<PAGE>
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EMERSON RADIO CORP.
(Exact name of Registrant as specified in its charter)
Delaware 5064 22-3285224
(State of (Primary (I.R.S.
Incorporation) Standard Employer
Industrial Identification
Classification No.)
Code Number)
Nine Entin Road
Parsippany, NJ 07054
(201) 884-5800
(Address including zip code and
telephone number including
area code, of registrant's principal executive offices)
______________
Eugene I. Davis
President
Emerson Radio Corp.
Nine Entin Road
Parsippany, NJ 07054
(201) 884-5800
(Name address including zip code
and telephone number
including area code, of agent for service)
____________
With copies to:
Albert G. McGrath, Jr., Esq. Jeffrey M. Davis, Esq.
Senior Vice President and Lowenstein, Sandler, Kohl,
General Counsel Fisher & Boylan, P.A.
Emerson Radio Corp. 65 Livingston Avenue
Nine Entin Road Roseland, NJ 07068
Parsippany, NJ 07054
Approximate date of commencement of proposed sale to the public. As soon as
practicable after the Securities and Exchange Commission declares the
Registration Statement effective.
If any of the securities being registered on this Form are to be offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box [ ]
Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of each class of to be price per offering registration
securities to be registered security price fee
registered
8 1/2% Senior $20,750,000 Par $20,750,000 $7,155.17
Subordinated
Convertible
Debentures Due 2002
Common Stock (1) (2) (2) (2)
$.01 par value
(1) This Registration Statement also relates to an indeterminate number of
shares of Common Stock to be issued if and when the Debentures are
converted in accordance with the terms thereof, including terms
providing for adjustment of the conversion price to prevent dilution.
(2) No additional consideration will be received for the Common Stock, and
accordingly no registration fee is required in connection with the
registration of the offer and sale of such Stock.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EMERSON RADIO CORP.
Cross Reference Sheet Pursuant to Item 501 of Regulation S-K showing the
location in the Prospectus of the response to items of Part I of Form S-1.
Form S-1 Item Location in Prospectus
1. Forepart of Registration Cover Page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Cover Page; Available Information; Back
Back Cover Pages of Cover Page
Prospectus
3. Summary Information, Risk Summary; Risk Factors
Factors and Ratio of
Earnings to
Fixed Charges
4. Use of Proceeds Summary; Use of Proceeds; Management's
Discussion and
Analysis of Results of Operations and
Financial Condition
5. Determination of Offering Cover Page; Summary; Risk Factors; Plan
Price of Distribution
6. Dilution *
7. Selling Securityholders Cover Page; Summary; Selling
Securityholders; Plan of
Distribution
8. Plan of Distribution Cover Page; Summary; Plan of
Distribution
9. Description of Securities
to be Registered Cover Page; Summary; Description of
Debentures; Description of Other
Securities
10. Interests of Named Experts Certain Relationships and Related
and Counsel Transactions
11. Information with Respect
to the Registrant Summary; Risk Factors; The Company;
Capitalization; Selected Consolidated
Financial Data; Management's Discussion
and Analysis of Results of Operations
and Financial Condition; Business;
Legal Proceedings; Management;
Executive Compensation and Other
Information; Certain Relationships and
Related Transactions; Principal
Stockholders; Description of Other
Securities; Consolidated Financial
Statements.
12. Disclosure of Commission's *
position on indemnification
for Securities Act liabilities
_____________
* Not Applicable
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 21, 1995
PROSPECTUS *
$20,750,000
EMERSON RADIO CORP.
8 1/2% Senior Subordinated Convertible Debentures Due 2002
This Prospectus relates to the offer and sale of up to $20,750,000
aggregate principal amount of 8 1/2% Senior Subordinated Convertible
Debentures Due 2002 (the "Debentures") of Emerson Radio Corp. ("Emerson"
or the "Company") by the Selling Securityholders (as hereinafter defined)
See "Selling Securityholders." The Debentures are convertible into shares of
the Company's common stock, par value $0.01 per share (the "Common Stock"),
at any time prior to redemption or maturity at an initial conversion price
of $3.9875 per share, subject to adjustment under certain circumstances.
This Prospectus also relates to the offer and sale of the shares of Common
Stock which may be owned by the Selling Securityholders upon conversion of
the Debentures. On September 15, 1995, the last reported sales price of
the Common Stock, which is traded on the American Stock Exchange ("AMEX")
under the symbol "MSN," was $3.3125 per share. See "Description of
Debentures," "Description of Other Securities" and "Plan of Distribution."
Interest on the Debentures is payable on March 15, June 15, September 15,
and December 15, of each year commencing September 15, 1995. The Debentures
are redeemable in whole or in part, at the option of the Company at anytime
after August 15, 1998, at the redemption prices set forth herein, plus accrued
interest, if any, to the redemption date. Each holder of Debentures will have
the right to cause the Company to redeem the Debentures if certain Designated
Events (as defined in the Indenture) should occur. The Debentures are
subordinated to all existing and future Senior Indebtedness (as defined in the
Indenture). At September 15, 1995, there was approximately $19.5 million of
outstanding Senior Indebtedness. The Debentures restrict the amount of Senior
Indebtedness and other indebtedness that the Company and, in certain cases, its
subsidiaries may incur. See "Description of Debentures."
The Debentures were initially sold in reliance on exemptions under Section
4(2) and other exemptions under the Securities Act of 1933, as amended (the
"Securities Act"), to qualified institutional buyers (as defined in Rule 144A
under the Securities Act) ("QIBs") and to a limited number of institutional
"accredited investors" (as such term is defined in Rule 501 under the
Securities Act and referred to herein as "Accredited Investors"). Certain of
the Debentures and Common Stock underlying the Debentures have been designated
for trading in the Private Offerings, Resales and Trading through Automatic
Linkages ("PORTAL") System of the National Association of Securities Dealers,
Inc. No other trading market currently exists for the Debentures.
AN INVESTMENT IN THE DEBENTURES OR THE UNDERLYING
COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED BY
PURCHASERS OF THE DEBENTURES OR THE UNDERLYING COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
__________________________
The date of this Prospectus is September 21, 1995.
SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein.
References to "Emerson" or the "Company" in this Prospectus refer to
Emerson Radio Corp. and its subsidiaries, unless the context otherwise
indicates.
The Company
Emerson, one of the nation's largest volume consumer electronics
distributors, directly and through subsidiaries, designs, sources,
imports and markets a variety of video and audio consumer electronics
and microwave oven products. The Company distributes its products
primarily through mass merchants and discount retailers, leveraging on the
strength of its "Emerson and G-Clef" trademark, a nationally recognized
trade name in the consumer electronics industry. The trade name "Emerson
Radio" dates back to 1912 and is one of the oldest and most well respected
names in the consumer products industry. In addition, the Company offers a
line of audio products for sale under the "H.H. Scott" brand name.
Approximately $15 billion of factory sales are generated by the industry
in the market segment in which the Company competes. In calendar year
1994, Emerson believes it was among the top three brand names in unit sales
volume of video cassette recorders ("VCRs") and TV/VCR combinations and
among the top five brand names in unit sales volume of color televisions.
The Company believes it possesses an advantage over its competitors due
to the combination of the Emerson brand recognition, its extensive
distribution base and established relations with customers in the mass
merchant and discount retail channels of distribution, its sourcing
expertise and established vendor relations, and an infrastructure boasting
personnel experienced in servicing and providing logistical support to the
domestic mass merchant distribution channel. Emerson intends to
leverage its core competencies to offer a broad variety of current and new
consumer products to retail customers in developing markets worldwide.
The Company intends to form joint ventures and enter into licensing
agreements which will take advantage of the Company's trademarks and
utilize the Company's logistical and sourcing advantages.
The Company's core business consists of the distribution and
sale of various low to moderately priced product categories, including black
and white and color televisions, VCRs, video cassette players ("VCPs"),
TV/VCR combination units, home stereo and portable audio products and
microwave ovens. The majority of the Company's marketing and sales of these
products is concentrated in the United States and, to a lesser extent,
Canada and certain other international regions. Emerson's major competition
in these markets are foreign-based manufacturers and distributors. See
"Business."
The Company successfully restructured its financial position
(the "Restructuring") through a plan of reorganization confirmed
under Chapter 11 of the United States Bankruptcy Code ("Plan of
Reorganization") on March 31, 1994. Through the Restructuring,
the Company reduced its institutional debt by approximately $203
million. Additionally, the Company increased its net sales by
34% in the fiscal year ended March 31, 1995 ("Fiscal 1995"), the
fiscal year immediately following emergence from bankruptcy, as
compared to the prior fiscal year. Also, since the fiscal year
ended March 31, 1993 ("Fiscal 1993"), the Company has reduced its
annual fixed operating costs by more than 50%. See "The Company
- - Restructuring of the Company."
The Offering
Securities Offered $20,750,000 aggregate principal
amount of 8 1/2% Senior
Subordinated Convertible
Debentures Due 2002 and the
underlying shares of Common
Stock by the Selling
Securityholders. See
"Description of Debentures" and
"Selling Securityholders."
Interest Payment Dates March 15, June 15, September 15
and December 15 of each year
commencing September 15, 1995.
For the interest period ending
on September 15, 1995, interest
as to each Debenture will be
calculated from the closing
date of the sale to the initial
Debenture holder applicable to
such Debenture.
Conversion Rights The Debentures are convertible
prior to redemption or
maturity, at the option of the
holder, into shares of Common
Stock at an initial conversion
price of $3.9875 per share of
Common Stock, subject to
adjustment under certain
circumstances (the "Conversion
Price"). See "Description of
Debentures."
Redemption at Option of the At the Company's option, the
Company Debentures are redeemable after
the expiration of three years
from the date of issuance, in
whole or in part, at the
redemption prices (expressed as
a percentage of principal
amount) set forth below for the
applicable 12-month period
beginning August 15:
Year Redemption Price
1998 104%
1999 103%
2000 102%
2001 101%
and at maturity at 100% of
principal, together in the case
of any such redemption with
accrued interest to the
redemption date. See
"Description of Debentures."
Repurchase at Option of If a Designated Event (as
Holders defined herein) occurs, each
holder of the Debentures has
the right, subject to certain
conditions and restrictions, to
require the Company to offer to
repurchase all outstanding
Debentures, in whole or in
part, owned by such holder at
100% of their principal amount
plus accrued interest, if any,
to the date of repurchase. If
a Designated Event occurs, no
assurance can be given that the
Company would have sufficient
funds to pay the repurchase
price for all Debentures
tendered by the holders
thereof. The Company's ability
to make such payments may be
limited by the terms of then
existing borrowings and other
agreements. See "Risk
Factors," "Management's
Discussion and Analysis of
Results of Operations and
Financial Condition" and
"Description of Debentures."
Subordination The Debentures are subordinated
to all existing and future
Senior Indebtedness (as defined
herein). At September 15,
1995, there was approximately
$19.5 million of outstanding
Senior Indebtedness. The
Indenture (the "Indenture")
governing the Debentures
restricts the amount of Senior
Indebtedness and other
indebtedness that the Company
and, in certain instances, its
subsidiaries may incur. See
"Description of Debentures."
Use of Proceeds The Company will not receive
any of the proceeds from the
sale of Debentures and/or
underlying Common Stock offered
and sold by the Selling
Securityholders.
Registration In the Indenture, the Company
agreed to file the
registration statement
applicable to this Prospectus
(the "Registration Statement")
covering the resale of the
Debentures (and the resale of
the Common Stock underlying the
Debentures) by December 21,
1995 and to maintain such
effectiveness for a three-year
period. The interest rate on
the Debentures shall be
increased by 0.5% if the
Company fails to cause the
Registration Statement to
become effective by December
21, 1995 or to maintain such
effectiveness for a three-year
period provided that such
increase shall be effective
only for so long as the
Registration Statement is not
effective. See "Description of
Debentures."
Trading Market Certain of the Debentures (and
the Common Stock underlying
such Debentures) sold to QIBs
have been designated for
trading on the PORTAL System.
No other market currently
exists for the Debentures. The
Common Stock is listed on the
AMEX under the symbol "MSN."
See "Description of Debentures"
and "Description of Other
Securities."
Shares of Common Stock
Outstanding Before Offering1 40,252,772
Shares of Common Stock
Outstanding
Assuming Conversion of
$20,750,000 Aggregate
Principal Amount of 45,456,533
Debentures1,2
Certain Covenants The Indenture pursuant to which
the Debentures were issued
restricts, among other items,
the ability of the Company and
its subsidiaries to: incur
additional indebtedness, pay
dividends or make distributions
or other restricted payments;
consolidate, merge or sell all
or substantially all of their
assets; create liens; sell
certain assets; sell or issue
capital stock of the Company's
subsidiaries; make certain
investments, loans and
advances; enter into
transactions with affiliates;
and make prepayments on
outstanding indebtedness other
than Senior Indebtedness.
These covenants are subject to
important exceptions and
qualifications. See
"Description of Debentures."
Risk Factors The Debentures offered hereby
involve a high degree of risk.
Prospective purchasers of the
Debentures or the Common Stock
underlying the Debentures
should carefully consider all
the information set forth in
this Prospectus and, in
particular, should evaluate the
specific risk factors set forth
under "Risk Factors,"
including, but not limited to,
a discussion of operating
losses and recent
reorganization, the Company's
secured indebtedness and
financing, and certain
outstanding litigation.
<footnote>
1Does not include an aggregate of 3,550,000 shares of Common Stock issuable
upon exercise of (i) 1,890,000 outstanding options exercisable at a weighted
average exercise price of $1.03 per share; (ii) 750,000 outstanding seven-
year warrants exercisable at an exercise price of $1.00 per share until March
31, 1997 and excalating $0.10 per share per annum thereafter until expiration
(March 31, 2001); (iii) 410,000 options available for issuance under the
Company's stock option plans; and (iv) 500,000 outstanding five-year warrants
exercisable at an exercise price of $3,9875 per share granted to Dresdner
Securities (USA) Inc. (the "Placement Agent") and its authorized dealers in
connection with the private placement of Debentures. Also does not include
shares of Common Stock issuable from and after March 31, 1997, upon
conversion of $10 million of Series A Preferred Stock at a price equal to
80% of the average market value of a shares of Common Stock at the time of
conversion. See "Risk Factors-Potential Future Sales of Stock,"
"Executive Compensation and Other Information" and "Description of Other
Securities."
2Gives effect to the issuance of 5,203,761 shares of Common Stock upon
conversion of $20,750,000 aggregate principal amount of Debentures at the
initial Conversion Price of $3,9875 per share.
</footnote>
Summary of Consolidated Financial and Operating Data
The following table sets forth for the periods and dates indicated,
selected consolidated financial data of the Company and its subsidiaries.
The Company changed its fiscal year-end from December 31 to March 31,
beginning with the period ended March 31, 1992. Previously, the Company had
changed its fiscal year-end from March 31 to December 31, beginning with the
period ended December 31, 1990. The Summary Financial Data should be read
in conjunction with the Consolidated Financial Statements, including the
notes thereto set forth elsewhere in this Prospectus. All unaudited
financial information reflects all adjustments that management believes
necessary to present fairly the results of operations for the periods being
reported.
<TABLE>
Historical
<C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Year Three Months Year Year Year Three Months Three Months
Ended Ended Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31 Mar. 31 Mar. 31 Mar 31, Mar. 31, June 30 June 30,
1990 1991 1992 1993 1994 1995 1994 1995
(In thousands, except per share and ratio data)
<S>
Statement of Operations Data:
Net Sales:
Core Business $528,809 $716,651 $169,936 $741,357 $487,390 $654,671 $137,140 $57,058
Personal Computers
and Other $ 96,609 73,555 1,562 -- -- -- -- --
625,418 790,206 171,498 741,357 487,390 654,671 137,140 57,058
Net Earnings
(Loss(1) $(37,463) (60,746) ( 6,976) $56,000) 55,501 7,375 (2,894) (1,401)
Per Common Share:
Net Earnings (Loss)
Per Common Share $ (1.03) $ (1.60) $ (0.18) $ (1.47) 1.45 0.16 (0.09) $ (0.03)
Weighted Average
Number of Common
and Common Equivalent
Shares Outstanding 36,519 37,897 37,968 38,179 38,191 46,571 33,333 40,253
Common Shareholders'
Equity (Deficit)(3) $ 1.78 0.12 (0.04) (1.52) 0.98 1.08 0.88 1.04
Ratio of Earnings
(Loss) to
Combined Fixed
Charges and
Preferred Stock
Dividends ( 1.85) (2.21) (0.60) (2.03) (6.16) 2.92 (3.74) (0.86)
Coverage Deficiency 13,978 18,546 4,217 18,257 10,243 -- 635 803
As of June 30, 1995
Balance Sheet Data: Actual As Adjusted(4)
Working Capital $39,871 $ 59,244
Total Assets 103,422 104,799
Total Debt 25,870 27,247
Common Shareholders' Equity 42,944 42,944
Shareholders' Equity 51,944 51,944
</TABLE>
__________________
(1) The net earnings for the fiscal year ended March 31, 1994 ("Fiscal
1994"), include an extraordinary gain of $129,155,000, or $3.38 per share,
on the extinguishment of debt settled in the Plan of Reorganization.
Additionally, the Company recorded reorganization expenses of $17,385,000
relating primarily to the writedown of assets transferred to creditors under
the Plan of Reorganization and professional fees and other related expenses
incurred during the bankruptcy proceedings. The results of operations for
Fiscal 1993, the three months ended March 31, 1992 and the year ended
December 31, 1991 include restructuring and other nonrecurring charges
aggregating $35,002,000, $3,698,000 and $36,964,000, respectively. These
charges represent the cost of discontinuing the personal computer business,
professional fees and other expenses related to the Company's financial
restructuring, and the up-front costs and writedowns of certain assets
associated with implementing long-term cost reduction programs. Charges for
Fiscal 1993 also include costs related to the Company's proxy contest
settled in June 1992. The year ended December 31, 1991 also includes
charges related to the discontinuance of the H.H. Scott domestic business.
(2) Net earnings (loss) per common share for all periods, except Fiscal
1995 and the three months ended June 30, 1994 and 1995, are based on
the weighted average number of old common shares outstanding during each
period. Net earnings per common share for Fiscal 1995 is based on
the weighted average number of shares of new Common Stock and
related common stock equivalents outstanding during the year. Common
Stock equivalents include 9,081,000 shares assuming conversion of
$10 million of Series A Preferred Stock at a price equal to 80% of
the weighted average market value of a share of Common Stock,
determined on a quarterly basis. Since the Series A Preferred Stock
is not convertible into Common Stock until March 31, 1997, the number
of shares issuable upon conversion may be significantly different.
Net loss per common share for the three months ended June 30, 1994
and 1995 is based on the weighted average number of shares of new
Common Stock outstanding during each period. The net loss per share
for both periods does not include common stock equivalents assumed
outstanding since they are anti-dilutive.
(3) Calculated based on common shareholders equity (deficit) divided by
actual shares of Common Stock outstanding. Common shareholders' equity
at March 31, 1994 and 1995 and June 30, 1994 and 1995 are equal to
total shareholders' equity less $10 million for the liquidation
preference of the Series A Preferred Stock.
(4) Balance sheet data is adjusted to give effect to the initial
application of the estimated net proceeds of $19,373,000 from the
issuance of $20,750,000 of Debentures.
Supplemental Results of Operations
The following table presents consolidated sales and net
earnings (loss) for the past five years on the basis of a March
31 fiscal year-end. This information is provided for comparative
purposes only and should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto,
and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" set forth elsewhere in the
Prospectus. The financial information for the years ended March
31, 1992 and March 31, 1991 is unaudited and was derived by
adjusting the audited results of operations of the Company for
the years ended December 31, 1990 and December 31, 1991 to
include the results of operations for the three month periods
ended March 31, 1991 (unaudited) and March 31, 1992,
respectively, and to omit the unaudited results of operations for
the three months ended March 31, 1991 for the latter. All
unaudited financial information reflects all adjustments that
management believes necessary to present fairly the results of
operations for the periods being reported.
<TABLE>
Year Ended March 31,
1991 1992 1993 1994 1995
(In thousands, except per share data)
Net Sales:
Core Business $662,421 $752,975 $741,357 $487,390 $654,671
Personal Computers
and Other 123,385 48,341 - - -
$785,806 $801,316 $741,357 $487,390 $654,671
Net Earnings
(Loss) $(52,435) $(52,750) $(56,000) $ 55,501 $ 7,375
Net Earnings (Loss)
Per Common Share(1)(2) $ (1.42) $ (1.39) $ (1.47) $ 1.45 $ 0.16
Weighted Average
Number of Common
and Common Equivalent
Shares Outstanding 36,854 37,925 38,179 38,191 46,571
_______________
(1)The net earnings for Fiscal 1994 include an extraordinary
gain of $129,155,000, or $3.38 per share, on the
extinguishment of debt settled in the Plan of Reorganization.
Additionally, the Company recorded reorganization expenses of
$17,385,000 relating primarily to the write down of assets
transferred to creditors in the Plan of Reorganization and
professional fees and other related expenses incurred during
the bankruptcy proceedings. The results of operations for
the fiscal years ended March 31, 1993, 1992 and 1991 include
restructuring and nonrecurring charges aggregating
$35,002,000, $40,012,000 and $650,000, respectively. These
charges represent the cost of discontinuing the personal
computer business, professional fees and other expenses
related to the Company's financial restructuring, and the up-
front costs and write downs of certain assets associated with
implementing long-term cost reduction programs. Charges for
Fiscal 1993 also include costs related to the Company's proxy
contest settled in June 1992. The year ended March 31, 1992
also includes charges related to the discontinuance of the
H.H. Scott domestic business.
(2)Net earnings (loss) per common share for all periods, except
Fiscal 1995, are based on the weighted average number of
shares of Common Stock outstanding during each fiscal year.
Net earnings per common share for Fiscal 1995 is based on the
weighted average number of shares of new Common Stock and
related common stock equivalents outstanding during the year.
Common stock equivalents include 9,081,000 shares assuming
conversion of $10 million of Series A Preferred Stock at a
price equal to 80% of the weighted average market value of a
share of Common Stock, determined on a quarterly basis.
Since the Series A Preferred Stock is not convertible into
Common Stock until March 31, 1997, the number of shares
issuable upon conversion may be significantly different.
RISK FACTORS
An investment in the Debentures or the underlying Common
Stock involves a high degree of risk. Prospective investors
should carefully consider the following risk factors, as well as
other information contained in this Prospectus:
Operating Losses and Recent Reorganization
Although the Company reported a net profit of $7,375,000 in
Fiscal 1995, the Company subsequently reported a net loss of
$1,401,000 for the first quarter of its fiscal year ending March
31, 1996 ("Fiscal 1996"). See "Risk Factors - Seasonality."
Prior thereto, the Company, on a consolidated basis, operated at
a loss in the aggregate from the nine month period ended December
31, 1990 through Fiscal 1994 and had an accumulated deficit of
$199.9 million as of March 31, 1994, prior to the extraordinary
gain recognized on the extinguishment of debt as a result of the
Restructuring. See "The Company - Restructuring of the Company."
For Fiscal 1994, the Company experienced a significant decline in
sales from the prior year, which decline commenced in the latter
part of Fiscal 1993. Additionally, for Fiscal 1994, the Company
generated a gross profit of $0.9 million on consolidated net
sales of $487.4 million and recorded a consolidated net loss of
$73.7 million prior to the extraordinary gain recognized on the
extinguishment of debt. During Fiscal 1993, the Company reported
a consolidated net loss of $56 million attributable to reduced
sales to key customers and recorded substantial restructuring and
other nonrecurring charges aggregating $35 million. While the
Company reported a profit for Fiscal 1995, and decreased losses
by approximately 52% for the three months ended June 30, 1995 as
compared to the same period in the prior Fiscal Year, no
assurance can be given that the Company will be able to continue
to generate sufficient revenues to meet its operating expenses,
make its interest payments under the Debentures or otherwise
continue to operate profitably in the future. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition."
Risks Associated With the Company's Secured Indebtedness and
Financing
As of September 15, 1995, the Company had approximately
$19.5 million of Senior Indebtedness outstanding with its United
States secured credit lender pursuant to the terms of a $60
million credit facility. Substantially all of the assets of
Emerson and certain of its subsidiaries, except for their
trademarks, are encumbered to secure repayment of such
indebtedness. The trademarks are subject to a negative pledge
covenant. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition - Subsequent Events." The
Company's ability to meet its ongoing debt service obligations
and operate its business will depend on a number of factors,
including its ability to operate its business as presently
projected, the success of future operations, the availability of
working capital and compliance with the requirements of the
Indenture. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and "Description of
Debentures." As market conditions permit, the Company plans to
secure additional financing (subject to restrictions imposed on
it by its credit facilities and the Indenture), as necessary, in
the form of debt or equity, to finance the growth of its core
business, product line extensions and any new business ventures.
Dependence on Key Customers
During the three months ended June 30, 1995 and Fiscal 1995,
1994, and 1993, approximately 16%, 53%, 34%, and 39%,
respectively, of consolidated net sales were made by the Company
to Wal-Mart Stores, Inc. ("Wal-Mart"). Similarly, during such
periods, 10%, 10%, 12% and 11%, respectively, of consolidated net
sales were made by the Company to Target Stores, Inc. While
management believes that the Company presently has and
historically has had good relationships with these two customers,
the Company has no long-term contracts with such customers, as
they purchase on individually placed purchase orders submitted to
the Company. The Company has entered into agreements with Otake
Trading Co., Ltd. and certain related entities ("Otake") its
largest supplier, which provide, among other things, for the
limited license of certain trademarks to that supplier to
manufacture and sell video product under the "Emerson and G-Clef"
trademark directly to Wal-Mart. The decrease in sales to
Wal-Mart for the three months ended June 30, 1995, as compared
to the other periods presented was the direct result of these
agreements. It is anticipated that the net operating results
of the Company will not be adversely impacted by such a
decline in volume attributable to the licensing arrangement with
its supplier since the Company will receive royalty payments under
this arrangement and a corresponding reduction in the Company's
operating expenses attributable thereto. No assurance can be given
that the Company will obtain such operating results or that
the licensing arrangement will not adversely impact its operations
or the reputation of its trade names or products. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition." There can be no assurances that other key customers
will continue to account for comparable percentages of the
Company's sales and the loss of a significant volume of purchases
could have a material adverse impact on the Company in certain
circumstances.
Dependence on Key Vendors
The Company is dependent upon certain unaffiliated foreign
manufacturers for various components, parts and finished
products; some of those manufacturers also produce products for
the Company's competitors. In particular, Otake accounted for
approximately 18%, 73%, 59%, and 71%, respectively, of the
Company's purchases during the three months ended June 30, 1995
and Fiscal 1995, 1994, and 1993. The Company has recently
entered into agreements with Otake, including a supply agreement
which provides the Company the option to purchase video product
from Otake for a period of three years. See "Risk Factors -
Dependence on Key Customers" and "Business - Licensing." Kong
Wah Video Company Limited and related entities ("Kong Wah")
accounted for approximately 10% of the Company's purchases during
the three months ended June 30, 1995 and Fiscal 1994.
Additionally, Daewoo Electronics Co., Ltd., Imarflex, Mfg. Co.,
Ltd. and Musical Electronics Limited accounted for approximately
22%, 21% and 14%, respectively, of the Company's purchases during
the three months ended June 30, 1995. Disruption or cessation in
purchases from, any delay or disruption in regular and timely
deliveries by, or any deterioration in the quality of products
of, such vendors could have a material adverse effect on the
Company's results of operations. Management, however, believes
alternative sources of supply are available in the marketplace.
From time to time, the Company has been required to allocate
product among its customer base. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition"
and "Business - Design and Manufacturing."
No Security for Debentures; Subordination
The Debentures represent general unsecured obligations of
the Company. The rights of the holders of the Debentures to
receive payment of any principal or interest thereon is
subordinate to the prior payment of the principal of (and
premium, if any), and the interest on, all Senior Indebtedness
(as defined in the Indenture and summarized herein under
"Description of Debentures") of the Company, whether secured or
unsecured, and any deferrals, renewals or extensions of such
Senior Indebtedness. As of September 15, 1995, the Company
estimates its Senior Indebtedness to be approximately $19.5
million. Upon any receivership, insolvency, assignment for the
benefit of creditors, bankruptcy, reorganization, sale of all or
substantially all of the assets, dissolution, liquidation, or any
other marshalling of the assets and liabilities of the Company,
or, if the Debentures are declared due and payable on the
occurrence of an Event of Default (as defined herein), then no
amounts shall be paid by the Company on the Debentures for their
respective principal and interest thereon unless and until the
principal of, and the interest on, all Senior Indebtedness then
outstanding are paid in full. See "Description of Debentures."
Lack of Sinking Fund; Substantial Final Payment for the
Debentures
The Company is under no obligation to make any sinking fund
payments with respect to the Debentures and the Debentures are
redeemable only at the Company's option prior to stated maturity,
except for a holder's limited right to repayment upon a
Designated Event pursuant to the terms of the Indenture. Thus,
the Company will be required to repay on August 15, 2002, up to
the principal amount of the Debentures sold in this Offering, and
then outstanding, and any accrued interest thereon on such date.
If the Company does not have sufficient funds to pay such amount
at maturity, it will have to refinance the Debentures at that
time. There can be no assurance that the Company will be able to
obtain such financing. See "Description of Debentures."
Licensing Risks
The Company has licensed the "Emerson and G-Clef" trademark
to certain parties on a limited basis and intends to pursue
additional licensing opportunities. While the Company believes
that its quality control system and contractual protective provisions
are adequate to protect the integrity and reputation of its trademarks,
there can be no assurance that the actions of the Company's licensees
in manufacturing or distributing products under the Emerson and G-Clef"
trademark will not adversely, even if temporarily, impact the value of the
Company's trademarks. The Company has registered the "Emerson and G-Clef"
"H.H. Scott" and "Scott" trademarks for certain of its consumer
products in the United States, Canada, Mexico and various other
countries. Despite the legal protection afforded by such
registration, there can be no assurance that there will not be
infringements of the Company's trademarks or that the Company
would be able to successfully prosecute any such infringements.
Any damage to the Company's trademarks by a licensee or any
trademark infringement could have a material adverse effect on
the Company's business. Further, the Company has agreed not to
pledge its trademarks under its United States secured credit
facility and under the Indenture. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition -
Subsequent Events," "Business - Licensing" and "Business -
Trademarks."
Seasonality
The Company generally experiences stronger demand for its
products in the quarters of each year ending September 30 and
December 31. Accordingly, to accommodate such increased demand,
the Company is generally required to place seasonally higher
orders with its vendors during the quarters ending June 30 and
September 30, thereby affecting the Company's need for working
capital during such periods. On a corresponding basis, the
Company also is subject to increased returns during the quarters
ending on March 31 and June 30, which adversely affects the
Company's collections activities during such periods, also
affecting its liquidity. Operating results may fluctuate due to
other factors such as the timing of the introduction of new
products, price reductions by the Company and its competitors,
demand for the Company's products, product mix, delay, available
inventory levels, fluctuation in foreign currency exchange rates
relative to the United States dollar, seasonal cost increases and
general economic conditions. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
Competition and Dependence on Market Acceptance
The market segment in which the Company competes is highly
competitive. The mass merchandise and discount retail market is
divided among a large number of foreign-based manufacturers and
distributors. Many of the Company's competitors have or may
obtain significantly greater financial and marketing strength and
resources than the Company, enabling them to compete more
effectively than the Company. Further, the Company's business is
dependent upon consumer awareness and acceptance of existing and
new products. The Company's products compete at the retail store
level for shelf space and promotional displays, all of which have
an impact on the Company's established and proposed distribution
channels. Competition, or failure of consumers to accept
existing or new products, may result in reduced sales, reduced
profit margins, or both, for the Company. There can be no
assurance that the Company will not encounter increased
competition in the future, which could have a material adverse
effect on the ability of the Company to successfully market
existing products, develop new products or expand its business.
See "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and "Business - Competition."
Potential Product Liability and Insurance Limits
A failure of any of the products marketed by the Company may
subject the Company to the risk of product liability claims and
litigation arising from injuries allegedly caused by the improper
functioning or design of its products. The Company currently
maintains product liability insurance in amounts which the
Company considers adequate. No product liability claims have
been asserted or, to the knowledge of the Company's management,
threatened against the Company to date, which management believes
would have a material adverse effect on the Company's
consolidated financial position. To the extent product liability
losses are beyond the limits or scope of the Company's insurance
coverage, any such losses could have a material adverse effect
upon the Company's business, operations, profitability and
assets.
Government Regulation
Pursuant to the Tariff Act of 1930, as amended, the Trade
Act of 1974, and regulations promulgated thereunder, the United
States Government charges tariff duties, excess charges,
assessments and penalties on many imports. These regulations are
subject to constant change and revision by governmental agencies
and by action of the United States Trade Representative and may
have the effect of increasing the cost of goods purchased by the
Company or limiting quantities of goods available to the Company
from its overseas suppliers. Additionally, a number of states
have adopted statutes regulating the manner of determining the
amount of payments to independent service centers performing
warranty service on products such as those sold by the Company.
Such statutes may have the effect of increasing the costs of the
Company's operations. Additional Federal legislation and
regulations regarding the importation of consumer electronics
products, including the products marketed by the Company, have
been proposed from time-to-time and, if enacted into law, could
adversely affect the Company's results of operations. See
"Business -- Government Regulation."
Tax Risks
The Company realized a substantial amount of cancellation of
indebtedness ("COD") as a result of the Restructuring. However,
the Company did not include such COD in its gross income because
the Restructuring was consummated as part of the Plan of
Reorganization. See "The Company - Restructuring of the
Company." Ordinarily, the Company would be required to reduce
certain Federal income tax attributes (e.g., a net operating loss
for the taxable year of the debt discharge, net operating loss or
tax credit carry forwards, tax basis of assets) by the amount of
COD so excluded from its gross income. The Company's management
believes that the exchanges of debt-for-stock by certain of the
Company's institutional creditors should qualify for an exception
from those requirements applicable to certain stock-for-debt
exchanges. Further, management believes that the Restructuring
should qualify as a tax free reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"). It is possible
that the Internal Revenue Service could contend that the
stock-for-debt exception is not applicable to the Restructuring,
or that the Restructuring does not constitute a tax-free
reorganization. In either such event, the Company's net
operating loss carry forwards and tax credit carry forwards and
other tax attributes would be reduced by a significant amount,
and the reorganized Company's taxable income would be greater
than it would be if the Restructuring constitutes a tax-free
reorganization.
Assuming the stock-for-debt exception applies and the
Restructuring qualifies under the tax-free reorganization
provisions of the Code, the ability to carry forward the
Company's net operating loss and tax credit carry forwards from
taxable years (or portions thereof) ending on or prior to the
consummation of the Plan of Reorganization is subject to an
annual limitation under Sections 382 and 383 of the Code. The
annual limitation is approximately $2,200,000. This limitation
could be reduced or eliminated if the Company becomes subject to
a second, later, annual limitation under Sections 382 and 383 of
the Code because of future equity changes, including the issuance
of the Common Stock on conversion of the Debentures described in
this Prospectus. Finally, under certain circumstances, the
Company could become subject to a personal holding company tax in
the future. See "Certain Federal Income Tax Considerations."
Controlling Stockholders
As a result of the Restructuring, Fidenas International
Limited, now known as Fidenas International Limited, L.L.C.
("Fidenas International"), Elision International, Inc.
("Elision") and GSE Multimedia Technologies Corporation ("GSE"),
own, in the aggregate, 30 million shares of Common Stock,
representing approximately 74.5% of the Company's outstanding
shares of Common Stock. Geoffrey P. Jurick, Chairman of the
Board of Directors and Chief Executive Officer of the Company may
be deemed to control each of Fidenas International, GSE and
Elision, through stock ownership, direct or indirect, position of
officer or director, or otherwise. Consequently, such persons
and entities on a combined basis will have the power to elect the
Company's Board of Directors and, consistent with their
respective fiduciary responsibilities, to approve any action
requiring stockholder approval. Because of the existence of such
interrelationships noted above, it is possible that conflicts of
interest may arise between certain of the Company's officers and
directors, Fidenas International, GSE, Elision and/or any of
their respective affiliates. If conflicts of interest arise, the
Company's Board of Directors is obligated to resolve any such
conflicts in a manner consistent with its fiduciary duties. All
future transactions between the Company and its affiliates will
be on terms no less favorable than could be obtained from
unaffiliated third parties and must be approved by a majority of
the independent outside members of the Company's Board of
Directors who do not have an interest in the transactions.
Further, certain restrictions have been imposed on transactions
between the Company and its affiliates in the Indenture for the
Debentures. See "Principal Stockholders," "Certain Relationships
and Related Transactions," "Description of Debentures" and
"Description of Other Securities."
Litigation Relating to Common Stock
The shares of Common Stock issued to GSE, Fidenas
International and Elision in connection with the Restructuring
are the subject of certain legal proceedings in the Commonwealth
of Bahamas and the United States. It is possible that a court of
competent jurisdiction may order the turnover of all or a portion
of the shares of Common Stock owned by such persons to a third
party. A turnover of a substantial portion of the Common Stock
could result in a "change of control" prohibited pursuant to the
terms of the Company's credit facility and pursuant to the terms
of the Debentures. Additionally, such a change in control could
result in a second ownership change further limiting the
Company's ability to use its net operating loss carryforwards
("NOLs") and tax credit carryovers ("TCCOs"). See "Certain
Federal Income Tax Considerations," "Principal Stockholders" and
"Legal Proceedings." If a turnover of a substantial portion of
the Common Stock results from such legal proceedings, the holders
of such Common Stock may have different investment objectives
than the current holders of the Common Stock. Sales of such
Common Stock by such holders, or the perception that such sales
may occur, could adversely affect prevailing market prices for
the Common Stock or the Company's ability to raise capital in the
future. See "Description of Debentures" for a description of
certain adjustments in the Conversion Price of the Debentures
upon certain decreases in the weighted average closing price of
the Common Stock attributable to certain events resulting from
the litigation described in this paragraph. However, such
securities would constitute "restricted securities" as defined in
paragraph (a)(3) of Rule 144 promulgated under the Securities
Act. Resales of such securities may only be made in compliance
with Rule 144, another applicable exemption under the Securities
Act, or pursuant to an effective registration statement under the
Securities Act. A settlement of the legal proceedings described
above may entail requests for certain actions to be taken by the
Company to permit greater liquidity of any Common Stock
transferred pursuant to any such settlement. Such actions, if
any, on the part of the Company will be taken by the Board of
Directors of the Company consistent with its fiduciary duties and
in accordance with certain restrictive provisions contained in
the Indenture for the Debentures. The Placement Agent has
agreed, subject to the granting of registration rights in
accordance with the requirements of the Indenture and applicable
law, to permit the registration of up to 5,000,000 shares of
Common Stock owned by GSE, Fidenas International and Elision,
which registration rights were subsequently approved by the Board
of Directors of the Company. No assurance can be given that any
settlement of such legal proceedings will occur or that the terms
of any such settlement will be beneficial to the Company, its
stockholders or the market value of the Debentures or the Common
Stock. See "Legal Proceedings" and "Description of Other
Securities - Common Stock Eligible for Future Sale."
Bankruptcy Claims Resolution Process
During and subsequent to the Restructuring, the Company has
analyzed the various claims filed by creditors in the United
States Bankruptcy Court for the District of New Jersey (the
"Bankruptcy Court") in the Company's bankruptcy proceedings and,
where appropriate, contested certain claims. The Company is
presently engaged in litigation regarding such claims and no
assurance can be given as to whether an unfavorable judicial
determination could have a material adverse effect on the
Company. See "Legal Proceedings."
Risks Inherent in International Operations and Foreign Trade
The Company plans on increasing international distribution
and sales of its products. There can be no assurance that the
Company's trademarks will be as widely recognized or accepted
internationally as in the United States. In addition, there are
certain risks, varying in degrees, inherent in doing business
internationally and with respect to foreign trade. Such risks
include the possibility of quotas, anti-dumping laws and
regulations, unfavorable changes in tax or other laws; partial or
total expropriation; currency exchange rate fluctuations and
restrictions on currency repatriation; the disruption of
operations, production and shipping from labor and political
disturbances, insurrection or war; and the requirements of
partial local ownership of operations in certain countries. See
"Business."
Absence of An Established Market; Restrictions on Transfer
The Debentures sold to QIBs and Common Stock underlying such
Debentures have been designated for trading in the PORTAL System
and the Common Stock is listed for trading on the AMEX. No other
market currently exists for the Debentures. There can be no
assurance that an active trading market for the Debentures will
develop or, if one develops, that it will be maintained.
Although the Company has agreed to use its best efforts to
register the resale of the Debentures (and the resale of the
securities underlying the Debentures) in the Registration
Statement by December 21, 1995 and to maintain such effectiveness
for a three-year period, there can be no assurance that such
Registration Statement will remain effective. The interest rate
on the Debentures shall be increased by 0.5% if the Company fails
to cause the Registration Statement to become effective by
December 21, 1995 or to maintain such effectiveness for a three-
year period, provided that such increase shall be effective only
for so long as the Registration Statement is not effective. See
"Description of Debentures."
Potential Future Sales of Stock
No prediction can be made as to the effect, if any, that
future sales of securities by the Company, or the availability of
shares for future sale, will have on the market price of the
Common Stock prevailing from time-to-time. Sales of Common Stock
or the perception that such sales may occur, could adversely
affect prevailing market prices for the Common Stock or the
Company's ability to raise capital in the future. In connection
with its Restructuring, the Company issued 33,333,333 shares of
Common Stock ("Issued Common Stock") and 10,000 shares of Series
A Preferred Stock ("Series A Preferred Stock"), the latter of
which were issued to the Company's group of bank lenders
(collectively, with any successors in interest, the "Bank
Lenders") and insurance company creditors ("Noteholders"),
convertible upon certain terms and conditions into Common Stock
and warrants ("Creditor's Warrants") to purchase an aggregate of
750,000 shares of Common Stock. 3,333,333 shares of the Issued
Common Stock, the Creditor's Warrants, the Common Stock
underlying the Creditor's Warrants, the Series A Preferred Stock,
and the Common Stock underlying the Series A Preferred Stock,
were issued to certain of the Company's creditors in connection
with the Restructuring pursuant to Section 1145 of the Bankruptcy
Code, and are therefore freely tradeable, to the extent such
creditors are not affiliates of the Company. Additionally,
769,446 shares of Common Stock were issued in February 1995 to
such creditors and 6,149,993 shares were sold in the public
offering authorized by the Plan of Reorganization confirmed in
connection with the Restructuring. All such shares are freely
tradeable. The remaining 30 million shares of Common Stock are
"restricted securities" as that term is defined in paragraph
(a)(3) of Rule 144 promulgated under the Securities Act, although
the Company has recently granted certain registration rights with
respect to 5,000,000 of such shares and intends to file a
registration statement related thereto with the Commission in the
near future. Also, the Company has outstanding options to
acquire 1,890,000 shares of Common Stock, granted in accordance
with Rule 701 of the Securities Act, which may be sold under
certain conditions and issued warrants to purchase 500,000 shares
of Common Stock to the Placement Agent and its authorized
dealers. See "Description of Other Securities." Future sales of
shares of the Common Stock, including those made under Rule 144
or in accordance with the resale provisions of Rule 701,
depending on the timing thereof, may (i) have an adverse effect
on the then prevailing market price, if any, of the Common Stock,
(ii) adversely affect the Company's ability to obtain future
financing in the capital markets, and (iii) also create a
potential large block of Common Stock coming into the market at
substantially the same time. However, the holders of such shares
of Common Stock and officers and directors of the Company, with
certain significant exceptions, have agreed to additional
restrictions on the transfer of their shares for a period of 12
months. See "Description of Debentures" and "Description of
Other Securities - Common Stock Eligible for Future Sale."
Anti-Takeover Provisions
Certain provisions of the Company's Certificate of
Incorporation and By-Laws, including provisions (i) authorizing
the Board of Directors to create new series of preferred stock,
including series of preferred stock that affect the voting rights
of Common Stock and may provide for conversion into Common Stock,
(ii) providing that any action requiring stockholder consent must
be effected at a meeting as opposed to by consent in writing and
(iii) setting forth that directors may only be removed for cause,
upon the affirmative vote of at least 80% of the voting
securities then outstanding, voting together as a single class,
may make it more difficult for a third party to make, or may
discourage a third party from making, an acquisition proposal for
the Company or initiating a proxy contest and may thereby inhibit
a change in control of the Company or the removal of incumbent
management or directors. There can be no assurance that the
issuance of one or more series of preferred stock will not be
authorized in the future. See "Description of Other Securities."
Certain Covenants
The Indenture pursuant to which the Debentures were issued
restricts, with certain exceptions and among other items, the
ability of the Company and, in certain cases, its subsidiaries
to: incur additional indebtedness, pay dividends or make
distributions or other restricted payments; consolidate, merge or
sell all or substantially all of their assets; create liens; sell
certain assets; sell or issue capital stock of the Company's
subsidiaries; make certain investments, loans and advances; enter
into transactions with affiliates; and make prepayments on
outstanding indebtedness other than Senior Indebtedness. These
covenants are subject to important exceptions and qualifications.
See "Description of Debentures."
THE COMPANY
General
Emerson, one of the nation's largest volume consumer
electronics distributors, directly and through subsidiaries,
designs, sources, imports and markets a variety of video and
audio consumer electronics and microwave oven products. The
Company distributes its products primarily through mass merchants
and discount retailers, leveraging on the strength of its
"Emerson and G-Clef" trademark, a nationally recognized trade name
in the consumer electronics industry. The trade name "Emerson
Radio" dates back to 1912 and is one of the oldest and most well respected
names in the consumer products industry. In addition, the Company offers
a line of audio products for sale under the "H.H. Scott" brand
name. Approximately $15 billion of factory sales are generated
by the industry in the market segment in which the Company
competes. In calendar year 1994, Emerson believes it was among
the top three brand names in unit sales volume of VCRs and TV/VCR
combinations and among the top five brand names in unit sales
volume of color televisions.
The Company believes it possesses an advantage over its
competitors due to the combination of the Emerson brand
recognition, its extensive distribution base and established
relations with customers in the mass merchant and discount retail
channels of distribution, its sourcing expertise and established
vendor relations, and an infrastructure boasting personnel
experienced in servicing and providing logistical support to the
domestic mass merchant distribution channel. Emerson intends to
leverage its core competencies to offer a broad variety of
current and new consumer products to retail customers in
developing markets worldwide. The Company intends to form joint
ventures and enter into licensing agreements which will take
advantage of the Company's trademarks and utilize the Company's
logistical and sourcing advantages.
The Company's core business consists of the distribution and
sale of various low to moderately priced product categories,
including black and white and color televisions, VCRs, VCPs,
TV/VCR combination units, home stereo and portable audio products
and microwave ovens. The majority of the Company's marketing and
sales of these products is concentrated in the United States and,
to a lesser extent, Canada and certain other international
regions. Emerson's major competition in these markets are
foreign-based manufacturers and distributors. See "Business."
The Company successfully restructured its financial position
through the Plan of Reorganization. Through the Restructuring,
the Company reduced its institutional debt by approximately $203
million. Additionally, the Company increased its net sales by
34% in Fiscal 1995, the fiscal year immediately following its
emergence from bankruptcy, as compared to the prior fiscal year.
Also, since Fiscal 1993, the Company has reduced its annual fixed
operating costs by more than 50%.
The Company was originally formed in the State of New York
in 1956 under the name Major Electronics Corp. In 1977 the
Company reincorporated in the State of New Jersey and changed its
name to Emerson Radio Corp. On April 4, 1994, the Company was
reincorporated in Delaware by merger of its predecessor into its
wholly-owned Delaware subsidiary formed for such purpose. The
Company's principal executive offices are located at Nine Entin
Road, Parsippany, New Jersey 07054-0430. The Company's telephone
number in Parsippany, New Jersey is (201) 884-5800. See
"Business - Properties."
Restructuring of the Company
In 1990, the Company defaulted on certain covenants in the
loan documents evidencing significant payment obligations to the
Noteholders. The Company subsequently, through several different
management teams, attempted for approximately three and a half
years to restructure such debt, as well as its lines of credit
with the Bank Lenders. No agreement could be reached with such
creditors. New management of the Company, consisting largely of
the current management of the Company, took control of the
Company's operations in July 1992. On September 29, 1993, the
Company and five of its domestic subsidiaries filed voluntary
petitions for relief under the Bankruptcy Code based upon an
agreement reached by the new management with the Bank Lenders.
On March 31, 1994, the Court entered an order confirming the Plan
of Reorganization implementing such agreement, which became
effective on such date. During the pendency of the proceedings,
the Company continued its operations in the ordinary course of
business. The Company was able to retain most of its senior
management and believes it maintained customer and supplier
goodwill and the confidence of its employees.
The principal components of the Plan of Reorganization
included the following:
The payment of $75 million to the Bank Lenders and the
Noteholders.
The issuance of (i) Common Stock of the reorganized
Company, such that the Bank Lenders and Noteholders
possess 10% of the Company's outstanding Common Stock
upon the effective date of the Plan of Reorganization
and subsequent to the completion of the offering
(described below) contemplated by the Plan of
Reorganization, (ii) 10,000 shares of Series A
Preferred Stock to the Bank Lenders and Noteholders,
having a face value of $10 million, and (iii)
Creditor's Warrants to the Noteholders to purchase
750,000 shares of Common Stock. See "Description of
Other Securities."
The issuance to Fidenas International, Elision and
GSE, upon the payment to the Company of $30 million, of
an aggregate of 90% of the Company's then outstanding
shares of Common Stock.
The transfer by the Company to a liquidating trust
established for the benefit of the Bank Lenders and
Noteholders of certain assets consisting of real estate
in Princeton, Indiana, and the Company's rights with
respect to certain anti-dumping duty receivables.
On the effective date of the Plan of Reorganization,
all then existing shares of common stock, stock options
and warrants were terminated and canceled.
Stockholders of the debtor company and third parties
(to the extent that the existing stockholders of the
debtor company did not purchase all of the offered
stock) were given the opportunity to purchase, at $1.00
per share, up to 15 million shares of Common Stock,
constituting approximately 30% of the outstanding
Common Stock of the Company, assuming a fully-
subscribed offering (6,149,993 shares of Common Stock
were sold in such offering).
The Company reincorporated under the laws of Delaware.
The payment of up to an aggregate of $1,850,000 of the
net proceeds of the offering to certain of the
Company's creditors.
The Plan of Reorganization effected a recapitalization of
the Company. After giving effect to the Plan of Reorganization:
The Company's total consolidated institutional debt
owed to its secured bank lenders and insurance company
noteholders was reduced by approximately $203 million,
from approximately $223 million immediately prior to
the effective date, to approximately $20 million
immediately subsequent to the effective date, which
consisted primarily of advances pursuant to a secured
revolving credit facility. The holders of the
prepetition institutional debt acquired 10% of the
Common Stock in connection with the Restructuring.
At the Plan of Reorganization's effective date,
stockholders' equity increased to approximately $42.6
million.
Commencing in early 1993 and continuing through the
reorganization proceedings, the Company successfully instituted a
series of downsizing and outsourcing measures to reduce the fixed
costs of the core consumer electronics business. As a result of
the outsourcing of several functions and the elimination of fixed
costs associated with such functions, the Company was able to
achieve a reduction in annual fixed costs from approximately
$59.1 million in the fiscal year ended 1993 to an anticipated
$25.7 million for the fiscal year ending in 1996, although there
can be no assurances that such reductions will be realized.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the
resale of any Debentures or sale of the shares of the Underlying
Common Stock by any of the Selling Securityholders. The Company
has and intends to use the proceeds from the initial sale of the
Debentures by the Company as described in "Management's
Discussion and Analysis of Results of Operations and Financial
Condition - Subsequent Events."
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of June 30, 1995, and as adjusted to give effect to the issuance by
the Company of $20,750,000 of Debentures and the initial application
of $19,373,000 of estimated net proceeds therefrom. This table should
be read in conjunction with the Consolidated Financial Statements, set
forth elsewhere in this Prospectus.
As of June 30, 1995
Actual As Adjusted
Short-term debt $ 25,677 $ 6,304
Long-term debt $ 193 $ 20,943
Shareholders' Equity (1):
Preferred stock, $0.01 par
value, 1,000,000 shares
authorized, 10,000 issued and 9,000 9,000
outstanding Common stock,
$0.01 par value,
75,000,000 shares
authorized, 40,252,772 shares 403 403
issued and outstanding;
Capital in excess of par value 107,969 107,969
Accumulated deficit (65,662) (65,662)
Cumulative translation 234 234
adjustment
Total shareholders' equity 51,944 51,944
Total capitalization $ 52,137 $ 72,887
________________
(1) Does not include an aggregate of 3,550,000 shares of
Common Stock issuable upon exercise of (i) 1,890,000
outstanding options exercisable at a weighted average exercise
price of $1.03 per share; (ii) 750,000 outstanding seven-year
warrants exercisable at an exercise price of $1.00 per share
until March 31, 1997 and escalating $0.10 per share per annum
thereafter until expiration (March 31, 2001); (iii) 410,000
options available for issuance under the Company's stock
option plans; and (iv) 500,000 outstanding five-year warrants
at an exercise price of $3.9875 per share granted to the
Placement Agent and its authorized dealers in connection with
the private placement of Debentures. Also does not include
shares of Common Stock issuable (i) from and after March 31,
1997, upon conversion of $10 million of Series A Preferred
Stock at a price equal to 80% of the average market value of a
share of Common Stock at the time of conversion; and (ii) upon
Conversion of the Debentures.
