets, rights,
properties, claims and contracts.
B. Assignee desires to issue 1,000 shares of its common
stock to Assignor, which will constitute all of the issued and outstanding
shares of capital stock of Assignee, in exchange for the assets, rights,
properties, claims and contracts assigned by Assignor hereunder.
C. It is intended that the transaction contemplated by
this Agreement will qualify for nonrecognition of gain or loss under Section
351 of the Internal Revenue Code of 1986.
NOW, THEREFORE, Assignor and Assignee hereby agree as follows:
1. Assignment of Property and Assets by Assignor.
a. Assignment. On the terms and subject to the
conditions of this Agreement, Assignor hereby conveys, assigns, transfers and
delivers to Assignee, in exchange for the issuance to Assignor of 1,000 shares
of common stock of Assignee (the "Shares"), all of Assignor's assets, rights,
accounts, properties, claims and contracts (the "Assigned Assets"), except for
those leases set forth in ATTACHMENT I (the "Unassigned Leases") which will be
the subject of a separate assignment and assumption agreement, and except that
any contract between Assignor and any third party which contains a prohibition
against, or limitation or condition on, transfer or assignment (the
"Non-Assignable Contracts") is not assigned hereby.
b. Instruments of Conveyance and Transfer.
Assignor has delivered or will deliver to Assignee such deeds, endorsements,
consents, assignments and other good and sufficient instruments of conveyance
and assignment as will be effective to vest in Assignee all right, title and
-1-
<PAGE> 2
interest of Assignor in and to the Assigned Assets, and has transferred or will
transfer to Assignee copies of all the contracts, agreements, commitments,
books, records, files and other data relating to the Assigned Assets reasonably
necessary for the continued operation of the Business by Assignee.
c. Further Assurances. From time to time
hereafter, Assignor will execute and deliver such other instruments of
conveyance, assignment, transfer and delivery, and will take such other
actions, as Assignee reasonably may request in order more effectively to
transfer, convey, assign and deliver to Assignee, and to place Assignee in
possession and control of, any of the Assigned Assets and the Unassigned Leases
and Non-Assignable Contracts (at such time as they may be assigned by Assignor
to Assignee).
2. Assumption of Liabilities. Effective as of the date
hereof, Assignee hereby assumes and agrees to pay, perform and discharge when
due the liabilities and obligations of Assignor, to the extent the same are
unpaid, undelivered or unperformed as of the date hereof (the "Assumed
Liabilities").
3. Delivery of Shares.
a. Subscription; Delivery of Certificates.
Assignee will promptly deliver to Assignor a duly executed stock certificate or
certificates, registered in Assignor's name and representing the Shares,
against assignment of the Assigned Assets to Assignee pursuant to Section 1
hereof and the assumption of the Assumed Liabilities by Assignee pursuant to
Section 2 hereof, representing payment in full for the Shares.
b. Representation of Assignor. Assignor hereby
represents and warrants that it is acquiring the Shares for its own account and
not with an intent to sell or otherwise distribute such securities.
4. Covenants Subsequent to Assignment and Assumption.
a. Assignor's Cooperation. Assignor will use
its reasonable best efforts to provide any information contained in Assignor's
books and records, and will use its reasonable best efforts otherwise to assist
and cause its employees to assist Assignee, in connection with the
investigation, litigation and final disposition of any claims relating to the
Assigned Assets or the Assumed Liabilities.
-2-
<PAGE> 3
b. Insurance. With respect to any liability or
obligation assumed hereunder by Assignee relating to the operation of the
Business prior to the date hereof that is covered by Assignor's insurance
policies, Assignor will make its insurance available to cover such claims,
including worker's compensation claims with respect to occurrences prior to the
date hereof; provided that Assignee will be responsible for any deductible
amounts and amounts in excess of coverage with respect thereto. Assignor and
Assignee each agree to cooperate fully and promptly in the preparation and
presentation of defenses to any such liability claims, including, but not
limited to, the prompt review and copying of records, the availability of
employees for consultation and as witnesses, and the prompt response to all
requests for supporting documents and materials. Assignee agrees to give
Assignor prompt notice of any information it receives which pertains to a claim
for which Assignor could be required to make insurance coverage available under
this Section 4.b.
c. Further Agreements. Assignor authorizes and
empowers Assignee on and after the date hereof to receive and open all mail
received by Assignee relating to the Business, the Assigned Assets, or the
Assumed Liabilities, and to deal with the contents of such communications in
any proper manner. Assignor will promptly deliver to Assignee any mail or
other communication received by Assignor after the date hereof pertaining to
the Assigned Assets or the Assumed Liabilities and any cash, checks or other
instruments of payment to which Assignee is entitled.
5. Miscellaneous.
a. Bulk Sales Law. Assignee and Assignor agree
to waive compliance with the provisions of the California Bulk Sales Law.
b. Further Action. Each of the parties hereto
agrees to use reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
and to effect all registrations, filings and notices with or to third parties
or governmental or regulatory authorities that are necessary or desirable.
c. No Third Party Rights. Nothing in this
Agreement, expressed or implied, is intended to confer on any person or entity
other than Assignor and Assignee or their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
-3-
<PAGE> 4
d. Choice of Law. This Agreement will be
interpreted and enforced in accordance with the laws of the State of California
as applied to contracts executed and performed entirely therein.
e. Counterparts. This Agreement may be executed
in any number of counterparts, each of which will be an original, but all of
which together will constitute one instrument.
f. Captions. The captions appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or interpretation of this Agreement.
g. Amendment of Agreement; Termination. This
Agreement may be amended by a written instrument signed by all of the parties
hereto. This Agreement may be terminated and the transactions contemplated
herein may be abandoned by mutual written consent of Assignor and Assignee. In
the event of any such termination, this Agreement will forthwith become wholly
void and of no further force and effect and there will be no liability on the
part of Assignor, Assignee, or their respective officers or directors.
h. Severability. The invalidity or
unenforceability of any provision of this Agreement will not affect the
validity or enforceability of any other provision.
i. Assignability. This Agreement is not
assignable by either party without the prior written consent of the other.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Assignment and Assumption Agreement as of the date first written
above.
THE GOOD GUYS, INC., A DELAWARE
CORPORATION
By: /s/ Robert A. Gunst
-------------------------------
Robert A. Gunst
Title: President
----------------------------
THE GOOD GUYS - CALIFORNIA,
INC., A CALIFORNIA CORPORATION
By: /s/ Robert A. Gunst
-------------------------------
Robert A. Gunst
Title: President
----------------------------
-5-
<PAGE> 6
ATTACHMENT I
UNASSIGNED LEASES
Stonestown Shopping Center
Stonestown Installation Facility
San Mateo
Almaden Plaza (Blossom Hill)
Beverly Connection
Chula Vista
Southland Mall (Hayward)
Marina Del Rey
Metro Center (MIS Facility) Burlingame
Anaheim Service Center
Temple of the Golden Rule (Berkeley)
Geary Street, San Francisco
Grossmont Center, San Diego
-6-
<PAGE> 1
EXHIBIT 10.19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
------------------
DATED AS OF SEPTEMBER 26, 1995
AMONG
THE GOOD GUYS - CALIFORNIA, INC.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
AND
THE BANK OF CALIFORNIA N.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Definitions and Financial Requirements...................................................................... 1
1.1 Definitions..................................................................................... 1
1.2 Financial Requirements.......................................................................... 5
2. The Credit Facilities....................................................................................... 5
2.1 The BofA Facility............................................................................... 5
2.2 The BankCal Facility............................................................................ 5
2.3 Pro Rata Borrowings............................................................................. 6
2.4 Advances Under this Agreement................................................................... 6
2.5 Optional Interest Rates......................................................................... 6
2.6 Standby Letters of Credit....................................................................... 8
2.7 Fee............................................................................................. 9
2.8 Commitment Fee.................................................................................. 9
2.9 Default Rate.................................................................................... 9
2.10 Termination of Prior Agreement.................................................................. 9
2.11 Termination of This Agreement................................................................... 10
2.12 Extension of Availability Period................................................................ 10
3. Extensions of Credit, Payments and Interest Calculations.................................................... 10
3.1 Requests for Credit............................................................................. 10
3.2 Oral Requests................................................................................... 10
3.3 Disbursements and Payments...................................................................... 11
3.4 Branch Accounts................................................................................. 11
3.5 Evidence of Indebtedness........................................................................ 11
3.6 Debits to Borrower's Accounts................................................................... 11
3.7 Interest Calculation............................................................................ 11
3.8 Late Payments; Compounding...................................................................... 11
3.9 Banking Day..................................................................................... 11
3.10 Taxes and Other Charges......................................................................... 12
3.11 Increased Costs................................................................................. 12
4. Conditions to Availability of Credit.................................................................... 13
4.1 Conditions to First Extension of Credit......................................................... 13
4.2 Conditions to Each Extension of Credit.......................................................... 13
5. Representations and Warranties.............................................................................. 14
5.1 Organization.................................................................................... 14
5.2 No Conflicts.................................................................................... 14
5.3 Enforceability.................................................................................. 14
5.4 Good Standing................................................................................... 14
5.5 Compliance with Laws............................................................................ 14
5.6 Litigation...................................................................................... 14
5.7 No Event of Default............................................................................. 14
5.8 Information Submitted........................................................................... 15
5.9 No Material Adverse Change...................................................................... 15
5.10 ERISA Plan Compliance........................................................................... 15
5.11 Transfer of Assets.............................................................................. 15
6. Covenants................................................................................................... 15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
<S> <C>
6.1 Notices of Certain Events....................................................................... 16
6.2 Financial and Other Information................................................................. 16
6.3 Books, Records, Audits and Inspections.......................................................... 17
6.4 Adjusted Tangible Net Worth..................................................................... 17
6.5 Total Liabilities to Adjusted Tangible Net Worth................................................ 18
6.6 Fixed Charge Coverage Ratio..................................................................... 18
6.7 Capital Expenditures............................................................................ 18
6.8 Out-Of-Debt Requirement......................................................................... 19
6.9 Other Indebtedness.............................................................................. 19
6.10 Liens........................................................................................... 20
6.11 Acquisitions and Investments.................................................................... 21
6.12 Dividends....................................................................................... 21
6.13 Loans to Officers............................................................................... 21
6.14 Capital Ownership............................................................................... 22
6.15 Sales and Leasebacks............................................................................ 22
6.16 Existence and Properties........................................................................ 22
6.17 Liquidations and Mergers........................................................................ 22
6.18 Sale of Assets.................................................................................. 22
6.19 Insurance....................................................................................... 23
6.20 Compliance with Laws............................................................................ 23
6.21 Accuracy of Financial Information............................................................... 23
6.22 Additional Acts................................................................................. 23
6.23 Business Activities............................................................................. 23
6.24 Change in Name, Structure or Location........................................................... 23
6.25 Subsidiaries.................................................................................... 23
6.26 Environmental Quality........................................................................... 23
6.27 Use of Proceeds................................................................................. 24
6.28 Taxes........................................................................................... 24
6.29 Current Ratio................................................................................... 24
7. Events of Default........................................................................................... 24
7.1 Failure to Pay.................................................................................. 24
7.2 Breach of Representation or Warranty............................................................ 24
7.3 Falsity of Information.......................................................................... 24
7.4 Suits........................................................................................... 24
7.5 Judgments....................................................................................... 24
7.6 Failure to Pay Debts; Voluntary Bankruptcy...................................................... 25
7.7 Involuntary Bankruptcy.......................................................................... 25
7.8 Governmental Action............................................................................. 25
7.9 Default of Other Financial Obligations.......................................................... 25
7.10 Default of Other Bank Obligations............................................................... 25
7.11 Material Adverse Change......................................................................... 25
7.12 ERISA Plan Termination.......................................................................... 25
7.13 Other Breach Under Agreement.................................................................... 26
8. Miscellaneous............................................................................................... 26
8.1 Successors and Assigns.......................................................................... 26
8.2 Consents and Waivers............................................................................ 26
8.3 Governing Law................................................................................... 26
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
<S> <C>
8.4 Costs and Attorneys' Fees....................................................................... 26
8.5 Integration..................................................................................... 26
8.6 Participations.................................................................................. 27
8.7 Arbitration; Reference Proceeding............................................................... 27
8.8 Notices......................................................................................... 29
8.9 Headings........................................................................................ 29
8.10 Severability.................................................................................... 29
8.11 Counterparts.................................................................................... 29
8.12 Indemnification................................................................................. 29
8.13 Setoff.......................................................................................... 29
9. Relation of Banks........................................................................................... 29
9.1 Independent Facilities.......................................................................... 29
9.2 No Agency....................................................................................... 29
9.3 No Requirement to Share......................................................................... 30
9.4 Notices......................................................................................... 30
9.5 Independent Credit Investigations............................................................... 30
9.6 Other Relationships............................................................................. 30
</TABLE>
-iii-
<PAGE> 5
CREDIT AGREEMENT
This Agreement is effective as of September 26, 1995 among Bank of
America National Trust and Savings Association ("BofA"), The Bank of California
N.A. ("BankCal") and The Good Guys - California, Inc., a California corporation
("Borrower"). BofA and BankCal are sometimes referred to as "Banks," and each is
a "Bank."
RECITALS
A. The Banks and The Good Guys, Inc., a Delaware corporation ("Former
Borrower") entered into a certain Credit Agreement dated as of June 28,
1995 (the "Previous Credit Agreement").
B. The Former Borrower and the Borrower are entering into an
Assignment and Assumption Agreement dated September 26, 1995, under which
the Former Borrower is assigning all of its assets to the Borrower, and the
Borrower is assuming the liabilities and obligations of the Former
Borrower. In exchange, the Former Borrower will own all of the 1,000 issued
and outstanding shares of the Borrower.
C. The Borrower and the Former Borrower have requested the Banks to
permit the Borrower to assume all of the obligations under the Previous
Credit Agreement, with the Former Borrower becoming a guarantor
("Guarantor") of the obligations of the Borrower under this Agreement.
D. On the effective date of this Agreement, all indebtedness
outstanding under the Previous Credit Agreement shall be assumed by the
Borrower and shall be deemed outstanding under this Agreement, and the
Previous Credit Agreement shall be deemed cancelled.
AGREEMENT
1. Definitions and Financial Requirements.
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes
hereof:
"Availability Period" means the period commencing on the Closing
Date and ending on February 28, 1997, or such later date as determined
under paragraph 2.12 below.
"Banking Day" means, unless otherwise defined in this Agreement,
a day other than a Saturday or a Sunday on which Banks are open for
business in California. With respect to LIBOR Rate Portions, a Banking Day
is a day other than a Saturday or a Sunday on which Banks are open for
business in California, New York and London and are dealing in offshore
dollars.
"BankCal Facility" means the facility provided by BankCal under
Paragraph 2.2 below.
"BankCal Money Market Rate" means a rate per annum which BankCal
quotes as the rate at which funds in the amount of the Portion and for a
period of time comparable to the Interest Period are available for purchase
from other banks in the ordinary course of BankCal's business on the first
day of the applicable Interest Period, adjusted for the then maximum
reserve, capital adequacy, deposit insurance, and similar requirements that
under any circumstances could be applicable to BankCal pursuant to
applicable law or regulation, and other amounts associated with BankCal's
costs and desired return. The BankCal Money Market Rate may be accepted
only at the time quoted by BankCal. Due to changes in legal, regulatory,
economic, or market conditions, BankCal may at any time determine that the
BankCal Money Market Rate is not available.
"BankCal's Prime Rate" means a fluctuating rate that changes
with the rate BankCal announces to be in effect from time to time as its
prime rate. The Prime Rate is set by BankCal based on various factors,
including general economic and market conditions, and is used as a
reference point in pricing certain loans. BankCal may price its loans at,
above or below the Prime Rate.
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<PAGE> 6
"BofA Facility" means the facility provided by BofA under
Paragraph 2.1 below.
"BofA Fixed Rate" means the fixed interest rate per annum,
determined solely by BofA on the first day of the applicable Interest
Period for the Portion, as the rate at which BofA would be able to borrow
funds in the Money Market in the amount of the Portion and with an interest
and principal payment schedule equal to the Portion and for a term equal to
the applicable Interest Period. The BofA Fixed Rate shall include
adjustments for reserve requirements, federal deposit insurance, and any
other similar adjustment which BofA deems appropriate. The BofA Fixed Rate
is BofA's estimate only and BofA is under no obligation to actually
purchase or match funds for any transaction. "Money Market" means one or
more wholesale funding markets available to BofA, including domestic
negotiable certificates of deposit, eurodollar deposits, bank deposit notes
or other appropriate money market instruments selected by BofA.
"BofA's Reference Rate" means the rate of interest publicly
announced from time to time by BofA in San Francisco, California, as its
reference rate. Any change in BofA's Reference Rate shall take effect on
the day specified in the public announcement of such change. BofA's
Reference Rate is set by BofA based on various factors, including BofA's
costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans. BofA may price
loans at, above or below BofA's Reference Rate.
"Capital Expenditure" means an expenditure for the acquisition
of fixed or capital assets or the leasing of fixed or capital assets, but
excluding the leasing of premises for retail store locations and
distribution facilities; excluding equipment rentals for less than one
year; excluding landlord allowances for leasehold improvements; and
excluding expenditures under operating leases.
"Cayman Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by BofA as of the first day of the
Interest Period.)
Cayman Rate = Cayman Base Rate
------------------------------
(1.00 - Reserve Percentage)
Where "Cayman Base Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which BofA's Grand Cayman Branch, Grand
Cayman, British West Indies, would offer U.S. dollar deposits for the
applicable Interest Period
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<PAGE> 7
to other major banks in the offshore dollar inter-bank market.
"Closing Date" means the date that the conditions precedent
stated in Paragraph 4.1 below are all satisfied or waived as provided by
the Banks in writing.
"ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
"ERISA Plan" means any employee pension benefit plan maintained
or contributed to by Borrower and insured by the Pension Benefit Guaranty
Corporation under Title IV of ERISA.
"Event of Default" means any event listed in Article 7 of this
Agreement.
"Fixed Charge Coverage Ratio" means the ratio of Income Available
for Fixed Charges to the sum of interest expense, positive income taxes,
rent expense and lease expense.
"Income Available for Fixed Charges" means net income, plus
positive income taxes, depreciation and amortization, interest expense,
rent expense and lease expense.
"Interest Period" means for each Portion the period during which
such Portion shall bear interest at a specified Optional Rate, as agreed by
the Banks and the Borrower at the time Borrower requests the Portion.
"LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by the respective Bank as of the
first day of the Interest Period.)
LIBOR Rate = London Rate
-----------------------------
(1.00 - Reserve Percentage)
Where "London Rate" means the interest rate (rounded upward to the nearest
1/16th of one percent) determined as follows:
(a) for amounts outstanding from BofA, the rate at which
BofA's London Branch, London, Great Britain, would offer U.S. dollar
deposits for the applicable Interest Period to other major banks in
the London inter-bank market at approximately 11:00 a.m. London time
two (2) Banking Days before the commencement of the Interest Period.
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(b) for amounts outstanding from BankCal, the rate at which
U.S. dollar deposits for the applicable Interest Period would be
offered to BankCal in the Eurodollar market two (2) Banking Days
before the commencement of the Interest Period.
"Optional Rate" means one of the optional interest rates provided
under this Agreement, other than BofA's Reference Rate and BankCal's Prime
Rate.
"Portion" means all or such part of the principal balance of
credit provided under this Agreement for which interest is accruing at one
of the Optional Rates.
"Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks
of the Federal Reserve System for Eurocurrency Liabilities, as defined in
Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of
one percent. The percentage will be expressed as a decimal, and will
include, but not be limited to, marginal, emergency, supplemental, special,
and other reserve percentages.
"Spread" means seven-eighths (0.875) of one percentage point.
"Tangible Net Worth" means the gross book value of the assets of
Borrower (exclusive of goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and
expense, deferred charges and other like intangibles) less (a) reserves
applicable thereto, and (b) all liabilities (including accrued and deferred
income taxes).
1.2 Financial Requirements. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
financial computations required under this Agreement shall be made, and all
financial information required under this Agreement shall be prepared in
accordance with generally accepted accounting principles consistently applied.
2. The Credit Facilities
2.1 The BofA Facility. Subject to the provisions of this Agreement,
from time to time during the Availability Period, BofA, on a revolving basis,
will make advances to Borrower and issue standby letters of credit for
Borrower's account. The undrawn and the drawn and unreimbursed amount of all
letters of credit outstanding under the BofA Facility may not exceed at any one
time Five Million Dollars ($5,000,000). The total of all advances, plus the
undrawn and the drawn and unreimbursed amount of all letters of credit,
outstanding under the BofA Facility may
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<PAGE> 9
not exceed at any one time the following amounts (the "BofA Credit Limit"):
(a) From February 1 through October 31 of each year: Twenty
Million Dollars ($20,000,000).
(b) At all other times: Fifty Million Dollars ($50,000,000).
