-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E4tbQ3rwybMFwHD5v2cGEKIoqmafF8RAh63jvXeQJ4iR59d0jH4GYHrDJc7gCNOV 4dzrqpHHj1KU921DTMJ+Og== 0000950149-99-000966.txt : 19990517 0000950149-99-000966.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950149-99-000966 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOOD GUYS INC CENTRAL INDEX KEY: 0000785931 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 942366177 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14134 FILM NUMBER: 99623457 BUSINESS ADDRESS: STREET 1: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 BUSINESS PHONE: 4156155000 MAIL ADDRESS: STREET 2: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDED MARCH 31, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 or [ ] TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-14134 THE GOOD GUYS, INC. (exact name of registrant as specified in its charter) Delaware 94-2366177 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 7000 Marina Blvd. Brisbane, CA 94005-1840 (Address of principal executive offices) (650) 615-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required 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. [ X ] Yes [ ] No CLASS OUTSTANDING AS OF April 30, 1999 ------------ -------------------------------- Common Stock 14,532,350 2 THE GOOD GUYS, INC. INDEX
Page ---- PART I: FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets - March 31, 1999 and September 30, 1998 3 Consolidated Statements of Operations - Three and six month periods ended March 31, 1999 and 1998 4 Consolidated Statement of Changes in Shareholders' Equity - Six month period ended March 31, 1999 5 Consolidated Statements of Cash Flows - Six month periods ended March 31, 1999 and 1998 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II: OTHER INFORMATION Item 1. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14
2 3 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
March 31, September 30, 1999 1998 -------- ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,124 $ 3,051 Accounts receivable, net 26,184 26,653 Merchandise inventories 147,596 135,072 Prepaid expenses 6,530 6,445 -------- -------- Total current assets 183,434 171,221 PROPERTY AND EQUIPMENT: Leasehold improvements 68,483 63,818 Furniture, fixtures and equipment 67,334 59,284 Construction in progress 8,613 12,684 -------- -------- Total property and equipment 144,430 135,786 Less accumulated depreciation and amortization 67,978 63,570 -------- -------- Property and equipment, net 76,452 72,216 OTHER ASSETS 7,283 7,421 -------- -------- Total Assets $267,169 $250,858 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 92,205 $ 96,517 Accrued expenses and other liabilities: Accrued payroll 10,757 10,630 Sales taxes payable 5,806 5,940 Other 21,359 25,764 -------- -------- Total current liabilities 130,127 138,851 LOAN PAYABLE, NONCURRENT 29,305 -- SHAREHOLDERS' EQUITY: Preferred stock, $.001 par value: Authorized - 2,000,000 shares Issued -none -- -- Capital stock, $.001 par value Authorized -40,000,000 shares Issued and outstanding -14,532,350 and 14,250,218 shares, respectively 15 14 Additional paid-in-capital 66,475 65,152 Retained earnings 41,247 46,841 -------- -------- Total shareholders' equity 107,737 112,007 -------- -------- Total liabilities and Shareholders' Equity $267,169 $250,858 ======== ========
The accompanying notes are an integral part of these financial statements. 3 4 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three Months Ended Six Months Ended March 31, March 31, ------------------------- ------------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Net sales $ 219,099 $ 209,062 $ 513,199 $ 499,365 Cost of sales 167,156 156,730 389,806 375,412 --------- --------- --------- --------- Gross profit 51,943 52,332 123,393 123,953 Selling, general and administrative expenses 59,475 55,243 127,733 122,810 --------- --------- --------- --------- Income (loss) from operations (7,532) (2,911) (4,340) 1,143 Interest expense, net 666 242 1,254 495 --------- --------- --------- --------- Income (loss) before income taxes (8,198) (3,153) (5,594) 648 Income tax expense (benefit) (952) (1,159) 0 239 --------- --------- --------- --------- Net income (loss) $ (7,246) $ (1,994) $ (5,594) $ 409 ========= ========= ========= ========= Net income (loss) per common share Basic $ (0.50) $ (.14) $ (0.39) $ .03 ========= ========= ========= ========= Diluted $ (0.50) $ (.14) $ (0.39) $ .03 ========= ========= ========= ========= Weighted average shares Basic 14,508 13,995 14,378 13,856 ========= ========= ========= ========= Diluted 14,508 13,995 14,378 13,889 ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. 4 5 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999 (In thousands except share data) (Unaudited)
Common Stock Additional ----------------------------- Paid-in Retained Shares Amount Capital Earnings Total ----------- ----------- ----------- ----------- ----------- Balance at September 30, 1998 14,250,218 $ 14 $ 65,152 $ 46,841 $ 112,007 Issuance of common stock 282,132 1 1,323 1,324 Net loss for the six-month period ended March 31, 1999 (5,594) (5,594) ----------- ----------- ----------- ----------- ----------- Balance at March 31, 1999 14,532,350 $ 15 $ 66,475 $ 41,247 $ 107,737 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 5 6 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended March 31, ----------------------- 1999 1998 -------- -------- Cash Flows from Operating Activities: Net income (loss) $ (5,594) $ 409 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,209 5,258 Early retirement of assets 702 -- Changes in assets and liabilities: Accounts receivable 469 (7,580) Income taxes receivable 6,176 Merchandise inventories (12,524) (27,666) Prepaid expenses and other assets 53 1,069 Accounts payable (4,312) 10,759 Accrued expenses and other liabilities (4,412) 3,914 -------- -------- Net cash used in operating activities (19,409) (7,661) -------- -------- Cash Flows from Investing Activities: Capital expenditures (11,147) (7,106) -------- -------- Net cash used in investing activities (11,147) (7,106) -------- -------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt 29,305 -- Proceeds from issuance of common stock 1,324 2,426 Repurchase and retirement of common stock -- (1,382) -------- -------- Net cash provided by financing activities 30,629 1,044 -------- -------- Net increase (decrease) in cash and cash equivalents 73 (13,723) Cash and cash equivalents at beginning of period 3,051 18,951 -------- -------- Cash and cash equivalents at end of the period $ 3,124 $ 5,228 ======== ========