SELECTED CONSOLIDATED FINANCIAL DATA
The Company changed its fiscal year end from December 31 to March 31,
commencing with the period ended March 31, 1992. Previously, the Company
had changed its fiscal year-end from March 31 to December 31, beginning
with the period ended December 31, 1990. The following table sets forth
selected consolidated financial data of the Company for the years ended
March 31, 1995, 1994 and 1993, the three months ended March 31, 1992, the
year ended December 31, 1991 and the nine months ended December 31, 1990.
The selected consolidated financial data should be read in conjunction with
the Company's consolidated financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" set forth elsewhere in this Prospectus.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Three Three Three
Months Year Months Year Year Year Months Months
Ended Ended Ended Ended Ended Ended Ended Ended
Dec.31, Dec. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, June 30, June 30,
1990 1991 1992 1993 1994 1995 1994 1995
(In thousands, except per share and ratio data)
Summary of Operations:
Net Sales:
Core Business $528,809 $716,651 $169,936 $741,357 $487,390 $654,671 $137,140 $57,058
Personal Computers
and Other 96,609 73,555 1,562 - - - - -
625,418 790,206 171,498 741,357 487,390 654,671 137,140 57,058
Net Earnings (Loss) (1):
Before Extraordinary $(37,463) $(60,746) $(6,976) $ (56,000) $(73,654) $ 7,375 (2,894) (1,401)
Extraordinary Gain ________ ________ _______ _________ 129,155 ______ _______ _______
(37,463) $(60,746) $(6,976) $ (56,000) 55,501 7,375 (2,894) (1,401)
Per Common Share:
Net Earnings (Loss) Per Common
Share (1) (3):
Before Extraordinary
Gain $(1.03) (1.60) $ (0.18) $ (1.47) (1.93) $ 0.16 $(0.09) $ (0.03)
Extraordinary Gain _____ _____ _____ _______ 3.38 _______ ______ _______
$(1.03) (1.60) $ (0.18) $ (1.47) 1.45 $ 0.16 $(0.09) (0.03)
Weighted Average
Number of Common
and Common
Equivalent Shares
Outstanding $36,519 37,897 37,968 38,179 38,191 46,571 33,333 40,253
Common Shareholders'
Equity (Deficit((4) 1.78 0.12 $ (0.04) $ (1.52) 0.98 1.08 0.88 1.04
Ratio of Earnings
(Loss) to Combined
Fixed Charges and ( 1.85) (2.21) (0.60) (2.03) (6.16) 2.92 (3.74) (0.86)
Preferred Stock Dividends
Coverage Deficiency 13,978 18,546 4,217 18,257 10,243 -- 635 803
</TABLE>
<TABLE>
December 31, March 31, June 30, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 Actual Adjusted(5)
Balance Sheet Data:
Total Assets $300,366 $226,131 $ 216,693 $194,510 $119,021 $113,969 $103,422 $104,799
Current Liabilities 232,220 218,504 215,069 249,307 76,083 59,782 50,961 31,588
Long-Term Debt (2) 60 130 157 151 227 214 193 20,943
Shareholders'
Equity (Deficit) 65,139 4,550 ( 1,480) (57,895) 42,617 53,651 51,944 51,944
Working Capital
(Deficit) 31,111 (29,503) (36,003) (89,949) 32,248 42,598 39,871 59,244
Current Ratio 1.1 to 1 0.9 to 1 0.8 to 1 0.6 to 1 1.4 to 1 1.7 to 1 1.8 to1 2.9 to 1
</TABLE>
______________________________
(1) The net earnings for Fiscal 1994 include an extraordinary
gain of $129,155,000, or $3.38 per common share, on the
extinguishment of debt settled in the Plan of Reorganization.
Additionally, the Company recorded reorganization expenses of
$17,385,000 relating primarily to the writedown of assets
transferred to creditors under the Plan of Reorganization and
professional fees and other related expenses incurred during
the bankruptcy proceedings. The results of operations for
Fiscal 1993, the three months ended March 31, 1992 and the
year ended December 31, 1991 include restructuring and other
nonrecurring charges aggregating $35,002,000, $3,698,000 and
$36,964,000, respectively. These charges represent the cost
of discontinuing the personal computer business, professional
fees and other expenses related to the Company's financial
restructuring, and the up-front costs and writedowns of
certain assets associated with implementing long-term cost
reduction programs. Charges for Fiscal 1993 also include
costs related to the Company's proxy contest settled in June
1992. The year ended December 31, 1991 also includes charges
related to the discontinuance of the H.H. Scott domestic
business.
(2) The aggregate outstanding principal balance of the
Company's senior notes has been classified as current as of
March 31, 1993 and 1992, and December 31, 1991 and 1990.
(3) Net earnings (loss) per common share for all periods,
except Fiscal 1995 and the three months ended June 30, 1994
and 1995, are based on the weighted average number of old
common shares outstanding during each period. Net earnings
per common share for Fiscal 1995 is based on the weighted
average number of shares of new Common Stock and related
common stock equivalents outstanding during the year. Common
Stock equivalents include 9,081,000 shares assuming conversion
of $10 million of Series A Preferred Stock at a price equal to
80% of the weighted average market value of a share of Common
Stock, determined on a quarterly basis. Since the Series A
Preferred Stock is not convertible into Common Stock until
March 31, 1997, the number of shares issuable upon conversion
may be significantly different. Net loss per common share for
the three months ended June 30, 1994 and 1995 is based on the
weighted average number of shares of new Common Stock
outstanding during each period. The net loss per share for
both periods does not include common stock equivalents assumed
outstanding since they are anti-dilutive.
(4) Calculated based on common shareholders' equity
(deficit) divided by actual shares of Common Stock
outstanding. Common shareholders' equity at March 31, 1994
and 1995 and June 30, 1994 and 1995 are equal to total
shareholders' equity less $10 million for the liquidation
preference of the Series A Preferred Stock.
(5) Balance sheet data is adjusted to give effect to the
initial application of the estimated net proceeds of
$19,373,000 from the issuance of $20,750,000 of Debentures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
General
On March 31, 1994, the Company emerged from bankruptcy
pursuant to the Plan of Reorganization which resulted in a net
reduction of approximately $203 million in institutional debt,
cancellation of the Company's old common stock and other
equity, the issuance of 30 million shares of Common Stock for
$30 million and the issuance of certain equity securities to
certain of the Company's former creditors. The Restructuring
substantially reduced the Company's debt service costs and
significantly improved the Company's financial condition. The
Company experienced a significant improvement in its United
States sales in Fiscal 1995 over Fiscal 1994. However, the
Company expects sales for Fiscal 1996 to decline from Fiscal 1995
due to a license agreement entered into with the Company's
largest supplier (as described below).
On February 22, 1995, the Company and Otake, the Company's
largest supplier, entered into two mutually contingent agreements
(the "Agreements"). Effective March 31, 1995, the Company
granted a license of certain trademarks to Otake for a three-year
term. The license permits Otake to manufacture and sell certain
video products under the "Emerson and G-Clef" trademark to
Wal-Mart, the Company's largest customer, in the United States and
Canada. As a result, the Company will receive royalties attributable
to such sales over the three-year term of the Agreements in lieu
of reporting the full dollar value of such sales and associated costs.
Net sales of these products to Wal-Mart accounted for approximately
47% of consolidated net sales for Fiscal 1995. The Company will
continue to supply other products to Wal-Mart directly. Further,
the Agreements provide that Otake will supply the Company with
certain video products for sale to other customers at preferred
prices for a three-year term. Under the terms of the Agreements,
the Company will receive non-refundable minimum annual royalties
from Otake to be credited against royalties earned from sales of
VCRs, VCPs, TV/VCR combination units, and color televisions to
Wal-Mart. In addition, effective August 1, 1995, Otake assumed
responsibility for returns and after-sale and warranty services
on all video products manufactured by Otake and sold to Wal-Mart,
including video products sold by the Company prior to August 1,
1995. As a result, the impact of sales returns on the Company's
net sales and operating results are expected to be significantly
reduced commencing with the second quarter of Fiscal 1996. The
Company has reported lower direct sales in the quarter ended June
30, 1995 and expects to report lower direct sales in Fiscal 1996
as a result of the Agreements, but no negative material impact is
expected on its net operating results for such year. The Company
expects to realize a more stable cash flow over the three-year
term of the Agreements, and expects to reduce short-term
borrowings used to finance accounts receivable and inventory,
thereby reducing interest costs.
The Company reported a significant decline in its net
direct sales for the first quarter of Fiscal 1996 as compared to
the same period in Fiscal 1995 primarily due to the licensed
video sales. However, the Company's United States sales to other
customers also declined in the current quarter due to increased
price competition, primarily in video product categories, higher
retail stock levels, a slowdown in retail activity and the higher
levels of sales achieved in the first quarter of Fiscal 1995.
The Company expects its United States sales for the second
quarter of Fiscal 1996 to remain comparable with the second
quarter of Fiscal 1995, exclusive of the licensed video sales.
Net sales of video product to Wal-Mart in the second quarter of
Fiscal 1995 (quarter ended September 30, 1994) were $104,357,000,
or 53% of consolidated net sales.
The Company's operating results and liquidity are impacted
by the seasonality of its business. The Company records the
majority of its annual sales in the quarters ending September 30
and December 31 and receives the largest percentages of customer
returns in the quarters ending March 31 and June 30. Therefore,
the results of operations discussed below are not necessarily
indicative of the Company's prospective annual results of
operations.
Results of Operations --Three Months Ended June 30, 1995
Compared With Three Months Ended June 30, 1994
Consolidated net sales for the three month period ended June
30, 1995 decreased $80,082,000 (58%) as compared to the same
period in Fiscal 1995. The effects of the Agreements described
above accounted for approximately 80% (or $64,452,000) of the
decrease in sales, net of licensing revenues received, and as a
result, sales to Wal-Mart were reduced to 16% of consolidated net
sales for the first quarter of Fiscal 1996, as compared to 49%
for the same period in Fiscal 1995. Net sales to Wal-Mart of
video products bearing the "Emerson and G-Clef" trademark was
reported by Otake to the Company to be $61,307,000 for the first quarter
of Fiscal 1996. In addition, the decrease resulted from lower unit
sales of VCRs, televisions and TV/VCR combination units due to higher
retail stock levels and increased price competition in these
product categories. Furthermore, the Company's European sales
decreased $6.5 million relating to the Company's discontinuance
of its Spanish branch office, and plan to sell products in Spain
through a distributor. See "Certain Relationships and Related
Transactions."
Cost of sales, as a percentage of consolidated sales, was
89% for the three month period ended June 30, 1995 as compared to
94% for the same period in Fiscal 1995. Gross profit margins in
the three month period ended June 30, 1995 were favorably
impacted by a change in product mix, the recognition of licensing
income, reduced reserve requirements for sales returns due
primarily to the Agreements with Otake, and reduced fixed costs
associated with the downsizing of the Company's foreign offices,
partially offset by lower sales prices.
Other operating costs and expenses declined $1,135,000 in
the three month period ended June 30, 1995 as compared to the
same period in Fiscal 1995, primarily as a result of a decrease
in compensation expense and other expenses incurred to process
product returns, both relating to the Company's downsizing
program and change in the resale arrangement for product returns.
Selling, general and administrative expenses ("S, G & A") as
a percentage of sales, was 9% for the three month period ended
June 30, 1995, as compared to 6% for the same period in Fiscal
1995. In absolute terms, S,G&A decreased by $2,613,000 in the
three month period ended June 30, 1995 as compared to the same
period in Fiscal 1995. The decrease was primarily attributable
to lower compensation expense relating to the Company's
downsizing program in both the United States and in its foreign
offices, and lower selling expenses attributable to the lower
sales. The increase in the S,G&A percentage of sales is due
primarily to the allocation of fixed S,G&A costs over a
significantly lower sales base resulting from the licensing of
video sales. Additionally, the Company's exposure to foreign
currency fluctuations, primarily in Canada and Spain, resulted in
the recognition of net foreign currency exchange gains
aggregating $432,000 and $401,000 in the three month periods
ended June 30, 1995 and 1994, respectively.
Interest expense increased by $168,000 in the three month
period ended June 30, 1995 as compared to the same period in
Fiscal 1995. The increase in interest expense in the current
quarter was attributable to higher average borrowings and higher
interest rates. The average rate in effect for the three month
periods ended June 30, 1995 and 1994 was approximately 11.3% and
9.1%, respectively.
As a result of the foregoing factors, the Company incurred a
net loss of $1,401,000 for the three month period ended June 30,
1995, compared to a net loss of $2,894,000 for the same period in
Fiscal 1995.
Results of Operations -- Fiscal 1995 Compared with Fiscal 1994
Consolidated net sales for Fiscal 1995 increased
$167,281,000 as compared to Fiscal 1994, resulting from a
significant increase in unit sales of VCRs, VCPs and TV/VCR
combination units, partially offset by a decline in unit sales of
color televisions and audio products, as well as lower sales
prices for such products. The sales increase for the VCR, VCP
and TV/VCR product categories was attributable to significantly
higher sales to the Company's two largest customers, resulting
from an improved retail climate, low retail stock levels after
the 1993 holiday season, and an improved perception of the
Company by retailers since its emergence from bankruptcy. Net
sales to the Company's largest customer approximated 53% of
consolidated net sales for Fiscal 1995. The Company's Canadian
operations experienced a decline in net sales for Fiscal 1995 due
to declines in unit volume and sales prices (relating to a weak
retail climate) and unfavorable foreign currency exchange rates.
Cost of sales, as a percentage of consolidated sales, was
approximately 92% for Fiscal 1995 as compared to approximately
100% for Fiscal 1994. Gross profit margins were favorably
impacted by the allocation of fixed overhead costs over a
significantly higher sales base, a decline in fixed overhead
costs, reduced losses associated with product returns, the
recognition of $9.9 million of purchase discounts from a
supplier, $1.2 million of licensing income and reduced reserve
requirements for sales returns due primarily to an agreement with
the Company's largest supplier. See "Liquidity and Capital
Resources." This improvement was partially offset by a 1%
decline in gross profit margins attributable to lower sales
prices in most product categories resulting from increased price
competition, and a change in product mix.
The Company's margins continue to be impacted by the pricing
category of the consumer electronics market in which the Company
competes. The Company's products are generally placed in the low-
to-medium priced category of the market. These categories tend
to be the most competitive and generate the lowest profits. The
Company intends to focus on its higher margin products and is
reviewing new product categories that can generate higher margins
than the current business, either through license arrangements,
joint ventures or on its own.
Other operating costs and expenses declined $3,230,000 in
Fiscal 1995 as compared to Fiscal 1994, primarily as a result of
a decrease in compensation and other expenses incurred to process
product returns, due to the Company's downsizing program and
changes in the resale arrangement for product returns. See
"Business - Refurbished Products."
S,G&A, as a percentage of sales, was 5% and 7% for Fiscal
1995 and Fiscal 1994, respectively. In absolute terms, S,G&A
decreased $3,505,000 in Fiscal 1995. The decrease was primarily
attributable to lower compensation expense relating to the
Company's downsizing program, lower selling expenses, including
decreases in promotional allowances granted to customers, and
improved foreign currency results. The Company's exposure to
foreign currency fluctuations, primarily in Canada and Spain,
resulted in net foreign currency exchange gains aggregating
$354,000 in Fiscal 1995 as compared to net foreign currency
exchange losses of $1,406,000 in Fiscal 1994. In Fiscal 1996,
the Company intends to reduce its foreign currency exposure by
conducting its European business in U.S. dollars.
The Company has implemented additional cost reductions in
the first quarter of Fiscal 1996 by reducing the infrastructure
of its foreign offices, which should improve the Company's
operating results in Fiscal 1996.
Interest expense decreased $7,361,000 in Fiscal 1995 as
compared to Fiscal 1994. The decrease was attributable to the
extinguishment of approximately $203 million of institutional
debt in connection with the Restructuring, effective March 31,
1994, and a moratorium on interest accrued on pre-petition
indebtedness during the pendency of the Company's bankruptcy
proceedings in Fiscal 1994.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses
incurred in the bankruptcy proceedings, and the writedown of
certain assets transferred to a liquidating trust pursuant to the
bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment
of debt of $129,155,000 in Fiscal 1994. This gain related to the
settlement of the Company's pre-petition liabilities, as a result
of the Company's emergence from bankruptcy.
As a result of the foregoing factors, the Company earned
$7,375,000 and $55,501,000 for Fiscal 1995 and Fiscal 1994,
respectively.
Results of Operations -- Fiscal 1994 Compared with Fiscal 1993
Consolidated net sales for Fiscal 1994 decreased
$253,967,000 as compared to Fiscal 1993, resulting from a
significant decrease in unit sales of VCR/VCP and television
products, as well as lower sales prices for the same product
categories. The sales decline was attributable to the effect of
the Restructuring and the Company's financial condition on the
retailers' perception of the Company, a cautious outlook
maintained by retailers over inventory levels, excess stock at
the retail level and increased price competition in the Company's
major product categories.
Cost of sales, as a percentage of consolidated sales, was
approximately 100% for Fiscal 1994 as compared to approximately
91% for Fiscal 1993. Gross profit margins were negatively
impacted by a $6.3 million increase in the reserve for sales
returns and were impacted further by the allocation of fixed
overhead costs over a significantly lower sales base, sales price
decreases which were in excess of price reductions received from
suppliers, and significant costs and inventory writedowns
associated with product returns. Additionally, gross margins
earned by the Company's foreign operations were adversely
impacted by a decline in the Canadian dollar and Spanish peseta
of 9% and 16%, respectively, from March 31, 1993 to March 31,
1994. Although the Company entered into foreign currency
contracts to minimize its exposure to foreign currency
fluctuations in Europe, it lacked the necessary working capital
to hedge all its foreign currency commitments.
Other operating costs and expenses declined $7,025,000 in
Fiscal 1994, as compared to Fiscal 1993, primarily as a result of
a reduction in compensation costs relating to the Company's
downsizing program and lower warranty expenses associated with
the decline in the Company's net sales.
S,G & A, as a percentage of sales, was 7% for Fiscal 1994
and Fiscal 1993. In absolute terms, S,G&A decreased by
$14,956,000 in Fiscal 1994 as compared to Fiscal 1993. In terms
of actual cost, the decrease in Fiscal 1994 was primarily
attributable to lower variable selling expenses, including
decreases in promotional allowances granted to customers, sales
commissions, facility and compensation costs relating to the
Company's downsizing program and a decrease in reserves against
the Company's accounts receivable.
Interest expense decreased by $8,014,000 in Fiscal 1994 as
compared to Fiscal 1993. The decrease was attributable to the
moratorium on interest accrued on pre-petition indebtedness for
the six month period ended March 31, 1994. Interest expense was
only accrued and paid on the Company's debtor-in-possession
financing during the pendency of the bankruptcy proceedings.
During Fiscal 1993, the Company recorded restructuring and
other nonrecurring charges aggregating $35,002,000. The
provision included $31.9 million of charges related to the
Company's core business operations of consumer electronics
products. These charges are primarily comprised of certain costs
associated with the consolidation of facilities, severance of
employees ($3,967,000 provision for termination of officers and
other employees), the writedown of certain assets, a provision
relating to a significant change in the resale arrangement for
returned product, and professional fees and other charges related
to the Company's proposed financial restructuring and to the
proxy contest settled in June 1992. The provision also included
$3.1 million in charges relating to the final wind-down of the
Company's personal computer business.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses
incurred in the bankruptcy proceedings, and the writedown of
certain assets transferred to a liquidating trust pursuant to the
bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment
of debt of $129,155,000 in Fiscal 1994. This gain related to the
settlement of the Company's pre-petition liabilities, as a result
of the Restructuring.
As a result of the foregoing factors, the Company earned
$55,501,000 for Fiscal 1994, compared to a net loss of
$56,000,000 for Fiscal 1993.
Liquidity and Capital Resources
Net cash provided by operating activities was $1,428,000 for
the three months ended June 30, 1995. Cash was provided by a
decrease in accounts receivable partially offset by a loss from
operations. The decrease in accounts receivable was due to a
decrease in sales and an increase in cash collections in the
current quarter.
Net cash utilized by investing activities was $1,177,000 for
the three months ended June 30, 1995. Investing activities
consisted primarily of capital expenditures for the purchase of
new product molds.
In the three months ended June 30, 1995, the Company's
financing activities utilized $2,797,000 of cash. The Company
reduced its borrowings under its United States line of credit
facility by $2,077,000 through the collection of accounts
receivable.
Net cash utilized by operating activities was $20,974,000
for Fiscal 1995. Cash was utilized to purchase inventory for
sale which resulted in increased sales and accounts receivable.
The increase in accounts receivable also reflects sales of
returned product to a 50% owned joint venture that has a net
payable to the Company of $15,283,000 at March 31, 1995. See
"Business - Refurbished Products." Further, a reduction in
accounts payable to the Company's largest supplier (as noted
below) and a reduction of a large customer's credit balance,
negatively impacted cash.
Net cash provided by investing activities was $5,691,000 for
Fiscal 1995. Investing activities consisted primarily of a
redemption of pledged certificates of deposit, net of capital
expenditures, primarily for new product molds. The redemption of
the pledged certificates of deposit relates primarily to a draw-
down of an $8 million standby letter of credit by the Company's
largest supplier against a certificate of deposit for the same
amount, fulfilling commitments made during the Restructuring.
In Fiscal 1995, the Company's financing activities provided
$10,680,000 of cash. The Company increased borrowings under its
U.S. line of credit facility by $7,256,000 to finance the higher
accounts receivable levels and reduce accounts payable.
Additionally, the Company generated net proceeds of $5,692,000
from an initial public offering of Common Stock, as described
below.
On September 29, 1993, the Company and five of its U.S.
subsidiaries filed voluntary petitions for relief under the
reorganization provisions of Chapter 11 of the United States
Bankruptcy Code and operated as debtors-in-possession under the
supervision of the Bankruptcy Court while their reorganization
cases were pending. The precipitating factor for these filings
was the Company's severe liquidity problems relating to its high
level of indebtedness and a significant decline in sales from the
prior year.
Effective March 31, 1994, the Bankruptcy Court entered an
order confirming the Plan of Reorganization. The Plan of
Reorganization provided for the implementation of a
recapitalization of the Company. In accordance with the Plan of
Reorganization, the Company's pre-petition liabilities (of
approximately $233 million) were settled with the creditors in
the aggregate, as follows:
I. The Bank Lenders received $70 million in cash and
the right to receive the initial $2 million of net proceeds
from the Company's anti-dumping duty receivable.
II. The Noteholders initially received $2,650,000 in
cash and warrants to purchase 750,000 shares of Common Stock
for a period of seven years at an exercise price of $1.00
per share, provided that the exercise price shall increase
by 10% per year commencing in year four, and further
received $1 million, payable $922,498 in cash from the
initial public offering of Common Stock and $77,502 in
Common Stock calculated on the basis of $1.00 per share.
III. The Bank Lenders and Noteholders received their
pro rata percentage of the following:
A. $2,350,000 in cash (however $350,000 of this
amount was distributable to the holders of allowed
unsecured claims);
B. 10,000 shares of Series A Preferred Stock with
a face value of $10 million (estimated fair market
value of approximately $9 million at March 31,
1994);
C. 4,025,277 shares of Common Stock, including
691,944 shares issued in February 1995 pursuant to
an anti-dilution provision;
D. The net proceeds from the sale of the
Company's Indiana land and building; and
E. The net proceeds to be received from the
Company's anti-dumping duty receivable in excess
of $2 million .
IV. Holders of allowed unsecured claims received a
pro-rata portion of the $350,000 distribution and interest
bearing promissory notes equal to 18.3% of the allowed claim
amount, payable in two installments over 18 months. See
"Legal Proceedings."
In accordance with the Plan of Reorganization, the Company
completed an initial public offering of its Common Stock in
September 1994 to shareholders of record as of March 31, 1994,
excluding Fidenas Investment Limited ("FIL"). The Company sold
6,149,993 shares of Common Stock for $1.00 per share resulting in
proceeds to the Company, net of issuance costs, of $5,692,000.
The Company maintains an asset-based revolving credit
facility with a U.S. financial institution (the "Lender"). The
facility provides for revolving loans and letters of credit,
subject to individual maximums which, in the aggregate, cannot
exceed the lesser of $60 million or a "Borrowing Base" amount
based on specified percentages of eligible accounts receivable
and inventories. Credit extended under the line is secured by
the U.S. and Canadian assets of the Company. Until August 24,
1995, the interest rate on these borrowings was 2.25% above the
prime rate. "Management's Discussion and Analysis of Results of
Operations and Financial Condition - Subsequent Events." At June
30, 1995, the weighted average interest rate on the outstanding
borrowings was 11.25%. The facility is also subject to an unused
line fee of 0.5% per annum. Pursuant to the terms of this credit
facility, the Company is restricted from, among other things,
paying cash dividends (other than on the Series A Preferred
Stock), redeeming stock, and entering into certain transactions
and is required to maintain certain working capital and equity
levels (as defined). The Company is required to maintain a
minimum net worth of $42,000,000, excluding net proceeds received
by the Company from the sale of equity securities, which minimum
will increase to $50,000,000, effective January 1, 1996. At June
30, 1995, there was approximately $25.2 million outstanding under
the revolving loan facility, and approximately $2.1 million of
outstanding letters of credit issued for inventory purchases.
Based on the "Borrowing Base" amount at June 30, 1995, $2,939,000
of the credit facility was not utilized.
The Company's Hong Kong subsidiary maintains various credit
facilities aggregating $114.3 million with a bank in Hong Kong
consisting of the following: (i) a $12.3 million credit facility
which is generally used for letters of credit for a foreign
subsidiary's direct import business and affiliates' inventory
purchases, (ii) a $2 million standby letter of credit facility,
and (iii) a $100 million credit facility, for the benefit of a
foreign subsidiary, which is for the establishment of back-to-
back letters of credit with the Company's largest customer. At
June 30, 1995, the Company's Hong Kong subsidiary had pledged $4
million in certificates of deposit to this bank to assure the
availability of these credit facilities. At June 30, 1995, there
were $11.9 million and $9.9 million, respectively, of letters of
credit outstanding under the $12.3 million and $100 million
credit facilities.
The Company's Hong Kong subsidiary maintains an additional
credit facility with another bank in Hong Kong. The facility
provides for a $10 million line of credit for documentary letters
of credit and a $10 million back-to-back letter of credit line,
collateralized by a $5 million certificate of deposit. At June
30, 1995, the Company's Hong Kong subsidiary had pledged $5.1
million in certificates of deposit to assure the availability of
these credit facilities. At June 30, 1995, these credit
facilities were not utilized.
Management's strategy to compete more effectively in the
highly competitive consumer products market in the United States
and Canada, is to combine innovative approaches to the Company's
current product line, such as value-added promotions, augment its
product line with higher margin complementary products, including
personal and home security products, a home theater system, ready-
to-assemble furniture, clocks and watches, and car audio products
and engage in the sale of distribution, sourcing and other
services to third parties. Management believes that these new
products and services will contribute to the Company's sales and
operating results commencing in the second half of Fiscal 1996.
The Company also intends to undertake efforts to expand the
international distribution of its products into areas where
management believes low to moderately priced, dependable consumer
electronics and microwave oven products will have a broad appeal.
The Company has in the past and intends in the future to pursue
such plans either on its own or by forging new relationships,
including through license arrangements, partnerships or joint
ventures.
In Fiscal 1995, the Company concluded licensing agreements
for existing core business products and new products. The
Company intends to pursue additional licensing opportunities and
believes that such licensing activities will have a positive
impact on net operating results by generating royalty income with
minimal costs, if any, and without the necessity of utilizing
working capital or accepting customer returns.
Short-Term Liquidity. At present, management believes that
cash flow from operations, the institutional financing noted
above and the sale of Debentures described below will be
sufficient to fund all of the Company's cash requirements for the
next year for its core business and to exploit new business
opportunities. The Company has also restructured its United
States secured credit facility as described below. Cash flow
from operations will be negatively impacted by any increase in
the prime rate of interest and by a decrease in the proportion of
the Company's direct import sales to consolidated sales. A lower
percentage of direct import sales will require increased use of
the Company's United States secured credit facility with the
Lender and may restrict growth of the Company's sales.
The Company's liquidity is also impacted by the seasonality
of its business. The Company records the majority of its annual
sales in the quarters ending September 30 and December 31. This
requires the Company to open significantly higher amounts of
letters of credit during the quarters ending June 30 and
September 30, therefore significantly increasing the Company's
working capital needs during this period. Additionally, the
Company receives the largest percentage of customer returns in
the quarters ending March 31 and June 30. The high level of
returns during this period adversely impacts the Company's
collection activity during this period, and therefore its
liquidity. The Company believes that its recent Agreements with
Otake (as noted above) should favorably impact the Company's cash
flow over the three-year term of the Agreements.
Long-Term Liquidity. The revolving credit facility with the
Lender imposes financial covenants on the Company that could
materially affect its liquidity in the future. However,
management believes that the financing noted above and cash flow
from operations will provide sufficient liquidity to meet the
Company's operating and debt service cash requirements on a
long-term basis for its current core business.
Inflation and Foreign Currency
Except as disclosed above, neither inflation nor currency
fluctuations had a significant effect on the Company's results of
operations during the three months ended June 30, 1995, Fiscal
1995, Fiscal 1994 or Fiscal 1993. The Company's exposure to
currency fluctuations has been minimized by the use of U.S.
dollar denominated purchase orders, and by sourcing production in
more than one country. However, the strength of the Japanese Yen
in 1995 has raised the costs of certain raw materials and
subassemblies of the Company's suppliers which has been passed on
to the Company in the form of price increases in Fiscal 1996.
There can be no assurance that the Company will be able to
recover such price increases from the selling price to its
customers. To mitigate the impact of the Yen, the Company has
been able to negotiate lower prices from new sources of supply
for certain audio products commencing primarily in the second
half of Fiscal 1996.
Subsequent Events
On August 30, 1995, the Company completed its private
placement of $20,750,000 aggregate principal amount of Debentures
to certain QIBs and institutional Accredited Investors, resulting
in net proceeds to the Company of approximately $19,373,000 after
the payment of commissions and other expenses of such offering.
The proceeds of this offering initially were used to reduce the
Company's United States secured credit facility. As of September
15, 1995, there was approximately $19.5 million of such
outstanding Senior Indebtedness.
The Company currently intends to utilize a portion of the
net proceeds of such offering or, alternatively, availability
under such United States secured credit facility, as follows: (i)
repayment of an intercompany balance with a foreign subsidiary;
(ii) finance development of a home theatre system; (iii) finance
development of the "H.H. Scott" product line; (iv) finance
development of an Emerson mobile audio product line; (v) working
capital; and (vi) acquisitions. To date, the Company does not
have any signed contracts, letters of intent, or agreements in
principle with respect to any acquisitions and is not currently
engaged in any significant negotiations to make any such
acquisition.
The allocation of net proceeds from the offering of the
Debentures by the Company set forth in this Prospectus represents
the Company's current estimates based upon its present plans and
certain assumptions, including plans and assumptions regarding
the Company's business and assumptions regarding the industry and
general economic and other conditions. If any of those factors
change, the Company may find it necessary or advisable to
reallocate some of the proceeds for other purposes.
The Company has also amended its United States secured
credit facility effective as of August 24, 1995. The amendment
includes, among other things, a reduction of 1% in the interest
rate charged on borrowings, down to 1.25% above the stated prime
rate, an extension on the term of the facility for one additional
year to March 1998, an increase in working capital requirements,
a reduction of other loan fees and charges under such facility
and the release of the Lender's security interests in the
trademarks of the Company. The trademarks are subject to a
negative pledge covenant. The modifications to its United States
secured credit facility, together with the net proceeds from the
sale of the Debentures, should enable the Company to
significantly reduce its costs of borrowings while permitting the
Company to expand its product lines and distribution base as
described above.
BUSINESS
General
Emerson, one of the nation's largest volume consumer
electronics distributors, directly and through subsidiaries,
designs, sources, imports and markets a variety of video and
audio consumer electronics and microwave oven products. The
Company distributes its products primarily through mass merchants
and discount retailers, leveraging on the strength of its
"Emerson and G-Clef" trademark, a nationally recognized trade name
in the consumer electronics industry. The trade name "Emerson
Radio" dates back to 1912 and is one of the oldest and most well
respected names in the consumer products industry. In addition, the
Company offers a line of audio products for sale under the
"H.H. Scott" brand name. Approximately $15 billion of factory sales
are generated by the industry in the market segment in which the
Company competes. In calendar year 1994, Emerson believes it was among
the top three brand names in unit sales volume of VCRs and TV/VCR
combinations and among the top five brand names in unit sales
volume of color televisions.
The Company believes it possesses an advantage over its
competitors due to the combination of the Emerson brand
recognition, its extensive distribution base and established
relations with customers in the mass merchant and discount retail
channels of distribution, its sourcing expertise and established
vendor relations, and an infrastructure boasting personnel
experienced in servicing and providing logistical support to the
domestic mass merchant distribution channel. Emerson intends to
leverage its core competencies to offer a broad variety of
current and new consumer products to retail customers in
developing markets worldwide. The Company intends to form joint
ventures and enter into licensing agreements which will take
advantage of the Company's trademarks and utilize the Company's
logistical and sourcing advantages.
The Company's core business consists of the distribution and
sale of various low to moderately priced product categories,
including black and white and color televisions, VCRs, VCPs,
TV/VCR combination units, home stereo and portable audio products
and microwave ovens. The majority of the Company's marketing and
sales of these products is concentrated in the United States and,
to a lesser extent, Canada and certain other international
regions. Emerson's major competition in these markets are
foreign-based manufacturers and distributors.
The Company successfully restructured its financial position
through the Plan of Reorganization. Through the Restructuring,
the Company reduced its institutional debt by approximately $203
million. Additionally, the Company increased its net sales by
34% in Fiscal 1995, the fiscal year immediately following its
emergence from bankruptcy, as compared to Fiscal 1994. Also,
since Fiscal 1993, the Company has reduced its annual fixed
operating costs by more than 50%. See "The Company -
Restructuring of the Company."
Industry
Consumer electronics products play a major role in the
entertainment, information and education industries and provide
consumers with affordable options in these areas. Based on
industry sources, sales of consumer electronics products set all
time sales records in 1994, with estimated factory sales of
approximately $55.9 billion.
The consumer electronics industry comprises over 30
different categories of products. Of these, the largest
categories are personal computers, color televisions, auto sound,
computer peripherals, electronic software, VCRs, portable audio,
batteries, computer software, camcorders, audio systems and
telephone products. These categories represent $38.3 billion of
factory sales, or approximately 69% of the consumer electronics
industry. The specific product categories in which the Company
competes represent approximately $15 billion of factory sales, or
approximately 25% of the consumer electronics industry.
The consumer electronics industry factory sales data shown
in the table below are based on information provided by the
Electronics Industries Association:
Consumer Electronics Industry
Annual Factory Sales Dollars
Calendar 1991-1995
(Billions)
1991 1992 1993 1994 1995
Actual Actual Actual Estimated Projected
$42.08 $46.2 $51.03 $55.9 $59.8
Emerson sells a wide range of video, audio and microwave
oven products. The Company's significant sales volume is the
result of offering what management believes are well featured,
value priced products primarily to mass merchants, warehouse
clubs and catalog showrooms.
Company Products
The Company directly and through subsidiaries designs,
sources, imports and markets a variety of video and audio
consumer electronics and microwave oven products, primarily on
the strength of its "Emerson and G-Clef" trademark, a nationally
recognized symbol in the consumer electronics industry. The
Company's core business currently consists of the following video and
audio product categories as well as microwave ovens:
Video Products Audio Products
Color Televisions Shelf systems
Black and White Specialty CD stereo systems
Televisions
Color Specialty Televisions Portable audio,
cassette and CD
systems
Color TV/VCR Combination Unit AM/FM Bicycle radios
Video Cassette Recorders Personal audio,
cassette and CD
systems
Speciality Video Cassette Players Digital clock radios
Televisions:
Management believes that market saturation for color
televisions is extensive and that more than one-half of its
television sales will be replacement sets. Emerson intends to
capitalize on its strength in the small screen categories while
moving into the growing and more profitable larger screen sizes.
Emerson will continue to offer innovative new features and
contemporary styling.
VCRs and Combination Units:
Approximately 85% of all U.S. households have at least one
VCR. Industry sales reporting practices appear to indicate
modest growth rates in VCRs, with consumers purchasing both stand-
alone VCRs and the TV/VCR combination product. Emerson was one
of the first companies to sell VCRs through the discount store
channel of distribution. As the category began to mature, the
discount store channel experienced explosive sales growth,
resulting in a large market share for the "Emerson and G-Clef"
brand. In 1988, Emerson introduced the industry's first TV/VCR
combination product in the United States market. Since that time,
the Company has remained among the industry leaders. The Company
intends to maintain its leadership position through the
introduction of new, larger screen sizes and trendy fashion
colors in small screen models.
Audio:
Emerson competes in the following product categories within
the audio segment:
Clock Radios: In the clock radio category, Emerson
maintains a strong market share. The Company was one of the
first to offer models with large clock displays and continues to
introduce new products.
Headphone Stereo: Portable headset audio sales have
remained flat in the 1990's and this trend is expected to
continue. The Company is also developing a line of "active
series" products to tap into the fitness trend in the United
States.
Personal CD: With sales increases of 32% in 1994 and 18%
projected (based upon management's best estimate) in 1995, the
personal compact disc market continues to expand. Beginning in
1995, Emerson will introduce new products and programs to attempt
to gain a stronger position in this market.
Non-CD Portable Stereo: While the total "Boombox" category
is growing due to the strong sales of CD units, non-CD sales have
been declining rapidly. While maintaining a dominant position in
the entry level product area, the Company will attempt to expand
its presence in step-up products.
Portable CD/Radio/Cassette: The Company will increase its
emphasis on CD's. Emerson will offer CD combination models with
step-up features, while attempting to price such products below
its competition.
Shelf Systems: Shelf systems remain a growth area for the
industry. The category has dramatically shifted to digital with
93% of the unit sales in CD based systems in 1994.
Microwave Ovens:
The microwave category allows Emerson to merchandise its
products and promote its brand name in other departments. As a
result, the "Emerson and G-Clef" brand name is known in housewares
and appliance departments.
Emerson will maintain its focus in the under $150 price
range. The Company will attempt to gain market share by offering
better styled products with more features and greater dealer
margin, in conjunction with "Emerson and G-Clef" brand name
recognition to enhance sales to entry level purchasers. The Company
is also introducing ready-to-assemble furniture and home and personal
security products to complement its current product line.
Growth Strategy
The Company's strategic focus is to develop and expand its
distribution of consumer electronics products in the domestic
marketplace to new customers and the development and sale of new
products, such as ready-to-assemble furniture and home and
personal security products; capitalize on opportunities to
license the "Emerson and G-Clef" and "H.H. Scott" trade names; leverage
and exploit its sourcing capabilities, buying power and logistics
expertise in the Far East; and expand international sales including
not only core consumer electronic products but also other consumer
products such as ready-to-assemble furniture and home and
personal security products.
The Company believes that the "Emerson and G-Clef"
trademark is widely recognized on a world-wide basis. A principal
component of the Company's growth strategy is to utilize this
brand name recognition together with the Company's reputation for quality
and cost competitive products to aggressively promote its product
lines within the United States and Canada and targeted geographic
areas on an international basis. The Company's management
believes that the Company will be able to compete more
effectively in the highly competitive consumer electronics and
microwave oven industries domestically and internationally, by
combining innovative approaches to the Company's current product
line and augmenting its product line with complementary products.
The Company intends to pursue such plans either on its own, or by
forging new relationships, including through license
arrangements, partnerships or joint ventures. The Company has
successfully negotiated definitive licensing arrangements with
its largest supplier, a distributor of consumer electronics
accessories, a manufacturer of clocks and watches and the
Franklin Mint. See "Business - Licensing." Further, the Company
is currently involved in negotiations with different parties with
respect to additional similar transactions.
Sales and Distribution
The Company has implemented an integrated system to
coordinate the purchasing, sales and distribution segments of its
operations. The Company is equipped to receive orders from its
major accounts electronically or by the conventional modes of
facsimile, telephone or mail. The Company does not have
long-term contracts with any of its customers, but rather
receives orders on an ongoing basis. Products imported by the
Company (generally from the Far East) are shipped by ocean
freight and then stored in contracted public warehouse
facilities, for shipment to customers. Products manufactured by
vendors in Indiana are stored in public warehouses on an interim
basis until shipped to the Company's customers. All merchandise
received by Emerson is automatically updated into the Company's
on-line inventory system. As a purchase order is received and
filled, warehoused product is labeled and prepared for outbound
shipment to Company customers by common, contract or small
package carriers.
The Company also makes available to its customers (through
subsidiaries) a direct import program, pursuant to which products
are imported directly by the Company's customers. In the three
months ended June 30, 1995, Fiscal 1995 and Fiscal 1994, products
representing approximately 47%, 68% and 52% of net sales,
respectively, were imported directly from manufacturers to the
Company's customers. If the Company experiences a decline in the
percentage of sales effected through direct imports, its working
capital and inventory requirements may be incrementally affected.
See "Risk Factors" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
Domestic Marketing
In the United States, the Company markets its products
primarily through mass merchandisers and discount retailers. Wal-
Mart accounted for approximately 16%, 53% and 34%, and Target
Stores, Inc., accounted for approximately 10%, 10% and 12% of the
Company's net sales in the three months ended June 30, 1995,
Fiscal 1995 and Fiscal 1994, respectively. Net sales to Wal-Mart
for Fiscal 1995 and Fiscal 1994 include sales of certain video
products which are subject to a license/supply arrangement with
the Company's largest supplier, effective March 31, 1995. As a
result, the Company now reports royalty revenues attributable to
such sales, in lieu of reporting the full dollar values of such
sales and associated costs. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition." Net
sales of these products to Wal-Mart accounted for approximately
47% and 21% of consolidated net sales in Fiscal 1995 and Fiscal
1994, respectively. See "Business-Licensing." No other customer
accounted for more than 10% of the Company's net sales during
these periods.
A portion of the Company's sales are made through sales
representative organizations which receive sales commissions and
work closely with Company sales personnel. The remainder of the
Company's sales are made to retail customers serviced principally
by Company sales personnel. The Company has six sales
professionals based in the United States. The domestic sales
force is based in the Company's New Jersey corporate
headquarters, and in regional offices located in Missouri and
California. The sales representative organizations sell, in
addition to the Company's products, allied, but generally
non-competitive, products. In most instances, either party may
terminate a sales representative relationship on 30 days' prior
notice in accordance with customary industry practice. The
Company utilizes approximately 30 sales representative
organizations, including one through which approximately 13% and
10% of the Company's net sales were made in the three months
ended June 30, 1995 and Fiscal 1995, respectively. Additionally,
one other sales representative organization accounted for 14% of
the Company's net sales made in the three months ended June 30,
1995. No other sales representative organization accounted for
more than 10% of the Company's net sales in the three months
ended June 30, 1995 or Fiscal 1995.
Foreign Marketing
While the major portion of the Company's marketing efforts
are directed toward the United States, approximately 9% and 7% of
the Company's net sales in the three months ended June 30, 1995
and Fiscal 1995, respectively, were made to foreign customers in
Canada, Central and South America, Spain and the Middle East.
See Note M of Notes to Consolidated Financial Statements for
Fiscal 1995 and "Management's Discussion and Analysis of Results
of Operations and Financial Condition." The Company is expanding
its marketing and sales activities in certain international
geographic regions and has expanded such activities to cover
other parts of Europe, South America, the Far East and Mexico.
Licensing
The Company believes that licensing activities will have a
positive impact on net operating results by generating royalty
income with minimal costs, if any, and without the necessity of
utilizing working capital or accepting customer returns. The
Company has successfully concluded licensing agreements with (i)
Otake for the sale of video products bearing the "Emerson and G-Clef"
trademark to Wal-Mart locations in the United States and Canada,
(ii) Jasco Products Co., Inc. ("Jasco"), one of the largest
domestic electronics accessory companies, for distribution of electronic
accessories in the United States, (iii) Herald Holding Limited
("Herald"), a publicly-traded Hong Kong Company, for the
distribution of clocks and watches in the United States bearing
the "Emerson and G-Clef" trademark and (iv) the Franklin Mint for
distribution of classic Emerson Radio reproductions. The Company
intends to pursue additional licensing opportunities. See "Risk
Factors" and "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
Design and Manufacturing
The Company's design team is responsible for product
development and operates closely with the Company's
manufacturers. The Company's engineers determine the detailed
cosmetic and option specifications for new products, which
typically incorporate commercially available electronic parts to
be assembled according to the Company's designs. Accordingly,
the exterior designs and operating features of the Company's
products reflect the Company's judgment of current styles and
consumer preferences. The Company's designs are tailored to meet
the needs of the local market, particularly in the case of
international distribution, where products are generally
introduced on a country-by-country basis.
The majority of the Company's products are manufactured by
original equipment manufacturers in accordance with the Company's
specifications. The manufacturers are primarily located in Hong
Kong, South Korea, Taiwan, China, Malaysia and Thailand. Certain
of the Company's products are also assembled by a contract
manufacturer in Indiana.
During the three months ended June 30, 1995, Fiscal 1995 and
Fiscal 1994, approximately 95%, 89% and 84%, respectively, of the
cost value of the Company's purchases consisted of imported
finished goods. Otake, a manufacturer headquartered in Japan,
supplied approximately 18%, 73% and 59%, respectively, of the
Company's total purchases in the three months ended June 30,
1995, Fiscal 1995 and Fiscal 1994. Approximately 52% and 30% of
the cost value of the Company's purchases in Fiscal 1995 and
Fiscal 1994, respectively, were video products purchased from
Otake and sold to Wal-Mart. As a result of the license/supply
arrangement with Otake, the Company expects to purchase a
significantly lower proportion of its finished goods from Otake
over the three-year term of the agreements. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" and "Business-Licensing." The license/supply
arrangement also provides that Otake will supply the Company with
certain video products for sale to other customers at preferred
prices for a three-year term. Otake also sells a line of video
products under its Orion trademark. Kong Wah, a manufacturer
headquartered in Hong Kong, supplied approximately 10% of the
Company's total purchases in each of the three months ended June
30, 1995 and Fiscal 1994. Additionally, Daewoo Electronics Co.
Ltd., Imarflex, Mfg. Co., Ltd. and Musical Electronics Limited
accounted for approximately 22%, 21% and 14%, respectively, of
the Company's purchases during the three months ended June 30,
1995. No other supplier accounted for more than 10% of the
Company's total purchases during these periods. The Company
believes that, barring any unusual shortages or economic
conditions, it could develop alternative sources for any of the
products it currently purchases. Except with respect to the
Agreements with Otake, the Company does not have a contractual
agreement with any of its suppliers and no assurance can be given
that certain short-term shortages of product would not result if
the Company were required to seek alternative sources of supply
without adequate notice by the supplier or a reasonable
opportunity to seek alternate production facilities and component
parts. See "Risk Factors."
Warranties
The Company offers its United States and Canadian consumers
limited warranties comparable to those offered to consumers by
its competitors and accepts returns from its customers in
accordance with customary industry practices. Warranties for
products sold internationally are, in certain cases, provided on
a region-by-region basis through local entities retained by the
Company.
Refurbished Products
The Company's customers return product to the Company for a
variety of reasons, including liberal retailer return policies,
damage to goods in transit and occasional cosmetic imperfections
and mechanical failure.
To improve profitability, effective April 1, 1994, the
Company formed a partnership ("Partnership") with Hopper Radio of
Florida, Inc. ("Hopper"), a major independent reseller of
consumer electronics products. The Company and Hopper each own a
50% interest in the Partnership. The Partnership was formed to
purchase (i) all returned consumer electronics products from the
Company, refurbish them, if feasible, and sell them refurbished
or "As-Is", on a worldwide basis in all countries where the
Company has trademark rights and (ii) new consumer electronics
products from manufacturers sourced through a subsidiary of the
Company or through third parties, if such new products could be
obtained on more favorable prices and terms, for sale in Mexico
and Central and South America.
The Partnership with Hopper has enabled the Company to
control the costs associated with product returns, by providing a
stable selling price for returned products and increased
inventory turnover, by utilizing the distribution network of
Hopper to sell products, and by potentially increasing the
Company's sales of new products to Mexico and Central and South
America. The Partnership's profits and losses are allocated
evenly. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition - Liquidity and Capital
Resources." The general managerial activities are under the
control of Barry Smith, who is also the President of Hopper. The
Company previously refurbished certain products which were either
sold as refurbished or, if not refurbished, sold "As-Is". See
"Management's Discussion and Analysis of Results of Operations
and Financial Condition."
In forming the Partnership, the Company contributed returned
product to the Partnership equal in value to the amount of
Hopper's initial cash contribution of $500,000. The Company also
agreed to (i) sell additional returned products to the
Partnership, pursuant to the terms of a sales agreement, (ii)
license to the Partnership its "Emerson and G-Clef" trademark
for sale of refurbished product worldwide and for sale of new products
in Mexico, Central and South America, (iii) provide the Partnership
with access to its vendors, (iv) relinquish its territories for
refurbished merchandise and (v) lease to the Partnership the
equipment to refurbish the returned merchandise. The partnership
agreement of the Partnership similarly provides that Hopper is
required to provide the Partnership with (i) the set price list
at which all merchandise shall be sold, to be approved in advance
by both partners, (ii) financing on terms to be agreed to by both
parties, and (iii) the physical location for refurbishing
activities at a rental rate of $2.00 per square foot, or as
otherwise agreed to by the parties.
The Company filed suit on July 5, 1995 in the State Court of
New Jersey alleging that Hopper, Barry Smith and three former
employees of the Company (collectively, the "Defendants") have
formed a business entity for the purpose of engaging in the
distribution of consumer electronics and that the action of the
Defendants in connection therewith violated certain duties owed
to and rights of the Company. The Partnership has continued to
operate since the filing of the lawsuit. The Company cannot
predict at this time how this suit will, if at all, affect the
Partnership or the Company.
Backlog
From time-to-time, the Company has substantial orders from
customers on hand. Management believes, however, that backlog is
not a significant factor in its operations. The ability of
management to correctly anticipate and provide for inventory
requirements is essential to the successful operation of the
Company's business.
Trademarks
The Company owns the "Emerson and G-Clef" "H.H. Scott" and
"Scott" trademarks for certain of its home entertainment and electronic
products in the United States, Canada, Mexico and various other countries.
Of the trademarks owned by the Company, those registered in the
United States must be renewed at various times from 1996 to 2008
and those registered in Canada must be renewed at various times
from 1995 to 2007. The Company's trademarks are also registered
on a worldwide basis, which registrations must be renewed at
various times. The Company intends to renew all such trademarks.
The Company considers the "Emerson and G-Clef" trademark to
be of material importance to its business. The Company
also owns the "Electrophonic" trademark and is studying the
introduction of this trademark on value priced audio products in
fiscal year 1996. The Company owns several other trademarks, none
of which is currently considered by the Company to be of
material importance to its business. The Company has licensed certain
applications of the "Emerson and G-Clef" trademark to Otake, Jasco, Herald
and the Franklin Mint on a limited basis. See "Business - Licensing."
The Company may not pledge the "Emerson and G-Clef" trademark to secure
indebtedness under its United States secured credit facility or under
the Indenture. See "Description of Debentures."
Competition
The market segment of the consumer electronics industry in
which the Company competes generates approximately $15 billion of
factory sales annually and is highly fragmented, cyclical and
very competitive, supporting major American, Japanese and Korean
companies, as well as numerous small importers. The industry is
characterized by the short life cycle of products which requires
continuous design and development efforts. Market entry is
comparatively easy because of low initial capital requirements.
