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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.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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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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THE GOOD GUYS, INC,
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 31, 2001
The Annual Meeting of Shareholders of The Good Guys, Inc. will be held at
the Ritz-Carlton Hotel, located at 600 Stockton Street, San Francisco,
California on Wednesday, January 31, 2001, at 11:00 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 an increase by 700,000 in the number of shares covered
by the 1994 Stock Incentive Plan.
3. To approve an increase by 400,000 in the number of shares covered
by the Employee Stock Purchase Plan.
4. To ratify the selection of Deloitte & Touche LLP as independent
certified public accountants for the Company.
5. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on December 15, 2000,
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ RONALD A. UNKEFER
Ronald A. Unkefer
Chairman and Chief Executive Officer
Brisbane, California
January 2, 2001
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 Ritz-Carlton Hotel, 600 Stockton
Street, San Francisco, California, on Wednesday, January 31, 2001, at 11:00 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, 2000, 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 2, 2001.
VOTING
Only shareholders of record on December 15, 2000 (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 22,867,055 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. Based upon the announced
change in the Company's fiscal year to one ending on February 28 of each year,
it is anticipated that the directors elected at this meeting will serve at least
until May or June of 2002, when the next annual meeting will be held. The eight
nominees receiving the highest number of the affirmative votes of the shares
represented in person or by proxy and entitled to vote at the Annual Meeting of
Shareholders shall be elected as directors.
<PAGE> 4
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. In
April 2000, Horst H. Schulze resigned as a director and in August 2000, Kenneth
R. Weller was elected as a director to fill the vacancy created by Mr. Schulze's
resignation. W. Howard Lester is not standing for reelection and in December
2000, the Board of Directors pursuant to the Company's Bylaws decreased the
authorized number of directors to eight, effective immediately prior to the vote
for directors at the Annual Meeting of Shareholders. The beneficial ownership of
the Company's stock by the nominees is set forth under "Certain Shareholders."
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>
Ronald A. Unkefer........................................... 56 1999
Stanley R. Baker(1)......................................... 56 1976
Russell M. Solomon(2)....................................... 75 1986
John E. Martin.............................................. 55 1990
Gary M. Lawrence(2)......................................... 44 1999
Joseph P. Clayton(1)........................................ 51 1999
Joseph M. Schell(1)(2)...................................... 54 1999
Kenneth R. Weller........................................... 52 2000
</TABLE>
---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Ronald A. Unkefer founded the Company on July 1, 1973. From 1973 to 1993,
he served as Chairman and Chief Executive Officer. In January 1993, he retired
from the position of Chief Executive Officer to pursue venture capital and
broadcasting interests and continued to serve as Chairman of the Company until
January 1996. Mr. Unkefer returned to the Company as its Chairman and Chief
Executive Officer on July 1, 1999. Currently, he also serves as Chairman of
First Ventures, a venture capital fund investing in internet and technology
companies in Silicon Valley and is Chairman of First Broadcasting, an owner and
developer of major market radio stations.
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. In May,
2000, Mr. Baker was appointed Vice Chairman of the Company and from March 2000
to the present, he has acted as a consultant to the Company in the merchandising
and advertising areas.
Russell M. Solomon is the founder and Chairman of MTS Incorporated (dba
Tower Records).
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.
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Gary M. Lawrence has been a partner in the law firm of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., a leading international law firm with offices in the
United States, Europe and Russia, since 1989. Mr. Lawrence was Chair of the
Mergers and Acquisitions Group from 1997 to 1999 and is currently Chair of the
Technology Practice Group. Mr. Lawrence is also a member of the firm-wide
management and strategic planning committees of Akin Gump.
Joseph P. Clayton has more than 24 years of experience in the consumer
electronics industry. From June 1997 to September 1999 he served as Chief
Executive Officer of Frontier Corporation and since September 1999 has been
President and Chief Executive Officer -- North America and a director of Global
Crossing, Ltd., a publicly-held communications company, following its merger
with Frontier. From March 1992 to January 1997, he served as Executive Vice
President of Marketing and Sales for Thomson Consumer Electronics for the
Americas and Asia. Mr. Clayton serves as a director of Asia Global Crossing, a
publicly-held communications company, and E.W. Scripps, a publicly-held
communications company.
Joseph M. Schell became Chairman of Global Technology Investment Banking of
Merrill Lynch & Co. in February 2000. From May 1985 until June 1999, he served
as the Senior Managing Director, Director of Investment Banking and a member of
the Executive Committee of NationsBank Montgomery Securities. Mr. Schell serves
on the Boards of Directors of Dycom Industries, a publicly held engineering,
construction and maintenance services company, and Sanmina Corporation, a
publicly held electronics contract manufacturing services company.
Kenneth R. Weller became President of the Company in August 2000. From
April 1993 until August 2000, Mr. Weller served as Vice President of Sales of
Best Buy and from July 1982 to April 1993 he served as Vice President of Stores
of the Company.
The Board of Directors has established an Audit Committee and a
Compensation Committee, but has not established a Nominating Committee.
The Compensation Committee met four times during fiscal 2000. 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 Audit Committee met three times during fiscal 2000. 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) reviewing the independence of the auditors. All of the members
of the Audit Committee meet the independence standards established by the
National Association of Securities Dealers, with the exception of Mr. Lawrence,
whose law firm has provided legal services to the Company. The Board concluded
that, based upon Mr. Lawrence's background, his service on the Audit Committee
was in the best interests of the Company and it shareholders. The Audit
Committee has adopted a charter, a copy of which is attached to this Proxy
Statement as Appendix A.
The total number of meetings of the Board of Directors during fiscal 2000
was six. Each of the incumbent directors other than Mr. Lester 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
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, 2000, each of Messrs. Baker, Lester, Martin, Solomon, Lawrence,
Clayton and Schell received 4,885 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
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stock on the date of grant) as full compensation for the year that commenced on
the date of the last annual meeting of stockholders; such stock vests one year
after such date, or, if earlier, on the death or disability of the director.
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 20,000 shares of
common stock of the Company. Directors are reimbursed for expenses incurred in
attending meetings.
