<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Good Guys, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
THE GOOD GUYS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 11, 1997
The Annual Meeting of Shareholders of The Good Guys, Inc. will be held at
the A.P. Giannini Auditorium, Bank of America Building, located at 555
California Street, San Francisco, California on Tuesday, February 11, 1997, at
10:30 A.M., for the following purposes:
1. To elect Directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve the increase by 600,000 in the number of shares covered by
the Employee Stock Purchase Plan.
3. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Company.
4. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on December 16, 1996
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
Robert A. Gunst
President and Chief Executive Officer
Brisbane, California
December 31, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POST-PAID ENVELOPE. IF
YOU ARE ABLE TO ATTEND THE MEETING, AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU
MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 3
THE GOOD GUYS, INC.
7000 MARINA BOULEVARD
BRISBANE, CALIFORNIA 94005-1840
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of The
Good Guys, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held at the A.P. Giannini Auditorium, Bank of
America Building, located at 555 California Street, San Francisco, California,
on Tuesday, February 11, 1997, at 10:30 A.M.
Any proxy given may be revoked by a shareholder at any time before it is
voted by filing with the Secretary of the Company a notice in writing revoking
it, or by duly executing a proxy bearing a later date. Proxies may also be
revoked by any shareholder present at the meeting who expresses a desire to vote
his or her shares in person. Subject to any such revocation, all shares
represented by properly executed proxies which are received prior to the meeting
will be voted in accordance with the specifications on the proxy. If no
specification is made with regard to a proposal set forth in the proxy, the
shares will be voted in favor of the proposal.
A copy of the Annual Report of the Company for its fiscal year ended
September 30, 1996 is being mailed to shareholders with this proxy statement.
The approximate date on which this proxy statement and the accompanying proxy
are being sent to shareholders is January 3, 1997.
VOTING
Only shareholders of record on December 16, 1996 (the "Record Date") will
be entitled to notice of and to vote at the meeting. At the close of business on
the Record Date, the Company had 13,419,362 shares of Common Stock outstanding.
Each holder of record of Common Stock on the Record Date is entitled to one vote
per share on each matter to be considered at the Annual Meeting of Shareholders.
A majority of all shares represented in person or by proxy at the Annual Meeting
constitutes a quorum for the transaction of business at the meeting. Abstentions
are considered as shares present and entitled to vote and therefore will have
the same effect as a vote against a matter presented at the meeting. Brokers who
hold shares in street name for customers have the authority to vote on certain
matters; with respect to any other matters, shares as to which brokers have not
received discretionary voting authority from their customers are considered as
shares not entitled to vote with respect to such matters, but are counted toward
the establishment of a quorum.
ELECTION OF DIRECTORS
Directors are elected to hold office until the next annual shareholders'
meeting or until their successors have been elected. Unless otherwise instructed
by the shareholder, it is intended that the shares represented by the enclosed
proxy will be voted for the nominees named below. Although management
anticipates that all of the nominees will be able to serve, if any nominee is
unable or unwilling to serve at the time of the meeting, the proxy may be voted
for a substitute nominee chosen by management.
All of the nominees are presently directors of the Company and no nominee
has any family relationship with any other nominee or executive officer. The
beneficial ownership of the Company's stock by the nominees is set forth under
"Certain Shareholders."
<PAGE> 4
The following table and biographical summaries set forth the names and ages
of the nominees, their principal occupations at present, the positions and
offices held by each of them with the Company in addition to the position as
director, and the period during which each of them has served as a director of
the Company.
<TABLE>
<CAPTION>
DIRECTOR
CONTINUOUSLY
NOMINEE AGE SINCE
------------------------------------------------------------------ --- ------------
<S> <C> <C>
Stanley R. Baker(1)(2)............................................ 52 1976
Robert A. Gunst................................................... 48 1986
Russell M. Solomon(1)(2).......................................... 71 1986
W. Howard Lester(1)(2)............................................ 61 1990
John E. Martin(1)(2).............................................. 51 1990
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Stanley R. Baker has been a director of the Company since its incorporation
in 1976 and was Secretary of the Company from 1976 until his resignation as an
employee of the Company in August 1991. Mr. Baker became Vice President, Video
Merchandising in 1986, and Vice President, Co-Head of Merchandising in 1990.
From August 1991 to the present Mr. Baker has been a private investor.
