Exhibit 10.40 (Wherehouse Entertainment, Inc. Letterhead) May 11, 1994 GGG, Inc. Post Office Box 5240 Incline Village, Nevada 89452 Re: Contract Terms Dear Jerry: The following are terms of the contract as agreed upon between GGG, Inc. (Goldress) and Wherehouse Entertainment. 1) President and Chief Operating Officer: If we choose that Goldress not retain this title and function, we owe him the termination provisions of his contract. 2) Change of Control: Control is not "changed" as long as Merrill Lynch Capital Partners controls the Board of Directors and thus the Company, even if MLCP's economic ownership is less than 50%. If control does change as defined above, we owe termination provisions of Goldress' contract. 3) Base Compensation: $300,000 per annum for three days a week of work; $400,000 for four days a week. We will employ Goldress for four days a week for the present time with the expectation that we will revert to three days a week (and thus the lower annual base compensation) upon the hiring of a CFO. 4) Goldress participates in the regular Company performance- based bonus plan for senior management. 5) Termination Provisions: The remainder of the contract; however, no more than $600,000 (two years base compensation at the $300,000 per annum rate), nor less than $400,000. 6) Contract Effective Date: October 1, 1993 7) Term: Three (3) years 8) Options as previously agreed to: 30,000 shares at 444 per share. Sincerely, /s/ Scott Young /s/ Jerry E. Goldress - -------------------- ------------------------ Scott Young GGG, Inc. Chairman and CEO Jerry E. Goldress, CEO cc: Board of Directors