<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------- -------------------
Commission File Number 0-19269
SUN TELEVISION AND APPLIANCES, INC.
(Exact name of Registrant as specified in its charter)
OHIO 31-1178151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6600 PORT ROAD, GROVEPORT, OH 43125
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614)492-5600
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT SEPTEMBER 23, 1996
Common shares, $.01 par value 17,419,408 shares
This document contains 14 pages of which this is page 1. The exhibit index is on
page 11.
<PAGE> 2
SUN TELEVISION AND APPLIANCES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Operations
for the Quarters Ended
August 31, 1996 and August 26, 1995 3
Statement of Operations
for the Six Months Ended
August 31, 1996 and August 26, 1995 4
Balance Sheet
August 31, 1996 and March 2, 1996 5
Statement of Cash Flows
for the Six Months Ended
August 31, 1996 and August 26, 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Results of Operation and Financial Condition 8-10
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUN TELEVISION AND APPLIANCES, INC.
STATEMENT OF OPERATIONS
For the quarters ended August 31, 1996 and August 26, 1995
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
August 31, August 26,
1996 1995
---------- ----------
<S> <C> <C>
Net sales and
service revenues $ 150,389 $ 183,234
Cost of sales 111,437 135,622
--------- ---------
Gross profit 38,952 47,612
Selling, general and administrative 42,050 43,483
Amortization of intangibles 123 123
--------- ---------
(Loss) income from operations (3,221) 4,006
Other income (expenses):
Interest income 73 120
Interest expense (1,136) (1,230)
Other --- 894
--------- ---------
Total Other (1,063) (216)
--------- ---------
(Loss)income before income taxes (4,284) 3,790
Income tax (benefit) expense (1,723) 1,534
--------- ---------
Net (loss) income $ (2,561) $ 2,256
========= =========
Net (loss)income per share $ (.15) $ .13
========= =========
Weighted average shares outstanding 17,453 17,441
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
STATEMENT OF OPERATIONS
For the six months ended August 31, 1996 and August 26, 1995
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
August 31, August 26,
1996 1995
---------- ----------
<S> <C> <C>
Net sales and
service revenues $ 304,048 $ 347,714
Cost of sales 227,939 258,463
--------- ---------
Gross profit 76,109 89,251
Selling, general and administrative 83,875 83,917
Amortization of intangibles 247 247
Restructuring charge 2,000 ---
--------- ---------
(Loss) income from operations (10,013) 5,087
Other income (expenses):
Interest income 249 355
Interest expense (2,193) (2,193)
Other --- 894
--------- ---------
Total Other (1,944) (944)
--------- ---------
(Loss)income before income taxes (11,957) 4,143
Income tax (benefit) expense (4,808) 1,677
--------- ---------
Net (loss) income $ (7,149) $ 2,466
========= =========
Net (loss)income per share $ (.41) $ .14
========= =========
Weighted average shares outstanding 17,444 17,462
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
SUN TELEVISION AND APPLIANCES, INC.
BALANCE SHEET
August 31, 1996 and March 2, 1996
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
August 31, March 2,
1996 1996
---------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,140 $ 13,583
Trade accounts receivable net of allowance
for doubtful accounts of $400 and $400 16,863 18,943
Income tax receivable 4,402 ---
Merchandise inventory 149,137 114,777
Prepaid expenses and other 6,680 5,903
Deferred income taxes 8,131 8,116
-------- --------
Total current assets 192,353 161,322
Property and equipment, net 103,626 100,563
Deferred income taxes 7,477 8,410
Intangible assets 14,800 15,047
-------- --------
Total assets $318,256 $285,342
======== ========
LIABILITIES
Current liabilities:
Short-term borrowings $ 35,000 $ ---
Trade accounts payable 61,722 20,100
Accrued liabilities 24,082 23,431
Income taxes payable --- 3,934
Current portion of deferred revenue 17,102 18,089
-------- --------
Total current liabilities 137,906 65,554
Capital lease obligations 14,475 14,651
Deferred revenue, non-current 19,662 21,621
Long-term debt --- 30,000
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
500 shares authorized - none issued --- ---
Common stock, $.01 par value, 30,000 shares authorized
17,419 and 17,364 shares issued and outstanding 174 174
Additional paid-in capital 88,419 88,268
Retained earnings 57,620 65,074
-------- --------
Total stockholders' equity 146,213 153,516
-------- --------
Total liabilities and stockholders' equity $318,256 $285,342
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
SUN TELEVISION AND APPLIANCES, INC.
STATEMENT OF CASH FLOWS
For the six months ended August 31, 1996 and August 26, 1995
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
August 31, August 26,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (7,149) $ 2,466
Adjustments to reconcile (loss) income to net cash
used by operating activities:
Depreciation and amortization 4,461 3,793
Deferred revenue (2,946) (726)
Deferred income taxes 918 249
Restructuring charge 2,000 ---
Gain of sale property and equipment --- (894)
Changes in items affecting operations:
Trade accounts receivable 2,080 (409)
Merchandise inventory (34,360) (11,048)
Prepaid expenses and other (777) 57
Trade accounts payable 41,622 17,734
Accrued liabilities (1,349) 3,302
Income taxes payable/receivable (8,336) (4,618)
-------- --------
(1,120) 5,018
-------- --------
Net cash (used) provided by operating activities (3,836) 9,906
-------- --------
Cash flows from financing activities:
Short-term borrowings 5,000 ---
Reduction of capital lease obligations (176) (148)
Issuance of common stock under stock options 151 ---
Dividends on common stock (305) (302)
-------- --------
Net cash provided(used) by financing activities 4,670 (450)
-------- --------
Cash flows from investing activities:
Additions to property and equipment, net of disposals (7,277) (17,408)
Proceeds from the disposal of property and equipment --- 2,784
-------- --------
Net cash (used) in investing activities (7,277) (14,624)
-------- --------
(Decrease) in cash and cash equivalents (6,443) (5,168)
Cash and cash equivalents, beginning of year 13,583 16,736
-------- --------
Cash and cash equivalents, end of period $ 7,140 $ 11,568
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ --- $ ---
Income taxes $ 2,830 $ 6,200
Non-cash investing and financing activities:
Capital lease $ --- $ 2,004
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
SUN TELEVISION AND APPLIANCES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements as of August 31, 1996, and August 26, 1995, of
Sun Television and Appliances, Inc. (the "Company") are unaudited, and
are presented pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, Notes to the Financial Statements
which are contained in the Company's 1996 Annual Report should be read
in conjunction with these Financial Statements. In the opinion of
management, the accompanying unaudited financial statements reflect all
adjustments (which are of a normal recurring nature) necessary to
present fairly the financial position, results of operations and cash
flows for the interim periods presented, but are not necessarily
indicative of the results of operations for a full fiscal year.