Robert A. Gunst became the President and Chief Operating Officer of the
Company in May 1990 and its Chief Executive Officer in January 1993. Mr. Gunst
is also a director of Garden Fresh Restaurant Corp., a publicly-held restaurant
chain.
Russell M. Solomon is the founder and President of MTS Incorporated (dba
Tower Records).
W. Howard Lester has been Chairman and Chief Executive Officer of
Williams-Sonoma, Inc., a publicly-held specialty retailer, since 1987. Mr.
Lester is also a director of CKE Restaurant, Inc., a publicly-held restaurant
chain.
John E. Martin served as Chief Executive Officer of Taco Bell, a
wholly-owned subsidiary of PepsiCo, from 1983 to October 1996 and also as
Chairman from June 1994 to October 1996. In October 1996 he resigned from those
positions to become Chairman and Chief Executive Officer of PepsiCo Casual
Restaurants International, another wholly-owned subsidiary of PepsiCo. Mr.
Martin is also a director of Williams-Sonoma, Inc.
The Board of Directors has established an Audit Committee and a
Compensation Committee, but has not established a Nominating Committee. The
Audit Committee met two times during fiscal 1996. Responsibilities of the Audit
Committee include (1) reviewing financial statements and consulting with the
independent auditors concerning the Company's financial statements, accounting
and financial policies, and internal controls, (2) reviewing the scope of the
independent auditors' activities and the fees of the independent auditors, and
(3) maintaining good communications among the Committee, the Company's
independent auditors and the Company's management on accounting matters. The
Compensation Committee met four times during fiscal 1996. The function of the
Compensation Committee is to approve stock plans and option grants and review
and make recommendations to the Board of Directors regarding executive
compensation and benefits.
The total number of meetings of the Board of Directors during fiscal 1996
was four. Each of the incumbent directors other than W. Howard Lester (who
attended seven of ten meetings) attended at least 75% of the aggregate of (1)
the meetings of the Board during the year and (2) the total number of meetings
of all committees of the Board on which he served.
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<PAGE> 5
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their service as directors. During the fiscal year ended
September 30, 1996, directors who were not employees of the Company were
compensated at the rate of $16,000 per year, plus $2,000 per day for each
meeting of the Board of Directors attended. No additional compensation is paid
to directors for their attendance at meetings of Board committees. Directors are
reimbursed for expenses incurred in attending meetings. Under the Company's 1994
Stock Incentive Plan, each person who is not an employee of the Company, upon
becoming a member of the Board of Directors for the first time, is awarded a
non-qualified option to purchase 5,000 shares of Common Stock of the Company,
and immediately after the completion of each annual meeting of the shareholders
of the Company, each non-employee member of the Board is awarded a non-qualified
option to purchase 1,000 shares of Common Stock. Such options have an exercise
price per share equal to the fair market value of the shares of Common Stock on
the date of award, and vest in four equal annual installments from the date of
grant. Under this provision, each of Messrs. Baker, Lester, Martin and Solomon
was granted an option to purchase 1,000 shares of Company Common Stock at an
exercise price of $8.125 per share on January 24, 1996.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows specific compensation information, for the fiscal
years ending September 30, 1996, 1995 and 1994, for the Company's Chief
Executive Officer and the next four most highly compensated executive officers
as of September 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- -------------
OTHER ANNUAL STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (NUMBER)
- --------------------------------- ---- -------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Robert A. Gunst.................. 1996 $475,000 $ 0 $10,766 50,000
President and 1995 $450,000 $ 80,000 $18,240 50,000
Chief Executive Officer 1994 $425,000 $318,750 $19,544 50,000
Thomas A. Hannah................. 1996 $245,000 $ 0 $ 7,289 20,000
Senior Vice President, 1995 $225,000 $ 32,000 $11,890 20,000
Operations(2) 1994 $205,000 $150,000 $48,190 20,000
Robert E. Baird.................. 1996 $230,000 $ 0 $ 6,488 20,000
Vice President, Marketing and 1995 $205,000 $ 30,000 $14,567 18,000
Merchandising (3) 1994 $104,000 $ 85,000 $ 7,163 10,000
William C. Curley................ 1996 $210,000 $ 0 $11,765 15,000
Vice President, 1995 $200,000 $ 23,000 $23,397 15,000
MIS and Operations 1994 $190,000 $114,000 $22,484 15,000
Gregory L. Steele................ 1996 $170,000 $ 14,000 $ 6,133 10,000
Vice President, 1995 $160,000 $ 38,750 $ 9,746 10,000
Real Estate 1994 $150,000 $115,000 $ 8,529 10,000
</TABLE>
- ---------------
(1) Consists of perquisites and other personal benefits, including long term
disability insurance premiums paid by the Company.
