<PAGE> 1
Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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 the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction 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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE> 2
THE GOOD GUYS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 10, 1999
The Annual Meeting of Shareholders of The Good Guys, Inc. will be held at
the good guys! Corporate Offices, located at 7000 Marina Blvd., Brisbane,
California on Wednesday, February 10, 1999, at 10:30 A.M., for the following
purposes:
1. To elect Directors to serve for the ensuing year and until their
successors are duty elected and qualified.
2. To approve an increase by 700,000 in the number of shares covered by the
Employee Stock Purchase Plan of the Company.
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 18, 1998
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT A. GUNST
Robert A. Gunst
President and Chief Executive Officer
Brisbane, California
January 4, 1999
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 good guys! Corporate Offices located
at 7000 Marina Blvd., Brisbane, California, on Wednesday, February 10, 1999, 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, 1998 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 4, 1999.
VOTING
Only shareholders of record on December 18, 1998 (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 14,250,218 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.
Each participant in The Good Guys! Profit-Sharing Plan and The Good Guys!
Deferred Pay Plan is entitled to instruct the respective Plan's Trustee to vote
the shares of Common Stock allocated to such participant's account on each
matter to be considered at the Annual Meeting of Shareholders. If a participant
does not give voting instructions to the Trustee, the shares of Common Stock as
to which he or she was entitled to provide instructions shall be voted by the
Trustee in the manner directed by the respective Plan's Administrative
Committee. Unallocated shares of Common Stock shall be voted in the same
proportion as the allocated shares of Common Stock in each respective Plan.
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)...................................... 54 1976
Robert A. Gunst............................................. 50 1986
Russell M. Solomon(1)(2).................................... 73 1986
W. Howard Lester(1)(2)...................................... 63 1990
John E. Martin(1)(2)........................................ 53 1990
Horst H. Schulze(3)......................................... 59 1997
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Chairman of Quality 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 a director of Garden Fresh Restaurant Corp., a publicly-held restaurant
chain.
Russell M. Solomon is the founder and Chairman of MTS Incorporated (dba
Tower Records).
W. Howard Lester has been the Chief Executive Officer of Williams-Sonoma,
Inc., a publicly held specialty retailer, since 1979 and has also been the
Chairman of that corporation since 1986. Mr. Lester is a director of CKE
Restaurant, Inc., a publicly-held restaurant chain, Il Fornaio (America) Corp.,
a publicly-held chain of Italian restaurants and wholesale bakeries, and
Harold's Stores, Inc., a publicly-held specialty apparel retailer.
John E. Martin has served as Chairman of Easyriders, Inc., an operator of
restaurants and apparel stores, since June 1997, and also has served as Chairman
of Diedrich Coffee, Inc., an operator of specialty coffee stores, since November
1997. From October 1996 to June 1997, he served as Chairman and Chief Executive
Officer of PepsiCo Casual Restaurants International, a subsidiary of PepsiCo.
From 1983 until October 1996, he served as Chief Executive Officer of Taco Bell,
another subsidiary of PepsiCo and he also served as Chairman of Taco Bell from
June 1994 until October 1996. Mr. Martin is a director of Williams-Sonoma, Inc.
and Franchise Mortgage Acceptance Company.
Horst H. Schulze has been the President and Chief Operating Officer of the
Ritz-Carlton Hotel Company, L.L.C. since 1988.
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 1998. 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 one time during fiscal 1998. 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.
2
<PAGE> 5
In fiscal 1998, the Board of Directors established the Company's Quality
Committee, which has as its members the members of the Board, Cathy A. Stauffer,
the Company's Vice President, Quality, John Duken, the Company's Vice President,
Operations and Kevin McNeill, the Company's Vice President, Sales. The purpose
of the Committee is to assist with the formalization and implementation of the
Company's programs for ensuring continuous improvement in the level of service
to its customers. Horst H. Schulze is the Chairman of the Committee and in that
capacity met regularly during the year with various members of the Committee and
management for the purpose of making suggestions regarding the programs and
evaluating the progress being made.
The total number of meetings of the Board of Directors during fiscal 1998
was four. Each of the incumbent directors, with the exception of Stanley R.
Baker, 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.
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, 1998, each of Messrs. Baker, Lester, Solomon and Schulze received
cash compensation of $6,000 for their services as directors for the period
commencing on October 1, 1997 and ending on February 12, 1998 and for that same
period John E. Martin received $4,000. On February 13, 1998, each of Messrs.