Stanley R. Baker received $238,750 for consulting services rendered to the
Company in the merchandising and advertising areas during the fiscal year and
also received in consideration for his agreement to continue rendering such
services an option to acquire 25,000 shares of common stock having a one-year
vesting period and an exercise price of $3.25 per share, which was the fair
market value of the Company's common stock on the date of grant.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows specific compensation information for the fiscal
years ending September 30, 2000, 1999 and 1998 for the Chief Executive Officer,
the three others who were serving as of September 30, 2000, and received over
$100,000 dollars for the fiscal year then ended, and a former executive officer
who would have been included among the most highly compensated officers had he
remained in the employ of the Company through September 30, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------- ------------
RESTRICTED SHARES
STOCK UNDERLYING
OTHER ANNUAL AWARDS OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) ($) (NUMBER)
--------------------------- ---- -------- ------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Unkefer............... 2000 $500,043 $ 0 $ 0 $ 0 0
Chief Executive Officer(2) 1999 $125,005 $ 0 $ 0 $ 0 0
Cathy A. Stauffer............... 2000 $199,591 $ 0 $ 6,754 $ 0 30,000
Vice President, 1999 $185,994 $ 0 $19,619 $60,000 17,500
Merchandising 1998 $170,925 $ 0 $ 0 $ 0 0
George J. Hechtman.............. 2000 $106,254 $ 0 $ 6,477 $ 0 100,000
Vice President of 1999 $ 0 $ 0 $ 0 $ 0 0
Administration(3) 1998 $ 0 $ 0 $ 0 $ 0 0
Richard C. Gazlay............... 2000 $167,506 $15,000 $ 0 $ 0 0
Vice President of 1999 $ 53,343 $75,679 $ 0 $ 0 26,000
Operations(4) 1998 $103,587 $94,203 $ 0 $ 0 1,000
Vance R. Schram................. 2000 $189,060 $ 0 $ 339 $ 0 0
Vice President, Finance 1999 $155,637 $ 0 $ 0 $90,000 20,500
and Secretary(5) 1998 $ 91,852 $20,000 $ 0 $ 0 7,500
</TABLE>
---------------
(1) Consists of perquisites and other personal benefits, including long term
disability, life insurance premiums paid by the Company, accrued vacation
for terminated employees, and the tax gross up for relocation expenses.
(2) Mr. Unkefer became Chief Executive Officer of the Company on July 1, 1999.
(3) Mr. Hechtman became Vice President of Administration in April 2000.
(4) Mr. Gazlay became Vice President of Operations in February 2000 and prior to
then was Director of Service. In October 2000, Mr. Gazlay requested a return
to the position of Director of Service and will now again give his undivided
attention to the service organization.
(5) Mr. Schram resigned as an officer of the Company in September 2000.
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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, 2000.
OPTION GRANTS IN FISCAL 2000
<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 OPTION TERM(2)(3)
OPTIONS IN EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Unkefer.................. 0 0 -- -- -- --
Cathy A. Stauffer.................. 25,000 1.79% $5.9375 2/11/10 $ 93,352 $236,571
5,000 .36% $4.6250 3/17/10 $ 14,543 $ 36,855
George J. Hechtman................. 100,000 7.15% $2.8750 4/26/10 $180,807 $458,201
Richard C. Gazlay.................. 0 0 -- -- -- --
Vance R. Schram.................... 0 0 -- -- -- --
</TABLE>
---------------
(1) All of the above options were granted under the 1994 Stock Incentive Plan
with the exception that the options granted to George Hechtman were granted
outside that 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. Options granted vest 33.3% per year on the first
three 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, 2000 for the ten-year period from February 11, 2000 to
February 11, 2010 would be $84,999,174 and $215,404,596, for the ten-year
period from March 17, 2000 to March 17, 2010 would be $66,209,883 and
$167,788,843, and for the ten-year period from April 26, 2000 to April 26,
2010 would be $41,157,495 and $104,301,173.
(4) All information given in this table and the following table as to exercise
prices and values is as of September 30, 2000.
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<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, 2000 and the value of unexercised
options as of that date.
<TABLE>
<CAPTION>
VALUE(1) OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 9/30/00 9/30/00
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Unkefer.............. -- -- 0 0 $ 0 $ 0
Cathy A. Stauffer.............. -- -- 9,375 38,375 $17,871 $ 53,925
George J. Hechtman............. -- -- -- 100,000 $ 0 $412,500
Richard C. Gazlay.............. -- -- 12,666 13,334 $15,041 $ 15,834
Vance R. Schram................ -- -- 7,833 0 $11,911 $ 0
</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, 2000 closing price of $7.00 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, 2000 closing price were not
included in this calculation.
EMPLOYMENT ARRANGEMENTS
On June 2, 1999, the Company entered into an Employment Agreement with
Ronald A. Unkefer, providing for his appointment to the Company's Board of
Directors and his election as Chairman and Chief Executive Officer of the
Company, effective as of July 1, 1999. The Agreement provides for a minimum
annual base salary of $500,000, an annual cash incentive bonus in an amount of
up to 100% of Mr. Unkefer's annual base pay as reasonably determined by the
Board of Directors, and for the payment of relocation expenses for Mr. Unkefer
and his family. Either party may terminate the Agreement upon 30 days written
notice to the other party for any reason whatsoever. There is no provision in
the Agreement for any severance payments in the event of termination of Mr.
Unkefer's employment by the Company.
Effective as of the close of business on the 15th day of August 2000, the
Company entered into an Employment Agreement with Kenneth R. Weller, providing
for his appointment to the Company's Board of Directors and his election as
President of the Company. The Agreement provides for a minimum base salary of
$400,000, an annual cash incentive bonus in an amount of up to 100% of Mr.