(2) Other annual compensation for Mr. Hannah includes $34,942 in fiscal year
1994, for payments made in consideration of his becoming an employee of the
Company.
(3) Mr. Baird resigned as an employee of the Company in October 1996.
3
<PAGE> 6
STOCK OPTION TABLES
The following table shows information concerning stock options granted to
the individuals named in the Summary Compensation Table above during the fiscal
year ended September 30, 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)(3)
OPTIONS IN PRICE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ------------------------------------ ---------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Gunst..................... 50,000 13.05% $10.38 11/21/05 $326,239 $826,754
Thomas A. Hannah.................... 20,000 5.22% $10.38 11/21/05 $130,496 $330,702
Robert E. Baird..................... 20,000(4) 5.22% $10.38 -- -- --
William C. Curley................... 15,000 3.91% $10.38 11/21/05 $97,872 $248,026
Gregory L. Steele................... 10,000 2.61% $10.38 11/21/05 $65,248 $165,351
</TABLE>
- ---------------
(1) All options granted in fiscal 1996 were granted under the 1994 Stock
Incentive Plan. The options are non-qualified stock options that were
granted at 100% of the fair market value of the Common Stock on the date of
grant. The options expire ten years from the date of grant, unless
otherwise earlier terminated upon the occurrence of certain events related
to termination of employment. The options vest 25% per year on each of the
first four anniversaries of the option grant date. Additional vesting of
the right to exercise the options ceases when the optionee's employment
terminates.
(2) The 5% and the 10% assumed rates of appreciation applied to the option
exercise price over the ten-year option term are prescribed by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of Common Stock. If the
Company's Common Stock does not appreciate relative to the exercise price,
the named executive officers will receive no benefit from the options.
(3) At assumed annual rates of appreciation of 5% and 10%, the aggregate
potential realizable increase in value for shares held by all stockholders
as of September 30, 1996 for the ten-year period from November 21, 1995 to
November 21, 2005 would be $87,558,408 and $221,890,197.
(4) Upon Mr. Baird's resignation from the Company in October 1996, these options
were cancelled as none of them were vested at that time.
The following table shows the number of shares covered by both exercisable
and non-exercisable stock options held by the individuals named in the Summary
Compensation Table above as of September 30, 1996 and the value of unexercised
options as of that date.
AGGREGATE OPTIONS EXERCISED IN FISCAL 1996
AND SEPTEMBER 30, 1996 OPTION VALUES
<TABLE>
<CAPTION>
VALUE(1) OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT 9/30/96 9/30/96
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Gunst............ -- -- 279,125 122,375 $ 141,750 --
Thomas A. Hannah........... -- -- 26,250 48,750 -- --
Robert E. Baird............ -- -- 9,500 38,500 -- --
William C. Curley.......... -- -- 42,000 36,000 -- --
Gregory L. Steele.......... 380 $2,208 24,500 24,000 $ 12,000 --
</TABLE>
- ---------------
(1) The value of unexercised options is calculated by multiplying the number of
options outstanding by the difference between the option exercise price and
the September 30, 1996 closing price of $8.00 per share of the Company's
Common Stock as reported on the Nasdaq National Market. Options with an
exercise price in excess of the September 30, 1996 closing price were not
included in this calculation.
4
<PAGE> 7
EMPLOYMENT AGREEMENTS
Robert A. Gunst is employed at will by the Company at a minimum annual
salary of $275,000 per year (his present salary being at the rate of $500,000
per year). The Company may terminate Mr. Gunst's employment at any time with or
without cause, provided that if the termination is without cause, Mr. Gunst
would be entitled to the payment of an amount equal to his then-current annual
base salary plus a pro-rated bonus amount.
On June 1, 1993, the Company entered into an employment agreement with
Thomas A. Hannah, Senior Vice President, Operations, under which he will receive
an annual salary of not less than $195,000 (his present salary being at the rate
of $257,500 per year). In the event the Company terminates Mr. Hannah's
employment without cause, the Company will continue to pay Mr. Hannah's base
salary for 12 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company are Stanley R.