2. CHANGE IN FISCAL YEAR
Effective with the beginning of fiscal 1996, the Company has changed
its fiscal year end to the Saturday closest to February 28 from a
calendar month-end of February. The first six months of fiscal 1997 had
182 days compared to 179 days in the first six months of fiscal 1996.
3. SHORT-TERM AND LONG-TERM DEBT
As of August 31, 1996, the Company had outstanding short-term
borrowings of $5,000,000 against its reducing revolving credit
commitment. The interest rate in effect at August 31, 1996, was prime
rate, or 8.25%.
Net losses sustained by the Company in the second quarter of fiscal
1997 resulted in the Company's failure to meet the fixed-charge
coverage required by the agreements between the Company and the holders
of its senior notes and the banks providing its revolving credit loans.
The Company is in compliance with all other covenants contained in the
agreements.
Neither the note holders nor the banks have indicated their intention
to declare the outstanding principal amounts and accrued interest
immediately due and payable. Negotiations with both the note holders
and the banks are currently in progress.
The Company has made all required principal and interest payments due
the note holders and the banks to date and anticipates that it will be
able to make the required future payments as scheduled under the
current agreements.
4. NEW FINANCIAL ACCOUNTING STANDARDS
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of". SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
full recoverability is questionable. The impact of adopting SFAS No.
121 was immaterial to the results of operations or financial condition
of the Company. SFAS No. 123, "Accounting for Stock-Based
Compensation," has also been adopted for fiscal year 1997. The Company
will make the required disclosure of the impact of SFAS No. 123 in the
annual report for fiscal 1997.
7
<PAGE> 8
Item 2.
SUN TELEVISION AND APPLIANCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATION AND FINANCIAL CONDITION
RESULTS OF OPERATION
The Company recorded net loss of $2,561,000 or $.15 per share for the second
quarter ended August 31, 1996, compared to net income of $2,256,000, or $.13 per
share for the quarter ended August 26, 1995. The decrease was primarily
attributable to a decline in gross sales volume. The gross profit percentage
rate decreased slighty from 26.0% last year to 25.9% this year. Selling, general
and administrative expenses have decreased in dollars versus last year's second
quarter but increased as a percentage of sales as compared to last year due to
the decline in sales volume and the operation of additional stores in this
quarter compared to the second quarter last year.
For the six months ended August 31, 1996, the net loss was $7,149,000 or $.41
per share as compared to net income of $2,466,000 or $.14 per share for the
prior year. The decline in net income was primarily attributable to the decrease
in sales volume and the decrease in gross profit rate as a percentage of net
sales from 25.7% last year to 25.0% this year. In addition, during the first
quarter of this year the Company had a one-time restructuring charge of $2.0
million, or $.07 per share, principally related to severance pay.
NET SALES AND SERVICE REVENUES
Net sales and service revenues for the second quarter ended August 31, 1996 were
$150,389,000, a decrease of $32,845,000 or 17.9% from the $183,234,000 for last
year's quarter ended August 26, 1995. Comparable store sales declined 28.0% from
$179.8 million for the quarter ended August 26, 1995 to $129.6 million for the
quarter ended August 31, 1996. Sales of all major product categories declined
this quarter versus last year's second quarter with home appliances, which
includes air conditioners, decreasing 35.6% this quarter versus the comparable
quarter last year.
Net sales and service revenues for the six months ended August 31, 1996
decreased 12.6% to $304,048,000 from $347,714,000 for the six months ended
August 26, 1995. Comparable store sales for this six months ended August 31,
1996 decreased $79.4 million to $266.4 million from $345.7 for the comparable
period last year. Again, sales in all major product categories decreased this
year versus the prior year with the largest decrease occurring in home
appliances (19.4%).
GROSS PROFIT
Gross profit of $38,952,000 (25.9% of sales) for the second quarter of this year
represents a decrease of $8,660,000 or 18.2% from last year's second quarter
amount of $47,612,000 (26.0% of sales). The gross profit percentage was
approximately the same in this year's second quarter versus last year. Most
product categories reflected a decline this year versus last year due to the
highly competitive environment, offset by an increased rate of service policy
revenue recognition which has a higher than average gross margin rate.
8
<PAGE> 9
For the first six months of this fiscal year, gross profit of $76,109,000 (25.0%
of sales) was 14.7%, or $13,142,000, lower than last year's amount of
$89,251,000 (25.7% of sales). The decline in gross profit percentage this year
versus last year was again attributable to the promotional environment related
to new competitors entering our markets as well as a slow down in consumer
spending.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $42,050,000 for the quarter
ended August 31, 1996 versus $43,483,000 for last year's second quarter, a
decrease of $1,433,000 or 3.3%. The decrease in dollars is primarily
attributable to lower payroll costs, primarily selling, offset partially by
higher occupancy costs related to the new stores this year as compared to last
year. As a percentage of sales, selling, general and administrative expense was
28.0% versus 23.7% last year and this is primarily attributable to the decline
in sales volume in the second quarter versus last year.
During the first six months of this year, selling, general and administrative
expenses decreased $42,000 to $83,875,000 from $83,917,000. As a percentage of
sales, selling, general and administrative expense was 27.6% versus 24.1%, with
the increase relating to the decline in sales volume for the first six months of
this year versus last year.
OTHER INCOME/EXPENSES
Interest expense decreased $94,000 for the second quarter and was flat for the
first six months this year versus last year due to the reduction in average
outstanding short-term borrowings for the same period.
INCOME TAXES
The provision for income taxes is based on the current estimate of the annual
effective tax rate for the year (40.2%) which has reduced slightly from last
year, primarily due to a decrease in the effective state tax rate.
9
<PAGE> 10
FINANCIAL CONDITION
The Company's current ratio is 1.4 as compared to 2.5 as of March 2, 1996. The
major reason for the decrease in the current ratio is the reclassification of
the principal amount of the senior notes as a current liability due to the
non-compliance by the Company with the fixed-charge coverage covenant (See Note
3 of Notes to Financial Statements). If the senior notes had not been
reclassified the current ratio would have been 1.8 as of the end of the current
quarter. Inventory has increased by $34,360,000 in preparation for the Fall
selling season and the additional new stores opened this year versus last year
and was largely financed by increases in short-term borrowings and trade
payables.