Weller's annual base pay as reasonably determined by the Board of Directors, and
for the payment of relocation expenses. The initial term of employment is for
three years. The Company, however, may terminate Mr. Weller's employment at
anytime, provided that if the termination is without cause, Mr. Weller will be
entitled to receive one year severance pay based upon Mr. Weller's then current
annual base salary. Mr. Weller was granted an option outside of the 1994 Stock
Option Plan to purchase 1,000,000 shares of the Company's common stock,
exercisable over a period of three years, and vesting at the rate of one-third
per year (subject to full vesting in the event of a change of control or
termination for any reason other than the voluntary resignation by Mr. Weller or
dismissal for cause). The option is exercisable at an exercise price of $3.75
per share, the fair market value of the Company's common stock as of the date of
grant. Mr. Weller also purchased 500,000 shares of restricted stock of the
Company at fair market value (with 50% warrant coverage at that same price), as
more fully described under Certain Relationships and Related Transactions.
Cathy A. Stauffer, Vice President, Merchandising, and George J. Hechtman,
Vice President of Administration, have severance agreements that provide for
severance payments in the event of their termination without cause by the
Company or termination by them for good reason following a change in control of
the Company; the maximum payment under either agreement would be 12 months of
salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company are Stanley R.
Baker, Joseph M. Schell and Joseph P. Clayton, all of whom are outside
directors. None of the members of the Committee is or was an
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<PAGE> 9
officer of the Company or any of its subsidiaries, with the exception of Stanley
R. Baker. Mr. Baker resigned as an officer and employee in August 1991 and was
appointed Vice Chairman of the Board of Directors of the Company in May 2000 (a
position without compensation). He was compensated in a consulting capacity
during the fiscal year. See "Director Compensation."
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 from time to time 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 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 for fiscal 1999 and 1998 took the form of cash bonuses that
were 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) was multiplied by a percentage, ranging from zero to 125%,
that could 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
was directly tied to the achievement of specific financial or other goals
developed at the beginning of the year. No bonuses were paid under the Company's
plans in the event the Company did not achieve at least 75% of its budgeted
earnings per share, which was the case in fiscal 1998 and 1999. A cash incentive
compensation plan for fiscal 2000 was not established, but discretionary
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<PAGE> 10
bonuses were paid to two officers after taking into consideration their target
bonus percentages and their job performance.
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, generally have ten-year
terms and vest ratably over a three-year period (vesting was over a four year
period prior to August 26, 1999).
BENEFITS
The Company provides benefits to the executive officers that are generally
available to Company employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
Ronald A. Unkefer's employment as Chairman and Chief Executive Officer
commenced on July 1, 1999. Mr. Unkefer's annual salary and bonus were negotiated
prior to the commencement of his employment and are described under Employment
Arrangements above. No bonus was paid to Mr. Unkefer for fiscal 2000.
The Committee has reviewed the total compensation of all executive officers
in fiscal 2000 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. Based upon fiscal 2000 compensation, no such
limits on the deductibility of compensation applied for any officer of the
Company. Compensation that is "performance-based" is not subject to that limit
if certain requirements are met and the Committee will when possible try to meet
those requirements. Although the Committee reserves the right to award
compensation to its executives that may not qualify under Section 162(m) as
deductible compensation, the Committee will continue to consider all elements of
the cost to the Company of providing such compensation, including the potential
impact of Section 162(m).
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
Joseph P. Clayton
Joseph M. Schell
Stanley R. Baker
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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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Good Guys!
Stock 100 70 65 52 56 62
NASDAQ Stock Market 100 119 163 165 270 359
NASDAQ Retail Trade
Stocks 100 120 137 117 140 104
--------------------------------------------------------------------------------
</TABLE>
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. The Company also subleases a portion of one of its
other stores to MTS Incorporated and the income received by the Company from
that sublease during the fiscal year ended September 30, 2000, was $326,077.
Gary M. Lawrence is a member of a law firm that has been retained from time to
time by the Company to provide services to the Company.
In August 2000, the Company completed a private placement of $9.36 million
of its common stock. Participants in the offering included every member of the
Company's Board of Directors, including Chairman and Chief Executive Officer,
Ronald A. Unkefer and newly appointed President Kenneth R. Weller and Richard C.
Gazlay. The investors purchased 2,017,647 restricted shares of the Company's
common stock at $4.64 a share, the closing price of the Company's common stock
on the NASDAQ National Market at the time of purchase. Investors also received
warrants exercisable for three years to purchase 1,008,822 additional shares of
common stock at the same price. The individual purchases by the directors (or
trusts established or controlled by them) and executive officers were as
follows: Ronald A. Unkefer 646,468 Shares/323,234 Warrants; Stanley R. Baker:
161,617 Shares/80,808 Warrants; Russell M. Solomon: 5,387 Shares/2,694
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<PAGE> 12
warrants held in the Michael T. Solomon Trust and 5,387 Shares/2693 Warrants
held in the David T. Solomon Trust; H. Howard Lester: 107,744 Shares/53,872
Warrants; John E. Martin: 215,489 Shares/ 107,744 Warrants; Gary M. Lawrence:
107,744 Shares/53,872 Warrants; Joseph P. Clayton: 20,000 Shares/ 10,000
Warrants; Joseph M. Schell: 215,489 Shares/107,744 Warrants; Kenneth R. Weller:
500,000 Shares/ 250,000 Warrants; and Richard C. Gazlay: 10,774 Shares/5,387
Warrants.
The shares of common stock issued to each investor were not registered
under the Securities Act of 1933 as amended, but the Company is required to file
a Registration Statement covering those shares.
The Company in January 2000 entered into a royalty and services agreement
with GoodGuys.com, Inc., a company formed to maximize opportunities for
electronic commerce in the consumer entertainment electronics industry. The
Company will facilitate certain functions for purchase and delivery of product
to GoodGuys.com and both the Company and GoodGuys.com desire the benefit from
the cross promotion of their businesses. The Company will receive a percentage
of sales to GoodGuys.com. In addition, the Company received an equity
participation in GoodGuys.com of approximately 20% and warrants to acquire up to
an additional 29.9% of equity, exercisable only upon the occurrence of certain
events. Outside investors and members of the Company's management and Board of
Directors provided the initial funding for GoodGuys.com. Investments made by
members of management and members of the Board of Directors were as follows:
Ronald A. Unkefer -- $1,046,000; Joseph M. Schell -- $250,000; Gary M.