Baker, W. Howard Lester, John E. Martin and Russell M. Solomon, all of whom are
outside directors. None of the members of the Committee is or was an officer of
the Company or any of its subsidiaries, with the exception of Stanley R. Baker
who resigned as an officer and employee in August 1991.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing the Company's policies and administering the
Company's programs governing stock incentive plans and executive compensation,
including annual salaries, bonuses (if any), and awards under stock and
long-term cash incentive plans.
The Committee has engaged a nationally recognized compensation and benefits
consulting firm to assist the Committee and the Company in reviewing the
compensation program of the Company's executive officers.
The objectives of the Company's executive compensation program are to
provide the following:
- Overall compensation opportunities that are competitive within the
Company's executive labor markets and that enable the Company to attract
and retain highly talented, experienced executives capable of furthering
the Company's objectives;
- Annual cash incentive compensation tied primarily to the overall
financial performance of the Company, but also recognizing business unit
and individual performance as appropriate; and
- Long term incentives which directly align the financial interests of
management with those of the shareholders and which provide an incentive
to remain in the Company's employ.
To achieve compensation opportunities that are competitive, the Company
focuses on compensation survey data for retailers of comparable size. Although
not determinative, the Company takes into consideration 75th percentile
competitive executive pay levels and average annual percentage increases in
executive compensation granted by comparable companies.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, and various other common benefits.
BASE SALARY
Base salary levels for the Company's executive officers are competitively
set relative to companies in the Company's industry and other comparable
companies. In determining salaries, the Committee also takes into
5
<PAGE> 8
account the Company's financial performance and the executive's demonstrated
skill, experience and performance.
ANNUAL INCENTIVE COMPENSATION
The Company's system of annual cash incentive compensation for its
executive officers takes the form of cash bonuses that are determined by overall
Company performance as measured by earnings per share in relation to budgeted
earnings per share, and, where appropriate, individual performance. The target
bonus for an executive officer (other than the Chief Executive Officer)
determined by earnings per share is multiplied by a percentage, ranging from
zero to 125%, that can be adjusted by the Chief Executive Officer based on his
assessment of the officer's job performance. For officers with responsibility
for sales, merchandising, real estate and store operations, a portion of their
annual bonus is directly tied to the achievement of specific financial or other
goals developed at the beginning of the year. No bonuses are paid under the
Company's plans (other than for bonuses based upon store openings in the case of
the Vice President, Real Estate) in the event the Company does not achieve at
least 75% of its budgeted earnings per share, which was the case in fiscal 1993
and fiscal 1996.
STOCK OPTION PROGRAM
The stock option program is the Company's principal long-term incentive
plan for executive officers and key managers. The objectives of the program are
to align executive and shareholder long-term interests by creating a strong and
direct link between executive compensation and shareholder return, and to enable
executives to develop and maintain a significant long-term ownership position in
the Company's Common Stock. The Committee attempts to grant options sufficient
to deliver competitive gains assuming the Company's stock price performance is
competitive, but the Committee also considers the dilutive impact of options
granted.
Stock options are granted at an option price equal to the fair market value
of the Company's Common Stock on the date of grant, have ten-year terms and vest
ratably over a four-year period.
BENEFITS
The Company provides benefits to the executive officers that are generally
available to Company employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
After reviewing Mr. Gunst's and the Company's performance during fiscal
1995 and the other factors discussed above relative to determining salaries, it
was concluded that Gunst's salary should be raised from the annual rate of
$450,000 to the annual rate of $475,000 for fiscal 1996. In addition, after
reviewing the option grants to Mr. Gunst in the past and his present
stockholdings, Mr. Gunst was granted an option to acquire 50,000 shares of
Common Stock of the Company, exercisable at a price equal to the fair market
value of the Company's stock on the date of grant. The Committee expects to
grant Mr. Gunst additional stock options in the future, so that a portion of his
annual compensation each year will consist of new stock options.
The Committee has reviewed the total compensation of all executive officers
in fiscal 1996 and has concluded that their compensation is reasonable and
consistent with the Company's compensation philosophy and industry practice.
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits the
amount of compensation a corporation may deduct as a business expense. Section
162(m) generally disallows deductions for compensation in excess of $1 million
to a company's Chief Executive Officer or to any of its four other most highly
compensated executive officers. Compensation that is "performance-based" is not
subject to that limit if certain requirements are met. The Committee does not
contemplate that there will be any nondeductible compensation for 1996 or for
1997 for any of the five executive positions in question.