The Company opened one store in Dayton, Ohio, in the first quarter of this year,
a store in Charleston, West Virginia during the second quarter and a store in
Beckley, West Virginia in the third quarter of this year. The Company plans to
replace the existing stores in North Randall, Chillicothe and Newark, Ohio with
larger, better located stores and open a new store in Huntington, West Virginia,
in the third quarter of this year. The Company expects capital expenditures for
the remainder of the year to be approximately $11,000,000 and anticipates
covering these requirements using cash on hand, cash flow from operations, the
anticipated sale of non-productive property, the possible sale/leaseback of
certain owned properties and short-term borrowings on an interim basis.
The ability of the Company to meet its operating cash requirements for current
and future fiscal periods is dependent upon its ability to negotiate
satisfactory amendments to its current lending agreements and satisfactory
long-term financing arrangements. The Company is currently negotiating with its
banks, note holders and other potential lenders regarding such agreement.
10
<PAGE> 11
PART II. - OTHER INFORMATION
In accordance with the instruction to Part II, the other specified items in this
part have been omitted because they are not applicable or the information has
been previously reported.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on July 30, 1996.
The following matters were voted on:
1. Election of Directors.
2. Ratification of the appointment of Coopers & Lybrand L.L.P. to
serve as independent public accountants for the Company for
fiscal 1997.
All nominees to the Board of Directors were elected, and all other matters were
approved. The votes cast were as follows:
1. Election
<TABLE>
<CAPTION>
Nominee For Withheld Total
--------- ----- ---------- -----
<S> <C> <C> <C>
Macy T. Block 15,566,853 335,080 15,901,933
Thomas Epstein 15,598,758 303,175 15,901,933
Brady J. Churches 15,593,068 308,865 15,901,933
Ned L. Sherwood 15,589,808 312,125 15,901,933
Michel Zaleski 15,589,783 312,150 15,901,933
Paul D. Bauer 14,233,692 1,678,241 15,901,933
James R. Copitzky 15,601,208 300,725 15,901,933
Joseph Nusim 15,576,886 325,047 15,901,933
</TABLE>
2. Ratification for Appointment of Independent Public
Accountants:
For 15,796,403
Opposed 57,760
Abstentions 47,770
Items 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10a. Employment Agreement
Exhibit 10b. Stock Option Agreement
Exhibit 10c. Restricted Stock Agreement
Exhibit 11. Computation of Net (Loss) Income per Common
Share
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE> 12
SUN TELEVISION AND APPLIANCES, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN TELEVISION AND APPLIANCES, INC.
(Registrant)
By /s/Steven A. Martin
----------------------------------------------------
Steven A. Martin, Executive Vice President, Treasurer
and Chief Financial Officer *
Date: October 11, 1996
- ---------------
* Mr. Martin is the principal financial officer and has been duly authorized to
sign on behalf of the Registrant.
12
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement is made as of May 22, 1996 between Sun Television and
Appliances, Inc., an Ohio corporation (the "Company") and Steven A. Martin (the
"Executive").
The Company desires to employ the Executive as its Executive Vice
President, Chief Financial Officer and Treasurer and the Executive desires to
accept such employment pursuant to the terms set forth herein. The parties,
therefore, agree as follows:
A. TERM, DUTIES, AND COMPENSATION
1. TERM. The Company employs the Executive as its Executive Vice
President, Chief Financial Officer and Treasurer, and the Executive accepts
such employment, commencing on July 1, 1996, and, subject to early termination
as provided below, terminating April 30, 2000. If notice of non-renewal is not
given in writing by either party to the other on or before November 1, 1999, or
on or before November 1 of each year thereafter, the term of this Agreement
will be extended for one additional year. The period during which this
Agreement is in effect, as provided above, is hereinafter referred to as the
"Term."
2. DUTIES. The Executive will perform the duties and have the
responsibilities customary to the office of Chief Financial Officer and
Treasurer, and will perform such other executive, managerial and administrative
duties as the Chief Executive Officer, the President and the Board of Directors
shall from time to time determine, provided that such duties are appropriate to
and consistent with his position as Executive Vice President, Chief Financial
Officer and Treasurer. The Executive will devote his full business time and
attention and best efforts to the performance of such services and duties. The
Executive may, without violating this provision, serve as a director of one or
more corporations which do not compete with, and are neither suppliers to nor
customers of, the Company and may serve as an officer or director of, or
otherwise participate in, educational, welfare, social, religious, and civic
organizations.
3. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Beginning on July 1, 1996, the Company will
pay the Executive a base salary at the annual rate of $150,000. For the year
beginning July 1, 1997, the base salary will be increased to not less than
$180,000, plus the amount resulting from the application to $180,000 of the
percentage increase provided for in the last sentence of this subsection 3(a).
The base salary will be paid in bi-weekly installments, less such deductions as
are required to be withheld by applicable law and regulations. The base salary
will be reviewed by the Board of Directors of the Company (the "Board")
annually during the Term, but will be increased annually by an amount not less
than 3% or the percentage increase in the cost-of-living index during the prior
calendar year, as published by the Bureau of Labor Statistics, whichever is
greater, multiplied by the Executive's then current base salary.
<PAGE> 2
(b) INITIAL PAYMENT. To induce the Executive to enter
into this Agreement, the Company will pay to the Executive, on or before June
30, 1996, the sum of $31,500, which sum shall be in addition to his base
salary.
30, ADDITIONAL CASH COMPENSATION. The Executive will
receive, in addition to his base salary, such additional cash compensation in
the form of a bonus or otherwise, as the Board determines, from time to time.
(d) STOCK OPTIONS AND RESTRICTED STOCK. The Company, acting
through its Compensation and Stock Option Committee, will grant to the
Executive an option to purchase 150,000 shares of common stock, $.01 par value,
at a price per share determined as provided in this paragraph and on the terms
set forth in the form of Stock Option Agreement attached hereto as Exhibit A.