Lawrence -- $250,000; Joseph P. Clayton -- $50,000; Stanley R.
Baker -- $100,000; Cathy A. Stauffer -- $10,000; and Richard C.
Gazlay -- $150,000.
REPORT OF AUDIT COMMITTEE
The Audit Committee reviewed the Company's financial statements with the
Board of Directors and discussed with Deloitte & Touche LLP, the Company's
independent auditors during the 2000 fiscal year, the matters required to be
discussed by Statement of Auditing Standard No. 61. The Audit Committee received
from Deloitte & Touche LLP the written disclosures required by Independence
Standards Board Standard No. 1 and discussed with them their independence. After
reviewing and discussing the financial statements with management and the
auditors, the Audit Committee, based upon such review and discussions,
recommended that the financial statements be included in the Company's annual
report on Form 10-K.
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Joseph M. Schell
Gary M. Lawrence
Russell M. Solomon
AMENDMENT TO 1994 STOCK INCENTIVE PLAN
The Company believes that all key employees and directors should have a
significant stake in the Company's stock price performance under programs that
link compensation to shareholder return. There remain, however, only
approximately 110,189 shares of stock available for grant for this purpose under
the Company's 1994 Stock Incentive Plan (the "Plan"). Due to the limited
availability of shares under the Plan, during the fiscal year ended September
30, 2000, options covering 1,125,000 shares were granted outside the Plan to
induce key employees to join the Company.
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<PAGE> 13
Rather than adopting a new stock incentive plan at this time, the
Compensation Committee and the Board of Directors of the Company approved in
December 2000 an increase by 700,000 in the number of shares available for the
grant of options under the Plan. The affirmative vote of the holders of at least
a majority of the outstanding shares of common stock represented in person or by
proxy and entitled to vote at the Annual Meeting of Shareholders is required for
approval of the amendment.
The following is a summary of the material features of the Plan.
GENERAL
If the amendment to the Plan is approved, the aggregate number of shares of
common stock which may be issued under the Plan will be 2,500,000 shares, of
which approximately 810,000 shares will remain available for awards under the
Plan. The Plan presently provides that the maximum number of shares covered by
all grants or awards in any fiscal year of the Company to any participant cannot
exceed 250,000, subject to adjustment in the event of stock splits or similar
events. No awards may be granted under the Plan after November 13, 2004.
Approximately 145 persons are eligible to participate in the Plan.
ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee selects key employees and directors
who will receive awards, determines the amount, vesting requirements,
performance criteria, if any, and other conditions of each award, interprets the
provisions of the Plan and makes all other decisions regarding the operation of
the Plan.
The types of awards which the Committee will have authority to grant
consist of (1) stock options, (2) restricted shares, (3) restricted share units,
(4) performance units and (5) bonus shares. Each of these types of awards is
described below.
STOCK OPTIONS
Stock options granted by the Committee may be either "incentive stock
options" (stock options qualifying under Section 422 of Code, which may only be
granted to employees of the Company), "non-qualified stock options" (stock
options which do not so qualify) or both types of stock options (but not in
tandem), provided that the aggregate value (at the time the option is granted)
of the stock with respect to which incentive stock options are exercisable for
the first time by any Optionee during any calendar year may not exceed $100,000.
On the date on which a person who is not an employee becomes a member of
the Board for the first time, such director will be awarded a non-qualified
stock option under the Plan to purchase 20,000 shares of common stock.
The option price for each stock option may not be less than 100% of the
fair market value of the common stock on the date the stock option is granted,
with the exception that in the case of incentive stock options granted to an
employee who owns 10% or more of the total combined voting power of all classes
of stock of the Company or its subsidiaries (a "ten percent employee") the
exercise price must be not less than 110% of such fair market value. On December
15, 2000, the fair market value of a share of the Company's common stock was
$3.938.
No stock option may be exercised by an optionee during the first six months
of its term unless the exercise date has been accelerated as described under
"Rights in Certain Events" below. No stock option may be exercised after the
expiration of ten years from the date of grant (five years in the case of an
incentive stock option granted to a ten percent employee). A stock option to the
extent exercisable at any time may be exercised in whole or in part.
Unless otherwise determined by the Committee in its discretion, if the
employment or directorship of an optionee terminates for any reason other than
the death or disability any then outstanding stock option held by such grantee
shall be exercisable by the grantee (but only to the extent exercisable by the
grantee immediately
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<PAGE> 14
prior to such termination) at any time prior to the expiration date of such
stock option or within three months after the date of such termination,
whichever is the shorter period. In the event of termination by reason of death
or disability, the Plan provides for limited periods following any such
termination during which stock options held by the optionee at the time of
termination may be exercised by the optionee or his or her estate.
The option price for each stock option will be payable in full in cash at
the time of exercise; however, in lieu of cash any optionee may pay the option
price in whole or in part by delivering to the Company shares of common stock
having a fair market value on the date of exercise of the stock option equal to
the option price for the shares being purchased, except that any portion of the
option price representing a fraction of a share must be paid in cash and no
shares of common stock which have been held less than six months may be
delivered in payment of the option price of a stock option.
With the exception of certain transfers allowed for estate planning
purposes, no stock option granted under the Plan is transferable other than by
will or by the laws of descent and distribution and a stock option may be
exercised during an optionee's lifetime only by the optionee.
Subject to the foregoing and other provisions of the Plan, stock options
granted under the Plan may be exercised at such times and in such amounts and be
subject to such restrictions and other terms and conditions, if any, as will be
determined, in its discretion, by the Committee. Unless otherwise specifically
provided in the agreements covering options, options granted under the Plan will
vest at the rate of 33 1/3% on each of the first three anniversaries of the date
of grant of the option.