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<PAGE> 9
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Stanley R. Baker
W. Howard Lester
John E. Martin
Russell M. Solomon
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company's Common Stock, the Nasdaq Stock Market (US) Index and
the Nasdaq -- Retail Trade Index, each of which assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
Measurement Period The Good Guys! NASDAQ Stock NASDAQ Retail
(Fiscal Year Covered) Stock Market (US) Trade Stocks
<S> <C> <C> <C>
1991 100 100 100
1992 31 112 101
1993 39 147 115
1994 43 148 112
1995 39 204 124
1996 28 243 148
</TABLE>
7
<PAGE> 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1995, the Company opened WOW!, Multimedia Superstore, in Las
Vegas, Nevada, and in October 1996 the Company opened WOW!, Multimedia
Superstore in Long Beach, California. The 62,000 square foot facility in Las
Vegas and the 55,000 square foot facility in Long Beach are jointly operated
with Tower Records under an Operating Agreement between the Company and Tower
Records. The Company and Tower Records have separate leases for their respective
stores, and the Operating Agreement governs the joint operation of the
facilities. The Company and Tower Records share equally certain expenses in
connection with operation of these facilities, but do not share any profits on
their respective sales. Russell M. Solomon, President of MTS Incorporated (dba
Tower Records) is a member of the Company's Board of Directors.
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors in November 1996 approved an increase by 600,000 in
the number of shares covered by the Employee Stock Purchase Plan (the "Purchase
Plan"). Approval of the increase in the number of shares covered by the Purchase
Plan by the holders of at least a majority of the shares of Common Stock present
and entitled to vote at the meeting is required.
Through December 16, 1996, there have been 1,762,370 shares purchased under
the Purchase Plan, in which all of the Company's full-time employees may
participate (approximately 900 employees are participating) and if the proposed
amendment to the Purchase Plan is adopted, 737,630 shares will remain available
for purchase under the Purchase Plan.
The continued success of the Company depends upon its ability to attract
and retain highly qualified and competent employees. The Purchase Plan enhances
that ability and provides additional incentive to such personnel to advance the
interests of the Company and its shareholders.
The Purchase Plan is described below.
GENERAL
All employees (except any employee who owns 5% or more of the stock of the
Company or whose customary employment by the Company is for five months or less
in any calendar year or for an average of less than 20 hours per week) are
eligible to participate in the Purchase Plan commencing on the first enrollment
date (January 1 or July 1) following the commencement of their employment. Each
employee enrolling in the Purchase Plan elects to make contributions by payroll
deductions of either 2%, 5% or 10% of monthly gross pay. The rate of
contribution may be either increased or decreased to such amounts on any
subsequent enrollment date. No employee may purchase stock under the Purchase
Plan exceeding $25,000 in fair market value in any calendar year, and no
employee may make contributions for any period during which he or she is not
receiving pay from the Company or its subsidiaries. Employee contributions are
credited to each participant's individual account and, on June 30 and December
31 of each year, the funds then in the participant's account are applied to the
purchase of whole shares of Common Stock, unless the member has previously
advised the Company that he or she does not wish shares purchased for his or her
account.
The cost to each participant's account for the shares so purchased will be
not less than 85% of the lower of the closing price on (a) the first trading day
of each six-month period or (b) the last trading day of each six-month period.
If the number of shares members desire to purchase at the end of any six-month
period exceeds the number of shares then available under the Purchase Plan, the
shares available will be allocated among such members in proportion to their
contributions during the six-month period.
No rights of any members are assignable by operation of law or otherwise,
except to the extent that there has been a designation of a beneficiary or
except as permitted by the laws of descent and distribution if a beneficiary is
not designated.
Membership in the Purchase Plan will be terminated when the member (a)
voluntarily elects to withdraw his or her entire account, (b) resigns or is
discharged from the Company or one of its subsidiaries, (c) dies, or (d) does
not receive pay from the Company or one of its eligible subsidiaries for 12
consecutive
8
<PAGE> 11
months, unless this period is due to illness, injury or for other reasons
approved by the person or persons appointed by the Company to administer the
Purchase Plan. Upon termination of membership, the terminated member will not be
entitled to rejoin the Purchase Plan until the first day of the six-month period
immediately following the six-month period in which the termination occurs. Upon
termination of membership, the member will be entitled to the amount of his or
her individual account within 15 days after termination.