If the fair market value per share of the Company's common stock on the date of
grant, determined in accordance with the Company's stock option plan ("Fair
Market Value") is less than $4.00 per share, the option price shall be $4.00
per share. If the Fair Market Value is more than $4.00 per share, the option
price shall be the Fair Market Value, and the Company shall issue to the
Executive, pursuant to an agreement in the form of the Restricted Stock
Agreement attached hereto as Exhibit B, that number of shares of common stock
(rounded up to a whole share, if necessary) which is determined by subtracting
$4.00 from the Fair Market Value, multiplying the difference by 150,000, and
dividing the product so obtained by the Fair Market Value.
(e) FRINGE BENEFITS. Executive will be eligible to
participate in such fringe benefits including, without limitation, health care
insurance coverage, long term disability insurance coverage, group life
insurance coverage, business travel insurance, stock option and stock purchase
plans, a 401(k) plan, Section 125/cafeteria plans and other fringe benefits, as
are now or in the future made available to executives of the Company or any
parent or subsidiary corporation in accordance with the terms and conditions on
which such fringe benefits are maintained by the Company or such parent or
subsidiary.
(f) RELOCATION EXPENSES. In connection with his
relocation from Chicago (St. Charles) to Columbus, the Company will pay or
reimburse the Executive for the following:
(1) reasonable moving costs, including, but not
limited to, financing and closing costs such as points, fees
and broker costs customary in the Columbus area, and title
insurance if not provided by the seller;
(2) interim living expenses for a period beginning
with the date of commencement of his employment hereunder and
ending on the earlier of (a) his move into a permanent
residence and (b) the expiration of 120 days from the date of
commencement of his employment (which 120-day period may be
extended by the Company's Chief Executive Officer);
-2-
<PAGE> 3
(3) the cost of three trips by his wife to
Columbus for the purpose of finding a house;
(4) the difference between the net proceeds to
the Executive of the sale of his present residence and the
average of two appraisals acceptable to the Company;
(5) reimbursement for legal fees not in excess
of $5,000 incurred in connection with the negotiation of this
Agreement; and
(6) the cost of air fare and ground transportation
for a reasonable number of trips by the Executive between
Columbus and St. Charles between the time he commences his
employment and the time his family is relocated to Columbus.
In the event that Executive's present residence is not sold within 120
days of the commence ment of his employment hereunder, the Company will either
(a) lend to him, interest free, the amount required to purchase a comparable
residence in the Columbus area, or (b) sell the Executive's present residence
to a buyer of its choice and reimburse the Executive as provided in clause (4)
above.
In addition to the foregoing, the Company will pay to the Executive
such amount as is necessary to cover his federal income tax liability with
respect to those items above listed which are includible in his gross income
for federal income tax purposes.
(g) OTHER BENEFITS. Executive will receive the following
benefits during the Term: (i) such holidays and vacation (not less than three
weeks) as are provided under policies generally applicable to executives of the
Company, (ii) reimbursement of all out-of-pocket expenses incurred by Executive
in performance of his duties, and (iii) dues at an annual rate not to exceed
$1,000 for membership in a private club of the Executive's choice.
B. EARLY TERMINATION OF THE TERM OF THIS AGREEMENT
4. TERMINATION UPON RETIREMENT. "Retirement," for purposes of this
Agreement, means retirement at the age and in accordance with the conditions
prescribed by a Company retirement plan or, if no such plan is in effect,
voluntary termination by the Executive at or after attaining 65 years of age.
Upon retirement this Agreement will terminate as of the date of retirement, and
the Company will pay to the Executive the benefits provided by Section 3
hereof, earned, accrued, or incurred through the date of retirement. In
addition, the Company will continue in effect for a period of 18 months
following his retirement date the Executive's participation in the medical,
health and accident benefit plans and programs in which he was participating
prior to retirement or, if his continued participation in such plans and
programs is not permitted, will, for that period, pay to him a sum equal to the
premiums the Company was paying to provide for his participation in such plans
and programs prior to this retirement. If the Executive should die within that
18-month period, the Company will use its reasonable best efforts to arrange
for participation by the Executive's spouse, at her expense, in such plans and
programs for the remainder of that period.
-3-
<PAGE> 4
5. TERMINATION UPON DEATH. If the Executive dies during the Term, this
Agreement will terminate as of the date of death, and, in addition to any other
benefits to which any person would be entitled upon the Executive's death, his
bi-weekly compensation and any applicable fringe benefits will continue until
the last day of the month in which his death occurs.
6. TERMINATION UPON DISABILITY.
(a) TERMINATION. If during the Term, by virtue of illness or
other incapacity ("Disability"), the Executive is unable to perform,
substantially and continuously, his duties for a period of more than six
consecutive months in any twelve-month period, the Company may thereafter, on
not less than 45 days written notice to the Executive, terminate this
Agreement.
(b) BENEFITS. After the date of termination, the Company
shall maintain for the Executive's benefit, until the earlier of (a) the
expiration of 18 months from the date of termination or (b) the Executive's
death, all costs associated with any life insurance, medical, health and
accident or other welfare benefit plans or programs maintained by the Company
at the time of the Executive's termination for Disability in which the
Executive shall have been participating prior to termination, provided that the
Executive's continued participation is permitted under the general terms of
such plans and programs after such termination. If the Executive's continued
participation in any such plan or program is not permitted, the Company will,
for the above-stated period, pay to the Executive a sum equal to the premiums
the Company was paying to provide for his participation in such plans and
programs prior to his termination. If the Executive should die within that
18-month period, the Company will use its reasonable best efforts to arrange
for participation by the Executive's spouse, at her expense, in the medical,
health and accident programs in which the Executive was participating for the
remainder of that 18-month period and, thereafter, at her expense, until she
shall reach age 65.
(c) CERTIFICATION OF DISABILITY. A determination of
Disability shall be subject to certification, if such a certification is
requested by either party, by a qualified medical doctor agreed to by the
Company and the Executive, or, in the event of the Executive's incapacity to
designate a qualified medical doctor, by the Executive's legal representative.
If the Company and the Executive fail to agree upon a qualified medical doctor,
each party shall designate a qualified medical doctor and the two doctors so
designated shall select a third qualified medical doctor, who shall make the
determination of Disability.
7. TERMINATION FOR CAUSE. For purposes of this Agreement, "cause"
means fraud, embezzlement, gross negligence or willful misconduct or a material
default by the Executive in the performance of his duties hereunder. No act or
failure to act on the Executive's part will be considered "willful" unless done
or omitted to be done by him not in good faith or without a reasonable belief
that his action or omission was in the best interest of the Company.