The accompanying notes are an integral part of these financial statements. 6 7 THE GOOD GUYS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles and reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information contained therein. The consolidated financial statements should be read in conjunction with the financial statements, notes and supplementary data included and incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998. 2. Net income per common share has been computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires a dual presentation of basic and diluted earnings per share (EPS). Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. No potential common shares were included in the computation of diluted per-share amounts for the periods presented, during which a loss from operations was recorded, as such potential shares would be anti-dilutive. 3. In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," was issued, which defines derivatives, requires all derivatives be carried at fair value, and provides for hedging accounting when certain conditions are met. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Although the Company has not fully assessed the implications of this new statement, the Company does not believe adoption of this statement will have a material impact on the Company's financial statements. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS OUTLOOK AND RISK FACTORS The trend analyses and other non-historical information contained in Management's Discussion and Analysis of Financial Condition and Results of Operations are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor provisions of those Sections. Such forward looking statements include, without limitation, statements concerning the Company's future net sales, net earnings and other operating results. The Company's actual results could differ materially from those discussed in the forward looking statements, due to a number of factors, including but not limited to success in finding a new chief executive officer, increases in promotional activities of the Company's competitors, changes in consumer buying attitudes, the presence or absence of new products or product features in the Company's merchandise categories, changes in vendor support, changes in the Company's merchandise sales mix, general economic conditions, risks associated with Year 2000 issues, and other factors referred to in the Company's fiscal 1998 Annual Report on Form 10-K under "Information Regarding Forward Looking Statements". RESULTS OF OPERATIONS Net sales for the quarter ended March 31, 1999 were $219.1 million, an increase of 5% from sales of $209.1 million last year. During the second quarter of fiscal 1999, comparable store sales increased 1% from the same period last year. During the quarter, sales of new digital technologies --- such as DVD, digital television, digital camcorders and audio components --- were relatively strong, but were partially offset by decreased same store dollar sales in older technologies, such as VCR, home office, portable stereo, stereo systems, and traditional photographic equipment. Also negatively impacting same store sales was a decline in the sale of Premier Performance Guarantee contracts from 5.1% of sales during the second quarter of fiscal 1998 to 4.7% this year. For the six months ended March 31, 1999, sales increased by 3% to $513.2 million compared to $499.4 million for the six months ended March 31, 1998. Comparable store sales for the first six months of fiscal 1999 were level with the prior year. The increase in net sales was primarily attributable to two new stores that opened during the first quarter of fiscal 1999 and the remodeling of two existing stores into the Audio/Video Exposition format, partially offset by the impact of temporary store closings for remodel into the Expo format during the period. During the first half of 1999, sales of new digital technologies --- such as DVD, audio components, camcorders and digital television --- were strong, but were partially offset by dollar same store sales decreases in VCR, home office, portable audio, traditional photographic equipment and stereo systems. Also negatively impacting same store sales was a decline in the sale of Premier Performance Guarantee contracts from 5.0% of sales during the first six months of fiscal 1998 to 4.5% this year. The Company's gross profit as a percentage of sales was 23.7% during the second fiscal quarter of 1999, versus 25.0% last year. The decrease in the gross profit percentage resulted primarily from more promotional pricing, lower year-over-year sales of Premier Performance Guarantee contracts, higher credit card promotional expenses, and higher inventory shrinkage. For the first half of fiscal 1999, the Company's gross profit as a percentage of sales was 24.0%, versus 24.8% last year. The decreased gross profit percentage in 1999 was primarily the result of lower year-over-year sales of Premier Performance Guarantee contracts, higher credit card promotional expenses, and higher inventory shrinkage. 8 9 Selling, general and administrative expense increased by $4.2 million and $4.9 in the second quarter and first six months of fiscal 1999, respectively, compared to the corresponding periods in fiscal 1998. Selling, general and administrative expenses were 27.1% and 24.9% of net sales in the second quarter and first six months of fiscal 1999, respectively, compared to 26.4% and 24.6% of net sales in the corresponding periods of fiscal 1998. The increase in selling, general and administrative expenses is primarily due to more stores in operation and the pre-opening costs relating to the Company's Audio/Video Exposition remodeling program, partially offset by lower net advertising expenses. Interest expense increased by $0.4 million and $0.8 million in the second quarter and first six months of fiscal 1999, respectively, compared to the corresponding periods in fiscal 1998. This increase was due to higher levels of borrowings in the current fiscal year, primarily to finance the build-out of new and remodeled stores, which the Company expects will continue for the balance of the year. The Company's effective tax benefit was 11.6% and 0% for the second quarter and first six months of fiscal 1999, respectively, compared to a tax benefit of 36.8% and tax rate of 36.9% for the corresponding periods in fiscal 1998. The change in the effective tax rate for the second quarter of 1999 is due to the fact that the Company has now used all of the loss carrybacks available from previous fiscal years. As a result of the factors discussed above, the net loss in the second quarter of fiscal 1999 was $7.2 million, compared to $2.0 million in the same period in fiscal 1998; and diluted earnings per share were $(0.50) and $(0.14), respectively. The net loss for the first six months of fiscal 1999 was $5.6 million, compared to net income of $0.4 million in the same period in fiscal 1998; and the diluted loss/earnings per share was $(0.39) and $0.03, respectively. The Company continues to focus on quality execution to enhance customer satisfaction and competitive differentiation. Over the past quarter, it has also taken steps to lower its store operating cost structure, enhance its advertising tactics, refine the merchandising and presentation of existing product lines, and introduce new product lines and technologies into its mix. By focusing on these and other key initiatives, the Company expects to make progress towards attaining profitability. However, the return to profitability is contingent on many factors, including but not limited to the development of consumer acceptance of new technologies, consumer demand for existing technologies, the presence or absence of new features on existing merchandise, and economic conditions in the regions in which our stores are located. Liquidity and Capital Resources At March 31, 1999, the Company had working capital of $53.3 million, and the Company's cash and cash equivalents were $3.1 million, similar to September 30, 1998. Net cash used in operating activities was $19.4 million for the six months ended March 31, 1999, compared to $7.7 million for the six months ended March 31, 1998. The decrease in net cash provided by operating activities for the first six months of fiscal 1999 was primarily due to increased inventory levels from September 30, 1999 and decreased net income. 