RESTRICTED SHARES OR RESTRICTED SHARE UNITS
Restricted shares of common stock or restricted share units awarded by the
Committee will be subject to such restrictions as the Committee may impose
thereon and will be subject to forfeiture if certain events (which may, in the
discretion of the Committee, include termination of employment and/or
performance-based events) specified by the Committee occur prior to the lapse of
the restrictions. The agreement between the Company and the grantee will set
forth the number of restricted shares or restricted share units awarded to the
grantee, the restrictions imposed thereon, the duration of such restrictions,
the events the occurrence of which would cause a forfeiture and such other terms
and conditions as the Committee in its discretion deems appropriate.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares will
be held in escrow. Upon the lapse or termination of the restrictions, the share
certificates will be delivered to the grantee. From the date a restricted share
award is effective, however, the grantee will be a shareholder with respect to
the restricted shares and will have all the rights of a shareholder with respect
to such shares, including the right to vote the shares and to receive all
dividends and other distributions paid with respect to the shares, subject only
to the restrictions imposed by the Committee.
Restricted shares or restricted share units may be issued for no
consideration or for such consideration as shall be determined at the time of
the award by the Committee.
PERFORMANCE UNITS
The Committee may award performance units (expressed in dollars or shares)
to be earned by an awardee based on the level of performance of the Company, a
subsidiary or subsidiaries, a branch, department or other unit thereof or the
awardee individually over a specified period of not less than one year
("Performance Period"). For each Performance Period the Committee will establish
a Performance Target, and a Minimum Target which may be the same or less than
the Performance Target. Targets may be expressed in terms of earnings per share,
return on assets, return on equity, asset growth, ratio of capital to assets or
such other level or levels of performance by the Company, a subsidiary or
subsidiaries, a branch, department or other unit thereof or the awardee
individually as the Committee may establish.
An awardee will earn the performance unit in full by meeting the
Performance Target for the Performance Period. If the Minimum Target has not
been attained but the Performance Target is not
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<PAGE> 15
attained, the portion of the performance unit earned by the awardee will be
determined on the basis of a formula established by the Committee.
Payment in respect of earned performance units, whether expressed in
dollars or shares, may be made in cash, in shares of common stock, or partly in
cash and partly in shares of common stock, as determined by the Committee at the
time of payment. For this purpose, performance units expressed in dollars will
be converted to shares, and performance units expressed in shares will be
converted to dollars, based on the fair market value of the common stock as of
the date the amount payable is determined by the Committee.
Except as otherwise provided below under "Rights in Certain Events," if the
employment of an awardee terminates prior to the close of a Performance Period
for any reason other than voluntary termination with the consent of the Company
or a subsidiary, retirement under any retirement plan of the Company or a
subsidiary or death, the performance units of the awardee will be deemed not to
have been earned, and no portion of such performance units may be paid. If prior
to the close of the Performance Period the employment of an awardee is
voluntarily terminated with the consent of the Company or a subsidiary or the
awardee retires under any retirement plan of the Company or a subsidiary or the
awardee dies during employment, the Committee may in its discretion determine to
pay all or any part of the performance unit based upon the extent to which the
Committee determines the Performance Target or Minimum Target has been achieved
as of the date of termination of employment, retirement or death, the period of
time remaining until the close of the Performance Period and/or such other
factors as the Committee may deem relevant.
Performance unit awards may have such other terms and conditions as the
Committee in its discretion deems appropriate.
BONUS SHARES
The Committee will have the authority in its discretion to award bonus
shares of common stock in recognition of the contribution of the awardee to the
performance of the Company, a subsidiary or subsidiaries, or a branch,
department or other unit, in recognition of the awardee's individual performance
or on the basis of such other factors as the Committee may deem relevant. Any
bonus shares awarded would not be subject to any restrictions or possibilities
of forfeiture.
RIGHTS IN CERTAIN EVENTS
With respect to options granted under the Plan prior to November 8, 2000,
the Plan provides for certain additional rights upon the occurrence of one or
more events described in Section 9A of the Plan ("Section 9A Events"). Such an
event is deemed to have occurred when (1) the Company acquires actual knowledge
that any person (other than the Company, a subsidiary or any employee benefit
plan sponsored by the Company or a person approved under certain circumstances
by the Board of Directors) has acquired beneficial ownership, directly or
indirectly, of securities of the Company representing 20% or more of the voting
power of the Company, (2) a tender offer is made to acquire securities of the
Company representing 20% or more of the voting power of the Company, (3) a
person other than the Company solicits proxies relating to the election or
removal of 50% or more of any class of the Board of Directors or (4) the
shareholders of the Company approve a merger, consolidation, share exchange,
division or sale or other disposition of assets of the Company as a result of
which the shareholders of the Company immediately prior to the transaction will
not own a majority of the voting power of the surviving or resulting company or
any company which acquires the stock of the Company or more than 20% of its
consolidated assets. Unless the agreement between the Company and the awardee
otherwise provides, if any Section 9A Event occurs (1) all outstanding stock
options will become immediately and fully exercisable, (2) all stock options
held by an awardee whose employment with the Company or a subsidiary terminates
within one year of any Section 9A Event for any reason other than voluntary
termination with the consent of the Company or a subsidiary, retirement under
any retirement plan of the Company or subsidiary or death will be exercisable
for a period of three months from the date of such termination of employment,
but in no event after the expiration date of the stock option, (3) all
restrictions applicable to restricted shares awarded under the plan will lapse
and (4) all performance units for which the
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<PAGE> 16
performance period has not yet expired will be deemed to have been fully earned
as of the date of the Section 9A Event, regardless of the attainment or
nonattainment of the performance target or any minimum target.
With respect to a change in control (as defined in the Plan) of the Company
after November 7, 2000, the Company will endeavor to cause the successor entity
in the transaction either to assume all of the options which have been granted
after such date and which are outstanding as of the closing of such transaction,
or to issue (or cause to be issued) in substitution therefor comparable options
of such successor entity (or of its parent or its subsidiary). If the successor
entity is unwilling to either assume such option or grant comparable options in
substitution for such options on terms that are acceptable to the Company as
determined by the Board in the exercise of its discretion, then with respect to
each outstanding option, that portion of the option which remains unvested will
become vested immediately prior to the closing; and the Board may cancel all
outstanding options, and terminate this Plan, effective as of the closing,
provided that it will notify the grantee of the proposed change of control
transaction a reasonable amount of time prior to the closing so that the grantee
will be given the opportunity to exercise his or her option (after giving effect
to the acceleration of such vesting) prior to closing. In the event of a change
of control transaction, the Board will also have the discretion to waive
restricted share or restricted share unit restrictions and determine that
performance units have been fully earned.