-4-
<PAGE> 5
If the Board believes that the Executive's employment should be
terminated for cause, the Board will notify the Executive in writing, stating
the bases for its belief. The Executive will have 10 days to respond to the
notice. If, following receipt of the Executive's response, the Board determines
that the Executive's employment should be terminated for cause, the Company
may, upon 30 days' prior written notice to the Executive, terminate his
employment . Upon such termination, the Executive will receive, through the
date of termination, his base salary and other benefits provided by Section 3
hereof, earned, accrued, or incurred.
8. VOLUNTARY TERMINATION BY THE EXECUTIVE. If the Executive
voluntarily terminates his employment , he will receive his base salary and
other benefits provided by Section 3 hereof, earned, accrued, and incurred
through the date of termination . Termination by the Executive following a
change in control, in the event of either a material and adverse change in his
status or responsibilities or a relocation of the Company's headquarters to a
location more than 50 miles from its present location, will not be a voluntary
termination by him within the meaning of this Section 8, but will be deemed to
be a termination without cause, within the meaning of Section 9. For purposes
of this Section, a "change in control" will be deemed to have occurred if and
when (a) any person not presently affiliated with the Company acquires,
directly or indirectly, or through or in concert with one or more other
persons, the power to vote or direct the voting of more than 50% of the voting
power of the outstanding voting securities of the Company, (b) all or
substantially all of the assets of the Company are acquired by or combined with
another person, in one or more transactions, and less than 50% of the
outstanding voting securities of the person surviving such transaction or
transactions, after such acquisition or combination is consummated, are owned
by persons who owned, immediately prior to such acquisition or combination,
voting shares of the Company outstanding immediately prior to such acquisition
or combination, or (c) there is elected at a meeting of the shareholders of the
Company a majority of the members of the Board of Directors who were not
members of, or elected or recommended by, the previously existing Board of
Directors of the Company.
9. TERMINATION BY THE COMPANY WITHOUT CAUSE. If the Board
determines that the employment of the Executive should be terminated without
cause, the Board will notify the Executive, in writing, of its decision.
After the date of termination without cause of the
Executive's employment , the Company will maintain for the Executive's benefit,
until the earlier of (i) the date when the Executive is employed by any person
other than the Company or (ii) the expiration of 18 months from the date of
termination, all costs associated with any medical, health and accident,
disability or other similar benefit plans or programs maintained by the Company
at the time of the Executive's termination in which the Executive was
participating prior to termination without cause, provided the Executive's
continued participation is permitted under the general terms of such plans and
programs after his termination. If the Executive's participation in any such
plan or program is not permitted, the Company will for such period pay to him a
sum equal to the premiums the Company was paying to provide for his
participation in such plans and programs prior to termination. If the Executive
should die within that 18-month period and prior to his employment by any other
person, the Company will
-5-
<PAGE> 6
use its reasonable best efforts to arrange for participation by the Executive's
spouse, at her expense, in the medical, health and accident plans and programs
in which the Executive was participating for the remainder of that 18-month
period.
In addition, the Executive will be entitled to receive
payment of his base salary then in effect until the earliest of (i) the date
when he is employed by any person other than the Company, (ii) the expiration
of the then-current Term, or (iii) his death.
C. RESTRICTIVE COVENANTS
10. COVENANT AGAINST COMPETITION; CONFIDENTIALITY. The Executive
acknowledges that the principal business of the Company is the operation of
consumer electronics and appliance stores ("the Company Business"), that the
Company is one of a limited number of persons who have developed such business,
that the Executive's employment by the Company will give him access to
confidential and proprietary information belonging to the Company, and that the
Company would not have entered into this Agreement but for the agreements and
covenants of the Executive in this Section 10. Accordingly, the Executive
covenants and agrees that:
(a) The Executive will not, directly or indirectly, for a
period commencing on the date of this Agreement and terminating one year
following the termination of the Executive's employment with the Company (the
"Restricted Period"), (i) engage in the Company Business for the Executive's
own account within 100 miles of any store operated by the Company or proposed
to be opened by the Company at the time of termination or (ii) render any
services as an officer, director, consultant, or employee to any person other
than the Company engaged in such business within 100 miles of any store
operated by the Company or proposed to be opened by the Company at the time of
termination. For the purpose of this Section 10, a store as to which a decision
has been made by the Company to negotiate for a site will be considered as
"proposed to be opened."
Notwithstanding the foregoing, the Restricted Period
will be two years if the Executive's employment is terminated for cause in
accordance with Section 7, or if the Executive terminates his employment
voluntarily, as provided in Section 8. If the Executive's employment is
terminated by the Company without cause, the Restricted Period will terminate if
the Company fails to pay the Executive, at the times and in the amounts provided
for, the compensation due him in accordance with Section 9 of this Agreement.
(b) During the Restricted Period, the Executive will not,
directly or indirectly, (i) knowingly solicit or encourage to leave the
employment of the Company or any of its affiliates any employee of the Company
or any of its affiliates or (ii) hire any employee who has left the employment
of the Company or any of its affiliates within six months of the termination of
such employee's employment with the Company or any of its affiliates.
-6-
<PAGE> 7
(c) During and after the Restricted Period, the
Executive will keep secret and retain in strict confidence and will not use for
his benefit or for the benefit of others, except in connection with the business
and affairs of the Company and its affiliates, all confidential matters relating
to the Company's business and to the Company and its affiliates learned by the
Executive heretofore or hereafter, directly or indirectly, from the Company and
its affiliates, including, without limitation, all software systems, trade
secrets, customer lists, supplier information, costing information, financial
information and similar property (the "Confidential Company Information"), and
will not disclose the Company Confidential Information to anyone outside the
Company and its affiliates except with the Company's express prior written
consent and except for the Confidential Company Information which (i) is at the
time of receipt or thereafter becomes publicly known through no wrongful act of
the Executive, (ii) is received without breach of this Agreement from a third
party not under an obligation to keep such information confidential, or (iii) is
required to be disclosed by legal order or subpoena.
(d) All memoranda, notes, lists, records and other documents
(and all copies thereof) made or copied by the Executive or made available to
the Executive concerning the Company's business or the Company or any of its
affiliates will be the Company's property and will be kept confidential in
accordance with the provisions of this Agreement and will be delivered to the
Company at any time on request and, upon termination of the Executive's
employment, will be left with the Company.