9 10 Net cash used in investing activities, which primarily consists of expenditures for stores, distribution facilities and administrative property and equipment, was $11.1 million for the six months ended March 31, 1999, as compared to $7.1 million for the six months ended March 31, 1998. During the first quarter of fiscal 1999, the Company opened two Audio/Video Exposition-Enhanced WOW! stores, one of which replaced an existing store. The Company also opened two new stores in the Audio/Video Exposition format during that quarter. At March 31, 1999, the Company maintained a revolving credit agreement which allowed borrowings of up to $75 million. Effective April 29, 1999, the revolving credit agreement limit was raised to allow borrowings up to $82.5 million. The agreement requires maintenance of certain financial loan covenants, including minimum tangible net worth, restrictions on capital expenditures and prohibits payment of cash dividends, which, if violated, could be used as a basis for termination of the agreement. The revolving credit is secured by the Company's assets. For the six months ended March 31, 1999, the Company was in compliance with all covenants under the credit agreement. The revolving credit also includes a standby letter of credit facility. At March 31, 1999, the Company had borrowings of $29.3 million outstanding under the revolving credit agreement and $16 million of the credit line is reserved for outstanding letters of credit. The Company expects to fund its working capital requirements and expansion plans, including remodels and relocations, with a combination of cash flows from operations, normal trade credit, and other financing arrangements. Year 2000 Matters As used by the Company, "Year 2000 Compliance" means that the Operating Systems (OS), Data Base Systems, Application or Business Systems have been reviewed to confirm that they store, process (including sorting and performing mathematical operations), input, and output data containing date information correctly, regardless of whether the data contains dates before, on or after January 1, 2000. The Company has identified all significant applications that will require modification to ensure Year 2000 Compliance. Internal and external resources are being used to make the required modifications and test Year 2000 Compliance. The Company anticipates that all testing will be concluded on or about September 30, 1999. In addition, the Company is seeking assurances from vendors, suppliers and other third parties with whom it does significant business to determine their Year 2000 Compliance readiness and the extent to which the Company is vulnerable to any third party Year 2000 issues. Currently, the Company is unable to assess the likelihood that it will experience significant operational problems due to the unresolved Year 2000 issues of third parties who do business with the Company. There can be no assurance that other entities will achieve timely Year 2000 compliance. If they do not, Year 2000 problems could have a material impact on the Company's operations. Similarly, there can be no assurance that the Company can timely mitigate its risks related to a supplier's failure to resolve its Year 2000 issues. If such mitigation is not achievable, Year 2000 problems could have a material impact on the Company's operations. The Company estimates that the total cost of achieving Year 2000 compliance will be in the range of $3,000,000 to $3,500,000, of which approximately $2.0 million has been incurred through March 31, 1999. These costs and the date on which the Company plans to complete the Year 2000 modifications and testing 10 11 processes are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantees that these estimates will be achieved and actual results could differ from those plans. The Company, however, does not anticipate that these costs will be material to its financial position or results of operations in any given year. Quantitative and Qualitative Disclosures About Market Risk The Company believes that because of competition among manufacturers and technological changes in consumer electronics industry, inflation has not had a material effect on net sales and cost of sales. 11 12 THE GOOD GUYS, INC. PART II: OTHER INFORMATION Item 1. Legal Proceedings On or about July 22, 1996, Jo Quattrini dba Sand Canyon Cellular and numerous other individuals and entities filed a complaint against the Company and 20 other named defendants entitled Quattrini, et al. v. Pana-Pacific Corp., et al., Orange County Superior Court Case no. 766649. Plaintiffs, who are small agents or subagents of the cellular service providers offering cellular telephone products and service in the Orange County area, alleged a conspiracy to sell cellular telephone equipment below cost with the intent to drive plaintiffs out of business. This case was settled in April 1999 for an amount that was not material to the financial condition, results of operations or liquidity. The Company was named in July 1998 as defendants in an action entitled Cavnar, et al. v. National Semiconductor Corp., et al., no. 996297, San Francisco Superior Court, along with many other defendants. Plaintiffs' complaint is styled as a class action and the primary allegation involving the Company is that the Company's advertisements have misrepresented the amount of random access memory in certain computers that is available for programming and processing applications. The Company, along with several of the other retailers defendants, filed demurrers to several of the Plaintiffs' causes of action, with were granted without leave to amend. Two claims remain. The Company believes it has meritorious claims for indemnification from the computer manufacturers from which it has purchased personal computers and intends to defend the action and pursue its indemnification claims vigorously. However, the Company, along with other defendants, has engaged in extensive settlement negotiations in order to resolve the litigation. A draft settlement agreement has been prepared, but has not yet been executed by the parties and any final settlement would be subject to court approval. If the suit were to be settled on the basis set forth in the draft settlement agreement, the settlement would not have a material effect on the Company's financial condition, results of operations or liquidity. On January 13, 1999, the Company was named as a defendant in an action entitled Johnson v. Circuit City Stores, et al., filed in Contra Costa County Superior Court. The primary allegation is that a number of consumer electronics retailers have sold computer hardware and software products that allegedly will not properly process dates after December 31, 1999. Plaintiff claims that the actions of the defendants violate the prohibitions in the California Business and Professions Code on unfair business practices and false and misleading advertising, and seeks injunctive relief, restitution, and attorney's fees. The case is at an early stage, discovery has not yet commenced, and it is too early to be able to express any opinion as to the likely outcome of the matter. The Company, however, believes it has meritorious defenses to the claims alleged in the lawsuit and intends to defend the action vigorously. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders of the Company held on February 10, 1999, 13,015,793 shares were present in person or by proxy. The matters voted upon and the results of the voting are as follows: 12 13 1. The election of directors.