2.2 The BankCal Facility. Subject to the provisions of this Agreement,
from time to time during the Availability Period, BankCal, on a revolving basis,
will make advances to Borrower and issue standby letters of credit for
Borrower's account. The undrawn and the drawn and unreimbursed amount of all
letters of credit outstanding under the BankCal Facility may not exceed at any
one time Three Million Dollars ($3,000,000). The total of all advances plus the
undrawn and the drawn and unreimbursed amount of all letters of credit
outstanding under the BankCal Facility may not exceed at any one time the
following amounts (the "BankCal Credit Limit"):
(a) From February 1 through October 31 of each year: Ten Million
Dollars ($10,000,000).
(b) At all other times: Twenty Five Million Dollars
($25,000,000).
2.3 Pro Rata Borrowings. Borrower agrees that, at all times, the total
of all advances, plus the undrawn and the drawn and unreimbursed amount of all
letters of credit, outstanding under the BofA Facility and the BankCal Facility,
respectively, shall bear the same ratio as the ratio of the BofA Credit Limit to
the BankCal Credit Limit. This requirement shall apply regardless of the amount
of any credit outstanding from either Bank to Borrower outside the BofA Facility
and the BankCal Facility (to the extent such credit is permitted under paragraph
6.9(h) below). Whenever the ratio of the BofA Credit Limit to the BankCal Credit
Limit changes in accordance with the provisions of paragraphs 2.1 and 2.2 above,
the Borrower shall adjust the credit outstandings from the two Banks to maintain
the ratio required by the preceding sentence as soon as it is possible to do so
without incurring any penalties for prepaying any Portion bearing interest at an
Optional Rate. Whenever the Borrower requests a letter of credit, both Banks
shall issue letters of credit to the same beneficiary and for the same term, in
pro rata amounts in proportion to the ratio of the BofA Credit Limit to the
BankCal Credit Limit at the time the letters of credit are designated.
2.4 Advances Under this Agreement.
(a) Borrower shall repay the entire principal balance of all
advances under this Agreement on the last day
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<PAGE> 10
of the Availability Period, subject to the provisions of Paragraph 2.5(e)
below.
(b) Except as provided below, advances made by BofA under this
Agreement shall bear interest at a rate per annum equal to BofA's Reference
Rate, and advances made by BankCal under this Agreement shall bear interest
at a rate per annum equal to BankCal's Prime Rate. Borrower shall pay
interest monthly in arrears on the first day of each month until the last
day of the Availability Period, on which date all accrued and unpaid
interest shall be due and payable.
2.5 Optional Interest Rates. In lieu of the rates related to BofA's
Reference Rate and BankCal's Prime Rate, Borrower may elect to have all or
portions of advances under this Agreement bear interest at any of the following
rates plus the Spread during an appropriate Interest Period: the LIBOR Rate; for
amounts advanced by BofA, the BofA Fixed Rate or the Cayman Rate; and for
amounts advanced by BankCal, the BankCal Money Market Rate. Each Optional Rate
is subject to the following requirements:
(a) Each Portion shall be for an amount not less than the
following:
(i) For the LIBOR Rate or the BankCal Money Market Rate, One
Million Dollars ($1,000,000).
(ii) For the BofA Fixed Rate or the Cayman Rate, an amount
not less than Five Hundred Thousand Dollars ($500,000) for interest
periods of 30 days or longer. For shorter maturities, each Portion
will be for an amount which, when multiplied by the number of days in
the applicable interest period, is not less than fifteen million
(15,000,000) dollar-days.
(b) Each Interest Period shall not end later than the last day of
the Availability Period. For the LIBOR Rate, the Interest Period shall be
one (1), two (2), three (3), six (6), or twelve (12) months. For the
BankCal Money Market Rate, the Interest Period shall be from one to no
longer than sixty days. For the Grand Cayman Rate and the BofA Fixed Rate,
the Interest Period shall be from one day to no longer than one year. For
the LIBOR Rate and the Cayman Rate, the last day of the Interest Period
will be determined by each Bank using the practices of the offshore dollar
inter-bank market.
(c) Borrower shall pay interest on each Portion on the first day
of each month following the first day of the Interest Period for such
portion and on the last day of the Interest Period for such portion.
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<PAGE> 11
(d) A Portion shall not be converted to a different interest rate
during its Interest Period. Upon the expiration of an Interest Period, the
Portion shall thereafter bear interest at the rate based on BofA's
Reference Rate or BankCal's Prime Rate, as applicable, unless Borrower
elects a new interest rate as provided hereunder.
(e) Any payment of a Portion prior to the last day of the
Interest Period for such Portion, whether voluntary, by reason of
acceleration or otherwise, including any mandatory payments required under
this Agreement and applied by either Bank to a Portion, shall be
accompanied by the amount of accrued interest on the amount repaid and by
the amount (if any) by which (i) the additional interest which would have
been payable on the amount repaid had it not been paid until the last day
of its Interest Period exceeds (ii) the interest which would have been
recoverable by such Bank by placing the amount repaid on deposit in the
Reinvestment Market specified below for a period starting on the date it
was repaid and ending on the last day of the Interest Period for such
portion. The Reinvestment Market for LIBOR Rate Portions, Cayman Rate
Portions and BankCal Money Market Rate Portions shall be the offshore
dollar inter-bank markets, and the Reinvestment Market for the BofA Fixed
Rate shall be the certificate of deposit markets.
(f) Banks shall have no obligation to accept an election for a
Portion if any of the following described events has occurred and is
continuing:
(1) Dollar deposits in the principal amount, and for periods
equal to the Interest Period, of a Portion are not available in the
relevant market; or
(2) The Optional Rate does not accurately reflect the cost
of the Portion.
2.6 Standby Letters of Credit.
(a) Each standby letter of credit shall be issued pursuant to the
terms and conditions hereof and of each Bank's standard form agreement for
standby letter of credit executed by Borrower.
(b) Each standby letter of credit shall:
(1) expire on or before one (1) year after the date such
letter of credit is issued, but in no event later than four months
after the last day of the Availability Period;
(2) be otherwise in form and substance and in favor of
beneficiaries satisfactory to Banks.
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<PAGE> 12
(c) Borrower shall pay the Banks an issuance fee equal to
seven-eighths of one percent (0.875%) per annum of the outstanding undrawn
amount of each standby letter of credit, payable in advance at the time the
letter of credit is issued and annually thereafter, calculated on the basis
of the face amount outstanding on the day the fee is calculated. If there
is a default under this Agreement, at each Bank's option, the amount of the
fee shall be increased to 1-1/2% per annum, effective starting on the day
the Bank provides notice of the increase to the Borrower. In addition, the
Borrower shall pay such other fees at the times and in the amounts that
each Bank advises Borrower from time to time as being applicable to
Borrower's standby letters of credit.
(d) Any sum owed to either Bank with respect to a standby letter
of credit issued for Borrower's account which is not paid when due shall,
at the option of that Bank in each instance, be added to advances
outstanding under the that Bank's Facility and shall thereafter bear
interest at the rate applicable to advances.
(e) In addition to any other rights or remedies which Banks may
have under this Agreement or otherwise, upon the occurrence of an Event of
Default each Bank may require Borrower to prepay the amount of any standby
letters of credit outstanding from that Bank under this Agreement.
2.7 Fee. Borrower shall pay the following fees on or before the date
of execution of this Agreement: for BofA, a fee of Twenty Thousand Dollars
($20,000); and for BankCal, a fee of Ten Thousand Dollars ($10,000).
2.8 Commitment Fee.
(a) Borrower shall pay each Bank a commitment fee at the rate of
two tenths of one percent (0.20%) per annum on the average daily unused
portion of the following: (i) for BofA, the BofA Credit Limit; and (ii) for
BankCal, the BankCal Credit Limit. The commitment fee shall be computed on
a calendar quarter basis in arrears. The commitment fee shall be payable on
the first day of each calendar quarter, and on the last day of the
Availability Period.
(b) Upon at least thirty (30) days' advance written notice to
Banks, Borrower may cancel the availability of credit under this Agreement
and repay all of its obligations hereunder in full (subject to the
provisions of Paragraphs 2.5(e) above), and Borrower shall not be obligated
to pay a commitment fee for any quarterly fee after the quarterly period in
which such cancellation and repayment occurred.
2.9 Default Rate. Upon the occurrence and during the continuation of
any Event of Default under Paragraph 7.1 below,
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<PAGE> 13
and without constituting a waiver of any such Event of Default, advances under
this Agreement from either Bank shall at the option of such Bank bear interest
at a rate per annum which is two percentage points (2.00%) higher than the rate
of interest otherwise provided under this Agreement. Upon the expiration of any
Interest Period, the relevant Portion shall thereafter bear interest at BofA's
Reference Rate plus two percentage points (2.00%) or BankCal's Prime Rate plus
two percentage points (2.00%).
2.10 Termination of Prior Agreement. On the Closing Date, the Credit
Agreement between the Banks and Borrower dated June 28, 1995, shall be
terminated, and any credit outstanding thereunder shall be deemed outstanding
under this Agreement.
2.11 Termination of This Agreement. Borrower may, at any time,
terminate this Agreement by written notice to Banks, provided that all amounts
outstanding hereunder have been paid and all other obligations of Borrower have
been fulfilled.
2.12 Extension of Availability Period. The Borrower may extend the
Availability Period to expire on February 28, 1998, by providing a written
notice of extension to both Banks. The notice must be given by the Borrower to
the Banks during the period commencing on March 1, 1996 and ending on April 30,
1996; provided that, at the time the notice is given by the Borrower to the
Banks, there is no Event of Default under this Agreement, and the Borrower has
provided a certificate, signed by a responsible officer of Borrower, certifying
compliance with all terms and conditions of this Agreement as of December 31,
1995.
3. Extensions of Credit, Payments and Interest Calculations
3.1 Requests for Credit. Each request for an extension of credit shall
be made in writing on a form acceptable to the Bank extending the credit or in
any other manner acceptable to that Bank. Requests for advances must be received
no later than 2:00 p.m. on the date the advance will be made; provided that
requests for advances or the designation of portions which will bear interest at
the LIBOR Rate must be received no later than 9:00 a.m. three (3) Banking Days
before the date the advance will be made or the designation will take effect;
provided further that requests for advances or the designation of Portions which
will bear interest at an Optional Rate other than the LIBOR Rate must be
received no later than 11:00 a.m. on the date the advance will be made or the
designation will take effect.
3.2 Oral Requests. At each Bank's sole discretion in each instance,
such Bank may accept telephone requests to make or to repay extensions of
credit. Extensions of credit requested by telephone shall be deposited or wired
into Borrower's commercial account number 14995-05205 with BofA, or such other
account(s) as
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<PAGE> 14
may be specified in writing by Borrower. Telephone requests may be made by any
individual identified in writing to such Bank on a form acceptable to such Bank
as being authorized to make such requests. Each Bank shall be entitled to rely
upon any written or telephone request from persons it reasonably believes to be
authorized by Borrower to make such requests without making independent inquiry.
Borrower hereby indemnifies each Bank for, and holds each Bank harmless from,
any and all losses, damages, claims and expenses (including reasonable
attorneys' fees and allocated costs of Banks' in-house counsel), however
arising, which such Bank suffers or incurs based on or arising out of extensions
of credit or payments made on any telephone request, except that Banks shall not
be indemnified against their own gross negligence or wilful misconduct. The
provisions of this Paragraph shall survive termination of this Agreement.
3.3 Disbursements and Payments. Each disbursement by Banks and each
payment by Borrower under this Agreement shall be made in U.S. Dollars and in
immediately available funds and at such branch of each Bank as that Bank may
from time to time select.
3.4 Branch Accounts. Each extension of credit under this Agreement
shall be made for the account of such branch of the Bank extending the credit as
such Bank may from time to time select.
3.5 Evidence of Indebtedness. Principal, interest and all other sums
due each Bank under this Agreement shall be evidenced by entries in records
maintained by such Bank, and, if required by such Bank, by a promissory note or
notes. Each payment on and any other credits with respect to principal, interest
and all other sums due under this Agreement shall be evidenced by entries to
records maintained by each Bank.
3.6 Debits to Borrower's Accounts. Borrower hereby authorizes BofA to
debit Borrower's account number 14995-05205 in the amount of interest and fees
due to BofA under this Agreement. BofA shall debit the account on the date such
amounts become due, or, if such due date is not a Banking Day, on the next
Banking Day after such due date. For amounts due to BankCal, upon the
instructions of Borrower, BofA shall wire such amounts as designated by Borrower
to The Bank of California N.A., ABA #1210-000-15, for credit to Bancontrol
Account No. 001-060235 with reference to The Good Guys, Inc. If there are
insufficient funds in the account to cover the amount debited to the account in
accordance with this Paragraph, such debit will be reversed and such amount will
remain unpaid. Borrower shall pay BofA's standard fees for each wire transfer.
3.7 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, payable under this Agreement shall be
computed on the basis of a three hundred sixty
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<PAGE> 15
(360) day year and actual days elapsed, which results in more interest or a
larger fee than if a three hundred sixty-five (365) day year were used.
3.8 Late Payments; Compounding. At the option of each Bank, in each
instance, any sum payable hereunder which is not paid when due (including unpaid
interest) may be added to principal of this Agreement and shall thereafter bear
interest at the rate applicable to principal.
3.9 Banking Day. Any sum payable by Borrower hereunder which becomes
due on a day which is not a Banking Day shall be due on the next Banking Day
after such due date (subject to the practices of the Eurodollar market, if
applicable). Any payments received by either Bank on a day which is not a
Banking Day or after 2:00 p.m. on a Banking Day shall be deemed to be received
on the next Banking Day after such date of receipt.
3.10 Taxes and Other Charges.
(a) Borrower agrees to make all payments or reimbursements under
this Agreement free and clear of and without deduction for any present or
future taxes, levies, imposts, fees or other charges of any kind which may
be imposed by any governmental authority with respect to such payments or
reimbursements ("Taxes"). If any Taxes are imposed by any governmental
authority, Borrower agrees to pay such Taxes and to confirm payment by
delivery of official tax receipts or notarized copies thereof to Banks
within thirty (30) days after the due date for each tax payment. This
Paragraph shall not apply with respect to any taxes which are imposed on or
measured by either Bank's net income by any jurisdiction.
(b) In the event the Borrower is prohibited by operation of law
from making payments or reimbursements to the Banks without making such
deductions or paying, or causing to be paid, any and all Taxes, the
Borrower shall pay to the Banks upon demand such additional amounts as may
be necessary in order to reimburse the Banks for Taxes paid by the Banks on
the Borrower's behalf such that the aggregate net amounts received by the
Banks shall equal the amounts which would have been received if such
deduction or withholding had not been required.
3.11 Increased Costs. Borrower shall reimburse or compensate each
Bank, upon demand by that Bank, for all costs incurred, losses suffered or
payments made by that Bank which are applied or allocated by such Bank to this
Agreement (all as reasonably determined by such Bank in its sole discretion) by
reason of any change in any statute, regulation, or any request or requirement
of any regulatory agency, whether or not having
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<PAGE> 16
the force of law, which is applicable to all or a class of all national banks,
including:
(a) any and all present or future reserve, deposit or similar
requirements applied against (or against any class of or change in or in
the amount of) assets or liabilities of, or commitments or extensions of
credit by, such Bank; and
(b) any and all present or future capital or similar requirements
against (or against any class of or change in or in the amount of) assets
or liabilities of, or commitments or extensions of credit by, such Bank.
4. Conditions to Availability of Credit.
Each Bank's obligation to extend credit under this Agreement is
subject to the following conditions. In the case of documents or evidence to be
received by Banks, each such item must be in form and substance satisfactory to
both Banks:
4.1 Conditions to First Extension of Credit. Before the first
extension of credit:
(a) Receipt by Banks of evidence that the execution, delivery,
and performance by Borrower and Guarantor of this Agreement and any
instrument or agreement required under this Agreement, as appropriate, have
been duly authorized.
(b) Receipt by Banks of an executed copy of this Agreement; a
promissory note as required by BankCal; and each Bank's standard wire
transfer agreement.
(c) Payment of any fees and costs due on the Closing Date.
(d) Receipt by Banks of evidence of the insurance coverage
required by Paragraph 6.19 below.
(e) Receipt by Bank of copies of all executed documents and
agreements effecting the transfer of the assets and liabilities of the
Guarantor to the Borrower.
(f) Continuing guaranties, on each Bank's standard form, executed
by Guarantor, guarantying the obligations of Borrower to each Bank, in a
principal amount acceptable to each Bank.
(g) Payment by the Borrower of all costs, expense and attorneys'
fees (including allocated costs for in-house legal services) incurred by
the Banks in connection with this Agreement.
4.2 Conditions to Each Extension of Credit. As a condition to each
extension of credit,
(a) Borrower must be in compliance with Paragraph 2.3 above.
(b) Each representation and warranty made by Borrower and
Guarantor under this Agreement must be true and correct as of the date of
the extension of credit.
5. Representations and Warranties
Borrower represents and warrants (and each request for an extension of
credit under this Agreement shall be deemed a
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<PAGE> 17
representation and warranty made on the date of such request) that:
5.1 Organization. Borrower and Guarantor each is a corporation duly
organized and existing under the laws of the state of its organization and the
execution, delivery, and performance of this Agreement and of any instrument or
agreement required by this Agreement are within Borrower's and Guarantor's
powers, have been duly authorized, and are not in conflict with the terms of any
charter, bylaw, or other organization papers of Borrower or Guarantor;
5.2 No Conflicts. The execution, delivery, and performance of this
Agreement and of any instrument or agreement required by this Agreement are not
in conflict with any law or any indenture, agreement, or undertaking to which
Borrower or Guarantor is a party or by which Borrower or Guarantor is bound or
affected;
5.3 Enforceability. This Agreement is a legal, valid and binding
agreement of Borrower, enforceable against Borrower in accordance with its
terms, and any instrument or agreement required under this Agreement, when
executed and delivered, will be similarly legal, valid, binding and enforceable;
5.4 Good Standing. Borrower and Guarantor each is properly licensed
and in good standing in each state in which it is doing business and Borrower
and Guarantor each has qualified under, and complied with, where required, the
fictitious name statute of each state in which it is doing business;
5.5 Compliance with Laws. Borrower and Guarantor each has complied
with all federal, state, and local laws, rules, and regulations affecting the
business of Borrower and Guarantor including, but not limited to, laws
regulating Borrower's and Guarantor's sales or the furnishing of services to
their customers and disclosures in connection therewith;
5.6 Litigation. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of Borrower, threatened, against or
affecting Borrower or Guarantor or their property, the adverse determination of
which would have a material adverse effect on Borrower's or Guarantor's
financial condition or operations or impair Borrower's or Guarantor's ability to
perform its obligations hereunder or under any instrument or agreement required
hereunder;
5.7 No Event of Default. No event has occurred and is continuing or
would result from the extension of credit under this Agreement which constitutes
or would constitute an Event of Default or which, upon a lapse of time or notice
or both, would become an Event of Default;
5.8 Information Submitted. All financial information submitted by
Borrower or Guarantor to either Bank has been prepared in accordance with
generally accepted accounting principles consistently applied, is fairly
presented in all material
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respects and is complete insofar as may be necessary to give Banks a true and
accurate knowledge of the subject matter thereof;
5.9 No Material Adverse Change. There has been no material adverse
change in the consolidated financial condition of Borrower and Guarantor since
the date of the most recent financial statements submitted to Banks;
5.10 ERISA Plan Compliance.
(a) Borrower and Guarantor each has fulfilled its obligations, if
any, under the minimum funding standards of ERISA and the Internal Revenue
Code of 1986, as amended from time to time, (the "Code") with respect to
each ERISA Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and has not incurred
any liability with respect to any ERISA Plan under Title IV of ERISA;
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the Pension Benefit Guaranty Corporation requires 30 day
notice;
(c) No action by Borrower or Guarantor to terminate or withdraw
from any ERISA Plan has been taken and no notice of intent to terminate an
ERISA Plan has been filed under Section 4041 of ERISA;
(d) No proceeding has been commenced with respect to an ERISA
Plan under Section 4042 of ERISA, and no event has occurred or condition
exists which might constitute grounds for the commencement of such a
proceeding.
5.11 Transfer of Assets. All of the assets of the
Guarantor have been transferred to the Borrower, and all of the liabilities and
obligations of the Guarantor have been assumed by the Borrower, except for such
assets, liabilities and obligations which have been disclosed to the Banks and
are acceptable to the Banks.