(e) If the Executive breaches or threatens to commit a breach
of any of the provisions of Sections 10(a)-(d) (the "Restrictive Covenants"),
the Company will have the following rights and remedies, each of which rights
and remedies will be independent of the other and severally enforceable, and
all of which rights and remedies will be in addition to, and not in lieu of,
any other rights and remedies available to the Company at law or in equity:
(1) The right to have the Restrictive Covenants
specifically enforced by any court having equity jurisdiction,
including, without limitation, the right to entry against the
Executive of restraining orders and injunctions (preliminary,
mandatory, temporary, and permanent) against violations, threatened or
actual, and whether or not continuing, of such covenants, it being
acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will
not provide an adequate remedy to the Company.
(2) The right to damages as provided by law.
D. MISCELLANEOUS
11. ARBITRATION. If a controversy arises as to (a) whether the
services and duties assigned to the Executive are within the terms of this
Agreement or (b) whether this Agreement was rightfully or wrongfully terminated
(by either party) within the terms of this Agreement, such controversy will be
settled by arbitration in Columbus, Ohio. The arbitration will be held in
accordance with the rules of the American Arbitration Association (the "AAA")
then in effect. The arbitration will be conducted by a single arbitrator
mutually agreed upon by the parties, or, if the parties cannot agree, chosen in
accordance with the rules of the AAA.
-7-
<PAGE> 8
The determination or award rendered therein will be binding
and conclusive on the parties, and judgment may be rendered thereon in
accordance with applicable law by any court having jurisdiction.
12. SEVERABILITY. The Executive acknowledges and agrees that he has
had an opportunity to seek advice of counsel in connection with this Agreement,
and that the Restrictive Covenants are reasonable in geographical and temporal
scope and in all other respects. If it is determined that any of the provisions
of this Agreement, including, without limitation, any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the remainder of
the provisions of this Agreement will not thereby be affected and will be given
full effect, without regard to the invalid portions. If any court determines
that any of the covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, is
unenforceable because of the duration or geographical scope of such provision,
the duration or scope of such provision, as the case may be, will be reduced so
that such provision becomes enforceable and, in its reduced form, such
provision will then be enforceable and will be enforced.
13. NOTICES. Any notice or other communication required or permitted
hereunder will be in writing and will be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail,
pre-paid. Any such notice will be deemed given when so delivered personally,
sent by facsimile transmission, or if mailed, five days after the date of
deposit in the United States mail as follows:
IF TO THE COMPANY:
-----------------
Sun Television and Appliances, Inc.
6600 Port Road
Groveport, Ohio 43125
Attn: Chairman of the Board
or such other address as the Company shall
from time to time designate by notice in
writing to the Executive.
and
IF TO THE EXECUTIVE:
-------------------
Mr. Steven A. Martin, at his address on the
personnel records of the Company.
14. WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
canceled, renewed or extended and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any waiver on the part of any party of any such right, power or privilege or
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other such right,
power or privilege.
-8-
<PAGE> 9
15. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed entirely within that state.
16. SUCCESSORS.
(a) This Agreement will inure to the benefit of and be
binding upon the Company, its successors and assigns, including without
limitation any person, partnership or corporation which may acquire voting
control of the Company or all or substantially all of the Company's assets and
business, or with or into which the Company may be consolidated or merged.
(b) This Agreement will also inure to the benefit of and be
binding upon the Executive, his heirs, successors, and legal representatives.
17. ASSIGNMENT. Except as expressly provided herein, neither
this Agreement nor any rights, benefits or obligations hereunder may be
assigned by the Company or the Executive without the prior written consent of
the other.
18. CAPTIONS AND TITLES. Captions and titles have been used in
this Agreement only for convenience, and will not affect the interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement effective
as of the date and year first above-written.
SUN TELEVISION AND APPLIANCES, INC.
By: /s/ JAMES R. COPITZKY /s/ STEVEN A. MARTIN
------------------------------------ -----------------------------------
Steven A. Martin
Name: James R. Copitzky
----------------------------------
Title: President
---------------------------------
-9-
<PAGE> 1
SUN TELEVISION AND APPLIANCES, INC.
STOCK OPTION AGREEMENT
Sun Television and Appliances, Inc. (the "Company") hereby grants,
effective this 22nd day of May, 1996 (the "effective date") to Steven A. Martin
(the "Optionee") an option to purchase 150,000 shares of its common stock, $.01
par value (the "Option Shares"), at a price of Four Dollars and Fifty Cents
($4.50) per share pursuant to the Company's 1991 Stock Option Plan (the "Plan"):
1. RELATIONSHIP TO THE PLAN. This option is granted pursuant to the
Plan, and is in all respects subject to the terms and provisions of the Plan.
The Optionee acknowledges receipt of a copy of the Plan and accepts this option
subject to all the terms and provisions of the Plan (including without
limitation provisions relating to non-transferability, termination of the
option, adjustment of the number of shares subject to the option, and the
exercise price of the option). The Optionee further agrees that all decisions
and interpretations made by the Stock Option Committee (the "Committee"), as
established under the Plan, and as from time to time constituted, shall be
final, binding, and conclusive upon the Optionee and his or her heirs.
2. TIME OF EXERCISE. This option shall vest and become exercisable,
cumulatively, for 1/48 of the Option Shares at the end of each month following
the effective date. In the event that more than 50% of the voting stock of the
Company or all or substantially all of the assets of the Company are acquired,
in a transaction not involving a merger or consolidation contemplated by
paragraph 11 of the Plan, by a person who is not at the date of this Agreement
an affiliate of the Company, the Company will give the Optionee written notice
thereof at least 30 days prior to the effective date of such acquisition and
the Optionee will have the right, within such 30-day period, to exercise the
Option for 100% of the Option Shares. This right is in addition to the right
provided for in paragraph 11 of the Plan in the event of the merger or
consolidation of the Company. In the event the Optionee's employment with the
Company is terminated without cause under Section 9 of the Employment Agreement
dated as of May 22, 1996, between the Optionee and the Company, the Optionee
shall thereupon have the right to exercise this option for 50% of the Option
Shares as to which that right remains unvested, in addition to such right to
purchase as has theretofore vested. This option shall terminate at the close of
business on the tenth anniversary of the effective date.