Votes Votes Name For Withheld ---- ---------- ------- Stanley R. Baker 12,598,702 531,961 Robert A. Gunst 12,504,963 625,700 Russell M. Solomon 12,595,157 535,506 W. Howard Lester 12,594,805 535,858 John E. Martin 12,594,513 536,150 Horst H. Schulze 12,584,544 546,119
2. The amendment to the Company's Employee Stock Purchase Plan to increase the number of shares of Common Stock reserved for issuance under the plan by 700,000: 11,030,726 votes in favor, 1,506,308 votes against and 478,759 abstentions. 3. The ratification of selection of Deloitte & Touche LLP as the independent auditors of the Company: 12,899,169 votes in favor, 75,468 votes against and 41,156 abstentions. Item 5. Other Information In connection with the resignation of Robert A. Gunst as the Chief Executive Officer of the Company, effective as of June 30, 1999, the Company entered into a severance agreement with Mr. Gunst containing the terms set forth in Exhibit 10.13 to this report. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10.11 Amendment to Loan Agreement, dated as of March 16, 1999, between Wells Fargo and the Company. 10.12 Amendment to Loan Agreement, dated as of April 29,1999, between Wells Fargo and the Company. 10.13 Agreement between Robert A. Gunst and the Company, dated as of April 14, 1999. 27.1 Financial Data Schedule b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 1999, but reports on Form 8-K were filed on April 23,1999 and May 5, 1999 relating to the resignations of officers of the Company. 13 14 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. THE GOOD GUYS, INC. Date: May 13, 1999 By: /s/ Dennis C. Carroll --------------------------- ------------------------------------ Dennis C. Carroll Sr. VP, Finance & Administration, Chief Financial Officer, Secretary (Principal Financial Officer) Date: May 13, 1999 By: /s/ Vance Schram --------------------------- ------------------------------------ Vance Schram Controller (Principal Accounting Officer) 14 15 EXHIBIT INDEX
Exhibit No. Description - ---------- ----------- 10.11 Third Amendment to Loan Agreement. 10.12 Fourth Amendment To Loan Agreement. 10.13 Employment Resignation Agreement. 27.1 Financial Data Schedule.
EX-10.11 2 THIRD AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10.11 THIRD AMENDMENT TO LOAN AGREEMENT THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Third Amendment") is entered into as of March 16, 1999, by and among THE GOOD GUYS - CALIFORNIA, INC., a California corporation ("Borrower"), each of the financial institutions from time to time listed on Schedule I attached to the Loan Agreement defined below, as amended from time to time (collectively, the "Lenders"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo"), as agent for the Lenders (in such capacity, the "Agent"). RECITALS -------- WHEREAS, Borrower is currently indebted to the Lenders pursuant to the terms and conditions of that certain Loan Agreement among Borrower, the Lenders and the Agent dated as of September 29, 1997, as amended from time to time (the "Loan Agreement"). WHEREAS, the Lenders, the Agent and Borrower have agreed to certain changes in the terms and conditions set forth in the Loan Agreement and have agreed to amend the Loan Agreement to reflect such changes. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendment to Section 2.2(b). The second sentence of Section 2.2(b) of the Loan Agreement setting forth the maximum amount of Letter of Credit Obligations is amended in its entirety to read as follows: Except in the Agent's and the Required Lender's discretion, the amount of all Letter of Credit Obligations shall not at any time exceed $20,000,000.00. 2. Conditions Precedent. The effectiveness of this Third Amendment and the Agent's and Lenders' agreements set forth herein are subject to the satisfaction of each of the following conditions precedent on or before March 23, 1999: 1. Documentation. Borrower shall have delivered or caused to be delivered to the Agent, at Borrower's sole cost and expense the following, each of which shall be in form and substance satisfactory to the Agent: (1) Two (2) executed original counterparts of this Third Amendment; (2) executed counterparts of the Consent and Reaffirmation of Guarantor attached hereto in the form of Annex I; and 2 (3) such additional agreements, certificates, reports, approvals, instruments, documents, consents and/or reaffirmations as the Agent or any Lender may reasonably request. 2. Amendment Fee. Borrower shall have paid to the Agent, for the benefit of the Lenders, a non-refundable, fully earned amendment fee of $2,500. 3. Miscellaneous. Except as specifically provided herein, all terms and conditions of the Loan Agreement remain in full force and effect, without waiver or modification. All terms defined in the Loan Agreement shall have the same meaning when used in this Third Amendment. This Third Amendment and the Loan Agreement shall be read together, as one document. 4. Representations and Warranties. Borrower hereby remakes all representations and warranties contained in the Loan Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Third Amendment there exists no Default or Event of Default as defined in the Loan Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed as of the day and year first written above. THE GOOD GUYS - CALIFORNIA, INC. WELLS FARGO BANK, a California corporation NATIONAL ASSOCIATION, as Agent and Lender By: _______________________ By: _______________________________ Dale Foster Title: _______________________ Vice President 3 ANNEX I ------- CONSENT AND REAFFIRMATION OF GUARANTOR -------------------------------------- Reference is hereby made to the foregoing Third Amendment to Loan Agreement ("Third Amendment") dated as of March 16, 1999, by and among The Good Guys - California, Inc., a California corporation ("Borrower"), each of the financial institutions from time to time listed on Schedule I attached to the Loan Agreement described therein, as amended from time to time (collectively, the "Lenders"), and Wells Fargo Bank, National Association ("Wells Fargo"), as agent for the Lenders (in such capacity, the "Agent"). In order to induce the Agent and the Lenders to enter into the Third Amendment, the undersigned hereby consents to the execution, delivery and performance by Borrower, the Agent and the Lenders of the Third Amendment and all other documents, instruments and agreements now or hereafter executed in connection therewith (collectively, together with the Third Amendment, the "Third Amendment Documents"). In connection therewith, the undersigned (a) expressly and knowingly reaffirms its liability under the Continuing Guaranty dated as of September 29, 1997 (the "Guaranty") and any and all security agreements, pledge agreements, deeds of trust, mortgages and other collateral documents (collectively, together with the Guaranty, the "Third Party Documents"), heretofore executed and delivered by the undersigned from time to time in favor of the Agent, for the benefit of the Lenders, (b) expressly agrees to be and remain liable under the terms of such Third Party Documents for the obligations of Borrower to the Agent and the Lenders and (c) acknowledges that it has no defense, offset or counterclaim whatsoever against the Agent or the Lenders with respect to the Third Party Documents to which it is a party. The undersigned further agrees that the Third Party Documents to which it is a party shall remain in full force and effect and are hereby ratified and confirmed and shall guarantee payment and performance of, or continue to constitute collateral security for, as the case may be, of all of Borrower's obligations under the Loan Agreement and related Loan Documents, as any one or more of the same may be amended by the Third Amendment Documents. The undersigned acknowledges that (a) none of the Agent or the Lenders has any obligation to inform it of the particulars of any modification or amendment to the Loan Agreement or any other Loan Document executed in connection therewith, and (b) it has established satisfactory means by which Borrower keeps it informed with respect to any modification of or amendment to the Loan Agreement and related Loan Documents. 