6. Covenants
So long as credit is available under this Agreement and until full and
final payment of all of Borrower's obligations under this Agreement and any
instrument or agreement required under this Agreement, Borrower and Guarantor
shall, unless Banks waive compliance in writing:
6.1 Notices of Certain Events. Promptly give written notice to both
Banks of:
(a) all litigation affecting Borrower or Guarantor where the
amount claimed is Two Million Dollars ($2,000,000) or more;
(b) any substantial dispute which may exist between Borrower or
Guarantor and any governmental regulatory body or law enforcement
authority;
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<PAGE> 19
(c) any Event of Default or any event which, upon a lapse of time
or notice or both, would become an Event of Default;
(d) the occurrence of any reportable event under Section 4043(b)
of ERISA for which the Pension Benefit Guaranty Corporation requires thirty
(30) day notice; any action by Borrower or Guarantor to terminate or
withdraw from an ERISA Plan or the filing of any notice of intent to
terminate under Section 4041 of ERISA; any notice of noncompliance made
with respect to an ERISA Plan under Section 4041(b) of ERISA; or the
commencement of any proceeding with respect to an ERISA Plan under Section
4042 of ERISA;
(e) any other matter which has resulted or could reasonably be
expected to result in an adverse change in Borrower's or Guarantor's
financial condition or operations;
6.2 Financial and Other Information. Deliver to both Banks in form and
detail satisfactory to Banks, and in such number of copies as Banks may request:
(a) Within one hundred twenty (120) days after the end of each
fiscal year Guarantor's consolidated financial statements for such year
audited by a certified public accountant together with an unqualified
opinion of such certified public accountant and including, at a minimum,
Guarantor's consolidated balance sheet and statements of income, retained
earnings and cash flow, and including a copy of the accountant's management
letter, and consolidating worksheets prepared by Borrower;
(b) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of Guarantor's Form 10-K Annual Report; within sixty
(60) days after each quarterly accounting period, a copy of Guarantor's
Form 10-Q Quarterly Report; and within ten (10) days after the date of
filing with the Securities and Exchange Commission, a copy of each Form 8-K
Current Report filed by Guarantor;
(c) Within one hundred twenty (120) days after the end of each
fiscal year Guarantor's projected consolidated balance sheet and statements
of income, retained earnings and cash flow for the period through the last
day of the Availability Period; or a written notice that the projections
previously supplied to the Banks and covering such period are unchanged;
(d) Within forty-five (45) days after each quarterly accounting
period, a certificate, signed by a responsible officer of Borrower,
certifying compliance with all terms and conditions of this Agreement;
(e) Within forty-five (45) days after each quarterly accounting
period, the Guarantor's consolidated and consolidating financial statements
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<PAGE> 20
prepared by the Guarantor;
(f) Promptly upon request of either Bank, such other statements,
lists of property and accounts, budgets, forecasts or reports as to
Borrower or Guarantor as Banks may reasonably request;
6.3 Books, Records, Audits and Inspections. Borrower and Guarantor
must maintain adequate books, accounts and records and prepare all financial
statements required hereunder in accordance with generally accepted accounting
principles consistently applied, and in compliance with the regulations of any
governmental regulatory body having jurisdiction over Borrower or Guarantor or
their business and permit employees or agents of either Bank at any reasonable
time to inspect Borrower's and Guarantor's properties and to examine or audit
Borrower's and Guarantor's books, accounts, and records and make copies and
memoranda thereof.
6.4 Adjusted Tangible Net Worth. Maintain on a consolidated basis
Adjusted Tangible Net Worth of at least the amount indicated as of the end of
each quarter set forth below. "Adjusted Tangible Net Worth" means Tangible Net
Worth minus the proceeds of any public or private offering of stock of the
Guarantor after the date of this Agreement, other than stock sold under the
Employee Stock Purchase Plan and Stock Options:
<TABLE>
<CAPTION>
Quarter Ending Amount
-------------- ------
<S> <C>
March 31, 1995 $124,000,000
June 30, 1995 $127,000,000
September 30, 1995 $131,000,000
December 31, 1995 $140,000,000
March 31, 1996 $144,000,000
June 30, 1996 $147,000,000
September 30, 1996 $151,000,000
December 31, 1996 $161,000,000
March 31, 1997 $166,000,000
June 30, 1997 $171,000,000
September 30, 1997 $177,000,000
December 31, 1997 $191,000,000
</TABLE>
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<PAGE> 21
6.5 Total Liabilities to Adjusted Tangible Net Worth. Not permit the
ratio of consolidated total liabilities (as shown on consolidated balance sheet,
prepared in accordance with generally accepted accounting principles) to
Adjusted Tangible Net Worth to exceed the figures indicated as of each date set
forth below:
(a) As of March 31, June 30, and September 30 of each year:
0.90:1.00.
(b) As of December 31 of each year: 1.25:1.00.
6.6 Fixed Charge Coverage Ratio. As of the end of each quarterly
accounting period set forth below, achieve a consolidated Fixed Charge Coverage
Ratio at least equal to the ratio indicated:
(a) As of March 31, June 30, and September 30 of each year:
1.25:1.00.
(b) As of December 31 of each year: 1.50:1.00.
6.7 Capital Expenditures. Not, in any of the periods specified below,
on a consolidated basis, expend or incur, or consent to expend or incur, Capital
Expenditures of more than amounts indicated. These limitations are
non-cumulative, i.e. amounts not used in any period may not be carried forward
into the next period; provided, however, that an unused amount not exceeding Two
Million Dollars ($2,000,000) may be carried forward into the next period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal year ending
September 30, 1995 $23,500,000
Fiscal year ending
September 30, 1996 $17,500,000
Five months ending
February 28, 1997 $ 8,500,000
Fiscal year ending
September 30, 1997 $23,000,000
Quarter ending
December 31, 1997 $ 6,000,000
</TABLE>
6.8 Out-Of-Debt Requirement. For each ninety (90) day period ending on
March 31 of each year, Borrower and Guarantor must fulfill either the
requirements of (a) or of (b) below:
(a) Repay all outstanding advances, and not draw any new
advances, for a period of at least thirty (30) consecutive calendar days
during such ninety (90) day period. This requirement must be fulfilled for
the BofA Facility, the
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<PAGE> 22
BankCal Facility and any indebtedness permitted under paragraphs 6.9(g) and
(h) at the same time; or
(b) Reduce the amount of all advances (including the BofA
Facility, the BankCal Facility and any indebtedness permitted under
paragraphs 6.9(g) and (h)) to not more than Fifteen Million Dollars
($15,000,000) for a period of at least sixty (60) consecutive calendar days
during such ninety (90) day period.
6.9 Other Indebtedness. Borrower and Guarantor each shall not create
or incur any indebtedness for borrowed money or for the deferred purchase price
of property under capital leases, or become liable as a surety, guarantor,
accommodation endorser, or otherwise for or upon the obligation of any other
person, firm or corporation; provided, however, that this Paragraph shall not be
deemed to prohibit:
(a) the acquisition of goods, supplies or merchandise on normal
trade credit; including, but not limited to, indebtedness for the purchase
of inventory under the existing agreements with I.T.T. Commercial Finance
Corporation and Whirlpool Credit Corporation, in an amount not exceeding
Forty Million Dollars ($40,000,000) at any one time; provided, however,
that in each case the agreement between the Borrower and the lender (and
any amendments thereto) must be in form and substance acceptable to the
Banks;
(b) the execution of bonds or undertakings in the ordinary course
of its business as presently conducted;
(c) the endorsement of negotiable instruments received in the
ordinary course of its business as presently conducted;
(d) indebtedness and lease obligations existing as of the date of
this Agreement and which have been disclosed to Banks in writing;
(e) leasing of premises for retail store locations, distribution
facilities and corporate facilities;
(f) equipment rentals for less than one year;
(g) additional indebtedness under uncommitted facilities from
lenders other than the Banks in an amount outstanding not to exceed the
following at any one time: from February 1 through October 31 of any year,
Twenty Million Dollars ($20,000,000); and at other times, Forty Million
Dollars ($40,000,000);
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<PAGE> 23
(h) additional indebtedness under uncommitted facilities from
either Bank; provided, however, that the total outstanding indebtedness
from both Banks (whether under this Agreement or otherwise) plus the total
outstanding indebtedness from other lenders under subparagraph (g) above
must not exceed the following at any on time: from February 1 through
October 31 of any year, Fifty Million Dollars ($50,000,000); and at other
times, Seventy Five Million Dollars ($75,000,000).
6.10 Liens. Borrower and Guarantor each shall not create, assume or
suffer to exist any security interest, lien (including the lien of an
attachment, judgment or execution) or encumbrance, securing a charge or
obligation, on or of any of its property, real or personal, whether now owned or
hereafter acquired, except:
(a) liens, security interests and encumbrances in existence as of
the date of this Agreement which have been disclosed to Banks in writing;
(b) liens for current taxes, assessments or other governmental
charges which are not delinquent or remain payable without any penalty;
(c) purchase money security interests in property acquired after
the date of this Agreement; provided, however, that no such liens shall
cover Borrower's inventory;
(d) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other liens, other than any lien
imposed under ERISA, imposed by law and created in the ordinary course of
business for amounts not yet due or which are being contested in good faith
by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with the
provisions of GAAP;provided that all such items shall not, in the
aggregate, exceed Two Million Dollars ($2,000,000) at any time (excluding
any mechanics and materialmen liens which have not been recorded in the
real property records and for which no other enforcement action has been
taken); provided, however, that no such liens shall cover Borrower's
inventory;
6.11 Acquisitions and Investments. Borrower and Guarantor each shall
not acquire or purchase the assets or business of any other person, firm, or
corporation; and not purchase any stock or make any other investment in any
other company, except for:
(a) joint ventures for real estate development with respect to
the Borrower's retail store locations and distribution facilities, for an
aggregate investment in any one fiscal year not exceeding Two Million Five
Hundred
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<PAGE> 24
Thousand Dollars ($2,500,000); such dollar limit to be non-cumulative from
year to year;
(b) cash and certificates of deposit;
(c) U.S. treasury bills and other obligations of the federal
government;
(d) readily marketable commercial paper with a maturity not
exceeding sixty (60) days;
(e) bankers' acceptances;
(f) repurchase agreements covering U.S. government securities;
6.12 Dividends. Borrower and Guarantor shall not (and shall not permit
any of their subsidiaries to) declare or pay any dividends on any of their
respective shares except dividends payable in capital stock, and not purchase,
redeem or otherwise acquire for value any of their respective shares, or create
any sinking fund in relation thereto; provided, however, that Borrower and
Guarantor may purchase stock from their employees for a consideration not
exceeding, in the aggregate, One Million Five Hundred Thousand Dollars
($1,500,000) in any one fiscal year; such dollar limit to be non-cumulative from
year to year;
6.13 Loans to Officers. Borrower and Guarantor each shall not make any
loans, advances or other extensions of credit to any of Borrower's or
Guarantor's executives, officers, employees, directors or shareholders (or any
relatives of any of the foregoing); provided, however, that Borrower and
Guarantor may make such loans, advances and extensions of credit to executives,
officers and employees in an amount not exceeding, in the aggregate, One Million
Dollars ($1,000,000) in any one fiscal year; such dollar limit to be
non-cumulative from year to year;
6.14 Capital Ownership. Borrower and Guarantor each shall not cause,
permit, or suffer any one shareholder to control, directly, indirectly or
through affiliates, more than fifty percent (50%) of Guarantor's capital
ownership; and Guarantor's capital stock must continue to be entirely owned by
Guarantor;
6.15 Sales and Leasebacks. Borrower and Guarantor each shall:
(a) Not dispose of any of its assets except for full, fair and
reasonable consideration;
(b) Not enter into any sale and leaseback agreement covering any
of its fixed or capital assets; provided, however, that Borrower may enter
into sale/leaseback agreements covering rolling stock, equipment and
fixtures as follows: (i) agreements covering assets first used by Borrower
or Guarantor within the 90 days prior to the agreement; and (ii) additional
agreements in an aggregate amount not exceeding
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<PAGE> 25
Five Million Dollars ($5,000,000) in each fiscal year; such dollar limit to
be non-cumulative from year to year;
6.16 Existence and Properties. Borrower and Guarantor each shall
maintain and preserve Borrower's and Guarantor's existence and all rights,
privileges and franchises now enjoyed, conduct Borrower's and Guarantor's
business in an orderly, efficient and customary manner, keep all Borrower's and
Guarantor's properties in good working order and condition, and from time to
time make all needed repairs, renewals or replacements thereto and thereof so
that the efficiency of such property shall be fully maintained and preserved;
6.17 Liquidations and Mergers. Borrower and Guarantor each shall not
liquidate or dissolve or enter into any consolidation, merger, partnership,
joint venture or other combination, except for (a) joint ventures permitted in
Paragraph 6.11 above; and (b) any merger whose primary purpose is to
reincorporate in another state; provided that any other secondary purpose is
reasonably acceptable to both Banks in their reasonable discretion; and provided
further that Borrower provides to Banks such documentation as reasonably
required by either Bank;
6.18 Sale of Assets. Borrower and Guarantor each shall not sell, lease,
or otherwise dispose of its business or assets as a whole or such as in the
opinion of either Bank constitute a substantial portion of its business or
assets except in the ordinary course of its business as heretofore conducted;
6.19 Insurance. Borrower and Guarantor each shall maintain and keep in
force insurance of the type usual for the business it is in, and deliver to
Banks upon either Bank's request a copy of each insurance policy or, if
permitted by Banks, a certificate of insurance listing all insurance in force;
6.20 Compliance with Laws. Borrower and Guarantor each shall at all
times comply with, or cause to be complied with, all laws, statutes (including
but not limited to any fictitious name statute), rules, regulations, orders and
directions of any governmental authority having jurisdiction over Borrower or
Guarantor or Borrower's or Guarantor's business;
6.21 Accuracy of Financial Information. Borrower and Guarantor each
shall cause all financial information upon submission by Borrower or Guarantor
to Banks to be fairly presented in all material respects and complete to the
extent necessary to give Banks a true and accurate knowledge of the subject
matter thereof;
6.22 Additional Acts. Borrower and Guarantor each shall perform, on
request of either Bank, such acts as may be reasonably necessary or advisable to
carry out the intent of this Agreement;
6.23 Business Activities. Borrower and Guarantor each shall not engage
in any business activities or operations substantially different from or
unrelated to present business activities and operations;
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<PAGE> 26
6.24 Change in Name, Structure or Location. Notify Banks in writing
prior to any change in (a) Borrower's or Guarantor's name, (b) Borrower's or
Guarantor's business or legal structure, or (c) Borrower's or Guarantor's place
of business or chief executive office if Borrower or Guarantor has more than one
place of business;
6.25 Subsidiaries. Borrower and Guarantor each shall not create or
acquire any subsidiaries without the prior written consent of both Banks, which
consent shall not unreasonably be withheld;
6.26 Environmental Quality. Borrower and Guarantor each shall comply
with all applicable laws, rules, regulations, orders and directives relating to
environmental quality, where a failure to so comply may result in a material
adverse effect on the Borrower's or Guarantor's financial condition or ability
to repay the credit outstanding under this Agreement;
6.27 Use of Proceeds. Borrower shall use the proceeds of the credit
provided by this Agreement for general working capital purposes, and such other
purposes as may be acceptable to Banks;
6.28 Taxes. Borrower and Guarantor each shall pay all taxes when due.
6.29 Current Ratio. Maintain on a consolidated basis a ratio of current
assets to current liabilities, as of the end of each fiscal quarter, at least
equal to 1.40:1.00. For the purposes of this computation, all amounts
outstanding under lines of credit, including the BofA Facility and the BankCal
Facility, shall be considered current liabilities.
7. Events of Default
The occurrence of any of the following Events of Default shall
terminate any obligation on the part of either Bank to extend credit under this
Agreement and, at the option of each Bank, shall make all obligations of
Borrower to such Bank under or in respect of this Agreement and any instrument
or agreement required under this Agreement immediately due and payable, without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character:
7.1 Failure to Pay. Borrower fails to pay when due, any instalment of
interest or principal or any other sum due under this Agreement in accordance
with the terms hereof;
7.2 Breach of Representation or Warranty. Any representation or
warranty herein or in any agreement, instrument or certificate executed pursuant
hereto or in connection with any transaction contemplated hereby proves to have
been false or misleading in any material respect when made;
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<PAGE> 27
7.3 Falsity of Information. Any financial or other information
delivered by Borrower or Guarantor to Banks proves to be false or misleading in
any material respect;
7.4 Suits. One or more suits are filed against Borrower or Guarantor by
a trade creditor or trade creditors of Borrower or Guarantor in an aggregate
amount of at least One Million Dollars ($1,000,000) provided that such suit may
have a material adverse impact on Borrower or Guarantor;
7.5 Judgments. One or more judgments or arbitration awards are entered
against Borrower or Guarantor, or Borrower or Guarantor enters into any
settlement agreements with respect to any litigation or arbitration, in the
aggregate amount of One Million Dollars ($1,000,000) or more on a claim or
claims not covered by insurance;
7.6 Failure to Pay Debts; Voluntary Bankruptcy. Borrower or Guarantor
fails to pay its debts generally as they come due, or files any petition,
proceeding, case, or action for relief under any bankruptcy, reorganization,
insolvency, or moratorium law, or any other law or laws for the relief of, or
relating to, debtors;
7.7 Involuntary Bankruptcy. An involuntary petition is filed under any
bankruptcy or similar statute against Borrower or Guarantor, or a receiver,
trustee, liquidator, assignee, custodian, sequestrator, or other similar
official is appointed to take possession of the properties of Borrower or
Guarantor; provided, however, that such Event of Default shall be deemed cured
if such petition or appointment is set aside or withdrawn or ceases to be in
effect within sixty (60) days from the date of said filing or appointment;
7.8 Governmental Action. Any governmental regulatory authority takes or
institutes action which, in the opinion of either Bank, will materially
adversely affect Borrower's or Guarantor's condition, operations or ability to
pay Borrower's obligations under this Agreement or any instrument or agreement
required under this Agreement;
7.9 Default of Other Financial Obligations. Any default occurs under
any other agreement involving the borrowing of money or the extension of credit
to which Borrower or Guarantor may be a party as borrower, guarantor or
instalment purchaser if such default consists of the failure to pay any
obligation when due or if such default gives to the holder of the obligation
concerned the right to accelerate the obligation;
7.10 Default of Other Bank Obligations. Any default occurs under any
other obligation of Borrower or Guarantor to either Bank or to any subsidiary or
affiliate of either Bank, which default has
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<PAGE> 28
not been waived in writing by such Bank or cured by Borrower or Guarantor within
any applicable grace period;
7.11 Material Adverse Change. Any material adverse change occurs in the
financial condition or results of operations of Borrower or Guarantor or in
Borrower's or Guarantor's ability to perform its obligations under this
Agreement or under any instrument or agreement required by this Agreement;
7.12 ERISA Plan Termination. Any ERISA Plan termination or any full or
partial withdrawal from an ERISA Plan occurs which could result in liability of
Borrower or Guarantor to the Pension Benefit Guaranty Corporation or to the
ERISA Plan in an aggregate amount which, in the reasonable opinion of either
Bank, will have a material adverse effect on the financial condition of Borrower
or Guarantor;
7.13 Other Breach Under Agreement. Borrower or Guarantor breaches, or
defaults under, any term, condition, provision, representation or warranty
contained in this Agreement not specifically referred to in this Article.
8. Miscellaneous
8.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that Borrower shall not assign this Agreement or any of the
rights, duties or obligations of Borrower hereunder without the prior written
consent of both Banks.
8.2 Consents and Waivers. No consent or waiver under this Agreement
shall be effective unless in writing. No waiver of any breach or default shall
be deemed a waiver of any breach or default thereafter occurring.
8.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California.
8.4 Costs and Attorneys' Fees. Borrower agrees to pay to Banks, on
demand, all costs, expenses and attorneys' fees (including allocated costs for
in-house legal services) incurred by either Bank in connection with the
preparation, administration and enforcement of this Agreement and any instrument
or agreement required under this Agreement, including without limitation during
any workout, attempted workout, and/or in connection with the rendering of legal
advice as to the Banks' rights, remedies, and obligations under this Agreement.
In the event a legal action or arbitration proceeding is commenced in connection
with the enforcement of this Agreement or any instrument or agreement required
under this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees (including allocated costs for in-house legal services), costs
and necessary disbursements incurred in connection with such action or
proceeding (including
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<PAGE> 29
any proceeding for declaratory relief, any counterclaim to any proceeding, or
any appeal), as determined by the court or arbitrator.
8.5 Integration. This Agreement and any instrument, agreement or
document attached hereto or referred to herein (a) integrate all the terms and
conditions mentioned herein or incidental hereto, (b) supersede all oral
negotiations and prior writings in respect to the subject matter hereof, and (c)
are intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Agreement and any such
instrument, agreement or document and as the complete and exclusive statement of
the terms agreed to by the parties. In the event of any conflict between the
terms, conditions and provisions of this Agreement and any such instrument,
agreement, or document, the terms, conditions and provisions of this Agreement
shall prevail.
8.6 Participations.
(a) Any Bank (a "Transferor") may from time to time sell, assign,
grant participations in, or otherwise transfer to any other person, firm or
corporation (a "Participant") all or part of the obligations of Borrower and
Guarantor to Transferor under this Agreement.
(b) Borrower agrees that each transfer of its obligations under
this Agreement will give rise to a direct obligation of Borrower to the
Participant and that Participant shall have the same rights and benefits
under this Agreement as it would have if it were a Bank party to this
Agreement, including rights and benefits under Paragraphs 3.10 and 3.11
above.