3. METHODS OF EXERCISE. This option shall be exercisable by delivery
to the Company of written notice of exercise in the form adopted by the
Committee which specifies the number of shares to be purchased and the election
of the method of payment of therefor, which shall be one of the methods of
payment specified in paragraph 12 of the Plan and, if otherwise than payment in
full, in cash, shall be subject to the consent of the Committee. Upon receipt
of payment for the shares to be purchased pursuant to the option or, if
applicable, the shares to be delivered pursuant to the election of an
alternative payment method, the Company will deliver or cause to be delivered
to the Optionee, to any other person exercising this option, or to a broker or
dealer if the method of payment specified in clause (v) of paragraph 12 of the
Plan is elected, a
<PAGE> 2
certificate or certificates for the number of shares with respect to which this
option is being exercised, registered in the name of the Optionee or other
person exercising the option, or if appropriate, in the name of such broker or
dealer; provided, however, that if any law or regulation or order of the
Securities and Exchange Commission or other body having jurisdiction in the
premises shall require the Company or Optionee (or other person exercising this
option) to take any action in connection with the shares then being purchased,
the delivery of the certificate or certificates for such shares may be delayed
for the period necessary to take and complete such action.
4. RESTRICTIONS ON RESALE. At the time of any exercise of the
option, the Optionee (or other person exercising this option) will execute such
further agreements as the Company may require to acknowledge the Optionee's
(or such other person's) familiarity with restrictions, if any, on the resale
of the Option Shares under applicable securities laws. The Optionee acknowledges
that certain restrictions on resale of the shares may be applicable if the
Optionee is an "affiliate," as that term is used in Rule 144 promulgated by
the Securities and Exchange Commission.
5. GENERAL. This Agreement shall be construed as a
contract under the laws of the State of Ohio. It may be executed in several
counterparts, all of which shall constitute one Agreement. It shall bind and,
subject to the terms of the Plan, benefit the parties and their respective
successors, assigns, and legal representatives.
IN WITNESS WHEREOF, the Company and the Optionee have caused this
Agreement to be executed as of the date first above written.
SUN TELEVISION AND APPLIANCES, INC.
By: /s/ JAMES R. COPITZKY
-----------------------------------
Its: President
OPTIONEE:
/s/ STEVEN A. MARTIN
-----------------------------------
- 2 -
<PAGE> 1
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (the "Agreement") is entered into as of
the 22nd day of May, 1996, by and between SUN TELEVISION AND APPLIANCES, INC.,
an Ohio corporation (the "Company") and Steven A. Martin (the "Executive").
RECITAL
The Company has agreed to employ the Executive as its Executive Vice
President and Chief Financial Officer and Treasurer and the Executive has
accepted such employment pursuant to an Employment Agreement dated as of May
22, 1996. Pursuant to that agreement, the Company has agreed to issue shares of
its common stock to the Executive, as provided in this Agreement.
AGREEMENT
1. GRANT OF RESTRICTED STOCK. The Company hereby agrees to issue to the
Executive sixteen thousand six hundred and sixty-seven (16,667) shares
of the Company's common stock, $.01 par value (the "Restricted Shares"),
subject to the terms and conditions set forth in this Agreement. The
Company shall cause certificates for the Restricted Shares to be issued
in the Executive's name as provided in Section 2 of this Agreement, and
the Executive shall thereupon be a shareholder of the Company with
respect to all of the Restricted Shares represented by each such
certificate and shall have all of the rights of a shareholder with
respect to the Restricted Shares, including the right to vote the
Restricted Shares and to receive all dividends and other distributions
paid with respect to the Restricted Shares; provided, however, that the
Restricted Shares shall be subject to the restrictions hereinafter
described. Certificates representing Restricted Shares shall be
imprinted, in conspicuous type, with the following legend:
THE SALE, EXCHANGE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND
ANY INTEREST THEREIN IS RESTRICTED BY AN AGREEMENT DATED AS OF
MAY 22, 1996 BETWEEN THE CORPORATION AND THE HOLDER, A COPY OF
WHICH IS LOCATED AT THE OFFICE OF THE SECRETARY OF THE
CORPORATION. THE SECRETARY OF THE CORPORATION WILL MAIL WITHOUT
CHARGE TO A SHAREHOLDER, WITHIN FIVE DAYS AFTER WRITTEN REQUEST
THEREFOR FROM SUCH SHAREHOLDER, A COPY OF SUCH AGREEMENT.
Delivery of the certificates for Restricted Shares shall occur as soon
as practicable.
2. RESTRICTIONS. The Executive shall not sell, exchange, transfer, pledge,
hypothecate or otherwise dispose of any legal or beneficial ownership
interest in the Restricted Shares
<PAGE> 2
otherwise than in the amounts and after the dates (each a
"Vesting Date") determined as follows: The Restricted Shares
shall become vested at the rate of 1/48 of such shares at the end
of each month following the effective date.
If the Executive is continuously employed by the Company on a full-time
basis from the date of this Agreement through and including the last
Vesting Date, or if the Executive's employment is terminated at any time
prior to the last Vesting Date, unless such termination is either by the
Company for cause or voluntarily by Executive, then all of the
Restricted Shares shall vest and Executive, Executive's personal
representative or the person or persons to whom his rights pass by will
or the laws of descent and distribution may sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of the Restricted Shares
without reference to the restrictions set forth in this Section (but
subject, to the extent then applicable, to the restrictions set forth in
Section 4) and shall be entitled to the reissuance of a stock
certificate without the legend referred to in Section 1. If the
Company's full-time employment of Executive should be terminated at any
time prior to any Vesting Date either by the Company for Cause or
voluntarily by Executive, then all of the Restricted Shares not vested
prior to that Vesting Date shall be forfeited by the Executive and the
certificate or certificates for such unvested Restricted Shares shall be
delivered to the Company by the Executive for cancellation. As used
herein, "cause" shall have the meaning ascribed to that term in Section
7 of the Employment Agreement.
3. REORGANIZATION OR CHANGE IN CONTROL.
(a) If shares of common stock of the Company should, as a result of a stock
split, stock dividend, combination of shares or any other change, or
exchange for other securities, by reclassification, reorganization,
merger, consolidation, recapitalization or otherwise, be increased or
decreased or changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another
corporation, the number of Restricted Shares shall be adjusted to
reflect such action on the same basis as other shares of common stock of
the Company then outstanding.
(b) If, as a result of one of the events set forth in paragraph (a) of this
Section 3, the Executive shall, as owner of the Restricted Shares, be
entitled to new or additional or different shares of stock or
securities, the certificate or certificates therefor, or other evidences
of such new or additional or different shares or securities, shall be
imprinted with the legends set forth in Sections 1 and 4, and all the
provisions of this Agreement shall be applicable to such new or
additional or different shares or securities to the extent applicable to
the Restricted Shares.