4 The undersigned further agrees that the execution of this Consent and Reaffirmation is not necessary for the continued validity and enforceability of the Third Party Documents to which it is a party, but is executed to induce the Agent and the Lenders to enter into the Third Amendment Documents. The undersigned further agrees that none of the Agent or the Lenders shall have any obligation to notify it of any actions or omissions to act with respect to its dealings with Borrower. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has caused this Consent and Reaffirmation to be executed as of March 16, 1999. THE GOOD GUYS, INC., a Delaware corporation By: _______________________________________ Title: _______________________________________ EX-10.12 3 FOURTH AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10.12 FOURTH AMENDMENT TO LOAN AGREEMENT THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "Fourth Amendment") is entered into as of April 29, 1999, by and among THE GOOD GUYS - CALIFORNIA, INC., a California corporation ("Borrower"), each of the financial institutions from time to time listed on Schedule 1 attached to the Loan Agreement defined below, as amended from time to time (collectively, the "Lenders"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, ("Wells Fargo"), as agent for the Lenders (in such capacity, the "Agent"). RECITALS WHEREAS, Borrower is currently indebted to the lenders pursuant to the terms and conditions of that certain Loan Agreement among Borrower, the Lenders and the Agent dated as of September 29, 1997, as amended from time to time (the "Loan Agreement"). WHEREAS, the Lenders, the Agent and Borrower have agreed to certain changes in the terms and conditions set forth in the Loan Agreement and have agreed to amend the Loan Agreement to reflect such changes. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: I. Amendment to Section 1.8. The definition of "Applicable Maximum Amount" set forth in Section 1.8 of the Loan Agreement is amended in its entirety to read as follows: "Applicable Maximum Amount" means (a) from April 29, 1999, through and including May 29, 1999, Eighty-Two Million Five Hundred Thousand Dollars ($82,500,000), and (b) at any other time, Seventy-Five Million Dollars ($75,000,000). II. Amendment to Section 2.1(c). Section 2.1(c) of the Loan Agreement is amended in its entirety to read as follows: (c) Overadvance Subfeature; Non-Compliance with Advance Limitations. (i) Each Lender hereby severally agrees, on a pro rata basis, to make Revolving Advances to Borrower from time to time for the period from April 29, 1999, through and including May 29, 1999, in excess of the amounts under the lending formula (each, an "Overadvance"), but nonetheless subject to the Applicable Maximum Amount. The aggregate principal 2 amount of such Overadvances shall not exceed, as of any date of determination during said period, Seven Million Five Hundred Thousand Dollars ($75,000,000.00). (ii) The foregoing shall be referred to herein as the "Overadvance Subfeature." Each Overadvance made by Lender under the Overadvance Subfeature shall be deemed a Revolving Advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such Revolvng Advances; provided, however, that (A) Overadvances under the Overadvance Subfeature shall not be subject to the lending formulas set forth in Section 2.1(a), and (B) the aggregate amount of all outstanding Overadvances under the Overadvance Subfeature shall be reserved under the Line of Credit and shall not be available for Revolving Advances thereunder. (iii) In the event that the outstanding amount of any component of the Revolving Advances, or the aggregate amount of the outstanding Revolving Advances and Letter of Credit Obligations, exceed the amounts available under the lending formulas, the sublimit for Overadvances set forth in Section 2.1 (c)(i), the sublimits for Letters of Credit set forth in Section 2.2(b) or the then Applicable Maximum Amount, as the case may be, such event shall not limit, waive or otherwise affect any rights of the Agent in that circumstances or on any future occasions and Borrower shall, upon demand by the Agent, which may be made at any time or from time to time, immediately repay to Lenders the entire amount of any such excess(es) for which payment is demanded. III. Exhibit B. Exhibit B (the Line of Credit Note) to the Loan Agreement is amended and restated in its entirety by Exhibit B attached hereto as Annex I. IV. Conditions Precedent. The effectiveness of this Fourth Amendment and the Agent's and Lenders' agreements set forth herein are subject to the satisfaction of each of the following conditions precedent on or before April 29, 1999: A. Documentation. Borrower shall have delivered or caused to be delivered to the Agent, at Borrower's sole cost and expense the following, each of which shall be in form and substance satisfactory to the Agent: 3 (a) Two (2) executed original counterparts of this Fourth Amendment; (b) executed counterparts of the Consent and Reaffirmation of Guarantor attached hereto in the form of Annex II; (c) unanimous written consent of the board of directors of Borrower authorizing Borrower to borrow, under the Loan Agreement, any amount not to exceed $82,500,000.00; (d) an Amended and Restated Line of Credit Note executed by Borrower in favor Wells Fargo substantially in the form of Annex I attached hereto; and (e) such additional agreements, certificates, reports, approvals, instruments, documents, consents and/or reaffirmations as the Agent or any Lender may reasonably request. B. Amendment Fee. Borrower shall have paid to the Agent, for the benefit of the Lenders, an amendment fee of $75,000; provided that upon extension of the Loan Agreement for a period of at least one year from the Line Maturity Date, $25,000 of said amendment fee shall be refunded to Borrower concurrently with the effectiveness of such extension of the Loan Agreement. V. Miscellaneous. Except as specifically provided herein, all terms and conditions of the Loan Agreement remain in full force and effect, without waiver or modification. All terms defined in the Loan Agreement shall have the same meaning when used in this Fourth Amendment. This Fourth Amendment and the Loan Agreement shall be read together, as one document. VI. Representations and Warranties. Borrower hereby remakes all representations and warranties contained in the Loan Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Fourth Amendment there exits no Default of Event of Default as defined in the Loan Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be executed as of the day and year first written above. 