(c) Each transferor shall remain liable for the performance of all
of its obligations under this Agreement notwithstanding any transfer by such
Transferor of Borrower's obligations under this Agreement.
(d) Each transfer of Borrower's obligations under this Agreement
shall be on terms which provide that: (i) Participant shall not be entitled
to take or refrain from taking, or to require Transferor to take or refrain
from taking, any action under this Agreement or any instrument or agreement
required hereunder other than through Transferor; and (ii) Except in case of
insolvency, bankruptcy, receivership or equivalent proceedings: (A)
Participant shall deal only with Transferor; and (B) Borrower shall not be
required to deal with Participant.
(e) Borrower authorizes each Bank and each Participant, upon the
occurrence of an Event of Default, to proceed directly by right of setoff,
banker's lien, or
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<PAGE> 30
otherwise, against any assets of Borrower which may be in the hands of Bank
or such Participant, respectively. Borrower authorizes each Bank to disclose
to any prospective Participant and any Participant any and all information
in such Bank's possession concerning Borrower, Guarantor and this Agreement.
8.7 Arbitration; Reference Proceeding.
(a) Any controversy or claim between or among the parties,
including but not limited to those arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration. The
arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute
a waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action
for judicial relief.
(b) Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the consent
of all parties if, at the time of the proposed submission, such controversy
or claim arises from or relates to an obligation to either Bank which is
secured by real property collateral located in California. If all parties do
not consent to submission of such a controversy or claim to arbitration, the
controversy or claim shall be determined as provided in subparagraph (c).
(c) A controversy or claim which is not submitted to arbitration
as provided and limited in subparagraphs (a) and (b) shall, at the request
of any party, be determined by a reference in accordance with California
Code of Civil Procedure Sections 638 et seq. If such an election is made,
the parties shall designate to the court a referee or referees selected
under the auspices of the AAA in the same manner as arbitrators are selected
in AAA-sponsored proceedings. The presiding referee of the panel, or the
referee if there is a single referee, shall be an active attorney or retired
judge. Judgment upon the award rendered by such referee or referees shall be
entered in the court in
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<PAGE> 31
which such proceeding was commenced in accordance with California Code of
Civil Procedure Sections 644 and 645.
(d) No provision of this Paragraph shall limit the right of any
party to this Agreement to exercise self-help remedies such as setoff, to
foreclose against or sell any real or personal property collateral or
security, or to obtain provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of a remedy does not waive the
right of either party to resort to arbitration or reference. At each Bank's
option, foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or mortgage or
by judicial foreclosure.
8.8 Notices. All notices required hereunder shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses set
forth on the signature page of this Agreement, or to such other addresses as the
parties hereto may specify from time to time in writing.
8.9 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
8.10 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
8.11 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same agreement.
8.12 Indemnification. The Borrower shall indemnify the Banks against,
and hold the Banks harmless from, all claims, actions, losses, and expenses,
including attorneys' fees and costs incurred by the Banks, arising from any
contention that the Borrower has failed to comply with any law, rule,
regulation, order or directive applicable to the Borrower's sales or leases to
or performance of services for the Borrower's customers, including without
limitation those sales, leases, and services requiring consumer or other
disclosures. This indemnification shall survive the repayment of all principal,
interest and fees payable under this Agreement.
8.13 Setoff. Each Bank agrees that it will not set off amounts due to
such Bank against deposits made by Borrower or Guarantor at such Bank, unless
there has been an Event of Default under
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Paragraph 7.6 or 7.7 above. Nothing in this Paragraph shall constitute a waiver
of any rights the Banks may have to place an administrative hold on any deposits
upon the occurrence of an Event of Default under Paragraph 7.6 or 7.7 above.
9. Relation of Banks.
9.1 Independent Facilities. The obligations of each Bank under this
Agreement are several and not joint, and the credit facilities provided by each
Bank under this Agreement are independent.
9.2 No Agency. Neither Bank is the agent of the other under this
Agreement, and each Bank shall manage its own credit facilities and enforce its
own rights and remedies under this Agreement; provided, however, that (a) any
amendment of this Agreement requires the consent of both Banks, and (b) any
waiver of any provision of this Agreement shall be binding only on such Bank or
Banks as consent to the waiver.
9.3 No Requirement to Share. Neither Bank shall be obligated to share
with the other Bank any payments or other amounts received from, or for the
account of, the Borrower or the Guarantor; provided, however, that to the extent
that either Bank exercises the right of setoff as permitted in Paragraph 8.13
above, then that Bank shall share the amount recovered by such setoff, with each
Bank receiving from such setoff an amount proportional to the ratio of the total
credit outstanding under this Agreement from each Bank at the time of the
setoff. The amount shared with the other Bank shall constitute a purchase of a
participation in the other Bank's credit outstanding to the Borrower.
9.4 Notices. Each Bank (the "Notifying Bank") shall promptly give
notice to the other Bank (the "Receiving Bank") of any (a) declaration of
Borrower's default made by the Notifying Bank; (b) termination of the
availability of additional credit from the Notifying Bank; or (c) acceleration
of the due date of any payment to be made to the Notifying Bank. Upon receipt of
such notice, the Receiving Bank shall have the right to terminate the
availability of any additional credit from the Receiving Bank.
9.5 Independent Credit Investigations. Each Bank represents that it has
made and agrees that it shall continue to make its own independent investigation
of the financial condition and affairs of Borrower and Guarantor and its own
appraisal of the creditworthiness of Borrower and Guarantor. Neither Bank has
any duty to provide the other Bank with any credit or other information with
respect to Borrower, Guarantor or this Agreement; provided, however, that
Borrower agrees that the Banks may share any such information as the Banks may
choose.
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9.6 Other Relationships. Each Bank may accept deposits from, lend money
to, act as agent or trustee for other lenders to, and generally engage in any
kind of banking, trust or other business with Borrower or Guarantor as if it
were not a party to this Agreement.
In Witness Whereof, the parties hereto have executed this Agreement as
of the day and year first above written.
Bank of America National Trust
and Savings Association The Good Guys - California, Inc.
By: /s/ Hagop Bouloukian By: /s/ Robert A. Gunst
--------------------------- ----------------------------
Title: Vice President Title: President and CEO
------------------------ -------------------------
By By
--------------------------- -----------------------------
Title Title
------------------------ --------------------------
Address for notices: Address for notices:
San Francisco Commercial 7000 Marina Boulevard
Banking, Concourse Level Brisbane, CA 94005-1830
345 Montgomery Street
San Francisco, CA 94104
The Bank of California N.A.
By: /s/ Wanda Headrick
---------------------------
Title: Vice President
------------------------
By
---------------------------
Title
------------------------
Address for notices:
San Francisco Corporate Banking
17th Floor
400 California Street
San Francisco, CA 94104
(Attach Exhibit A - Form of Financial Statements)
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<PAGE> 34
CONTINUING GUARANTY
THIS CONTINUING GUARANTY (the "Guaranty") is made by the undersigned (the
"Guarantor") in favor of THE BANK OF CALIFORNIA, N.A. (the "Bank").
1. CONSIDERATION. Guarantor acknowledges that the giving of this Guaranty is
a material condition precedent to Bank's extending or continuing any present or
future financial accommodations of whatever nature to any one or more of THE
GOOD GUYS -- CALIFORNIA, INC., a California corporation (the "Borrower") and
that Guarantor has derived or expects to derive material financial advantages
or other benefits commensurate in value to the obligations and liabilities
being undertaken by Guarantor under the terms of this Guaranty.
2. INDEBTEDNESS GUARANTEED. In consideration of the foregoing, and for other
valuable consideration, Guarantor unconditionally guarantees and promises to
pay to Bank, on demand, in lawful money of the United States of America all
Indebtedness of Borrower to Bank. "Indebtedness" is used herein in its most
comprehensive sense and includes all debts, obligations and liabilities of
Borrower or any one or more of them to Bank currently existing or now or
hereafter made, incurred or created, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by assignment or
succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly with others, or whether recovery upon such debt may be
or become barred by any statute of limitation or otherwise unenforceable. This
is a continuing guaranty relating to any Indebtedness, including that arising
under successive transactions which shall either continue the Indebtedness or
from time to time renew it after it has been satisfied. This Guaranty may be
revoked only by Bank's actual receipt of written notice from Guarantor. Where
Bank has a contractual commitment to extend credit, such revocation shall not
be effective with respect to Indebtedness created under such commitment. This
Guaranty shall continue to be effective or be reinstated if at any time any
payment of any Indebtedness is rescinded or must otherwise be returned by Bank
upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor or
otherwise, all as though such payment had not been made.
3. GUARANTOR'S LIABILITY. The liability of Guarantor under this Guaranty
shall not exceed at any time an amount equal to the sum of (a) THIRTY FIVE
MILLION AND NO/100 DOLLARS ($35,000,000.00) (b) all interest, fees and charges
constituting Indebtedness upon or with respect to such amount, (c) Guarantor's
obligations to pay attorneys' fees and all other costs and expenses which may
be incurred by Bank in the protection, preservation or enforcement of any
rights of Bank under this Guaranty, and (d) Guarantor's obligations to
reimburse and indemnify Bank hereunder. In any event, Bank may permit the
Indebtedness to exceed Guarantor's liability under this Guaranty. Any payment
by Guarantor to Bank hereunder shall not reduce its maximum obligations
hereunder, unless Guarantor has given Bank actual written notice that such
payment shall
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<PAGE> 35
have such effect at or prior to the time of such payment. The foregoing
limitation of liability applies only to Guarantor's obligations under this
Guaranty; unless otherwise specifically agreed in writing, every other guaranty
heretofore, now, or hereafter given by Guarantor to Bank with respect to the
Indebtedness shall be deemed independent of this Guaranty and every other such
guaranty, so that as each such guaranty is enforced or collected upon in a
manner that reduces the liability of Guarantor thereunder, the liability of all
guarantors on all other guaranties shall remain intact.
4. NATURE OF GUARANTOR'S LIABILITY. Guarantor's obligations and liabilities
under this Guaranty are independent of Borrower's obligations and liabilities
under any documents evidencing Indebtedness ("Loan Documents"), and a
separate action or actions may be brought and prosecuted against Guarantor
whether action is brought against Borrower or any other guarantor or Person,
whether or not any foreclosure has been or is going to be initiated with
respect to any security for the Indebtedness, or whether Borrower or any other
guarantor or Person are joined in any such action or actions. Recovery realized
from any other guarantor of the Indebtedness, or recovery from any source other
than a direct payment by Guarantor, shall be first credited upon that portion
of the Indebtedness which exceeds the maximum liability of Guarantor hereunder.
As used in this Guaranty, "Person" means any individual or entity, and may
include Bank where the construction so allows.
5. GUARANTOR'S AUTHORIZATION. Guarantor authorizes Bank, without notice,
demand or consent of any kind, and without affecting Guarantor's liability
under this Guaranty, from time to time, to (a) renew, alter, compromise,
extend, accelerate or otherwise change any of the terms of the Indebtedness or
any part thereof, including changing the rate of interest thereon or the time
for payment thereof, (b) accept partial payments on the Indebtedness, (c)
extend credit to Borrower on an unsecured basis or take security or other
support for the obligations evidenced by this Guaranty or the Indebtedness, and
exchange and enforce, waive or release any such security or other support or
any part thereof, (d) accept new or additional documents, instruments or
agreements relative to the Indebtedness, (e) apply any security or other
support and direct the order or manner of sale or other disposition of such
property as Bank, in its sole discretion, may determine, and (f) release or
substitute any Person liable on the Indebtedness, any other guarantor of the
Indebtedness, or any other Person providing support for the Indebtedness to
Bank, this Guaranty, or any other guaranty. Guarantor waives all rights and
defenses based on Bank's taking or failing to take none, some, any or all of
the actions referred to in this section.
6. WAIVERS.
(a) Guarantor waives any and all rights or defenses arising by reason of:
(i) the absence, impairment or loss of any right of reimbursement,
contribution or subrogation, or any other right or remedy of Guarantor
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<PAGE> 36
against Borrower or any other guarantor or Person, or with respect to any
security interest or other support for the Indebtedness,
(ii) any disability or other defense of Borrower, or the partial or
complete cessation from any cause of the liability of Borrower for the
Indebtedness for any reason other than payment in full and final
satisfaction,
(iii) the application by Borrower of the proceeds of any Indebtedness
for purposes other than the purposes represented by Borrower to Bank or
Guarantor or intended or understood by Bank or Guarantor,
(iv) any act or omission by Bank which directly or indirectly results
in or aids the discharge of Borrower or any of the Indebtedness by
operation of law or otherwise,
(v) the statute of limitations in any action under this Guaranty or
in any action for the collection of any Indebtedness,
(vi) the omission of any demand, presentment, protest or notice of any
kind, including without limitation notice of the existence, creation,
incurring, modification, substitution or renewal of any new or additional
Indebtedness or of any action or non-action on the part of Borrower, Bank
or any other Person in connection with any Indebtedness, or
(vii) any exchange, release, loss, damage, impairment or non-perfection
of any security or support for the Indebtedness, or any release,
amendment, waiver of or consent to depart from the terms of any security
agreement, other support or any other guaranty, for all or any of the
Indebtedness.
(b) Guarantor waives all rights to require Bank to (i) seek payment of the
Indebtedness from borrower, any other guarantor or Person, or from any
collateral securing the Indebtedness, before enforcing Guarantor's obligations
under this Guaranty, (ii) apply any payments from any source in any particular
manner, including without limitation to apply any payments to any portion of the
Indebtedness guaranteed by this Guaranty before applying them to anything else,
(iii) give notice of the terms, time and place of any public or private sale of
personal property security for the Indebtedness or comply with any other
provisions of Section 9504 of the Uniform Commercial Code or its equivalent,
from time to time in effect in the state governing such security interest, (iv)
give notice of any judicial or nonjudicial sale or foreclosure of any real
property securing any portion of the Indebtedness, or (v) enforce any remedy
which Bank now has or hereafter may have against Borrower, any other guarantor
or Person. Guarantor also waives any benefit of, and any right to participate in
or direct the
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<PAGE> 37
application of, any now existing or hereafter acquired security or support
for the Indebtedness.
(c) Guarantor acknowledges that Guarantor is entitled under various legal
doctrines to reimbursement from Borrower to the extent Guarantor pays the
Indebtedness. Nonetheless, Guarantor hereby waives any and all rights of
reimbursement under any legal doctrine including without limitation
subrogation, indemnity, contribution, or any other claim arising from the
existence or performance of this Guaranty which Guarantor now or hereafter
may have against Borrower or any Person, or their respective properties,
directly or contingently liable for the Indebtedness, or any direct or
contingent security for the Indebtedness. The preceding sentence shall
remain in effect only until all of the Indebtedness has been paid in full,
including without limitation any portion thereof which exceeds the liability
of Guarantor under this Guaranty.
(d) Guarantor waives notice of acceptance of this Guaranty. Without
limiting the generality of the waivers contained in this Guaranty, Guarantor
waives all rights, defenses and other benefits under the following statutes,
judicial decisions applying these statutes, and further waives all
equivalent legal rules in any form in all applicable jurisdictions:
California Civil Code sections 2787-2855. Guarantor acknowledges that Bank
is relying on all of the waivers contained throughout this Guaranty in
creating and continuing the Indebtedness, and that these waivers are a
material part of the consideration to Bank for creating and continuing the
Indebtedness.
7. DILIGENT INQUIRIES. Guarantor assumes the responsibility for being and
keeping informed of the financial condition of Borrower and any other guarantor
or Person liable on, or with respect to, any of the Indebtedness, and of all
other circumstances bearing upon the risk of nonpayment of the Indebtedness,
and confirms that Bank shall have no duty to advise Guarantor of any
information regarding such condition or any such circumstances whether or not
materially adverse. Guarantor waives all rights and defenses based on Bank's
failure to perform any such duty.
8. AUTHORIZATION OF BORROWER. Where Borrower is a corporation, partnership or
other business entity, Bank shall have no duty to inquire into the powers of
Borrower or its officers, directors, partners, trustees or agents acting or
purporting to act on Borrower's behalf (and Guarantor waives all rights and
defenses based on Bank's failure to perform any such duty), and any
Indebtedness made or created in reliance upon the exercise of such powers shall
be covered by this Guaranty. Bank's books and records showing the account
between Bank and Borrower shall be admissable in any proceeding or action to
enforce this Guaranty and shall be conclusive and binding upon Guarantor absent
obvious error.
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<PAGE> 38
9. GENERAL PROVISIONS.
9.1 NOTICES. Any notice given by any party under this Guaranty shall be in
writing and personally delivered, sent by United States mail, postage
prepaid, or sent by telex or other authenticated message, charges prepaid
and addressed as follows:
To Guarantor: To Bank:
The Good Guys, Inc. The Bank of California, N.A.
7000 Marina Blvd. 400 California Street
Brisbane, California 94005-1830 San Francisco, California 94104
Attn: Robert A. Gunst, President Attn: Wanda Headrick, Vice President
FAX or Telex No. (415) 615-6287 FAX or Telex No. (415) 765-2634
Guarantor and Bank may change the place to which notices, requests, and
other communications are to be sent by giving written notice of such change
to the other.
9.2 BINDING EFFECT. This Guaranty shall be binding upon Guarantor, its
permitted successors, representatives and assigns, and shall inure to the
benefit of Bank and its successors and assigns; provided, however, that
Guarantor may not assign or transfer its obligations under this Guaranty
without the prior written consent of Bank. Bank reserves the right to sell,
assign, or transfer its rights and powers under this Guaranty in whole or in
part without notice to Guarantor. In that connection, Bank may disclose all
documents and information which Bank now or hereafter may have relating to
this Guaranty, Guarantor or Guarantor's operations or finances. Guarantor
waives any duty of confidentiality Bank may have with respect to information
concerning Guarantor and Guarantor's operations and finances, as well as all
rights and defenses based on Bank's failure to comply with any such duty, in
the circumstances covered by the preceding two sentences.
9.3 NO WAIVER. Any waiver, consent or approval of any kind by Bank must be
in writing and shall be effective only to the extent set forth in such
writing. No failure or delay on the part of Bank in exercising any power,
right or privilege under this Guaranty shall operate as a waiver thereof,
and no single or partial exercise of any such power, right or privilege
shall preclude any further exercise thereof, or the exercise of any other
power, right or privilege.
9.4 RIGHTS CUMULATIVE. All rights and remedies existing under this Guaranty
are cumulative to, and not exclusive of, any other rights or remedies under
contract or applicable law.
9.5 UNENFORCEABLE PROVISIONS. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall be so only as to such
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<PAGE> 39
jurisdiction and only to the extent of such prohibition or unenforceability, but
all the remaining provisions of this Guaranty shall remain valid and
enforceable.
9.6 GOVERNING LAW. Except as may be otherwise provided herein, this
Guaranty shall be governed by and construed in accordance with the laws of the
State of California.
9.7 INDEMNIFICATION. Guarantor shall pay and protect, defend and indemnify
Bank and Bank's employees, officers, directors, shareholders, affiliates,
correspondents, agents and representatives (other than Bank, collectively
"Agents") against, and hold Bank and each Agent harmless from, all claims,
actions, proceedings, liabilities, damages, losses, expenses (including,
without limitation, attorneys' fees and costs) and other amounts incurred by
Bank and each Agent, arising from (i) the matters contemplated by this Guaranty
or by any Loan Document or (ii) any contention that Guarantor has failed to
comply with any law, rule, regulation, order or directive applicable to
Guarantor's business; PROVIDED, HOWEVER, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Bank's or any
Agent's gross negligence or willful misconduct. This indemnification shall
survive the payment and satisfaction of all of Borrower's obligations and
liabilities to Bank.
9.8 REIMBURSEMENT. Guarantor shall reimburse Bank for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements (and fees and disbursements of Bank's in-house counsel) expended
or incurred by Bank in any arbitration, mediation, judicial reference, legal
action or otherwise in connection with (a) the negotiation, preparation,
amendment, interpretation and enforcement of this Guaranty including without
limitation during any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Bank's rights,remedies and obligations under
this Guaranty or any of the Loan Documents, (b) collecting any sum which
becomes due Bank under this Guaranty or any Loan Document, (c) any proceeding
for declaratory relief, any counterclaim to any proceeding, or any appeal, or
(d) the protection, preservation or enforcement of any rights of Bank. For the
purposes of this section, attorneys' fees shall include, without limitation,
fees incurred in connection with the following: (1) contempt proceedings; (2)
discovery; (3) any motion, proceeding or other activity of any kind in
connection with a bankruptcy proceeding or case arising out of or relating to
any petition under Title 11 of the United States Code,as the same shall be in
effect from time to time, or any similar law; (4) garnishment, levy, and debtor
and third party examinations; and (5) postjudgment motions and proceedings of
any kind, including without limitation any activity taken to collect or enforce
any judgment.
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9.9 ENTIRE AGREEMENT. This Guaranty is intended by Guarantor and Bank as the
final expression of Guarantor's obligations and liabilities to Bank described
herein and supersedes all prior understandings or agreements concerning the
subject matter hereof. This Guaranty may be amended only by a writing signed by
Guarantor and Bank. This Continuing Guaranty is a replacement of that certain
Continuing Guaranty dated as of September 26, 1995, executed by The Good Guys,
Inc., a Delaware corporation in favor of The Bank of California, N.A.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of October 27, 1995.