The Company primarily competes in the low to medium-priced
sector of the consumer electronics market. Management estimates
that the Company has several dozen competitors, many of which are
much larger and have greater financial resources than the
Company. Emerson's major competitors are foreign-based
manufacturers and distributors. The Company competes primarily
on the basis of its products' reliability, quality, price and
design, the "Emerson and G-Clef" trademark and service to retailers
and their customers. The Company's products also compete at the
retail level for shelf space and promotional displays, all of which have
an impact on the Company's established and proposed distribution
channels. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
Government Regulation
Pursuant to the Tariff Act of 1930, as amended, the Trade
Act of 1974 and regulations promulgated thereunder, the United
States government charges tariff duties, excess charges,
assessments and penalties on many imports. These regulations are
subject to constant change and revision by government agencies
and by action by the United States Trade Representative and may
have the effect of increasing the cost of goods purchased by the
Company or limiting quantities of goods available to the Company
from its overseas suppliers. A number of states have adopted
statutes regulating the manner of determining the amount of
payments to independent service centers performing warranty
service on products such as those sold by the Company.
Additional Federal legislation and regulations regarding the
importation of consumer electronics products, including the
products marketed by the Company, have been proposed from
time-to-time and, if enacted into law, could adversely affect the
Company's results of operations.
Employees
As of September 15, 1995, the Company had 173 employees.
The Company considers its labor relations to be generally
satisfactory.
Properties
The Company, directly and through its subsidiaries, leases
warehouse and office space in New Jersey, California, Canada,
Georgia, Missouri, the Far East and Spain under leases expiring
at various times from calendar 1995 to 1998, at minimum aggregate
rentals as follows:
Year Ending
March 31, (In Thousands)
1996 $1,507
1997 1,484
1998 1,071
1999 271
$4,333
In the past several years, the Company has closed
substantially all of its leased or owned warehouse facilities in
favor of utilizing public warehouse space as part of the
Company's effort to convert fixed costs to variable costs. The
cost for the public warehouse space is based on a fixed
percentage of the Company's sales from each respective location.
Such amounts are not included in the above table.
LEGAL PROCEEDINGS
Bankruptcy Claims
Pursuant to the Plan of Reorganization and the Bankruptcy
Code, all claims against the Company existing as of September 29,
1993, were discharged, except as specifically set forth in the
Plan of Reorganization. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition." The
Plan of Reorganization provides that unsecured creditors other
than the Bank Lenders and the Noteholders holding pre-petition
claims which are allowed, will receive unsecured promissory notes
in the principal amount equal to 18.3% of the allowed amount of
the claim; the notes will bear interest at a rate based on the
LIBOR rate for one year obligations, and are due and payable as
follows: (i) 35% of the outstanding principal is due 12 months
from the date of issuance, and (ii) the remaining balance is due
18 months from the date of issuance. The Company is presently
contesting claims submitted by several creditors.
The largest claim was filed on July 25, 1994 in connection
with the rejection of certain executory contracts with two
Brazilian entities, Cineral Electronica de Amazonia Ltda. and
Cineral Magazine Ltda. (collectively, "Cineral"). The contracts
were executed in August 1993, shortly before the Company's filing
for bankruptcy protection. The amount claimed was $93,563,457,
of which $86,785,000 represents a claim for loss of profits and
$6,400,000 for plant installation and the establishment of
offices, which were installed and established prior to execution
of the contracts. The claim was filed as an unsecured claim and,
therefore, will be satisfied, to the extent the claim is allowed
by the Bankruptcy Court, in the manner other allowed unsecured
claims were satisfied. The Company believes the Bankruptcy Court
will separately review the portion of the claim for lost profits
from the substantially smaller claim for actual damages. The
Company has objected to the claim, intends to vigorously contest
such claim and believes it has meritorious defenses to the highly
speculative portion of the claim for lost profits and the portion
of the claim for actual damages for expenses incurred prior to
the execution of the contracts. Additionally, the Company has
instituted an adversary proceeding in the Bankruptcy Court
asserting damages caused by Cineral. A motion filed by Cineral
to dismiss the adversary proceeding has been denied. The
adversary proceeding and claim objection have been consolidated
into one proceeding. An adverse final ruling on the Cineral
claim could have a material adverse effect on the Company, even
though liability of the Company would be limited to 18.3% of the
final claim determined by a court of competent jurisdiction;
however, with respect to the claim for lost profits, in light of
the foregoing, the Company believes the chances for recovery on
the Cineral claim for lost profits are remote.
Teletech Litigation
In December 1990, an action entitled Emerson Radio (Hong
Kong) Limited (a wholly- owned subsidiary of the Company) and
Teletech (Hong Kong) Limited was commenced in the Supreme Court
of Hong Kong High Court (the "Teletech Action") by Emerson Radio
(Hong Kong) Limited ("Emerson (H.K.)") against Teletech (Hong
Kong) Limited ("Teletech"). The Statement of Claim (the
"Claim"), filed and served in March 1991, alleges that Teletech
breached its agreements to sell cordless telephones and telephone
answering machines to Emerson (H.K.). The Claim seeks damages of
approximately $1,000,000.
In March 1991, Teletech filed a counterclaim that
essentially denies the allegations and alleges that Emerson
(H.K.) breached its agreement to purchase cordless telephones and
telephone answering machines arising from wrongful cancellation
of placed orders. The counterclaim seeks damages of
approximately $1,700,000. In May 1991, Emerson (H.K.) filed a
reply to the counterclaim denying the allegations in the
counterclaim. Discovery is currently proceeding. This
litigation was not affected by the bankruptcy proceedings.
Tax Matters
In June and October 1988, the Franchise Tax Board of the
State of California issued Notices of Proposed Assessment to the
Company proposing additional state income tax of approximately
$501,000 in the aggregate, plus interest, for the fiscal years
1980, 1985 and 1986. In August and November 1988, the Company
filed protests with the Franchise Tax Board taking exception to
the Notices of Proposed Assessment. After disallowing the
Company's protest, on July 24, 1992, the Franchise Tax Board
issued a formal Notice of Action assessing a deficiency in the
aggregate of approximately $664,000, which includes interest
through July 24, 1992. On August 24, 1992, the Company filed an
appeal with the California State Board of Equalization. The
Franchise Tax Board filed a response on April 29, 1993, and the
Company filed its reply on July 16, 1993.
On March 9, 1994, the Company filed an adversary complaint
with the Bankruptcy Court, to obtain a declaratory judgment
against the Franchise Tax Board with regard to this matter. The
Franchise Tax Board filed its response on April 6, 1994.
Discovery is proceeding. The Franchise Tax Board moved to
dismiss the adversary proceeding and requested the Bankruptcy
Court to abstain. On October 19, 1994, the Bankruptcy Court
entered an order of abstention which directed the parties to
litigate in California. The Company appealed to the District
Court of New Jersey. The District Court affirmed the order of
the Bankruptcy Court and the Company has filed a notice of appeal
with the Third Circuit. Subsequent to entry of the District
Court order, the California State Board of Equalization advised
the Company and the Franchise Tax Board of the opportunity and
deadlines to file additional papers with respect to the Notice of
Action.
On February 15, 1994, the Franchise Tax Board issued Notices
of Proposed Assessment to the Company proposing additional state
income tax of approximately $382,000 in the aggregate, plus
interest, for the fiscal years 1987, 1988 and 1989. The Company
filed its protest with the Franchise Tax Board on April 15, 1994,
taking exception to the Notices of Proposed Settlement.
Management believes that adequate amounts of tax reserves
have been provided for any adjustments which may result from the
above assessments and any additional adjustments for the
remaining years under examination.
Litigation Regarding Certain Outstanding Common Stock
Subsequent to confirmation of the Plan of Reorganization,
litigation arose among the principal shareholders of FIL, the
Company's largest shareholder prior to confirmation of the Plan
of Reorganization, with respect to various business relations and
transactions entered into between the shareholders, certain
affiliates and their principals, including Geoffrey Jurick, the
Company's Chairman and Chief Executive Officer, and Donald
Stelling, the former Chairman. Mr. Stelling resigned on December
2, 1993 from the Company's Board of Directors creating
uncertainty about the ability of FIL to honor its commitment to
the Company and the Bank Lenders to satisfy its obligations to
infuse $75 million in funds for the purpose of financing the
Restructuring. The $75 million commitment was made available by
Mr. Jurick and related companies, which utilized approximately
$15.2 million in funds which had been deposited by FIL into an
escrow account for the purpose of securing the Company's
Debtor-in-Possession financing obtained in connection with the
Restructuring. Management believes that, at the date of this
Prospectus, Messrs. Jurick and Peter Bunger, directors of the
Company, comprise the Board of Directors of FIL. The utilization
of the $15.2 million has been challenged by various Stelling
interests in three countries.
Proceedings were commenced in the Commonwealth of Bahamas
for the winding-up of FIL. The proceeding was brought by one of
its shareholders, a Bahamian entity controlled by Petra Stelling,
wife of Donald Stelling. The liquidator appointed by the
Bahamian Court for the winding-up of FIL commenced litigation
against Fidenas International and Mr. Jurick with respect to
claims arising from the acquisition of the Company's Common Stock
by GSE and Fidenas International.
The liquidator commenced ancillary proceedings in the United
States Bankruptcy Court pursuant to authorization granted by the
Bahamian Court for the purposes of, among other things, (i)
conducting discovery regarding the issuance of the shares of
Common Stock to Fidenas International, GSE and Elision and
utilization of the $15.2 million in funds which secured the
Company's Debtor-in-Possession Financing and (ii) restraining the
transfer, disposition or further encumbrance of any shares of the
Company owned by Fidenas International, GSE, and Elision issued
pursuant to the Plan of Reorganization. The ancillary proceeding
was dismissed by the Bankruptcy Court on February 16, 1995.
In addition to the litigation pending in the Bahamas and New
York, the Stelling interests have pursued Mr. Jurick and certain
business associates and affiliates in civil and criminal actions
in Switzerland for various claims relating to their business
relationships and transactions. Based on certain charges raised
by the Stellings, the Swiss authorities have commenced
investigations of Messrs. Jurick, Bunger and Jerome Farnum (also
a director of the Company). In addition, the Swiss authorities
have questioned Messrs. Jurick and Farnum as part of an
investigation of possible violations by them of certain Swiss
bank licensing laws. While the investigation is still pending,
none of Messrs. Jurick, Farnum or Bunger have been charged or
indicted by the Swiss authorities. The Federal Banking
Commission of Switzerland has issued a decree purporting to
determine that certain entities affiliated with Messrs. Jurick
and Farnum are subject to Swiss banking laws and have engaged in
banking activities without a license; the Commission has ordered
(i) the liquidation of one affiliate and the assets of another,
(ii) the appointment of a Swiss accounting firm to conduct the
decreed liquidation and (iii) certain preliminary measures
providing for the appointment of the Swiss accounting firm to act
as an observer with special supervisory powers. The Company has
been informed by counsel to those entities that an appeal has
been filed with respect to the decree and that during the appeal,
if timely filed, the provisions of the decree providing for the
liquidation shall not be implemented.
Though the Company is not a party to any of the proceedings
in Switzerland or in the Commonwealth of Bahamas, the Company
intends to monitor the litigation. An order of a court of
competent jurisdiction requiring the turnover of all or a
substantial portion of the Common Stock may result in a default
under the terms of the Company's United States secured credit
facility and/or the Indenture. See "Risk Factors - Litigation
Relating to Common Stock." Additionally, such a change in
control could result in a second ownership change further
limiting the Company's ability to use its NOLs and TCCOs.
See "Certain Federal Income Tax Considerations."
The Official Liquidator appointed in the Commonwealth of
Bahamas for Fidenas International Bank Limited (which management
believes to be a holder of approximately 18% of the shares of
Elision and approximately 11% of the shares of GSE) has filed an
action in the Bahamas concerning the ownership by Fidenas
International of certain shares of Common Stock. Transfer of the
stock has been enjoined by the Bahamian courts. The Official
Liquidator has also filed an action in the United States District
Court on behalf of Fidenas International Bank Limited with
respect to certain shares of Common Stock issued to Fidenas
International in conjunction with the Restructuring. As of the
date hereof, the transfer of such shares has been restrained and
discovery in the action has been commenced.
A creditor of Elision has requested and obtained a
preliminary injunction issued by a state court in Massachusetts
which enjoins Elision from conveying, pledging, hypothecating or
transferring any interest in assets of the corporation, including
securities registered in the name of the corporation, other than
in the usual course of business, until November 8, 1995. On that
date, a hearing is scheduled for further consideration of the
relief sought by such creditor. The order has the effect of
prohibiting transfers of any shares of Common Stock of the
Company owned by Elision.
Stelling Litigation
The Company filed a suit in federal court in New Jersey on
July 14, 1994, naming Mr. Stelling and his spouse as defendants
alleging, among other things, breaches by Mr. Stelling of
fiduciary duties and breaches of contract by Mr. Stelling, as
agent, and Mrs. Stelling, as principal. The suit sets forth
requests for monetary damages as well as declaratory judgments
that the provisions of the Plan of Reorganization providing for
releases do not apply to the Stellings and that they are estopped
from claiming any interest in the Company. The Stellings have
filed a motion to dismiss the suit. As of the date hereof, no
ruling has been made with respect to such motion.
Other Litigation
The Company is involved in other legal proceedings and
claims of various types in the ordinary course of business.
While any litigation to which the Company is a party contains an
element of uncertainty, management presently believes that the
outcome of each such proceeding or claim which is pending or
known to be threatened, or all of them combined, will not have a
material adverse effect on the Company's consolidated financial
position.
MANAGEMENT
Officers and Directors
The following table sets forth certain information regarding
the officers and directors of the Company as of the date hereof:
Name Age Position
Geoffrey P. 54 Chairman of the Board and Chief
Jurick(1) Executive Officer, Director
Eugene I. Davis(1) 40 President and Interim Chief Financial
Officer, Director
John P. Walker 32 Senior Vice President - Finance
Albert G. McGrath, Jr. 38 Senior Vice President, Secretary and
General Counsel
Eddie Rishty 35 Vice President - Controller
Merle W. Eakins 48 Vice President - Sales
Andrew Cohan 40 Vice President - Merchandising
John J. Raab 59 Vice President - Far East Operations
Frank L. Guerriero 51 Vice President - Logistics
Stuart D. Slugh 40 Vice President - Engineering/After
Sales Service
Elizabeth J. Calianese 37 Vice President - Human Resources
William A. Parks 56 Vice President - Home Products
Division
Robert H. Brown, Jr.(2)(3)42 Director
Peter G. Bunger(2) 54 Director
Jerome H. Farnum 59 Director
Raymond L. Steele(2)(3) 60 Director
_____________________________
(1)Member of Executive Committee
(2)Member of Audit Committee
(3)Member of Compensation and Personnel Committee
Geoffrey P. Jurick has served as Director since September 1990,
Chief Executive Officer since July 7, 1992 and Chairman since
December 22, 1993. Mr. Jurick served as President from July 1993
to October 1994. Since March 1990, he has been President and
Director of FIL. Since December 1993, Mr. Jurick has served as a
Director of Fidenas International, and since May 1994, as an
officer and general manager of Fidenas International and as a
Director, Chairman and Chief Executive Officer of GSE, which is
traded on the pink sheets of the over-the-counter market. For
more than the past five years, Mr. Jurick has held a variety of
senior executive positions with several of the entities
comprising the Fidenas group of companies ("Fidenas Group"),
whose activities encompass merchant banking, investment banking,
investment management and corporate development.
Eugene I. Davis has served as President since October 1994,
Interim Chief Financial Officer since February 7, 1993 and a
Director since September 1990. Mr. Davis served as Executive
Vice President from July 7, 1992 to October 1994. From June 1989
to July 1992, Mr. Davis was a shareholder and director of the law
firm of Holmes Millard & Duncan, P.C., in Dallas, Texas. From
February 1988 to June 1989, he was a partner in the law firm of
Arter & Hadden, P.C., in Dallas, Texas. Since August 1992, Mr.
Davis has served as a director of Tipperary Corporation, which is
traded on the American Stock Exchange, and, from October 1993,
until January, 1995 he was a director of Crandall Finance
Corporation, which is traded on the pink sheets of the
over-the-counter market. From May 1995, Mr. Davis has also
served as Director of Beth Israel Health Care Services, a private
corporation.
John P. Walker has served as Senior Vice President since April
1994. Mr. Walker was Vice President - Finance from February 1993
to April 1994, Assistant Vice President - Finance from June 1991
to January 1993 and Director of Financial Management from
September 1990 to May 1991. Prior thereto, Mr. Walker was
Supervising Senior Accountant with KPMG - Peat Marwick.
Albert G. McGrath, Jr. has served as Secretary and General
Counsel since August 1992 and Senior Vice President since July
1993. Prior thereto, Mr. McGrath was a shareholder of Holmes
Millard & Duncan, P.C., in Dallas, Texas, from January 1990
through August 1992.
Eddie Rishty has served as Vice President - Controller since July
1993 and was Corporate Controller from October 1991 to June 1993.
Prior thereto, Mr. Rishty was Assistant Controller from April
1989 to September 1991.
Merle W. Eakins joined the Company as Vice President - Sales in
July 1993. Since 1976, Mr. Eakins was with Philips Consumer
Electronics Company in a variety of positions, most recently as
Vice President, National Accounts.
Andrew Cohan joined the Company in October 1994 as Vice President-
Merchandising. Prior thereto, he was an independent consultant
from August 1993 until October 1994, and was employed as Senior
Vice President - Retail Stores for McCrory Stores Corporation
from June 1992 to July 1993 and as Vice President - Retail Stores
for Ames Department Stores, Inc. from February 1984 to June 1992.
Prior thereto and for more than the past five years, Mr. Cohan
was employed by Ames Department Stores, Inc. in a variety of
positions. Each of McCrory Stores Corporation and Ames
Department Stores, Inc. filed for relief under the United States
Bankruptcy Code.
John J. Raab joined the Company in March 1995 as Vice President -
Far East Operations. Prior thereto, he was President and Chief
Operating Officer of Robeson Industries Corp. from March 1990 to
March 1995. Robeson Industries Corp. has filed for relief under
the United States Bankruptcy Code.
Frank L. Guerriero has served as Vice President - Logistics since
September 1994. Prior thereto, Mr. Guerriero was Assistant Vice
President - Operations and Logistics from April 1994 until
September 1994, and was the Director of Transportation and
Distribution for the Company from July 1981 until April 1994.
Stuart D. Slugh has served as Vice President - Engineering and
After Sales Service since September 1994. Prior thereto, Mr.
Slugh was Assistant Vice President - Engineering and After Sales
Service from April 1994 until September 1994, and was Director of
Technical Sales Services for the Company from May 1993 until
April 1994. Prior thereto and for more than the past five years,
Mr. Slugh was National Parts Manager for the Company.
Elizabeth J. Calianese has served as Vice President - Human
Resources since May 1995. Since April 1991, Ms. Calianese has
served as Assistant General Counsel. Prior thereto, from June
1989 until March 1991, Ms. Calianese was a corporate attorney
with the Company.
William A. Parks has served as Vice President - Home Products
Division since August 1995. Since 1991, Mr. Parks has been
President of William A. Parks & Assoc., Inc., a sales and
marketing consulting firm based in Newport, North Carolina.
Prior thereto, Mr. Parks served as President of Hamilton Beach,
Inc. in Washington, North Carolina.
Robert H. Brown, Jr. has been a Director since July 7, 1992.
Since February 1994, he has been Executive Vice President of
Capital Markets of Rauscher Pierce Refsnes, Inc. ("Rauscher") in
Dallas, Texas. From January 1990 until February 1994, Mr. Brown
was Senior Vice President and Director of the Corporate Finance
Department of Rauscher. Since May 1993, Mr. Brown has served as
a director of Stevens Graphics Corp., which is traded on the
American Stock Exchange.
Peter G. Bunger has been a Director since July 7, 1992. Since
October 1992, Mr. Bunger has served as Director of Savarina AG,
engaged in the business of portfolio management monitoring in
Zurich, Switzerland and since 1992, as director of ISCS, a
computer software company. From December 1991 until December
1993, he was Vice Chairman of Montcour Bank and Trust Company
Limited, a bank organized in the Bahamas and an affiliate of
Fidenas International. Montcour Bank and Trust Company Limited
is the subject of liquidation proceedings in Nassau, Bahamas.
From 1981 until 1992, Mr. Bunger was owner and Managing Director
of Peter G. Bunger Investment Consulting, a firm which
supervises, controls, and analyzes investments for individuals.
Jerome H. Farnum has been a Director since July 7, 1992. Since
July 1994, Mr. Farnum has been an independent consultant. From
1979 until 1994, Mr. Farnum served as a senior executive with
several of the entities comprising the Fidenas Group, in charge
of legal and tax affairs, accounting, asset and investment
management, foreign exchange relations and financial affairs.
Raymond L. Steele has been a Director since July 7, 1992. Mr.
Steele has been retired since September 1993. From August 1990
until September 1993, Mr. Steele served as Executive Vice
President of Pacholder Associates, Inc., a company providing
investment management and other financial advisory services to
institutional clients. Mr. Steele is a member of the Board of
Directors of Orion Pictures Corporation, whose common stock is
traded on NASDAQ, and Pharmhouse, Inc., a publicly-traded retail
drug chain.
The terms of the Debentures require that, for their term,
the Company shall cause one-third of the Board of Directors to be
comprised of independent directors. Certain actions in
connection with the potential settlement of the litigation
described in "Legal Proceedings - Litigation Regarding Certain
Outstanding Common Stock" will require the approval of three
members of the Board of Directors, including the independent
Board members and Mr. Eugene I. Davis. See "Description of
Debentures." The terms of the Series A Preferred Stock provide
that the holders shall have the right to appoint two directors to
the Company's Board of Directors if dividends are in default for
six quarters. See "Description of Other Securities."
Director Compensation
Independent directors are entitled to an annual retainer of
$20,000. Committee chairmen who are independent directors
receive an annual retainer of $10,000. Each of the Company's
current independent directors received cash compensation of
$20,000 (excluding the Committee Chairmen who each received
$27,500) in connection with serving on the Company's Board of
Directors during the fiscal year ended March 31, 1995. Directors
who are officers or employees of the Company are not compensated
for serving as directors or for attending meetings. The Company
maintains directors and officers liability insurance policies it
deems satisfactory for such purposes.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation of Executive Officers
The discussion that follows has been prepared based on the
actual compensation paid and benefits provided by the Company and
its subsidiaries to those persons who were, at March 31, 1995,
the Chief Executive Officer ("CEO") of the Company and the other
four most highly compensated executive officers of the Company
("Named Executives") for the periods indicated. This historical
data is not necessarily indicative of the compensation and
benefits that may be provided to such persons in the future.
Three Year Compensation Summary
The following table summarizes for the years indicated the
compensation awarded to, earned by or paid to the Named
Executives for services rendered in all capacities to the
Company:
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
<C> <C> <C> <C>
OTHER ALL
<S> <C> <C> <C> ANNUAL SECURITIES OTHER
Name and Principal FISCAL COMPENS- RESTRICTED UNDERLYING LTIP COMPENS-
Position(s) YEAR SALARY BONUS ATION STOCK AWARDS OPTIONS PAYOUTS ATION
(3) (1) (6) (4)
GEOFFREY P. JURICK 1995 378,333 275,000 78,702 - 600,000 - $ 311
CHAIRMAN OF THE 1994 250,000 195,000 - - - -
BOARD AND CHIEF 1993 187,500 - 5,589 - - -
EXECUTIVE
OFFICER (2) (5)
EUGENE I. DAVIS 1995 360,000 175,000 102,024 - 600,000 - 6,986
PRESIDENT AND 1994 360,000 150,000 102,385 - - - 5,524
INTERIM CHIEF 1993 261,692 161,290 172,281 - - - 5,473
FINANCIAL OFFICER
(2) (5)
ALBERT G. MCGRATH, JR. 1995 175,000 75,000 19,958 - 200,000 - 5,451 5,451
SENIOR VICE PRESIDENT, 1994 175,000 100,000 18,462 - - - 4,671
SECRETARY AND 1993 107,693 29,166 21,273 - -
GENERAL COUNSEL (5)
MERLE W. EAKINS 1995 193,077 40,000 89,175 - 40,000 - 5,950
VICE PRESIDENT- 1994 130,577 40,000 45,870 - - - 621
SALES (5) 1993 - - - - - - -
JOHN P. WALKER 1995 110,000 75,000 20,420 - 200,000 - 3,841
SENIOR VICE 1994 110,000 100,000 9,483 - - - 1,918
PRESIDENT-FINANCE 1993 96,625 18,000 700 - - - 2,406
</TABLE>
(1) Consists of (i) car allowance and auto expenses afforded to
the listed Company executive officers, including $26,947 and
$17,277 paid to Messrs. Davis and Walker, respectively, in
Fiscal 1995, (ii) tax preparation services provided to Mr.
Davis, (iii) expenses paid by the Company on behalf of Mr.
Davis, covering his club membership, and (iv) relocation and
temporary lodging expenses and associated tax gross-ups in
the amount of $73,394, $0 and $0 for Mr. Jurick, $43,002,
$64,643 and $132,270 for Mr. Davis, $0, $9,137 and $16,249
for Mr. McGrath, and $80,784 and $39,570 for Mr. Eakins paid
by the Company in Fiscal 1995 and 1994, respectively. See
"Certain Relationships and Related Transactions."
(2) Does not include Director's fees of $5,000 received by each
of Messrs. Jurick and Davis prior to becoming officers for
Fiscal 1993.
(3) In the case of Messrs. Davis and McGrath consists of
one-time bonus payments upon joining the Company in Fiscal
1993.
(4) Consists of the Company's contribution to its 401(k)
employee savings plan, life insurance and, disability
insurance.
(5) Messrs. Jurick and Davis became executive officers of the
Company in July 1992, Mr. McGrath became an executive
officer of the Company in August 1992 and Mr. Eakins became
an executive officer of the Company in July 1993.
(6) In July 1994, the Company granted stock options to purchase
600,000, 600,000, 200,000, 200,000 and 30,000 shares of
Common Stock to each of Messrs. Jurick, Davis, McGrath,
Walker and Eakins respectively, exercisable at an exercise
price of $1 per share (except $1.10 in the case of Mr.
Jurick). In September 1994, Mr. Eakins was granted an
additional option to purchase 10,000 shares of common stock
at an exercise price of $1 per share. The options vest in
annual increments of one-third, commencing one year from the
date of grant, and their exercise is contingent on continued
employment with the Company.
Stock Options
The following table sets forth information regarding the
grant of stock options during Fiscal 1995 to the Named Executive
Officers:
<TABLE>
<C>
<S> <C> <C> <C> Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants % of Totals for Option Term(2)
Number Options Granted Exercise
of Options to Employees Price Per Expiration
Name Granted in Fiscal 1995 Share Date(1) 5% 10%
GEOFFREY P. JURICK 600,000 32% $1.10 7/7/04 $317,337 $896,245
EUGENE I. DAVIS 600,000 32% $1.00 7/7/04 $377,337 $956,245
ALBERT G. MCGRATH 200,000 11% $1.00 7/7/04 $125,779 $318,748
JOHN P. WALKER 200,000 11% $1.00 7/7/04 $125,779 $318,748
MERLE W. EAKINS 30,000 2% $1.00 7/7/04 $ 18,867 $ 47,812
10,000 1% $1.00 9/6/04 6,289 15,937
</TABLE>
(1) The options were issued under the 1994 Stock Compensation
Program, and are exercisable commencing one year after the
grant date in three equal annual installments, with full
vesting occurring on the third anniversary of the date of
the grant.
(2) The dollar amounts under these columns are the result of
calculations at the assumed compounded market appreciation
rates of 5% and 10% as required by the Securities and
Exchange Commission over a ten-year term and therefore, are
not intended to forecast possible future appreciation, if
any, of the stock price.
Option Exercises And Holdings
The following table sets forth information with respect to
the Named Executive Officers concerning the exercise of options
during Fiscal 1995 and unexercised options held at March 31,
1995:
<TABLE>
OPTION EXERCISES IN FISCAL 1995
AND MARCH 31, 1995 OPTION VALUES
<S> <C> <C> <C> <C>
Number of Value of Unexercised
Unexercised In-the-Money
Number of Options at Options at
Shares March 31, 1995 March 31, 1995
Acquired on Value Exercisable/ Exercisable
Name Exercise Realized Unexercisable Unexercisable(1)
GEOFFREY P. JURICK 0 $- 0/600,000 $0/$1,215,000
EUGENE I. DAVIS 0 $- 0/600,000 $0/$1,275,000
ALBERT G. MCGRATH 0 $- 0/200,000 $0/$ 425,000
JOHN P. WALKER 0 $- 0/200,000 $0/$ 425,000
MERLE W. EAKINS 0 $- 0/ 40,000 $0/$ 85,000
</TABLE>
(1) Calculated based on the difference between the aggregate
fair market value of the shares subject to options at March
31, 1995 and the aggregate option exercise price.
Certain Employment Contracts
On August 13, 1992, the Board of Directors of the Company
approved the Employment Agreements of certain of the Company's
senior management, including certain of the senior management
included in the table set forth above. A description of the
material terms of such employment agreements, each of which is
effective as of July 7, 1992 (unless stated to the contrary)
follows.
Geoffrey P. Jurick, Chairman and Chief Executive Officer of
the Company, entered into five year employment agreements
("Jurick Employment Agreements") with the Company and two of its
wholly-owned subsidiaries, Emerson Radio (Hong Kong), Limited and
Emerson Radio International Ltd. (formerly Emerson Radio
(B.V.I.), Ltd.) (hereinafter, collectively the "Companies"),
providing for an aggregate annual compensation of $250,000, which
was increased to $390,000 in May 1994 and to $490,000 effective
April 1, 1995. In addition to his base salary, Mr. Jurick is
entitled to an annual bonus upon recommendation by the
Compensation and Personnel Committee of the Company's Board of
Directors, subject to the final approval of the Company's Board
of Directors.
Subject to certain conditions, each of the Jurick Employment
Agreements grants to Mr. Jurick severance benefits, through
expiration of the respective terms of each of such agreements,
commensurate with Mr. Jurick's base salary, in the event that his
employment with the Companies terminates due to permanent
disability, without cause or as a result of constructive
discharge (as defined therein). In the event that Mr. Jurick's
employment with the Companies terminates due to termination for
"cause," because Mr. Jurick unilaterally terminates the
agreements or for reasons other than constructive discharge or
permanent disability, Mr. Jurick shall only be entitled to base
salary earned through the applicable date of termination.
Similar provisions are set forth in each of the contracts
described below.
Eugene I. Davis, President and Interim Chief Financial
Officer entered into a five year Employment Agreement ("Davis
Employment Agreement") with the Company providing for an annual
compensation of $360,000, which was increased to $450,000
effective April 1, 1995. In addition to his base salary, Mr.
Davis is entitled to an annual bonus equal to an amount up to 30%
of Mr. Davis' base salary, based upon attainment of objectives
identified in the Company's five-year business plan ("Business
Plan"). Mr. Davis may also receive an additional annual
performance bonus to be recommended by the Compensation and
Personnel Committee of the Company's Board of Directors, subject
to the final approval of the Company's Board of Directors.
Pursuant to the Davis Employment Agreement, the Company
granted to Mr. Davis an option to purchase 500,000 shares of
Common Stock. Such option was cancelled pursuant to the Plan of
Reorganization; however, the Company subsequently granted Mr.
Davis options to purchase 600,000 shares of Common Stock. The
Company has also agreed for the term of the Davis Employment
Agreement and three years thereafter, to pay for and maintain
legal malpractice insurance covering Mr. Davis for occurrences
and actions taken by him at any time prior to or during the term
of such agreement on behalf of the Company or its employees. The
Company has also agreed to pay all sums which may be deductible
amounts not otherwise paid by such insurer.
Upon execution of the Davis Employment Agreement, the
Company provided Mr. Davis with a one-time lump sum payment of
$100,000, which figure is net of applicable taxes and
withholdings. In connection with Mr. Davis' relocation to New
Jersey, the Company assumed certain relocation expenses and
associated tax gross-ups on Mr. Davis' behalf aggregating
$239,915. See "Summary Compensation Table."
Albert G. McGrath, Jr., General Counsel, Senior Vice
President and Secretary, entered into a five-year Employment
Agreement ("McGrath Employment Agreement") with the Company
providing for an annual compensation of $175,000, which was
increased to $210,000 effective April 1, 1995. In addition to
his base salary, Mr. McGrath is entitled to an annual performance
bonus to be recommended by the Compensation and Personnel
Committee of the Company's Board of Directors, subject to the
final approval of the Company's Board of Directors.
Upon execution of the McGrath Employment Agreement, the
Company provided Mr. McGrath with a one-time lump sum payment of
$29,166, which figure is before applicable taxes and
withholdings. In connection with Mr. McGrath's relocation to New
Jersey, the Company assumed relocation expenses and associated
tax gross-ups on Mr. McGrath's behalf aggregating $25,386. See
"Summary Compensation Table."
Merle W. Eakins, Vice President-Sales, entered into a three-
year employment agreement with the Company providing for an
annual compensation of $175,000; which was increased to $195,000
effective May 1, 1994. In addition to his base salary, Mr.
Eakins is entitled to an annual bonus equal to an amount up to
30% of Mr. Eakins' base salary, upon attainment of objectives
identified by the Board of Directors. In connection with Mr.
Eakins' employment in New Jersey, the Company assumed relocation
expenses and associated tax gross-ups on Mr. Eakins' behalf
aggregating $120,354. See "Summary Compensation Table."
John P. Walker, Senior Vice President-Finance, entered into
a three-year employment agreement with the Company providing for
an annual compensation of $110,000, which was increased to
$165,000 effective April 1, 1995. In additional to his base
salary, Mr. Walker is entitled to an annual bonus equal to an
amount up to 30% of Mr. Walker's base salary; upon attainment of
objectives identified by the Executive Committee. Mr. Walker may
also receive an additional annual performance bonus to be
recommended by the Compensation and Personnel Committee of the
Company's Board of Directors, subject to the final approval of
the Company's Board of Directors.
In the event that Messrs. Jurick, Davis, McGrath, Eakins and
Walker were to be terminated due to permanent disability, without
cause or as a result of constructive discharge, the estimated
dollar amount to be paid after March 31, 1995 to each such
individual, based on the terms of their respective contracts,
would be $1,112,000, $1,021,000, $501,000, $263,000 and $330,000,
respectively.
Emerson Employee Savings Plan
The Emerson Radio Corp. Employee Savings Plan (the "Savings
Plan") is a defined contribution plan intended to qualify under
Sections 401(a) and 401(k) of the Code. Generally, a full-time
salaried employee who has completed three months of service may
elect to make basic contributions to the Savings Plan of up to 6%
of his or her compensation, commencing on the first day of the
Savings Plan year or the seventh month of such year subsequent to
satisfying such eligibility requirement. These contributions are
partially matched by the Company. In addition, the employee may
elect to contribute up to an additional 4% of his or her
compensation (for a total of 10%), which amount will not be
matched by the Company. All employee contributions (plus related
earnings and increased value) are 100% vested. Generally,
Company contributions become 50% vested after an employee has
satisfied one year of service and 100% vested after two years of
service. If the employee's employment terminates for any reason,
the employee's total vested plan account will be distributed to
him or her within a reasonable period of time after termination
of employment. If any nonvested account balance is forfeited,
the nonvested amount of any forfeiture remains in the Savings
Plan to be used as Company contributions. The amounts credited to
individual accounts are invested by the Savings Plan trustee as
directed by Savings Plan participants, and any gain or loss from
investments is credited to, or charged against, the individual
account of each participant.
Stock Plans
In July 1994, the Company's Board of Directors adopted, and
the stockholders subsequently ratified, a Stock Compensation
Program ("Program") intended to secure for the Company and its
stockholders the benefits arising from ownership of the Company's
Common Stock by those selected directors, officers, other key
employees, advisors and consultants of the Company who are most
responsible for the Company's success and future growth. The
maximum aggregate number of shares of Common Stock available
pursuant to the Program is 2,000,000 shares and the Program is
comprised of 4 parts -- the Incentive Stock Option Plan, the
Supplemental Stock Option Plan, the Stock Appreciation Rights
Plan and the Stock Bonus Plan. The Program is administered by
the Company's Compensation and Personnel Committee. Each of the
Plans provides for vesting of grants or awards in equal thirds on
the first three anniversaries after grant, unless the
Compensation and Personnel Committee otherwise provides, and that
the term of options granted thereunder may not exceed ten (10)
years. The Program also provides that the purchase price of
stock options granted under the Program shall not be less than
the fair market value of the Common Stock on the date of grant,
except that the purchase price with respect to an option granted
to a holder of at least 10% of the Company's outstanding
securities must be equal to at least 110% of the fair market
value of the Common Stock on the date of grant.
In July 1994 the Company's Compensation and Personnel
Committee granted options to purchase an aggregate of 1,630,000
shares of Common Stock to Messrs. Jurick (600,000), Davis
(600,000), McGrath (200,000), Walker (200,000) and Eakins
(30,000). The options granted to Messrs. Davis, McGrath, Walker
and Eakins are all exercisable at $1.00 a share and the options
granted to Mr. Jurick are exercisable at $1.10 a share. The
Compensation and Personnel Committee subsequently granted options
to purchase an aggregate of 170,000 shares of Common Stock to
various employees, each exercisable at $1.00 per share, in
September 1994 and also granted an aggregate of 60,000 options to
various employees, each exercisable at $1.00 per share, in
October 1994, for an aggregate of options on 230,000 shares
(143,333 net of cancellations).
In October 1994, the Company's Board of Directors adopted,
subject to stockholder approval, the 1994 Non-Employee Director
Stock Option Plan. The Committee authorized and appointed
pursuant to such plan, consisting of Messrs. Jurick and Davis,
has granted options to purchase an aggregate of 175,000 shares
(150,000 net of cancellations) of Common Stock to certain non-
employee directors of the Company at an exercise price of $1.00
per share. The maximum aggregate number of shares of Common
Stock available under such plan is 300,000. Each option granted
provides for vesting in equal thirds on the first three
anniversaries after the date of grant and has a term of ten (10)
years.
PRINCIPAL STOCKHOLDERS
The table below sets forth as of September 15, 1995, certain
information regarding the beneficial ownership of Common Stock by
each person or entity known by the Company to be the beneficial
owner of more than five percent of the outstanding Common Stock,
by each director of the Company and by all officers and directors
as a group:
Name and Address of Amount and Percent of
Beneficial Owner Nature of Beneficial Percent Class as
Ownership(3) of Class Adjusted(6)
Geoffrey P. Jurick(1)(5) 30,200,100 74.7% 66.1%
Nine Entin Road
Parsippany, NJ 07054
Fidenas International 30,000,000 74.5% 66.0%
Limited, L.L.C. (2)
831 Route 10
Suite 38, #113
Whippany, NJ 07981
Elision International, 1,600,000 4.0% 3.5%
Inc.(4)
275 Wyman Street
Waltham, MA 02154
GSE Multimedia 12,000,000 29.8% 26.4%
Technologies
Corporation(4)
Kostheimer Landstrasse 36
Mainz-Kostheim
Germany D6502
Eugene I. Davis(5) 290,000 (7) (7)
Robert H. Brown, Jr.(8) 16,667 (7) (7)
Peter G. Bunger(9) 8,333 (7) (7)
Jerome Farnum(9) 8,333 (7) (7)
Raymond L. Steele(8) 16,667 (7) (7)
All Directors and 30,720,100 75.1% 66.7%
Officers as a Group
(16 persons) (10)(11)
_______________
(1)Consists of 16,400,000, 1,600,000 and 12,000,000 shares of
Common Stock held by Fidenas International, Elision and GSE,
respectively, including 847,458 shares of Common Stock held
by Fidenas International, as nominee, as to which Fidenas
International and Mr. Jurick disclaim beneficial ownership.
All of such shares, except those for which Fidenas
International holds as nominee, will be subject to certain
lockup agreements. See "Plan of Distribution - Certain
Restrictions on Offering, Directors and Certain
Stockholders." Mr. Jurick indirectly owns, through a
controlled holding company, approximately 80% of Fidenas
International. In addition, Mr. Jurick is an officer and
director of Fidenas International. Fidenas International
owns approximately 14.3% of Elision. Mr. Jurick indirectly
owns, through certain holding companies and beneficial
interests in affiliates, a controlling interest in each of
GSE and Elision. The shares of Common Stock issued to GSE,
Fidenas International and Elision in connection with the
Restructuring are the subject of certain legal proceedings in
the Commonwealth of the Bahamas and the United States. In
connection with settlement negotiations related thereto, the
Company has been advised that the parties to such
negotiations may desire a portion of these shares to be sold
in furtherance of a settlement of such litigation. See
"Legal Proceedings - Litigation Regarding Certain Outstanding
Common Stock".
(2)Includes 12,000,000 shares of Common Stock owned by GSE and
1,600,000 shares of Common Stock owned by Elision. Fidenas
International, GSE and Elision may be deemed to be under
common control. Also includes 847,458 shares held by Fidenas
International, as nominee, as to which Fidenas International
disclaims beneficial ownership.
(3)Based on 40,252,772 shares of Common Stock outstanding as of
September 15, 1995 plus shares of Common Stock under option
of any director or executive officer, exercisable within 60
days. Does not include (i) shares of Common Stock issuable
upon conversion of 10,000 shares of Series A Preferred Stock
(ii) Common Stock issuable upon exercise of the Creditor's
Warrants (iii) Common Stock issuable upon conversion of the
Debentures; (iv) Common Stock issuable upon exercise of
outstanding options, which are not currently exercisable
within 60 days; or (v) shares of Common Stock issuable upon
exercise of warrants granted to the Placement Agent and its
authorized dealers in connection with the private placement
of the Debentures.
(4)A petition for the winding-up of Fidenas International Bank
Limited, a holder of 18% of the shares of Elision and 11% of
the shares of GSE, was filed by the majority of the
shareholders of the bank in the Commonwealth of Bahamas on
July 29, 1994.
(5)Includes options exercisable within 60 days to purchase
200,000 shares of Common Stock. Does not include options to
purchase an aggregate of 400,000 shares of Common Stock not
currently exercisable.
(6)Assumes conversion of all $20,750,000 aggregate principal
amount of Debentures at the initial Conversion Price of
$3.9875 per share into 5,203,761 shares of Common Stock.
(7)Represents less than 1% of the outstanding Common Stock.
(8)Includes options exercisable within 60 days to purchase
16,667 shares of Common Stock. Does not include options to
purchase an aggregate of 33,333 shares of Common Stock not
currently exercisable.
(9)Includes options exercisable within 60 days to purchase 8,333
shares of Common Stock. Does not include options to purchase
an aggregate of 16,667 shares of Common Stock not currently
exercisable.
(10) Includes 630,000 shares of Common Stock subject to
unexercised stock options which were exercisable within 60
days under the Company's Stock Compensation Program.
(11) Does not include options to purchase an aggregate of
1,260,000 shares of Common Stock not currently exercisable
within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Plan of Reorganization
Debtor-in-Possession Financing
During the pendency of the Company's Restructuring, the
Company obtained Debtor-in-Possession financing ("DIP Financing")
from its present secured lender. Fidenas Investment Limited, of
which Mr. Jurick is President and a director, which is also an
affiliate of Fidenas International, guaranteed payment of the DIP
Financing. In April 1994, in connection with the DIP Financing,
the Company paid (i) $187,000 as a cumulative credit enhancement
fee which accrued commencing October 1, 1993 and (ii) $208,000
for reimbursement of various legal, accounting and filing fees at
the direction of the President of Fidenas Investment Limited to
its designee.
Capital Infusion at Confirmation of the Plan
To fund the Plan of Reorganization, Fidenas International,
Elision and GSE provided to the Company an aggregate of
approximately $30 million, for which they collectively received
30 million shares of Common Stock. See "Principal Stockholders."
Certain of the officers and directors of the Company are
affiliated with Fidenas International, Elision and GSE. See
"Management." In connection with the capital infusion,
reimbursements of $568,000 for various legal, accounting and
filing fees were paid at the direction of the President of
Fidenas International to its designee.
Other Transactions
The law firm of Lowenstein, Sandler, Kohl, Fisher & Boylan,
P.A., was retained as the Company's outside counsel following the
settlement of a proxy contest conducted in 1992. Payments
aggregating approximately $1,070,000 were made by the Company for
Fiscal 1994. The firm was retained by the Company as special
corporate counsel during the Restructuring proceedings and
received payment for services rendered and expenses incurred
during such proceedings. In addition, the firm provides ongoing
services for the Company, including representing the Company in
this Offering. The firm received approximately $182,000 and
$737,000 during the three months ended June 30, 1995 and Fiscal
1995, respectively. A brother of Mr. Davis joined such law firm
subsequent to its retention by the Company and serves of counsel
to such law firm.
In connection with the execution of their respective
employment agreements with the Company, each of Messrs. Martin
Holleran (a former officer of the Company), Davis, and Alex
Wijnen (a former officer of the Company) agreed to relocate their
respective residences to the general locality of the Company's
principal executive offices. To assist in such relocation, in
the fiscal year ended March 31, 1993, the Company provided to
Messrs. Holleran, Davis and Wijnen interest-free bridge loans of
$140,000, $120,000 and $130,000, respectively. In connection
with the resignations of Messrs. Holleran and Wijnen from the
Company, and the settlement of claims under their respective
employment contracts, Mr. Holleran's obligation to repay such
loans was discharged and Mr. Wijnen's loan will be repaid through
consulting services to be rendered in calendar year 1995. The
maturity date of Mr. Davis' loan has been extended and is due in
the fiscal year ending March 31, 1996.
Mr. Pablo Bunger, the brother of Peter Bunger, a director of
the Company, was the Managing Director of the Company's Spanish
branch. Pursuant to a consulting arrangement, Mr. Bunger
received compensation and reimbursement of expenses aggregating
$23,000 and $118,000 in the three months ended June 30, 1995 and
Fiscal 1995, respectively. The Company will be closing the
Spanish branch and has assigned the exclusive distribution rights
for Emerson brand products in Spain to a corporation controlled
by Mr. Pablo Bunger.
The Company is in the process of reorganizing its Canadian
operations. In connection with such reorganization, Emerson's
Canadian subsidiary has entered into a series of agreements with
Tammy Venator, doing business as Venator Electronics Sales and
Service Ltd. ("Venator"). Ms. Venator is the daughter of Theo
Heuthorst, former President of Emerson's Canadian subsidiary, and
she was formerly the National Service Manager of such subsidiary.
Effective April 1, 1995, Emerson's Canadian subsidiary entered
into several three-year agreements with Venator providing for (i)
Venator receiving returned products, (ii) Venator purchasing
returned products on an "as-is" basis for refurbishing and resale
by Venator, (iii) Venator processing warranty claims submitted by
service centers authorized to engage in warranty service of
Emerson products sold in Canada, (iv) Venator distributing parts
to customers and service centers for Emerson products, which it
will purchase from the Company's Canadian subsidiary at a premium
over their costs, and (v) Venator maintaining an effective
service center network to accommodate all customers of Emerson's
Canadian subsidiary, maintaining a factory service center, and
maintaining a parts distribution center, and providing other
after sale services. The Company was billed $8,323 for services
provided with respect to the above-mentioned agreements during
the three months ended June 30, 1995. In addition, the Company
billed Venator approximately $24,000 for spare parts purchases
over the same period. The Company was owed approximately $24,000
for these purchases as of June 30, 1995. Through these
agreements, the Company believes it will be able to reduce its
costs of operations in Canada, while maintaining its market
presence in Canada. The Company believes that the terms on which
it has entered into the agreements with Venator described above
are no less favorable than could have been obtained from an
unrelated third party.
In the three months ended June 30, 1995 and in Fiscal 1995,
the Company sold finished goods and spare parts to GSE for
$114,000 and $341,000, respectively, on terms no more favorable
than those available to third parties. The Company was owed
$277,000 for these purchases as of June 30, 1995.
Rauscher was retained by the Company, for a fee of $20,000,
to make offers in connection with the public offering of the
Company's Common Stock authorized by the Plan of Reorganization
in those states requiring that all sales in such states be made
through broker/dealers. Robert H. Brown, Jr., a Director of the
Company, is Executive Vice President of Capital Markets of
Rauscher. See "Management."
At March 31, 1994, Emerson Radio (Hong Kong) Ltd., a wholly
owned subsidiary of the Company, had $1 million on deposit with
Fidenas International Bank Limited. The deposit was returned
shortly after March 31, 1994.
In October 1994 and February 1995, the Company employed two
professional advisers of Mr. Jurick and certain entities with
which Mr. Jurick is affiliated or associated. One individual was
paid $29,615 and $52,885 by the Company in the three months ended
June 30, 1995 and Fiscal 1995, respectively, as well as receiving
automobile benefits and related expenses in the amount of $1,256
and $3,027, respectively. The other individual was paid $20,865
and $6,856 by the Company for the three months ended June 30,
1995 and Fiscal 1995, respectively, as well as receiving
automobile benefits in the amount of $897 and $1,295,
respectively. The services of one individual were terminated as
of July 31, 1995 and the other will continue to be employed by
the Company until September 22, 1995 and to receive the benefits
described herein until such date. In addition to services
rendered to the Company, each of the individuals, while employed
by the Company, devoted substantial amounts of time to services
for Mr. Jurick and his associated or affiliated entities, and
consequently, Mr. Jurick may be deemed to receive an indirect
benefit from the payment by the Company of the salary and other
expenses of these two individuals.
Peter G. Bunger, a Director of the Company, has been engaged
as a consultant to two foreign subsidiaries of the Company. The
agreements, effective as of October 1, 1994, provide for
aggregate annual compensation of $140,000, have terms of two
years and authorize reimbursement for reasonable travel and
business expenses. Mr. Bunger has agreed to terminate the
agreements as of September 30, 1995.
Emerson Radio (Hong Kong) Ltd. retained Roger Vickery as a
consultant for a period of five months during Fiscal 1995. Mr.
Vickery, formerly a director of certain entities with which Mr.
Jurick was affiliated or associated, received $70,000 for
services rendered and $75,841 was paid for expenses incurred in
connection with such services.
In Fiscal 1995, the Company paid Elision the sum of $34,275
for consulting services with respect to management information
services. Elision owns 1,600,000 shares of Common Stock. Mr.
Jurick indirectly owns a controlling interest in Elision.
In May 1995, the Company and Elision organized Merchandising
Information Systems, L.L.C. ("MIS"), with equal ownership, for
the purpose of conducting a feasibility study to determine the
marketability of certain of Emerson's software applications and
know-how associated therewith through Elision's communications
and marketing services, to provide an on-line bureau
administration service for sourcing and distribution in the
consumer electronics industry. Initially, each of Emerson and
Elision has contributed $22,500 to MIS for purposes of conducting
such study. Further financing from each of Emerson and Elision
will be necessary if they determine to pursue the marketing of
such technology. The President of Elision will initially serve
as the President and Manager of MIS, and two of Emerson's
employees will also serve as officers of MIS.
The Company has adopted a policy that all future affiliated
transactions and loans will be made or entered into on terms no
less favorable to the Company than those that can be obtained
from unaffiliated third parties. In addition, all future
affiliated transactions and loans, and any forgiveness of loans,
must be approved by a majority of the independent outside members
of the Company's Board of Directors who do not have an interest
in the transactions. Certain restrictions have also been imposed
on transactions between the Company and its affiliates in the
Indenture for the Debentures. See "Description of Debentures."
DESCRIPTION OF DEBENTURES
General
The Debentures were issued under an Indenture (the
"Indenture"), dated as of August 17, 1995, between the Company and Bank
One, Columbus, NA, as trustee (the "Trustee"). The following statements
are summaries of certain provisions of the Debentures and the Indenture and
do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Indenture,
including the definitions therein of certain terms (generally capitalized
when used herein), which provisions and definitions are incorporated herein
by reference.
The Company has issued $20,750,000 aggregate principal amount
of Debentures under the Indenture. They are unsecured obligations of the
Company and do not have the benefit of a sinking fund for the retirement of
principal. The Debentures are subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company. See
"Description of Debentures - Subordination." At September 15, 1995, the
Company had $19.5 million of Senior Indebtedness outstanding under its
United States secured credit facility. See "Risk Factors - Risks
associated with the Company's Secured Indebtedness and Financing". The
Debentures will mature on August 15, 2002. Each Debenture bears interest
from the closing date applicable to such Debenture in the Company's private
placement of such Debentures, at the rate per annum stated on the front
cover of this Prospectus, payable quarterly on March 15, June 15, September
15 and December 15 in each year commencing September 15, 1995, to the
person in whose name the Debenture is registered at the close of business
on the Regular Record Date for such interest, which shall be the March 1,
June 1, September 1 or December 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The interest payable on each December 15, March 15, June 15 and September
15 after September 15, 1995 will amount to $21.25 per $1,000 aggregate
principal amount of Debentures. The interest rate payable on the
Debentures shall be increased by 0.5% if the Company fails to cause the
Registration Statement to become effective by December 21, 1995 or if the
Company fails to maintain such effectiveness for the required three-year
period; provided, however, that such increased interest rate shall only
apply during the periods when such Registration Statement is not effective
in accordance with the terms of the Registration Rights Agreement.
Principal and interest will be payable at the office or agency to be
maintained by Emerson in New York, New York (initially the office of the
Trustee in New York).