4 THE GOOD GUYS - CALIFORNIA, INC. WELLS FARGO BANK, a California corporation NATIONAL ASSOCIATION, as Agent and Lender By: By: ------------------------------- ------------------------------------- Dale Foster Vice President Title: ---------------------------- 5 ANNEX I AMENDED AND RESTATED LINE OF CREDIT NOTE $82,500,000 April 29, 1999 FOR VALUE RECEIVED, the undersigned, THE GOOD GUYS - CALIFORNIA, INC., a California corporation ("Borrower"), hereby promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Lender"), on the Line Maturity Date the principal sum of Eighty-Two Million Five Hundred Thousand Dollars ($82,500,000), or such lesser amount as shall equal the aggregate outstanding principal balance of all Revolving Advances made by Lender to Borrower pursuant to the Loan Agreement referred to below. This promissory note is one of the Line of Credit Notes referred to in, and subject to the terms of, that certain Loan Agreement among Borrower, Lender and the other financial institutions from time to time parties thereto (collectively, the "Lenders"), and Wells Fargo Bank, National Association, as agent for the Lenders, dated as of September 29, 1997 (as amended, modified or supplemented from time to time, the "Loan Agreement"). Capitalized terms used herein shall have the respective meanings assigned to them in the Loan Agreement. This promissory note amends and restates in its entirety that certain Line of Credit Note dated as of September 29, 1997 executed and delivered by Borrower to the order of Lender in the original principal amount of up to $75,000,000 (the "Prior Note"). Amounts outstanding and committed under the Prior Note shall, upon the effectiveness of this Note be deemed to be outstanding and committed hereunder and evidenced hereby, subject, however, to all terms and conditions hereunder and under the Loan Agreement. Borrower further promises to pay interest on the outstanding principal balance hereof at the interest rates, and payable on the dates, set forth in the Loan Agreement. All payments of principal and interest hereunder shall be made to Agent, at Agent's Office, for the account of Lender, in lawful money of the United States and in same day or immediately available funds. Lender is authorized, but not required, to record the date and amount of each Revolving Advance evidenced hereby, each conversion to a different interest rate and the length of each Fixed Rate Term, the date and amount of each payment of principal and interest hereunder, and the resulting unpaid principal balance hereof, in Lender's internal records, and any such recordation shall be prima facie evidence of the accuracy of the information so recorded; provided however, that Lender's failure to so record shall not limit or otherwise affect the obligations of Borrower hereunder and under the Loan Agreement to repay the principal hereof and interest hereon. 6 The Loan Agreement provides, among other things, for acceleration (which in certain cases shall be automatic) of the maturity hereof upon the occurrence of certain stated events, in each case without presentment, demand, protest of further notice of any kind, all of which are hereby expressly waived by Borrower. This promissory note is secured by certain collateral more specifically described in the Loan Agreement and the other Loan Documents. This promissory note shall be governed by and construed in accordance with the laws of the State of California. THE GOOD GUYS - CALIFORNIA, INC. a California corporation By: ------------------------------------- Title: ---------------------------------- 7 ANNEX II CONSENT AND REAFFIRMATION OF GUARANTOR Reference is hereby made to the foregoing Fourth Amendment to Loan Agreement ("Fourth Amendment") dated as of April 29, 1999, by and among The Good Guys - California, Inc., a California corporation ("Borrower"), each of the financial institutions from time to time listed on Schedule I attached to the Loan Agreement described therein, as amended from time to time (collectively, the "Lenders"), and Wells Fargo Bank, National Association ("Wells Fargo"), as agent for the Lenders (in such capacity, the "Agent"). In order to induce the Agent and the Lenders to enter into the Fourth Amendment, the undersigned hereby consents to the execution, delivery and performance by Borrower, the Agent and the Lenders of the Fourth Amendment and all other documents, instruments and agreements now or hereafter executed in connection therewith (collectively, together with the Fourth Amendment, the "Fourth Amendment Documents"). In connection therewith, the undersigned (a) expressly and knowingly reaffirms its liability under the Continuing Guaranty dated as of September 29, 1997 (the "Guaranty") and any and all security agreements, pledge agreements, deeds of trust, mortgages and other collateral documents (collectively, together with the Guaranty, the "Third Party Documents"), heretofore executed and delivered by the undersigned from time to time in favor of the Agent, for the benefit of the Lenders, (b) expressly agrees to be and remain liable under the terms of such Third Party Documents for the obligations of Borrower to the Agent and the Lenders and (c) acknowledges that it has no defense, offset or counterclaim whatsoever against the Agent or the Lenders with respect to the Third Party Documents to which it is a party. The undersigned further agrees that the Third Party Documents to which it is a party shall remain in full force and effect and are hereby ratified and confirmed and shall guarantee payment and performance of, or continue to constitute collateral security for, as the case may be, of all of Borrower's obligations under the Loan Agreement and related Loan Documents, as any one or more of the same may be amended by the Fourth Amendment Documents. The undersigned acknowledges that (a) none of the Agent or the Lenders has any obligation to inform it of the particulars of any modification or amendment to the Loan Agreement or any other Loan Document executed in connection therewith, and (b) it has established satisfactory means by which Borrower keeps it informed with respect to any modification of or amendment to the Loan Agreement and related Loan Documents. 8 The undersigned further agrees that the execution of this Consent and Reaffirmation is not necessary for the continued validity and enforceability of the Third Party Documents to which it is a party, but is executed to induce the Agent and the Lenders to enter into the Fourth Amendment Documents. The undersigned further agrees that none of the Agent or the Lenders shall have any obligation to notify it of any actions or omissions to act with respect to its dealings with Borrower. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has caused this Consent and Reaffirmation to be executed as of April 29, 1999. THE GOOD GUYS, INC., a Delaware corporation By: ------------------------------------- Title: ---------------------------------- EX-10.13 4 EMPLOYMENT RESIGNATION AGREEMENT 1 EXHIBIT 10.13 AGREEMENT This Agreement is entered into as of April 14, 1999, by and between The Good Guys, Inc. (the "Company") and Robert A. Gunst (the "Employee"). W I T N E S S E T H: WHEREAS, it has been agreed that the Employee will resign as an officer and employee of the Company, effective as of June 30, 1999; NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. Resignation as an Employee. The Employee's resignation as an officer and employee of the Company, effective as of June 30, 1999 (the "Termination Date"), is hereby accepted by the Company. During the period between the date hereof and the Termination Date, the Employee shall (a) assist the Company in finding a successor, (b) continue to perform his duties in his area of responsibility, and (c) assist in the transition of his responsibilities to his successor or to others in the Company, provided that the Employee shall be entitled to devote a reasonable amount of time to seeking a new position. The Employee shall continue to serve as a member of the Board of Directors until his successor is elected by the shareholders of the Company or until he tenders his resignation as a director or until he is requested, at any time after September 30, 1999 (the end of the Company's current fiscal year), to step down as a member of the Board by a majority of the members of the Board other than the Employee. 2. Severance Pay - 1990 Agreement. Employee is entitled to and shall receive from the Company, on July 1, 1999, a lump sum payment in cash in an amount calculated pursuant to the formula described in paragraph 2 of the employment agreement entered into between Company and Employee, dated March 30, 1990. 3. Wages, Accrued Vacation and Other Benefits. Employee shall be paid all wages, including any accrued vacation benefits, due through the Termination Date. In addition, the Company shall pay the cost of continuation of the existing health, disability and life insurance coverage for the Employee from the Termination Date through June 30, 2000. Thereafter, the Employee shall have the right to elect further continuation of such coverage to the extent available under COBRA, provided the Company shall not have any obligation to pay the cost of the coverage that continues beyond June 30, 2000. The Company's obligation to pay the cost of continuation of health and disability insurance shall terminate upon the Employee's becoming reemployed prior to July 1, 2000 and the Employee agrees to promptly notify the Company of any such reemployment. On July 1, 2000, or, if earlier, the date on which the Company receives notice of his reemployment, the Company shall transfer to Employee the disability insurance policy he brought with him from Shaklee Corporation. The Company agrees to pay the fees charged by Price, Waterhouse to Employee for preparation of his personal -1- 2 income tax returns for the tax year ending December 31, 1999, in accordance with the current practice for officers of the Company. 4. Return of Property. Any property of the Company in the Employee's possession shall be returned by him to the Company on or before the Termination Date, provided that the Employee shall have the right to purchase from the Company certain items of personal property for $1,500. 5. Stock Options. As to stock options held by the Employee that are vested as of the later to occur of the date on which the Employee ceases to be an officer of the Company or the date on which the Employee ceases to be a director of the Company (the "Final Termination Date"), the Employee shall have the right to exercise (i) options granted under the 1985 Stock Option Plan during the three-month period following the Final Termination Date, as provided in that Plan, and (ii) options granted under the 1994 Stock Incentive Plan during the one-year period following the Final Termination Date, as provided in that Plan. 6. Mutual Releases. (a) Employee (who shall be deemed to have executed this release for himself and his heirs, successors and assignees) releases, forever discharges and promises not to sue the Company and its past, present and future predecessors, successors, assignees, officers, directors, shareholders, employees, attorneys, agents, and other affiliates, from and for any and all claims, demands, causes of action, actions, lawsuits, liabilities, indemnities, costs, damages, obligations, and expenses (including, without limitation, attorneys' fees) whatsoever which Employee may now have or hereafter acquire in law or in equity past, present and future, known and unknown, suspected and unsuspected, which in whole or in part, arise out of or in any manner relate to the Company's employment of Employee and/or any agreements, acts, omissions, opportunities or conduct at any time prior to the date of this Agreement, including, without limitation, any and all of the same that Employee now has or any time had based upon wrongful discharge, the California Fair Employment Practices Act, national origin, age, sex, or other discrimination under the federal Civil Rights Act of 1964, federal Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Employment and Housing Act, or any other applicable law; provided, however, that this release shall not be construed to extinguish or otherwise reduce the rights of Employee to indemnity and contribution set forth in Paragraph 7(f). (b) The Company (which shall be deemed to have executed this release for itself and its affiliate company, directors, officers, successors and assignees) releases, forever discharges and promises not to sue Employee and his relatives, heirs, successors, assignees, attorneys and agents from and for any and all claims, demands, causes of action, actions, lawsuits, liabilities, indemnities, costs, damages, obligations, and expenses (including, without limitation, attorneys' fees) whatsoever which the Company may now have or hereafter acquire in law or in equity, past, present and future, known and unknown, suspected and unsuspected, which in whole or in part, arise out of or in any manner relate to the Company's employment of Employee and/or any agreements, acts, omissions, opportunities or conduct at any time prior to the date of this Agreement, -2- 3 except that the foregoing release shall not apply to any act or omission of Employee at any time before or after the date of this Agreement which constituted fraud, dishonesty, or willful misconduct. In the event any person or entity for which Company has executed this release, brings any action or makes any claim against Employee which would otherwise be covered by the release contained in this subparagraph, Company shall indemnify and defend Employee with respect to such claim or action. (c) The Company and the Employee expressly waive the provisions of Section 1542 of the Civil Code of the State of California, which provides A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. (d) Notwithstanding anything to contrary in the foregoing, the Company and the Employee agree that the provisions of this Section 6 shall not release or otherwise diminish the obligations of the Company and the Employee to perform their respective obligations under the provisions of this Agreement. 