Acknowledgement: _____ YES _____ NO I/We hereby acknowledge receipt of a copy
of this signed guaranty. (If "No", copy mailed to Guarantor on _____________)
GUARANTOR
THE GOOD GUYS, INC., a
Delaware corporation
By: /s/ Robert A. Gunst
------------------------------
Robert A. Gunst, President and
Chief Executive Officer
WITNESS
- ---------------------------------
- ---------------------------------
If the Guarantor(s)' signature cannot be witnessed by the account officer, the
Guarantor(s) must have his or her signature notarized or must obtain a
signature guaranty of the document from his or her bank.
PAGE 7
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Exhibit 10.20
OPERATING AGREEMENT
This OPERATING AGREEMENT (the "Agreement") is made and entered into to
be effective as of the 15th day of April 1995 (the "Effective Date"), between
MTS, Inc., a California corporation, dba Tower Records/Book/Video ("Tower") and
The Good Guys, Inc., a Delaware corporation ("TGGI"). Wilton Company Sahara, a
Nevada Limited-Liability Company is hereinafter referred to as the "Developer".
Tower and TGGI are sometimes hereinafter referred to collectively as the
"Parties" or individually as a "Party." Except as otherwise provided herein,
the terms utilized in this Agreement shall have the same meaning as set forth
in the Leases (as defined below) between the Parties and Developer.
R E C I T A L S
A. Developer has executed a lease with TGGI with an Effective Date of
February 23, 1995 (the "TGGI Lease") for certain premises (the "TGGI
Premises") located in the building to be constructed by the Developer at the
corner of Sahara and Decatur, Las Vegas, Nevada (the ""Building").
B. Developer has also executed a lease with Tower with an Effective
Date of February 22, 1995 (the "Tower Lease") for certain premises (the "Tower
Premises") located in the Building that are adjacent to the TGGI Premises.
The TGGI Premises and the Tower Premises are sometimes hereinafter
referred to collectively as the "Premises" and the TGGI Lease and the Tower
Lease are sometimes hereinafter collectively referred to as the "Leases".
C. TGGI and Tower desire to set forth their agreements regarding
access to and the conduct of their businesses in their respective Premises
and to obtain the consent and agreement of the Developer with respect to such
operations.
NOW, THEREFORE, the Parties hereto, and, where specified, the
Developer, have agreed as follows.
1. Initial Construction. The Parties have approved the design of the
shell of the Building which Developer has agreed to construct in a first class
manner pursuant to the Leases and the plans, a list of which is attached hereto
a Exhibit A (the "Building Shell Plans"). TGGI and Tower have approved the
Plans for the layout and design of interior space within their respective
Premises and a list of such plans is attached hereto as Exhibit B (the
"Interior Space Plans"). Any changes to the Building Shell Plan shall be
subject to the approval of TGGI and Tower.
1
<PAGE> 2
Upon satisfaction of the conditions set forth in the Tower Lease and in
the TGGI Lease, Developer will (1) construct the Building pursuant to the
Building Shell Plans, (2) construct the Common Areas (as defined in the
Leases), and (3) construct or cause to be constructed as soon as reasonably
possible the balance of the improvements on Pads A and B (as defined in the
Leases) provided that on an interim basis Parcel A and Parcel B shall be rough
graded and treated by Developer to avoid blowing dust and sand, and utilities
to the site shall be installed by Developer. TGGI and Tower will construct
their respective Tenant Improvements pursuant to the terms of their respective
Leases. The Parties will coordinate their construction efforts and cooperate
with respect to the selection of contractors, appropriate course of
construction insurance, the scheduling of construction and related matters in
order to provide for a coordinated opening of the TGGI and Tower stores within
their respective Premises.
2. Joint Opening. It is the intent of the Parties to conduct a joint
opening of the stores within their respective Premises. Each Party shall use
all reasonable efforts and due diligence to obtain such result.
3. Use of Space and Alterations. As shown in the Interior Space
Plans, space within the Tower Premises will be dedicated to the sale of TGGI
products and space within the TGGI Premises will be dedicated to the sale of
Tower products. Additionally, portions of the Tower Premises and the TGGI
Premises and a portion of the Common Area (as defined in the Tower Lease and
the TGGI Lease) may be utilized for a cafe/coffee bar (the "Cafe") to be
operated by an independent third party unless otherwise agreed by the parties;
the space within the Building to be utilized for the Cafe is shown on the
Interior Space Plans. The operator of the Cafe may also be permitted by Tower
and TGGI to locate non-permanently attached kiosks or similar type of facilities
containing not more than two hundred (200) square feet of area on the sidewalk
portion of the Common Area adjacent to the Building. Tower and TGGI may also
permit the operator of the Cafe to install a drive through facility adjacent to
the Building as more particularly set forth in the Tower Lease and the TGGI
Lease, provided the drive through facility shall be subject to the permitting
requirements of the City of Las Vegas and shall not materially reduce the number
of parking spaces available in the Common Area. All such installations shall be
subject to approval of the Parties as to size, location(s), design, signage and
other terms and conditions. Proceeds of all operations of the Cafe shall be
divided equally between Tower and TGGI.
Changes to the Interior Space Plans which materially affect the
designated location of the Cafe or the location of each Party's display of
products within the other Party's Premises will be subject to mutual review
and approval, provided that if approval thereof is not obtained and the Party
that requested the change is not willing to withdraw its request, then either
(i) the Party in whose Premises such products are displayed may remove such
products and deliver such products to the other Party following five (5) days
notice of the requirement for such consent, or (ii) the Party whose products
are so displayed may remove such product from the other Party's Premises upon
five (5) days prior written notice that such consent will not be granted.
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<PAGE> 3
4. Common Name in Advertising. TGGI and Tower are considering the
utilization of a mutually acceptable common name for purposes of publicity and
advertising and with respect to signage in the area designated on the Building
Shell Plans for such purposes; the name tentatively approved by both Tower and
TGGI is "WOW". WOW or such other mutually acceptable common name is hereinafter
referred to as the "Common Name". The text, format and cost pertaining to
advertising and publicity materials utilizing the Common Name shall be subject
to the prior written approval of Tower and TGGI. Neither Tower nor TGGI shall
utilize the Common Name in any other locations or with any other co-tenants or
co-occupants, except with the prior written consent of Tower in the event TGGI
wishes to so utilize the Common Name or the prior written consent of TGGI in
the event Tower wishes to so utilize the Common Name. Nothing contained herein
shall preclude Tower or TGGI from utilizing names other than the Common Name,
with other co-tenants or co-occupants in other locations. Either TGGI or Tower
shall, at its sole election, have the option to cause the use of the Common
Name to be discontinued by both TGGI and Tower in the conduct of their
businesses in their respective Premises. In such event both Tower and TGGI
shall, as soon as reasonably practical after receipt of written notice to such
effect, cease and desist from the utilization of the Common Name in any
manner. In such event the sign(s) containing the Common Name shall be removed
from the Building and the Shopping Center; the cost of removal shall be a
Shared Expense (as hereinafter defined).
5. Product Sales. TGGI and Tower will use their best efforts to
mutually agree upon a point of sale system and a cash reconciliation system.
Any changes to such approved systems shall be subject to the prior written
consent of both Parties, provided that if the Parties cannot agree the systems
shall be maintained separately.
6. Employees. TGGI acknowledges that Tower employees may be selling
TGGI inventory which is located in the Tower Premises. Tower acknowledges that
TGGI employees may be selling Tower inventory which is located in the TGGI
Premises. In no event shall such activity constitute a violation of the
exclusive provisions of the TGGI Lease or the Tower Lease. Neither Party nor
their employees shall be entitled to compensation from the other Party with
respect to such sales. The Parties agree to cooperate in connection with such
sales in order to be assured that the employees of each Party are competent and
able to conduct such sales in a reasonably knowledgeable and expeditious manner.
7. Operations. Each party shall designate a Store Manager for the
store operated on its Premises. The duties of the TGGI Store Manager shall
include the supervision of any matters pertaining to the physical condition of
the Premises. The TGGI Store Manager shall consult with the Tower Store Manager
on a regular basis so that matters requiring joint approval or involving
considerations affecting both Premises are resolved to the satisfaction of both
Parties. The specifications for any contracts to be let relative to the
physical condition of the Building shall be developed jointly by Tower and
TGGI; unless otherwise agreed contracts involving substantial financial
commitments shall be subject to a mutually acceptable bid procedure and the
selection of acceptable bids involving such substantial financial commitments
shall be subject to the mutual approval of TGGI and Tower. In
3
<PAGE> 4
the event the TGGI Store Manager in consultation with the Tower Store Manager
and/or the Chief Financial Officer of Tower is unable to resolve any matters to
the mutual satisfaction of both Parties, such matters shall be referred by
written notice to the persons to whom notices are to be sent pursuant to Section
17.g below for further discussion and resolution. If a mutually satisfactory
resolution is not obtained, the Parties shall take steps to employ an expedited
private mediation service to negotiate a binding resolution of the matter. In no
event shall either Party be responsible in monetary damages as the result of the
failure to agree so long as such Party is acting in good faith.
8. Shared Expenses. Tower and TGGI will enter into contracts for the
provision of certain common services at the Premises and to bear equally such
expenses (the "Shared Expenses"). Such services include the following: (i)
security for TGGI Premises and Tower Premises; (ii) use of outside contractors
for interior janitorial and maintenance services; (iii) maintenance and repair
of exterior signs; (iv) maintenance and repair of the heating, ventilating and
air conditioning system, including replacement of units or portions thereof as
required by the Leases; (v) repair and replacement of roof coverings if required
pursuant to the terms of the Lease; (vi) utilities supplied to the Premises to
the extent not separately metered to the TGGI Premises or the Tower Premises;
(vii) insurance expense pursuant to Article 12 of this Agreement; (viii) Common
Area Expenses if TGGI and Tower elect to take over the operation of the Common
Areas as provided in the Leases; and (ix) such other services as the Parties may
deem appropriate to designate as Shared Expenses. The terms of the aforesaid
contracts shall be subject to the mutual approval of the Parties and shall be
supervised on an on-going basis by the TGGI Store Manager in consultation with
the Tower Store Manager or the person(s) to whom notices are to be sent pursuant
to Section 17.g below. Notwithstanding the foregoing, each Party may elect to
have separate janitorial and maintenance contracts for services to be rendered
within their respective Premises. Copies of all such contracts involving Shared
Expenses shall be provided to the respective Store Managers and the person(s) to
whom notices are to be sent pursuant to Section 17.g below. Nothing contained
herein shall require TGGI to continue to provide the services of its Store
Manager for such purposes; in the event TGGI elects to cease providing such
services, the Parties shall determine by mutual agreement the procedure for
resolving all such issues.
To the extent that services to be rendered jointly to the TGGI Premises
and the Tower Premises benefit disproportionately one of the Parties, the share
to be borne by each Party may be adjusted on an equitable basis. To the extent
that insurance to be carried pursuant to Section 12 below contains different
coverages applicable to either of the Premises, an equitable adjustment to the
portion to be borne by the Party requiring the greater coverage shall be made.
9. Payments of Shared Expenses. Shared Expenses incurred pursuant to
Sections 7 and 8 hereof shall be paid within fifteen (15) days of receipt of a
statement therefore accompanied by copies of invoices pertaining thereto.
Each Party reserves the right to audit the records of Shared
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expenses not more often than once per annum with such audit to be conducted
within the three (3) year period following payment of any such obligation.
10. Hours of Business. TGGI and Tower agree that the hours for the
conduct of business within their respective Premises will be 9:00 a.m. to
Midnight, seven (7) days per week. Those hours may be modified upon mutual
agreement of the Parties. In the event one Party determines to open or close
later than the other Party, reasonable provision for securing the unopened
Premises shall be determined by mutual agreement.
11. In-Store Promotions. Nothing contained herein shall be deemed to
preclude either Party from conducting in-store promotions including live
appearance by persons whose products may be sold within the TGGI Premises or
the Tower Premises, provided that in such event (i) the Party conducting the
promotion shall provide at least five (5) days prior written notice or other
notice as may be mutually agreed in writing by the Parties together with such
reasonable additional security services as may be required in connection with
such appearance at the sole cost and expense of the Party conducting the
promotion, and (ii) such promotion shall be conducted in such a manner that it
will not unreasonably interfere with the operations of the other Party.
12. Insurance. The Parties have agreed that the bodily injury and
property damage insurance described in Section 12.1A of their respective Leases
shall be carried pursuant to separate policies in which each Party names the
other Party as an additional insured. In the event the Parties elect pursuant to
Section 12.4 of their respective Leases to carry Landlord's Property Insurance
and/or Landlord's earthquake and flood damage insurance (as those terms are
defined and/or referenced in Section 12.2 of their respective Leases), the
expense related thereto shall be treated as a Shared Expense, subject to a
mutually acceptable written agreement as to the deductibles with respect to
earthquake and flood damage insurance.
All policies of insurance delivered to either Party to this Agreement
pursuant to this provision must contain a provision that the company writing
said policy will give to the other Party twenty (20) days notice in writing in
advance of any cancellation or lapse or the effective date of any reduction in
the amounts of insurance.
13. Separation. At any time during the Term of the TGGI Lease or the
Tower Lease, as those Leases may be extended pursuant to their terms, either
Party shall have the right upon sixty (60) days prior written notice to
require the construction of a demising wall between the Premises. Upon election
by a Party to cause the demising wall to be constructed, and upon such written
notice thereof to the other Party, the Party so electing to construct the
demising wall shall be entitled to proceed to construct such demising wall in a
manner which will not unreasonably interfere with the operations of the other
Party. All changes to the respective Premises of each Party, such as the
relocation of entrances, modifications to signs, changes to utility systems or
other components of the Building, necessitated by the separation of the
Premises shall be made pursuant to plans and specifications prepared by the
Party electing to construct the demising wall, such plans and specifications to
be subject to the reasonable approval of Developer and the other Party. All
construction shall be performed in
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accordance with all applicable Laws (as that term is defined in the Tower Lease
and in the TGGI Lease). The construction of the demising wall shall be the
obligation of the remaining Party if one of the Parties ceases the conduct of
business in its Premises or if the Lease of one Party is terminated for any
reason. Notwithstanding the foregoing, each Party shall bear an equal share of
the cost of such construction (excluding interior painting or other decorative
covering of such wall), such sum to be paid within thirty (30) days of
receipt of a bill therefore accompanied by reasonable supporting data.
14. Right of First Refusal. In the event any Party (the "Transferor")
is in receipt of a valid, bona fide, acceptable written offer (the "Offer") to
accept an assignment of its Lease or to sublease all or any portion of its
Premises, other than an assignment or sublease pursuant to Section 16.2A of the
Party's Lease, said offer shall be submitted in writing (the "Transfer Notice")
simultaneously to the other Party (the "Optionee") and to Developer. The
Optionee shall have the right to elect to (i) take the assignment of the
Transferor's Lease or enter into the sublease as the case may be upon the terms
and conditions set forth in the Offer, or (ii) take an assignment of the
Transferor's Lease upon and subject to all of the terms and conditions set
forth in the Lease if a change of use is included in the Offer; such rights
shall be exercised (if at all) by delivery of a written notice of such
exercise to Transferor within twenty (20) days of receipt of the Transfer
Notice. If either right is exercised, the Transferor shall close its business
in its Premises within ninety (90) days after execution by Tower, TGGI and
Developer of the documents necessary to convey Transferor's interest in the
subject Premises. Optionee's failure to so elect shall constitute a waiver of
the right of first refusal with respect to the Offer so long as the transaction
is consummated within ninety (90) days of the expiration of the twenty (20) day
period. The failure to exercise the foregoing rights in any instance shall not
relieve the Transferor or its successor from the obligations set forth herein
with respect to any subsequent proposed assignment or sublease.
15. Default and Remedies.
A. Default. The occurrence of any of the following events shall
constitute a material default under this Agreement giving rise to the rights
set forth in Section B below: (i) material breach of the TGGI Lease by TGGI
that is not cured within any applicable cure period provided for in the Lease;
(ii) material breach of the Tower Lease by Tower that is not cured within any
applicable cure period provided for in the Lease; (iii) abandonment or vacation
of the Premises by either Party for eighteen (18) days or more other than in
connection with a remodeling of the Premises or restoration following a
casualty as set forth in Article 13 of the Leases; (iv) the filing for
protection under the federal or state bankruptcy protection law which has a
material detrimental effect upon the conduct of the business of the bankrupt
Party in the Premises; (v) assignment of the Party's Lease or sublease of all
or any interest in the Party's Premises in violation of the provisions of
Article 16 of the Party's Lease or Section 14 of this Agreement; or (vi) a
material default in the terms of this Agreement which is not cured within ten
(10) days after written notice thereof.
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In the event of a material default pursuant to Section 15A(vi) hereof,
it is agreed that if any monetary default is cured within said ten (10) day
period or if the Defaulting Party in good faith within said ten (10) day
period commences to cure any non-monetary default and diligently proceeds
therewith, then such Party shall not be deemed to be in default hereunder.
Developer agrees that all times set forth in the Leases for the cure of
a default thereunder shall be deemed extended for an additional ten (10) days
period from the date Developer gives the Non-Defaulting Party written notice
that the Defaulting Party has not cured its breach of its Lease with Developer
in order to enable the NonDefaulting Party (as hereinafter defined) to exercise
its remedies as provided for herein.
B. Remedies. In the event of any such material default or breach by
either Party beyond the period of notice and cure provided in such Party's
Lease (hereinafter the "Defaulting Party"), pursuant to Section 15A hereof and
in addition to any other remedy available at law or in equity, the Party not
then in default (the "NonDefaulting Party") may at any time after five (5)
days written notice to the Defaulting Party thereafter: (i) cure the default of
the Defaulting Party by payment of monetary sums due or otherwise by
undertaking to perform any matter with respect to which breach has occurred;
(ii) require an assignment of the Defaulting Party's Lease. In the event the
Defaulting Party notifies the Non-Defaulting Party within said five (5) day
period that the matter with respect to which a default is claimed is the
subject of a litigation or dispute between the Defaulting Party and the
Developer, then the Non-Defaulting Party shall not have the option to (a) cure
the alleged default, unless the failure would jeopardize the Non-Defaulting
Party's Lease and/or its occupancy thereunder, or (b) require an assignment of
the Defaulting Party's Lease until the litigation pertaining thereto is
concluded and the Defaulting Party is determined to be in default without a
cure thereof. Neither Party shall permit the termination of its Lease based on
an alleged default under its Lease. Notwithstanding the foregoing, in the event
the NonDefaulting Party elects to cure any default by the Defaulting Party, all
sums paid by the NonDefaulting Party shall be due from the Defaulting Party
within ten (10) days of receipt of a bill therefore together with interest from
the date advanced at the rate specified in Section 17(i) hereof.
Upon the Defaulting Party's Premises becoming vacant or upon the
cessation of the conduct of business in the Premises for a period of eighteen
(18) days, the NonDefaulting Party shall have all the rights set forth in this
Agreement in addition to all other remedies available at law or in equity.
In the event the Lease is assigned in violation of the provisions of
the Defaulting Party's Lease or in violation of this Agreement, the Parties
agree that the NonDefaulting Party may seek and shall be entitled to obtain
such legal and equitable relief as shall be available at law or in equity to
prevent the transfer in violation of the terms set forth herein.
16. Indemnity and Waiver of Subrogation. Each Party shall indemnify,
without regard to insurance proceeds receivable, defend and save the other
Party and such Party's agents, contractors and employees harmless from all
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costs, liabilities, obligations, damages, penalties, claims or actions
(including without limitation, any and all sums paid for investigation costs,
settlement of claims, consultant and expert fees, and reasonable attorneys'
fees, and costs and expenses of litigation and appeal from the first notice of
any claim or demand), payable in connection with or resulting from any of the
following:
a. a breach of any representation or warranty contained in such
indemnifying Party's Lease;
b. loss of life, personal injury or damage to property, occurring in,
on or about the Premises as the result of a negligence, act or omission to act
of the indemnifying Party, its agents, contractors or employees;
c. any breach or other failure to perform any covenant or agreement
under this Agreement;
d. the presence of Hazardous Substances (as defined in the indemnifying
Party's Lease) in, on or under the Premises, the Building or the Shopping
Center at any time during the term of this Lease resulting from the negligence
or act or omission of the indemnifying Party, its agents, contractors or
employees; or
e. violation of or noncompliance with any public law, statute,
ordinance, governmental rule or regulation or requirement imposed by any city,
county, state or federal authority having jurisdiction over the subject matter
pertaining to the indemnifying Party's obligations with respect to its
Premises, the Building or the Shopping Center. It shall be the obligation of
the indemnifying Party to defend the other Party by counsel reasonably
acceptable to the indemnified Party.