Baker, Lester, Martin, Solomon and Schulze received 5,872 shares of restricted
Common Stock under the Company's 1994 Stock Incentive Plan (determined by
dividing $40,000 by the fair market value of the Company's Common Stock on that
date) as full compensation for the year commencing on that date, with such stock
to vest one year after such date, or, if earlier, on the death or disability of
the director. The restricted stock was given in lieu of further cash
compensation and the automatic annual 1,000 share option grant to non-employee
directors that was eliminated from the 1994 Stock Incentive Plan.
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. Directors are reimbursed for expenses incurred in
attending meetings.
3
<PAGE> 6
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows specific compensation information, for the fiscal
years ended September 30, 1998, 1997 and 1996, for the Company's Chief Executive
Officer and the next five most highly compensated executive officers as of
September 30, 1998.
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.................... 1998 $500,000 $ 0 $36,615 50,000
President and Chief Executive
Officer 1997 $500,000 $ 0 $21,673 50,000
1996 $475,000 $ 0 $10,766 50,000
Jayne Spiegelman................... 1998 $300,000 $ 0 $ 895 30,000
Senior Vice President, 1997 $ 11,538 $ 0 $ 0 20,000
Merchandising and Marketing(2)
Dennis C. Carroll.................. 1998 $250,000 $ 0 $ 4,153 15,000
Senior Vice President and 1997 $210,000 $ 0 $ 1,214 60,000
Chief Financial Officer(3) 1996 $ 80,000 $ 0 $ 539 20,000
Gregory L. Steele.................. 1998 $195,000 $ 0 $13,032 7,500
Vice President, Real Estate and 1997 $180,000 $ 0 $ 8,798 7,500
Development 1996 $170,000 $14,000 $ 6,133 10,000
Geradette M. Vaz................... 1998 $190,000 $ 0 $ 8,162 7,500
Vice President, Human Resources 1997 $175,000 $ 0 $ 7,771 10,000
1996 $165,000 $ 0 $ 5,342 10,000
John G. Duken...................... 1998 $190,000 $ 0 $ 3,442 7,500
Vice President, Operations 1997 $164,682 $ 0 $ 3,431 7,500
1996 $158,077 $ 0 $22,026 10,000
</TABLE>
- ---------------
(1) Consists of perquisites and other personal benefits, including long term
disability and life insurance premiums paid by the Company and in the case
of Mr. Duken $17,570 of relocation expenses for fiscal 1996.
(2) Ms. Spiegelman became an employee of the Company in September 1997.
(3) Mr. Carroll became an employee of the Company in April 1996.
4
<PAGE> 7
STOCK OPTION TABLES
The following table shows information concerning stock options granted to
the individuals named in the Summary Compensation Table above during the fiscal
year ended September 30, 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------ VALUE AT ASSUMED
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM(2)(3)
OPTIONS IN PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Gunst.................. 50,000 15.88% $ 6.63 11/17/07 208,321 527,927
Jayne Spiegelman................. 30,000 9.53% $12.69 5/29/08 239,373 606,618
Dennis C. Carroll................ 15,000 4.76% $ 6.63 11/17/07 62,496 158,378
Gregory L. Steele................ 7,500 2.38% $ 6.63 11/17/07 31,248 79,189
Geradette M. Vaz................. 7,500 2.38% $ 6.63 11/17/07 31,248 79,189
John G. Duken.................... 7,500 2.38% $ 6.63 11/17/07 31,248 79,189
</TABLE>
- ---------------
(1) All options granted in fiscal 1998 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, 1998 for the ten-year period from November 17, 1997 to
November 17, 2007 would be $59,372,492 and $150,461,551, and for the
ten-year period from May 29, 1998 to May 29, 2008 would be $113,703,923 and
$288,148,064.
(4) All information given in this table and the following table as to exercise
prices and values is as of September 30, 1998. On November 12, 1998, all
options held by employees of the Company that had exercise prices above the
fair market value of the Company's stock on that date, namely, $5 3/32 per
share, were repriced at such fair market value.
5
<PAGE> 8
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, 1998 and the value of unexercised
options as of that date.
<TABLE>
<CAPTION>
VALUE(1) OF
NUMBER OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT 9/30/98 AT 9/30/98
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Gunst...... -- -- 376,500 125,000 -- --
Jayne Spiegelman..... -- -- 5,000 45,000 -- --
Dennis C. Carroll.... -- -- 25,000 70,000 -- --
Geradette M. Vaz..... -- -- 42,875 20,625 -- --
Gregory L. Steele.... -- -- 42,875 20,625 -- --
John G. Duken........ -- -- 28,375 20,625 -- --
</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, 1998 closing price of $5.875 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, 1998 closing price were not
included in this calculation.