The Company will issue the Debentures only in fully registered
form, without coupons, in denominations of $1,000 with a minimum initial
purchase of $25,000, subject to modification. The Company will not assess
a service charge for any transfer or exchange of the Debentures, but it may
require payment of a sum sufficient to cover the tax or governmental charge
payable in connection therewith. Holders may transfer the Debentures by
surrendering them for transfer at the office of the Trustee. The Company
is not required to transfer or exchange any Debenture (i) during a period
beginning at the opening of business 15 days before the date of the mailing
of a notice of redemption and ending at the close of business on the date
of such mailing or (ii) selected for redemption, in whole or in part,
except the unredeemed portion of Debentures being redeemed in part.
All moneys paid by the Company to the Trustee or any Paying
Agent for the payment of principal of and premium, if any, and interest on
any Debenture which remain unclaimed for two years after such principal,
premium or interest became due and payable may be repaid to the Company.
Thereafter, the Holder of such Debenture may, as an unsecured general
creditor, look only to the Company for payment thereof.
Conversion
Each $1,000 principal amount of Debentures is convertible at
any time and from time to time, prior to redemption or maturity, at the
option of the Holders, into approximately 251 shares of Common Stock of the
Company (a conversion price of $3.9875 per share). The right to convert
Debentures which have been called for redemption will terminate at the
close of business on the last business day prior to any Redemption Date.
Emerson has reserved a sufficient number of shares of Common Stock for
issuance upon conversion.
The Conversion Price is subject to adjustment in certain events
as more fully described in the Indenture, including: (i) issuances or
distributions of Common Stock or the issuance of rights, warrants or
options entitling the holder to subscribe for or purchase Common Stock at
less than the Current Market Price (as defined in the Indenture) (except
that no adjustment of the Conversion Price shall be made as a result of
Permitted Transactions), (ii) dividends (and other distributions) payable
in Common Stock on any class of capital stock of the Company or any
Subsidiary; (iii) subdivisions, combinations or reclassifications of Common
Stock; (iv) dividends and distributions to holders of Common Stock
generally or to holders (other than the Company or its Subsidiaries) of
capital stock of any Subsidiary of evidences of indebtedness of the Company
or assets (including shares of capital stock or other securities, but
excluding those dividends, rights, warrants, options and distributions for
which adjustments are made as described above and dividends and
distributions on the Series A Preferred Stock in accordance with the terms
thereof paid exclusively in cash out of retained or current earnings), (v)
upon a decrease of 35% (a "Price Decrease") or more in the weighted average
Closing Price of the Common Stock in any forty-day period commencing ten
days prior to: (a) the disclosure (by press release or otherwise) of a
settlement, judgment, court order, disposition or other event relating to
the Litigation (relating to Geoffrey P. Jurick and related entities and
affiliates and described herein); or (b) whether singly or in the aggregate
and whether or not in the public markets, (x) the offer, pledge, sale,
contract to sell, sale of any option or contract to purchase, purchase of
any option or contract to sell, grant of any option, right or warrant to
purchase, assignment, hypothecation, transfer or other encumbrance or
disposition of, any securities of the Company, or (y) the entry into any
swap or similar arrangement that transfers, in whole or in part, the
economic risk of ownership of the Company's securities whether any such
transaction described in clause (x) or (y) above (any such transaction
being referred to herein as a "Transfer") is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, which Transfer
is directly or indirectly related to, or for the benefit of, the settlement
or other disposition of the Litigation, provided, however, no adjustment
will be made with respect to those Debentures held by a Holder who has
engaged in open-market sales of Debentures or underlying securities with
the sole intent of manipulating the price of the Common Stock in order to
cause such Price Decrease. The adjustment resulting from the occurrence of
a Price Decrease shall only be in effect for a period of 90 days commencing
upon the mailing of a notice of such Price Decrease in accordance with the
Debenture. For the purposes of adjustments to the Conversion Price,
"Permitted Transaction" means an issuance by the Company of Capital Stock
or the issuance of rights, warrants or options entitling the holder thereof
to subscribe for or purchase Common Stock, in a single or series of arms'-
length acquisition transactions, at a maximum discount of 15% to the
average Closing Price for 20 consecutive Trading Days immediately prior to
such issuance, provided (i) such issuance is not otherwise prohibited by
the terms of the Indenture, (ii) no Default or Event of Default shall have
occurred or be continuing, (iii) all such transactions aggregate
not more than ten percent (10%) of the Company's then outstanding voting
stock while any Debentures are Outstanding, (iv) such transaction(s) is in
furtherance of a bona fide business purpose of the Company and is in
exchange for valuable consideration, (v) such transaction(s) does not
involve an Affiliate Transaction, (vi) after giving pro forma effect to the
transaction(s), there will not exist a Default or an Event of Default, and
(vii) such transaction(s) will not have a Material Adverse Effect.
In certain circumstances it may be unclear as to whether a
Price Decrease has occurred or the cause thereof. The determination of
whether a Price Decrease has occurred is a determination based on the facts
and circumstances of the subject transaction. No fractional shares will be
issued upon conversion, but the Company will pay cash in lieu thereof.
The Company from time to time may to the extent permitted by
law reduce the Conversion Price by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction to the registered Holders of the Debentures, if the Board of
Directors of the Company has made a determination that such reduction would
be in the best interests of the Company.
In addition, the Company will be permitted to make such
reductions in the Conversion Price as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the Holders of Common Stock.
Under certain circumstances, a decrease in the Conversion Price of the
Debentures may be considered as resulting in the distribution of a dividend
to Holders of the Debentures for federal income tax purposes.
Subject to any applicable right of the Holders of the
Debentures to cause the Company to purchase the Debentures upon a
Designated Event (as described below), in case of any consolidation or
merger to which the Company is a party, other than a transaction in which
the Company is the continuing corporation, or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation or other entity (including
any exchange effected in connection with a merger of a third corporation or
other entity into the Company), there will be no adjustment of the
Conversion Price, but the Holder of each Debenture then outstanding will
have the right to convert such Debenture only into the kind and amount of
securities, cash or other property which the Holder would have owned or
have been entitled to receive immediately after such consolidation, merger,
statutory exchange, sale or conveyance had such Debenture been converted
immediately prior to the effective date of such consolidation, merger,
statutory exchange, sale or conveyance. In the case of a cash merger of
the Company with another corporation or other entity or any other cash
transaction of the type mentioned above, the effect of these provisions
would be that the conversion features of the Debentures would thereafter be
limited to converting the Debentures at the Conversion Price then in effect
into the same amount of cash that such holder would have received had such
holder converted the Debentures into Common Stock immediately prior to the
effective date of such cash merger or transaction. Depending upon the
terms of such cash merger or transaction, the aggregate amount of cash so
received on conversion could be more or less than the principal amount of
the Debentures.
Fractional shares of Common Stock will not be issued upon
conversion, but in lieu thereof, the Company will pay cash equal to the
market value of such fractional share computed with reference to the
Closing Price of the Common Stock on the last business day prior to
conversion. Debentures surrendered for conversion during the period from
the close of business on any Regular Record Date to the opening of business
on the next succeeding Interest Payment Date (except Debentures whose
maturity is prior to such Interest Payment Date and Debentures called for
redemption on a Redemption Date within such period) must be accompanied by
payment of an amount equal to the interest thereon to be paid on such
Interest Payment Date (provided, however, that if the Company shall default
in payment of such interest, such payment shall be returned to the payor
thereof). Except for Debentures surrendered for conversion which must be
accompanied by payment as described above, no interest on converted
Debentures will be payable by the Company on any Interest Payment Date
subsequent to the date of conversion.
The Company has covenanted under the Indenture to reserve and
keep available at all times out of its authorized but unissued Common
Stock, for the purpose of effecting conversions of Debentures, the full
number of shares of Common Stock deliverable upon the conversion of all
outstanding Debentures.
The Company will use its reasonable best efforts to cause all
registrations with, and to obtain any approvals by, any governmental
authority under any state law of the United States that may be required in
connection with conversion of the Debentures into Common Stock and the
resale thereof. If at any time during the three year period following the
effective date of the Registration Statement the Registration Statement is
not effective, shares of Common Stock issued upon conversion of Debentures
("Restricted Shares") may not be sold or otherwise transferred except in
accordance with Regulation S thereunder or pursuant to any other exemption
from, or otherwise in a transaction not subject to, the registration
requirements of the Securities Act and, if such Registration Statement
under the Securities Act is not effective at the time of a conversion, the
Restricted Shares will bear a legend to that effect. The Transfer Agent
for the Common Stock will not be required to accept for registration of
transfer any Restricted Shares, except upon presentation of satisfactory
evidence that these restrictions on transfer have been compiled with, all
in accordance with such reasonable regulations as the Company may from time
to time agree with the Transfer Agent.
Redemption at the Option of the Company
The Debentures are subject to redemption at the option of the
Company, in whole or in part, in cash, from time to time, commencing on
August 15, 1998 upon not less than 30 nor more than 45 days' notice mailed
to the Holders thereof, at the Redemption Prices established for the
Debentures, together, in each case with interest accrued and unpaid to the
date fixed for redemption (subject to the right of a Holder on the Regular
Record Date for an interest payment to receive such interest). The
Redemption Prices for the Debentures (expressed as a percentage of the
principal amount) shall be as follows for Debentures redeemed in the 12-
month period beginning August 15:
Year Percentage
1998 104%
1999 103%
2000 102%
2001 101%
and at maturity at 100% of principal, together in the case of any such
redemption with accrued interest to the redemption date.
The Company may elect to redeem less than all of the
Debentures. If the Company elects to redeem less than all of the
Debentures, the Trustee will select which Debentures to redeem, using such
method as it shall deem fair and appropriate, which may include the
selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Debentures of a denomination
larger than $1,000.
Certain Rights to Require Repurchase of Debentures
Each Holder of a Debenture has the right, at such Holder's
option, to cause the Company to repurchase all or any part of such
Debenture, at a price equal to 100% of the principal amount, together with
accrued and unpaid interest to the repurchase date, if any Change of
Control (as defined below) which constitutes a Designated Event occurs or
has occurred after the date of issuance of the Debentures and on or prior to
maturity. Notice with respect to the occurrence of a Designated Event will be
given as described in the Indenture and not later than 15 days after the date
of the occurrence of such Designated Event. Such notice shall include among
other things the repurchase price; the date fixed for repurchase; and the
instructions which a Holder must follow in order to exercise a repurchase
right. The date fixed for such purchase will be the date 30 days after
notice of the occurrence of a Designated Event is given (except as
otherwise required by law). To be purchased, a Debenture must be received
with a duly executed written notice, substantially in the form provided on
the reverse side of such Debenture, at the office of the Trustee not later
than the fifth day prior to the date fixed for such repurchase. All
Debentures purchased by the Company will be canceled. Such written notice
shall be irrevocable following the close of business on the fifth day prior
to the repurchase date, except in the discretion of the Company.
A "Change of Control" of the Company will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates),
becomes the beneficial owner (as defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of 50% or more of
the total permitted voting power of the Company's Common Stock, (ii)
Permitted Holders shall cease to own beneficially at least 51% of the total
voting power of the Company's Common Stock, (iii) any Person (including a
Person's Affiliates and associates) becomes the beneficial owner of more
than 30% of the total voting power of the Company's Common Stock, and
Jurick beneficially owns, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Company than such other
Person and does not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company, (iv) there shall be consummated any consolidation
or merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which the Common Stock of the Company
would be converted into cash, securities or other property, other than a
merger or consolidation of the Company in which the holders of the Common
Stock of the Company outstanding immediately prior to the consolidation or
merger hold, directly or indirectly, at least a majority of the Common
Stock of the surviving corporation immediately after such consolidation or
merger, or (v) beginning the date of the Indenture, during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company has been approved by 66 2/3% of
the directors then still in office who either were directors at the
beginning of such period or whose election or recommendation for election
was previously so approved) cease to constitute a majority of the Board of
Directors of the Company; provided, however, in any such event, a Change of
Control shall not be deemed to have occurred if Mr. Jurick ceases to own
beneficially 51%, but not less than 25%, of the total voting power of the
Company's Common Stock as a direct result of an Approved Settlement and
there is no other Person which beneficially owns or controls a percentage
of total voting power of the Company's Common Stock equal to or greater
than Mr. Jurick. "Permitted Holders" means (i) Mr. Jurick, Fidenas
International, Elision or GSE, but, in the case of Fidenas International,
Elision or GSE, only if such entity is controlled (as defined in the
Indenture) by Mr. Jurick and (ii) the heirs, executors, administrators
testamentary, trustees, legatees or beneficiaries of Mr. Jurick.
The Change of Control provisions described above may deter
certain mergers, tender offers and other takeover attempts involving the
Company. The Change of Control provisions will not prevent a leveraged
buyout led by the Company's management or a recapitalization of the
Company. In certain circumstances it may be unclear as to whether a Change
of Control has occurred. The determination of whether a Change of Control
has occurred is a determination based on the facts and circumstances of the
subject transaction.
The Company will comply with the provisions of Rule 13e-4 and
any other tender offer rules under the Exchange Act which may then be
applicable and will file a Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by the Company to purchase
Debentures at the option of Holders upon a Change in Control. The Change
in Control purchase feature is not, however, the result of management's
knowledge of any specific efforts to accumulate shares of Common Stock or
to obtain control of the Company by means of a merger, tender offer,
solicitation of proxies or consents or otherwise, or part of a plan to
implement a series of anti-takeover measures.
A "Designated Event" means the right to request the Company to
repurchase the Debentures and a Change of Control shall constitute a
Designated Event unless (i) the Closing Price of the Common Stock is at
least equal to 105% of the Conversion Price of the Debentures in effect
immediately preceding the time of such Change of Control; (ii) all of the
consideration (excluding cash payments for fractional shares) in the
transaction giving rise to such Change of Control to the holders of Common
Stock consists of shares of Common Stock that are, or immediately upon
issuance will be, listed on a national securities exchange or quoted on the
Nasdaq National Market, and as a result of such transaction the Debentures
become convertible solely into such Common Stock; or (iii) all of the
consideration in the transaction giving rise to such Change of Control to
the holders of Common Stock consists of cash, securities that are, or
immediately upon issuance will be, listed on a national securities exchange
or quoted on the Nasdaq National Market, or a combination of cash and such
securities, the aggregate fair market value of such consideration (which,
in the case of such securities, shall be equal to the average of the daily
Closing Price of such securities during the ten consecutive Trading Days
commencing with the sixth Trading Day following consummation of such
transaction) is at least 105% of the Conversion Price of the Debentures in
effect on the date immediately preceding the closing date of such
transaction.
The Company, could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that
would not constitute a Change in Control under the Debentures, but that
would increase the amount of Senior Indebtedness (or any other
indebtedness) outstanding at such time. The Company's ability to create
any additional Senior Indebtedness or additional Subordinated Indebtedness
is limited as described in the Debentures and the Indenture although, under
certain circumstances, the incurrence of significant amounts of additional
indebtedness could have an adverse effect on the Company's ability to
service its indebtedness, including the Debentures. If a Change in Control
were to occur, there can be no assurance that the Company would have
sufficient funds at the time of such event to pay the Change in Control
purchase price for all Debentures tendered by the Holders thereof. A
default by the Company on its obligation to pay the Change in Control
purchase price could, pursuant to cross-default provisions, result in
acceleration of the payment of other indebtedness of the Company
outstanding at that time.
Certain of the Company's existing and future agreements
relating to its indebtedness could prohibit the purchase by the Company of
the Debentures pursuant to the exercise by a Holder of the foregoing
option, depending on the financial circumstances of the Company at the time
any such purchase may occur, because such purchase could cause a breach of
certain covenants contained in such agreements. Such a breach may
constitute an event of default under such indebtedness and thereby
restrict the Company's ability to purchase the Debentures. See
"Description of the Debentures - Subordination."
Subordination
The payment of the principal of, premium, if any, and interest
on, the Debentures is, to the extent set forth in the Indenture,
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, or marshalling of assets, whether voluntary,
involuntary or in receivership, bankruptcy, insolvency or similar
proceedings, the holders of all Senior Indebtedness will first be entitled
to receive payment in full of all amounts due or to become due thereon
before any payment is made on account of the principal of, any premium, if
any, or interest on the indebtedness evidenced by the Debentures or on
account of any other monetary claims, including such monetary claims as may
result from rights to repurchase or rescission, under or in respect of the
Debentures, before any payment is made to acquire any of the Debentures for
cash, property or securities. No payments on account of principal of
sinking fund requirements, if any, or premium, if any, or interest on the
Debentures shall be made, and no Debentures shall be redeemed or
repurchased, if at the time thereof; (i) there is a default in the payment
of all or any portion of the obligations under any Senior Indebtedness; or
(ii) there shall exist a default in any covenant with respect to the Senior
Indebtedness (other than as specified in clause (i) of this sentence), and,
in such event, such default shall not have been cured or waived or shall
not have ceased to exist, the Trustee and the Company shall have received
written notice from any holder of such Senior Indebtedness stating that no
payment shall be made with respect to the Debentures and such default would
permit the maturity of such Senior Indebtedness to be accelerated, provided
that no such default will prevent any payment on, or in respect of, the
Debentures for more than 120 days unless the maturity of such Senior
Indebtedness has been accelerated.
The Holders of the Debentures are subrogated to the rights of
the holders of the Senior Indebtedness to the extent of payments made on
Senior Indebtedness upon any distribution of assets in any such proceedings
out of the distributive share of the Debentures.
By reason of such subordination, in the event of insolvency,
creditors of the Company, who are not holders of Senior Indebtedness or of
the Debentures, may recover less, ratably, than holders of Senior
Indebtedness, but may recover more, ratably, than the Holders of the
Debentures.
Senior Indebtedness is defined in the Indenture as (i) the
principal of all Indebtedness, now existing or hereafter created, of the
Borrower under or evidenced by the Senior Credit Agreement (as defined in
the Indenture); (ii) all interest with respect to principal described in
the foregoing clause (i) and obligations described in clause (iii) of this
definition (including, without limitation, any interest accruing subsequent
to the commencement of any proceeding against or with respect to the
Company under federal bankruptcy law or any other proceedings in
insolvency, bankruptcy, receivership, reorganization, dissolution,
assignment for the benefit of creditors or other similar case or proceeding
whether or not such interest constitutes an allowed claim in any such
proceeding); and (iii) all other Obligations (as defined in the Senior
Credit Agreement) then due and payable, now existing or hereafter arising
under the Senior Credit Agreement other than amounts referred to in clause
(i) of this definition, including, without limitation, premiums,
commitment, agency and other fees, expenses (including reasonable and
documented attorney's fees and disbursements payable thereunder or in
connection therewith) and indemnities then due and payable thereunder;
provided, however, Senior Indebtedness shall not include (i) Indebtedness
of the Company to a Subsidiary or an Affiliate of the Company (including
but not limited to Jurick and his Affiliates), (ii) Indebtedness to, or
guaranteed on behalf of, any individual stockholder, director, officer,
employee or consultant of the Company (including, but not limited to,
Jurick and his Affiliates), or any of the Company's Subsidiaries, and (iii)
trade payables and other Indebtedness and other amounts incurred in
connection with obtaining goods, materials or services.
The Debentures are obligations exclusively of the Company.
Except as described hereinafter, the Subsidiaries are separate distinct
entities that have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Debentures. In addition, the payment of
dividends, interest and the repayment of certain loans and advances to the
Company by the Subsidiaries may be subject to certain statutory or
contractual restrictions and are contingent upon the earnings of such
Subsidiaries. Moreover, the right of the Company and, therefore, the right
of creditors of the Company (including Holders of Debentures) to receive
assets of any such Subsidiary upon the liquidation or reorganization of any
such Subsidiary or otherwise will be effectively subordinated to the claims
of the Subsidiaries' creditors, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the
claims of the Company would still be subordinate to any secured claim on
the assets of such Subsidiary and any indebtedness of such Subsidiary
senior to that held by the Company.
Certain Covenants
Limitations on Dividends and Redemptions
Under the terms of the Indenture, Emerson has agreed not to,
and not to permit any Subsidiary to (a) declare or pay any dividend, or
make any other distribution on any Capital Stock, except (i) dividends or
distributions payable in Capital Stock, (ii) dividends and distributions
payable by the Subsidiaries to the Company or its Wholly Owned Subsidiaries
(as defined in the Indenture), and (iii) that so long as no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the payment or distribution, the Company may declare and pay
during any fiscal year cash dividends to the holders of the Series A
Preferred Stock in accordance with the terms of its Certificate of
Designation, or (b) purchase, redeem or otherwise acquire or receive for
value any Capital Stock acquired upon conversion thereof into other Capital
Stock, if, upon giving effect to such dividend, distribution, purchase,
redemption, retirement or other acquisition, a Default or Event of Default
shall have occurred and be continuing.
Limitation on Consolidation, Merger and Sale or Acquisition of
Assets.
Under the Indenture, the Company has agreed not to, and except
for Permitted Subsidiary Transactions, not to permit any of its
Subsidiaries, without the consent of the Holders of not less than 66 2/3%
in aggregate principal amount of the Outstanding Debentures to: (i)
consolidate with or merge into any other Person or (ii) sell, lease,
convey, or transfer, in a single transaction or through a series of
transactions, its properties and assets substantially as an entirety to any
Person or Persons, or (iii) adopt a Plan of Liquidation, unless: (a) either
(x) the Company or such Subsidiary, as the case may be, is the continuing
surviving corporation or transferee or (y) the corporation or other Person
formed by such consolidation or into which the Company or such Subsidiary,
as the case may be, is merged or the Person which acquires by sale, lease,
conveyance, transfer or other disposition, the properties and assets of the
Company or such Subsidiary shall be a corporation organized and existing
under the laws of the United States of America or any State thereof or the
District of Columbia, and shall expressly assume, by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee,
the due and punctual payment of the principal of (and premium, if any) and
interest on all the Debentures and the performance of every covenant of the
Indenture on the part of the Company to be performed or observed; (b) the
Person (or, in the case of (ii), one Person to which property and assets are
transferred) formed by such consolidation or surviving such merger or to
which the properties and assets of the Company or such Subsidiary, as the
case may be, are sold, transferred, conveyed or leased as an entirety or
substantially as an entirety or pursuant to a Plan of Liquidation shall
have a Consolidated Net Worth immediately after such transaction, equal to
or greater than that of the Company or such Subsidiary, as the case may be,
immediately preceding, and without giving effect to, such transaction; (c)
immediately after giving effect to such transaction, no Default or Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; (d) such
transaction shall be on such terms as shall not impair the rights and
powers of the Trustee or the Holders of Debentures or have a Material
Adverse Effect; and (e) certain other conditions are met.
Limitations on Additional Indebtedness
The Company has agreed in the Indenture not to, and not to
permit any of its Subsidiaries to, directly or indirectly, Incur any
Indebtedness (other than Permitted Indebtedness) unless, after giving pro
forma effect to the Incurrence thereof, (i) no Default or Event of Default
shall have occurred and be continuing at the time or as a consequence (as
defined in the Indenture) of the Incurrence of such Indebtedness, (ii) the
Consolidated Interest Coverage Ratio (as defined in the Indenture) of the
Company and its consolidated Subsidiaries is greater than 1.75 to 1, and
(iii) such Indebtedness constitutes Subordinated Indebtedness.
Contingency for Sinking Fund Under Certain Circumstances
If the Company provides for one or more sinking funds for
securities representing indebtedness for money borrowed ranking equal or
junior to the Debentures, and such indebtedness has a maturity or weighted
average time to maturity which is on or prior to the maturity date of the
Debentures, the Company will provide a sinking fund for the Debentures
calculated to retire that amount of Debentures equal to the lesser of (i)
the same percentage of outstanding Debentures prior to maturity as the
percentage of the principal amount of such other indebtedness to be retired
prior to maturity on the same payment schedule as such other indebtedness
or (ii) such amount of Debentures necessary to result in the Debenture
having the same weighted average time to maturity as other indebtedness.
Except as set forth herein with respect to the credit against mandatory
sinking fund payments, the redemption price and other terms of the sinking
fund applicable to the Debentures shall be the same as those applicable to
the relevant indebtedness, except that the redemption price of the
Debentures in connection with the sinking fund shall be 100% of the
principal amount thereof plus accrued and unpaid interest to the date fixed
for redemption. The Company may, at its option, receive credit against
mandatory sinking fund payments for the principal amount of (i) Debentures
acquired by the Company and surrendered for cancellation, (ii) Debentures
previously converted into Common Stock and (iii) Debentures redeemed or
called for redemption otherwise than through the operation of the sinking
fund.
Limitations on Liens
The Company has agreed not to, and, except for Permitted
Subsidiary Transactions, not to permit any of its Subsidiaries to, directly
or indirectly, Incur (as defined in the Indenture) any Lien (as defined in
the Indenture) upon any of the property or assets (tangible or intangible)
of the Company or any of its Subsidiaries or any shares of stock or debt of
any Subsidiary which owns property or assets, now owned or hereafter
acquired (including Capital Stock (as defined in the Indenture)), other
than Permitted Liens (as defined in the Indenture). Permitted Liens is
defined in the Indenture to exclude any Lien of any nature whatsoever on
trademarks, service marks, copyrights, tradenames, or application for the
foregoing, of any of the Company or its Subsidiaries.
Limitations on Sales of Assets
The Company has agreed not to and not to permit any of its
Subsidiaries to, directly or indirectly, consummate any Asset Sale or
otherwise permit an Asset Sale to occur, as the case may be, (A) unless (i)
the Company or such Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of
the property or other assets subject to such Asset Sale (as determined in
good faith by a majority of the Independent Directors of the Company, as
evidenced by a Board Resolution, or as determined based upon an opinion
letter from an Independent Appraiser, which opinion letter shall identify
such Independent Appraiser as such and shall be dated within 30 days of
such Asset Sale), (ii) the consideration therefor received by the Company
or such Subsidiary is in the form of cash or Cash Equivalents, (iii) the
fair market value of the property or other assets sold or otherwise
disposed of does not exceed $4,000,000 individually or in the aggregate,
during any consecutive 12 month period for all Asset Sales, and (iv) such
Asset Sale shall not have a Material Adverse Effect, or (B) except (i) for
sales of the Company's Common Stock (not exceeding, singly or in the
aggregate, 15% of the Company's then outstanding voting stock) pursuant to
an offering on behalf of the Company effected at a discount of not more
than seven percent (7%) from the then Closing Price, (ii) if after giving
pro forma effect to the such offering, no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
offering, and (ii) not involving an Affiliate Transaction.
Not later than 10 business days prior to the occurrence of any
Asset Sale by the Company or any of its Subsidiaries that will cause the
aggregate amount of all Net Proceeds of Asset Sales by the Company and/or
its Subsidiaries in any year to exceed $4,000,000, the Company shall notify
the Trustee in writing of the occurrence of such Asset Sale.
Limitation on Sale or Issuance of Capital Stock of Subsidiaries
Except for Permitted Subsidiary Transactions the Company has
agreed not to (a) sell or otherwise convey or dispose of any Capital Stock
of any of its Subsidiaries, except to a Wholly-Owned Subsidiary of the
Company, or (b) permit any Subsidiary to issue or sell to any Person,
except the Company or a Wholly-Owned Subsidiary, (A) any preferred stock of
such Subsidiary or (B) any other Capital Stock of Subsidiaries.
Limitations on Investments, Loans and Advances
Except for Permitted Subsidiary Transactions, the Company has
agreed not to make, and not to permit any of its Subsidiaries to make, any
capital contributions, advances or loans to (including any guarantees of
loans to), or investments or purchases of Capital Stock in, any Person
(collectively, "Investments"), except: (i) Investments represented by
accounts receivable created or acquired in the ordinary course of business;
(ii) advances to employees in the ordinary course of business not exceeding
$50,000 per employee in any 12-month period and not exceeding $250,000 in
aggregate advances for all employees in any 12-month period; (iii) certain
Investments arising in connection with Indebtedness permitted pursuant to
the Indenture; and (iv) cash and Cash Equivalents.
Limitation on Transactions with Affiliates
Under the terms of the Indenture, the Company may not, and may
not permit any of its Subsidiaries to, directly or indirectly, enter into
any transaction or series of related transactions (including, but not
limited to, the sale, purchase, exchange, lease, transfer or other disposition
of any properties, assets or services to, or the purchase of any property,
assets or services from, or the entry into any contract, agreement,
undertaking, loan, advance or guarantee) with, or for the benefit of, an
Affiliate (an "Affiliate Transaction"), or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior
to the date of issuance of the Debentures unless (i) such Affiliate
Transaction is between or among the Company and its Wholly-Owned
Subsidiaries, or (ii) the terms of such Affiliate Transaction are
fair and reasonable and at least as favorable to the Company or such
Subsidiary, as the case may be, than those that could have been obtained in
a comparable arm's length transaction by the Company or such Subsidiary
with an unrelated Person, and such Affiliate Transaction is entered into in
the ordinary course of business of the parties thereto; provided, however,
notwithstanding anything to the contrary contained in this paragraph, the
Company may issue securities pursuant to the exercise of outstanding
options and warrants on the terms in effect and described in this
Prospectus. All Affiliate Transactions must be approved in good faith by
the Board of Directors of the Company and majority of the Independent
Directors thereof, and such approval evidenced by a Board resolution that
such transaction meets the criterion set forth in (i) or (ii) above.
Limitation on Prepayments
Neither the Company nor any of its Subsidiaries shall
voluntarily prepay any outstanding Indebtedness (as defined in the
Indenture), whether or not permitted by the terms of such outstanding
Indebtedness or by the agreement, indenture or instrument creating or
evidencing such outstanding Indebtedness; provided, however, the Company
and the Subsidiaries may prepay any Senior Indebtedness to the extent
permitted thereunder.
Independent Directors
Under the terms of the Indenture, prior to the Closing Date,
the Company has agreed to use its best efforts to cause at least one-third
of the members constituting the Company's entire Board of Directors to be
Independent Directors (as defined in the Indenture) for the term of the
Debentures. Any settlement or other disposition of the litigation
involving Mr. Jurick and related entities and affiliates requires the
approval of a majority of three members of the Board of Directors
(including the Independent Directors and Mr. Eugene Davis) to the extent
such settlement or other disposition (i) includes the grant of registration
rights of any kind, and/or (ii) contemplates a Transfer (as defined in the
Indenture) of any securities which might adversely impact the market price
of the Common Stock. In the context of any such Board vote, the Indenture
requires the Company to expressly instruct the Independent Directors to
consider the interests of the Holders.
Payments for Consent
The Indenture provides that neither the Company nor any of its
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder
of any Debentures for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the
Debentures unless such consideration is offered to be paid or agreed to be
paid to all Holders of the Debentures which so consent, waive or agree to
amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
The Company has also covenanted and agreed to be bound by
certain other restrictive covenants, as more fully described in the
Indenture.
Events of Default
The Indenture defines the following as "Events of Default":
(1) default for a period of 30 days in the payment of any interest on any
Debenture when it becomes due and payable, whether or not such payments are
prohibited by the subordination provisions of the Indenture; or (2) default
in the payment of the principal of (or premium, if any, on) any Debenture
at its Maturity, whether or not such payments are prohibited by the
subordination provisions of the Indenture; or (3) default in the payment of
the Repurchase Price or Redemption Price on any Debentures, whether or not
such payments are prohibited by the subordination provisions of the
Indenture; or (4) default in the performance, or breach, of any covenant or
warranty of the Company in the Debentures or the Indenture, and continuance
of such default or breach for a period of 60 days after the Trustee has
given the Company, or the Holders of at least 25% in principal amount of
Outstanding Debentures have given the Company and the Trustee, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under the Indenture;
or (5) default on any Indebtedness of the Company or any Subsidiary of the
Company in excess of $1,000,000 which results in such Indebtedness being
declared due and payable after the expiration of any applicable grace
period or becoming due and payable; or (6) an "Event of Default" as defined
in the Senior Credit Agreement resulting in such Senior Indebtedness being
declared due and payable after the expiration of any applicable grace
period or becoming due and payable; or (7) the entry of one or more
judgments (not paid or fully covered by insurance) against the Company or
any of its Subsidiaries in an aggregate amount in excess of $1,000,000
(after deduction for the applicable insurance coverage), which judgments
are not vacated, discharge or stayed or bonded pending appeal within 30
days from the entry thereof; or (8) certain events of bankruptcy,
insolvency, or reorganization; or (9) the failure by the Company to have in
place for any consecutive seven day period an effective and enforceable
Senior Credit Facility.
If an Event of Default shall occur and be continuing (other
than an Event of Default resulting from certain events of bankruptcy,
insolvency, reorganization or the Company's failure to have in place an
effective and enforceable Senior Credit Facility as described in clause (8)
of the immediately preceding paragraph) either the Trustee or the Holders
of not less than 25% in aggregate principal amount of Outstanding
Debentures may accelerate the maturity of all such Outstanding Debentures.
Prior to acceleration of maturity of such Debentures, the Holders of at
least 66-2/3% in aggregate principal amount of Outstanding Debentures may
waive any past defaults under the Indenture, except for default in the
payment of principal (or premium, if any) or interest on any Debenture or
in the payment of any Repurchase Price or Redemption Price which may be due
and payable and except for certain covenants as provided in the Indenture.
The Holders of at least 66-2/3% in principal amount of Outstanding
Debentures may waive an Event of Default resulting in acceleration, and
annul the acceleration, of such Debentures, but only if all the Events of
Default have been remedied and all payments (other than those due as a
result of acceleration) have been made.
The Company must furnish the Trustee annually with a statement
of certain officers of the Company as to their knowledge of defaults.
Modification, Waiver and Satisfaction of Indenture
With certain exceptions that permit modifications of the
Indenture by Emerson and the Trustee only, the Indenture, the rights and
obligations of Emerson and the rights of Holders of Debentures may be
modified by the Company with the consent of Holders of not less than 66-
2/3% in aggregate principal amount of Outstanding Debentures affected
thereby; provided that Emerson may make no such modification without the
consent of the Holder of each Debenture affected thereby if such
modification would:
(1) change the Stated Maturity of the principal of, or
any installment of interest on, any Debenture or reduce the
principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the time
or place of payment where, or the coin or currency in which,
any Debenture or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption
Date or, in the case of a repurchase, on or after 10 days
following the Repurchase Date), or adversely affect the right
to convert any Debenture (except as permitted by subparagraph
(4) hereof);
(2) reduce the percentage in principal amount of the
Outstanding Debentures, the consent of whose Holders is
required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver (of compliance with
certain provisions of the Indenture or certain defaults
hereunder and their consequences) provided for in the
Indenture;
(3) modify any of the provisions of this covenant or
the provisions regarding waiver of past defaults, except to
increase the percentage of Holders required to waive a past
default under the Indenture or to provide that certain other
provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Debenture
affected thereby;
(4) modify or impair the absolute and unconditional
right of the Holder of any Debenture to receive payment of the
principal of (and premium, if any) and interest on such
Debenture on the respective Stated Maturities expressed in such
Debenture (or, in the case of redemption, on the Redemption
Date) and to convert such Debenture pursuant to the Indenture
and to institute suit for the enforcement of any such payment
and right to convert without the consent of such Holder;
(5) waive a Default or Event of Default in the payment
of principal of (and premium, if any) or interest on, or
redemption payment with respect to, any Debenture (other than a
Default or Event of Default in the payment of an amount due as
a result of an acceleration if the Holders rescind such
acceleration); or
(6) adversely modify or affect (in any manner adverse
to the Holders) the terms and conditions of the obligations of
the Company under the Indenture to repurchase the Debentures.
No supplemental indenture shall affect adversely the rights of the holders
of Senior Indebtedness without the consent of such holders.
The Holders of at least 66-2/3% in aggregate principal amount
of Outstanding Debentures may waive Emerson's compliance with certain
restrictive provisions of the Indenture.
Upon cancellation of all of the Debentures or, with certain
limitations, upon Emerson's deposit with the Trustee of funds sufficient
therefor, Emerson may satisfy and discharge the Indenture.
The Trustee
Bank One, Columbus, NA, is the Trustee under the Indenture.
DESCRIPTION OF OTHER SECURITIES
The Company's authorized capital stock consists of 75,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share. The Company intends to request
stockholder approval to increase the authorized number of shares of
Preferred Stock to 10,000,000.
Outstanding Common Stock
As of September 15, 1995, 40,252,772 shares of Common Stock are
outstanding. All of the issued and outstanding shares of Common Stock are
fully paid and non-assessable. Each share of Common Stock has one vote on
all matters to which stockholders are entitled or permitted to vote upon,
including the election of directors. There are no cumulative voting
rights. Shares of Common Stock would participate ratably in any
distribution of assets in a liquidation, dissolution or winding up of the
Company subject to prior distribution rights of any shares of Preferred
Stock then outstanding. The Common Stock has no preemptive rights or
conversion rights nor are there any redemption or sinking fund provisions
applicable to the Common Stock. Subject to the rights of the holders of
the Series A Preferred Stock, holders of Common Stock are entitled to
participate in dividends if and when declared by the Company's Board of
Directors out of funds legally available therefor. The Company's ability
to pay cash dividends is subject to certain restrictions. See "Description
of Debentures" and "Description of Other Securities - Dividend Policy
Regarding Common Stock."
The transfer agent and registrar for the Common Stock is the American
Stock Transfer & Trust Company.
Outstanding Preferred Stock
The Certificate of Incorporation provides that the Board of Directors
of the Company may authorize the issuance of one or more series of
preferred stock having such rights, including voting, conversion and
redemption rights and such preferences, including dividend and liquidation
preferences, as the Board may determine without any further action by the
stockholders of the Company which could adversely affect the voting rights
of the holders of Common Stock.
There are currently 10,000 shares of Series A Preferred Stock
outstanding, $10 million face value in the aggregate, which were issued
pursuant to the Plan of Reorganization and are held as of the date hereof
by 21 holders. Series A Preferred Stock is convertible into Common Stock
of the Company at any time during the period beginning on the third
anniversary of the issuance date of the Series A Preferred Stock, March 31,
1994 (the "Issuance Date"), and ending on the eighth anniversary thereof.
The Series A Preferred Stock will be convertible into Common Stock at a
price per share of Common Stock equal to 80% of the then market value of a
share of Common Stock (determined on a 60 day average prior to conversion).
The Series A Preferred Stock bears dividends as described below, prohibits
Common Stock dividends unless Series A Preferred Stock dividends are paid
or set aside, provides for the appointment of two directors if Series A
Preferred Stock dividends are in default for six consecutive quarters and
has other customary priorities. In the event of liquidation, dissolution
or winding-up of the Company, the Series A Preferred stockholders are
entitled to receive an amount equal to $1,000 per share, plus a sum equal
to cumulative dividends accrued and unpaid, prior to any payment or
distribution to any other class or series of stock ranking junior.
Dividend Policy Regarding Common Stock
The Company's policy has been to retain all available earnings, if
any, for the development and growth of its business. The Company has never
paid cash dividends on its common stock. In deciding whether to pay
dividends on the Common Stock in the future, the Company's Board of
Directors will consider factors it deems relevant, including the Company's
earnings and financial condition and its working capital and anticipated
capital expenditures. The Company's existing United States secured credit
facility contains and, if consummated, the terms of the contemplated
Facility will contain, and the Indenture relating to the Debentures will
contain, certain dividend payment restrictions on the Company's Common
Stock. Also, the Company's Certificate of Incorporation defining the
rights of the Series A Preferred Stock prohibits Common Stock dividends
unless Series A Preferred Stock dividends are paid or put aside.
Dividend Policy Regarding Series A Preferred Stock
The Company's Series A Preferred Stock earns dividends based on a
$1,000 per share stated value commencing June 30, 1994, payable on a
quarterly cumulative basis at (i) a 7% dividend rate during the period
beginning on the Issuance Date, and ending on the day before the third
anniversary thereof, (ii) a 5.6% dividend rate during the period beginning
on the third anniversary of the Issuance Date and ending on the day before
the fourth anniversary thereof, (iii) a 4.2% dividend rate during the
period beginning on the fourth anniversary of the Issuance Date and ending
on the day before the fifth anniversary thereof, (iv) a 2.8% dividend rate
during the period beginning on the fifth anniversary of the Issuance Date
and ending on the day before the sixth anniversary thereof, (v) a 1.4%
dividend rate during the period beginning on the sixth anniversary of the
Issuance Date and ending on the day before the seventh anniversary thereof,
and (vi) a 0% dividend rate thereafter.
Potential Anti-Takeover Implications
Under certain circumstances, an increase in the number of shares of
Common Stock or the authorization of a new series of preferred stock could
provide corporate management with a means to discourage a change of
control, such as through the issuance to stockholders of rights to purchase
shares of preferred stock or additional shares of Common Stock at prices
below the then current market price. Such intentions to prevent or to
discourage changes of control could be accomplished without further
stockholder approval. However, the Board of Directors has no present
intention of using the preferred stock or the additional shares of Common
Stock for such a purpose and is not aware that any takeover or similar
action is contemplated.
Certain Provisions of Governing Documents
The Company's Certificate of Incorporation contains an express
election not to be governed by Section 203 of the Delaware General
Corporation Law ("Delaware Law"). Section 203 provides generally that a
corporation may not engage in certain transactions with an "interested
stockholder" (as defined) within a period of three years after the
interested stockholder becomes such, unless certain conditions are met.
Because Fidenas International may be deemed to be an "interested
stockholder" within the meaning of Section 203, the effect of such election
is to permit certain transactions between the Company and Fidenas
International, including certain business combinations and issuances of
securities, which would not be permitted (unless certain conditions are
met) were Section 203 to apply. No transactions or business combinations
to which Section 203 would apply are currently contemplated by the Company,
but for the Company's election not to be governed by such section.
In addition, certain provisions of the Company's Certificate of
Incorporation and By-Laws, including provisions (i) authorizing the Board
of Directors to create new series of preferred stock, (ii) providing that
any action requiring stockholder consent must be effected at a meeting as
opposed to by consent in writing and (iii) setting forth that directors may
only be removed for cause, upon the affirmative vote of at least 80% of the
voting securities then outstanding, voting together as a single class, may
make it more difficult for a third party to make, or may discourage a third
party from making, an acquisition proposal for the Company or initiating a
proxy contest and may thereby inhibit a change in control of the Company or
the removal of incumbent management or directors.
The Company has included in its Certificate of Incorporation and By-
Laws provisions to (i) eliminate the personal liability of its directors
for monetary damages resulting from breaches of their fiduciary duty (other
than breaches of the duty of loyalty, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the Delaware Law or for any transactions
from which the director derived an improper personal benefit) and (ii)
indemnify its directors and officers to the fullest extent permitted by
Section 145 of the Delaware Law, including circumstances in which
indemnification is otherwise discretionary. The Company believes that
these provisions are necessary to attract and retain qualified persons as
directors and officers.
Price Range of the Company's Common Stock
The Company's Common Stock has traded on the AMEX since December 22,
1994 under the symbol MSN. The Common Stock began trading publicly on
September 1, 1994 in the over-the-counter market. Prior thereto, there was
no established public trading market for the Common Stock.
Prior to the consummation of the Restructuring, there were
approximately 4,500 shareholders of record of the common stock of the
Company's predecessor. The shares of such shareholders were terminated and
canceled on the effective date of the confirmed Plan of Reorganization.
Such shares had been traded on the New York Stock Exchange until trading
was suspended on October 6, 1993 and the shares delisted on April 15, 1994.
The following table sets forth the range of high and low closing bid
prices for the Company's Common Stock as reported by the National
Quotations Bureau for the period September 1, 1994 through December 21,
1994 and the range of high and low last reported sales prices as reported
by the AMEX from December 22, 1994.
High Low
Fiscal 1995
Second Quarter $ 1-1/2 $ 1
Third Quarter 2-7/8 15/16
Fourth Quarter 3-3/8 2
Fiscal 1996
First Quarter $ 3-1/8 $ 2-1/4
Second Quarter (through
September 15, 1995) 3-3/4 2-1/4
On September 15, 1995, the last sale price of the Common Stock as
reported by the AMEX was $3.3125 per share. As of September 15, 1995,
there were approximately 459 stockholders of record.
Common Stock Eligible for Future Sale
As of March 31, 1995 the Company has 40,252,772 shares of Common
Stock outstanding, in addition to the Creditor's Warrants and the Series A
Preferred Stock. Of the outstanding shares of Common Stock, an aggregate
of 3,333,333 shares initially issued to the Bank Lenders and the
Noteholders, in addition to the 769,446 Shares issued in February 1995, are
freely tradeable without restriction or further registration under the
Securities Act. In addition, the Creditor's Warrants, shares of Common
Stock underlying the Creditor's Warrants, Series A Preferred Stock, and
Common Stock underlying the Series A Preferred Stock and the 6,149,993
shares sold in the public offering authorized by the Plan of Reorganization
are freely tradeable. All of the securities issued pursuant to the Plan of
Reorganization described above are deemed to be freely tradeable by virtue
of Section 1145 of the Bankruptcy Code, provided the holders thereof are
not deemed affiliates of the Company. Also, the Company has outstanding
options to acquire 1,890,000 shares of Common Stock, granted in accordance
with Rule 701 of the Securities Act, which may be sold under certain
conditions. The 30 million shares issued pursuant to the Plan of
Reorganization to Fidenas International, Elision and GSE, and currently
outstanding, are "restricted securities" within the meaning of Rule 144 and
are eligible for sale in the public market in reliance upon Rule 144
commencing April 1996, subject to applicable volume restrictions, to the
extent that Fidenas International, Elision and GSE are deemed to be
"affiliates" of the Company, as that term is defined under the Securities
Act. The Placement Agent has agreed, subject to the granting of
registration rights in accordance with the requirements of the Indenture
and applicable law, to permit the registration of up to 5,000,000 shares of
Common Stock owned by GSE, Fidenas International and Elision, which
registration rights were subsequently approved by the Board of Directors of
the Company. The Company intends to file a registration statement related
thereto with the commission in the near future. Also, the holders of such
shares of Common Stock and the officers and directors of the Company, with
certain exceptions, have agreed to additional restrictions on the transfer
of their shares for a period of 12 months. See "Description of
Debentures."
In addition, the Company has been advised by Mr. Jurick that current
settlement discussions regarding the litigation described under "Legal
Proceedings - Litigation Regarding Certain Outstanding Common Stock"
include discussions regarding the possible sale of a portion of the shares
of Common Stock beneficially owned by him to fund settlement payments. In
this regard, it is anticipated that the Company may be requested in the
future, subject to the restrictions described in the Indenture, to register
the resale of certain of such shares. The Placement Agent has, pursuant to
an agreement with Mr. Jurick and certain affiliated entities, an exclusive
right to sell a certain number of these shares in furtherance of the
settlement. See also "Plan of Distribution - Certain Restrictions on
Officers, Directors and Certain Stockholders." There can be no assurance
that a settlement will be reached or consummated or on favorable terms.
Moreover, any settlement and/or sales of Common Stock thereunder may have
an adverse effect on the market for the Company's securities. See "Risk
Factors - Litigation Relating to Common Stock."
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated), including persons who may be deemed
to be "affiliates" of the Company, as that term is defined under the
Securities Act, is entitled to sell within any three-month period a number
of restricted shares beneficially owned for at least two years that does
not exceed the greater of (i) one percent of the then outstanding Common
Shares, or (ii) the average weekly trading volume in the Common Shares
during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice
and the availability of current public information about the Company.
However, a person who is not an affiliate and has beneficially owned such
shares for at least three years is entitled to sell such shares without
regard to the volume or other resale requirements.
Creditor's Warrants
The Company has issued 750,000 Creditor's Warrants to the Noteholders
in connection with the consummation of the Plan of Reorganization, which
are held as of the date hereof by 11 holders. Each Creditor's Warrant
entitles the holder thereof to acquire one share of Common Stock at an
exercise price of $1.00 per share until March 31, 1997, and escalating
$0.10 per share per annum thereafter until the expiration of the Creditor's
Warrants on March 31, 2001, subject in all events to standard anti-dilution
adjustments. All of these Creditor's Warrants are currently exercisable,
and the Company believes that the Creditor's Warrants and the shares of
Common Stock underlying them are freely tradeable by virtue of Section 1145
of the Bankruptcy Code, provided the holders thereof are not deemed
affiliates of the Company. See "Description of Other Securities - Common
Stock Eligible for Future Sale." In connection with the granting of the
Creditor's Warrants, the Company granted the holders thereof certain demand
and incidental registration rights, to the extent that the underlying
shares of Common Stock may not be freely tradeable by virtue of Section
1145 of the Bankruptcy Code.
Placement Agent's Warrants
The Company has issued to the Placement Agent and its authorized
dealers five year warrants (the "Warrants") to purchase 500,000 Shares of
Common Stock, subject to adjustment under certain circumstances. The
Warrants shall be exercisable at any time during a period of four years
commencing at the beginning of the second year after their issuance and
sale at a price equal to 100% of the initial Conversion Price subject to
adjustment under certain circumstances. The Company has granted certain
customary "piggyback" and "demand" registration rights with respect to the
Warrants.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary is a general discussion of certain of the
Federal income tax consequences of the Restructuring to the Company and the
purchase of Debentures to prospective investors. The summary is based upon
relevant provisions of the Code, the applicable Treasury Regulations
promulgated thereunder (the "Treasury Regulations" or "Regulations"),
judicial authority and current administrative rulings and practice, all of
which are subject to change, possibly on a retroactive basis. The Company
has not requested a ruling from the Internal Revenue Service (the
"Service") with respect to these matters.
Tax Consequences of the Restructuring to the Company
Discharge of Indebtedness
Under the Code, a taxpayer generally must include in gross income the
amount of any discharged indebtedness realized during the taxable year. No
income is recognized, however, where a taxpayer has a discharge of
indebtedness while under Chapter 11 of the Bankruptcy Code, provided the
taxpayer is under the jurisdiction of the court and the cancellation of
indebtedness is granted by the court or is pursuant to a plan approved by
the court. However, the Code generally provides that the amount so
excluded from income reduces the tax attributes (see below) of the
taxpayer. The Code, as in effect on the date of the Restructuring,
contained an exception to the rule requiring reduction of tax attributes
(the "Stock-for-Debt Exception") for a debtor corporation that transfers
its own stock to a creditor in satisfaction of its indebtedness while such
corporation is under Chapter 11 of the Bankruptcy Code.
The Stock-for-Debt Exception does not apply when, among other tests,
"nominal or token" shares are issued in exchange for debt (the
"Nominal/Token Rule"). The Nominal/Token Rule has only been in the Code
since 1980 and the Code does not define the term "nominal or token" shares.
There were no reported cases interpreting the Nominal/Token Rule, nor were
Treasury Regulations or Revenue Rulings in effect at the time of the
Restructuring that governed the tax consequences of this aspect of the
Restructuring (although Regulations were promulgated by the Treasury
Department prior to the Restructuring, they are only effective with respect
to debt restructuring that occurred after the Restructuring was completed).
If the Stock-for-Debt exception does not apply to the Company's
issuance of stock to creditors in satisfaction of Company indebtedness (the
"Exchange"), the Company's NOLs and TCCOs would be eliminated. In
addition, the Company's tax basis in its assets would be reduced, but not
below the aggregate liabilities of the reorganized Company immediately
after the discharge of indebtedness.
The courts have not yet ruled on what factors should be considered in
determining whether stock issued to creditors is nominal or token. Over
the years the Service has proposed various methods of applying the
Nominal/Token Rule, and, in 1994, it adopted a safe harbor ("Rev. Proc.
94-26") agreeing not to treat the issuance of common stock as nominal or
token if the value of common stock issued to creditors for unsecured debt
is at least 15% of the value of all stock (including preferred stock)
outstanding after that exchange. The Exchange did not satisfy that safe
harbor. The Service also has issued Regulations that generally are
unfavorable to the Company, in part because they treat preferred stock less
favorably than common stock in applying the Nominal/Token Rule. Neither
Rev. Proc. 94-26 nor the Regulations govern the Exchange, since by their
terms they do not apply to a plan of reorganization confirmed by a
bankruptcy court before May 18, 1994 and, in any event, Rev. Proc. 94-26
only sets forth a safe harbor for taxpayers that meet its test. Although
no assurance can be given that a court would reject the Service's
interpretation of the Nominal/Token Rule and although there is no
definitive applicable precedent, counsel believes that the better view is
that the stock issued to creditors in satisfaction of Company indebtedness
was not nominal or token and thus the Exchange should qualify for the
Stock-for-Debt Exception. In rendering its opinion, counsel relied on
certain factual representations made by the Company about the value of
stock and other consideration received by creditors and others under the
Plan and about the amount of unsecured debt held by creditors at the time
of the Exchange. The balance of the description of Tax Consequences to the
Company assumes that the Stock-for-Debt Exception applies to the Exchange.
Tax Attributes
For Federal income tax purposes, the Company has substantial
consolidated NOLs and consolidated TCCOs. As of March 31, 1995, the
Company had approximately $95 million of NOLs. The Company's ability to
utilize the NOLs is materially limited under Section 382 of the Code, as
discussed below.