Each Party hereby waives any rights it may have against the other
Party in connection with any of the matters which are the subject of the
insurance required to be carried pursuant to Section 12 of this Agreement or
which may be carried by such Party in excess of the requirements set forth in
Article 12 of the TGGI Lease or the Tower Lease. Each Party on behalf of their
respective insurance companies insuring their respective interests against any
such loss or risk, waive any right of subrogation it may have against the other
Party and each Party will provide evidence to the other within fifteen (15)
days of receipt of a written request therefore at any time during the term of
this Lease that any policy maintained pursuant to this Agreement or otherwise
at such Party's option, shall contain a provision affirming the aforesaid
waiver.
17. Miscellaneous.
a. Severability. If any term or provision of this Agreement shall, to
any extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby,
and each term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law; it is the intention of the parties hereto
that if any provision of this Agreement is
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capable of two constructions, one of which would render the provision void and
the other of which would render the provision valid, then the provision shall
have the meaning that renders it valid.
b. No Partnership. It is agreed that nothing contained in this
Agreement or in any Party's Lease shall be deemed or construed as creating a
partnership or joint venture between Tower and TGGI or between any Party and
the Developer or cause any of them to be liable and responsible in any way for
the obligations or debts of the other.
c. Tower Sales. Notwithstanding the provisions of Section 16.e of this
Agreement, Tower shall not be prevented from selling material and/or products
permitted to be sold under the provisions of the Tower Lease and alleged to be
pornographic or obscene unless said materials and/or products are determined to
be in violation of applicable obscenity statutes and/or other statutes pursuant
to a final non-appealable judgment of a court of competent jurisdiction.
d. Time; Binding Effect; Choice of Law. Time is of the essence of this
Agreement and each and every provision hereof. The Parties hereto agree that all
the provisions of this Agreement are to be construed as both covenants and
conditions as though the words imparting such covenants and conditions were used
in each separate paragraph hereof. All of the provisions hereof shall bind and
inure to the benefit hereto and their respective heirs, legal representatives,
successors and assigns. This Agreement shall be covered by the laws of the State
of Nevada.
e. Waiver. No covenant, term, or condition or the breach thereof shall
be deemed waived, except by written consent of the party against whom the
waiver is claimed, and any waiver of the breach of any covenant, term or
condition shall not be deemed to be a waiver of other covenant, term or
condition. Acceptance by either party of any performance by the other after the
time the same shall have become due shall not constitute a waiver by the other
party of the breach or default of any covenant, term, or condition, unless
otherwise expressly agreed in writing by the other party.
f. Reasonable Consent. Except as limited elsewhere in this Agreement,
wherever in this Agreement or in any matter pertaining to a Party's occupancy
of the Premises, such Party shall be required to give its consent or approval
to any action on the part of the other, such consent or approval shall not be
unreasonably withheld or delayed. Except where other time periods to give or
deny consent are otherwise provided in this Agreement, it is agreed that
failure to respond in writing to a written request for consent stating the
specific reasons for denying same within ten (10) business days from the date
of such request shall be deemed to constitute a granting of such consent; if
the written request for consent sets forth a shorter time period (but in no
event less than five (5) business days) and references this Section of the
Agreement, the consent shall be deemed granted at the end of the shorter period
unless such consent is denied in writing stating the specific reasons therefor
within such shorter time period. In the event of failure to give any such
consent, the other party shall be entitled to specific performance at law and
shall have such other remedies as are reserved to it under this Agreement, but
in no event shall
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either Party be responsible in monetary damages for failure to give consent
unless said failure is withheld maliciously or in bad faith.
g. Notices Whenever in this Agreement it shall be required or
permitted that notice or demand be given or served by either party to this
Agreement to or on the other, such notice or demand shall be given or served,
and shall not be deemed to have been duly given or served unless in writing and
served personally or forwarded by (i) certified or registered mail, return
receipt requested, (ii) guaranteed overnight mail delivery service, or (iii)
facsimile transmission with evidence of delivery; such notice shall be
addressed to the addresses of the parties specified on the signature page
hereto and, in the case of Tower, with copies to Walter S. Martin, Devaughn
Searson and Russell Solomon at the same address. Date of service of a notice
served by mail shall be the date of receipt or refusal of receipt. Either party
may change such addresses or the persons to whom the notices are to be sent by
written notice by certified or registered mail to the other Party.
h. Cost of Suit. If either party or Developer shall bring any action
for any relief against the other, declaratory or otherwise, arising out of this
Agreement, the losing Party shall pay the successful Party a reasonable sum for
attorney's fees and costs that shall be deemed to have accrued on the
commencement of such action and shall be paid pursuant to an order of a court
of competent jurisdiction. Attorney's fees incurred in enforcing any provision
of this Agreement are recoverable as a separate item; this provision is
intended to be severable from the provisions of the Lease or the other
provisions of this Agreement and to survive any judgment that is not deemed
merged into the judgment.
i. Interest Charges. Wherever in this Agreement reference is made to
the accrual of interest or to interest on sums due to either party, such sums
shall bear interest from the date due at a rate equal to the greater of ten
percent (10%) per annum or the Reference Rate announced by the Bank of America
N.T. & S.A. plus one percent (1%) or the rate of interest to avoid imputed
interest pursuant to the provisions of the Internal Revenue Code of 1986 as
amended. Notwithstanding anything to the contrary contained herein, interest to
be paid hereunder shall be limited to the maximum legal rate payable. Payment of
such interest shall not excuse or cure any default under this Agreement unless
expressly agreed to in writing.
j. Assignment. This Agreement may not be assigned or transferred
without (i) the prior written consent of both Parties which may be withheld in
such Party's sole and absolute discretion, and (ii) the prior written consent
of Developer which consent shall not be unreasonably withheld or delayed and
which shall be subject to the provisions of Section 17.f hereof. Any transferee
shall expressly assume and agree in writing to be bound by the terms of this
Agreement.
k. Termination. This Agreement shall terminate upon the occurrence of
any of the following events:
(i) Expiration or earlier termination of either of the Leases;
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(ii) separation pursuant to Section 13 of this Agreement;
(iii) transfer of all or any interest in the Lease pursuant to
which the Party ceases conduct of business in the Premises pursuant to
Article 5 of such Party's Lease.
The provisions of Sections 13 and 16 of this Agreement shall be deemed
to survive termination of this Agreement.
1. Entire Understanding. THIS AGREEMENT TOGETHER WITH THE EXHIBITS
HERETO CONSTITUTES THE ENTIRE AGREEMENT BETWEEN TGGI AND TOWER RELATIVE TO THE
SUBJECT MATTER HEREOF, AND THIS AGREEMENT AND THE EXHIBITS AND ATTACHMENTS MAY
BE ALTERED, AMENDED OR REVOKED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY BOTH
TOWER AND TGGI.
IN WITNESS WHEREOF, the Parties have hereto executed this Agreement to
be effective as of the Effective Date.
THE GOOD GUYS, INC. MTS, INC.,
a Delaware corporation a California corporation,
dba Tower Records/Book/Video
By: /s/ Gregg Steele By: /s/ Walter S. Martin
--------------------------- --------------------------
Gregg Steele
Vice President Real Estate
7000 Marina Blvd. 2500 Del Monte St., Bldg. C
Brisbane, CA 94005-1840 Sacramento, CA 95691
ATTN: Vice President Real Estate ATTN: Michael Solomon
Date of Execution: 4/20/95 Date of Execution: 4/20/95
------------ ------------
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ACKNOWLEDGEMENT
Developer has read and hereby approves the foregoing Agreement and each
and every term hereof. Developer acknowledges and agrees that it shall be bound
by the provisions of this Agreement pertaining to the transfer of any interest
in the Tower Lease and/or the TGGI Lease and their respective Premises pursuant
to Sections 14 and 15 hereof. Developer will provide to the other Party a copy
of any notice of default given to any Party under the Lease, such notice to be
given simultaneously with the notice to the Party against whom the default is
alleged by Developer.
DEVELOPER AND TOWER AGREE THAT NO CHANGES TO THE TOWER LEASE SHALL BE
ENTERED INTO, WHICH WOULD HAVE THE EFFECT OF INCREASING THE BURDEN OF TGGI AS
THE RESULT OF THE SHARED EXPENSES REFERRED TO IN SECTION 8 ABOVE OR THE
OBLIGATIONS OF TGGI IF IT WERE TO ASSUME THE TOWER LEASE OR SUBLEASE THE TOWER
PREMISES, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF TGGI.
DEVELOPER AND TGGI AGREE THAT NO CHANGES TO THE TGGI LEASE SHALL BE
ENTERED INTO, WHICH WOULD HAVE THE EFFECT OF INCREASING THE BURDEN OF TOWER AS
THE RESULT OF THE SHARED EXPENSES REFERRED TO IN SECTION 8 ABOVE OR THE
OBLIGATIONS OF TOWER IF IT WERE TO ASSUME THE TGGI LEASE OR SUBLEASE THE TGGI
PREMISES, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF TOWER.
WILTON COMPANY SAHARA,
a Nevada Limited-Liability Company
BY: /s/ Jay H. Wilton
------------------------------
Jay H. Wilton, Managing Member
3226 Thatcher Avenue
Marina Del Rey, CA 90292
Date of Execution: 4/26/95
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EXHIBIT 10.21
[BANKCAL LOGO]
THE BANK OF CALIFORNIA
October 27, 1995
THE GOOD GUYS-CALIFORNIA, INC.
7000 Marina Blvd.
Brisbane, California 94005
Attn: Robert Gunst, Chief Executive Officer
Re: $10,000,000.00 Optional Advance Facility
Dear Bob:
The Bank of California, N.A. (the "Bank") is pleased to offer to The Good
Guys-California, Inc., a California corporation ("Borrower") an optional
advance facility (the "Facility") in the maximum principal amount of the lessor
of (a) TEN MILLION AND NO/100 DOLLARS ($10,000,000.00); or (b) the difference
between (i) the Maximum Available Amount (defined below) and (ii) the sum of
(1) all principal outstanding under the Credit Agreement (defined below); and
(2) all principal outstanding outside the Credit Agreement to Bank, B or A
(defined below) or any other lender. The Maximum Available Amount is THIRTY
MILLION AND NO/100 DOLLARS ($30,000,000.00) from February 1 through October
31 of any year, and SEVENTY FIVE MILLION AND NO/100 DOLLARS ($75,000,000.00) at
all other times. The Facility, at Bank's sole option, may be available from
time to time until February 28, 1997, to be governed by the terms of the
enclosed Optional Advance Note ("Note"). As between Borrower and Bank, the
Credit Agreement shall survive the termination thereof until the Facility
terminates or is canceled; and no change thereto shall be effective with
respect to Bank unless Bank so agrees in writing.
Advances under the Facility may be requested in writing, by telephone or
otherwise on behalf of Borrower. Borrower shall promptly provide Bank a written
confirmation of all telephone bids accepted by Borrower in accordance with the
Facility Letter and Note, which confirmation shall be executed by an officer
duly authorized to conduct such transactions with Bank; provided that Bank
retains the right to correct any errors contained therein. If the proceeds of
any advances under the Note are, at Borrower's request, to be wire-transferred
to Borrower or any other individual or entity, such transfer shall be subject to
all applicable laws and regulations, and the policy of the Board of Governors of
the Federal Reserve System on Reduction of Payments System Risk in effect from
time to time. Borrower recognizes and agrees that Bank cannot effectively
determine whether a specific request purportedly made by or on behalf of
Borrower is actually authorized or authentic. Borrower assumes all risks
regarding the validity, authenticity and due authorization of any request
purporting to be made by or on behalf of Borrower and promises to repay any
sums, with interest, that are advanced by Bank pursuant to any request which
Bank in good faith believes to be authorized.
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This Facility reflects the Bank's general willingness to extend credit to you,
but does not involve any obligation on the part of the Bank to make funds
available. Therefore, no commitment or facility fee will be charged.
Enclosed is the original Note and the Facility Letter. For the purposes of the
Loan Documents, the following terms shall have the following meanings:
"ADVANCE" means an extension of credit under the Note.
"COVERED AMOUNT" means all or a portion of the principal amount
outstanding under the Note.
"CREDIT AGREEMENT" means that certain Credit Agreement dated as of October
27, 1995 among Borrower and Bank of America National Trust and Savings
Association ("B of A") and The Bank of California, N.A.
"FACILITY LETTER" means this Optional Advance Facility Letter dated
October 27, 1995 from Bank to and accepted by Borrower, as amended from time
to time.
"LOAN DOCUMENTS" means, individually and collectively, the Facility
Letter, the Note, the Credit Agreement and all other contracts, instruments,
addenda and documents executed in connection with the extensions of credit
which are the subject of the Facility Letter and Note.
"MATURITY DATE" means the earlier of (i) last day of each Period, or (ii)
the date Bank may make all sums of principal and interest immediately due and
payable pursuant to the rights of Bank under the Note or the Credit Agreement.
"PERIOD" means each agreed upon period of 1 to 60 days.
"PRIME RATE" means the rate Bank announces to be in effect from time to
time as Bank's prime rate. Prime Rate is a rate set by Bank based upon various
factors including general economic and market conditions, that is used as a
reference point for pricing certain loans. Bank may price its loans at, above,
or below the Prime Rate.
"RATE OPTION" means a rate per annum Bank quotes as the rate at which the
Covered Amount for the applicable Period are available for purchase from other
banks in the ordinary course of Bank's business on the first day of the
applicable Period, adjusted for the then maximum reserve, capital adequacy,
deposit insurance and similar requirements applicable to Bank pursuant to
applicable law or regulation, and other amounts associated with Bank's costs
and desired return.
"TERMINATION DATE" means the earlier of (i) February 28, 1997; or (ii)
the date Bank may make all sums of principal and interest immediately due and
payable pursuant to the rights of Bank under the Note or the Credit Agreement.
Your signing and returning these documents constitutes your agreement to
the terms and conditions of the Facility. This Facility Letter and Note
supersede and replace in their entirety that certain Facility Letter and Note
dated June 20, 1995 ("Previous Facility Letter and Note"). As of the effective
date of this Facility Letter and Note, all unpaid principal, interest and other
amounts accrued and outstanding under the Previous Facility Letter and Note
shall for all purposes be and constitute unpaid amounts outstanding under, and
evidenced by this Facility Letter and Note.
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We look forward to serving you.
Very truly yours,
THE BANK OF CALIFORNIA, N.A.
By: /s/ Wanda Headrick
----------------------------
Title: Vice President
-------------------------
Accepted and Agreed:
THE GOOD GUYS-CALIFORNIA, INC.
a California corporation
By: /s/ Robert A. Gunst
----------------------------
Title: President and CEO
-------------------------
Date: October 27 , 1995
--------------------------
<PAGE> 4
OPTIONAL ADVANCE NOTE
$10,000,000.00 October 27, 1995
This signer of this Note ("Borrower") promises to pay to the order of THE BANK
OF CALIFORNIA, N.A. ("Bank") at its office at 400 California Street, San
Francisco, California 94104, or at such other place as Bank may designate in
writing, in lawful money of the United States of America, the principal sum of
TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or such sums as Bank may
advance from time to time in its sole discretion to Borrower, with interest on
each advance under this Note form the date it is disbursed until maturity,
whether scheduled or accelerated, at a fluctuating rate per annum at all times
equal to the Prime Rate, unless another Rate Option is in effect as set forth
herein, provided,however, that no Maturity Date shall be subsequent to the
Termination Date.
The Rate Option may apply to a Covered Amount for each Period, provided,
however, that such Period shall not have a maturity date subsequent to the
Termination Date. For a quote of Bank's Rate Option which would apply to a
Covered Amount, Borrower may call Bank's San Francisco Office at (415) 765-3641
between 8:00 a.m. and 11:00 a.m., Pacific time, on any day on which Bank's San
Francisco Office is open for business to the public. If Borrower accepts the
Rate Option when offered, that rate will apply to such Covered Amount for the
applicable Period as follows: For maturities of 1 day to and including 60 days,
the minimum Covered Amount will be One Million and No/100 Dollars
($1,000,000.00). Regardless of maturity, Covered Amounts in excess of the
minimum must be in increments of at least Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00).
Subject to the provisions of this Note, Borrower may repay and reborrow under
this Note; provided, however, that each Advance (whether priced at the Prime
Rate or the Rate Option) is payable in full on the Maturity Date, together with
all accrued unpaid interest. Subject to all of the rights and remedies of the
Bank hereunder, the entire outstanding principal balance and all accrued but
unpaid interest shall be payable no later than the Termination Date. Interest
on each Advance shall be payable on the applicable Maturity Date for each such
Advance. Principal, interest, and all other sums owed Bank under this Note or
any Loan Document shall be evidenced by entries in records maintained by Bank
for such purpose. Each payment on and any other credits with respect to
principal, interest and all other sums outstanding under this Note or any Loan
Document shall be evidenced by entries in such records. Bank's records shall be
conclusive evidence thereof.
Any unpaid payments of principal or interest on this Note, shall bear interest
from maturity, whether scheduled or accelerated, at a fluctuating rate per
annum at all times equal to the Prime Rate plus 2.0%, until paid in full,
whether before or after judgment.
Bank establishes the Rate Option with the understanding it will apply to a
Covered Amount for the entire scheduled Period. If for any reason Bank receives
all or any portion of a Covered Amount prior to the scheduled Maturity Date of
the applicable Period, then in consideration thereof, Borrower shall pay to bank
on demand, liquidated damages to cover breakage costs and loss of contractual
return.
<PAGE> 5
Interest shall be calculated for actual days elapsed on the basis of a 360-day
year. Each change in the rate of interest shall become effective on the date
each Prime Rate change is announced in the Bank. In no event shall Borrower be
obligated to pay interest at a rate in excess of the highest rate permitted by
applicable law from time to time in effect.
The following shall constitute Events of Default hereunder: (a) the failure of
Borrower to perform its obligations to Bank under, or the occurrence of any
other default under the terms of this Note or other Loan Document; provided,
however, that in the event of a conflict in the definition of Default or
Events of Default in the Loan Documents and the Credit Agreement, provisions of
the Loan Documents shall control; and (b) the occurrence of an event described
in Section 7 of the Credit Agreement. The occurrence of an Event of Default
shall make all sums of interest, principal and any other amounts owing under
any Loan Documents immediately due and payable at Bank's option without notice
of default, presentment on demand for payment, protest or notice of nonpayment
or dishonor or any other notices or demands; and give Bank the right to
exercise any other right or remedy provided by contract or applicable law.
Any failure or delay on the part of Bank in exercising any power, right or
privilege under this Note or under any Loan Document shall not operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude any further exercise thereof.
Borrower shall reimburse and indemnify Bank, including without limitation for
attorneys' fees, as set forth in Sections 8.4 and 8.12 of the Credit Agreement.
For the purpose of this provision, the term "Banks" shall refer to Bank and the
term "this Agreement" shall refer to the Loan Documents.
This Note shall be governed by and construed in accordance with the law of the
State of California. This Note is the Note defined in the Facility Letter of
even date herewith and shall be governed by the terms thereof.
THE GOOD GUYS-CALIFORNIA, INC.,
a California corporation
By: /s/ Robert A. Gunst
---------------------------
Title: President and CEO
------------------------
Page 2
<PAGE> 1
EXHIBIT 10.22
THE DAI-ICHI KANGYO BANK, LIMITED
SAN FRANCISCO AGENCY
101 CALIFORNIA STREET, SUITE 4000
SAN FRANCISCO, CA 94111
The Good Guys, Inc. July 24, 1995
7000 Marina Boulevard
Brisbane, California 94005
DEMAND LINE OF CREDIT FACILITY
Ladies and Gentlemen:
We are pleased to make available to you a demand line of credit facility for
general corporate purposes on the terms set forth in this letter.
1. We agree to consider from time to time your requests that we make advances
("Advances") to you in an aggregate amount not to exceed $20,000,000 at any one
time outstanding on the terms and conditions set forth below. This letter is not
a commitment to lend but rather sets forth the procedures to be used in
connection with your requests for our making of Advances to you from time to
time on or prior to the termination hereof pursuant to paragraph (8) and, in the
event that we make Advances to you hereunder, your obligations to us with
respect thereto. However, our agreement to make any Advance shall not create any
obligation to make any further Advances. The Advances shall be evidenced by the
"grid" promissory note executed by you in substantially the form of Exhibit A
hereto (the "Note").
2. Each Advance shall be in an amount at least equal to $10,000 and shall be
made upon (i) your request to us by telephone, facsimile or letter, given by any
of the persons ("Designated Persons") empowered to borrow by your general
borrowing resolution, as amended from time to time, and listed on Exhibit B
hereto or otherwise designated by you in writing in accordance with paragraph
(9) (the Bank being conclusively entitled at all times to rely on the most
recent designation of Designated Persons on Exhibit B or any such written notice
actually received by the Bank, as the case may be), that you wish to borrow
money on a specified date in a specified amount; and (ii) our agreement with
you, and your agreement with us, as to such date and amount, as to whether such
Advance will bear interest at the Stated Rate (as defined in the Note) or at the
Quoted Rate (as defined in the Note) and, if such Advance will bear interest at
Quoted Rate, as to such Quoted Rate and the term of such Quoted Rate, in each
case subject to and in accordance with the terms of the Note. On the date of
such Advance as so agreed by you and us, we will make such Advance available to
you in same day funds by transferring funds to such account as is designated in
writing by a Designated Person. Promptly after the date of each Advance, we will
send you a written confirmation of such Advance and the amount thereof and, if
such Advance is at a Quoted Rate, the term of such Quoted Rate and the interest
rate per annum applicable thereto.