EMPLOYMENT AGREEMENTS
The Company may terminate the employment of Robert A. Gunst or Jayne
Spiegelman at any time with or without cause, provided that if termination is
without cause, Mr. Gunst would be entitled to the payment of an amount equal to
his then annual base salary plus a pro-rated bonus amount and Ms. Spiegelman
would receive a continuation of her then monthly base salary for twelve months
(subject to reduction in an amount equal to any compensation received from other
employers during that period). Mr. Gunst's present salary is at the rate of
$500,000 per year and Ms. Spiegelman's present salary is at the rate of $320,000
per year.
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.
6
<PAGE> 9
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 the 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 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 in the event the Company does not achieve at least 75% of its
budgeted earnings per share, which was the case in fiscal 1996, fiscal 1997 and
fiscal 1998.
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 Robert A. Gunst's and the Company's performance during
fiscal 1997 and the other factors discussed above relative to determining
salaries, it was concluded that Mr. Gunst's salary should remain at the annual
rate of $500,000 for fiscal 1998. 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
7
<PAGE> 10
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 1998 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 1998 or for
1999 for any of the five executive positions in question.
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>
NASDAQ RETAIL TRADE
THE GOOD GUYS! STOCK NASDAQ STOCK MARKET STOCKS
-------------------- ------------------- -------------------
<S> <C> <C> <C>
1993 100 100 100
1994 110 101 98
1995 101 139 108
1996 71 165 130
1997 66 227 149
1998 52 232 128
</TABLE>
8
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has opened five WOW! Multimedia Superstores, one in Nevada and
four in California. The WOW! Multimedia Superstores, which range in size from
40,500 to 61,350 square feet, 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, Chairman 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 August 1998 approved an increase by 700,000 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 to maintain the qualified status
of the Purchase Plan under the Internal Revenue Code.
Through December 18, 1998, there have been 2,434,644 shares purchased under
the Purchase Plan, in which all of the Company's full-time employees may
participate (987 employees are presently participating). There will remain
765,356 shares available for purchase under the Purchase Plan (including the
700,000 share increase).
The continued success of the Company depends upon its ability to attract
and retain highly qualified and competent employees and directors. The Purchase
Plan enhances that ability and provides additional incentive to such personnel
to advance the interests of the Company and its shareholders. If the requisite
approval is not obtained, certain participants in the Purchase Plan who have
acquired shares under the 700,000-share increase approved by the Board will lose
the favorable tax benefits described below.
DESCRIPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
All employees (except any employee who owns 5% or more of the stock or
whose customary employment by the Company is for five months or less in any
calendar year or less than 20 hours per week) are eligible to participate in the
Purchase Plan commencing on the 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 up to 15% of monthly
gross pay. The rate of contribution may be either increased or decreased 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 or exceeding
2,000 shares in any biannual period, 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.
9
<PAGE> 12
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 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.
The Purchase Plan is administered by Mark Smith, the Company's Treasurer.
The Purchase Plan may be terminated or amended at any time by the Board of
Directors.
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 or 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 the 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.
10
<PAGE> 13
PLAN BENEFITS
The following table sets forth the number of shares purchased under the
Purchase Plan during fiscal 1998 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), all current
directors who are not executive officers as a group, and all employees other
than executive officers as a group.
<TABLE>
<CAPTION>
PURCHASE PLAN
-----------------------------------
NUMBER OF
DOLLAR VALUE(1) SHARES PURCHASED
--------------- ----------------
<S> <C> <C>
Robert A. Gunst....................................... 17,867 3,895
Jayne Spiegelman...................................... 13,750 2,000
Dennis C. Carroll..................................... 9,241 2,074
Gregory L. Steele..................................... 14,498 3,270
Geradette M. Vaz...................................... 0 0
John G. Duken......................................... 0 0
Current Executive Officer Group....................... 57,171 11,503
Non-Executive Officer Director Group.................. 0 0
Non-Executive Officer Employee Group.................. 1,243,235 288,423
</TABLE>
- ---------------
(1) The amounts in this column reflect the difference between the market value
of the shares purchased on the date of purchase and the purchase price under
the Purchase Plan and may not represent amounts actually realized by the
participants.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE PURCHASE PLAN.
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.
11
<PAGE> 14
CERTAIN SHAREHOLDERS
The following table sets forth information as of December 18, 1998, 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 current 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)................................... 2,112,100 14.1%
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Dimensional Fund Advisors(3)................................ 998,300 6.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Franklin Advisors, Inc.(2).................................. 987,500 6.6%
777 Mariners Island Boulevard
San Mateo, CA 94404
TCW Asset Management(2)..................................... 754,500 5.0%
865 South Figueroa Street
Los Angeles, CA 90017
Robert A. Gunst(4)(5)....................................... 534,137 3.6%
John E. Martin(6)........................................... 321,122 2.1%
Stanley R. Baker(7)......................................... 165,372 1.1%
Geradette M. Vaz(8)......................................... 73,439 *
Gregory L. Steele(9)........................................ 59,952 *
John G. Duken(10)........................................... 54,393 *
W. Howard Lester(11)........................................ 51,122 *
Dennis C. Carroll(4)(12).................................... 37,264 *
Russell M. Solomon(13)...................................... 21,122 *
Horst H. Schulze(14)........................................ 11,122 *
Jayne Spiegelman(15)........................................ 7,000 *
All executive officers and directors as a group (14 1,385,185 9.3%
persons)(16)..............................................