As of March 31, 1995, the Company had approximately $1.1 million of
TCCOs, which all expire in 1996. The Company's ability to utilize the
TCCOs is limited under Section 383 of the Code, which applies rules similar
to those limiting NOLs under Section 382, as discussed below.
Sections 382 and 383 of the Code provide rules governing the
utilization of a corporation's NOLs and TCCOs following an "ownership
change." An ownership change occurs, in general, if the percentage of stock
owned by one or more "5-percent stockholders" has increased, in the
aggregate, by more than 50 percentage points relative to the lowest
percentage of stock owned by such 5-percent stockholders during a specified
period. For this purpose, all stock owned by persons who own less than 5%
of a corporation's stock is generally treated as stock owned by a single
5-percent stockholder.
An ownership change occurred with respect to the Company on March 31,
1994 as a result of the Restructuring. Accordingly, the amount of the
Company's taxable income in any year ending after the ownership change that
may be offset by its prechange NOLs (or TCCOs), in general, is limited to
an amount (the "Section 382 Limitation") equal to the product of (i) the
value of the Company's outstanding stock immediately after the
Restructuring and (ii) 5.15%, the long-term tax exempt rate (as published
by the Treasury Department) for ownership changes occurring during March
1994. The Company estimates that the annual Section 382 Limitation will be
approximately $2,200,000. In addition, if the Company had either net
built-in gains or net built-in losses (as defined in the Code) above
certain threshold levels, and those gains or losses are actually recognized
within a five year period, the effect would be to either increase the
Section 382 Limitation by such gains recognized, or treat those losses
recognized as pre-change losses, respectively.
In addition to this Debenture Offering, the Company is considering a
number of other transactions, and there are certain other possible
transactions beyond the Company's control, which, in the aggregate, may
trigger a second, future, ownership change within the meaning of Section
382. A second ownership change could cause the amount of the Section 382
Limitation to be reduced below $2,200,000, thereby reducing the value of
the NOLs to the Company.
However, in the Company's opinion, if an ownership change were to
occur as of the date of this Prospectus, such a further reduction in the
annual Section 382 Limitation would not result. While the Section 382
Limitation must be re-calculated after each ownership change, in the case
of successive ownership changes, the smallest of the Section 382
Limitations will be applicable. The Company's market value and the long
term tax exempt rate have both increased since the initial ownership
change.
The Section 382 Limitation is reduced to zero if a corporation does
not continue its business enterprise (i.e., maintain a significant line of
business) for the two-year period following the ownership change. In
addition, a corporation's ability to utilize its NOLs and TCCOs will be
disallowed if the corporation is acquired for the principal purpose of tax
avoidance (see the discussion below relating to Section 269 of the Code).
Section 269 of the Code authorizes the Service to disallow any
deduction, credit, or other allowance of a corporation if control (i.e.,
ownership of stock having at least 50% of the voting power or value of all
of the corporation's outstanding stock) of the corporation is acquired
principally for the purpose of evading or avoiding Federal income taxes by
securing the benefit of such deduction, credit, or other allowance. While
the existence of a principal tax-avoidance purpose is purely a question of
fact, and thus not one on which counsel can opine, the Company believes
that Section 269 of the Code should not apply to the transactions provided
for under the Plan of Reorganization.
Tax-free Reorganization
Code section 368(a)(1)(G) classifies as a "reorganization" (a "(G)
reorganization") a transfer by a corporation (e.g., the predecessor
Company) of all or a part of its assets to another corporation (e.g., the
post-merger Company, sometimes referred to as "Emerson (Del)") in a Chapter
11 case, but only if, in pursuance of the plan, stock or securities of the
transferee (e.g., Emerson (Del)) are distributed in a transaction which
qualifies under Code sections 354, 355 or 356 (the "Distribution
Requirement"). In addition, a so-called "continuity of interest test" must
be satisfied. As a tax-free reorganization, the Company would not
recognize gain or loss as a result of the Restructuring and the Company
would succeed to the predecessor Company's tax attributes.
If a court were to find that the Restructuring did not constitute a
reorganization within the meaning of Section 368(a)(1) of the Code, the
principal tax consequence would be that the Company would not succeed to
the predecessor Company's tax attributes (so that, for example, the Company
could not use the predecessor Company's NOL carryforward or TCCO
carryforward); further, the Company's tax basis in certain of the assets it
acquired from the predecessor Company as part of the Restructuring would be
less than the predecessor Company's tax basis in those assets immediately
before the Restructuring was consummated, so that the Company's taxable
income could be greater than it would be if the Restructuring constituted a
tax-free reorganization.
To satisfy the aforementioned continuity of interest test, the equity
owners of a corporation generally must receive a substantial portion of
their total consideration in stock. It is not certain who is treated as an
equity owner in a (G) reorganization, or what percentage of the
consideration given to those equity owners must be in the form of stock, to
establish continuity of interest. Based on the Company's representation
that more than 38.5% of the consideration received by certain claimants
under the Plan of Reorganization was in the form of stock, and the fact
that no stock was issued to any creditor on account of claims in classes
more senior than such aforementioned claimants, counsel believed that it
was more likely than not that the continuity of interest test was met in
the Restructuring. That conclusion was based in part on the Bankruptcy
Court's determination that the Company's former shareholders received no
property for their Old Common Stock under the Plan of Reorganization.
To satisfy the Distribution Requirement of a (G) reorganization,
Company stock must have been distributed to a creditor in exchange for a
security. While there is no bright line test of what constitutes a
"security" for this purpose, counsel was of the opinion, based on
applicable case law, that it was more likely than not that the distribution
requirement was satisfied in the Restructuring by the distribution of
Company stock to certain of the creditors in exchange for notes they held
of the predecessor Company.
The Company believes that the Restructuring is a tax-free
reorganization and has obtained an opinion of counsel that it is more
likely than not that the Restructuring constituted a (G) reorganization.
That opinion relied on certain assumptions and representations of the
Company (as to valuation, business matters, and the intentions of certain
parties to the Restructuring).
Personal Holding Company Status
Under the Code, a corporation will be designated as a "Personal
Holding Company," and taxed at 39.6% of its "undistributed personal holding
company income," if (in general) at any time during the last half of the
taxable year more than 50% in value of its outstanding stock is owned by,
or on behalf of, five or fewer individuals, and at least 60% of the
corporation's adjusted ordinary gross income consists of "personal holding
company income." Personal holding company income is defined to include such
passive types of income as dividends, interest, royalties, annuities, and
certain rents, among others. Undistributed personal holding company income
is defined as the undistributed (i.e. dividend distributions) portion of
taxable income, with certain adjustments; the most notable is the allowance
of a deduction for Federal income tax, but there also is an elimination of
NOL carryforwards, other than the immediately preceding year's NOL (i.e.,
the excess of deductions over income). The tax imposed on the personal
holding company is in addition to the regular income tax and alternative
minimum tax.
The Company expects that the stock ownership test described above may
be met indirectly by reason of the ownership of Common Stock by Fidenas
International, Elision and GSE. However, it also is the Company's
expectation, based on the type and amount of income the Company expects to
generate, that the personal holding company tax described above will not be
applicable.
Alternative Minimum Tax
Under the corporate alternative minimum tax, a 20% tax is imposed on
a corporation's alternative minimum taxable income if such tax exceeds the
regular Federal income tax otherwise payable by the corporation. The
Company believes that the consummation of the Plan of Reorganization should
not have a material effect on the Company's alternative minimum tax
liability.
If the Company had a net unrealized built-in loss (as described
above) at the time of the ownership change, the basis of each of the
Company's assets will be written up or down to its fair market value in
computing the Company's alternative minimum tax liability. A write-down
may trigger additional alternative minimum tax as assets are depreciated or
sold.
State Taxes
The merger of the predecessor of the Company into a Delaware
subsidiary may cause the Company to lose certain of its state NOLs for
state income tax purposes.
Certain Federal Income Tax Consequences to Investors in Debentures
The following discussion, which summarizes various United States
federal income tax consequences of ownership and disposition of the
Debentures to purchasers thereof, is for general information only. This
summary deals only with Debentures held as capital assets within the
meaning of Section 1221 of the Code by holders who are purchasers of the
Debentures. The discussion assumes that the Debentures will constitute
debt rather than equity for federal income tax purposes. No assurance can
be given that the tax treatment described below to holders of the
Debentures will be accepted by the Service or a court of competent
jurisdiction. The following summary does not purport to be a complete
analysis or listing of all potential tax considerations that may be
relevant to a decision to purchase Debentures.
This discussion does not address all aspects of federal income
taxation that may be relevant to particular investors in light of their
personal circumstances, or to certain types of investors subject to special
treatment under the Code (for example, foreign individuals or entities, S
corporations, certain estates and trusts, insurance companies, tax exempt
organizations, taxpayers subject to the US alternative minimum tax,
financial institutions, brokers, dealers or holders that own 10% or more of
the voting power of the Company) and does not address any aspect of state,
local or foreign tax laws or any estate tax, gift tax or generation-
skipping tax considerations.
Prospective investors are urged to consult their own tax advisors
concerning the tax consequences of acquiring, owning, converting and
disposing of Debentures.
Distribution of Stock and Stock Rights
Although Code Section 305 generally provides that gross income does
not include the amount of a corporation's pro-rata distribution of stock
to its shareholders (i.e., a stock dividend), under certain circumstances,
such as a disproportionate distribution or certain distributions of
preferred stock, stock distributions may be taxable as a dividend. In
addition, Sections 301 and 305 provide that certain changes in the
conversion ratio or redemption price of, for example, convertible
securities, that have the effect of increasing the proportionate interest
of certain shareholders in the assets or earnings and profits of the
corporation (which for these purposes includes owners of convertible debt
securities), may be taxable as a dividend to those shareholders. Treasury
Regulations explain that where there is a "full adjustment" to a
conversion ratio by reason of a stock dividend to the shareholders of a
corporation, in general, an increase in the proportionate interest will not
be deemed to have occurred. Furthermore, a change in the conversion ratio
or conversion price of convertible securities made pursuant to a bona fide,
reasonable, adjustment formula, which has the effect of preventing dilution
of the interest of the holders of such securities, generally will not be
considered to result in a deemed distribution of stock. However, an
adjustment in the conversion ratio to reflect changes in the market price
of the common stock may have the effect of increasing the proportionate
interest of the convertible securities owners, as that concept is explained
in the Treasury Regulations.
The Indenture provides that the Conversion Price will be adjusted
upon the occurrence of certain circumstances, or if the Company deems such
adjustments advisable so that an event, otherwise treated as a taxable
stock distribution, will not be taxable to the shareholders of Common
Stock. There can be no assurance that some of the adjustments, more fully
described in the Indenture, would not result in a deemed taxable dividend
to the Holders under Sections 301 and 305. In such case, Holders may
recognize income as a result of an event pursuant to which they receive no
cash or property that could be used to pay the related income tax. Holders
of the Debentures are advised to consult with their tax advisors to more
fully appreciate the potential of taxable dividend distributions upon such
conversion price modifications (but see "Taxation of Debenture Holders"
below, including the discussion regarding the requirement that a company
have undistributed current or accumulated earnings and profits for a
distribution to be taxable as dividend).
Taxation of Debenture Holders
Stated Interest: Interest on a Debenture will be taxable to a holder
as ordinary income in accordance with the holder's method of accounting at
the time that such interest is either accrued or received.
Market Discount: Subject to a statutory de minimis rule, if a Holder
purchases a Debenture for an amount that is less than its principal amount,
the Debenture generally will be considered to bear "market discount" in the
hands of such holder. In such case, gain realized by such holder on the
disposition of the Debenture generally will be treated as ordinary interest
income to the extent of the market discount that accrued while held by such
holder (to the extent not previously included in income by such holder
pursuant to an election to include such market discount in income as it
accrues). Any accrued market discount not previously included in income as
of the date of conversion of a Debenture will carry over to the Common
Stock received on conversion and generally any gain recognized upon the
subsequent disposition of the Common Stock will be treated as ordinary
income to the extent of such market discount. Market discount on a
Debenture will be treated as accruing ratably over the remaining term of
the Debenture, or at the election of the holder, under a constant yield
method. A holder of a Debenture acquired at a market discount may be
required to defer the deduction of all or a portion of any interest paid or
accrued on any indebtedness incurred or continued to purchase or carry the
Debenture until the Debenture is disposed of in a taxable transaction.
Deferral of the deduction is not required, however, if the holder elects to
include accrued market discount in income currently.
Bond Premium: If, as a result of purchasing a Debenture at a premium
or otherwise, a holder's adjusted tax basis in a Debenture exceeds its
stated principal amount, such excess may constitute amortizable bond
premium that the holder may elect to amortize, using a constant yield
method, over the remaining term of the Debenture. Special rules apply
which may require the amount of the premium and the amortization thereof to
be determined with reference to the optional redemption price and data of
the Debentures. Amortizable bond premium does not include any amount
attributable to the conversion feature of the Debentures. The amount
attributable to the conversion feature of the Debentures is determined by
reference to the market price of comparable instruments not having
conversion features.
Conversion of Debenture into Common Stock: A holder generally will
not recognize gain or loss on the conversion of a Debenture into Common
Stock, except with respect to cash received in lieu of a fractional share.
The holding period of the Common Stock received by the holder upon
conversion of a Debenture generally will include the period during which
the Debenture was held prior to the conversion. The holder's aggregate tax
basis in the Common Stock received upon conversion of a Debenture generally
will equal the holder's aggregate tax basis in the Debenture exchanged
(reduced by the portion allocable to cash received in lieu of a fractional
share).
A holder generally will recognize taxable gain or loss in connection
with any cash received in lieu of a fractional share in an amount equal to
the difference between the amount of cash received and the holder's tax
basis in the fractional share.
Sale, Exchange or Retirement of a Debenture or Common Stock: A holder
of a Debenture (or the Common Stock into which it was converted) generally
will recognize capital gain or loss upon the sale, exchange, redemption,
retirement or other disposition of the Debenture (or the Common Stock)
measured by the difference between the amount realized (except to the
extent the amount is attributable to accrued interest income, which is
taxable as ordinary income) and the holder's tax basis in the Debenture
(or the Common Stock). The gain or loss on such disposition will be long
term capital gain or loss if the Debenture (or the Common Stock) has been
held for more than one year at the time of such disposition.
Distributions made by the Company with respect to Common Stock will
constitute dividends for US federal income tax purposes to the extent of
the Company's undistributed current or accumulated earnings and profits.
Distributions in excess of the Company's current or accumulated earnings
and profits will be treated first as a nontaxable return of capital
reducing the holder's tax basis in the Common Stock. Any such distributions
in excess of the holder's basis in the Common Stock will be treated as
capital gain to the holder. There can be no assurance as to the
characterization of any distribution for US federal income tax purposes.
Distributions paid on the Common Stock that are treated as dividends
for US federal income tax purposes will be includable in the holder's
income as ordinary income. A corporate shareholder that receives a
dividend may be eligible to claim a dividends received deduction. Further,
the dividends received deduction will be limited to specific percentages of
the corporate shareholder's taxable income and may be reduced or eliminated
if the corporate shareholder has indebtedness "directly attributable" (as
defined in the Code) to such holder's investment in the stock. Further, a
corporate shareholder may be required to reduce its basis in the Common
Stock by an amount generally equal to the dividends received deduction
allowable with respect to an "extraordinary dividend" (generally, a
dividend or aggregate successive dividends greater than or equal to 10% of
a corporate shareholder's basis in Common Stock) paid with respect to such
stock if such shareholder has not held the stock for more than two years
before the dividend announcement date.
Backup Withholding: A holder may be subject to "backup withholding"
at the rate of 31% with respect to interest (or dividends), or the proceeds
from a sale, exchange or redemption of a Debenture (or Common Stock into
which the Debenture was converted). Such withholding generally applies
only if the holder (i) fails to furnish a social security number or other
taxpayer identification number ("TIN") within a reasonable time after the
request therefor, (ii) furnishes an incorrect TIN, (iii) is notified by the
Service that it has failed to properly report payments of interest or
dividends and the Service has notified the Company that the holder is
subject to backup withholding, or (iv) fails, under certain circumstances,
to provide a certified statement, signed under penalty of perjury, that the
TIN provided is the holder's correct number and that the holder is not
subject to backup withholding. Any amount withheld from a payment to a
holder under the backup withholding rules is allowable as a credit against
such holder's federal income tax liability.
Certain US Holders are exempt from backup withholding if their exempt
status is established properly. Holders of Debentures should consult their
tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
The Company will report to holders and the Service the amount of any
"reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on the Debentures or Common
Stock.
SELLING SECURITYHOLDERS
The table below lists all holders of Debentures as of the date hereof
(the "Selling Securityholders") and sets forth certain information with
respect to the ownership of the Debentures prior to any sales of
Debentures or underlying shares of Common Stock hereunder by the
Selling Securityholders. All outstanding Debentures are covered by
this Prospectus. To the knowledge of the Company, none of the Selling
Securityholders has had any position, office, or other material relationship
with the Company within the past three years, except as a securityholder
of the Company. This Prospectus also covers the Common Stock issuable
upon the conversion of the Debentures. None of the Selling Securityholders,
except Guardian Life Insurance Co. which beneficially owns approximately
1.8% of the Common Stock assuming conversion of all Debentures,
beneficially owns 1.0% or more of the Common Stock.
AGGREGATE PERCENTAGE OF
PRINCIPAL AMOUNT CLASS
NAME OF SELLING SECURITYHOLDER OF DEBENTURES OWNED ON DATE HEREOF
Michaelangelo, L.P. $200,000 *
Raphael, L.P. 200,000 *
Angelo, Gordon & Co., L.P. 100,000 *
International Forest Products 50,000 *
Holy Cross 50,000 *
Brandeis University 50,000 *
Boston College 100,000 *
ECH Fund 50,000 *
Chestnut Hill Fund L.P. 700,000 3.4%
Credit Suisse-Zurich 1,000,000 4.8
Kinder Investments L.P. 500,000 2.4
Bancroft Convertible Fund 750,000 3.6
Ellsworth Convertible Fund 750,000 3.6
Deltec Asset Management Corporation 400,000 1.9
Deutsche Bank AG London 500,000 2.4
F. Barry, M. Ferrigno, and B. Allen
DVMS Profit Sharing Plan Dated 7/1/73 50,000 *
Forest Fulcrum Fund L.P. 500,000 2.4
Investors Bank & Trust Company 300,000 1.4
Chase Manhattan Bank for Jack
Sater Corp. 200,000 *
Guardian Life Insurance Co. 3,200,000 15.4
Guardian Pension Trust Fund 300,000 1.4
John N. Kapoor Trustee for
John N. Kapoor 50,000 *
Virginia Retirement System 226,000 1.1
Montgomery Value 281,000 1.4
Outboard Marine 236,000 1.1
Donaldson Company 54,000 *
Schwan's Profit Sharing Trust 89,000 *
Wacker Chemical 10,000 *
City of New Haven 35,000 *
Oklahoma Law Enforcement 71,000 *
Michigan Municipal Employees
Retirement System 305,000 1.5
Monsanto Master Trust 193,000 *
Offshore Strategies, L.P. 500,000 2.4
Laterman Strategies 90's, L.P. 300,000 1.4
Laterman & Co., L.P. 200,000 *
Nicholas Applegate Income
& Growth Fund 1,000,000 4.8
San Diego County 1,000,000 4.8
Prospect Street High Income Portfolio 750,000 3.6
Putnam Global Growth Fund 1,500,000 7.2
Putnam Capital Appreciation Fund 500,000 2.4
Putnam Capital Manager Trust - PCM
Global Growth Fund 500,000 2.4
Robertson Stephens Growth & Income Fund 500,000 2.4
The Bond Fund for Growth 1,500,000 7.2
Catholic Pension 200,000 *
Zazove Convertible Fund 650,000 3.1
United National Insurance Co. Convertible
Non-Investment Grade 150,000 *
__________
*Less than 1.0%
From time to time this Prospectus may be supplemented and amended
as required by the Securities Act of 1933, and during any time when a
supplement or amendment is so required, the Selling Securityholders
will cease sales until the Prospectus is so supplemented or amended.
PLAN OF DISTRIBUTION
The distribution of the Debentures and/or underlying of Common Stock
by the Selling Securitholders may be effected from time to time in one or
more transactions (which may involve block transactions) (i) on the American
Stock Exchange or such other national security exchange on which the
Company's securites are listed, in transactions that may include special
offerings and exchange distributions pursuant to and in accordance with the
rules of such exchanges, (ii) in the over-the-counter market, or (iii) in
transactions otherwise than on such exchanges or in the over-the-counter
market, or in a combination of any such transactions. Such transactions
may be effected by the Selling Securityholder at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The Selling Securitholders may effect
such transactions by selling the Debentures and/or underlying shares of
Common Stock to or through broker-dealers and such broker-dealers will
receive compensation in the form of discounts or commissions from the
Selling Securityholders any may receive commissions from the purchasers
of such securities for whom they may act as agent (which discounts
or commissions from the Selling Securityholders or such purchasers will
not exceed those customary in the type of transactions involved).
Any broker-dealers that participate with the Selling Securityholders
in the distribution of such securities may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, and any commissions or
discounts received by such broker-dealers and any profit on the resale of
such securities by such broker-dealers might be deemed to be underwriting
discounts and commissions under such act.
Pursuant to Registration Rights Agreements with the initial holders
of the Debentures, the Company is obligated to file with the Commission
and cause to become effective by December 21, 1995 a Registration Statement
on such form as the Company deems appropriate covering resales of the
Debentures (and resales of the securities issuable upon conversion thereof)
by the holders of the Debentures. The Company shall use its best efforts to
keep the Registration Statement continuously effective for a period of three
years from the effective date of the Registration Statement or such shorter
period that will terminate when all of the Debentures (and the securities
issuable upon conversion of the Debentures) covered by the Registration
Statement have been sold pursuant to such Registration Statement. In the
event the Company fails to cause the Registration Statement to become
effective by December 21, 1995, or fails to maintain the effectiveness of
such Registration Statement under the Securities Act during the three year
period from the effective date of the Registration Statement, then the
Indenture provides for an increase in the interest rate payable on the
Debentures and the Debentures and underlying securities may not be sold
or otherwise transferred except in limited circumstances.
Certain Restrictions on Officers, Directors and Certain Stockholders
Except upon the prior written consent of the Company and the Placement
Agent, all officers, directors and stockholders beneficially owning five
percent or more of the Common Stock (including, but not limited to Mr.
Jurick and each of Fidenas International, Elision, and GSE (collectively,
the "Affiliated Companies")), have agreed not to sell, offer to sell, or
otherwise transfer or dispose of, directly or indirectly (either pursuant
to Rule 144 under the Securities Act or otherwise) (the "Lock-up") any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock owned by them for a period of not less than
twelve months following the effective date of the Registration Statement
(the "Lock-up Period"); provided, however, that (i) Mr. Eugene I. Davis
may sell up to an aggregate 90,000 shares of Common Stock; (ii) Mr. Jurick
or the Affiliated Companies may (a) sell, in accordance with applicable
law, up to an aggregate maximum of 2,000,000 shares of Common Stock to a
Company-sponsored qualified Employee Stock Ownership Plan, (b) transfer
or pledge for the benefit of the plaintiffs in the litigation described
at "Legal Proceedings - Litigation Relating to Outstanding Common Stock"
up to an additional 3,000,000 shares of Common Stock (the "Settlement
Shares"); provided, however, that the Placement Agent will act as the
exclusive placement agent in connection with any such transfer of Settlement
Shares, with the Placement Agent receiving a cash commission of $0.10
per Settlement Share sold, and further provided, that the proceeds from
the sale or transfer of the Settlement Share sold, and further provided,
that the proceeds from the sale or transfer of the Settlement Shares
shall be used for the sole purpose of final settlement of the above-
referenced litigation and payment of legal fees in connection therewith;
and (c) upon prior written notice to the Placement Agent, enter into
transactions during such period which would otherwise be prohibited up
to an aggregate maximum of 1,000,000 shares of Common Stock provided that
(A) with respect to a sale, the purchaser agrees in writing with the
Placement Agent to be bound by the Lock-up or (B) with respect to any
transfer other than an unconditional sale, all shares not subject to
such transfer not be finally transferable to the transferee until the
expiration of the Lock-up Period; and (iii) the shares of Common Stock
as to which Fidenas International holds as nominee shall not be subject
to the Lock-up. The parties subject to the Lock-up have consented
to the placing of certain legends and stop transfer instructions.
EXPERTS
The consolidated financial statements of Emerson Radio Corp. and
Subsidiaries at March 31, 1995 and 1994, and for the years ended
March 31, 1995, 1994 and 1993, appearing in the Prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth
in their report appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with this Prospectus will be
passed for the Company by Lowenstein, Sandler, Kohl, Fisher &
Boylan, P.A., of Roseland, New Jersey.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports and other information with the Commission. Such reports
and other information can be inspected and copied (at prescribed rates)
at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, DC 20549 or at the regional
offices, located at 7 World Trade Center, Suite 1300, New York, NY 10007
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. The Common Stock is listed with the American Stock Exchange, and
certain reports and other information concerning the Company may be
inspected at the offices of the American Stock Exchange at 86
Trinity Place, New York, New York 10006-1881.
Index to Consolidated Financial Statements
Audited Consolidated Financial Statements:
Report of Ernst & Young LLP F-2
Consolidated Statements of Operations
for the years ended March 31, 1995,
1994 and 1994 F-3
Consolidated Balance Sheets at March 31, 1995 and 1994 F-4
Consolidated Statements of Changes in Shareholders
Equity for the years ended March 31, 1995,
1994 and 1993 F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, 1994 and 1993 F-6
Notes to Consolidated Financial Statements F-7
Schedule VIII -- Valuation and Qualifying Accounts and Reserves F-27
Unaudited Consolidated Financial Statements
Consolidated Statements of Operations for the
three months ended June 30, 1995 and 1994 F-28
Consolidated Balance Sheets at June 30, 1995
and March 31, 1995 F-29
Consolidated Statements of Cash Flows for the
three months ended June 30, 1995 and 1994 F-30
Notes to Consolidated Financial Statements F-31
ALL OTHER SCHEDULES ARE OMITTED BECAUSE THEY ARE NOT APPLICABLE
OR THE REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR
NOTES THERETO.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Emerson Radio Corp.
We have audited the accompanying consolidated balance sheets of Emerson
Radio Corp. and Subsidiaries as of March 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years ended March 31, 1995, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. Any audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Emerson Radio Corp. and Subsidiaries at March 31, 1995 and 1994
and the consolidated results of its operations and cash flows for the years
ended March 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As discussed in Note H to the financial statements, in the year ended March
31, 1994, the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
New York, New York
May 24, 1995
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended March 31,
1995 1994 1993
Net sales $ 654,671 $ 487,390 $ 741,357
Costs and expenses:
Costs of sales 604,329 486,536 674,855
Other operating costs and expenses 8,771 12,001 19,026
Selling, general and administrative expenses 31,047 34,552 49,508
Restructuring and other nonrecurring charges 35,002
644,147 533,089 778,391
Operating profit (loss) 10,524 (45,699) (37,034)
Interest expense 2,882 10,243 18,257
Earnings (loss) before reorganization
costs and taxes 7,642 (55,942) (55,291)
Reorganization items:
Writedown of assets 12,914
Professional fees and other related expenses 4,545
Interest earned on accumulated cash (74)
- 17,385 -
Earnings (loss) before income taxes
and extraordinary gain 7,642 (73,327) (55,291)
Provision for income taxes 267 327 709
Earnings (loss) before extraordinary gain 7,375 (73,654) (56,000)
Extraordinary gain on extinguishment of debt 129,155
Net earnings (loss) $ 7,375 $ 55,501 $ (56,000)
Net earnings (loss) per common share:
Before extraordinary gain $ 0.16 ($ 1.93) ($ 1.47)
Extraordinary gain 3.38
Net earnings (loss) $ 0.16 $ 1.45 ($ 1.47)
Weighted average number of common and
common equivalent shares outstanding 46,571 38,191 38,179
Pro Forma:
Loss per common share $ (1.51)
Weighted average number of
common shares outstanding 33,333
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
ASSETS 1995 1994
Current Assets:
Cash and cash equivalents $ 17,020 $ 21,623
Accounts receivable (less allowances
of $9,350 and $6,442,
respectively) 34,309 20,131
Inventories 35,336 45,980
Prepaid expenses and other current assets 15,715 20,597
Total current assets 102,380 108,331
Property and equipment, net 4,676 5,256
Other assets 6,913 5,434
Total Assets $113,969 $ 119,021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 27,296 $ 20,040
Current maturities of long-term debt 508 1,498
Accounts payable and other current liabilities 18,982 37,378
Accrued sales returns 12,713 16,634
Income taxes payable 283 533
Total current liabilities 59,782 76,083
Long-term debt 214 227
Other non-current liabilities 322 94
Shareholders' Equity:
Preferred stock -- $.01 par value,
1,000,000 shares authorized, 10,000
issued and outstanding 9,000 9,000
Common stock -- $.01 par value,
75,000,000 shares authorized;
40,252,772 and 33,333,333 shares
issued and outstanding, respectively 403 333
Capital in excess of par value 107,969 103,427
Accumulated deficit (64,086) (70,761)
Cumulative translation adjustment 365 618
Total shareholders' equity 53,651 42,617
Total Liabilities and Shareholders' Equity $ 113,969 $ 119,021
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<C> <C> <C> <C> <C> <C>
Common Shares Issued Capital Cumulative
Preferred Number Par in Excess Accumulated Translation
Stock of Shares Value of Par Value Deficit Adjustment
<S>
Balance - March 31, 1992 37,978,119 $ 3,798 $ 63,881 $ (70,262) $ 1,103
Issuance of shares upon
exercise of stock options
and distribution of stock
grants 59,333 6 113
Issuance of stock and warrants to
Semi-Tech 153,847 15 (15)
Redemption of stock purchase rights (271)
Other 22 (285)
Net Loss _______ __________ _______ _______ (56,000) ______
Balance - March 31, 1993 38,191,299 3,819 63,730 (126,262) 818
Cancellation of common stock (38,191,299) (3,819) 3,819
Issuance of common stock 30,000,000 300 29,700
Issuance of preferred and
common stock and warrants
pursuant to bankruptcy
settlement $ 9,000 3,333,333 33 6,192
Other (14) (200)
Net earnings ________ _________ _______ ________ 55,501 _________
Balance - March 31, 1994 9,000 33,333,333 333 103,427 (70,761) 618
Issuance of common stock
in public offering, net
of expenses 6,149,993 62 5,630
Issuance of common stock to
former creditors 769,446 8 (8)
Payment to former creditors (922)
Preferred stock dividends (700)
Other (158) (253)
Net earnings ________ _________ ________ ________ 7,375 _________
Balance - March 31, 1995 $ 9,000 40,252,772 $ 403 $ 107,969 $(64,086) $ 365
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended March 31,
1995 1994 1993
Cash flows from Operating Activities:
Net earnings (loss) $ 7,375 $ 55,501 $ (56,000)
Adjustments to reconcile
net earnings (loss) to net
cash provided (used) by operating
activities:
Depreciation and amortization 3,876 7,327 6,419
Extraordinary gain (129,155)
Restructuring and other
nonrecurring charges (237) (9,711) 16,350
Reorganization expenses 12,914
Asset valuation and loss reserves (2,031) 8,415 6,495
Other (969) 2,643 1,570
Changes in assets and liabilities:
Accounts receivable (14,805) 12,081 26,769
Inventories 11,032 34,942 (28,884)
Prepaid expenses and other
current assets (5,598) 6,181 4,694
Other assets (605) 89 (498)
Accounts payable and other current
liabilities (18,633) 27,287 2,981
Income taxes payable (379) (924) (194)
Net cash provided (used) by operations (20,974) 27,590 (20,298)
Cash Flows from Investing Activities:
Additions to property and equipment (2,874) (3,552) (4,859)
Redemption of (investment in) certificates
of deposit 8,455 (500) (4,000)
Other 110 114 (134)
Net cash provided (used)
by investing activities 5,691 (3,938) (8,993)
Cash Flows from Financing Activities:
Net borrowings under line of
credit facility 7,256 20,040 25,366
Proceeds from issuances of common stock 5,692 30,000 125
Retirement of long-term debt (500) (30) (600)
Payment of former creditors (922)
Payment of preferred stock dividends (525)
Redemption of stock purchase rights (271)
Payment of pre-petition obligations (75,000)
Payment of debt costs (2,139)
Other (321) (83) (49)
Net cash provided (used)
by financing activities 10,680 (27,212) 24,571
Net decrease in cash and cash equivalents (4,603) (3,560) (4,720)
Cash and cash equivalents
at beginning of year 21,623 25,183 29,903
Cash and cash equivalents
at end of year $ 17,020 $ 21,623 $ 25,183
The accompanying notes are an integral part of the consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
Note A -- Significant Accounting Policies:
(1) Basis of Presentation:
The consolidated financial statements include the accounts of Emerson
Radio Corp. and its majority-owned subsidiaries (the "Company"). All
significant intercompany transactions and balances have been eliminated. A
50% ownership of a domestic joint venture is accounted for by the equity
method (see Note N). Historical cost accounting was used to account for
the plan of reorganization (the "Plan of Reorganization") (see Note B)
since the transaction did not meet the criteria required for fresh-start
reporting.
Certain prior year information has been reclassified to conform with
the current year presentation.
(2) Cash and Cash Equivalents:
Short-term investments with original maturities of three months or
less at the time of purchase are considered to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates fair value.
(3) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(4) Property and Equipment:
Property and equipment, stated at cost, is being depreciated for
financial accounting purposes on the straight-line method over its
estimated useful life. Leasehold improvements are amortized on a
straight-line basis over the shorter of the useful life of the improvement
or the term of the lease. Upon the sale or retirement of property and
equipment, the costs and related accumulated depreciation are eliminated
from the accounts. Any resulting gains or losses are included in income.
The cost of repairs and maintenance is charged to expense as incurred.
(5) Warranty Claims:
The Company provides an accrual for future warranty costs when the
product is sold.
(6) Income Taxes:
Deferred income taxes are accounted for on the liability method in
accordance with Statement of Financial Accounting Standards No. 109.
Provision is made for federal income tax which may be payable on earnings
of foreign subsidiaries to the extent that the Company anticipates they
will be remitted.
(7) Earnings (Loss) per Share:
Net earnings per common share for the year ended March 31, 1995 is
based on the weighted average number of shares of Common Stock and common
stock equivalents outstanding during the year. Common stock equivalents
include shares issuable upon conversion of the Company's Series A Preferred
Stock, exercise of stock options and warrants, and shares issued in the
year ended March 31, 1995 primarily to satisfy an anti-dilution provision.
The Series A Preferred Stock is not convertible into Common Stock until
March 31, 1997, and the shares of Common Stock issuable upon conversion is
dependent on the market value of the Common Stock at the time of conversion
(See Note J(6)). Net earnings (loss) per common share for the years ended
March 31, 1994 and 1993 are based on the weighted average number of shares
of Common Stock outstanding prior to confirmation of the Plan of
Reorganization (See Note B) and cancelled as a part thereof, and do not
include common stock equivalents assumed outstanding since they were not
dilutive.
Pro forma loss per common share for the year ended March 31, 1994
gives effect to the bankruptcy restructuring and is based on the number of
shares of Common Stock issued and outstanding at March 31, 1994. The pro
forma loss per common share does not include common stock equivalents
assumed outstanding since they are anti-dilutive. The pro forma loss per
common share also gives effect to the following adjustments:
(i) Elimination of extraordinary gain of $129,155,000 and
reorganization expenses of $17,385,000;
(ii) Reduction of $6,666,000 in interest expense to give
effect to the reorganized debt structure. The pro forma interest
expense is based on the maximum amount of borrowings ($45 million)
permitted under the new credit facility at the interest rate that
would have been in effect for the year ended March 31, 1994 (8.25%).
Additionally, the amortization of closing fees on the credit facility
is included in the pro forma interest expense above;
(iii) Assumed dividends on the Series A Preferred Stock
aggregating $700,000 for the year ended March 31, 1994.
(8) Foreign Currency:
The assets and liabilities of foreign subsidiaries have been
translated at current exchange rates, and related revenues and expenses
have been translated at average rates of exchange in effect during the
year. Related translation adjustments are reported as a separate component
of shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in the Consolidated Statements of Operations and
amounted to a gain of $220,000 and losses of $1,489,000 and $1,073,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
The Company entered into foreign currency exchange contracts to hedge
exposures related to foreign currency fluctuations for its European
operations. Gains and losses were recognized in the same period as the
transactions being hedged. At March 31, 1995, the Company has no forward
exchange contracts outstanding. In the fiscal year ending March 31, 1996,
the Company intends to reduce its foreign currency exposure by conducting
its Canadian and European businesses in U.S. dollars.
Note B -- Reorganization:
On September 29, 1993, the Company and five of its U.S. subsidiaries
filed voluntary petitions for relief under the reorganization provisions of
Chapter 11 of the United States Bankruptcy Code and operated as
debtors-in-possession under the supervision of the Bankruptcy Court while
their reorganization cases were pending. The precipitating factor for
these filings was the Company's severe liquidity problems relating to its
high level of indebtedness and a significant decline in sales from the
prior year.
Effective March 31, 1994, the Bankruptcy Court entered an order
confirming the Plan of Reorganization. The Plan of Reorganization provided
for the implementation of a recapitalization of the Company. In accordance
with the Plan of Reorganization, the Company's pre-petition liabilities (of
approximately $233 million) were settled with the creditors in the
aggregate, as follows:
I. The Company's bank group (the "Bank Lenders") received $70
million in cash and the right to receive the initial $2 million of
net proceeds from the Company's anti-dumping duty receivable (see
Note I (3)).
II. The institutional holders of the Company's senior notes
(the "Noteholders") initially received $2,650,000 in cash and
warrants to purchase 750,000 shares of Common Stock for a period of
seven years at an exercise price of $1.00 per share, provided that
the exercise price shall increase by 10% per year commencing in year
four, and further received $1 million, payable $922,498 in cash
from the initial public offering of Common Stock (see Note J(8))
and $77,502 in Common Stock calculated on the basis of $1.00 per share.
III. The Bank Lenders and Noteholders received their pro rata
percentage of the following:
A. $2,350,000 in cash (however $350,000 of this amount
was distributable to the holders of allowed unsecured
claims);
B. 10,000 shares of Series A Preferred Stock with a face
value of $10 million (estimated fair market value of
approximately $9 million at March 31, 1994);
C. 4,025,277 shares of Common Stock, including 691,944
shares issued in February 1995 pursuant to an
anti-dilution provision;
D. The net proceeds from the sale of the Company's
Indiana land and building; and
E. The net proceeds to be received from the Company's
anti-dumping duty receivable in excess of $2 million (see
Note I (3)).
IV. Holders of allowed unsecured claims received a pro-rata
portion of the $350,000 distribution and interest bearing promissory
notes equal to 18.3% of the allowed claim amount, payable in two
installments over 18 months (see Note G).
Pursuant to the provisions of the Plan of Reorganization, as of March
31, 1994, the equity of the Company's stockholders, and the equity interest
of holders of stock options and warrants were cancelled.
Based on the settlement of the Chapter 11 proceedings, the Company
recognized an extraordinary gain of $129.2 million from the extinguishment
of debt. Additionally, the Company recognized a writedown of $12.9 million
to estimated fair market value on the assets transferred for the benefit of
the Bank Lenders and Noteholders.
Pursuant to the Plan of Reorganization, and in consideration for $30
million, the reorganized Company issued 30 million shares of Common Stock,
currently held by the following parties:
Number of Shares
Fidenas International Limited L.L.C. ("Fidenas International") 16,400,000
Elision International, Inc. ("Elision") 1,600,000
GSE Multimedia Technologies Corporation ("GSE") 12,000,000
The Company's Chairman and Chief Executive Officer is an officer and
beneficial owner of 40% of Fidenas Investment Limited ("FIL"), the
Company's largest shareholder prior to confirmation of the Plan of
Reorganization with an approximate 20% ownership interest.
This officer has a controlling beneficial ownership interest in each
of the three entities listed above which purchased the Company's Common
Stock, and therefore holds an approximate 75% interest in the Company's
outstanding Common Stock at March 31, 1995.
Note C -- Restructuring and Other Nonrecurring Charges:
During the year ended March 31, 1993, the Company recorded
restructuring and other nonrecurring charges aggregating $35,002,000. The
provision included $31.9 million of charges related to the Company's core
business operations of consumer electronics products. These charges were
comprised primarily of certain costs associated with the consolidation of
facilities, severance of employees ($3,967,000 provision for termination of
officers and other employees), the writedown of certain assets, a provision
relating to a significant change in the resale arrangement for returned
product, and professional fees and other charges related to the Company's
proposed financial restructuring and to a proxy contest settled in June
1992. The provision also included $3.1 million in charges relating to the
final wind-down of the Company's personal computer business.
Note D -- Inventories:
Inventories are comprised primarily of finished goods. Spare parts
inventories, net of reserves, aggregating $2,763,000 and $4,140,000 at
March 31, 1995 and 1994, respectively, are included in "Prepaid expenses
and other current assets".
Note E -- Property and Equipment:
Property and equipment is comprised of the following:
March 31,
1995 1994
(In thousands)
Furniture and fixtures $ 5,854 $ 6,025
Molds and tooling 3,806 2,948
Machinery and equipment 1,847 2,509
Leasehold improvements 271 454
11,778 11,936
Less accumulated depreciation and amortization 7,102 6,680
$ 4,676 $ 5,256
Depreciation and amortization of property and equipment amounted to
$3,267,000, $6,679,000 and $5,062,000 for the years ended March 31, 1995,
1994 and 1993, respectively.
Pursuant to the Plan of Reorganization, the Company transferred its
land and building in Indiana to a liquidating trust established for the
benefit of the Bank Lenders and Noteholders. In connection with this
transfer, the Company recorded a writedown of approximately $2.3 million to
reduce the carrying value to estimated fair market value at March 31, 1994.
Note F -- Notes Payable:
Effective March 31, 1994, the Company entered into a three year Loan
and Security Agreement with a U.S. financial institution (the "Lender")
providing for an asset-based revolving credit facility. The facility
provides for revolving loans and letters of credit, subject to individual
maximums and, in the aggregate, not to exceed the lesser of $60 million or
a "Borrowing Base" amount based on specified percentages of eligible
accounts receivable and inventories. All credit extended under the line of
credit is secured by the U.S. and Canadian assets of the Company. The
interest rate on these borrowings is 2.25% above the prime rate. At March
31, 1995 and 1994, the weighted average interest rate on the outstanding
borrowings was 11.25% and 8.5%, respectively. The facility is also subject
to an unused line fee of 0.5% per annum. Pursuant to the Loan and Security
Agreement, the Company is restricted from, among other things, paying cash
dividends (other than on the Series A Preferred Stock), redeeming stock,
and entering into certain transactions and is required to maintain certain
working capital and equity levels (as defined). At March 31, 1995, there
was $27,296,000 outstanding under the revolving loan facility and
approximately $3,622,000 of outstanding letters of credit issued for
inventory purchases. The fair market value of the short-term notes payable
to the Lender at March 31, 1995 and 1994 is estimated to be $27,296,000 and
$20,040,000, respectively, which is the historical cost.
During the pendency of the bankruptcy proceedings, the Company
obtained debtor-in-possession financing ("DIP Financing") from the Lender.
The terms of the DIP Financing provided for a revolving credit facility in
an aggregate principal amount of $14.9 million and bore interest at the
prime rate plus 0.5% per annum. Repayment of the proceeds was guaranteed
by FIL. All principal and accrued interest on the DIP Financing was paid
and the DIP Financing was terminated as of March 31, 1994.
Cash paid for interest was $3,371,000, $11,251,000 and $20,108,000
for the years ended March 31, 1995, 1994 and 1993, respectively.
In the six months ended March 31, 1994, interest expense was only
accrued and paid on the Company's DIP Financing loan. No interest was
accrued during the pendency of the bankruptcy proceedings on the debt owed
to the Bank Lenders or the Noteholders. Had the contractual interest been
accrued during this period, interest expense would have been approximately
$10.2 million higher than the amount reported on the Consolidated Statement
of Operations for the year ended March 31, 1994.
Note G -- Long-Term Debt:
Long-term debt consists of the following:
March 31,
1995 1994
(In thousands)
Notes payable to unsecured creditors $ 465 $ 842
Equipment notes and other 257 383
11 1/2% convertible subordinated note 500
722 1,725
Less current obligations 508 1,498
$ 214 $ 227
Pursuant to the Plan of Reorganization, the holders of allowed
unsecured claims received interest bearing promissory notes equal to 18.3%
of the claim amount. The notes are due in two installments: 35% of the
outstanding principal is due 12 months from the date of issuance, and the
remaining balance is due 18 months from the date of issuance. The notes
bear interest at the London Interbank Offered Rate in effect at the date of
issuance for one year obligations.
Note H - Income Taxes:
The income tax provision consists of the following:
Years Ended March 31,
1995 1994 1993
(In thousands)
Current:
Federal $ 40 $215
Foreign, State and Other 227 $327 494
$267 $327 $709
The difference between the effective rate reflected in the provision
for income taxes and the amounts determined by applying the statutory U.S.
rate of 34% to earnings (loss) before income taxes are analyzed below:
Years Ended March 31,
1995 1994 1993
(In thousands)
Statutory tax (benefit) $ 2,598 $(24,931) $(18,799)
Utilization of net operating loss
carryforwards (632)
U.S. and foreign net operating
losses without tax benefit 1,675 24,975 20,752
Foreign income subject to foreign
tax, not subject to U.S. tax (785) (1,431)
Tax recognition of prior year book
deductions (888)
Rate differential on foreign income (1,959) 327 (638)
Nondeductible bankruptcy expenses 137 1,545
Nondeductible debt restructuring
expenses (1,540) 521
Other, net 121 (49) 304
Total income tax provision $267 $ 327 $ 709
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," under which
the liability method (rather than the deferred method) is used in
accounting for income taxes. Under the liability method, deferred tax
assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The change had no effect on the
results of operations for the year ended March 31, 1994.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
March 31,
1995 1994
(In thousands)
Deferred tax assets:
Accounts receivable reserves $ 7,653 $8,287
Inventory reserves 1,188 1,394
Net operating loss carryforwards 10,588 11,550
Other 1,014 1,131
Total deferred tax assets 20,443 22,362
Valuation allowance for deferred tax assets (20,189) (22,011)
Net deferred tax assets 254 351
Deferred tax liabilities:
Other (254) (351)
Total deferred tax liabilities (254) (351)
Net deferred taxes $ -- $ --
Total deferred tax assets of the Company at March 31, 1995 represent
the tax-effected annual limitation multiplied by the net operating loss
carryforward period and tax-effected deductible temporary differences. The
Company has established a valuation reserve against any expected future
benefits.
Cash paid for income taxes was $725,000, $946,000 and $453,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
Income before taxes of foreign subsidiaries was $3,786,000 and
$5,334,000 for the years ended March 31, 1995 and 1993, respectively.
Losses before taxes of foreign subsidiaries was $16,042,000 for the year
ended March 31, 1994. Unremitted earnings of foreign subsidiaries which
have been, or are intended to be permanently reinvested (and for
which no Federal income tax has been provided) aggregated $3,396,000 and
$1,086,000 at March 31, 1995 and 1994, respectively.
As of March 31, 1995, the Company has a net operating loss
carryforward of approximately $95,270,000, of which $31,692,000,
$13,385,000 and $50,193,000 will expire in 2006, 2007 and 2009,
respectively. This net operating loss carryforward reflects downward
adjustments made in 1995 pursuant to IRS examinations completed for the
years ended March 31, 1990 and 1989 totaling $20,346,000. As of March 31,
1995, foreign tax credit carryforwards of $929,000 are available and if
not utilized, will expire in 1996. In addition, as of March 31, 1995, the
Company has deductible temporary differences of approximately $26,003,000
principally attributable to accounts receivable reserves related to sales
returns and inventory reserves. The utilization of these net operating
losses and tax credits will be limited based on the effects of the Plan of
Reorganization consummated on March 31, 1994. Pursuant to the Plan of
Reorganization, the Bank Lenders, the Noteholders, Fidenas International,
Elision and GSE initially received 100% of the Common Stock. As a
result, an ownership change occurred with respect to the Company, and
subjected the Company's net operating losses and tax credits to the
limitation provided for in Section 382 and 383, respectively, of the
Internal Revenue Code. Subject to special rules regarding increases in the
annual limitation for the recognition of net unrealized built-in gains, the
Company's annual limitation will be approximately $2.2 million.
Note I -- Commitments, Contingencies and Related Party Transactions:
(1) Leases:
The Company leases warehouse and office space at minimum aggregate
rentals as follows:
Year Ending
March 31, Amount
(In thousands)
1996 $ 1,507
1997 1,484
1998 1,071
1999 271
2000 --
$4,333
Rent expense aggregated $2,731,000, $2,663,000 and $3,520,000 for the
years ended March 31, 1995, 1994 and 1993, respectively. Rental income
from the sublease of warehouse space aggregated $273,000, $89,000 and
$201,000 in the years ended March 31, 1995, 1994 and 1993, respectively.
The Company's previous headquarters was leased from a limited
partnership, 51% of which was indirectly owned by four former executive
officers of the Company. The lease, which was scheduled to expire in April
1995 (excluding renewal options), terminated in July 1993, as noted below.
Rent expense related to this lease amounted to $491,000 and $1,575,000 for
the years ended March 31, 1994 and 1993, respectively. In March 1993, the
Company entered into an agreement with the general partner of the limited
partnership under which the Company was released without penalty from
its lease obligations with respect to the above location, effective July
1993, in consideration for executing a five year lease (commencing on the
same date) for office space with an affiliate of the general partner. The
new lease provides for the annual payment of rent of approximately
$813,000, and that the Company pay for its proportionate share of increases
in real estate taxes.
(2) Letters of Credit:
Outstanding letters of credit for the purchase of inventory, not
reflected in the accompanying financial statements, aggregated $11,863,000
(including $3,622,000 issued under the Loan and Security Agreement -- see
Note F) at March 31, 1995.
The Company's Hong Kong subsidiary also maintains various credit
facilities aggregating $114.3 million with a bank in Hong Kong consisting
of the following: (i) a $12.3 million credit facility which is generally
used for letters of credit for a foreign subsidiary's direct import
business and affiliates' inventory purchases, (ii) a $2 million standby
letter of credit facility, and (iii) a $100 million credit facility, for
the benefit of a foreign subsidiary, which is for the establishment of back-
to-back letters of credit with the Company's largest customer. At March
31, 1995, the Company's Hong Kong subsidiary had pledged $4 million in
certificates of deposit to this bank to assure the availability of these
credit facilities. At March 31, 1995, there were $5,974,000 and $8,415,000
of letters of credit outstanding under the $12.3 million and $100 million
credit facilities, respectively.
The Company's Hong Kong subsidiary secured an additional credit
facility in the year ended March 31, 1995 with another bank in Hong Kong.
The facility provides for a $10 million line of credit for documentary
letters of credit and a $10 million back-to-back letter of credit line,
collateralized by a $5 million certificate of deposit. At March 31,
1995, the Company's Hong Kong subsidiary had pledged $5,041,000 in
certificates of deposit to assure the availability of these credit
facilities. At March 31, 1995, $3,871,000 of the letter of credit line
was utilized.
The Company has discounted unmatured notes received from its European
customers for payments of accounts receivable with various foreign banks.
At March 31, 1995, $1,282,000 of discounted notes have not matured.
(3) Anti-Dumping Duty Receivable:
The Company was a participant in matters pending before the United
States Customs Service and the United States Department of Commerce
pertaining to the assessment and deposit of anti-dumping duties on
importations of color televisions from both the Republic of Korea and
Taiwan. Such deposits were based on U.S. Commerce Department deposit
requirements in effect at the time and were deemed excessive based on the
U.S. Commerce Department's determinations of anti-dumping margins; however,
the deposits will not be refunded until litigation challenging the U.S.
Commerce Department determination of anti-dumping margins is completed.
Pursuant to the Plan of Reorganization, the Company transferred the
anti-dumping duty deposits and related interest, net of anti-dumping duty
liabilities, to a liquidating trust for the benefit of the Bank Lenders and
Noteholders in exchange for a reduction in outstanding indebtedness. In
preparation for the transfer, the Company reviewed the anti-dumping duty
deposit records of the U.S. Customs Service and noted significant
discrepancies between the Company's records and those of the U.S. Customs
Service on anti-dumping duties eligible for refund. The Company believes
that the U.S. Customs Service erroneously liquidated certain anti-dumping
duty entries that should be suspended in accordance with court orders and
misclassified certain anti-dumping duty deposits as regular duty payments.
The magnitude of these differences, including interest accruing thereon,
was estimated at $6.6 million. The net anti-dumping duty receivable was
transferred to the liquidating trust at a fair market value of $4 million
based on third-party analysis, resulting in a writedown of approximately
$10.6 million (based on a book value of $14.6 million).