ADMINISTRATION
The Purchase Plan is administered by Dennis C. Carroll, the Company's Vice
President and Chief Financial Officer. The Purchase Plan may be terminated or
amended at any time by the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of participation under the Purchase Plan under present law.
The Purchase Plan is intended to be a "qualified employee stock purchase
plan" under the Internal Revenue Code. The granting of the right to purchase
shares under the Purchase Plan has no tax effect on the participants of the
Company. No income is recognized to participants at the date shares are issued
under the Purchase Plan. If shares purchased under the Purchase Plan are held
for more than one year from the time they are received and for more than two
years from the date the rights to purchase are granted, amounts realized on a
sale of the shares are compensation to the employee taxable as ordinary income
only to the extent of the lesser of (a) the amount by which the fair market
value of the Common Stock at the date of such grant exceeds the price paid for
the shares or (b) the amount by which the sale price exceeds the purchase price.
Any further gain is treated as long-term capital gain. The same tax treatment is
applicable to shares acquired pursuant to the valid exercise of the right to
purchase subsequent to the death of an employee except that the holding period
requirements do not apply. If the shares are sold within the one-year or
two-year holding periods, the employee realizes compensation taxable as ordinary
income to the extent the fair market value of the shares at the date of purchase
was greater than the purchase price; the difference between the proceeds of sale
and the fair market value of the shares at the date of purchase is a capital
gain or loss (which will be long-term if the shares have been held for more than
one year). For purposes of determining the beginning of the two-year holding
period for shares, the date the rights to purchase are granted is deemed to be
the first day of that particular six-month period in which the shares are
purchased. To the extent the employee realizes ordinary income on a disposition
of the shares by reason of failing to meet the requisite holding periods, the
Company has a corresponding deduction.
THE BOARD OF DIRECTORS RECOMMENDS THAT
THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF
THE AMENDMENT TO THE PURCHASE PLAN.
9
<PAGE> 12
EMPLOYEE STOCK PURCHASE PLAN BENEFITS
The following table sets forth the number of shares purchased under the
Purchase Plan from October 1, 1995 through September 30, 1996 by each person
named in the Summary Compensation Table, all current executive officers as a
group (including the named executive officers who are currently executive
officers), and all employees other than executive officers as a group.
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
VALUE(1) SHARES PURCHASED
-------- ----------------
<S> <C> <C>
Robert A. Gunst........................................... $3,732 2,824
Thomas A. Hannah.......................................... $0 0
Robert E. Baird........................................... $4,512 3,388
William C. Curley......................................... $3,975 2,707
Gregory L. Steele......................................... $3,633 2,725
Current Executive Officer Group........................... $24,558 18,176
Non-Executive Officer Employee Group...................... $398,134 299,140
</TABLE>
- ---------------
(1) The amounts in this column reflect the difference between the market value
on the date of purchase and the purchase price under the Purchase Plan and
may not represent amounts actually realized by the participants.
RATIFICATION OF SELECTION OF AUDITORS
Touche Ross & Co. commenced service as the independent certified public
accountants for the Company in 1984. Deloitte, Haskins & Sells and Touche Ross &
Co. merged, effective December 3, 1989. Representatives of Deloitte & Touche LLP
are expected to be present at the shareholders' meeting with the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
This matter is not required to be submitted for shareholder approval, but
the Board of Directors has elected to seek ratification of its selection of
independent public accountants by the affirmative vote of the holders of a
majority of the shares present and entitled to vote at the meeting. Management
has not determined what action it will take in the event the shareholders do not
ratify the selection of independent public accountants.
10
<PAGE> 13
CERTAIN SHAREHOLDERS
The following table sets forth information as of December 15, 1996, unless
otherwise noted, regarding securities ownership by (i) each person who is known
by the Company to own beneficially more than five percent of the Company's
Common Stock, (ii) each executive officer named in the Summary Compensation
Table, (iii) the directors and nominees individually, and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------
NAME NUMBER PERCENT
- ------------------------------------------------------------------------- ---------- -------
<S> <C> <C>
First Pacific Advisors(2)................................................ 1,795,000 13.4%
11400 Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Lighthouse Capital Management(2)......................................... 835,008 6.2%
10000 Memorial Drive, Suite
660 Houston, TX 77024
Dimensional Fund Advisors(2)............................................. 698,900 5.2%
1299 Ocean Avenue, Suite
650 Santa Monica, CA 90401
Farmers Group Inc.(2).................................................... 692,300 5.2%
4680 Wilshire Boulevard, 4th Floor
Los Angeles, CA 90010
Robert A. Gunst(3)(4).................................................... 422,298 3.1%
Stanley R. Baker(5)...................................................... 157,750 1.2%
John E. Martin(6)........................................................ 73,500 *
William C. Curley(7)..................................................... 62,663 *
Thomas A. Hannah(3)(8)................................................... 47,870 *
Gregory L. Steele(9)..................................................... 40,707 *
Robert E. Baird(10)...................................................... 27,392 *
W. Howard Lester(11)..................................................... 25,500 *
Russell M. Solomon(12)................................................... 13,500 *
All executive officers and directors as a group (14 persons)(13)......... 1,016,215 7.2%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares.