</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, 1998.
(3) As of June 30, 1998.
(4) Messrs. Gunst and Carroll are members of the administrative committees for
The Good Guys! Profit Sharing Plan, the trustee of which currently holds
658,191 shares on behalf of plan participants, and The Good Guys! Deferred
Pay Plan, the trustee of which currently holds 130,444 shares on behalf of
plan participants. If a participant fails to vote his or her shares under
either Plan, such shares will be voted in the manner determined by the
administrative committees.
(5) Includes 2,253 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 voting
power, 18,158 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 voting power, 4,000 shares held as custodian for Mr. Gunst's children
and 426,500 shares issuable upon exercise of outstanding stock options that
are exercisable within 60 days.
12
<PAGE> 15
(6) Includes 15,250 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(7) Includes 25,250 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(8) Includes 5,441 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Ms. Vaz, as to which Ms. Vaz has voting power, and
51,625 shares issuable upon exercise of outstanding stock options that are
exercisable within 60 days.
(9) Includes 108 shares held by the trustee of the Good Guys! Profit-Sharing
Plan and allocated to Mr. Steele, as to which Mr. Steele has voting power,
669 shares held by the trustee of The Good Guys! Deferred Pay Plan and
allocated to Mr. Steele's individual account, as to which Mr. Steele has
voting power, and 51,625 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(10) Includes 1,135 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Duken's account, as to which Mr. Duken has voting
power, and 37,125 shares issuable upon exercise of outstanding stock
options that are exercisable within 60 days.
(11) Includes 15,250 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(12) Includes 985 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Mr. Carroll's account, as to which Mr. Carroll has
voting power, 830 shares held by the trustee of The Good Guys! Deferred Pay
Plan and allocated to Mr. Carroll's individual account, as to which Mr.
Carroll has voting power, and 31,250 shares issuable upon exercise of
outstanding stock options that are exercisable within 60 days.
(13) Includes 15,250 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(14) Includes 1,250 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(15) Includes 5,000 shares issuable upon exercise of outstanding stock options
that are exercisable within 60 days.
(16) Includes 11,200 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 such individuals have voting power, 21,609 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
voting power, and 716,475 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. 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
September 6, 1999.
13
<PAGE> 16
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.
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
/s/ ROBERT A. GUNST
Robert A. Gunst
President and Chief Executive Officer
Brisbane, California
January 4, 1999
14
<PAGE> 17
PROXY
THE GOOD GUYS, INC.
PROXY/VOTING INSTRUCTIONS SOLICITED BY BOARD
OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
I appoint Robert A. Gunst and Dennis C. Carroll, and each of them, proxies
with full power of substitution, to vote all of my common stock of The Good
Guys, Inc. at the Annual Meeting of Shareholders to be held at the good guys!
Corporate Offices, 7000 Marina Blvd., Brisbane, California on Wednesday,
February 10, 1999, at 10:30 a.m. (Pacific Time) 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.
This card also provides voting instructions to the trustees of The Good
Guys! Deferred Pay Plan and The Good Guys! Profit-Sharing Plan (the Plans) for
participants with shares allocated to their accounts. Your directions to vote
shares held in the Plans will be kept confidential.
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.
ADDRESS CHANGE
(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
(650) 615-5000
<PAGE> 18
Please mark [X]
your votes as
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES FOR DIRECTOR,
FOR ITEM 2 AND FOR ITEM 3.
1. ELECTION OF DIRECTORS
Nominees: Stanley R. Baker, Robert A. Gunst, Russell M. Solomon,
W. Howard Lester, John E. Martin, Horst H. Schulze.
FOR [ ] WITHHOLD FOR ALL [ ]
WITHHELD FOR: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, CROSS OUT
THE NOMINEE'S NAME IN THE LIST ABOVE.
2. EMPLOYEE STOCK PURCHASE PLAN
To approve an increase by 700,000 in the number of shares covered by the
Employee Stock Purchase Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF AUDITORS
To ratify the selection of Deloitte & Touche LLP as independent Certified
Public Accountants for the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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(s)___________________________________________________ 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 -
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THE SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