7. Additional Covenants. (a) Employee agrees that he shall not make any disparaging remarks to any other person or entity about the Company, its business or any of its employees. The Company agrees that it will use reasonable efforts to assure that no officer or director of the Company shall make any disparaging remarks to any other person or entity about Employee, including a direct instruction to such officers and directors not to do so. (b) Employee agrees that he shall not voluntarily testify, provide evidence, or otherwise assist any person or entity to pursue any legal claim or claims against the Company or any of its employees, officers and/or directors, except as may otherwise be required by law or in connection with enforcing his rights under this Agreement. Employee also agrees to cooperate with the Company by making himself reasonably available to testify on behalf of the Company or any of its affiliates in any action, suit or proceeding relating to events occurring during Employee's employment with the Company and to assist the Company or any of its affiliates in any such action, suit or proceeding by providing information and meeting and consulting with the Company's Board of Directors or its representatives or counsel, as reasonably requested by the Board or such representatives or counsel, provided that Employee shall receive reimbursement for any expenses reasonably incurred by him (including reasonable attorneys fees) in connection with any such matters and provided further that Employee shall receive reasonable compensation for any services rendered by him after the Termination Date in connection with any such matters. All such requests by Company and Employee's obligations with respect thereto shall take into account Employee's obligations and -3- 4 responsibilities to any new employer or other party with whom Employee has contractual or business commitments. (c) Employee and the Company, respectively, agree not to disclose either the existence of this Agreement or any of the terms of this Agreement, indirectly or indirectly, to anyone other than the immediate family of Employee or the parties' counsel, accountants and/or financial advisers, or except as such disclosure may be required for accounting or tax reporting purposes or law (including any applicable securities laws). (d) Employee will not at any time disclose or use for his own benefit or for purposes of any other person or entity, other than the Company or its affiliates, any trade secrets, information, data, or other confidential information relating to the business and affairs of the Company or its affiliates generally; provided that the foregoing shall not apply to (i) information which is generally known to the industry or the public other than as a result of Employee's breach of this covenant, or (ii) disclosures to the extent required by law, provided that Employee shall afford the Company reasonable notice and opportunity at its expense to obtain protective orders in connection with any such disclosure. (e) For the period of two years following the date hereof, the Employee agrees not, directly or indirectly, to solicit for employment or hire any employee of the Company or its affiliates, except that he shall not be precluded from hiring M.J. Parker or hiring any employee who initiates discussions regarding such employment without any direct or indirect solicitation by the Employee. (f) The Employee shall continue after the Termination Date to have the benefit of indemnification and contribution rights to which he is entitled as a former officer or director of the Company under the indemnification agreement between him and the Company and under the Certificate of Incorporation and By-Laws of the Company and under any directors' and officers' insurance maintained by the Company. (g) Employee acknowledges that he has consulted his own legal or tax advisers to the extent he desired to do so in connection with this Agreement, and is not relying upon the Company or its attorneys or other agents concerning any tax, legal or financial issues relating to this Agreement. 8. General Provisions. (a) With the exception of the indemnification agreement referred to in Section 7(f) above, this Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior negotiations, correspondence, memorandum, agreements and understandings, whether written or oral. This Agreement may be amended only by a writing signed by Employee and an officer of the Company or member of the Compensation Committee. -4- 5 (b) Notices under this Agreement shall be sufficient only if mailed by verified or registered United States mail, return receipt requested, delivered by facsimile transmission with machine generated confirmation, or personally delivered, to the parties at their addresses set forth below or as amended by notice pursuant to this subsection. Notice by mail shall be deemed received two (2) days after deposit. (c) This Agreement shall be governed by the internal laws of the State of California without regard to principles of conflicts of law. (d) This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (e) In the event of any dispute hereunder, the prevailing party shall be entitled to recovery of reasonable attorneys' fees. EMPLOYEE UNDERSTANDS THAT HE WAS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND ACKNOWLEDGES THAT HE HAS BEEN GIVEN THE OPPORTUNITY, IF HE SO DESIRED, TO CONSIDER THIS AGREEMENT FOR TWENTY-ONE (21) DAYS BEFORE EXECUTING IT. IN THE EVENT THAT EMPLOYEE HAS EXECUTED THIS AGREEMENT WITHIN LESS THAN TWENTY-ONE (21) DAYS OF THE DATE OF DELIVERY TO HIM, EMPLOYEE ACKNOWLEDGES THAT SUCH DECISION WAS ENTIRELY VOLUNTARY AND THAT HE HAD THE OPPORTUNITY TO CONSIDER THIS AGREEMENT FOR THE ENTIRE TWENTY-ONE (21) DAY PERIOD. THE COMPANY ACKNOWLEDGES THAT FOR A PERIOD SEVEN (7) DAYS FROM THE DATE OF EXECUTION OF THIS AGREEMENT, EMPLOYEE SHALL RETAIN THE RIGHT TO REVOKE THIS AGREEMENT BY WRITTEN NOTICE THAT IS RECEIVED BY THE COMPANY BEFORE THE END OF SUCH 7 DAY PERIOD, AND THAT THIS AGREEMENT SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH REVOCATION PERIOD. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE GOOD GUYS, INC. By: /s/ Signature Illegible ----------------------------------- Its: Chairman of the Compensation Committee /s/ ROBERT A. GUNST ---------------------------------------- Robert A. Gunst EX-27.1 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS SEP-30-1999 OCT-01-1998 MAR-31-1999 3,124 0 27,341 1,157 147,596 183,434 144,430 67,978 267,169 130,127 29,305 0 0 15 107,722 267,169 513,199 513,199 389,806 389,806 126,742 991 1,254 (5,594) 0 (5,594) 0 0 0 (5,594) (.39) (.39)
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