(4) Other Matters:
A law firm of which two officers of the Company (one of whom is a
director) were members until July 1992 and August 1992, respectively,
received fees of $541,000 in the year ended March 31, 1993, primarily as
reimbursement of amounts incurred by FIL in a 1992 proxy contest. Another
law firm which represented FIL in the proxy contest was paid fees
aggregating $200,000 in the year ended March 31, 1993 by the Company in
reimbursement of amounts incurred by FIL in the proxy contest. Upon
settlement of the proxy contest, such law firm was retained as the
Company's outside counsel and provided legal services to the Company for
fees aggregating $737,000, $1,070,000 and $259,000 for the years ended
March 31, 1995, 1994 and 1993, respectively. A family member of an
officer of the Company joined such law firm, as of counsel, subsequent
to its retention by the Company.
Effective April 1, 1995, the Company's Canadian subsidiary entered
into a series of three-year agreements with a company owned by a former
employee of the Canadian subsidiary, and who is also the daughter of a
former officer of the Canadian subsidiary. The agreements provide for this
Canadian company to perform certain after sale services, act as the
exclusive parts distributor for the Company's Canadian subsidiary and
purchase all products returned by the Company's Canadian customers.
In the year ended March 31, 1994, the Company paid $208,000 to a
designee of FIL for expenses incurred relating to the DIP Financing and
$187,000 to guarantee the DIP Financing. Additionally, the Company
reimbursed Fidenas International $568,000 for various legal, accounting and
filing fees relating to the capital infusion and debt restructuring in the
year ended March 31, 1994.
At March 31, 1994, the Company's Hong Kong subsidiary had $1 million
on deposit with a bank that is an affiliate of Fidenas International.
These funds were withdrawn shortly thereafter.
The Company paid fees to a former executive officer of the Company,
in accordance with a three-year consulting agreement, aggregating $204,000
and $490,000 for the years ended March 31, 1994 and 1993, respectively.
In accordance with the employment contract of an officer of the
Company, the Company has provided a non-interest bearing relocation bridge
loan to the officer of $120,000, secured by the equity in the former
personal residence of the officer. The maturity date of the loan has been
extended and is due in the fiscal year ending March 31, 1996.
The Company has employment agreements with certain of its officers,
that expire at various dates through 1997, and provide for minimum payments
aggregating $3,601,000.
Note J -- Shareholders' Equity:
(1) In connection with the settlement of shareholder litigation in
1991, the Company was required to redeem the common stock purchase rights
(the "Rights") previously granted under the Company's 1989 Shareholder
Rights Agreement at a redemption price of $.01 per Right. In the year
ended March 31, 1993, the Company paid approximately $271,000 to holders
of record on March 13, 1992 to redeem the Rights and granted additional
rights which expired without exercise in July 1992.
(2) In June 1991, the Company entered into a Securities Purchase
Agreement (as amended, the "Securities Purchase Agreement") with a
subsidiary of Semi-Tech (Global) Limited ("Semi-Tech") providing for the
purchase of 10 million common shares and the issuance of stock purchase
warrants. In April 1992, the Securities Purchase Agreement was terminated
in exchange for payment by the Company of $500,000 in cash and the issuance
of 153,847 common shares (then equal in value to $500,000).
Concurrently, the Company and Semi-Tech entered into a three-year
Supply Agreement (the "Supply Agreement"). Pursuant to the Supply
Agreement, the Company issued to Semi-Tech a four-year warrant (valued at
$600,000) to purchase 1 million common shares at $4.00 per share and a
five-year warrant to purchase 500,000 common shares at $4.00 per share.
The Supply Agreement and the warrants were cancelled pursuant to the Plan
of Reorganization.
(3) All stock options outstanding at March 31, 1994 under the 1987
Stock Option Plan and the 1980 Employees' Stock Participation Plan were
cancelled pursuant to the Plan of Reorganization.
(4) In July 1994, the Company's Board of Directors adopted, and the
stockholders subsequently ratified, a Stock Compensation Program
("Program") intended to secure for the Company and its stockholders the
benefits arising from ownership of the Company's Common Stock by those
selected directors, officers, other key employees, advisors and consultants
of the Company who are most responsible for the Company's success and
future growth. The maximum aggregate number of shares of Common Stock
available pursuant to the Program is 2,000,000 shares and the Program is
comprised of 4 parts -- the Incentive Stock Option Plan, the Supplemental
Stock Option Plan, the Stock Appreciation Rights Plan and the Stock Bonus
Plan. A summary of transactions since the inception of the Program is as
follows:
Number of Price Aggregate
Shares Per Share Price
Granted 1,860,000 $1.00 - $1.10 $1,920,000
Cancelled (30,000) $1.00 (30,000)
Outstanding -- March 31, 1995 1,830,000 $1.00 - $1.10 $1,890,000
The term of each option is ten years, except for options issued to
any person who owns more than 10% of the voting power of all classes of
capital stock for which the term is five years. Options may not be
exercised during the first year after the date of the grant. Thereafter
each option becomes exercisable on a pro rata basis on each of the first
through third anniversaries of the date of the grant. The exercise price
of options granted must be at least equal to the fair market value of
the shares on the date of the grant, except that the option price with
respect to an option granted to any person who owns more than 10% of the
voting power of all classes of capital stock shall not be less than
110% of the fair market value of the shares on the date of the grant.
(5) In October 1994, the Company's Board of Directors adopted,
subject to stockholder approval, the 1994 Non-Employee Director Stock
Option Plan. The maximum number of shares of Common Stock available under
such plan is 300,000. A summary of transactions since inception of the plan
is as follows:
Number of Price Aggregate
Shares Per Share Price
Granted 175,000 $1.00 $175,000
Outstanding -- March 31, 1995 175,000 $1.00 $175,000
The provisions for exercise price, term and vesting schedule are the
same as noted above for the Stock Compensation Program.
(6) Pursuant to the Plan of Reorganization, on March 31, 1994, the
Company issued Series A Preferred Stock with a face value of $10 million
and an estimated fair market value of approximately $9 million. The
preferred stock is convertible into Common Stock at any time during the
period beginning on March 31, 1997 and ending on March 31, 2002; the
preferred stock is convertible into Common Stock at a price per share of
Common Stock equal to 80% of the market value of a share of Common Stock on
the date of conversion. The preferred stock bears dividends commencing
June 30, 1994 on a cumulative basis at the following rates:
Dividend Rate
Year 1 to 3 7.0%
Year 4 5.6%
Year 5 4.2%
Year 6 2.8%
Year 7 1.4%
Thereafter None
The preferred stock is non-voting. However, the terms of the
preferred stock provide that holders shall have the right to appoint two
directors to the Company's Board of Directors if the preferred stock
dividends are in default for six consecutive quarters.
(7) Pursuant to the Plan of Reorganization, the Noteholders received
warrants for the purchase of 750,000 shares of Common Stock. The warrants
are exercisable for a period of seven years from March 31, 1994 and provide
for an exercise price of $1.00 per share for the first three years,
escalating by $.10 per share per annum thereafter until expiration of the
warrant.
(8) In accordance with the Company's Plan of Reorganization, the
Company completed an initial public offering of its Common Stock in
September 1994 to shareholders of record (in those states in which the
offering could be made) as of March 31, 1994, excluding FIL. The Company
sold 6,149,993 shares of Common Stock for $1.00 per share resulting in
proceeds to the Company, net of issuance costs, of approximately
$5,692,000. Pursuant to the terms of the Plan of Reorganization, in
January 1995, the Company paid approximately $922,000 to satisfy certain
obligations owed to former creditors, and in February 1995 issued 691,944
and 77,502 shares of Common Stock to former creditors, primarily to satisfy
an anti-dilution provision. The remainder of such funds were used for
working capital and other corporate purposes.
Note K -- License Agreements:
(1) In February 1995, the Company and Otake Trading Co. Ltd. and
certain affiliates ("Otake"), the Company's largest supplier, entered into
two mutually contingent agreements (the "Agreements"). Effective March 31,
1995, the Company granted a license of certain trademarks to Otake for a
three-year term. The license permits Otake to manufacture and sell certain
video products under the trademark to Wal-Mart Stores, Inc. ("Wal-Mart"),
the Company's largest customer, in the U.S. and Canada, and precludes Otake
from supplying product to Wal-Mart other than under the Emerson or Orion
trademarks. The Company will continue to supply other products to Wal-Mart
directly. Further, the Agreements provide that Otake will supply the
Company with certain video products for sale to other customers at
preferred prices for a three-year term. Under the terms of the Agreements,
the Company will receive non-refundable minimum annual royalties from Otake
to be credited against royalties earned from sales of video cassette
recorders and players, television/video cassette recorder and player
combinations, and color televisions to Wal-Mart. In addition, effective
August 1, 1995, Otake will assume responsibility for returns and after-sale
and warranty services on all video products manufactured by Otake and sold
to Wal-Mart, including video products sold by the Company prior to April 1,
1995.
Additionally, the Company and Otake agreed on a series of purchase
discounts, consistent with agreements and past practices between Otake and
the Company. Through March 31, 1995, Otake has paid the Company $6.3
million against an aggregate $10.2 million of purchase discounts for
product purchased from January 1, 1993 to March 31, 1995, and the balance
of $3.9 million is due in September 1995. The Company recognized $9.9
million of discounts in the year ended March 31, 1995, of which $4.3
million of discounts were attributable to purchases prior to April 1, 1994.
(2) In October 1994, the Company entered into a license agreement
with Jasco Products Co., Inc., ("Jasco") whereby the Company granted a
license of certain trademarks to Jasco for use on non-competing consumer
electronic accessories. Under the terms of the agreement, the Company will
receive minimum annual royalties through the life of the agreement, which
expires on December 31, 1997, and the agreement is automatically renewable
for three successive three-year periods based upon Jasco's compliance with
the agreement. The Company recognized license fee income of approximately
$1,125,000 in the year ended March 31, 1995.
Note L -- Legal Proceedings:
FIL Litigation:
The 30 million shares of Common Stock issued to GSE, Fidenas
International and Elision on March 31, 1994, pursuant to the Plan of
Reorganization, are the subject of certain legal proceedings. Transfers of
certain shares owned by Fidenas International have been enjoined by court
orders issued in the United States Bankruptcy Court for the Southern
District of New York and in the Commonwealth of Bahamas. The Company is
not a party to any of the proceedings described herein; it is possible that
a court of competent jurisdiction may order the turnover of all or a
portion of the shares of Common Stock owned by such persons to a third
party. A turnover of a substantial portion of the Common Stock could
result in a "change of controlling ownership" prohibited pursuant to the
terms of the Company's Loan and Security Agreement with its primary lender.
Additionally, such a change in control could result in a second "ownership
change" under Internal Revenue Code Section 382, which could affect the
Company's ability to use its net operating loss and tax credit
carryforwards. The Company does not believe the litigation or the results
thereof will have a material adverse effect on the Company or on the
Company's financial position.
Bankruptcy Claims:
The Company is presently engaged in litigation regarding several
bankruptcy claims which have not been resolved since the restructuring of
the Company's debt. The largest claim was filed July 25, 1994 in
connection with the rejection of certain executory contracts with two
Brazilian entities, Cineral Electronica de Amazonia Ltda. and Cineral
Magazine Ltda. (collectively, "Cineral"). The contracts were executed in
August 1993, shortly before the Company's filing for bankruptcy protection.
The amount claimed was $93,563,457, of which $86,785,000 represents a claim
for loss of profits and $6,400,000 for plant installation and establishment
of offices, which were installed and established prior to execution
of the contracts. The claim was filed as an unsecured claim and,
therefore, will be satisfied, to the extent the claim is allowed by the
Bankruptcy Court, in the manner other allowed unsecured claims were
satisfied. The Company has objected to the claim and intends
to vigorously contest such claim and believes it has meritorious defenses
to the highly speculative portion of the claim for lost profits and the
portion of the claim for actual damages for expenses incurred prior to the
execution of the contracts. Additionally, the Company has instituted an
adversary proceeding in the Bankruptcy Court asserting damages caused by
Cineral. A motion filed by Cineral to dismiss the adversary proceeding has
been denied. The adversary proceeding and claim objection have been
consolidated into one proceeding. An adverse final ruling on the Cineral
claim could have a material adverse effect on the Company, even though it
would be limited to 18.3% of the final claim determined by a court of
competent jurisdiction; however, with respect to the claim for lost
profits, in light of the foregoing, the Company believes the chances for
recovery for lost profits are remote.
Other Litigation:
The Company is involved in other legal proceedings and claims of
various types in the ordinary course of business. While any litigation
contains an element of uncertainty, management presently believes that the
outcome of each such proceeding or claim which is pending or known to be
threatened (including the actions noted above), or all of them combined,
will not have a material adverse effect on the Company's consolidated
financial position.
Note M -- Business Segment Information and Major Customers:
The consumer electronics business is the Company's only business
segment. Operations in this business segment are summarized below by
geographic area:
<TABLE>
<S> <C> <C> <C> <C>
Year Ended March 31, 1995 U.S. Foreign Eliminations Consolidated
(In thousands)
Sales to unaffiliated customers $ 608,717 $45,954 $ -- $654,671
Transfers between geographic areas 5,954 184 (6,138) --
Total net revenues $ 614,671 $46,138 $ (6,138) $654,671
Earnings (loss) before income
taxes $ 12,238 $(4,596) $ -- $ 7,642
Identifiable assets $ 98,604 $15,470 $ (105) $ 113,969
Year Ended March 31, 1994
Sales to unaffiliated customers $ 433,495 $53,895 $ -- $487,390
Transfers between geographic areas 2,587 -- (2,587) --
Total net revenues $ 436,082 $53,895 $ (2,587) $487,390
Loss before reorganization
costs and income taxes $ (50,718) $(5,224) $ -- $(55,942)
Identifiable assets $ 99,726 $19,295 $ -- $119,021
Year Ended March 31, 1993
Sales to unaffiliated customers $ 693,997 $47,360 $ -- $741,357
Transfers between geographic areas 3,803 -- (3,803) --
Total net revenues $ 697,800 $47,360 $ (3,803) $ 741,357
Loss before income taxes $ (53,279) $(2,012) $ -- $ (55,291)
Identifiable assets $ 175,363 $19,147 $ -- $ 194,510
</TABLE>
Transfers between geographic areas are accounted for on a cost basis.
Identifiable assets are those assets used in operations in each geographic
area.
At March 31, 1995 and 1994, identifiable assets include $37,492,000
and $51,390,000, respectively, of assets located in foreign countries.
The Company's net sales to one customer aggregated approximately 53%,
34% and 39%, of consolidated net sales for the years ended March 31, 1995,
1994 and 1993, respectively. At March 31, 1995 and 1994, the Company had a
liability balance to this customer for product returns. The Company's net
sales to another customer aggregated 10%, 12% and 11% for the years ended
March 31, 1995, 1994 and 1993, respectively. Trade receivables from this
customer approximated 10% and 11% of accounts receivable at March 31, 1995
and 1994, respectively, and are not collateralized.
Note N -- Investment in Joint Venture
The Company has a 50% investment in E & H Partners, a joint venture
that purchases, refurbishes and sells all of the Company's product returns.
The results of this joint venture are accounted for by the equity method.
The Company's equity in the earnings of the joint venture is reflected as a
reduction of cost of sales in the Company's Consolidated Statements of
Operations. Summarized financial information relating to the joint venture
is as follows:
March 31, 1995
(In thousands)
Accounts receivable from joint venture $15,283(a)
Investment in joint venture 1,565
Condensed balance sheet:
Current assets $26,749
Noncurrent assets 161
Total $26,910
Current liabilities $23,780
Partnership equity 3,130
Total $26,910
Year Ended
March 31, 1995
(In thousands)
Sales to joint venture $32,500
Condensed income statement:
Net sales 24,760(b)
Net earnings 2,130
___________________
(a) Secured by a lien on the partnership's inventory. Such lien has been
assigned to the Lender as collateral for the U.S. line of credit facility.
(b) Includes sales to the Company of $3,796,000.
<TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
<S> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Balance at Charged to Balance
beginning costs and at end of
Description of year expenses Deductions year
Allowance for doubtful accounts:
Year ended:
March 31, 1995 $ 1,639 $ 1,574 $ 280(A) $ 2,933
March 31, 1994 2,374 998 1,733(A) 1,639
March 31, 1993 2,390 2,043 2,059(A) 2,374
Inventory reserves:
Year ended:
March 31, 1995 $ 644 $ 251 $ 425(B) $ 470
March 31, 1994 1,559 6,619 7,534(B) 644
March 31, 1993 1,817 4,587 4,845(B) 1,559
</TABLE>
(A) Accounts written off, net of recoveries.
(B) Net realizable value reserve removed from account when inventory is
sold.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,
1995 1994
Net sales $ 57,058 $137,140
Costs and Expenses:
Cost of sales 50,886 128,906
Other operating costs and expenses 1,617 2,752
Selling, general & administrative
expenses 5,242 7,855
57,745 139,513
Operating loss (687) (2,373)
Interest expense 622 454
Loss before income taxes (1,309) (2,827)
Provision for income taxes 92 67
NET LOSS $ (1,401) $ (2,894)
Net loss per common share $ (.03) $ (.09)
Weighted average number of
common shares outstanding 40,253 33,333
The accompanying notes are an integral part of the interim
consolidated financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
June 30, March 31,
1995 1995
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 14,474 $ 17,020
Accounts receivable (less allowances of
$9,996 and $9,350, respectively) 25,151 34,309
Inventories 35,312 35,336
Prepaid expenses and other current
assets 15,895 15,715
Total current assets 90,832 102,380
Property and equipment - (at cost less
accumulated depreciation and amortization
of $5,676 and $7,102, respectively) 4,798 4,676
Other assets 7,792 6,913
Total Assets $ 103,422 $ 113,969
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 25,219 $ 27,296
Current maturities of long-term debt 458 508
Accounts payable and other current
liabilities 19,929 18,982
Accrued sales returns 5,171 12,713
Income taxes payable 184 283
Total current liabilities 50,961 59,782
Long-term debt 193 214
Other non-current liabilities 324 322
Shareholders' Equity:
Preferred stock - $.01 par value, 1,000,000
shares authorized, 10,000 shares issued
and outstanding 9,000 9,000
Common stock - $.01 par value, 75,000,000
shares authorized, 40,252,772
shares issued and outstanding 403 403
Capital in excess of par value 107,969 107,969
Accumulated deficit (65,662) (64,086)
Cumulative translation adjustment 234 365
Total shareholders' equity 51,944 53,651
Total Liabilities and
Shareholders' Equity $103,422 $113,969
The accompanying notes are an integral part of the interim consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of dollars)
Three Months Ended
June 30,
1995 1994
Cash Flows from Operating Activities:
Net cash provided (used) by operating
activities $ 1,428 $ (20,879)
Cash Flows from Investing Activities:
Redemption of (investment in)
certificates of deposit (16) 8,493
Additions to property and equipment (635) (1,443)
Other (526) ______
Net cash provided (used) by investing
activities (1,177) 7,050
Cash Flows from Financing Activities:
Net borrowings (repayments) under line of
credit facility. (2,077) 836
Other (720) (336)
Net cash provided (used) by financing
activities (2,797) 500
Net decrease in cash and cash
equivalents (2,546) (13,329)
Cash and cash equivalents at beginning
of year 17,020 21,623
Cash and cash equivalents at end of period $ 14,474(a) $ 8,294(a)
Supplemental disclosure of cash flow information:
Interest paid $ 884 $ 481
Income taxes paid $ 114 $ 275
(a) The balances at June 30, 1995 and 1994, include $9.1 million and $2.0
million of cash and cash equivalents, respectively, pledged to assure the
availability of certain letter of credit facilities.
The accompanying notes are an integral part of the interim consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE 1
The unaudited interim consolidated financial statements reflect all
adjustments that management believes necessary to present fairly the
results of operations for the periods being reported. The unaudited interim
consolidated financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission and accordingly
do not include all of the disclosures normally made in the Emerson Radio
Corp. (the "Company") annual consolidated financial statements. It is
suggested that these unaudited interim consolidated financial statements be
read in conjunction with the consolidated financial statements and notes
thereto for the year ended March 31, 1995, included in the Company's annual
Form 10-K filing.
Due to the seasonal nature of the Company's consumer electronics
business, the results of operations for the three months ended June 30,
1995 are not necessarily indicative of the results of operations for the
full year ending March 31, 1996.
NOTE 2
Net loss per common share for the three month periods ended June 30,
1995 and 1994 are based on the weighted average number of shares of common
stock outstanding during each period. The net loss per share for both
periods does not include common stock equivalents assumed outstanding since
they are anti-dilutive.
NOTE 3
The provision for income taxes for the three months ended June 30,
1995 and 1994 consists primarily of taxes related to international
operations. The Company did not recognize tax benefits for losses incurred
by its domestic operations (after tax recognition of prior year book
deductions) during the three months ended June 30, 1995 and 1994.
NOTE 4
Spare parts inventories, net of reserves, aggregating $2,583,000 and
$2,763,000 at June 30, 1995 and March 31, 1995, respectively, are included
in "Prepaid expenses and other current assets".
NOTE 5
Long-term debt consists of the following:
(In thousands of dollars)
June 30, March 31,
1995 1995
Notes payable to unsecured
creditors $ 342 $ 465
Equipment notes and other 309 257
651 722
Less current obligations 458 508
$ 193 $ 214
NOTE 6
The 30 million shares of Common Stock issued to GSE Multimedia
Technologies Corp., Fidenas International Limited L.L.C. and Elision
International, Inc. on March 31, 1994, pursuant to the Company's
bankruptcy restructuring plan, are the subject of certain legal
proceedings. Transfer of certain shares owned by Fidenas International
Limited L.L.C. have been enjoined by court orders issued in the United
States Bankruptcy Court for the Southern District of New York and the
Commonwealth of the Bahamas. The Company is not a party to any of the
proceedings described herein; it is possible that a court of competent
jurisdiction may order the turnover of all or a portion of the shares of
Common Stock owned by such persons to a third party. A turnover of a
substantial portion of the Common Stock could result in a "change of
controlling ownership" prohibited pursuant to the terms of the Company's
loan and security agreement with its primary United States lender.
Additionally, such a change in controlling ownership could result in a
second "ownership change" under Internal Revenue Code Section 382, which
could affect the Company's ability to use its net operating loss and tax
credit carryforwards. The Company does not believe the litigation or the
results thereof will have a material adverse effect on the Company or on
the Company's financial position.
The Company is presently engaged in litigation regarding several
bankruptcy claims which have not been resolved since the restructuring of
the Company's debt. The largest claim was filed July 25, 1994 in
connection with the rejection of certain executory contracts with two
Brazilian entities, Cineral Electronica de Amazonia Ltda. and Cineral
Magazine Ltda. (collectively, "Cineral"). The contracts were executed in
August 1993, shortly before the Company's filing for bankruptcy protection.
The amount claimed was $93,563,457, of which $86,785,000 represents a claim
for lost profits and $6,400,000 for plant installation and establishment of
offices, which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and, therefore, will
be satisfied, to the extent the claim is allowed by the Bankruptcy Court,
in the manner other allowed unsecured claims are satisfied. The Company
has objected to the claim and intends to vigorously contest such claim and
believes it has meritorious defenses to the highly speculative portion of
the claim for lost profits and the portion of the claim for actual damages
for expenses incurred prior to the execution of the contracts. Additionally,
the Company has instituted an adversary proceeding in the Bankruptcy Court
asserting damages caused by Cineral. A motion filed by Cineral to dismiss
the adversary proceeding has been denied. The adversary proceeding and
claim objection have been consolidated into one proceeding. An adverse final
ruling on the Cineral claim could have a material adverse effect on the
Company, even though it would be limited to 18.3% of the final claim
determined by a court of competent jurisdiction; however, with respect to
the claim for lost profits, in light of the foregoing, the Company believes
the chances for recovery for lost profits are remote.
NOTE 7
The Company has a 50% investment in E & H Partners, a joint venture
that purchases, refurbishes and sells all of the Company's product returns.
The results of this joint venture are accounted for by the equity method.
The Company's equity in the earnings of the joint venture is reflected as a
reduction of cost of sales in the Company's unaudited interim Consolidated
Statements of Operations. Summarized financial information relating to the
joint venture is as follows (in thousands):
June 30, March 31,
1995 1995
Accounts receivable from joint venture (a) $17,495(a) $15,283
Three Months
Ended
June 30, 1995
(In thousands)
Condensed income statement (c):
Net sales $ 7,274(b)
Net earnings 919
____________________
(a) Secured by a lien on the partnership's inventory. Such lien has been
assigned to the Company's primary lender as collateral for the U.S. line
of credit facility.
(b) Includes sales to the Company of $1,425,000.
(c) E&H Partners was inactive for substantially all of the three month
period ended June 30, 1994.
The Company filed suit on July 5, 1995 in the State Court of New
Jersey alleging Hopper Radio of Florida, Inc. ("Hopper"), the Company's
partner in E&H Partners, Barry Smith, the President of Hopper, and three
former employees of the Company ( collectively, the "Defendants") have
formed a business entity for the purpose of engaging in the distribution of
consumer electronics and that the action of the Defendants in connection
therewith violated certain duties owed to and rights of the Company. E & H
Partners has continued to operate since the filing of said lawsuit.
However, the Company cannot predict at this time how this suit will, if at
all, affect the joint venture or the Company.
No person has been authorized to give any
information or to make any representation $20,750,000
not contained in this Prospectus in 8 1/2% Senior Subordinated
connection with the offer made hereby. Convertible Debentures
If given or made, such information or Due 2002
representation must not be relied upon as
having been authorized by the Company. This
Prospectus does not constitute an offer of
any securities other than the securities
to which it relates or an offer to any "Emerson and G-Clef"
person in any jurisdiction where such an
offer would be unlawful. Neither delivery of
this Prospectus nor any sale made hereunder
shall under any circumstances create an
implication that information contained
herein is correct as of any time subsequent
to the date hereof.
TABLE OF CONTENTS PROSPECTUS
PAGE
Summary 1
Risk Factors 11
The Company 20
Use of Proceeds 23
Capitalization 24
Selected Consolidated
Financial Data 25
Management's Discussion and
Analysis of Results of
Operations and
Financial Condition 27
Business 38
Legal Proceedings 49
Management 54
Executive Compensation and Other
Information 57
Principal Stockholders 65
Certain Relationships and Related
Transactions 67
Description of Debentures 71
Description of Other Securities 87
Certain Federal Income Tax September 21, 1995
Considerations 93
Selling Securityholders 102
Plan of Distribution 104
Experts 105
Interim Financial Information 105
Legal Matters 106
Available Information 106
Index to Consolidated
Financial Statements F-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution*
The following are the estimated expenses of the issuance and
distribution of the securities being registered, including fees and
expenses previously incurred by the Company, other than any underwriting
compensation. None of such expenses have been or will be borne by the
Selling Securityholders.
Item Amount
Securities and Exchange Commission
Registration Fees........................ $ 7,155.17
Legal Fees and Expenses.................... 20,000.00
Accountants' Fees and Expenses............. 25,000.00
Trustee's Fees and Expenses................. 1,500.00
Printing and Engraving Expenses 20,000.00
Miscellaneous Expenses..................... 11,344.83
Total 85,000.00
_______________
*All expenses are estimated, except the Securities and Exchange Commission
Registration Fee.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("Section 145") (a)
gives Delaware corporations broad powers to indemnify their present and
former directors and officers and those of affiliated corporations against
expenses incurred in the defense of any lawsuit to which they are made
parties by reason of being or having been such directors or officers,
subject to specified conditions and exclusions, (b) gives a director or
officer who successfully defends an action the right to be so indemnified
and (c) authorizes the corporation to buy directors' and officers'
liability insurance. Such indemnification is not exclusive of any other
right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
The Company's Certificate of Incorporation provides that the Company (a)
shall indemnify every person who is or was a director or officer of the
Company or is or was serving at the Corporation's request as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise and (b) shall, if the board of directors so directs, indemnify
any person who is or was an employee or agent of the Company or is or was
serving at the Company's request as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
extent, in the manner, and subject to compliance with the applicable
standards of conduct, provided by Section 145 as the same (or any
substitute provision therefor) may be in effect from time to time.
Any such indemnification shall continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
The Plan of Reorganization provided that, among specified others, any and
all directors, officers and stockholders who at any time from after July 8,
1992, or as of the effective date of the Plan of Reorganization acted as
such, are released from all liability based upon any act or commission of
every kind related to past service with, for or on behalf of any of the
Restructuring companies, except where such liability is predicated on a
finding of gross negligence, willful misconduct or fraud.
The Company has procured insurance for the purpose of substantially
covering its future potential liability for indemnification under Section
145 as discussed above and certain future potential liability of individual
officers or directors incurred in their capacity as such which is not
subject to indemnification.
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Company has not sold any
unregistered securities, except as follows:
(a) On March 31, 1994, the effective date of the Plan of Reorganization,
all shares of common stock and other equity securities then outstanding
were canceled in accordance with the Plan of Reorganization, and 33,333,333
shares of Common Stock, 10,000 shares of Series A Preferred Stock, and
Creditors' Warrants to acquire 750,000 shares of Common Stock were issued.
Of such securities, 3,333,333 shares of Common Stock, 10,000 shares of
Series A Preferred Stock, and the Creditors' Warrants were issued to
holders of claims (in exchange for such claims) in reliance upon the
exemption from registration provided by Section 1145 of the United States
Bankruptcy Code. No underwriters were involved in such transactions.
(b) In July, September, and October 1994, the Company granted options to
purchase an aggregate of 1,890,000 shares of Common Stock (net of
cancellations) at a purchase price of $1.00 per share (except for 600,000
of such options which have an exercise price of $1.10 per share) to certain
executive officers. The options were granted in reliance on the exemption
from registration provided by Rule 701 promulgated under the Securities
Act.
(c) In February 1995, 769,446 shares of Common Stock were issued without
additional consideration to satisfy certain anti-dilution provisions of the
Plan of Reorganization resulting from the sale of 6,149,993 shares of
Common Stock by the Company in a registered public offering during 1994.
Such shares were issued to holders of claims in the Company's bankruptcy
proceedings in reliance upon the exemption from registration provided by
Section 1145 of the United States Bankruptcy Code. No underwriters were
involved in the issuance of such shares to such holders of claims.
(d) In August 1995, the Company issued $20,750,000 aggregate principal
amount of Debentures through the Placement Agent and its authorized dealers
to the Selling Securityholders in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
(a) The following is a complete list of Exhibits filed as a part of this
Registration Statement:
EXHIBIT DESCRIPTION
(2) Confirmation Order and Fourth Amended Joint
Plan of Reorganization of Emerson Radio Corp. ("Old
Emerson") and certain subsidiaries under Chapter
11 of the United States Bankruptcy Code, dated
March 31, 1994 (incorporated by reference to Exhibit
(2) of Emerson's Registration Statement on Form
S-1, Registration No. 33-53621, declared effective
by the Securities and Exchange Commission ("SEC") on
August 9, 1994).
(3) (a) Certificate of Incorporation of Emerson (incorporated
by reference to Exhibit (3) (a) of Emerson's
Registration Statement on Form S-1, Registration
No. 33-53621, declared effective by the SEC on
August 9, 1994).
(3) (b) Certificate of Designation for Series A
Preferred Stock (incorporated by reference
to Exhibit (3) (b) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of
Merger by and between Old Emerson and
Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)
(c) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (d) Certificate of Merger of Old Emerson with
and into Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)
(d) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (e) By-Laws of Emerson adopted March 1994
(incorporated by reference to Exhibit (3) (e)
of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares
of Common Stock, dated as of March 31, 1994
(incorporated by reference to Exhibit (4) (a)
of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (b) Indenture, dated as of August 17, 1995,
between Emerson and Bank One, Columbus, NA,
as Trustee (incorporated by reference to
Exhibit (1) of Emerson's Current Report on
Form 8-K filed with the SEC on September 8,
1995).
(5)(a) Opinion of Lowenstein, Sandler, Kohl, Fisher
& Boylan, P.A., with respect to Issuance of
the Debentures.*
(10) (a) Agreement, dated as of November 14, 1973,
between National Union Electric Corporation
("NUE") and Emerson (incorporated by
reference to Exhibit (10) (a) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of
February 28, 1979, by and between NUE and
Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement
on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(10) (c) Agreement, dated July 2, 1984, between NUE
and Emerson (incorporated by reference to
Exhibit (10) (c) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between
NUE and Emerson (incorporated by reference to
Exhibit (10) (d) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-
Petition Creditors (incorporated by reference
to Exhibit (10) (e) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31,
1994, by and among Emerson, Majexco Imports,
Inc. and Congress Financial Corporation
("Congress") (incorporated by reference to
Exhibit (10) (f) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation
Program (incorporated by reference to Exhibit
(10) (i) of Emerson's Registration Statement
on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(10) (h) Employment Agreement between Emerson and
Eugene I. Davis (incorporated by reference to
Exhibit 6(a)(4) of Emerson's Quarterly Report
on Form 10-Q for quarter ended June 30,
1992).
(10) (i) Employment Agreement between Emerson and
Albert G. McGrath, Jr. (incorporated by
reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter
ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and
Geoffrey P. Jurick (incorporated by reference
to Exhibit 6(a)(6) of Emerson's Quarterly
Report on Form 10-Q for quarter ended June
30, 1992).
(10) (k) Employment Agreement between Emerson Radio
(Hong Kong) Ltd. and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6)
of Emerson's Quarterly Report on Form 10-Q
for quarter ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio
International Ltd. (formerly Emerson Radio
(B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form
10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993,
by and between Hartz Mountain Parsippany and
Emerson with respect to the premises located
at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10)
(ww) of Emerson's Annual Report on Form 10-K
for the year ended December 31, 1992).
(10) (n) Employment Agreement, dated July 13, 1993,
between Emerson and Merle Eakins
(incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form
10-K for the year ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994,
between Emerson and John Walker (incorporated
herein by reference to Exhibit (10)(ee) of
Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (p) Liquidating Trust Agreement, dated as of
March 31, 1994, by and among Emerson, Majexco
Imports, Inc., H.H. Scott, Inc., and Stuart
D. Gavsy, Esq., as Trustee (incorporated by
reference to Exhibit (10) (ff) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994,
between Emerson and Hopper Radio of Florida,
Inc. (incorporated by reference to Exhibit
10(q) of Emerson's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995).
(10) (r) Sales Agreement, dated April 1, 1994, between
Emerson and E & H Partners. (incorporated by
reference to Exhibit 10(r) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (s) Agreement, dated July 1, 1994, between
Emerson and Alex Wijnen relating to
termination of employment and agreement on
consulting services. (incorporated by
reference to Exhibit 10(s) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (t) Independent Consultant's Agreement, dated
October 1, 1994, between Emerson Radio
International Ltd. and Peter G. Bunger.
(incorporated by reference to Exhibit 10(t)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (u) Independent Consultant's Agreement, dated
October 1, 1994, between Emerson Radio Europe
B.V. and Peter G. Bunger (incorporated by
reference to Exhibit 10 (u) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (v) Employment Agreement, dated October 3, 1994,
between Emerson and Andrew Cohan
(incorporated by reference to Exhibit 10 (v)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (w) License Agreement, dated February 22, 1995,
between Emerson and Otake (incorporated by
reference to Exhibit 6(a)(1) of Emerson's
quarterly report on Form 10-Q for quarter
ended December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995,
between Emerson and Otake (incorporated by
reference to Exhibit 6(a)(2) of Emerson's
quarterly report on Form 10-Q for quarter
ended December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10 (y)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (z) Amendment No. 1 to Financing Agreements,
dated as of August 24, 1995, among Emerson,
Majexco Imports, Inc. and Congress
(incorporated by reference to Exhibit (2) of
Emerson's Current Report on Form 8-K filed
with the SEC on September 8, 1995).
(11) Computation of Primary Earnings Per Share
(incorporated by reference to Exhibit (11) of
Emerson's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995).
(12) Computation of Ratios*
(21) Subsidiaries of the Registrant as of March
31, 1995 (incorporated by reference to
Exhibit (21) of Emerson's Annual Report on
Form 10-K for the fiscal year ended March 31,
1995).
(23) Consent of Experts and Counsel *
(25) Form T-1 of Bank One, Columbus, NA*
(27) Financial Data Schedule for year ended March
31, 1995 (incorporated by reference to
Exhibit (27) of Emerson's Annual Report on
Form 10-K for the fiscal year ended March 31,
1995).
____________________
*Filed herewith
(b) The following is a complete list of Financial Statements,
financial statement Schedules and Report of Independent Auditors filed as a
part of this Registration Statement and included with the financial
statements filed as a part of this Registration Statement:
(1) Financial Statements are included in the Prospectus; see
"Index to Consolidated Financial Statements" in the Prospectus at page F-1.
(2) Schedule VIII Valuation and Qualifying Accounts and
Reserves
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
Item 17. Undertakings
A. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
C. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of the registration statement as of the time it was declared
effective.
(2) For the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of Parsippany, State of New Jersey, on the 21th day of September,
1995.
EMERSON RADIO CORP.
By:/s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Geoffrey P. Jurick Chairman of the Board, September 21, 1995
Geoffrey P. Jurick Chief Executive Officer,
and Director (Principal
Executive Officer)
/s/ Eugene I. Davis President, Interim Chief September 21, 1995
Eugene I. Davis Financial Officer, and
Director (Principal Financial
and Accounting Officer)
/s/ Robert H. Brown, Jr.
Robert H. Brown, Jr. Director September 21, 1995
/s/ Peter G. Bunger
Peter G. Bunger Director September 21, 1995
/s/ Jerome H. Farnum
Jerome H. Farnum Director September 21, 1995
/s/ Raymond L. Steele
Raymond L. Steele Director September 21, 1995
PAGE NUMBER
EXHIBIT DESCRIPTION IN SEQUENTIAL SYSTEM
(2) Confirmation Order and Fourth Amended
Joint Plan of Reorganization of Emerson
Radio Corp. ("Old Emerson") and certain
subsidiaries under Chapter 11 of the
United States Bankruptcy Code, dated March
31, 1994 (incorporated by reference to
Exhibit (2) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the
Securities and Exchange Commission ("SEC")
on August 9, 1994).
(3) (a) Certificate of Incorporation of Emerson
(incorporated by reference to Exhibit
(3) (a) of Emerson's Registration Statement
on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(3) (b) Certificate of Designation for Series A
Preferred Stock (incorporated by reference
to Exhibit (3) (b) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of
Merger by and between Old Emerson and
Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)
(c) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (d) Certificate of Merger of Old Emerson with
and into Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)
(d) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (e) By-Laws of Emerson adopted March 1994
(incorporated by reference to Exhibit (3) (e)
of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares
of Common Stock, dated as of March 31, 1994
(incorporated by reference to Exhibit (4) (a)
of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (b) Indenture, dated as of August 17, 1995,
between Emerson and Bank One, Columbus, NA,
as Trustee (incorporated by reference to
Exhibit (1) of Emerson's Current Report on
Form 8-K filed with the SEC on September 8,
1995).
(5)(a) Opinion of Lowenstein, Sandler, Kohl, Fisher
& Boylan, P.A., with respect to Issuance of
the Debentures.*
(10) (a) Agreement, dated as of November 14, 1973,
between National Union Electric Corporation
("NUE") and Emerson (incorporated by
reference to Exhibit (10) (a) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of
February 28, 1979, by and between NUE and
Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement
on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(10) (c) Agreement, dated July 2, 1984, between NUE
and Emerson (incorporated by reference to
Exhibit (10) (c) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between
NUE and Emerson (incorporated by reference to
Exhibit (10) (d) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-
Petition Creditors (incorporated by reference
to Exhibit (10) (e) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31,
1994, by and among Emerson, Majexco Imports,
Inc. and Congress Financial Corporation
("Congress") (incorporated by reference to
Exhibit (10) (f) of Emerson's Registration
Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on
August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation
Program (incorporated by reference to Exhibit
(10) (i) of Emerson's Registration Statement
on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(10) (h) Employment Agreement between Emerson and
Eugene I. Davis (incorporated by reference to
Exhibit 6(a)(4) of Emerson's Quarterly Report
on Form 10-Q for quarter ended June 30,
1992).
(10) (i) Employment Agreement between Emerson and
Albert G. McGrath, Jr. (incorporated by
reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter
ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and
Geoffrey P. Jurick (incorporated by reference
to Exhibit 6(a)(6) of Emerson's Quarterly
Report on Form 10-Q for quarter ended June
30, 1992).
(10) (k) Employment Agreement between Emerson Radio
(Hong Kong) Ltd. and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6)
of Emerson's Quarterly Report on Form 10-Q
for quarter ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio
International Ltd. (formerly Emerson Radio
(B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form
10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993,
by and between Hartz Mountain Parsippany and
Emerson with respect to the premises located
at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10)
(ww) of Emerson's Annual Report on Form 10-K
for the year ended December 31, 1992).
(10) (n) Employment Agreement, dated July 13, 1993,
between Emerson and Merle Eakins
(incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form
10-K for the year ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994,
between Emerson and John Walker (incorporated
herein by reference to Exhibit (10)(ee) of
Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (p) Liquidating Trust Agreement, dated as of
March 31, 1994, by and among Emerson, Majexco
Imports, Inc., H.H. Scott, Inc., and Stuart
D. Gavsy, Esq., as Trustee (incorporated by
reference to Exhibit (10) (ff) of Emerson's
Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994,
between Emerson and Hopper Radio of Florida,
Inc. (incorporated by reference to Exhibit
10(q) of Emerson's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995).
(10) (r) Sales Agreement, dated April 1, 1994, between
Emerson and E & H Partners. (incorporated by
reference to Exhibit 10(r) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (s) Agreement, dated July 1, 1994, between
Emerson and Alex Wijnen relating to
termination of employment and agreement on
consulting services. (incorporated by
reference to Exhibit 10(s) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (t) Independent Consultant's Agreement, dated
October 1, 1994, between Emerson Radio
International Ltd. and Peter G. Bunger.
(incorporated by reference to Exhibit 10(t)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (u) Independent Consultant's Agreement, dated
October 1, 1994, between Emerson Radio Europe
B.V. and Peter G. Bunger (incorporated by
reference to Exhibit 10 (u) of Emerson's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
(10) (v) Employment Agreement, dated October 3, 1994,
between Emerson and Andrew Cohan
(incorporated by reference to Exhibit 10 (v)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (w) License Agreement, dated February 22, 1995,
between Emerson and Otake (incorporated by
reference to Exhibit 6(a)(1) of Emerson's
quarterly report on Form 10-Q for quarter
ended December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995,
between Emerson and Otake (incorporated by
reference to Exhibit 6(a)(2) of Emerson's
quarterly report on Form 10-Q for quarter
ended December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10 (y)
of Emerson's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995).
(10) (z) Amendment No. 1 to Financing Agreements,
dated as of August 24, 1995, among Emerson,
Majexco Imports, Inc. and Congress
(incorporated by reference to Exhibit (2) of
Emerson's Current Report on Form 8-K filed
with the SEC on September 8, 1995).
(11) Computation of Primary Earnings Per Share
(incorporated by reference to Exhibit (11) of
Emerson's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995).
(12) Computation of Ratios*
(21) Subsidiaries of the Registrant as of March
31, 1995 (incorporated by reference to
Exhibit (21) of Emerson's Annual Report on
Form 10-K for the fiscal year ended March 31,
1995).
(23) Consent of Experts and Counsel *
(25) Form T-1 of Bank One, Columbus, NA.*
(27) Financial Data Schedule for year ended March
31, 1995 (incorporated by reference to
Exhibit (27) of Emerson's Annual Report on
Form 10-K for the fiscal year ended March 31,
1995).
____________________
*Filed herewith
</PAGE>
EXHIBIT 5(a)
September 18, 1995
Emerson Radio Corp.
Nine Entin Road
Parsippany, NJ 07054
Gentlemen:
You have requested our opinion, as your securities counsel, in connection
with the registration with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), of a public offering by
certain selling securityholders on a registration statement on Form S-1
(the "Registration Statement") of $20,750,000 aggregate principal amount of
8 1/2% Senior Subordinated Convertible Debentures Due 2002 (the "Debentures")
and the shares of common stock, par value $.01 per share, of the Company
into which such Debentures are convertible (together with the Debentures,
the "Offered Securities").
We have examined and relied upon originals or copies of all such corporate
records of the Company, communications or certifications of public
officials, certificates of officers, directors and representatives of the
Company, and such other documents as we have deemed relevant and necessary
as the basis of the opinions expressed herein. In making such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents tendered to us as originals, and the conformity to original
documents of all documents submitted to us as certified or photostatic
copies.
Based upon the foregoing and relying upon statements of fact contained in
the documents that we have examined, we are of the opinion that, when the
Registration Statement becomes effective under the Act, the Offered
Securities offered by the selling securityholders named in, and covered by,
the Registration Statement, when issued and sold as contemplated in the
Registration Statement, will be legally issued, fully paid, and non-
assessable and the Debentures will be binding obligations of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto and to all references to
this firm contained in the Registration Statement.
Very truly yours,
LOWENSTEIN, SANDLER, KOHL,
FISHER & BOYLAN, P.A.
/s/LOWENSTEIN, SANLDER, KOHL,
FISHER & BOYLAN, P.A.
</PAGE>
<TABLE>
EXHIBIT 12
EMERSON RADIO CORP. AND SUBSIDIARIES
EXHIBIT TO FORM S-1
COMPUTATION OF RATIO OF EARNINGS (LOSS) TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(In thousands, except ratio data)
<C> <C> <C> <C> <C> <C> <C> <C>
Historical
Nine Three Three Three
Months Year Months Year Year Year Months Months
Ended Ended Ended Ended Ended Ended Ended Ended
Dec. 31 Dec. 31 Mar. 31 Mar. 31 Mar. 31 Mar. 31 June 30, June 30,
1990 1991 1992 1993 1994 1995 1994 1995
<S>
Pretax Earnings(loss)
$(39,851) $(59,571) $(6,743) $(55,291) $(73,327) $7,642 $(2,827) $(1,309)
Fixed Charges:
Interest 13,978 18,546 4,217 18,257 10,243 2,582 379 547
Amortization of
debt expenses - - - - - 300 75 75
13,978 18,546 4,217 18,257 10,245 2,882 454 622
Earnings(loss)
(25,873) (41,025) (2,526) (37,034) (63,084) 10,524 (2,373) (687)
Fixed Charges:
Interest 13,978 18,546 4,217 18,257 10,243 2,582 379 547
Amortization of debt
expenses - - - - - 300 75 75
Preferred stock dividend
requirements(a) - - - - - 725 181 181
13,978 18,546 4,217 18,257 10,243 3,607 635 803
Ratio of Earnings (Loss) to
Combined Fixed Charges and
Preferred Stock
Dividends (1.85) (2.21) (0.60) (2.03) (6.16) 2.92 (3.74) (0.86)
Coverage Deficiency $ 13,978 $ 18,546 $ 4,217 $ 18,257 $ 10,243 $ - $ 635 $ 803
</TABLE>
____________
(a) The preferred stock dividend requirements have been adjusted to
reflect the pretax earnings which would be required to cover such
dividend requirements.
</PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the inclusion in this Registration Statement of our report dated May
24, 1995, with respect to the consolidated financial statements of Emerson
Radio Corp.
Our audits also included the financial statement schedule of Emerson
Radio Corp. listed in Item 16(b) of this Registration Statement as at March
31, 1995, March 31, 1994 and March 31, 1993 and for the years ended March
31, 1995, 1994 and 1993. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
schedule based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Ernst & Young LLP
New York, New York
September 18, 1995
CONSENT OF COUNSEL
The Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. is
contained in its opinion filed as Exhibit 5(a) to the Registration
Statement.
</PAGE>
EXHIBIT 25
FORM T-1 OF BANK ONE, COLUMBUS, N.A.
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, COLUMBUS, NA
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code)
executive offices)
Victoria Pavlick
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6180
(Name, address and telephone number of agent for service)
EMERSON RADIO CORP.
(Exact name of obligor as specified in its charter)
Delaware 22-3285224
(State or other jurisdiction of
(I.R.S.Employer
incorporation or organization)
Identification No.)
Nine Entin Road 07054
Parsippany, N.J. (Zip Code)
(Address of principal executive offices)
Emerson Radio Corp. 8 1/2% Senior Subordinated Convertible Debentures Due
2002
(Title of the Indenture securities)
GENERAL
1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
16. List of Exhibits
List below all exhibits filed as a part of this statement of
eligibility and qualification. (Exhibits identified in parentheses,
on file with the Commission, are incorporated herein by reference as
exhibits hereto.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to
commence business, see Exhibit 2 to Form T-1, filed in connection with Form
S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes
due 2003, Securities and Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise
corporate trust powers, see Exhibit 3 to Form T-1, filed in connection with
Form S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes
due 2003, Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business
on June 30, 1995, published pursuant to the requirements of the Comptroller
of the Company.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in
default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, Columbus, NA, a national banking
association organized under the National Banking Act, has duly caused this
statement of eligibility and qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, all in Columbus, Ohio, on
September 18, 1995.
Bank One, Columbus, NA
By:
Victoria Pavlick
Authorized Signer
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business
of banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus,
County of Franklin, State of Ohio. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to-time by resolution of the shareholders at any annual or
special meeting thereof, provided, however, that the Board of Directors, by
resolution of a majority thereof, shall be authorized to increase the
number of its members by not more than two between regular meetings of the
shareholders. Each Director, during the full term of his directorship,
shall own, as qualifying shares, the minimum number of shares of either
this Association or of its parent bank holding company in accordance with
the provisions of applicable law. Unless otherwise provided by the laws of
the United States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by action of the
Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought
before said meeting shall be held at the main office of this Association or
such other place as the Board of Directors may designate, on the day of
each year specified therefor in the By-Laws, but if no election is held on
that day, it may be held on any subsequent business day according to the
provisions of law; and all elections shall be held according to such lawful
regulations as may be prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association
shall be 2,073,750 shares of common stock of the par value of Ten Dollars
($10) each; but said capital stock may be increased or decreased from
time-to-time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription
to any share of any class of stock of this Association, whether now or
hereafter authorized or to any obligations convertible into stock of this
Association, issued or sold, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors, in its discretion, may
from time-to-time determine and at such price as the Board of Directors may
from time-to-time fix.
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the
approval of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members
President of the Association, who shall be Chairman of the Board, unless
the Board appoints another director to be the Chairman. The Board of
Directors shall have the power to appoint one or more Vice Presidents and
to appoint a Secretary and such other officers and employees as may be
required to transact the business of this Association.
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to
be paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the
capital of this Association shall be made; to manage and administer the
business and affairs of this Association; to make all By-Laws that it may
be lawful for them to make; and generally to do and perform all acts that
it may be legal for a Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the
City of Columbus, Ohio, without the approval of the shareholders but
subject to the approval of the Comptroller of the Currency; and shall have
the power to establish or change the location of any branch or branches of
this Association to any other location, without the approval of the
shareholders but subject to the approval of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or
more shareholders owning, in the aggregate, not less than 10 percent of the
stock of this Association, may call a special meeting of shareholders at
any time. Unless otherwise provided by the laws of the United States, a
notice of the time, place and purpose of every annual and special meeting
of the shareholders shall be given by first-class mail, postage prepaid,
mailed at least ten days prior to the date of such meeting to each
shareholder of record at his address as shown upon the books of this
Association.
TENTH. Every person who is or was a Director, officer or employee of
the Association or of any other corporation which he served as a Director,
officer or employee at the request of the Association as part of his
regularly assigned duties may be indemnified by the Association in
accordance with the provisions of this paragraph against all liability
(including, without limitation, judgments, fines, penalties and
settlements) and all reasonable expenses (including, without limitation,
attorneys' fees and investigative expenses) that may be incurred or paid by
him in connection with any claim, action, suit or proceeding, whether
civil, criminal or administrative (all referred to hereafter in this
paragraphs as "Claims") or in connection with any appeal relating thereto
in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer
or employee of the Association or such other corporation, or by reason of
any action taken or omitted by him in his capacity as such Director,
officer or employee, whether or not he continues to be such at the time
such liability or expenses are incurred, provided that nothing contained in
this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification
is sought, such indemnification in such instance is permissible under
applicable law and regulations, including published rulings of the
Comptroller of the Currency or other appropriate supervisory or regulatory
authority, and provided further that there shall be no indemnification of
directors, officers, or employees against expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by
an appropriate regulatory agency which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action
by an individual or individuals in the form of payments to the Association.
Every person who may be indemnified under the provisions of this paragraph
and who has been wholly successful on the merits with respect to any Claim
shall be entitled to indemnification as of right. Except as provided in
the preceding sentence, any indemnification under this paragraph shall be
at the sole discretion of the Board of Directors and shall be made only if
the Board of Directors or the Executive Committee acting by a quorum
consisting of Directors who are not parties to such Claim shall find or if
independent legal counsel (who may be the regular counsel of the
Association) selected by the Board of Directors or Executive Committee
whether or not a disinterested quorum exists shall render their opinion
that in view of all of the circumstances then surrounding the Claim, such
indemnification is equitable and in the best interests of the Association.