The provisions of the Plan providing for the acceleration of the exercise
date of stock options, the lapse of restrictions applicable to restricted shares
and the deemed earnout of performance units upon the occurrence of a Section 9A
Event and for the extension of the period during which stock options may be
exercised upon termination of employment following a Section 9A Event may be
considered as having an anti-takeover effect.
MISCELLANEOUS
The Board of Directors may amend or terminate the Plan at any time, except
(1) the Board may not alter adversely or terminate any outstanding award without
the consent of the holders thereof and (2) shareholder approval is required for
any amendment that increases the total number of shares which may be issued
under the Plan or if such approval is required to maintain the favorable tax
treatment of incentive stock options granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of awards under present law.
Incentive Stock Options. An optionee will not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of any incentive stock option. The exercise
of an incentive stock option generally will result in an increase in an
optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a
long-term capital gain, and any loss will be treated as a long-term capital
loss. In the event of a "disqualifying disposition," the difference between the
fair market value of the shares received on the date of exercise and the option
price (limited, in the case of a taxable sale or exchange, to the excess of the
amount realized upon disposition over the optionee's tax basis in the shares)
will be treated as compensation received by the optionee in the year of
disposition. Any additional gain will be taxable as a capital gain and any loss
as a capital loss, which will be long-term or short-term depending on whether
the shares were held for more than one year. Under proposed regulations, special
rules apply in determining the compensation income recognized upon a
disqualifying disposition if the option price of the incentive stock option is
paid with shares of common stock or, in certain limited circumstances, if the
optionee is subject to Section 16(b) of the 1934 Act. If shares of common stock
received upon the prior exercise of an incentive stock option are transferred to
the Company
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<PAGE> 17
in payment of the option price of an incentive stock option within either of the
periods referred to above, the transfer will be considered a "disqualifying
disposition" of the shares transferred, but, under proposed regulations, only
compensation income determined as stated above, and no capital gain or loss,
will be recognized.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a "disqualifying disposition." If
an amount is treated as compensation received by an optionee because of a
"disqualifying disposition," the Company or one of its subsidiaries generally
will be entitled to a corresponding deduction in the same amount for
compensation paid.
Non-qualified Stock Options. An optionee will not recognize any taxable
income for Federal income tax purposes upon receipt of a non-qualified stock
option. Upon the exercise of a non-qualified stock option the amount by which
the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price will be treated as compensation received by
the optionee in the year of exercise. If the option price of a non-qualified
stock option is paid in whole or in part with shares of common stock, no income,
gain or loss will be recognized by the optionee on the receipt of shares equal
in value on the date of exercise to the shares delivered in payment of the
option price. The fair market value of the remainder of the shares received upon
exercise of the non-qualified stock option, determined as of the date of
exercise, less the amount of cash, if any, paid upon exercise will be treated as
compensation income received by the optionee on the date of exercise of the
stock option. Special rules will apply upon the exercise of a non-qualified
stock option in certain limited circumstances by an optionee who is subject to
Section 16(b) of the 1934 Act.
The Company or one of its subsidiaries generally will be entitled to a
deduction for compensation paid in the same amount treated as compensation
received by the optionee.
Restricted Shares. A grantee of restricted shares will not recognize any
taxable income for Federal income tax purposes in the year of the award,
provided the shares are subject to restrictions (that is, they are
nontransferable and subject to a substantial risk of forfeiture). If a grantee
is subject to Section 16(b) of the 1934 Act on the date of the award, the shares
generally will be deemed to be subject to restrictions (in addition to the
restrictions imposed by the award) for at least six months following the date of
the award. However, the grantee may elect under Section 83(b) of the Code to
recognize compensation income in the year of the award in an amount equal to the
fair market value of the shares on the date of the award, determined without
regard to the restrictions. If the grantee does not make a Section 83(b)
election, the fair market value of the shares on the date the restrictions lapse
will be treated as compensation income to the grantee and will be taxable in the
year the restrictions lapse. The Company or one of its subsidiaries generally
will be entitled to a deduction for compensation paid in the same amount treated
as compensation income to the grantee.
Performance Units. An awardee of performance units will not recognize any
taxable income for Federal income tax purposes upon receipt of the award. Any
cash or shares of common stock received pursuant to the award will be treated as
compensation income received by the awardee generally in the year in which the
awardee receives such cash or shares of common stock. If performance units are
expressed in dollars but paid in whole or in part in shares of common stock and
the awardee is subject to Section 16(b) of the 1934 Act on the date of receipt
of such shares, the awardee generally will not recognize compensation income
until the expiration of six months from the date or receipt, unless the awardee
makes an election under Section 83(b) of the Code to recognize compensation
income on the date of receipt. In each case, the amount of compensation income
will equal the amount of cash and the fair market value of the shares of common
stock on the date compensation income is recognized. The Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation income to the awardee.
Bonus Shares. Any shares of common stock received pursuant to an award of
bonus shares will be treated as compensation income received by the awardee
generally in the year in which the awardee receives such shares. If the awardee
is subject to Section 16(b) of the 1934 Act on the date of receipt of the bonus
shares, the awardee generally will not recognize compensation income until the
expiration of six months from
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the date of receipt, unless the awardee makes an election under Section 83(b) of
the Code to recognize compensation income on the date of receipt. In each case,
the amount of compensation income will equal the fair market value of the shares
of common stock on the date compensation income is recognized. The Company or
one of its subsidiaries generally will be entitled to a corresponding deduction
in the same amount for compensation paid.