(1) The stockholders named in the table have sole voting and investment power
with respect to all shares of stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.
(2) As of September 30, 1996.
(3) Messrs. Gunst and Hannah are members of the administrative committees for
The Good Guys! Profit-Sharing Plan, the trustee of which currently holds
583,051 shares on behalf of plan participants, and The Good Guys! Deferred
Pay Plan, the trustee which currently holds 84,885 on behalf of plan
participants.
(4) Includes 1,335 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Gunst's account, as to which Mr. Gunst has sole
voting power; 14,962 shares held by the trustee of The Good Guys! Deferred
Pay Plan and allocated to Mr. Gunst's individual account, as to which Mr.
Gunst has sole voting power; 4,000 shares held as custodian for Mr. Gunst's
children and 326,500 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(5) Includes 23,500 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(6) Includes 13,500 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(7) Includes 974 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Curley's account, as to which Mr. Curley has sole
voting power; and 55,500 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
11
<PAGE> 14
(8) Includes 620 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Hannah's account, as to which Mr. Hannah has sole
voting power; and 41,250 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(9) Includes 50 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Steele's account, as to which Mr. Steele has sole
voting power, and 33,500 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(10) Includes 414 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Baird's account, as to which Mr. Baird has sole
voting power; and 9,500 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(11) Includes 13,500 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(12) Includes 13,500 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(13) Includes 12,419 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to the individual accounts of members of the group, as
to which individuals have sole voting power; 14,962 shares held by the
trustee of The Good Guys! Deferred Pay Plan and allocated to the
individuals accounts of such members, as to which such individuals have
sole voting power; and 629,975 shares issuable upon exercise of outstanding
stock options that are exercisable within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors and
executive officers, and any persons holding more than ten percent of the
Company's common stock, are required to report their initial ownership of the
Company's common stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this proxy statement
any failure to file by such dates of which it becomes aware during the fiscal
year. During the last fiscal year, Mr. Brad Bramy, an officer of the Company,
filed one late report regarding one transaction in which he sold 817 shares of
the Company's common stock. Subject to the foregoing, the Company believes that
during the last fiscal year its directors and officers filed on a timely basis
all such reports required to be filed.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders of the Company intended to be presented at the
next annual meeting must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that meeting by August
25, 1997.
EXPENSES OF SOLICITATION
The expense of preparing, assembling, printing and mailing the forms of
proxy and the material used in the solicitation of proxies will be paid by the
Company. In addition to the solicitation of proxies by use of the mails, some of
the officers, directors and regular employees of the Company, none of whom will
receive additional compensation therefor, may solicit proxies by telephone,
telegram or personal interview, the cost of which will be borne by the Company.
Arrangements will also be made for the forwarding of soliciting material by
nominees, custodians and fiduciaries to their principals.
12
<PAGE> 15
OTHER MATTERS
Management knows of no other matters which will be brought before the
meeting, but if such matters are properly presented, the proxies solicited
hereby will be voted in accordance with the judgment of the persons holding such
proxies.
BY THE BOARD OF DIRECTORS
LOGO
Robert A. Gunst
President and Chief Executive Officer
Brisbane, California
December 31, 1996
13
<PAGE> 16
(LOGO)
Printed on Recyled Paper
<PAGE> 17
PROXY
THE GOOD GUYS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Robert A. Gunst and Dennis C. Carroll, and
each of them, with power of substitution and revocation, as the proxy or proxies
of the undersigned to represent the undersigned and vote all shares of the
Common Stock of The Good Guys, Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders of The Good
Guys, Inc. to be held at A.P. Giannini Auditorium, Bank of America Building,
located at 555 California Street, San Francisco, California 94014 on Tuesday,
February 11, 1997, at 10:30 A.M., and at any adjournment thereof, upon the
matters set forth on the reverse side and described in the accompanying Proxy
Statement and upon such other business as may properly come before the meeting
or any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
The Annual Meeting may be held as scheduled only if a majority of the
shares outstanding are represented at the meeting by attendance or proxy.