(c) In the event of a "Change in Control" (as defined in Section 8 of the
Employment Agreement), the restrictions described in Section 2 shall
terminate and the Restricted Shares shall be freely transferrable by the
Executive upon such Change in Control (but subject, to the extent then
applicable, to the restrictions set forth in Section 4).
- 2 -
<PAGE> 3
4. SECURITIES LAW COMPLIANCE. The Executive understands that the
Restricted Shares have not been registered under the Securities Act of
1933, as amended (the "Act") and are, therefore, "restricted
securities" as that term is defined in Rule 144 of the Securities and
Exchange Commission ("SEC"). The Executive further understands that,
regardless of the termination of the Restricted Period and the vesting
provisions set forth in Section 2, he may not sell or otherwise dispose
of the Restricted Shares unless they are registered under the Act and
any applicable state securities law or an exemption from such
registration is available. The Executive therefore agrees that the
certificate or certificates for the Restricted Shares delivered to him
pursuant to this Agreement shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
UNLESS THEY ARE SO REGISTERED OR UNLESS, IN THE OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION, AN EXEMPTION FROM THE REQUIREMENT FOR
SUCH REGISTRATION IS AVAILABLE.
The Executive further understands that, regardless of the status of the
Shares as "Restricted Securities," restrictions on resale of the Shares
may be applicable if he is an "affiliate" of the Company, as that term
is used in Rule 144. The Executive agrees that he will advise the
Secretary of the Company prior to any sale or other transfer of the
Restricted Shares.
5. WITHHOLDING TAXES. The Company shall have the right to require the
Executive to remit to the Company, or to withhold from other amounts
payable to the Executive, as compensation or otherwise, an amount
sufficient to satisfy all federal, state and local withholding tax
requirements.
6. NO CONTRACT OF EMPLOYMENT. Nothing in this Agreement shall confer on the
Executive any right to continue in the service of the Company or reduce,
enlarge or modify the employment relationship between the Company and
the Executive. The Restricted Shares and the Vesting Schedule shall not
be affected by any change of duties or position as long as the Executive
continues to be employed on a full-time basis by the Company.
7. NOTICES. All notices required pursuant to this Agreement shall be in
writing and shall be personally delivered or sent by registered or
certified mail, postage prepaid, (a) if to the Company, at its principal
office, Attn: Chairman of the Board; or (b) if to the Executive, to the
Executive's last address on the personnel records of the Company.
8. GENERAL. This Agreement shall be construed as a contract under the laws
of the State of Ohio, without reference to its choice of law rules. It
may be executed in several counterparts, all of which shall constitute
one agreement. It shall bind and benefit the parties and their
- 3 -
<PAGE> 4
respective successors, assigns, heirs and legal representatives. No
assignment of this Agreement, in whole or in part, may be made by any
party hereto without the prior written consent of all of the other
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SUN TELEVISION AND APPLIANCES, INC.
By: /s/ JAMES R. COPITZKY
---------------------------------------
Name: James R. Copitzky
-------------------------------------
Its: President
--------------------------------------
EXECUTIVE:
/s/ STEVEN A. MARTIN
---------------------------------------
Steven A. Martin
-4-
<PAGE> 1
EXHIBIT 11
SUN TELEVISION AND APPLIANCES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the quarters ended August 31, 1996 and August 26, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the
Quarters Ended
------------------------
August 31, August 26,
1996 1995
---------- ---------
<S> <C> <C>
Net (loss) income $ (2,561) $ 2,256
======== ========
Common shares outstanding:
Weighted average 17,406 17,278
Dilutive effect of stock options 47 163
-------- --------
Weighted average shares used to calculate
primary earnings per share 17,453 17,441
Add net additional dilutive effect of stock
options using period-end market price --- ---
-------- --------
Weighted average shares used to calculate
fully diluted earnings per share 17,453 17,441
======== ========
Net (loss) income per share
Assuming primary dilution $ (.15) $ .13
======== ========
Assuming full dilution $ (.15) $ .13
======== ========
</TABLE>
<PAGE> 2
EXHIBIT 11
SUN TELEVISION AND APPLIANCES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the six months ended August 31, 1996 and August 26, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the
Six Months Ended
-------------------------
August 31, August 26,
1996 1995
---------- ----------
<S> <C> <C>
Net (loss) income $ (7,149) $ 2,466
======== ========
Common shares outstanding:
Weighted average 17,385 17,278
Dilutive effect of stock options 59 184
-------- --------
Weighted average shares used to calculate
primary earnings per share 17,444 17,462
Add net additional dilutive effect of stock
options using period-end market price --- ---
-------- --------
Weighted average shares used to calculate
fully diluted earnings per share 17,444 17,462
======== ========
Net (loss) income per share
Assuming primary dilution $ (.41) $ .14
======== ========
Assuming full dilution $ (.41) $ .14
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Sun
Television and Appliances, Inc.'s quarter report on Form 10-Q for the six months
ended August 31, 1996.
</LEGEND>
<CIK> 0000874690
<NAME> SUN TELEVISION AND APPLIANCES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> MAR-03-1996
<PERIOD-END> AUG-31-1996
<CASH> 7,140
<SECURITIES> 0
<RECEIVABLES> 16,863<F1>
<ALLOWANCES> 0
<INVENTORY> 149,137
<CURRENT-ASSETS> 192,353
<PP&E> 103,626
<DEPRECIATION> 0
<TOTAL-ASSETS> 318,256
<CURRENT-LIABILITIES> 137,906
<BONDS> 0
0
0
<COMMON> 174
<OTHER-SE> 146,039
<TOTAL-LIABILITY-AND-EQUITY> 318,256
<SALES> 304,048
<TOTAL-REVENUES> 304,048
<CGS> 227,939
<TOTAL-COSTS> 227,939
<OTHER-EXPENSES> 84,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,193)
<INCOME-PRETAX> (10,761)
<INCOME-TAX> (4,808)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,196)<F2>
<CHANGES> 0
<NET-INCOME> (7,149)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
<FN>
<F1>Trade accounts receivable net allowance for doubtful accounts of $400,000 and
$325,000.
<F2>Represents the after tax effect of a $2,000,000 one-time restructure charge.
</FN>
</TABLE>