Other Tax Matters. The exercise of a stock option by an awardee, the lapse
of restrictions on restricted shares, or the deemed earnout of performance units
following the occurrence of a Section 9A Event, in certain circumstances, may
result in (i) a 20% Federal excise tax (in addition to Federal income tax) to
the awardee on certain payments of common stock or cash resulting from such
exercise or deemed earnout of performance units or, in the case of restricted
shares, on all or a portion of the fair market value of the shares on the date
the restrictions lapse and (ii) the loss of a compensation deduction which would
otherwise be allowable to the Company or one of its subsidiaries as explained
above.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE PLAN
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors in December 2000 approved an increase by 400,000 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
represented in person or by proxy and entitled to vote at the Annual Meeting of
Shareholders is required.
Through December 15, 2000, there have been 3,309,598 shares purchased under
the Purchase Plan, in which all of the Company's full-time employees may
participate (approximately 580 employees are participating) and if the proposed
amendment to the Purchase Plan is adopted, 690,402 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, April 1, July 1, or October 1) following the commencement of
their employment. Each employee enrolling in the Purchase Plan elects to make
contributions by payroll deductions of any whole integer amount ranging from 1%
to 15% 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 March 31, June 30, September 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. Shares purchased must
be held by its members for a period of one year from the last day of the
three-month period with respect to which the shares were purchased.
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 three-month period or (b) the last trading day of each three-month
period. If the number of shares members desire to purchase at the end of any
three-month period
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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 three-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 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
three-month period immediately following the three-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 Robert A. Stoffregen, the Company's
Chief Financial Officer and Secretary. 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 three-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 VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE PURCHASE PLAN
17
<PAGE> 20
PLAN BENEFITS
The following table sets forth the number of options and shares of
restricted stock granted under the 1994 Stock Incentive Plan from October 1,
1999 through September 30, 2000 and the number of shares purchased under the
Employee Stock Purchase Plan during that period, with respect to 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>
STOCK INCENTIVE PLAN
--------------------------------------- PURCHASE PLAN
NUMBER OF OPTIONS ----------------------------------
GRANTED IN FISCAL NUMBER OF SHARES NUMBER OF
2000(1) OF RESTRICTED STOCK DOLLAR VALUE(2) SHARES PURCHASED
----------------- ------------------- --------------- ----------------
<S> <C> <C> <C> <C>
Ronald A. Unkefer................. 0 0
George J. Hechtman................ 0 0 $ 1,447 385
Cathy A. Stauffer................. 30,000 0 $ 2,259 1,096
Richard C. Gazlay................. 0 0 $ 10,401 5,994
Vance R. Schram................... 0 0 0 0
Current Executive Officer Group... 30,000 0 $ 14,107 7,475
Non-Executive Officer Director
Group........................... 0 34,195 0 0
Non-Executive Officer Employee
Group........................... 243,950 79,000 $963,015 476,981
</TABLE>
---------------
(1) Does not include options covering 1,125,000 shares of common stock granted
outside the 1994 Stock Incentive Plan in fiscal 2000, including an option
covering 100,000 shares granted to George J. Hechtman and an option covering
1,000,000 shares granted to Kenneth R. Weller.
(2) 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 Employee Stock 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.
18
<PAGE> 21
CERTAIN SHAREHOLDERS
The following table sets forth information as of December 15, 2000, 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>
Lord, Abbett & Co.(2)....................................... 2,831,196 10.9%
767 Fifth Avenue, 11th Floor
New York, NY 10153
First Pacific Advisors(2)................................... 1,785,500 6.9%
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064
Dimensional Fund Advisors(2)................................ 1,463,400 5.6%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Ronald A. Unkefer(3)........................................ 2,898,202 11.2%
Kenneth R. Weller(4)........................................ 750,000 2.9%
John E. Martin(5)........................................... 729,836 2.8%
Joseph M. Schell(6)......................................... 450,644 1.7%
Stanley R. Baker(7)......................................... 433,278 1.7%
Gary M. Lawrence(8)......................................... 269,813 1.0%
W. Howard Lester(9)......................................... 248,219 1.0%
Russell M. Solomon(10)...................................... 72,764 *
Joseph P. Clayton(11)....................................... 60,011 *
George J. Hechtman.......................................... 20,000 *
Cathy A. Stauffer(12)....................................... 48,384 *
All executive officers and directors as a group (12
persons)(13).............................................. 5,989,542 23.3%
</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, 2000.
(3) Includes 801,734 shares issuable upon the exercise of outstanding warrants
that are exercisable within 60 days. Mr. Unkefer is a member of the
administrative committees for The Good Guys! Profit Sharing Plan, the
trustee of which currently holds 535,006 shares on behalf of plan
participants, and The Good Guys! Deferred Pay Plan, the trustee of which
currently holds 358,459 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.
(4) Includes 250,000 shares issuable upon the exercise of outstanding warrants
that are exercisable within 60 days.
(5) Includes 133,744 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days.
(6) Includes 127,744 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days.
(7) Includes 106,808 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days.
19
<PAGE> 22
(8) Includes 73,872 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days.
(9) Includes 79,872 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days.
(10) Includes 31,387 shares issuable upon the exercise of outstanding stock
options and warrants that are exercisable within 60 days, and also includes
shares held in trusts established by him as to which he disclaims
beneficial interest.
(11) Includes 30,000 shares issuable upon the exercise of outstanding stock
options and warrants that are issuable within 60 days.
(12) Includes 139 shares held by the trustee of The Good Guys! Profit-Sharing
Plan and allocated to Ms. Stauffer, as to which Ms. Stauffer has voting
power, 2,298 shares held by the trustee of The Good Guys! Deferred Pay Plan
and allocated to Ms. Stauffer's individual account, as to which Ms.
Stauffer has voting power, and 19,584 shares issuable upon exercise of
outstanding stock options that are exercisable within 60 days.
(13) Includes 139 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; 2,298 shares held by the
trustee of The Good Guys! Deferred Pay Plan and allocated to the individual
accounts of such members, as to which such individuals have voting power,
and 1,680,631 shares issuable upon exercise of outstanding stock options
and warrants 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, with the exception of a Form 3 filed by Mr. Gazlay and a
Form 3 filed by Mr. Hechtman.