Accordingly, please complete this proxy and return it promptly in the enclosed
envelope.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
INVESTOR INFORMATION
Additional Investor information on the Company can be found on The Good Guys!
Internet home page @http://www.thegoodguys.com.
Copies of recent quarterly financial press releases, along with all other press
releases, also can be obtained by fax through Company News On Call, a division
of PR Newswire, at 1-800-758-5804. The Good Guys! extension number is 108403.
Or contact: The Good Guys, Inc.
Investor Relations
7000 Marina Boulevard
Brisbane, CA 94005-1840
(415) 615-5000
<PAGE> 18
Please mark
your votes as /X/
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES FOR
DIRECTOR, FOR ITEM 2 AND FOR ITEM 3.
WITHHOLD
1. ELECTION OF DIRECTORS FOR FOR ALL
/ / / /
Nominees: Stanley R. Baker, Robert A. Gunst,
Russell M. Solomon, W. Howard Lester,
John E. Martin.
WITHHELD FOR: To withhold authority for any individual nominee, cross out the
nominee's name in the list above.
2. STOCK PURCHASE PLAN AMENDMENT FOR AGAINST ABSTAIN
/ / / / / /
To increase the number of shares covered by the Employee Stock Purchase Plan
by 600,000.
3. APPROVAL OF AUDITORS FOR AGAINST ABSTAIN
/ / / / / /
To ratify the selection of Deloitte & Touche LLP as independent Certified
Public Accountants for the Company.
I PLAN TO ATTEND THE MEETING. / /
Receipt is hereby acknowledged of The Good Guys, Inc. Notice of Annual
Meeting of Shareholders and Proxy Statement.
Signature of Shareholder:_________________________________________Dated:_______
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 19
PROXY
THE GOOD GUYS, INC.
DIRECTION TO TRUSTEES,
THE GOOD GUYS! PROFIT-SHARING PLAN
AND THE GOOD GUYS! DEFERRED PAY PLAN
TO: TRUSTEE, THE GOOD GUYS! PROFIT-SHARING PLAN
TRUSTEE, THE GOOD GUYS! DEFERRED PAY PLAN
I direct you as Trustee of The Good Guys! Profit-Sharing Plan and
Trustee of The Good Guys! Deferred Pay Plan, respectively, to vote as I have
indicated on the other side of this card. You will vote my shares of the Common
Stock of The Good Guys, Inc. credited to my account under the Plan(s) at the
Annual Meeting of Shareholders of The Good Guys, Inc. to be held at A.P.
Giannini Auditorium, Bank of America Building, located at 555 California Street,
San Francisco, California 94104 on Tuesday, February 11, 1997, at 10:30 A.M.,
and at any adjournment thereof.
Please sign and date the other side of this card
(PLEASE FILL IN THE APPROPRIATE BOXES ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 20
Please mark
your votes as /X/
indicated in
this example.
WITHHOLD
1. ELECTION OF DIRECTORS FOR FOR ALL
/ / / /
Nominees: Stanley R. Baker, Robert A. Gunst,
Russell M. Solomon, W. Howard Lester,
John E. Martin.
WITHHELD FOR: To withhold authority for any individual nominee, cross out the
nominee's name in the list above.
2. STOCK PURCHASE PLAN AMENDMENT FOR AGAINST ABSTAIN
/ / / / / /
To increase the number of shares covered by the Employee Stock Purchase Plan
by 600,000.
3. APPROVAL OF AUDITORS FOR AGAINST ABSTAIN
/ / / / / /
To ratify the selection of Deloitte & Touche LLP as independent Certified
Public Accountants for the Company.
I have filled in the appropriate boxes on the card. In the absence of any
instructions from me as to any item, shares credited to my account shall NOT
be voted with respect to that item. I may revoke my instructions prior to the
time you vote.
Signature of Shareholder:_________________________________________Dated:_______
Please date and sign exactly as your name appears above. If acting as
beneficiary, trustee, guardian, etc., you should so indicate in signing. Date
and promptly return this card in the envelope provided.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