3. Each request by you for an Advance shall constitute a representation and
warranty by you that no payment default has occurred and is continuing under any
agreement or instrument relating to any of your indebtedness or would result
after giving effect to such Advance and to the application of the proceeds
therefrom.
4. You shall repay, and shall pay interest on, each Advance in accordance with
the terms hereof and of the Note. Unless we demand payment of an Advance bearing
interest at a Quoted Rate, you shall have no right to prepay any unpaid
principal amount of any Advance bearing interest at a Quoted Rate prior to the
last day of the term of such Quoted Rate. To the extent that any unpaid
principal amount of any Advance bears interest at the Stated Rate, you may pay
all or any part thereof on not less than one Business Day notice to us, together
with accrued interest to the date of such payment on the principal amount
prepaid.
<PAGE> 2
5. You shall make each payment hereunder and under the Note on or before 1:00
P.M. (San Francisco time) on the day for payment thereof (whether upon demand or
otherwise) in lawful money of the United States of America to us at the office
of our San Francisco Agency at 101 California Street, Suite 4000, San Francisco,
California 94111, in same day funds. You hereby authorize us, if and to the
extent that payment is not made when due hereunder, to charge from time to time
against any or all of your accounts with us any amount so due. All computations
of interest shall be made by us on the basis of a year of 360 days, for the
actual number of days (including the first day but excluding the last day)
elapsed.
6. Whenever any payment to be made hereunder shall be otherwise due on a
Saturday, a Sunday or a public or bank holiday in San Francisco (any other day
being a "Business Day"), such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
7. We shall incur no liability to you in acting upon any telephone, facsimile or
letter request or other communication which we believe in good faith to have
been given by a Designated Person or in otherwise acting in good faith under
this letter. Further, all documents required to be executed in conjunction with
Advances under this letter may be signed by any Designated Person.
8. This letter shall remain in effect until terminated by either you or us by
giving prior written notice of termination hereof to the other party hereto, but
no such termination shall affect your obligations with respect to the Advances
hereunder outstanding at the time of such termination.
9. All written communications hereunder shall be mailed, transmitted by
facsimile or delivered to the address specified below for you and for us, or as
to each party, to such other address as shall be designated by such party in a
written notice to the other party.
If to you: The Good Guys, Inc.
7000 Marina Boulevard
Brisbane, California 94005
Attention: Brian Stiles
Telephone: (415) 615-6112
Facsimile: (415) 615-6287
If to us: The Dai-Ichi Kangyo Bank, Limited
San Francisco Agency
101 California Street, Suite 4000
San Francisco, CA 94111
Attention: Mark A. Dirsa
Telephone: (415) 393-1813
Facsimile: (415) 788-7868
10. We may assign to one or more banks or other entities all or any part of, or
may grant participations to one or more banks or other entities in or to all or
any part of, any Advance or Advances hereunder and under the Note. You may not
assign your rights hereunder or any interest herein without our prior written
consent and any such assignment without our consent shall be null and void.
11. You agree to pay on demand all costs and expenses, if any, incurred by us in
connection with the enforcement of this letter or the Note, and, in accordance
with the terms of the Note, any losses, costs or expenses incurred by us in
connection with any payment of any portion of the Advances bearing interest at a
Quoted Rate on a date other than the last day of the term of such Quoted Rate.
<PAGE> 3
12. This letter shall be governed by, and construed in accordance with, the laws
of the State of California.
If the terms of this letter are satisfactory to you, please indicate you
agreement and acceptance thereof by signing a counterpart of this letter and
returning it to us.
Very truly yours,
THE DAI-ICHI KANGYO BANK, LIMITED
By /s/ Seigo Makino
-------------------------------
Seigo Makino
Title: Joint General Manager
Agreed and Accepted:
By /s/ Robert A. Gunst
--------------------------
Name and Title: Robert A. Gunst, President and CEO
<PAGE> 4
EXHIBIT A
TO
DEMAND LINE OF CREDIT FACILITY
DEMAND PROMISSORY NOTE
$20,000,000 Dated July 24, 1995
FOR VALUE RECEIVED, the undersigned (the "Borrower") HEREBY PROMISES TO PAY ON
DEMAND to the order of THE DAI-ICHI KANGYO BANK, LIMITED (the "Bank"), the
principal amount of each Advance (as defined below) made by the Bank to the
Borrower; together with interest (computed on the basis of a year of 360 days
for the actual number of days, including the first day but excluding the last
day, elapsed) on the principal amount of each Advance outstanding from time to
time from and including the date on which such Advance is made until the day
when the principal amount of such Advance is paid in full, payable on the day
when the principal amount of such Advance is paid in full, and unless such
Advance bears interest at a Quoted Rate (as defined below) on the last day of
each calendar month, at a fluctuating interest rate per annum (the "Stated
Rate") in effect from time to time equal at all times to the rate of interest
announced publicly by the Bank at its Branch in New York, New York, from time to
time, as the Bank's Base Rate (the "Base Rate"), provided,
however, that any overdue amount of principal, interest, fees or other
amounts payable hereunder or under the Demand Line of Credit Facility referred
to below shall bear interest, payable on demand, at the Stated Rate plus 1.0%
per annum. Each change in the fluctuating interest rate hereunder shall take
effect simultaneously with the corresponding change in the Base Rate.
If from time to time the Borrower and the Bank mutually agree, all or any
portion (in the amount of at least $10,000) of the aggregate principal amount of
all or any of the Advances shall bear interest in lieu of the Stated Rate, but
otherwise payable as provided herein, at a rate (being a "Quoted Rate" as to any
such Advance or Advances) and for a term (such term being the "Quoted Rate
Interest Period" in respect of such Quoted Rate) in each case quoted by the Bank
and agreed to by the Borrower. Unless such payment shall earlier have been made
upon demand by the Bank, on the last day of each Quoted Rate Interest Period the
Borrower shall pay the full unpaid principal amount of the Advances bearing
interest at the Quoted Rate pertaining to such Quoted Rate Interest Period.
The duration of any Quoted Rate Interest Period shall in no way affect the
Bank's right to demand payment hereunder at any time; provided,
however, that unless the Bank shall have made a demand hereunder for
payment, the Borrower shall have no right to prepay any unpaid principal amount
of any Advance bearing interest at a Quoted Rate prior to the last day of the
Quoted Rate interest Period therefor. To the extent that any unpaid principal
amount of any Advance bears interest at the Stated Rate, the Borrower may pay
all or any part thereof on not less than one Business Day notice to the Bank,
together will accrued interest to the date of such payment on the principal
amount prepaid.
The Borrower shall make each payment of principal and interest hereunder prior
to 12:00 Noon (San Francisco time) on the day for payment thereof (whether upon
demand or otherwise) in lawful money of the United States of America to the Bank
at the office of its San Francisco Agency at 101 California Street, Suite 4000,
San Francisco, California 94111, in same day funds. Whenever any payment to be
made hereunder shall be otherwise due on a Saturday, a Sunday or a public or
bank holiday in San Francisco (any other day being a "Business Day"), such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.
The Borrower hereby authorized the Bank to endorse on the grid attached hereto
the date and amount of each Advance made by the Bank to the Borrower hereunder;
in the case of Advances bearing interest at a Quoted Rate, the Quoted Rate
Interest Period therefor and the interest rate applicable thereto; and all
payments made on account of principal thereof, provided that the failure
to do so shall not affect the obligations of the Borrower to the Bank.
<PAGE> 5
The Borrower also agrees to pay to the Bank on demand all costs and expenses
(including fees and expenses of counsel) incurred by the Bank in enforcing this
Promissory Note. Without limiting the foregoing, the Borrower further agrees
that if any payment of any portion of the principal an Advance bearing interest
at the Quoted Rate shall be made for any reason (including, without limitation,
demand therefor by the Bank) other than on the last day of the Quoted Rate
Interest Period for such Quoted Rate, the Borrower shall pay to the Bank on
demand any amounts required to compensate the Bank for any losses, costs or
expenses which the Bank may incur as a result of such principal payment,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the Bank's liquidation or reemployment of
deposits or other funds acquired by the Bank to fund or maintain such portion of
the principal of such Advance.
This Promissory Note shall be governed by, and construed in accordance with, the
laws of the State of California.
This Promissory note is the Noted referred to in, and is entitled to the
benefits of, the Demand Line of Credit Facility dated July 24, 1995 between the
Borrower and the Bank, which Demand Line of Credit Facility, among other things,
sets forth procedures to be used in connection with the Borrower's periodic
requests that the Bank make advances (the "Advances") to it from time to time in
an aggregate amount not to exceed at any time outstanding the amount first above
mentioned.
THE GOOD GUYS, INC.
By /s/ Robert A. Gunst
-------------------------
Robert A. Gunst
Title: President and CEO
<PAGE> 6
GRID
<TABLE>
<CAPTION>
===========================================================================================
Date of Amount of Quoted Amount of Unpaid Interest Notation
Advance Advance Rate Principal Principal Rate on Made By
Interest Paid Balance Advance
Period
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
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</TABLE>
<PAGE> 7
EXHIBIT B
TO
DEMAND LINE OF CREDIT FACILITY
INITIAL DESIGNATED PERSONS:
Robert A. Gunst
Judith P. Devolder
Leslie Benson
Kim Coleman
Michelle Brooks
Brian Stiles
WIRE TRANSFER FORMAT
FOR
THE GOOD GUYS, INC.
-------------------
ACCOUNT NAME: The Good Guys!
ACCOUNT NUMBER: 1499-505205
BANK: Bank of America
BRANCH: San Francisco Main Office
ADDRESS: 345 Montgomery Street
ABA NUMBER: 121000358
ATTENTION: Mimi Drew
<PAGE> 1
EXHIBIT 11.1
THE GOOD GUYS, INC.
STATEMENT SETTING FORTH COMPUTATION
OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
September 30, September 30, September 30,
1995 1994 1993
-------------------------------------------------------------
<S> <C> <C> <C>
Net Income
1. As presented in the annual report $14,166 $13,893 $7,651
Shares used in per share computation 13,427 13,164 12,787
Net income per common share and
common share equivalents $1.06 $1.06 $.60
=============================================================
2. Computation of primary and fully dilutive earnings per share including common stock
equivalents
a) Primary earnings per common share
Weighted average number of shares:
Common stock (A) 13,427 13,164 12,787
Stock options (B) 176 270 241
-----------------------------------------------------------------
Total 13,603 13,434 13,028
-----------------------------------------------------------------
Primary earnings per share $1.04 $1.03 $.59
=================================================================
b) Fully diluted earnings per share
Weighted average number of shares:
Common stock (A) 13,427 13,164 12,787
Stock options (B) 177 271 261
-----------------------------------------------------------------
Total 13,604 13,435 13,048
=================================================================
Fully diluted earnings per share $1.04 $1.03 $.59
=================================================================
</TABLE>
A) The weighted average number of common shares outstanding during the
year has been computed by taking the number of days each share is
outstanding and dividing by the number of days in the year.
B) Stock options used in the primary earnings per share are calculated
using the average market price. Stock options in fully diluted earnings
per share are calculated using the higher of the ending market price or
the average market price.
<PAGE> 1
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, the relative
percentages that certain income and expense items bear to net sales, and the
number of stores open at the end of each period:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------
1995 1994* 1993*
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Gross profit 24.2% 26.1% 28.4%
Selling, general &
administrative expenses 21.5% 22.9% 26.2%
Income before income tax 2.6% 3.2% 2.3%
Net income 1.6% 1.9% 1.4%
Number of stores open
at end of period 66 52 45
</TABLE>
*Certain reclassifications have been made to the 1994 and 1993 financial data in
order to conform to the current year's presentation
SALES
Sales increased to $889.2 million in 1995 from $724.7 million in 1994 and $562.8
million in 1993. The 23% sales increase in 1995 is a result of a same store
sales gain of 7%, the opening of 14 new stores (seven in Washington, three in
California, three in Oregon, and one in Nevada) and a full year of operation for
the seven stores opened in 1994.
The 29% sales increase in fiscal 1994 was attributable to a same store
sales gain of 19%, the opening of seven new stores, and a full year of operation
of the four stores opened in 1993.
Comparable store sales in the future may be affected by competition,
the opening of additional stores in existing markets and general economic
conditions.
The following table sets forth sales by product category:
SALES BY PRODUCT CATEGORY
<TABLE>
<CAPTION>
Years ended September 30,
-----------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Video 36% 36% 36%
Audio and Cellular Phones 30% 33% 35%
Home Office 17% 12% 9%
Other
Accessories, installation,
photo, premier performance
guarantee, repair service,
video games and other 17% 19% 20%
------------- ------------- -------------
Total 100% 100% 100%
============= ============= =============
</TABLE>
Sales of Home Office products continued to increase as a percentage of
sales during fiscal 1995 due to increased demand for computers. Video and Audio
remain our largest sales categories, although, due to the increase in Home
Office sales, Audio declined as a percentage of sales.
Sales of Home Office products increased as a percentage of sales during
fiscal 1994 as a result of the introduction of personal computers to all
locations during the year. In fiscal 1994, the Video category was particularly
strong, while Audio declined as a percentage of sales notwithstanding positive
Audio category same store sales growth.
GROSS PROFIT
Gross profit as a percentage of sales was 24.2% in fiscal 1995, compared to
26.1% in fiscal 1994 and 28.4% in fiscal 1993. Gross profit as a percentage of
sales decreased in 1995 primarily due to the increased proportion of Home Office
sales, which typically carry lower gross margins, the cost impact from
enhancements made to the Company's Premier Performance Guarantee program in
November 1994 and promotional activity in the consumer electronics market.
During fiscal 1994, margins decreased due to merchandising, marketing
and promotional activities. A second factor which contributed to the decrease in
gross margin percentage was the introduction of personal computers, which sell
at lower gross profit margins than most other categories.
The Company believes that gross profit as a percentage of sales may
continue to fluctuate as a result of changes in sales product mix and
competitive pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist primarily of payroll,
advertising and occupancy costs. Although most of these expenses vary
proportionately with sales, there is a fixed component to them that allows the
Company to leverage its costs with additional sales. This leveraging may not be
fully realized during periods when a large number of stores are opened because
new stores typically generate lower sales than the average mature location.
Additionally, when we open in new market areas, as we did in 1995, the leverage
will be impacted since the advertising costs of the entire market are initially
absorbed by a smaller number of stores. This provides an opportunity to improve
the percentage as we continue to open stores in both our established and our new
market areas.
Selling, general and administrative expenses as a percentage of sales
were 21.5% in fiscal 1995, compared to 22.9% in fiscal 1994 and 26.2% in fiscal
1993. The decrease in 1995 was due to cost reductions related to restructuring
store operations and additional support from vendors for advertising and
promotional programs. We also continued to leverage costs in our mature stores
and decreased general and administrative compensation as a percentage of sales.
The decrease between 1994 and 1993 reflects the combined impacts of cost
reduction programs and leverage from an increase in the average store sales
volume.
-10-
<PAGE> 2
NET EARNINGS
Income before income taxes as a percentage of sales for the fiscal years 1995,
1994 and 1993 was 2.6%, 3.2% and 2.3%, respectively.
The effective income tax rates for fiscal years 1995, 1994 and 1993
were 39.9%, 41.0% and 40.4%, respectively. The 1995 effective tax rate was
positively impacted by the utilization of job tax credits during the first half
of the year.
Net income as a percentage of sales for the fiscal years 1995, 1994 and
1993 was 1.6%, 1.9% and 1.4%, respectively. The decrease in 1995 was due to the
decline in gross margins partially offset by the decrease in operating costs.
The increase in net income in 1994 was attributable to increases in sales
without proportionate increases in selling, general and administrative expenses,
partially offset by a decrease in gross margin.
LIQUIDITY AND CAPITAL RESOURCES
The Company's store sales are primarily cash and credit card transactions,
providing a source of liquidity for the Company. The Company also uses private
label credit card programs administered and financed by financial services
companies, which allow the Company to expand store sales without the burden of
additional receivables. Working capital requirements are reduced by vendor
credit terms that allow the Company to finance a portion of its inventory. The
Company also uses lease financing to fund its capital requirements.
As of the end of fiscal 1995, the Company had working capital of $74.0
million, compared to $66.9 million in fiscal 1994 and $59.3 million in fiscal
1993. In fiscal 1995, net cash provided by operating activities was $11.7
million, compared to $26.1 million and $13.8 million in fiscal 1994 and 1993,
respectively. This decrease in net cash from operating activities was primarily
attributable to an increase in merchandise inventories and accounts receivable
that were partially offset by an increase in accounts payable and accrued
expenses. The 1995 increases in merchandise inventories and accounts payable
were due to preparing for and supporting a larger store base than in the prior
year. The increase in accounts receivable resulted from an increase in
receivables related to vendor programs and the proceeds due from store equipment
leasing transactions which had not been received at year end.
The Company added 14 stores in 1995, seven stores in 1994 and four
stores in 1993. This expansion has been financed primarily through the use of
cash provided from operations and lease financing. Cash utilized for capital
expenditures was $17.8, $19.6, and $9.4 million for fiscal years 1995, 1994 and
1993, respectively. The Company plans to open approximately 12 to 14 new stores
during the 1996 fiscal year. Management estimates that each new store requires
approximately $1.5 to $2.0 million for leasehold improvements, fixtures and
equipment and inventory not financed by the vendors.
The Company expects to be able to fund its working capital requirements
and expansion plans with a combination of anticipated cash flow from operations,
normal trade credit, financing agreements, and continued use of lease financing.
The Company has a committed unsecured $75 million revolving bank line
of credit which fluctuates with seasonal working capital requirements. The
credit agreement provides that funds borrowed will bear interest at the varying
alternative rates based on the prime rate and various domestic and
international money market rates. The credit facility expires in February 1997,
with the option to extend for one additional year. This credit facility is used
for working capital and store construction purposes. At both September 30, 1995
and 1994, there were no borrowings outstanding under the line.
During 1995, the Company also entered into demand line of credit
facilities with various banks totaling $30 million. These uncommitted
facilities require bank approval for each advance and allows the Company to
borrow at money market rates related to the banks financing costs. The Company
may use these facilities to fund its working capital, construction costs and
general corporate purposes. The maximum amount the Company can borrow under
these uncommitted demand line of credit facilities is limited by its committed
credit agreement.
Maximum borrowings outstanding under credit facilities during fiscal
1995 were $20 million, compared to $10 million in fiscal 1994 and $4 million in
fiscal 1993. The weighted average borrowings outstanding under credit facilities
during fiscal years 1995, 1994 and 1993 were $5,500,000, $400,000 and $100,000,
respectively. The weighted average interest rates for such borrowings were 8.3%
during fiscal year 1995 and 6.0% during both fiscal 1994 and 1993.
IMPACT OF INFLATION
The Company believes that, because of competition among manufacturers and the
technological changes in the consumer electronics industry, inflation has not
had a significant effect on results of operations.
-11-
<PAGE> 3
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------
- -------------------------------------------------------------------------------------------------------
(Dollars and shares in thousands, except per 1995 1994 1993 1992 1991
share and other data)
- -------------------------------------------------------------------------------------------------------
SUMMARY OF EARNINGS
<S> <C> <C> <C> <C> <C>
Net sales $889,206 $724,713 $562,827 $509,629 $424,276
Cost of sales 674,179 535,690 402,755 374,200 306,750
--------------------------------------------------------------
Gross profit 215,027 189,023 160,072 135,429 117,526
Selling, general, and administrative
expenses 191,066 166,046 147,579 129,330 98,663
--------------------------------------------------------------
Income from operations 23,961 22,977 12,493 6,099 18,863
Interest income(expense) - net (399) 567 346 233 (523)
--------------------------------------------------------------
Income before income taxes 23,562 23,544 12,839 6,332 18,340
Income taxes 9,396 9,651 5,188 2,539 7,355
--------------------------------------------------------------
Net income $ 14,166 $ 13,893 $ 7,651 $ 3,793 $ 10,985
--------------------------------------------------------------
Net income per share $ 1.06 $ 1.06 $ 0.60 $ 0.29 $ 0.93
Weighted average shares 13,427 13,164 12,787 12,908 11,823
FINANCIAL POSITION
Working capital $74,042 $66,900 $59,320 $47,440 $50,769
Total assets $227,729 $188,712 $149,782 $128,121 $113,567
Shareholders' equity $136,022 $118,948 $102,518 $91,274 $84,801
OTHER DATA
Number of stores at year end 66 52 45 41 33
Average sales per store $14,962 $14,912 $12,998 $13,700 $14,436
Sales per selling square foot $1,481 $1,519 $1,324 $1,426 $1,567
Sales per gross square foot $921 $925 $813 $897 $1,004
Same stores sales 7% 19% 0% 2% 11%
Inventory turns * 6.4 6.4 6.0 6.5 6.9
</TABLE>
Certain reclassifications have been made to this financial data in order to
conform to the current year's presentation.