STOCKHOLDERS PROPOSALS
The Company recently announced a change in its fiscal year to correspond to
one ending on February 28 of each year. Therefore, the next annual meeting of
stockholders, the date of which has not yet been determined, is expected to
occur in May or June of 2002 following the completion of the Company's fiscal
year ending February 28, 2002. When such meeting date is set, the Company will
announce the date to its stockholders in a Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission. Due to the change in fiscal year,
proposals that stockholders wish to include in the Proxy Statement for the next
annual meeting of stockholders must be received by the Company a reasonable time
before the Company begins to print and mail its proxy materials and must satisfy
the conditions established by the Securities and Exchange Commission for such
proposals.
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.
20
<PAGE> 23
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/ RONALD A. UNKEFER
--------------------------------------
Ronald A. Unkefer
Chairman and Chief Executive Officer
Brisbane, California
January 2, 2001
21
<PAGE> 24
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS OF THE GOOD GUYS, INC.
I. PURPOSE
The primary purposes of the Audit Committee are to assist the Board of
Directors in fulfilling its oversight responsibilities with regard to the
financial reporting process and internal controls of the Corporation and to
provide an avenue for open communication among the independent accountants,
financial and senior management and the Board of Directors.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be an independent director and
free from any relationship that in the opinion of the Board would
interfere with the exercise of his or her independent judgment as a member
of the Committee.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board. Unless a Chair is elected by the full
Board, the members of the Committee may designate a Chair by majority vote
of the full Committee membership.
III. MEETINGS
The Committee shall hold such regular meetings as it deems necessary and
such special meetings as may be called by the Chairman of the Audit
Committee or at the request of the independent accountants.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review the Corporation's annual financial statements and make a
recommendation to the Board whether they should be included in the
Corporation's Annual Report on Form 10-K.
2. Review with financial management and the independent accountants each Form
10-Q prior to its filing. The Chair of the Committee may represent the
entire Committee for purposes of this review.
-1-
<PAGE> 25
INDEPENDENT ACCOUNTANTS
3. Recommend to the Board the selection of the independent accountants and
approve the fees and other compensation to be paid to the independent
accountants. On an annual basis, the Committee shall review and discuss
with the accountants all significant relationships the accountants have
with the Corporation to determine their independence and shall receive from
them the disclosures regarding their independence required by Independent
Standards Board Standard No. 1.
4. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
5. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
FINANCIAL REPORTING PROCESSES
6. Meet with the independent accountants and financial management of the
Corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent accountants.
7. Review with the independent accountants and financial and accounting
personnel the adequacy and effectiveness of the accounting and financial
controls of the corporation, and elicit any recommendations for the
improvement of such controls, with emphasis on the adequacy of such
controls to expose any payments, transactions, or procedures that might be
deemed illegal or otherwise improper.
8. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in
its financial reporting.
9. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountant's or management.
10. Following completion of the annual audit, review with the independent
accountants the matters covered by Statement on Auditing Standard No. 61,
including (a) any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access to
required information, (b) methods used to account for significant unusual
transactions; (c) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative
guidance or consensus; and (d) the process used by management in
-2-
<PAGE> 26
formulating any particularly sensitive accounting estimates and the basis
for the auditor's conclusions regarding the reasonableness of those
estimates.
11. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial
statements, including whether there were any disagreements with regard to
the application of accounting principles, the basis for management's
accounting estimates or the disclosures in the financial statements.
12. Review with the independent accountants and management the extent to which
changes or improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented.
ETHICAL AND LEGAL COMPLIANCE
13. Review periodically the Corporation's Code of Conduct and its system for
enforcing the Code.
14. Review with counsel legal matters that could have a significant impact on
the Corporation's financial statements.
REPORT OF AUDIT COMMITTEE
15. Deliver a report for inclusion in the Proxy Statement of the Corporation
for its Annual Meeting of Shareholders on whether the Audit Committee has
(a) reviewed and discussed the audited financial statements with
management, (b) discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standard No. 61 and (c)
received from the independent accountants disclosures regarding their
independence required by Independence Standards Board Standard No. 1,
which report shall state whether, based upon such review and discussions,
the Audit Committee recommended to the Board the inclusion of the audited
financial statements in the Corporation's Annual Report on Form 10-K for
the last fiscal year.
-3-
<PAGE> 27
PROXY
THE GOOD GUYS, INC.
PROXY/VOTING INSTRUCTIONS SOLICITED BY BOARD
OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
I appoint Ronald A. Unkefer and Robert A. Stoffregan, 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
Ritz-Carlton Hotel, 600 Stockton Street, San Francisco, California on Wednesday,
January 31, 2001, at 11:00 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 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> 28
<TABLE>
<S> <C>
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, FOR item 3 and FOR item 4.
WITHHOLD
FOR FOR ALL FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS [ ] [ ] 4. APPROVAL OF AUDITORS [ ] [ ] [ ]
Nominees: Ronald A. Unkefer, Stanley R. Baker, To ratify the selection of
Russell M. Solomon, John E. Martin, Kenneth R. Weller, Deloitte & Touche LLP as
Gary M. Lawrence, Joseph P. Clayton, independent Certified Public
Joseph M. Schell. Accountants for the Company.
WITHHELD FOR: To withhold authority for any individual I PLAN TO ATTEND THE MEETING. [ ]
nominee, cross out the nominee's name in the list above.
Receipt is hereby acknowledged of The Good Guys, Inc.
Notice of Annual Meeting of Shareholders and
Proxy Statement.
FOR AGAINST ABSTAIN
2. 1994 STOCK INCENTIVE PLAN [ ] [ ] [ ]
To approve an increase by 700,000 in the
number of shares covered by the 1994 Stock
Incentive Plan.
FOR AGAINST ABSTAIN
3. EMPLOYEE STOCK PURCHASE PLAN [ ] [ ] [ ]
To approve an increase by 400,000 in the
number of shares covered by the Employee
Stock Purchase Plan.
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 -
</TABLE>
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