Among the circumstances to be taken into consideration in arriving at such
a finding or opinion is the existence or non-existence of a contract of
insurance or indemnity under which the Association would be wholly or
partially reimbursed for such indemnification, but the existence or
non-existence of such insurance is not the sole circumstance to be
considered nor shall it be wholly determinative of whether such
indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of
Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent
legal counsel (who may be the regular counsel of the Association) selected
by the Board of Directors or Executive Committee whether or not a
disinterested quorum exists shall render their opinion that the Director,
officer or employee acted in good faith in what he reasonably believed to
be the best interests of the Association or such other corporation and
further in the case of any criminal action or proceeding, that the
Director, officer or employee reasonably believed his conduct to be lawful.
Determination of any Claim by judgment adverse to a Director, officer or
employee by settlement with or without Court approval or conviction upon a
plea of guilty or of nolocontendere or its equivalent shall not create a
presumption that a Director, officer or employee failed to meet the
standards of conduct set forth in this paragraph. Expenses incurred with
respect to any Claim may be advanced by the Association prior to the final
disposition thereof upon receipt of an undertaking satisfactory to the
Association by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he is entitled to indemnification under this
paragraph. The rights of indemnification provided in this paragraph shall
be in addition to any rights to which any Director, officer or employee may
otherwise be entitled by contract or as a matter of law. Every person who
shall act as a Director, officer or employee of this Association shall be
conclusively presumed to be doing so in reliance upon the right of
indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of
the holders of a greater amount of stock is required by law, and in that
case by the vote of the holders of such greater amount.
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the
Shareholders of the Bank for the election of Directors and for the
transaction of such business as may properly come before the meeting shall
be held at its main banking house, or other convenient place duly
authorized by the Board of Directors, on the third Monday of January of
each year, or on the next succeeding banking day, if the day fixed falls on
a legal holiday. If from any cause, an election of directors is not made
on the day fixed for the regular meeting of shareholders or, in the event
of a legal holiday, on the next succeeding banking day, the Board of
Directors shall order the election to be held on some subsequent day, as
soon thereafter as practicable, according to the provisions of law; and
notice thereof shall be given in the manner herein provided for the annual
meeting. Notice of such annual meeting shall be given by or under the
direction of the Secretary or such other officer as may be designated by
the Chief Executive Officer by first-class mail, postage prepaid, to all
shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date
fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of
this Bank may be called at any time by the Board of Directors or by any
three or more shareholders owning, in the aggregate, not less than ten
percent of the stock of this Bank. The notice of any special meeting of
the shareholders called by the Board of Directors, stating the time, place
and purpose of the meeting, shall be given by or under the direction of the
Secretary, or such other officer as is designated by the Chief Executive
Officer, by first-class mail, postage prepaid, to all shareholders of
record of the Bank at their respective addresses as shown upon the books of
the Bank, mailed not less than ten days prior to the date fixed for such
meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors
may designate a person to be the Secretary of the meetings of shareholders.
In the absence of a presiding officer, as designated in these By-Laws, the
Board of Directors may designate a person to act as the presiding officer.
In the event the Board of Directors fails to designate a person to preside
at a meeting of shareholders and a Secretary of such meeting, the
shareholders present or represented shall elect a person to preside and a
person to serve as Secretary of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the
directors-elect of their election and to meet forthwith for the
organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as
many as three shareholders to be judges of the election, who shall hold and
conduct the same, and who shall, after the election has been held, notify,
in writing over their signatures, the secretary of the shareholders'
meeting of the result thereof and the names of the Directors elected;
provided, however, that upon failure for any reason of any judge or judges
of election, so appointed by the directors, to serve, the presiding officer
of the meeting shall appoint other shareholders or their proxies to fill
the vacancies. The judges of election at the request of the chairman of
the meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary
of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as
many persons as there are Directors to be elected, or to cumulate such
shares as provided by Federal Law. In deciding all other questions at
meetings of shareholders, each shareholder shall be entitled to one vote on
each share of stock of record in his name. Shareholders may vote by proxy
duly authorized in writing. All proxies used at the annual meeting shall
be secured for that meeting only, or any adjournment thereof, and shall be
dated, and if not dated by the shareholder, shall be dated as of the date
of receipt thereof. No officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of
the capital stock of the Bank, eligible to be voted, present either in
person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of shareholders, but shareholders present at any
meeting and consti- tuting less than a quorum may, without further notice,
adjourn the meeting from time to time until a quorum is obtained. A
majority of the votes cast shall decide every question or matter submitted
to the shareholders at any meeting, unless otherwise provided by law or by
the Articles of Association.
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION
and shall be employed either in the position of Chief Executive Officer or
active leadership within his or her business, professional or community
interest which shall be located within the geographic area in which the
Bank operates, or as an executive officer of the Bank. A director shall
not be eligible for nomination and re-election as a director of the Bank if
such person's executive or leadership position within his or her business,
professional or community interests which qualifies such person as a
director of Bank terminates. The age of 70 is the mandatory retirement age
as a director of the Bank. When a person's eligibility as director of the
Bank terminates, whether because of change in share ownership, position,
residency or age, within 30 days after such termination, such person shall
submit his resignation as a director to be effective at the pleasure of the
Board provided, however, that in no event shall such person be nominated or
elected as a director. Provided, however, following a person's retirement
or resignation as a director because of the age limitations herein set
forth with respect to election or re-election as a director, such person
may, in special or unusual circumstances, and at the discretion of the
Board, be elected by the directors as a Director Emeritus of the Bank for a
limited period of time. A Director Emeritus shall have the right to
participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the
powers of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office
until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to his
prior death, resignation, or removal from office. Whenever any vacancy
shall occur among the directors, the remaining directors shall constitute
the directors of the Bank until such vacancy is filled by the remaining
directors, and any director so appointed shall hold office for the
unexpired term of his or her successor. Notwithstanding the foregoing,
each director shall hold office and serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by
the presiding officer of the annual meeting. If at the time fixed for such
meeting there is no quorum present, the Directors in attendance may adjourn
from time to time until a quorum is obtained. A majority of the number of
Directors elected by the shareholders shall constitute a quorum for the
transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month
excluding March and July, which meeting will be held at 4:00 p.m. When any
regular meeting of the Board falls on a holiday, the meeting shall be held
on such other day as the Board may previously designate or should the Board
fail to so designate, on such day as the Chairman of the Board of President
may fix. Whenever a quorum is not present, the directors in attendance
shall adjourn the meeting to a time not later than the date fixed by the
Bylaws for the next succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at the call of the Chairman of the Board or
President, or at the request of two or more Directors. Any special meeting
may be held at such place in Franklin County, Ohio, and at such time as may
be fixed in the call. Written or oral notice shall be given to each
Director not later than the day next preceding the day on which special
meeting is to be held, which notice may be waived in writing. The presence
of a Director at any meeting of the Board shall be deemed a waiver of
notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum
is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a lesser
number may adjourn any meeting, from time-to-time, and the meeting may be
held, as adjourned, without further notice. When, however, less than a
quorum as herein defined, but at least one-third and not less than two of
the authorized number of Directors are present at a meeting of the
Directors, business of the Bank may be transacted and matters before the
Board approved or disapproved by the unanimous vote of the Directors
present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance
at Board and Board Committee Meetings and such fees for service as a
Director irrespective of meeting attendance as from time to time are fixed
by resolution of the Board; provided, however, that payment hereunder shall
not be made to a Director for meetings attended and/or Board service which
are not for the Bank's sole benefit and which are concurrent and
duplicative with meetings attended or board service for an affiliate of the
Bank for which the Director receives payment; and provided further, that
payment hereunder shall not be made in the case of any Director in the
regular employment of the Bank or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of
the Board of Directors known as the Executive Committee which shall possess
and exercise, when the Board is not in session, all powers of the Board
that may lawfully be delegated. The Executive Committee shall also
exercise the powers of the Board of Directors in accordance with the
Provisions of the "Employees Retirement Plan" and the "Agreement and
Declaration of Trust" as the same now exist or may be amended hereafter.
The Executive Committee shall consist of not fewer than four board members,
including the Chairman of the Board and President of the Bank, one of whom,
as hereinafter required by these By-laws, shall be the Chief Executive
Officer. The other members of the Committee shall be appointed by the
Chairman of the Board or by the President, with the approval of the Board
and shall continue as members of the Executive Committee until their
successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote
thereof at any regular or special meeting of the Board. The Chairman or
President shall fill any vacancy in the Committee by the appointment of
another Director, subject to the approval of the Board of Directors. The
regular meetings of the Executive Committee shall be held on a regular
basis as scheduled by the Board of Directors. Special meetings of the
Executive Committee shall be held at the call of the Chairman or President
or any two members thereof at such time or times as may be designated. In
the event of the absence of any member or members of the Committee, the
presiding member may appoint a member or members of the Board to fill the
place or places of such absent member or members to serve during such
absence. Not fewer than three members of the Committee must be present at
any meeting of the Executive Committee to constitute a quorum, provided,
however that with regard to any matters on which the Executive Committee
shall vote, a majority of the Committee members present at the meeting at
which a vote is to be taken shall not be officers of the Bank and, provided
further, that if, at any meeting at which the Chairman of the Board and
President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be
eligible to vote at such meeting and shall not be recognized for purposes
of determining if a quorum is present at such meeting. When neither the
Chairman of the Board nor President are present, the Committee shall
appoint a presiding officer. The Executive Committee shall keep a record
of its proceedings and report its proceedings and the action taken by it to
the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of
which shall be, at least once in each calendar year, to review, develop and
recommend policies and programs related to the Bank's Community
Reinvestment Act Compliance and regulatory compliance with all existing
statutes, rules and regulations affecting the Bank under state and federal
law. Such Committee shall provide and promptly make a full report of such
review of current Bank policies with regard to Community Reinvestment Act
and regulatory compliance in writing to the Board, with recommendations, if
any, which may be necessary to correct any unsatisfactory conditions. Such
Committee may, in its discretion, in fulfilling its duties, utilize the
Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation
and Banc One Corporation and may engage outside Community Reinvestment Act
experts, as approved by the Board, to review, develop and recommend
policies and programs as herein required. The Community Reinvestment Act
and regulatory compliance policies and procedures established and the
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The
Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer
than three members of the Committee, a majority of whom are not officers of
the Bank, must be present to constitute a quorum. The Chairman of the
Board or President of the Bank, whichever is not the Chief Executive
Officer, shall be an ex officio member of the Community Reinvestment Act
and Compliance Policy Committee. The Community Reinvestment Act and
Compliance Policy Committee, whose chairman shall be appointed by the
Board, shall keep a record of its proceedings and report its proceedings
and the action taken by it to the Board of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees
known as the Trust Management Committee and the Trust Examination Committee
appointed as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in
the interest of the Bank.
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include
one or more Executive Vice Presidents and/or Senior Vice
Presidents) and one or more Assistant Secretaries, all of whom
shall be elected by the Board. All other officers may be elected
by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall
be fixed by the Board. The Board from time-to-time shall
designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of
their election as officers until the organization meeting of the
Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be
relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as
otherwise limited by law or these By-laws, the Board assigns to
Chief Executive Officer and/or his designees the authority to
appoint and dismiss any elected or appointed officer or other
member of the Bank's management staff and other employees of the
Bank, as the person in charge of and responsible for any branch
office, department, section, operation, function, assignment or
duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsi- bilities. Any two or more offices may be held by the
same person except that no person shall hold the office of
Chairman of the Board and/or President and at the same time also
hold the office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of
the Bank, to the extent that such officer is authorized in writing
by the Chief Executive Officer, may appoint persons other than
officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however,
that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. Except as otherwise prescribed or limited by these
By-Laws, the Chief Executive Officer shall have full right, authority and
power to control all personnel, including elected and appointed officers,
of the Bank, to employ or direct the employment of such personnel and
officers as he may deem necessary, including the fixing of salaries and the
dismissal of them at pleasure, and to define and prescribe the duties and
responsibility of all Officers of the Bank, subject to such further
limitations and directions as he may from time-to-time deem proper. The
Chief Executive Officer shall perform all duties incident to his office and
such other and further duties, as may, from time-to-time, be required of
him by the Board of Directors or the shareholders. The specification of
authority in these By-Laws wherever and to whomever granted shall not be
construed to limit in any manner the general powers of delegation granted
to the Chief Executive Officer in conducting the business of the Bank. The
Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such officer as is designated by
the Chief Executive Officer shall be vested with all the powers and perform
all the duties of the Chief Executive Officer as defined by these By-Laws.
When designating an officer to serve in his absence, the Chief Executive
Officer shall select an officer who is a member of the Board of Directors
whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief
Executive Officer, the Chairman of the Board, the President, and those
officers so designated and authorized by the Chief Executive Officer are
authorized for an on behalf of the Bank, and to the extent permitted by
law, to make loans and discounts; to purchase or acquire drafts, notes,
stock, bonds, and other securities for investment of funds held by the
Bank; to execute and purchase acceptances; to appoint, empower and direct
all necessary agents and attor- neys; to sign and give any notice required
to be given; to demand payment and/or to declare due for any default any
debt or obligation due or payable to the Bank upon demand or authorized to
be declared due; to foreclose any mort- gages, to exercise any option,
privilege or election to forfeit, terminate, extend or renew any lease; to
authorize and direct any proceedings for the collection of any money or for
the enforcement of any right or obligation; to adjust, settle and
compromise all claims of every kind and description in favor of or against
the Bank, and to give receipts, releases and discharges therefor; to borrow
money and in connection therewith to make, execute and deliver notes, bonds
or other evidences of indebtedness; to pledge or hypothe- cate any
securities or any stocks, bonds, notes or any property real or personal
held or owned by the Bank, or to rediscount any notes or other obli-
gations held or owned by the Bank, to employ or direct the employment of
all personnel, including elected and appointed officers, and the dismissal
of them at pleasure, and in furtherance of and in addition to the powers
hereinabove set forth to do all such acts and to take all such proceedings
as in his judgment are necessary and incidental to the operation of the
Bank.
Other persons in the employment of the Bank, including but not limited
to officers and other members of the management staff, may be authorized by
the Chief Executive Officer, or by an officer so designated and authorized
by the chief Executive Officer, to perform the powers set forth above,
subject, how- ever, to such limitations and conditions as are set forth in
the authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and
control of the records of the Bank and, subject to the direction of the
Chief Executive Officer, shall undertake other duties and functions usually
performed by a corporate secretary. Other officers may be designated by
the Chief Executive Officer or the Board of Directors as Assistant
Secretary to perform the duties of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer,
Chairman of the Board, President, any officer being a member of the Bank's
management staff who is also a person in charge of and responsible for any
department within the Bank and any other officer to the extent such officer
is so designated and authorized by the Chief Executive Officer, the
Chairman of the Board, the President, or any other officer who is a member
of the Bank's management staff who is in charge of and responsible for any
department within the Bank, are hereby authorized on behalf of the Bank to
sell, assign, lease, mortgage, transfer, deliver and convey any real or
personal property now or hereafter owned by or standing in the name of the
Bank or its nominee, or held by this Bank as collateral security, and to
execute and deliver such deeds, contracts, leases, assignments, bills of
sale, transfers or other papers or documents as may be appropriate in the
circumstances; to execute any loan agreement, security agreement,
commitment letters and financing statements and other documents on behalf
of the Bank as a lender; to execute purchase orders, documents and
agreements entered into by the Bank in the ordinary course of business,
relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to
execute powers of attorney to perform specific or general functions in the
name of or on behalf of the Bank; to execute promissory notes or other
instruments evidencing debt of the Bank; to execute instruments pledging or
releasing securities for public funds, documents submitting public fund
bids on behalf of the Bank and public fund contracts; to purchase and
acquire any real or personal property including loan portfolios and to
execute and deliver such agreements, contracts or other papers or documents
as may be appropriate in the circumstances; to execute any indemnity and
fidelity bonds, proxies or other papers or documents of like or different
character necessary, desirable or incidental to the conduct of its banking
business; to execute and deliver settlement agreements or other papers or
documents as may be appropriate in connection with a dismissal authorized
by Section 3.01(c) of these By-laws; to execute agreements, instruments,
documents, contracts or other papers of like or difference character
necessary, desirable or incidental to the conduct of its banking business;
and to execute and deliver partial releases from and discharges or
assignments of mortgages, financing statements and assignments or surrender
of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person
in charge of and responsible for any department within the Bank, and any
other officer of the Bank so designated and authorized by the Chief
Executive Officer, Chairman of the Board, President or any officer who is a
member of the Bank's management staff who is in charge of and responsible
for any department within the Bank are authorized for and on behalf of the
Bank to sign and issue checks, drafts, and certificates of deposit; to sign
and endorse bills of exchange, to sign and countersign foreign and domestic
letters of credit, to receive and receipt for payments of principal,
interest, dividends, rents, fees and payments of every kind and description
paid to the Bank, to sign receipts for property acquired by or entrusted to
the Bank, to guarantee the genuineness of signatures on assignments of
stocks, bonds or other securities, to sign certifications of checks, to
endorse and deliver checks, drafts, warrants, bills, notes, certificates of
deposit and acceptances in all business transactions of the Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the
Board, President or by an officer so designated by the Chief Executive
Officer, Chairman of the Board, or President to perform the acts and to
execute the documents set forth above, subject, however, to such
limitations and conditions as are contained in the authorization given to
such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank
shall be bonded for the honest and faithful performance of their duties for
such amount as may be prescribed by the Board of Directors.
ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted
to this Bank under the provisions of Federal Law and Regulations of the
Comp- troller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified
herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing
Committee known as the Trust Management Committee, consisting of at least
five members, a majority of whom shall not be officers of the Bank. The
Committee shall consist of the Chairman of the Board who shall be Chairman
of the Com- mittee, the President, and at least three other Directors
appointed by the Board of Directors and who shall continue as members of
the Committee until their successors are appointed. Any vacancy in the
Trust Management Committee may be filled by the Board at any regular or
special meeting. In the event of the absence of any member or members,
such Committee may, in its discretion, appoint members of the Board to fill
the place of such absent members to serve during such absence. Three
members of the Committee shall constitute a quorum. Any member of the
Committee may be removed by the Board by a majority vote at any regular or
special meeting of the Board. The Committee shall meet at such times as it
may determine or at the call of the Chairman, or President or any two
members thereof.
The Trust Management Committee, under the general direction of the
Board of Directors, shall supervise the policy of the Trust Department
which shall be formulated and executed in accordance with Law, Regulations
of the Comp- troller of the Currency, and sound fiduciary principles.
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing
Commit- tee known as the Trust Examination Committee, consisting of three
directors appointed by the Board of Directors and who shall continue as
members of the committee until their successors are appointed. Such
members shall not be active officers of the Bank. Two members of the
Committee shall constitute a quorum. Any member of the Committee may be
removed by the Board by a majority vote at any regular or special meeting
of the Board. The Committee shall meet at such times as it may determine
or at the call of two members thereof.
This Committee shall, at least once during each calendar year and
within fifteen months of the last such audit, or at such other time(s) as
may be required by Regulations of the Comptroller of the Currency, make
suitable audits of the Trust Department or cause suitable audits to be made
by auditors responsible only to the Board of Directors, and at such time
shall ascertain whether the Department has been administered in accordance
with Law, Regula- tions of the Comptroller of the Currency and sound
fiduciary principles.
The Committee shall promptly make a full report of such audits in
writing to the Board of Directors of the Bank, together with a
recommendation as to what action, if any, may be necessary to correct any
unsatisfactory condition. A report of the audits together with the action
taken thereon shall be noted in the Minutes of the Board of Directors and
such report shall be a part of the records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the
management and supervision of an officer of the Bank or of the trust
affiliate of the Bank designated by and subject to the advice and direction
of the Chief Executive Officer. Such officer having supervisory
responsibility over the Trust Department shall do or cause to be done all
things necessary or proper in carrying on the business of the Trust
Department in accordance with provi- sions of law and applicable
regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department
may be carried in the name of the Bank in its fiduciary capacity, in the
name of Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested
or undistributed any longer than is reasonable for the proper management of
the account and shall be invested in accordance with the instrument
establishing a fiduciary relationship and local law. Where such instrument
does not specify the character or class of investments to be made and does
not vest in the Bank any discretion in the matter, funds held pursuant to
such instrument shall be invested in any investment which corporate
fiduciaries may invest under local law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint
custody or control of not less than two of the officers or employees of the
Bank or of the trust affiliate of the Bank designated for the purpose by
the Trust Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer,
Chairman of the Board, President, any officer of the Trust Department, and
such other officers of the trust affiliate of the Bank as are specifically
designated and authorized by the Chief Executive Officer, the President, or
the officer in charge of the Trust Department, are hereby authorized, on
behalf of this Bank, to sell, assign, lease, mortgage, transfer, deliver
and convey any real property or personal property and to purchase and
acquire any real or personal property and to execute and deliver such
agreements, contracts, or other papers and documents as may be appropriate
in the circumstances for property now or hereafter owned by or standing in
the name of this Bank, or its nominee, in any fiduciary capacity, or in the
name of any principal for whom this Bank may now or hereafter be acting
under a power of attorney, or as agent and to execute and deliver partial
releases from any discharges or assignments or mortgages and assignments or
surrender of insurance policies, to execute and deliver deeds, contracts,
leases, assignments, bills of sale, transfers or such other papers or
documents as may be appropriate in the circumstances for property now or
hereafter held by this Bank in any fiduciary capacity or owned by any
principal for whom this Bank may now or hereafter be acting under a power
of attorney or as agent; to execute and deliver settlement agreements or
other papers or documents as may be appropriate in connection with a
dismissal authorized by Section 3.01(c) of these By-laws; provided that the
signature of any such person shall be attested in each case by any officer
of the Trust Department or by any other person who is specifically
authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust
affiliate of the Bank as are specifically designated and authorized by the
Chief Executive Officer, the President, or the officer in charge of the
Trust Department, or any other person or corporation as is specifically
authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department, are hereby authorized on behalf of this
Bank, to sign any and all pleadings and papers in probate and other court
proceedings, to execute any indemnity and fidelity bonds, trust agreements,
proxies or other papers or documents of like or different character
necessary, desirable or incidental to the appointment of the Bank in any
fiduciary capacity and the conduct of its business in any fiduciary
capacity; also to foreclose any mortgage, to execute and deliver receipts
for payments of principal, interest, dividends, rents, fees and payments of
every kind and description paid to the Bank; to sign receipts for property
acquired or entrusted to the Bank; also to sign stock or bond certificates
on behalf of this Bank in any fiduciary capacity and on behalf of this Bank
as transfer agent or registrar; to guarantee the genuineness of signatures
on assignments of stocks, bonds or other securities, and to authenticate
bonds, debentures, land or lease trust certificates or other forms of
security issued pursuant to any indenture under which this Bank now or
hereafter is acting as Trustee. Any such person, as well as such other
persons as are specifically authorized by the Chief Executive Officer or
the officer in charge of the Trust Department, may sign checks, drafts and
orders for the payment of money executed by the Trust Department in the
course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the
Bank and such other persons as may be specifically authorized by Resolution
of the Trust Management Committee or the Board of Directors, may vote
shares of stock of a corporation of record on the books of the issuing
company in the name of the Bank or in the name of the Bank as fiduciary, or
may grant proxies for the voting of such stock of the granting if same is
permitted by the instrument under which the Bank is acting in a fiduciary
capacity, or by the law applicable to such fiduciary account. In the case
of shares of stock which are held by a nominee of the Bank, such shares may
be voted by such person(s) authorized by such nominee.
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall
be evidenced by certificates which shall bear the signature of the Chairman
of the Board, the President, or a Vice President (which signature may be
engraved, printed or impressed), and shall be signed manually by the
Secretary, or any other officer appointed by the Chief Executive Officer
for that purpose.
In case any such officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such before
such certificate is issued, it may be issued by the Bank with the same
effect as if such officer had not ceased to be such at the time of its
issue. Each such certificate shall bear the corporate seal of the Bank,
shall recite on its fact that the stock represented thereby is transferable
only upon the books of the Bank properly endorsed and shall recite such
other information as is required by law and deemed appropriate by the
Board. The corporate seal may be facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank
shall be transferable only upon the stock transfer books of the Bank and
except as hereinafter provided, no transfer shall be made or new
certificates issued except upon the surrender for cancellation of the
certificate or certificates previously issued therefor. In the case of the
loss, theft, or destruction of any certificate, a new certificate may be
issued in place of such certificate upon the furnishing of any affidavit
setting forth the circumstances of such loss, theft, or destruction and
indemnity satisfactory to the Chairman of the Board, the President, or a
Vice President. The Board of Directors, or the Chief Executive Officer,
may authorize the issuance of a new certificate therefor without the
furnishing of indemnity. Stock Transfer Books, in which all transfers of
stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and
under such conditions as the Board of Directors may at any time determine
for any meeting of shareholders, the payment of dividends or any other
lawful purpose. In lieu of closing the transfer books, the Board may, in
its discretion, fix a record date and hour constituting a reasonable period
prior to the day designated for the holding of any meeting of the
shareholders or the day appointed for the payment of any dividend or for
any other purpose at the time as of which shareholders entitled to notice
of and to vote at any such meeting or to receive such dividend or to be
treated as shareholders for such other purpose shall be determined, and
only shareholders of record at such time shall be entitled to notice of or
to vote at such meeting or to receive such dividends or to be treated as
shareholders for such other purpose.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the
seal adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION. The Seal may be affixed by any officer of the Bank to any
document executed by an authorized officer on behalf of the Bank, and any
officer may certify any act, proceedings, record, instrument or authority
of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on
such days and during such hours as the Chief Executive Officer of the Bank
shall, from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the
Articles of Association, the returns of the judges of elections, the
By-Laws and any amendments thereto, the proceedings of all regular and
special meetings of the shareholders and of the Board of Directors, and
reports of the committees of the Board of Directors shall be recorded in
the minute book of the Bank. The minutes of each such meeting shall be
signed by the presiding Officer and attested by the secretary of the
meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote
of a majority of the Directors.
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for
Emerson Radio Corp. described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the
Trust Indenture Act of 1939, as amended.
Bank One, Columbus, NA
Dated: September 18, 1995 By:----------------------
Victoria Pavlick
Authorized Signer
<PAGE>
09/20/950156260.01
Federal Financial Institutions Examination Council
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1996
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Office - FFIEC 031
Report at the close of business June 30, 1995 (950630)
(RCRI 9999)
This report is required by law: 12 U.S.C. 324 (State member banks); 12
U.S.C. 1817 (State nonmember banks); and 12 U.S.C. 161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I. Richard D. Nadler,Controller
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ R.D. Nadler
Signature of Officer Authorized to Sign Report
/s/ 7/26/95
Date of Signature
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate
Federal Reserve District Bank.
State Nonmember Banks: Return the original only in the special return
address envelope provided. If express mail is used in lieu of the special
return address envelope, return the original only to the FDIC, c/o Quality
Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We,the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
/s/ Alex Shumate
Director (Trustee)
/s/ William M. Bennett
Director (Trustee)
/s/ Frederick L. Cullen
Director (Trustee)
Alex Shumate
William M. Bennett
Federick L. Cullen
National Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
</PAGE>
<PAGE>
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
Table of Contents
Signature Page.................................................Cover
Report of Income
Schedule RI-Income Statement....................................RI-1, 2, 3
Schedule RI-A-Changes in Equity Capital.........................RI-4
Schedule RI-B-Charge-offs and Recoveries and Changes in
Allowance for Loan and Lease Losses....................... ...RI-4, 5
Schedule R-IC-Applicable Income Taxes by Taxing
Authority.......................................................RI-5
Schedule RI-D-Income from International Operations..............RI-6
Schedule RI-E-Explanations......................................RI-7, 8
Report of Condition
Schedule RC-Balance Sheet.......................................RC-1, 2
Schedule RC-A - Cash and Balances Due From Depository
Institutions....................................................RC-3
Schedule RC-B-Securities........................................RC-3, 4, 5
Schedule RC-C-Loans and Lease Financing Receivables:
Part I. Loans and Leases.....................................RC-6, 7
Part II. Loans to Small Businesses and Small Farms (included
in the forms for June 30 only)...............................RC-7a, 7b
Schedule RC-D-Trading Assets and Liabilities (to be completed
only by selected banks).....................................RC-8
Schedule RC-E - Deposit Liabilities........................... RC-9, 10, 11
Schedule RC-F- Other Assets.....................................RC-11
Schedule RC-G-Other Liabilities.................................RC-11
Schedule RC-H-Selected Balance Sheet Items for Domestic Offices.RC-12
Schedule RC-I-Selected Assets and Liabilities of IBFs...........RC-13
Schedule RC-K-Quarterly Averages................................RC-13
Schedule RC-L-Off-Balance Sheet Item............................RC-14, 15, 16
Schedule RC-M-Memoranda.........................................RC-17, 18
Schedule RC-N-Past Due and Nonaccural Loans, Leases, and
Other Assets..................................................RC-19, 20
Schedule RC-O)-Other Data for Deposit Insurance Assessments.....RC-21, 22
Schedule RC-R-Risk-Based Capital................................RC-23, 24
Optional Narrative Statement Concerning the Amounts Reported in
the Reports of Condition and Income ..........................RC-25
Special Report (to be completed by all banks)
Schedule RC-J - Repricing Opportunities (sent only to and to be
completed only by savings banks)
Disclosure of Estimated Burden
The estimated average burden associated with this information collection is
31.6 hours per respondent and is estimated to vary from 15 to 225 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the
required form, and completing the information collection, but exclude the
time for compiling and maintaining business records in the
normal course of a respondent's activities. Comments concerning the accuracy
of this burden estimate and suggests for reducing this burden should be
directed to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW,
Washington, D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through
Friday between 8:00 a.m. and 5:00 p.m., Eastern time. State member banks
should contact their Federal Reserve District Bank.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031A
Address: 100 East Broad Street Page RI-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Consolidated Report of Income for the period January 1, 1995 -June 30, 1995
All Report of Income Schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
I480
Dollar Amounts in Thousands RIAD Bil Mil Thou
Interest Income: //////////////////////
a. Interest and fee income on loans: //////////////////////
(1) In domestic offices: //////////////////////
(a) Loans secured by real estate 4011 50,454 1.a.(1)(a)
(b) Loans to depository institutions 4019 0 1.a.(1)(b)
(c) Loans to finance agricultrial
production and other loans to
farmers 4024 291 1.a.(1)(c)
(d) Commercial and industrial loans 4012 26,902 1.a.(1)(d)
(e) Acceptances of other banks 4026 0 1.a.(1)(e)
(f) Loans to individuals for household,
family, and other personal
expenditures: ///////////////////
(1) Credit cards and related plans4054 124,632 1.a.(1)(f)(1)
(2) Other 4055 57,809 1.a.(1)(f)(2)
(g) Loans to foreign governments and
official institutions 4056 0 1.a.(1)(g)
(h) Obligations (other than securities
and leases) of states and political /////////////////////
subdivisions in U.S.: /////////////////////
(1) Taxable obligations 4503 76 1.a.(1)(h)(1)
(2) Tax-exempt obligations 4504 818 1.a.(1)(h)(2)
(i) All other loans in domestic
offices 4058 1,680 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement
subsidiaries, and IBFs 4059 0 1.a.(2)
b. Income from lease financing receivables: ///////////////////////
(1) Taxable leases 4505 23,378 1.b.(1)
(2) Tax-exempt leases 4307 252 1.b.(2)
c. Interest income on balances due from ///////////////////////
depository institutions: (1)
(1) In domestic offices 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement
subsidiaries and IBFs 4106 1,642 1.c.(2)
d. Interest and dividend income on securities: //////////////////////
(1) U.S. Treasury securities and U.S.
Government agency and
corporate obligations 4027 20,631 1.d.(1)
(2) Securities issued by state and political
subdivisions in the U.S.: ////////////////////////
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 1,755 1.d.(2)(b)
(3) Other domestic debt securities 3657 1,225 1.d.(3)
(4) Foreign debt securites 3658 117 1.d.(4)
(5) Equity securities (including investments
in mutual funds) 3659 115 1.d.(5)
e. Interest income from trading assets 4069 0 1.e.
______________________
(1) includes interest income on time certificates of deposit not held for
trading.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031A
Address: 100 East Broad Street Page RI-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI -- Continued
<TABLE>
Dollars Amounts in Thousands Year-to-Date
<S> <C> <C> <C> <C> <C>
1. Interest Income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities ////////////////////////
purchased under agreements to resell in domestic offices ////////////////////////
of the bank and of its Edge and Agreement subsidiaries, ////////////////////////
and in IBFs 4020 9,073 1.f.
g. Total interest income (sum of items 1.a through 1.f) 4107 320,850 1.g.
2. Interest expense: ////////////////////////
a. Interest on deposits: ///////////////////////
(1) Interest on deposits in domestic offices: ////////////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and ////////////////////////
telephone and preauthorized transfer accounts) 4508 3,991 1.a.(1)(a)
(b) Nontransaction accounts: ////////////////////////
(1) Money market deposit accounts (MMDAs) 4509 20,708 2.a.(1)(b)(1)
(2) Other savings deposits 4511 12,014 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more 4174 2,309 2.a.(1)(b)(3)
(4) All other time deposits 4512 36,802 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs 4172 12,979 2.a.(2)
b. Expense of federal funds purchased and securities ////////////////////////
sold under agreements to repurchase in domestic offices ////////////////////////
of the bank and of its Edge and Agreement subsidiaries, ///////////////////////
and in IBFs 4180 25,401 2.b.
c. Interest on demand notes issued to the U.S. Treasury, ////////////////////////
trading liabilities, and other borrowed money 4185 12,801 2.c.
d. Interest on mortgage indebtedness and obligations l
under capitalized leases 4072 197 2.d.
e. Interest on subordinated notes and debentures 4200 5,150 2.e.
f. Total interest expense (sum of items 2.a through 2.e) 4073 132,352 2.f.
3. Net interest income (item 1.g minus 2.f) //////////////////////// RIAD 4074 188,498 3.
4. Provisions: ///////////////////////
a. Provisions for loan and lease losses /////////////////////// RIAD 4230 29,944 4.a
b. Provision for allocated transfer risk /////////////////////// RIAD 4243 0 4.b
5. Noninterest income: ///////////////////////
a. Income from fiduciary activities 4070 8,184 5.a.
b. Service charges on deposit accounts in domestic offices 4080 16,978 5.b.
c. Trading gains (losses) and fees from foreign exchange ////////////////////////
transactions 4075 806 5.c
d. Other foreign transaction gains (losses) 4076 161 5.d
e. Other gains (losses) and fees from trading assets and
liabilities 4077 0 5.e
f. Other noninterest income: ///////////////////////
(1) Other fee income 5407 168,067 5.f.(1)
(2) All other noninterest income* 5408 37,917 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) //////////////////////// RIAD 4079 232,113 5.g
6. a. Realized gains (losses) on held-to-maturity securities //////////////////////// RIAD 3521 (17)6.a
b. Realized gains (losses) on available-for-sale securities //////////////////////// RIAD 3196 0 6.b
7. Noninterest expense: ///////////////////////
a. Salaries and employee benefits 4135 64,549 7.a.
b. Expenses of premises and fixed assets (net of rental ///////////////////////
income) (excluding salaries and employee benefits and ///////////////////////
mortgage interest) 4217 11,898 7.b.
c. Other noninterest expense* 4092 217,832 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) ///////////////////////// RIAD 4093 294,279 7.d
8. Income (loss) before income taxes and extraordinary items ////////////////////////
and other adjustments (item 3 plus or minus items 4.a, ////////////////////////
4.b, 5.g, 6.a, 6.b, and 7.d) //////////////////////// RIAD 4301 96,371 8.
9. Applicable income taxes (on item 8) //////////////////////// RIAD 4302 32,006 9.
10. Income (loss) before extraordinary items and other
adjustments (item 8) minus 9 //////////////////////// RIAD 4300 64,365 10.
____________________
*Describe on Schedule R-1-E -- Explanations.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-Continued
<TABLE>
<S> <C> <C> <C> <C> <C>
Dollars Amounts in Thousands
Year-to-Date
RIAD Bil Mil Thou
11. Extraordinary items and other adjustments: ///////////////////////
a. Extraordinary items and other adjustments,
gross of income taxes* 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* 4315 0 11.b.
c. Extraordinary items and other adjustments, ////////////////////////
net of income taxes (items 11.a minus 11.b) RIAD 4320 0 11.c.
Net income (loss) (sum of items 10 and 11.c) RIAD 4340 64,365 12.
</TABLE>
<TABLE>
Memoranda
I481
<S> <C> <C> <C> <C> <C>
Year-to-Date
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Interest expense incurred to carry tax-exempt
securities, loans, and leases acquired after
August 7, 1986, that is not deductible for
federal income tax purpose 4513 157 M.1.
2. Income from the sale and servicing of mutual
funds and annuities in domestic offices
(included in Schedule RI, Item 8) 8431 237 M.2.
3. Estimated foreign tax credit included in applicable income
taxes, items 9 and 11.b above 4309 0 M.3.
To be completed only by banks with $1 billion or more in total
assets: ///////////////////////
4. Taxable equivalent adjustment to "Income (loss) before income
taxes and extraordinary items and other adjustments" (item 8
above) 1244 1,597 M.4.
5. Number of full-time equivalent employees on payroll at end of ////// Number
current period (round to nearest whole number) 4150 3,230 M.5.
6. Not applicable ////////////////////
7. If the reporting bank has restated its balance sheet as a result //// MM DD YY
of applying push down accounting this calendar year, report the /////////////////////
date of the bank's acquisition 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet
derivative instruments) included in Schedule RI,
Items 5.c and 5.e): //// Bil Mil Thou
a. Interest rate exposures 8757 0 M.8.a.
b. Foreign exchange exposures 8758 0 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives
held for purposes other than trading: /////////////////////
a. Net increase (decrease) to interest income 8761 (7,405) M.9.a.
b. Net (increase) decrease to interest expense 8762 (1,002) M.9.b.
c. Other (noninterest) allocations 8763 3,431 M.9.c.
*Describe on Schedule RI-E--Explanations.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-4
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parenthesis
<TABLE>
I483
<S> <C> <C> <C> <C>
Dollar Amounts in Thousands
RIAD Bil Mil Thou
1. Total equity capital originally reported /////////////////
in the December 31, 1994, Reports of Condition
and Income 3215 533,224 1.
2. Equity capital adjustments from amended
Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar year
(sum of items 1 and 2) 3217 533,224 3.
4. Net income (loss) (must equal Schedule RI, item 12) 4340 64,365 4.
5. Sale, conversion, acquisition, or retirement of
capital stock, net 4346 0 5.
6. Changes incident to business combinations, net 4356 0 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 0 8.
9. Cumulative effect of changes in accounting ////////////////////
principals from prior years* (see instructions
for this schedule) 4411 0 9.
10.Corrections of material accounting errors
from prior years* (see instructions for this schedule) 4412 0 10.
11.Change in net unrealized holding gains (losses)
on available-for-sale securities 8433 295 11.
2. Foreign currency translation adjustments 4414 0 12.
13.Other transactions with parent holding company*
(not included in items 5, 7, or 8 above) 4415 0 13.
14.Total equity capital end of current period
(sum of items 3 through 13) (must equal
Schedule RC, Item 28) 3210 597,884 14.
_____________________________
*Describe on Schedule RI-E -- Explanations.
</TABLE>
Schedule RI-B-- Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through the
allocated transfer risk reserve.
<TABLE>
I486
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
1. Loans secured by real estate: //////////////// ////////////////
a. To U.S. addressees (domicile) 4651 871 4661 3,490 1.a.
b. To non-U.S. addresses (domicile) 4652 0 4662 0 1.b.
2. Loans to depository institutions and
acceptances of other banks: //////////////// ///////////////
a. To U.S. banks and other U.S.
depository institutions 4653 0 4663 0 2.a.
b. To foreign banks 4654 0 4664 0 2.b.
3. Loans to finance agricultural
production and other loans to farms //////////////// ///////////////
loans to farms 4655 0 4665 1 3.
4. Commercial and industrial loans: //////////////// ///////////////
a. To U.S. addresses (domicile) 4645 313 4617 996 4.a.
b. To non-U.S. addresses (domicile) 4646 0 4618 0 4.b.
5. Loans to individuals for household,
family, and other personal expensitures://////////////// ////////////////
a. Credit cards and related plans 4656 25,668 4666 5,518 5.a.
b. Other (includes single payment,
installment, //////////////// ///////////////
and all student loans) 4657 16,529 4667 6,138 5.b.
6. Loans to foreign governments and
officials institutions 4643 0 4627 0 6.
7. All other loans 4644 0 4628 20 7.
8. Lease financing receivables: //////////////// ///////////////
a. Of U.S. addressees (domicile) 4658 478 4668 135 8.a.
b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) 4635 43,859 4605 16,298 9.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-B -- Continued
Part I. Continued
Memoranda
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
1-3.Not applicable /////////////////////// ///////////////////
4. Loans to finance commercial real estate, construction, /////////////////////// //////////////////
and land development activities (not secured by real /////////////////////// //////////////////
estate) included in Schedule RI-B, part 1, items 4 and /////////////////////// //////////////////
7, above 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic offices
(included in Schedule RI-B, part 1, item 1 above) //////////////////// //////////////////
a. Construction and land development 3852 30 3583 2 M.5.a
b. Secured by farmland 3854 0 3585 8 M.5.b.
c. Secured by 1-4 family residential properties: /////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family ////////////////// //////////////////
residental properties and extended under
lines of credit 5411 516 5412 1 M.5.c.(1)
(2) All other loans secured by 1-4 family residential //////////////// //////////////////
properties 5413 311 5414 155 M.5.c.(2)
d. Secured by multifamily (5 or more) residential //////////////// //////////////////
properties 3588 0 3589 288 M.5.d.
e. Secured by nonfarm non residential properties 3590 14 3591 3,096 M.5.e.
Part II. Changes in Allowance for Loan and Lease Losses
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Balance originally reported in the December 31, 1994, ///////////////////
Reports of Condition and Income 3124 120,654 1.
2. Recoveries (must equal part 1, item 9, column B above) 4605 16,298 2.
3. LESS: Charge-offs (must equal part 1, item 9, column A above)
4635 43,859 3.
4. Provision for loan and lease losses (must equal
Schedule RI, item 4.a) 4230 29,944 4.
5. Adjustments* (see instructions for this schedule) 4815 0 5.
6. Balance end of current period (sum of items 1 through 5)
(must equal Schedule RC, item 4.b) 3123 123,037 6.
</TABLE>
____________________________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income
I489
Dollar Amounts in Thousands RIAD Bil Mil Thou
l. Federal 4780 N/A 1.
2. State and local 4790 N/A 2.
3. Foreign 4795 N/A 3.
4. Total (sum of ites 1 through 3) (must equal
sum of Schedule RI, items 9 and 11.b) 4770 N/A 4.
5. Deferred portion of item 4 RIAD 4772 N/A //////////// 5.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-D -- Income from International Operations
For all banks with foreigh offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
I492
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year-to-Date
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Interest income and expense booked at foreign
offices, Edge and Agreement subsidiaries, and IBFs: ////////////////////
a. Interest income booked 4837 1,758 1.a.
b. Interest expense booked 4838 12,979 1.b.
c. Net interest income booked at foreign offices,
Edge and Agreement /////////////////////
Subsidiaries, and IBFs (item 1.a minus 1.b) 4839 (11,221) 1.c.
2. Adjustments for booking location of
international operations: /////////////////////
a. Net interest income attributable to
international operations booked at
domestic offices 4840 0 2.a.
b. Net interest income attributable to domestic //////////////////////
business booked at foreign offices 4841 0 2.b.
c. Net booking location adjustment
(item 2.a minus 2.b) 4842 0 2.c.
3. Noninterest income and expense attributable
to international operations: ///////////////////////
a. Noninterest income attributable to
international operations 4097 0 3.a.
b. Provision for loan and lease losses
attributable to international operations 4235 0 3.b.
c. Other noninterest expense attributable to
international operations 4239 0 3.c.
d. Net noninterest income (expense) attributable
to international operations (item 3.a minus
3.b and 3.c 4843 0 3.d.
4. Estimated pretax income attributable to
international operations before capital /////////////////////
allocation adjustment (sum of items
1.c, 2.c, and 3.d) 4844 (11,221) 4.
5. Adjustment to pretax income for internal /////////////////////
allocations to international operations /////////////////////
to reflect the effects of equity capital on /////////////////////
overall bank funding costs 4845 0 5.
6. Estimated pretax income attributable to
international operations after capital /////////////////////
allocation adjustment (sum of items 4 and 5) 4846 (11,221) 6.
7. Income taxes attributable to income from //////////////////////
international operations as estimated in item 6 4797 (3,927) 7.
8. Estimated net income attributable to
international operations (items 6 minus 7) 4341 (7,294) 8.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> < C>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Intracompany interest income included
in item 1.a above 4847 0 M.1.
2. Intracompany interest expense included
in item 1.b above 4848 0 M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
Year-to-Date
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Interest income booked at IBFs 4849 0 1.
2. Interest expense booked at IBFs 4850 0 2.
3. Noninterest income attributable to international
operations booked at domestic offices //////////////////
(excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items 5491 0 3.a.
b. Fees and other interest income 5492 0 3.b.
4. Provision for loan and lease losses attributable
to international operations booked at ////////////////////
domestic offices (excluding IBFs) 4852 0 4.
5. Other noninterest expense attributable to
international operations booked at
domestic offices (excluding IBFs) 4853 0 5.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-E-- Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date
basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
I495
Year-to-Date
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. All other noninterest income (from Schedule
RI, Item 5.f.(2)) /////////////////////
Report amounts that exceed 10% of Schedule
RI, item 5.f.(2): /////////////////////
a. Net gains on other real estate owned 5415 0 1.a.
b. Net gains on sales of loans 5416 0 1.b.
c. Net gains on sales of premises and
fixed assets 5417 0 1.c.
Itemize and describe the three largest other
amounts that exceed 10% of Schedule RI,
item 5.f.(2): /////////////////////
d. TEXT 4461 Card Processing Income 4461 30,059 1.d.
e. TEXT 4462 4462 1.e.
f. TEXT 4463 4463 1.f.
2. Other noninterest expense (from
Schedule RI, item 7.c): /////////////////////
a. Amortization expense of intangible assets 4531 3,733 2.a.
Report amounts that exceed 10% of
Schedule R1, item 7.c: /////////////////////
b. Net losses on other real estate owned 5418 0 2.b.
c. Net losses on sales of loans 5419 0 2.c.
d. Net losses on sales of premises and
fixed assets 5420 0 2.d.
Itemize and describe the three largest other
amounts that exceed 10% of Schedule R1,
item 7.c: /////////////////////
e. TEXT 4464 Card Processing Expense 4464 56,065 2.e.
f. TEXT 4467 Card Servicing Expense 4467 25,917 2.f.
g. TEXT 4468 Communication Expense 4468 22,665 2.g.
3. Extraordinary items and other adjustments
(from Schedule RI, items 11.a) and applicable
income tax effect (from Schedule R1,
items 11.b) (itemize and describe all
extraordinary items and other adjustments): /////////////////////
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 ////////////////////3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 ////////////////////3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 ////////////////////3.c.(2)
4. Equity capital adjustments from amended Reports
of Income (from Schedule R1-A, items 2)
(itemize and describe all adjustments):
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting /////////////////////
principles from prior years (from Schedule ////////////////////
RI-A, item 9) (itemize and describe all changes ///////////////////
in accounting principles):
(a) TEXT 4494 4494 5.a.
(b) TEXT 4495 4495 5.b.
6. Corrections of material accounting errors /////////////////////
from prior years (from Schedule RI-A, /////////////////////
items 10)(itemize and describe all corrections): //////////////////
(a) TEXT 4496 4496 6.a.
(b) TEXT 4497 4497 6.b.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RI-E--Continued
Year-to-Date
Dollar Amounts in Thousands RIAD Bil Mil Thou
7. Other transactions with parent holding
company (from Schedule RI-A, item 13)
(itemize and describe all transactions): /////////////////////
(a) TEXT 4498 4498 7.a.
(b) TEXT 4499 4499 7.b.
8. Adjustments to allowance for loan and
lease losses (from Schedule RI-B, /////////////////////
part II, item 5)(itemize and /////////////////////
describe all adjustments): /////////////////////
(a) TEXT 4521 4521 8.a.
(b) TEXT 4522 4522 8.b.
9. Other explanations (the space below is
provided for the bank to briefly 4498 4499
describe, at is option, any other significant
items affecting the Report of Income):
No comment X (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of
the quarter.
Schedule RC--Balance Sheet
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
ASSETS ///////////////////////
1. Cash and balances due from depository
institutions (from Schedule RC-A): ///////////////////////
a. Noninterest-bearing balances and
currency and coin(1) 0081 452,125 1.a.
b. Interest-bearing balances(2) 0071 0 1.b.
2. Securities: ///////////////////////
a. Held-to-maturity securities
(from Schedule RC-B, column A) 1754 88,597 2.a.
b. Available-for-sale securities (from
Schedule RC-B, column D) 1773 526,867 2.b.
3. Federal funds sold and securities
purchased under agreements to resell //////////////////////
in domestic offices of the bank and of //////////////////////
its Edge and Agreement subsidiaries, //////////////////////
and in IBFs: //////////////////////
a. Federal funds sold 0276 75,052 3.a.
b. Securities purchased under
agreements to resell 0277 0 3.b.
4. Loans and Lease financing receivables: ///////////////////////
a. Loans and Leases, net
of unearned income
(from Schedule RC-C) RCFD 2122 5,183,594
b. LESS: Allowance for loan
and lease losses RCFD 3123 123,037 ////////////////////// 4.b.
c. LESS: Allocated
transfer risk reserveRCFD 3128 0 ////////////////////// 4.c.
d. Loans and leases, net of unearned income //////////////////////
allowance, and reserve (item 4.a
minus 4.b and 4.c) 2125 5,060,557 4.d
5. Trading assets (from Schedule RC-D) 3545 0 5.
6. Premises and fixed assets (including
capitalized leases) 2145 55,840 6.
7. Other real estate owned (from Schedule RC-M)2150 2,050 7.
8. Investments in unconsolidated subsidiaries
and associated companies ///////////////////////
(from Schedule RC-M) 2130 36 8.
9. Customers' liability to this bank on
acceptances outstanding 2155 8,409 9.
10. Intangible assets (from Schedule RC-M) 2143 43,962 10.
11. Other assets (from Schedule RC-F) 2160 387,227 11.
12. Total assets (sum of items 1 through 11) 2170 6,700,722 12.
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No. 06559
Schedule RC--Continued
Dollar Amounts in Thousands //// Bil Mil Thou
LIABILITIES //////////////////////
13. Deposits //////////////////////
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E, //////////////////////
part 1) RCON 2200 4,048,489 13.a
(1) Noninterest-
bearing(1) RCON 6631 1,138,072 /////////////////// 13.a.(1)
(2) Interest-bearing RCON 6636 2,910,417 /////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule
RC-E, part II RCFN 2200 271,092 13.b.
(1) Noninterest-
bearing(1) RCFN 6631 0 /////////////// 13.b.(1)
(2) Interest-bearing RCON 6636 271,092 //////////////// 13.b.(2)
14. Federal funds purchased and securities sold ////////////////
under agreements to repurchase in domestic ////////////////
offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs: ////////////////
a. Federal funds purchased RCFD 0278 1,226,555 14.a.
b. Securities sold under agreements
to repurchase RCFD 0279 0 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 39,069 15.a.
b. Trading liabilities (from Schedule RC-D)RCFD 3548 0 15.b.
16. Other borrowed money: /////////////////////
a. With original maturity of one
year or less RCFD 2332 98,539 16.a
b. With original maturity of more
than one year RCFD 2333 1,135 16.b.
17. Mortgage indebtedness and obligations
under capitalized leases RCFD 2910 4,234 17.
18. Bank's liability on acceptances
executed and outstanding RCFD 2920 8,409 18.
19. Subordinated notes and debentures RCFD 3200 189,199 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 216,117 20.
21. Total liabilities (sum of
items 13 through 20) RCFD 2948 6,102,838 21.
/////////////////////
22. Limited-life preferred stock and
related surplus RCFD 3282 0 22.
EQUITY CAPITAL //////////////////////
23. Perpetual preferred stock and
related surplus RCFD 3838 0 23.
24. Common stock RCFD 3230 20,738 24.
25. Surplus (exclude all surplus related
to preferred stock) RCFD 3839 107,356 25.
26. a. Undivided profits and capital reserves RCFD 3632 469,825 26.a.
b. Net unrealized holding gains
(losses) on available-for-sale
securities RCFD 8434 (35) 26.b.
27. Cumulative foreign currency translation
adjustments RCFD 3284 0 27.