* Based on average of beginning and ending inventories for each fiscal year.
-12-
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
-----------------------
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $18,434 $21,661
Accounts receivable, less allowance for doubtful accounts of $569 and $481 21,209 11,080
Merchandise inventories 115,806 94,928
Prepaid expenses 10,300 8,995
-----------------------
Total current assets 165,749 136,664
PROPERTY AND EQUIPMENT:
Leasehold improvements 51,127 40,684
Furniture, fixtures, and equipment 37,791 30,284
Construction in progress 12,907 13,353
-----------------------
Total property and equipment 101,825 84,321
Less accumulated depreciation and amortization 42,584 33,490
-----------------------
Property and equipment - net 59,241 50,831
-----------------------
Other Assets 2,739 1,217
-----------------------
Total Assets $227,729 $188,712
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $53,504 $41,238
Accrued expenses and other liabilities:
Payroll 12,435 11,822
Sales taxes 6,025 5,774
Other 19,743 10,930
-----------------------
Total current liabilities 91,707 69,764
SHAREHOLDERS' EQUITY:
Preferred stock, no par value -
Authorized, 2,000,000 shares - None issued
Common stock, $.001 par value:
Authorized, 40,000,000 shares; Issued and outstanding,
13,581,416 and 13,282,181 shares, respectively 14 13
Additional paid-in capital 61,833 58,926
Retained earnings 74,175 60,009
-----------------------
Total shareholders' equity 136,022 118,948
-----------------------
Total Liabilities and Shareholders' Equity $227,729 $188,712
=======================
</TABLE>
See notes to financial statements.
-13-
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------------------------------------------------
(Dollars and shares in thousands, except per 1995 1994 1993
share data)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $889,206 $724,713 $562,827
Cost of sales 674,179 535,690 402,755
----------------------------------------------------------------------------------
Gross profit 215,027 189,023 160,072
Selling, general, and administrative expenses 191,066 166,046 147,579
----------------------------------------------------------------------------------
Income from operations 23,961 22,977 12,493
Interest income (expense) - net (399) 567 346
----------------------------------------------------------------------------------
Income before income taxes 23,562 23,544 12,839
Income taxes 9,396 9,651 5,188
----------------------------------------------------------------------------------
Net income $14,166 $13,893 $7,651
==================================================================================
Net income per common share $1.06 $1.06 $.60
==================================================================================
Shares used in per share computation 13,427 13,164 12,787
==================================================================================
</TABLE>
See notes to financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-In Retained
(Dollars in thousands) Shares Amount Capital Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992 12,533,082 $13 $52,796 $38,465 $ 91,274
Issuance of common stock under
Employee Stock Purchase Plan 248,371 2,140 2,140
Issuance pursuant to stock options and tax benefits
from sale of optioned stock by employees 239,575 1,453 1,453
Net income 7,651 7,651
---------------------------------------------------------------------
Balance at September 30, 1993 13,021,028 13 56,389 46,116 102,518
Issuance of common stock under
Employee Stock Purchase Plan 228,054 2,180 2,180
Issuance pursuant to stock options and tax benefits
from sale of optioned stock by employees 33,099 357 357
Net income 13,893 13,893
---------------------------------------------------------------------
Balance at September 30, 1994 13,282,181 13 58,926 60,009 118,948
Issuance of common stock under
Employee Stock Purchase Plan 264,335 1 2,575 2,576
Issuance pursuant to stock options and tax benefits
from sale of optioned stock by employees 34,900 332 332
Net income 14,166 14,166 14,166
---------------------------------------------------------------------
Balance at September 30, 1995 13,581,416 $14 $61,833 $74,175 $136,022
=====================================================================
</TABLE>
See notes to financial statements.
-14-
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------------------------------
(Dollars in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $14,166 $13,893 $7,651
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,387 8,485 7,450
Allowance for doubtful accounts 88 (219) 172
Shareholders' equity tax benefits from stock options 56 132 568
Change in assets, liabilities and equity:
Accounts receivable (10,217) 2,134 (36)
Merchandise inventories (20,878) (23,404) (10,284)
Prepaid expenses and other assets (2,827) 2,571 (2,151)
Accounts payable 12,266 15,510 7,004
Accrued expenses and other liabilities 9,677 6,990 3,413
--------------------------------------------------
Net cash provided by operating activities 11,718 26,092 13,787
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - net (17,797) (19,577) (9,378)
--------------------------------------------------
Net cash used in investing activities (17,797) (19,577) (9,378)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,852 2,405 3,025
--------------------------------------------------
Net cash provided by financing activities 2,852 2,405 3,025
Net increase (decrease) in cash and cash equivalents (3,227) 8,920 7,434
--------------------------------------------------
Cash and cash equivalents at beginning of year 21,661 12,741 5,307
--------------------------------------------------
Cash and cash equivalents at end of year $18,434 $21,661 $12,741
==================================================
</TABLE>
See notes to financial statements.
-15-
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: The Good Guys, Inc., through its wholly owned subsidiary (together,
the Company), is a retailer of consumer electronic products in California,
Nevada, Oregon and Washington.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the The Good Guys, Inc. and its wholly owned subsidiary. All
significant intercompany transactions have been eliminated in consolidation.
Certain reclassifications were made to prior year statements to conform
to current year presentations.
CASH EQUIVALENTS: Cash equivalents represent short-term, highly liquid
investments with maturities of three months or less.
MERCHANDISE INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation
and amortization are computed using the straight line method based on estimated
useful lives of three to seven years for furniture, fixtures and equipment, and
the lesser of the estimated useful lives of assets or the remaining lease terms
for leasehold improvements.
STORE PRE-OPENING COSTS: Store pre-opening costs are expensed as incurred.
REVENUE RECOGNITION: The Company recognizes revenue at the point of sale.
Merchandise returns are recorded at the time of return, as the effect of returns
are not significant to the Company's operating results.
PREMIER PERFORMANCE GUARANTEE CONTRACTS: The Company sells extended service
contracts ("Premier Performance Guarantee contracts") on behalf of an unrelated
company (the "Warrantor") that markets this product for merchandise sold by the
Company. Commission revenue is recognized at the time of sale. The Company acts
solely as an agent for the Warrantor and has no liability to the customer under
the extended service contract nor any other material obligation to the customer
or the Warrantor. Merchandise presented to the Company for servicing under
extended service contracts is repaired by the Company on behalf of the
Warrantor. The repairs are billed to the Warrantor at amounts customarily
charged by the Company for these services.
INCOME TAXES: The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes." Under this standard, deferred income taxes reflect the tax effects,
based on current tax law, of temporary differences resulting from differences
between the amounts of assets and liabilities recognized for financial reporting
and income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments", requires disclosure of the estimated fair value of
financial instruments. The carrying value of cash and cash equivalents, accounts
receivable and accounts payable approximate the estimated fair value.
NET INCOME PER COMMON SHARE: Net income per share was computed based on the
weighted average number of shares of common stock outstanding during the year.
NOTE 2:
BORROWING ARRANGEMENTS
The Company currently maintains a committed unsecured revolving line of credit
which expires on February 28, 1997, with the option to extend for one year. The
line of credit allows borrowings of up to $75,000,000, which fluctuates with
seasonal working capital requirements. The credit line also includes a standby
letter of credit facility. The agreement provides the Company with several
different borrowing alternatives with interest rates based on the prime rate and
various domestic and international money market rates. The agreement requires
maintenance of certain financial loan covenants, including minimum tangible net
worth, debt to equity and fixed charge coverage ratios, restrictions on capital
expenditures and prohibits payment of cash dividends. The Company was in
compliance with these covenants at September 30, 1995. There were no borrowings
under the line of credit at September 30, 1995 and 1994. Interest paid for the
years ended September 30, 1995, 1994 and 1993 was $606,000, $169,000, and
$131,000, respectively. At September 30, 1995 and 1994, no portion of the
commitment was reserved under the letter of credit facility.
During 1995, the Company also entered into demand line of credit
facilities with various banks totaling $30 million. These uncommitted facilities
require bank approval for each advance and allows the Company to borrow at money
market rates related to the banks financing costs. The Company may use these
facilities for working capital, construction costs and
-16-
<PAGE> 8
general corporate purposes. The maximum amount the Company can borrow under
these uncommitted demand line of credit facilities is limited by its committed
credit agreement. No amounts were borrowed under these agreements during 1995.
The Company also purchases products from some vendors through finance
companies under agreements which generally require payment in 30 days and
provide for purchase discounts.
NOTE 3:
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years ended September 30,
--------------------------------------------------
(Dollars In Thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 8,870 $7,650 $4,879
State 2,174 1,902 1,140
------- ------ ------
Total currently payable 11,044 9,552 6,019
Deferred tax (1,648) 99 (831)
------- ------ ------
Total $ 9,396 $9,651 $5,188
======= ====== ======
</TABLE>
For the years ended September 30, 1995, 1994 and 1993, the Company paid income
taxes totaling $9,485,000, $10,652,000 and $6,242,000, respectively.
The provisions for income taxes as reported are different from the tax
provisions computed by applying the statutory federal income tax rate. The
differences are reconciled as follows:
<TABLE>
<CAPTION>
Years ended September 30,
-----------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Income Tax
at the statutory rate 35.0% 35.0% 34.3%
State franchise tax,
less federal tax effect 5.6 6.0 6.0
Other - net (.7) .1
- ---------------------------------------------------------------------------------
Total 39.9% 41.0% 40.4%
- ---------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting and the
amounts used for income tax purposes. Significant components of the Company's
net deferred tax assets as of September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------------
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Current
Vacation accruals $1,088 $1,022
Prepaid expenses (891) (977)
Reserves 1,186 1,174
State taxes 733 733
Inventory capitalization 1,001 991
- ---------------------------------------------------------------------
Current - net 3,117 2,943
Noncurrent
Depreciation 2,127 1,256
Other - net (238) (841)
- ---------------------------------------------------------------------
Noncurrent - net 1,889 415
- ---------------------------------------------------------------------
Total $5,006 $3,358
- ---------------------------------------------------------------------
</TABLE>
NOTE 4:
LEASES
The Company's stores, distribution and administration facilities and certain
equipment are leased under operating leases. The leases have remaining initial
terms inclusive of renewal options, of one to forty-three years and generally
provide for rent increases based on the consumer price index. Certain store
leases require additional lease payments based on store sales.
The Company subleases a portion of one of its stores to a company whose
president is also a member of the Company's Board of Directors. The lease
expires on July 31, 2003 and provides for additional rent increases based on the
consumer price index. Under the terms of the sublease agreement, the income
received for the years ended September 30, 1995, 1994 and 1993 was $318,938,
$318,938 and $276,600, respectively.
The future minimum annual payments for leases having noncancelable
terms in excess of one year, net of sublease income, at September 30, 1995, are
as follows:
<TABLE>
<CAPTION>
REAL
(Dollars in thousands) PROPERTY EQUIPMENT
------------------------------------
<S> <C> <C>
1996 $26,409 $8,243
1997 25,891 6,095
1998 25,817 4,866
1999 25,271 3,733
2000 22,831 1,450
Later years through 2015 140,962 0
------------------------------------
Total $267,181 $24,387
------------------------------------
</TABLE>
Lease expense for the years ended September 30, 1995, 1994 and 1993 was
$35,958,000, $28,149,000 and $24,723,000, respectively.
-17-
<PAGE> 9
NOTE 5:
PROFIT SHARING PLAN
The Profit Sharing Plan (the "Plan") is a defined contribution plan covering
substantially all of the Company's employees. Contributions are made to the Plan
at the discretion of the Company's Board of Directors in cash or shares of the
Company's common stock. The profit sharing contributions for the years ended
September 30, 1995, 1994 and 1993 were $1,467,000, $602,000 and $562,000,
respectively.
NOTE 6:
STOCK OPTIONS
The Company's 1985 Stock Option Plan and 1994 Stock Incentive Plan authorize the
issuance of incentive stock options and non-qualified stock options covering up
to 2,715,000 shares of common stock. Although the 1985 Plan expired in 1995 and
no further options maybe granted under it, options granted prior to its
expiration remain outstanding. Options granted under both Plans are exercisable
at prices equal to the fair market value of the stock on the date of grant.
Options vest ratably over four years and no option may be granted for a term
exceeding ten years.
The following is a summary of stock option activity under the Plan for
the years ended September 30, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
Number Price
of shares Range
- ------------------------------------------------------------------------------
<S> <C> <C>
Balance at September 30, 1992 803,480 $2.37 - $26.25
Granted 275,000 9.00 - 13.75
Exercised (142,775) 2.37 - 8.25
Canceled (111,950) 5.00 - 26.25
-----------------------------------
Balance at September 30, 1993 823,755 2.37 - 26.25
Granted 303,150 11.25 - 17.25
Exercised (33,099) 2.94 - 13.12
Canceled (43,851) 6.50 - 26.25
-----------------------------------
Balance at September 30, 1994 1,049,955 2.37 - 26.25
Granted 338,200 9.75 - 12.63
Exercised (34,900) 2.94 - 11.25
Canceled (143,275) 9.50 - 26.25
-----------------------------------
Balance at September 30, 1995 1,209,980 $2.37 - $26.25
===================================
</TABLE>
At September 30, 1995, options for 621,463 shares were exercisable at prices
ranging from $2.37 to $26.25 per share and 903,450 shares were available for
additional option grants.
The following is a summary of non-qualified stock options not covered under the
1985 Stock Option Plan or the 1994 Stock Incentive Plan for the years ended
September 30, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Number Price
of Shares Range
- ---------------------------------------------------------------------------------
<S> <C> <C>
Balance at September 30, 1992 136,800 $2.56 - $8.12
Exercised (96,800) 2.56 - 2.56
---------------------------------
Balance at September 30, 1993 40,000 6.50 - 8.12
Exercised 0 6.50 - 8.12
---------------------------------
Balance at September 30, 1994 40,000 6.50 - 8.12
Exercised 0 6.50 - 8.12
---------------------------------
Balance at September 30, 1995 40,000 $6.50 - $8.12
---------------------------------
</TABLE>
At September 30, 1995, the options for 40,000 shares in the above table were
exercisable at prices ranging from $6.50 to $8.12.
NOTE 7:
EMPLOYEE STOCK PURCHASE PLAN
The Company established an employee stock purchase plan in February of 1986,
which permits eligible employees to purchase the Company's common stock under
terms specified by this Plan. Since inception a total of 1,900,000 shares of the
Company's common stock has been reserved for issuance under this Plan, and
1,445,054 shares have been issued as of September 30, 1995.
NOTE 8:
LEGAL PROCEEDINGS
The Company is involved in a number of lawsuits, including lawsuits alleging
unfair trade practices in connection with the sale of cellular telephones.
Management believes that the ultimate outcome of the lawsuits, individually and
in the aggregate, will not have a material impact on the financial position or
results of operations of the Company.
-18-
<PAGE> 10
NOTE 9:
QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended September 30, 1995 and 1994 are
summarized in the following table:
<TABLE>
<CAPTION>
December 31, March 31, June 30, September 30,
(Dollars in thousands, except per share amounts) 1994 1995 1995 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $281,658 $195,745 $198,315 $213,488
Gross profit 67,956 47,327 49,259 50,485
Net income 8,601 2,300 2,222 1,043
Net income per share $ .65 $ .17 $ .17 $ .08
<CAPTION>
December 31, March 31, June 30, September 30,
(Dollars in thousands, except per share amounts) 1993 1994 1994 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $217,204 $164,140 $164,431 $178,938
Gross profit 57,436 44,307 43,285 43,995
Net income 7,378 2,783 1,923 1,809
Net income per share $ .57 $ .21 $ .15 $ .14
</TABLE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
THE GOOD GUYS, INC.
Brisbane, California
We have audited the accompanying consolidated balance sheets of THE GOOD GUYS,
INC. as of September 30, 1995 and 1994, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of THE GOOD GUYS, INC. at
September 30, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Francisco, California
November 1, 1995
-19-
<PAGE> 11
CORPORATE INFORMATION
OFFICERS
Robert A. Gunst
President and Chief Executive Officer
Robert E. Baird
Senior Vice President, Marketing and Merchandising
Thomas A. Hannah
Senior Vice President, Operations
Brad S. Bramy
Vice President, Advertising
William C. Curley
Vice President, MIS and Operations
John G. Duken
Vice President, Store Operations
William B. Perlstein
Vice President, Stores
Gregory L. Steele
Vice President, Real Estate
Gera M. Vaz
Vice President, Human Resources
DIRECTORS
Ronald A. Unkefer
Chairman of the Board
Stanley R. Baker
Director
Robert A. Gunst
Director, President and Chief Executive Officer of the Company
Howard Lester
Director and Chairman and Chief Executive Officer of Williams-Sonoma, Inc.
John E. Martin
Director and Chairman and Chief Executive Officer of Taco Bell Corp.
Russell M. Solomon
Director and Founder and President of MTS, Inc. (Tower Records)
ANNUAL MEETING
January 24, 1996, 10:30 AM
Bank of America Building
A.P. Giannini Auditorium
555 California Street
San Francisco, CA 94104
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105
TRANSFER AGENT
Chemical Mellon Shareholder Services
50 California Street, 10th Floor
San Francisco, CA 94111
(800) 356-2017
FORM 10-K
A copy of the Company's From 10-K Annual Report filed with the Securities and
Exchange Commission may be obtained without charge by writing to Investor
Relations at the address noted below:
QUARTERLY REPORTS
THE GOOD GUYS! will discontinue mailing quarterly reports to shareholders
beginning in fiscal 1996. Shareholders can obtain a faxed copy of recent
quarterly reports and press releases by calling Company News On Call, a division
of PR Newswire, at 1-800-758-5804. THE GOOD GUYS! news # is 108403.
Or write to:
THE GOOD GUYS!
Attn: Investor Relations
7000 Marina Blvd.
Brisbane, CA 94005-1840
COMMON STOCK
The Good Guys, Inc. common stock is traded on the Nasdaq National Market under
the symbol GGUY. The following table sets for the quarterly high and low sales
prices for the Company's common stock as quoted in the Nasdaq National Market
for fiscal 1994 and 1995.
<TABLE>
<CAPTION>
Fiscal Quarter Ended HIGH LOW
- ---------------------------------------------------------------
<S> <C> <C>
December 31, 1993 16 11
March 31, 1994 20 1/2 11 1/4
June 30, 1994 19 1/4 10 5/8
September 30, 1994 14 10 1/2
December 31, 1994 13 11
March 31, 1995 13 3/4 11 1/4
June 30, 1995 11 3/4 9 1/4
September 30, 1995 13 7/8 10 7/8
</TABLE>
As of November 17, 1995 there were 1,849 shareholders of record, excluding
shareholders whose stock is held in nominee or street name by brokers.
The Company's present policy is to retain its earnings to finance future growth
and, accordingly, it does not anticipate paying cash dividends in the
foreseeable future.
-20-
<PAGE> 1
Exhibit 23.1
DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-5935, 33-19342, 33-32986, 33-38749, 33-39421, 33-49960, 33-56524 and 33-60957
of The Good Guys, Inc. on Form S-8 of our reports dated November 1, 1995,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
The Good Guys, Inc. for the year ended September 30, 1995.
DELOITTE & TOUCHE LLP
December 19, 1995
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons
whose signature appears below, being a member of the Board of Directors of The
Good Guys, Inc. (the "Company"), hereby constitutes and appoints Robert A.
Gunst as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign on his behalf the Company's ANNUAL REPORT ON FORM
10-K for its fiscal year ended September 30, 1995, and to execute any
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, with the full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection therewith, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
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: December 21, 1995
/s/ Ronald A. Unkefer
-----------------------------
Ronald A. Unkefer
/s/ Stanley R. Baker
-----------------------------
Stanley R. Baker
/s/ Russell M. Solomon
-----------------------------
Russell M. Solomon
/s/ W. Howard Lester
-----------------------------
W. Howard Lester
/s/ John E. Martin
-----------------------------
John E. Martin
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 18,434
<SECURITIES> 0
<RECEIVABLES> 21,778
<ALLOWANCES> 569
<INVENTORY> 115,806
<CURRENT-ASSETS> 165,749
<PP&E> 101,825
<DEPRECIATION> 42,584
<TOTAL-ASSETS> 227,729
<CURRENT-LIABILITIES> 91,707
<BONDS> 0
<COMMON> 14
0
0
<OTHER-SE> 136,008
<TOTAL-LIABILITY-AND-EQUITY> 227,729
<SALES> 889,206
<TOTAL-REVENUES> 889,206
<CGS> 674,179
<TOTAL-COSTS> 674,179
<OTHER-EXPENSES> 191,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> 23,562
<INCOME-TAX> 9,396
<INCOME-CONTINUING> 14,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,166
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