28. Total equity capital (sum of
items 23 through 27) RCFD 3210 597,884 28.
29. Total liabilities, limited-life
preferred stock, and equity capital
(sum of items 21, 22, and 28) RCFD 3300 6,700,722 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of
the statement below that best describes the most
comprehensive level of auditing work performed
for the bank by independent external Number
auditors as of any date during 1994 RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance examination of
the bank performed by other with generally accepted auditing standards by
auditors (may be required by state a certified public accounting firm which
authority submits a report on the bank)
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditors auditing standards by a
certified public accounting of the bank's financial statements firm which
submits a report on the consolidated auditors holding company(but not on
the bank separately) procedures (excluding tax preparation)
3 = Directors' examination of the bank conducted in work) accordance with
generally acceptance auditing audit work standards by a certified
public accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by external auditors
(may be required by state chartering authority
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
____________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-K:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-A -- Cash and Balances Due From Depository Institutions
Exclude assets held for trading
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
1. Cash items in process of
collection, unposted debits,
and currency and coin 0022 411,577 //////////////////// 1.
a. Cash items in process of collection
and unposted debits //////////////////// 0020 374,986 1.a.
b. Currency and coin //////////////////// 0080 36,591 1.b.
2. Balances due from depository institutions
in the U.S. //////////////////// 0082 36,361 2.
a. U.S. branches and agencies of foreign
banks (including their IBFs) //////////////////// ////////////////////
(including their IBFs) 0083 0 //////////////////// 2.a
b. Other commercial banks in the
U.S. and other depository //////////////////// ////////////////////
institutions in the U.S. including
their IBFs) 0085 35,361 //////////////////// 2.b.
3. Balances due from banks in foreign
countries and foreign central banks /////////////////// ////////////////////
central banks /////////////////// 0070 3,379 3.
a. Foreign branches of other U.S. banks 0073 0 //////////////////// 3.a.
b. Other banks in foreign countries and
foreign central banks 0074 3,379 //////////////////// 3.b.
4. Balances due from Federal Reserve Banks 0090 1,808 0090 1,808 4.
5. Total (sum of items 1 through 4)
(total of column A must equal //////////////////// ////////////////////
Schedule RC, sum of items 1.a and 1.b) 0010 452,125 0010 452,125 5.
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
1. Noninterest-bearing balances due from commercial banks ////////////////////
in the U.S. included in item 2, column Babove) 0050 35,361 M.1.
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<S> <C> <C> <C> <C> <C>
C410
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
1. U.S. Treasury securities 0211 0 0213 0 1286 157,856 1287 157,827 1.
2. U.S. Government agency ///////////////// ///////////////// ///////////////// ///////////////////
and corporation obligations ///////////////// ///////////////// ///////////////// ////////////////////
(exclude mortgage-backed ///////////////// ///////////////// ///////////////// ////////////////////
securities): ///////////////// ///////////////// ////////////////// ///////////////////
a. issued by U.S. Govern- ///////////////// ///////////////// ///////////////// ////////////////////
ment agencies (2) 1289 0 1290 0 1291 0 1293 0 2.a.
b. issued by U.S. ///////////////// ////////////////// ////////////////// ///////////////////
Government-sponsored ///////////////// ////////////////// ////////////////// ///////////////////
agencies (3 1294 24,136 1295 24,189 1297 339,221 1298 339,249 2.b.
</TABLE>
_________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations,and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-B -- Continued
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
3. Securiites issued by states /////////////////// ////////////////// //////////////////// //////////////////
and political subdivisions /////////////////// ///////////////// /////////////////// //////////////////
in the U.S. /////////////////// ///////////////// /////////////////// //////////////////
a. General obligations 676 11,986 1677 15,948 1678 0 1679 0 3.a.
b. Revenue obligations 1681 19,150 1686 17,619 1690 0 1691 0 3.b.
c. Industrial development ////////////////// ///////////////// ////////////////// //////////////////
and similar obligations 1694 10,733 1695 10,879 1696 0 1697 0 3.c.
4. Mortgage-backed /////////////////// //////////////// ////////////////// //////////////////
securities (MBS): /////////////////// //////////////// ////////////////// //////////////////
a. Pass-through securiities: ////////////////// //////////////// ////////////////// //////////////////
(1) Guaranteed by ////////////////// //////////////// ////////////////// /////////////////
GNMA 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA /////////////////// //////////////// ////////////////// /////////////////
and FHLMC 1703 525 1705 546 1706 0 1707 0 4.a.(2)
(3) Other pass-through /////////////////// /////////////// ////////////////// ////////////////
securities 1709 10,982 1710 10,942 1711 6,268 1713 6,427 4.a.(3)
b. Other mortgage-
backed securities/////////////////// //////////////// /////////////////// /////////////////
(include CMOs, ////////////////// ///////////////// /////////////////// /////////////////
REMICs, and ////////////////// ///////////////// /////////////////// /////////////////
stripped MBS); ///////////////// ////////////////// /////////////////// /////////////////
(1) Issued or
guaranteed //////////////// ///////////////// //////////////////// //////////////////
by FNMA, FHLMC,
or GNMA 1714 7,506 1715 7,630 716 19,460 1717 19,245 4.b.(1)
(2) Collaterlized ///////////////// //////////////// /////////////////// /////////////////
by MBS issued or ////////////////// //////////////// /////////////////// ////////////////
guaranteed by FNMA ////////////////// /////////////// /////////////////// /////////////////
FHLMC, or GNMA 1718 0 1719 0 731 0 1732 0 4.b.(2)
(3) All other mortgage- ///////////////// /////////////// /////////////////// ////////////////
backed securities 1733 0 1734 0 735 273 1736 275 4.b.(3)
5. Other debt securities: ////////////////// /////////////// /////////////////// ////////////////
a. Other domestic debt ////////////////// /////////////// /////////////////// ////////////////
securities 1737 789 1738 816 739 0 1741 0 5.a.
b. Foreign debt ////////////////// ////////////// /////////////////// ///////////////
securities 1742 2,750 1743 2,750 744 0 1746 0 5.b.
6. Equity securities: ////////////////// ////////////// ///////////////////
a. Investments in mutual ////////////////// ////////////// /////////////////// ///////////////
funds ////////////////// ////////////// 747 0 1748 0 6.a.
b. Other equity securities ////////////////// ////////////// /////////////////// ///////////////
with readily determin- ////////////////// ////////////// /////////////////// ///////////////
able fair values ////////////////// ////////////// 749 0 1751 0 6.b.
c. All other equity ////////////////// ////////////// /////////////////// ///////////////
securities(1)........... ////////////////// ///////////// 752 3,844 1753 3,844 6.c
7. Total (sum of items 1 ////////////////// ////////////// /////////////////// //////////////
through 6) (total of ////////////////// ////////////// /////////////////// //////////////
column A must equal ////////////////// ////////////// /////////////////// //////////////
Schedule RC, item 2.a) ////////////////// ////////////// /////////////////// //////////////
(total of column D must ////////////////// ////////////// /////////////////// //////////////
equal Schedule RC, ////////////////// ////////////// /////////////////// //////////////
item 2.b).................. 1754 88,597 1771 91,319 772 526,922 1773 526,867 7.
</TABLE>
____________
(1) Includes equity securities without readily determinable fair values at
historical
cost in item 6.c, column D.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-B--Continued
Memoranda
C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Pledged securities(2) 0416 582,378 M.1.
2. Maturity and repricing data for debt ////////////////////
securities(2)(3)(4) (excluding those ////////////////////
in nonaccrual status): ////////////////////
a. Fixed rate debt securities with ////////////////////
a remaining maturity of: ////////////////////
(1) Three months or less 0343 125,105 M.2.a.(1)
(2) Over three months through
12 months 0344 124,417 M.2.a.(2)
(3) Over one year through five years 0345 32,037 M.2.a.(3)
(4) Over five years 0346 42,245 M.2.a.(4)
(5) Total fixed rate debt securities
(sum of Memorandum items
2.a.(1) through 2.a.(4) 0347 323,804 M.2.a.(5)
b. Floating rate debt securities with a
repricing frequency of: /////////////////////
(1) Quarterly or more frequently 4544 284,099 M.2.b.(1)
(2) Annually or more frequently, but
less frequently than quarterly 4545 2,750 M.2.b.(2)
(3) Every five years or more ////////////////////
frequently, but less frequently
than annually 4551 0 M.2.b.(3)
(4) Less frequently than every
five years 4552 967 M.2.b.(4)
(5) Total floating rate debt
securities (sum of Memorandum
items 2.b.(1) through 2.b.(4)) 4553 287,816 M.2.b.(5)
c. Total debt securiities (sum of /////////////////////
Memorandum items 2.a.(5) and 2.b.(5)) /////////////////////
(must equal total debt securiites /////////////////////
from Schedule RC-B, sum of items 1 /////////////////////
through 5, columns A and D, minus ////////////////////
nonaccrual debt securities ////////////////////
included in Schedule RC-N, item 9,
column C) 0393 611,620 M.2.c.
3. Not applicable ////////////////////
4. Held-to-maturity debt securities
restructured and in compliance with
modified terms (included in Schedule
RC-B, items 3 through 5, column A, above) 5365 0 M.4.
5. Not applicable ///////////////////
6. Floating rate debt securities with a ///////////////////
remaining maturity of one year or ///////////////////
less(2)(included in Memorandum ///////////////////
item 2.b.(5) above) 5519 150,468 M.6.
7. Amortized cost of held-to-maturity //////////////////
securities sold or transferred to //////////////////
available-for-sale or trading //////////////////
securities during the calendar year- //////////////////
to-date (report the amortized cost //////////////////
at date of sale or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included //////////////////
in the held-to-maturity and /////////////////
available-for-sale accounts in /////////////////
Schedule RC-B, item 4.b.): /////////////////
a. Amortized cost 8780 0 M.8.a.
b. Fair value 8781 0 M.8.b.
9. Structured notes (included in the //////////////////
held-to-maturity and available- //////////////////
for-sale accounts in Schedule RC-B, //////////////////
items 2, 3, and 5): //////////////////
a. Amortized cost 8782 24,136 M.9.a.
b. Fair value 8783 24,189 M.9.b.
_____________________
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-C--Loans and Lease Financing Receibables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of
unearned income. Exclude asses held for trading.
C415
<TABLE>
(s)
(Column A) (Column B)
Consolidated Domestic
Bank Offices
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
1. Loans secured by real estate 1410 1,121,559 /////////////// 1.
a. Construction and land
development /////////////// 1415 124,857 1.a.
b. Secured by farmland (including
farm residential and other //////////////// ///////////////
improvements) /////////////// 1420 6,139 1.b.
c. Secured by 1-4 family
residential properties: //////////////
(1) Revolving, open-end loans //////////////
secured by 1-4 family ///////////////
residential /////////////// ///////////////
properties and extended
under lines of credit /////////////// 1797 342,850 1.c.(1)
(2) All other loans secured by
1-4 family residential //////////////// ///////////////
proper /////////////// ///////////////
(a) Secured by first
liens /////////////// 5367 159,162 1.c.(2)(a)
(b) Secured by junior
liens /////////////// 5368 101,702 1.c.(2)(b)
d. Secured by multifamily
(5 or more) residential
properties /////////////// 1460 58,271 1.d.
e. Secured by nonfarm
nonresidential properties /////////////// 1480 328,578 1.e.
2. Loans to depository institutions: ////////////// //////////////////
a. To commercial banks in the U.S. ///////////// 1505 364 2.a.
(1) To U.S. branches and agencies of
foreign banks 1506 0 /////////////// 2.a.(1)
(2) To other commercial banks
in the U.S. 1507 364 /////////////// 2.a.(2)
b. To other depository
institutions in the U.S. 1517 8,076 1517 8,076 2.b.
c. To banks in foreign countries //////////// 1510 122 2.c.
(1) To foreign branches of
other U.S. banks 1513 0 /////////////// 2.c.(1)
(2) To other banks in
foreign countries 1516 122 /////////////// 2.c.(2)
3. Loans to finance agricultural
production and other loans to farmers 1590 7,119 1590 7,119 3.
4. Commercial and industrial loans: /////////////// ////////////////
a. To U.S. addressees (domicile) 1763 768,596 1763 768,596 4.a.
b. To non-U.S. addressees (domicile) 1764 52 1764 52 4.b.
5. Acceptances of other banks: /////////////// //////////////
a. Of U.S. banks 1756 0 1756 0 5.a.
b. Of foreign banks 1757 0 1757 0 5.b.
6. Loans to individuals for household,
family, and other personal expenditures ///////////////// /////////////////
(i.e., consumer loans) (includes
purchased paper ///////////////// 1975 2,599,862 6.
a. Credit cards and related /////////////////
plans (includes check credit ///////////////// ////////////////
and other revolving credit plans) 2008 1,874,188 //////////////// 6.a.
b. Other (includes single payment,
installment, and all student //////////////////
loans) 2011 725,674 /////////////// 6.b.
7. Loans to foreign governments and
official institutions ///////////////// ///////////////
(including foreign central banks) 2081 0 2081 0 7.
8. Obligations (other than securities
and leases) of states and ////////////////// /////////////
political subdivisions in the
U.S. (includes nonrated industrial /////////////////// /////////////
development obligations) 2107 21,042 2107 21,042 8.
9. Other loans 1563 78,276 ////////////// 9.
a. Loans for purchasing or
carrying securities (secured and /////////////////// ///////
unsecured) /////////////////// 1545 8,804 9.a.
b. All other loans (exclude
consumer loans) /////////////////// 1564 69,472 9.b.
10. Lease financing receivables
(net of unearned income /////////////////// 2165 580,918 10.
a. Of U.S. addressees (domicile) 2182 580,918 /////////////// 10.a.
b. Of non-U.S. addressees (domicile) 2183 0 /////////////// 10.b.
11. LESS: Any unearned income on loans
reflected in items 1-9 above. 123 2,392 2123 2,392 11.
12. Total loans and leases, net of
unearned income (sum of items 1 /////////////////// ////////////////
through 10 minus item 11) (total
of column A must equal /////////////////// ///////////////
Schedule RC, item 4.a) 2122 5,183,594 2122 5,183,594 12.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-C -- Continued
Part I. Continued
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Column A) (Column B)
Consolidated Domestic
Memoranda Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
1. Commercial paper included in Schedule
RC-C, part I, above 1496 0 1496 0 M.1
2. Loans and leases restructured and in compliance ////////////////////
with modified (included in Schedule RC-C, ///////////////////
part 1, above and not reported as past due ////////////////////
or nonaccrual in Schedule RC-N, Memorandum ////////////////////
item 1): ////////////////////
a. Loans secured by real estate: ////////////////////
(1) To U.S. addressees (domicile) 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) 1689 0 M.2.a.(2)
b. All other loans and all lease financing ////////////////////
receivables (exclude loans to individuals ////////////////////
for household, family, and other personal ////////////////////
expenditures) 8691 0 M.2.b.
c. Commercial and industrial loans to and
lease financing receivables of non-U.S.
addressees (domicile) included ////////////////////
in Memorandum item 2.b above 8692 0 M.2.c.
3. Maturity and repricing data for loans and
leases(1) (excluding those in nonaccrual status): ////////////////////
a. Fixed rate loans and leases with a remaining
maturity of:
(1) Three months or less 0348 133,455 M.3.a.(1)
(2) Over three months through 12 months 0349 207,792 M.3.a.(2)
(3) Over one year through five years 0356 1,109,879 M.3.a.(3)
(4) Over five years 0357 266,849 M.3.a.(4)
(5) Total fixed rate loans and leases ////////////////////
(sum of Memorandum items 3.a.(1) ///////////////////
through 3.a.(4)) 0358 1,717,975 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: ////////////////////
(1) Quarterly or more frequently 4554 2,573,418 M.3.b.(1)
(2) Annually or more frequently,
but less frequently than quarterly 4555 862,868 M.3.b.(2)
(3) Every five years or more frequently, ////////////////////
but less frequently than annually 4561 7,532 M.3.b.(3)
(4) Less frequently than every five years 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of
Memorandum items 3.b.(1) through 3.b.(4)) 4567 3,443,818 M.3.b.(5)
c. Total loans and leases (sum of Memorandum ////////////////////
items 3.a.(5) and 3.b.(5)) (must equal the ////////////////////
sum of total loans and leases, net, from ////////////////////
Schedule RC-C, part 1, item 12, plus unearned ///////////////////
income from Schedule RC-C, part 1, item 11, ///////////////////
minus total nonaccrual loans and Leases ///////////////////
from Schedule RC-N, sum of items 1 through ///////////////////
8, column C) 1479 5,161,793 M.3.c.
4. Loans to finance commercial real estate, ///////////////////
construction, and land development activities ///////////////////
(not secured by real estate) included in ///////////////////
Schedule RC-C, part 1, items 4 and 9, column A, ///////////////////
page RC-6(2) 2746 15,192 M.4.
5. Loans and leases held for sale (included in
Schedule RC-C, part 1, above) 5369 0 M.5.
6. Adjustable rate closed-end loans secured by ////////////////////
first liens on 1-4 family residential ////////////////////
properties (included in Schedule RC-C, //////////////////// RCON BIL MIL THOU
part 1, item 1.c.(2)(a), column B, page RC-6 5370 84,915 M.6
</TABLE>
____________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part 1, item 1, column A.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-
BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-C -- Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should
be used to determine the "original amount" of a Loan: (1) For loans drawn
down under lines of credit or loan commitments, the "original amount"
of the loan is the size of the line of credit or loan commitment when the
line of credit or loan commitment was most recently approved, extended, or
renewed price to the report date. However, if the amount currently
outstanding as of the report date exceeds this size, the "original
amount" is the amount currently outstanding on the report date. (2)
For loan participations and syndications, the "original amount" of
the loan participation or syndication is the entire amount of the
credit originated by the lead lender. (3) For all other loans, the
"original amount" is the total amount of the loan at origination or the
amount currently outstanding as of the report date, whichever is larger.
Loans to Small Businesses
1. Indicate in the appropriate box at the right whether all or
substantially all of the dollar volume of your bank's "Loans
secured by nonfarm nonresidential properties" in domestic
offices reported in Schedule RC-C, part 1, item 1.e, column B,
and all or substantially all of the dollar volume of your
bank's "Commercial and industrial loans to U.S. addressees"
in domestic offices reported in Schedule RC-C, part 1, item
4.a, column B, have original amounts of $100,000 or less.
(If your bank has no loans outstanding in both of these two
loan categories, place an "X" in the box marked "NO" C418
and go to item 5; otherwise, see instructions for
further information.) RCON YES NO)
6999 /// X 1.
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go
to item 5. If NO and your bank has loans outstanding in either loan
category, skip items 2.a and 2.b, complete items 3 and 4 below, and
go to item 5.
2. Report the total number of loans currently Number of Loans
outstanding for each of the following Schedule
RC-C, part 1, loan categories: RCON //////////
a. "Loans secured by nonfarm nonresidential
properties" in domestic offices reported
in Schedule RC-C, part 1,
item 1.e, column B 5562 N/A 2.a.
b. "Commercial and industrial loans to U.S.
addressees" in domestic offices reported
in Schedule RC-C, part 1, item 4.a,
column B 5563 N/A 2.b.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(Column A) (Column B)
Amount Currently
Number of Loans Outstanding
Dollar Amounts in Thousands RCON ///////// RCON Bil Mil Thou
3. Number and amount currently outstanding of ///////////////////////////////////
"Loans secured by nonfarm nonresidential //////////////////////////////////
properties" in domestic offices reported //////////////////////////////////
in Schedule RC-C, part 1, item 1.e, //////////////////////////////////
column B (sum of items 3.a through 3.c //////////////////////////////////
must be less than or equal to Schedule //////////////////////////////////
RC-C, part 1, item 1.e, column B): /////////////////////////////////
a. With original amounts of $100,000 or less 5564 262 5565 10,446 3.a.
b. With original amounts of more than
$100,000 through $250,000 5566 220 5567 27,524 3.b.
c. With original amounts of more than
$250,000 through $1,000,000 5568 224 5569 84,386 3.c.
4. Number and amount currently outstanding of
"Commercial and industrial loans to U.S.
addressees" in domestic offices reported
in Schedule RC-C, part 1, item 4.a, column
B (sum of items 4.a through 4.c must be
less than or equal to Schedule RC-C,
part 1, item 4.a, column B):
a. With original amounts of $100,000 or less 5570 3,359 5571 78,049 4.a.
b. With original amounts of more than
$100,000 through $250,000 5572 323 5573 37,232 4.b.
c. With original amounts of more
than $250,000 through $1,000,000 5574 266 5575 88,246 4.c.
</TABLE>
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-7b
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
5. Indicate in the appropriate box at the right whether all or substantially
all of the dollar volume of your bank's "Loans secured by farmland
(including farm residential and other improvements)" in domestic offices
reported in Schedule RC-C, part 1, item 1.b, column B, and all or
substantially all of the dollar volume of your bank's "Loans to finance
agricultural production and other loans to farmers" in domestic offices
reported in Schedule RC-C, part 1, item 3, column B, have original amounts
of $100,000 or less. (If your bank has no loans outstanding in both
of these two loan categories, place an "X" in the box marked "NO"
and do not complete items 7 and 8; otherwise, see instructions for
further information.) YES NO
6860 /// X 5.
If YES, complete items 6.a and 6.b below and do not complete
items 7 and 8. If NO and your bank has loans outstanding in either loan
category, skip items 6.a an 6.b and complete items 7 and 8 below.
6. Report the total number of loans currently outstanding for each
of the following Schedule RC-C, part 1, loan categories: Number of Loans
a. "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported
in Schedule RC-C, part 1, item 1.b, column B 5576 N/A 6.a.
b. "Loans to finance agricultural production and other
loans to farmers" in domestic offices reported in
Schedule RC-C, part 1, item 3, column B 5577 N/A 6.b.
<TABLE>
<S> <C> <C>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
Dollar Amounts in Thousands RCON///////// RCON Bil Mil Thou
7. Number and amount currently outstanding of "Loans
secured by farmlard (including farm residential
and other improvements)" in domestic offices ///////////// ///////////////
reported in Schedule RC-C, part 1, item 1.b,
column B (sum of items 7.a through 7.c must be ///////////// ///////////////
less than or equal to Schedule RC-C,
part I, item 1.b column B): ///////////// //////////////
a. With original amounts of $100,000 or less 5578 11 5579 181 7.a.
b. With original amounts of more than
$100,000 through $250,000 5580 7 5581 922 7.b.
c. With original amounts of more than
$250,000 through $500,000 5582 5 5583 933 7.c.
8. Number and amount currently outstanding of ////////////////////////////////
"Loans to finance agricultural production ////////////////////////////////
and other loans to farmers" in domestic ////////////////////////////////
offices reported in Schedule RC-C, ////////////////////////////////
part 1, item 3, column B (sum of items ////////////////////////////////
8.a through 8.c must be less than or equal ////////////////////////////////
to Schedule RC-C, part 1, item 3, column B): ////////////////////////////////
a. With original amounts of $100,000 or less 5584 81 5585 2,821 8.a.
b. With original amounts of more than
$100,000 through $250,000 5586 22 5587 2,753 8.b.
c. With original amounts of more than
$250,000 through $500,000 5588 5 5589 1,394 8.c.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more
in total assets or with $2 billion or more in par/notional amount of
off-balance sheet derivative contracts (as reported in Schedule RC-L,
items 14.a through 14.e, columns A through D).
C420
Dollar Amounts in Thousands /////Bil Mil Thou
ASSETS /////////////////
1. U.S. Treasury securities in domestic offices RCON 3531 0 1.
2. U.S. Government agency and corporation obligations
in domestic offices (exclude mortgage-
backed securities RCON 3532 0 2.
3. Securities issued by states and political
subdivisions in the U.S. in domestic offices RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in
domestic offices:
a. Pass-through securities issued or guaranteed
by FNMA, FHLMC, or GNMA RCON 3534 0 4.a.
b. Other mortgage-backed securities issued
or guaranteed by FNMA, FHLMC, or GNMA
(included CMOs, REMICs, and stripped
MBS) RCON 3535 0 4.b.
c. All other mortgage-backed securities RCON 3536 0 4.c.
5. Other debt securities in domestic offices RCON 3537 0 5.
6. Certificates of deposit in domestic offices RCON 3538 0 6.
7. Commercial paper in domestic offices RCON 3539 0 7.
8. Bankers acceptances in domestic offices RCON 3540 0 8.
9. Other trading assets in domestic offices RCON 3541 0 9.
10. Trading assets in foreign offices RCON 3542 0 10.
11. Revaluation gains on interest rate, //////////////////////
foreign exchange rate, and other commodity //////////////////////
and equity contracts: /////////////////////
a. In domestic offices RCON 3543 0 11.a.
b. In foreign offices RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1
through 11) (must equal Schedule RC, item 5) RCFD 3545 0 12.
LIABILITIES
/////Bil Mil Thou
13. Liability for short positions RCFD 3546 0 13.
14. Revaluation losses on interest rate, ////////////////////
foreign exchange rate, and other commodity ////////////////////
and equity contracts. RCFD 3547 0 14.
15. Total trading liabilities (sum of items ////////////////////
13 and 14) (must equal Schedule RC, item ////////////////////
15.b) RCFD 3548 0 15.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-9
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
C425
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
Accounts (including demand deposits nontransacton
total demand (included in accounts
deposits) column A) (including MMDAs)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RCON Bil Ml Thou RCON Bil Mil Thou RCON Bil Mil Thou
Dollar Amounts in Thousands
Deposits of: /////////////// ///////////////// /////////////////
1. Individuals, partnerships,
and corporations 2201 1,226,507 2240 925,770 2346 2,570,595 1.
2. U.S. Government 2202 9,411 2280 9,411 2520 0 2.
3. States and political
subdivisions in the U.S. 2203 100,000 2290 88,367 2530 24,709 3.
4. Commercial banks
in the U.S. 2206 43,074 2310 43,074 ///////////// 4.
a. U.S. branches and
agencies of foreign
banks ////////////////// ///////////////// 2347 0 4.a.
b. Other commercial banks
in the U.S. ///////////////// ////////////////// 2348 2,713 4.b.
5. Other depository
institutions in the U.S. 2207 19,120 2312 19,120 2349 0 5.
6. Banks in foreign counties 2213 2,431 2320 2,431 //////////// 6.
a. Foreign branches of
other U.S. banks ///////////////// /////////////////// 2367 0 6.a.
b. Other banks in foreign
countries //////////////// //////////////////// 2373 0 6. b.
7. Foreign governments and
official institutions /////////////// //////////////////// /////
(including foreign central
banks) 2216 0 2300 0 2377 0 7.
8. Certified and official
checks 2330 49,899 2330 49,899 ////////////// 8.
9. Total (sum of items 1
though 8)(sum of columns A
and C must equal Schedule
RC, item 13.a) 2215 1,450,472 2210 1,138,072 2385 2,598,017 9.
</TABLE>
Memoranda
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Selected components of total deposits
(i.e., sum of item 9, columns A and C):
a. Total individual Retirement
Accounts (IRAs) and Keogh Plan
accounts 6835 245,127 M.1.a.
b. Total brokered deposits 2365 4,461 M.1.b.
c. Fully insured brokered deposits (included
in Memorandum item 1.b above):
(1) issued in denominations of less than
$100,000 2343 83 M.1.c.(1)
(2) issued either in denominations of
$100,000 or in denominations greater
than $100,000 and participated out by
the broker in shares of $100,000 or less 2344 3,906 M.1.c.(2)
d. Total deposits denominated in foreign
currencies 3776 0 M.1.d.
e. Preferred deposits (uninsured deposits of
states and political subdivisions in the
U.S. reported in item 3 above which are
secured or collateralized as required under
state law) 5590 124,341 M.1.e.
2. Components of total nontransaction accounts
(sum of Memorandum items 2.a through 2.d
must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) 6810 897,495 M.2.a.
(2) Other savings deposits (excludes MDAs) 0352 505,456 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 1,892,864 M.2.b.
c. Time Certificates of deposit of $100,000
or more 6645 102,202 M.2.c.
d. Open-account time deposits of $100,000
or more 6646 0 M.2.d.
3. All NOW accounts (included in column A above) 2398 312,400 M.3.
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-9
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.:06559
Schedule RC-E -- Continued
Part I. Continued
Memoranda (Continued)
Deposit Totals for FDIC Insurance Assessments
Dollar Amounts in Thousands RCON Bil Mil Thou
4. Total deposits in domestic offices
(sum of item 9, column A and item 9, column C) //////////////////
(must equal Schedule RC, item 13.a) 2200 4,048,489 M.4.
a. Total demand deposits (must equal
item 9, column B) 2210 1,138,072 M.4.a.
b. Total time and savings deposits(1)
(must equal item 9, column A plus item 9,
column C minus item 9, column B) 2350 2,910,417 M.4.b.
______________________
(1) for FDIC insurance assessment purposes, "total time and savings
deposits" consists of nontransaction accounts and all transaction
accounts other than demand deposits.
<TABLE>
<S> <C> <C> <C> <C> <C>
Dollar Amounts in Thousands RCON Bil Mil Thou
5. Time deposits of less than $100,000 and open- //////////////////
account time deposits of $100,000 or more //////////////////
(included in Memorandum items 2.b and 2.d above) //////////////////
with a remaining maturity or repricing //////////////////
frequency of: (1)
a. Three months or less 0359 197,696 M.5.a.
b. Over three months through 12 months 3644 372,520 M.5.b.
6. Maturity and repricing data for time //////////////////
certificates of deposit of $100,000 or more: (1) //////////////////
a. Fixed rate time certificates of deposit of //////////////////
$100,000 or more with a remaining maturity of://////////////////
(1) Three months or less 2761 54,580 M.6.a.(1)
(2) Over three months through 12 months 2762 23,850 M.6.a.(2)
(3) Over one year through five years 2763 21,077 M.6.a.(3)
(4) Over five years 2765 2,695 M.6.a.(4))
(5) Total fixed rate time certificates //////////////////
of deposit of $100,000 or more (sum of /////////////////
Memorandum item 6.a.(1) through 6.a.(4) 2767 102,202 M.6.a.(5)
b. Floating rate time certificates of //////////////////
deposit of $100,000 or more with a repricing /////////////////
frequency of: /////////////////
(1) Quarterly or more frequently 568 0 M.6.b.(1)
(2) Annually or more frequently, but less
frequently than quarterly 4569 0 M.6.b.(2)
(3) Every five years or more frequently,
but less frequently than annually 4571 0 M.6.b.(3)
(4) Less frequently than every five years 4572 0 M.6.b.(4))
(5) Total floating rate time certificates ///////////////////
of deposit of $100,000 or more ///////////////////
(sum of Memorandum items 6.b.(1) ///////////////////
through 6.b.(4)) 4573 0 M.6.b.(5)
c. Total time certificates of deposit of
$100,000 or more (sum of Memorandum //////////////////
items 6.a.(5)and 6.b.(5)) (must
equal Memorandum item 2.c.above) 6645 102,202 M.6.c.
_________________________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
</TABLE)
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-11
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-E-- Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
Dollar Amounts in Thousands RCFN Bil Mil Thou
Deposits of:
////////////////////
Individuals, partnerships, and corporations 2621 271,092 1.
U S banks (including IBFs and foreign
branches of U. S. banks) 2623 0 2.
Foreign banks (including U S branches
and agencies of foreign banks, including
their IBFs 2625 0 3.
Foreign governments and official
institutions (including foreign central
banks) 2650 0 4.
Certified and official checks 2330 0 5.
All other deposits 2668 0 6.
Total (sum of items 1 through 6) (must
equal Schedule RC, item 13 b) 2200 271,092 7.
Schedule RC - F - - Other Assets
C430
Dollar Amounts in Thousands ///// Bil Mil Thou
Income earned, not collected on loans RCFD 2164 37,861 1.
Net deferred tax assets (1) RCFD 2148 0 2.
Excess residential mortgage servicing /////////////////
fees receivable RCFD 5371 0 3.
Other (itemize amounts that exceed 25% /////////////////
of this item) RCFD 2168 349,366 4.
a. TEXT 3549 Cash Surrender Value of /////////////////
Life Insurance RCFD 3549 128,060 ///////////////// 4.a.
b. TEXT 3550 RCFD 3550 ///////////////// 4.b.
c. TEXT 3551 RCFD 3551 ///////////////// 4.c.
Total (sum of items 1 through 4) (must /////////////////
equal Schedule RC, item 11) RCFD 2160 387,227 5.
Memorandum
Dollar Amounts in Thousands ////// Bil Mil Thou
Deferred tax assets disallowed for ////////////////////
regulatory capital purposes RCFD 5610 0 M.1.
Schedule RC - G -- Other Liabilities
C435
Dollar Amounts in Thousands
/////// Bil Mil Thou
a. Interest accrued and unpaid on //////////////////////
deposits in domestic offices(2) RCFD 3645 28,314 1.a.
b. Other expenses accrued and unpaid //////////////////////
(includes accrued income taxes payable) RCFD 3646 69,670 1.b.
Net deferred tax liabilities(1) RCFD 3049 51,203 2.
Minority interest in consolidated //////////////////////
subsidiaries RCFD 3000 0 3.
Other (itemize amounts that exceed 25% //////////////////////
of this item) RCFD 2938 66,930 4.
a. TEXT 3552 Deferred Fees Received //////////////////////
on Swaps RCFD 3552 35,203 ////////////////////// 4.a.
b. TEXT 3553 Accrued Credit Card /////////////////////
Customer Awards RCFD 3553 26,021 ///////////////////// 4.b.
c. TEXT 3554 RCFD 3554 ///////////////////// 4.c.
Total (sum of items 1 through 4) (must /////////////////////
equal Schedule RC, item 20) RCFD 2930 216,117 5.
_____________________________
1) See discussion of deferred income taxes in Glossary entry on "income
taxes "
2) For savings banks, include "dividends" accrued and unpaid on deposits
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-12
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-H-- Selected Balance Sheet Items for Domestic Offices
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Customer's liability to this bank on /////////////////////
acceptances outstanding 2155 8,409 1.
2. Bank's liability on acceptances executed /////////////////////
and outstanding 2920 8,409 2.
3. Federal funds sold and securities /////////////////////
purchased under agreements to resell 1350 75,052 3.
4. Federal funds purchased and securities /////////////////////
sold under agreements to repurchase 2800 1,226,555 4.
5. Other borrowed money 3190 99,674 5.
EITHER /////////////////////
6. Net due from own foreign offices, Edge /////////////////////
and Agreement subsidiaries, and IBFs 2163 N/A 6.
OR /////////////////////
7. Net due to own foreign offices, Edge ////////////////////
and agreement subsidiaries, and IBFs 2941 272,405 7.
8. Total assets (excludes net due to /////////////////////
foreign offices, Edge and Agreement ////////////////////
subsidiaries, and IBFs 2192 6,695,336 8.
9. Total liabilities (excludes net due /////////////////////
to foreign offices, Edge and agreement ////////////////////
subsidiaries and IBFS) 3129 5,828,047 9.
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices
RCON Bil Mil Thou
10. U.S. Treasury securities 1779 157,827 10.
11. U S Government agency and corporation //////////////////////
obligations (exclude //////////////////////
mortgage-backed securities) 1785 363,385 11.
12. Securities issued by states and //////////////////////
political subdivisions in the U S 1786 41,909 12.
13. Mortgage-backed securities (MBS): //////////////////////
a. Pass-through securities: //////////////////////
(1) Issued or guaranteed by //////////////////////
FNMA, FHLMC, or GNMA 1787 525 13.a.
(2) Other pass-through securities 1869 17,409 13.a.
b. Other mortgage-backed securities //////////////////////
(include CMOs, REMICs, and //////////////////////
stripped MBS): //////////////////////
(1) Issued or guaranteed by /////////////////////
FNMA, FHLMC, or GNMA 1877 26,751 13.b.
(2) Other mortgage-backed //////////////////////
securities 2253 275 13.b.
14. Other domestic debt securities 3159 789 14.
15. Foreign debt securities 3160 0 15.
16. Equity securities: //////////////////////
a. Investment in mutual funds 3161 0 16.a.
b. Other equity securities with //////////////////////
readily determinable fair values 3162 0 16.b.
c. All other equity securities 3169 3,844 16.c.
17. Total held-to-maturity and //////////////////////
available-for-sale securities //////////////////////
(sum of items 10 through 16) 3170 612,714 17.
Memorandum (to be completed only by banks with IBFs and other "foreign"
offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
EITHER ///////////////////////
1. Net due from the IBF of the domestic //////////////////////
offices of the reporting bank 3051 N/A M.1.
OR //////////////////////
2. Net due to the IBF of the domestic /////////////////////
offices of the reporting bank 3059 N/A M.1.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK: 39-1580
FFIEC 031
Address: 100 East Broad Street Page RC-13
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-I-- Selected Assets and Liabilities of IBFs
be completed only by banks with IBFs and other "foreign" offices.
C445
Dollar Amounts in Thousands RCFN Bil Mil Thou
1. Total IBF assets of the consolidated /////////////////////
bank (component of Schedule RC, /////////////////////
item 12) 2133 N/A 1.
2. Total IBF loans and lease financing /////////////////////
receivables (component of Schedule /////////////////////
RC-C, part 1, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans /////////////////////
(component of Schedule RC-C, part, /////////////////////
1, item 4, column A 2077 N/A 3.
4. Total IBF liabilities (component of /////////////////////
Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks, /////////////////////
including other IBFs (component /////////////////////
of Schedule RC-E, part II, /////////////////////
items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities /////////////////////
(component of Schedule RC-E, part II, /////////////////////
items 1, 4, 5, and 6) 2381 N/A 6.
Schedule RC - K -- Quarterly Averages (1)
C455
Dollar Amounts in Thousands ////////// Bil Mil Thou
ASSETS //////////////////////////
1. Interest-bearing balances due from /////////////////////////
depository institutions RCFD 3381 967 1.
2. U.S. Treasury securities and U S //////////////////////////
Government agency and corporation //////////////////////////
obligations (2) RCFD 3382 600,967 2.
3. Securities issued by states and /////////////////////////
political subdivisions in the /////////////////////////
U.S. (2) RCFD 3383 42,264 3.
4. a. Other debt securities (2) RCFD 3647 21,202 4.a.
b. Equity securities (3) /////////////////////////
(includes investments in //////////////////////////
mutual funds and //////////////////////////
Federal Reserve stock) RCFD 3648 3,844 4.b.
5. Federal funds sold and //////////////////////////
securities purchased under //////////////////////////
agreements to resell //////////////////////////
in domestic offices of the bank //////////////////////////
and of its Edge and Agreement //////////////////////////
subsidiaries, and in IBFs RCFD 3365 286,677 5.
6. Loans: //////////////////////////
a. Loans in domestic offices: //////////////////////////
(1) Total loans RCON 3360 4,490,971 6.a.(1)
(2) Loans secured by real estate RCON 3385 1,069,642 6.a.(2)
(3) Loans to finance agricultural //////////////////////////
production and other loans to //////////////////////////
farmers RCON 3386 5,558 6.a.(3)
(4) Commercial and industrial //////////////////////////
loans RCON 3387 780,252 6.a.(4)
(5) Loans to individuals for //////////////////////////
household, family, and other //////////////////////////
personal //////////////////////////
expenditures RCON 3388 2,496,498 6.a.(5)
b. Total loans in foreign offices, /////////////////////////
Edge and Agreement subsidiaries, //////////////////////////
and IBFs RCFN 3360 0 6.b
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables ///////////////////////////
(net of unearned income) RCFD 3484 574,712 8.
9. Total assets (4) RCFD 3368 6,749,314 9.
LIABILITIES //////////////////////////
10. Interest-bearing transaction /////////////////////////
accounts in domestic offices //////////////////////////
(NOW //////////////////////////
accounts, ATS accounts, and /////////////////////////
telephone and preauthorized //////////////////////////
transfer //////////////////////////
accounts) (exclude demand /////////////////////////
deposits) RCON 3485 322,197 10.
11. Nontransaction accounts in ////////////////////////
domestic offices: //////////////////////////
a. Money market deposit accounts //////////////////////////
(MMDAs) RCON 3486 844,643 11.a.
b. Other savings deposits RCON 3487 637,985 11.b.
c. Time certificates of deposit //////////////////////////
of $100,000 or more RCON 3345 110,317 11.c.
d. All other time deposits RCON 3469 1,129,421 11.d.
12. Interest-bearing deposits in //////////////////////////
foreign offices, Edge and /////////////////////////
Agreement //////////////////////////
subsidiaries, and IBFs RCFN 3404 392,063 12.
13. Federal funds purchased and //////////////////////////
securities sold under //////////////////////////
agreements to //////////////////////////
repurchase in domestic offices //////////////////////////
of the bank and of its Edge and //////////////////////////
Agreement subsidiaries, and //////////////////////////
in IBFs RCFD 3353 1,125,276 13.
14. Other borrowed money RCFD 3355 135,220 14.
______________________
(1) For all items, banks have the option of reporting either (1) an average
of daily figures for the quarter, or (2) an average of weekly figures (i e , the Wednesday of each week of
the quarter)
(2) Quarterly averages for all debt securities should be based on amortized
cost
(3) Quarterly averages for all equity securities should be based on
historical cost
(4) The quarterly average for total assets should reflect all debt
securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the
lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-14
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-L-- Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
C460
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Unused commitments: /////////////////////
a. Revolving, open-end lines secured by /////////////////////
1-4 family residential properties, /////////////////////
e.g., home equity lines 3814 285,190 1.a.
b. Credit card lines 3815 24,142,212 1.b.
c. Commercial real estate, construction, /////////////////////
and land development: /////////////////////
(1) Commitments to fund loans ////////////////////
secured by real estate 3816 119,819 1.c.(1)
(2) Commitments to fund loans not ////////////////////
secured by real estate 6550 1,497 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 1,395,702 1.e.
2. Financial standby letters of credit /////////////////////
and foreign office guarantees 3819 498,511 2.
a. Amount of financial standby /////////////////////
letters of credit /////////////////////
conveyed to others RCFD 3820 207,722 /////////////////////
3. Performance standby letters of credit /////////////////////
and foreign office guarantees 3821 78,284 3.
a. Amount of performance standby /////////////////////
letters of credit /////////////////////
conveyed to others RCFD 3822 18,702 /////////////////////
4. Commercial and similar letters of credit 3411 52,191 4.
5. Participations in acceptances (as /////////////////////
described in the instructions) conveyed /////////////////////
to others by the reporting bank 3428 0 5.
6. Participations in acceptances (as /////////////////////
described in the instructions) acquired /////////////////////
by the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers' /////////////////////
securities lent where the customer /////////////////////
is indemnified against loss by the /////////////////////
reporting bank) 3433 0 8.
9. Mortgages transferred (i e , sold or ////////////////////
swapped) with recourse that have /////////////////////
been treated as sold for Call Report ////////////////////
purposes: /////////////////////
a. FNMA and FHLMC residential mortgage /////////////////////
loan pools: /////////////////////
(1) Outstanding principal balance ////////////////////
of mortgages transferred as /////////////////////
of the report date 3650 0 9.a.(1)
(2) Amount of recourse exposure /////////////////////
on these mortgages as of the /////////////////////
report date 3651 0 9.a.(2)
b. Private (nongovernment - issued or //////////////////////
-guaranteed) residential /////////////////////
mortgage loan pools: /////////////////////
(1) Outstanding principal balance /////////////////////
of mortgages transferred /////////////////////
as of the report date 3652 0 9.b.(1)
(2) Amount of recourse exposure /////////////////////
on these mortgages as of the /////////////////////
report date 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage /////////////////////
loan pools: /////////////////////
(1) Outstanding principal ////////////////////
balance of mortgages ////////////////////
transferred as /////////////////////
of the report date 3654 0 9.c.(1)
(2) Amount of recourse exposure /////////////////////
on these mortgages as of the /////////////////////
report date 3655 0 9.c.(2)
10. When - issued securities: /////////////////////
a. Gross commitments to purchase 3434 0 10.a.
b. Gross commitments to sell 3435 0 10.b.
11. Spot foreign exchange contracts 8765 5,927 11.
12. All other off-balance sheet /////////////////////
liabilities (exclude off-balance sheet /////////////////////
derivatives) (itemize and describe /////////////////////
each component of this item over /////////////////////
25% of Schedule RC, item 28, "Total
equity capital") 3430 0 12.
a. Text 3555 RCFD 3555 /////////////////////
b. Text 3556 RCFD 3556 /////////////////////
c. Text 3557 RCFD 3557 /////////////////////
d. Text 3558 RCFD 3558 /////////////////////
13. All other off-balance sheets assets
(exclude off-balance sheet /////////////////////
derivatives) itemize and describe ////////////////////
each component of this item /////////////////////
over 25% of Schedule RC, item 28,
"Total equity capital") 5591 73,662 13.
a. Text 5592 RCFD 5592 ///////////////////// 13.a.
b. Text 5593 RCFD 5593 ///////////////////// 13.b.
c. Text 5594 RCFD 5594 ///////////////////// 13.c.
d. Text 5595 RCFD 5595 ///////////////////// 13.d.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-15
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-L--Continued
</TABLE>
<TABLE> C461
<S> <C> <C> <C> <C>
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
14. Gross amounts (e.g., //////////////// //////////////// ///////////////// /////////////////
notional //////////////// ///////////////// ///////////////// /////////////////
amounts) (for each column, //////////////// ///////////////// ///////////////// /////////////////
sum of items 14.a through ///////////////// //////////////// ///////////////// /////////////////
14.e //////////////// ///////////////// ///////////////// /////////////////
must equal sum of items //////////////// ///////////////// //////////////// /////////////////
15, 16.a, and 16.b): //////////////// ///////////////// ///////////////// /////////////////
a. Future contracts 0 0 0 0 14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Forward contracts 1,010,000 168,085 0 0 14.b
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded option //////////////// ///////////////// ///////////////// /////////////////
contacts: //////////////// ///////////////// ///////////////// /////////////////
(1) Written options 0 0 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased options 0 0 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
d. Over-the-counter option //////////////// ///////////////// ///////////////// /////////////////
contracts: //////////////// ///////////////// ///////////////// /////////////////
(1) Written options 2,256,820 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased options: 3,357,820 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps 20,733,294 0 0 0 14.e.
15. Total gross notional amount of //////////////// //////////////// ///////////////// /////////////////
derivative contracts held //////////////// //////////////// ///////////////// /////////////////
for trading. 0 0 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD A8724
16. Total gross notional amount of //////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for //////////////// ///////////////// ///////////////// /////////////////
purposes other than trading: //////////////// ///////////////// ///////////////// /////////////////
a. Contracts marked to market. 1,362,630 168,085 0 0 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not marked //////////////// ///////////////// ///////////////// /////////////////
to market 25,995,304 0 0 0 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-16
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-L--Continued
<TABLE>
<S> <C> <C> <C> <C>
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivative Contracts Contracts Contracts Other Contracts
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
17. Gross fair values of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts: ///////////////// ///////////////// ///////////////// /////////////////
a. Contracts held for ///////////////// ///////////////// ///////////////// /////////////////
trading: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive ///////////////// ///////////////// ///////////////// /////////////////
fair value 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative ///////////////// ///////////////// ///////////////// /////////////////
fair value 8737 0 8738 8739 0 8740 0 17.a.(2)
b. Contracts held for ///////////////// ///////////////// ///////////////// /////////////////
purposes other than ///////////////// ///////////////// ///////////////// /////////////////
trading that are marked ///////////////// ///////////////// ///////////////// /////////////////
to market: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive ///////////////// ///////////////// ///////////////// /////////////////
fair value 8741 1,677 8742 1,343 8743 0 8744 0 17.b.(1)
(2) Gross negative ///////////////// ///////////////// ///////////////// /////////////////
fair value 8745 2,349 8746 1,264 8747 0 8748 0 17.b.(2)
c. Contracts held for ///////////////// ///////////////// ///////////////// /////////////////
purposes other than ///////////////// ///////////////// ///////////////// /////////////////
trading that are not ///////////////// ///////////////// ///////////////// /////////////////
marked to market: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive ///////////////// ///////////////// ///////////////// /////////////////
fair value 8749 142,692 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative ///////////////// ///////////////// ///////////////// /////////////////
fair value 8753 155,184 8754 0 8755 0 8756 0 17.c.(2)
</TABLE>
<TABLE>
<S> <C> <C>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
1.-2. Not applicable /////////////////
3. Unused commitments with an original maturity exceeding one /////////////////
year that are reported in Schedule RC-L, items 1.a through 1.e, /////////////////
above (report only the unused portions of commitments /////////////////
that are fee paid or otherwise legally binding) 3833 906,209 M.3.a
a. Participations in commitments with an original maturity /////////////////
exceeding one year conveyed to others RCFD 3834 104,953 /////////////////
4. To be completed only by banks with $1 billion or more in total assets: /////////////////
Standby letters of credit and foreign office guarantees (both financial /////////////////
and performance) issued to non-U.S. addresses (domicile) included in /////////////////
Schedule RC-L, items 2 and 3, above 3377 0 M.4.
5. To be completed for the September report only: /////////////////
Installment loans to individuals for household, family, and other personal /////////////////
expenditures that have been securitized and sold without recource /////////////////
(with servicing retained), amounts outstanding by type of loan: /////////////////
a. Loans to purchase private passenger automobiles 2741 N/A M.5.a.
b. Credit cards and related plans 2742 N/A M.5.b.
c. All other consumer installment credit (including mobile home loans) 2743 N/A M.5.c.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-17
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-M-- Memoranda
C465
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Extensions of credit by the reporting bank to /////////////////
its executive officers, directors, principal /////////////////
shareholders, and their related interests as of /////////////////
the report date: /////////////////
a. Aggregate amount of all extensions of credit /////////////////
to all executive officers, directors, principal /////////////////
shareholders and their related interests 6164 209,907 1.a.
b. Number of executive officers, directors, and /////////////////
principal shareholders to whom the amount of /////////////////
all extensions of credit by the reporting bank /////////////////
(including extensions of credit to related /////////////////
interests) equals or exceeds the lesser of /////////////////
$500,000 or 5 percent Number /////////////////
of total capital as defined for this purpose /////////////////
in agency regulations.RCFD 6165 9 //////////////// 1.b.
2. Federal funds sold and securities purchased ////////////////
under agreements to resell with U.S. branches ////////////////
and agencies of foreign banks (1) (included in ////////////////
Schedule RC, items 3.a and 3.b) 3405 0 2.
3. Not applicable. ////////////////
4. Outstanding principal balance of 1-4 family ////////////////
residential mortgage loans serviced for others ////////////////
serviced for others (include both retained ////////////////
servicing and purchased servicing): ////////////////
a. Mortgages serviced under a GNMA contract 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract: ////////////////
(1) Serviced with recourse to servicer 5501 0 4.b.(1)
(2) Serviced without recourse to servicer 5502 0 4.b.(2)
c. Mortgages serviced under a FNMA contract: ////////////////
(1) Serviced under a regular option contract 5503 0 4.c(1)
(2) Serviced under a special option contract 5504 0 4.c.(2)
d. Mortgages serviced under other servicing
contracts 5505 0 4.d.
5. To be completed only by banks with $1 billion ////////////////
or more in total assets: Customers' liability to ////////////////
its bank on acceptances outstanding ////////////////
(sum of items 5.a and 5.b must equal ////////////////
Schedule RC, item 9): ////////////////
a. U.S. addressees (domicile) 2103 8,409 5.a.
b. Non-U.S. addressees (domicile) 2104 0 5.b.
6. Intangible assets: /////////////////
a. Mortgage servicing rights 3164 0 6.a.
b. Other identifiable intangible assets: /////////////////
(1) Purchased credit card relationships 5506 27,267 6.b.(1)
(2) All other identifiable intangible assets 5507 3,314 6.b.(2)
c. Goodwill 3163 13,381 6.c.
d. Total (sum of items 6.a through 6.c) (must
equal Schedule RC, item 10) 2143 43,962 6.d.
e. Intangible assets that have been grandfathered
for regulatory capital purposes 6442 0 6.e.
7. Mandatory convertible debt, net of common or
perpetual preferred stock dedicated to redeem
the debt 3295 0 7.
____________________________________________
(1) Do not report federal funds sold and securities purchased under
agreements to resell with other commercial banks in the U.S.
in this item.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-
BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-18
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-M--Continued
Dollar Amounts in Thousands RCFD Bil Mil Thou
8. a. Other real estate owned: //////////////////
(1) Direct and indirect investments in real
estate ventures RCFD 5372 0 8.a.(1)
(2) All other real estate owned: //////////////////
(a) Construction and land development
in domestic offices RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in
domestic offices RCON 5510 150 8.a.(2)(c)
(d) Multifamily (5 or more) residential
properties in domestic offices RCON 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties
in domestic offices RCON 5512 1,900 8.a.(2)(e)
(f) In foreign offices RCFN 5513 0 8.a(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a(2))
(must equal Schedule /////////////////
RC, item 7) RCFD 2150 2,050 8.a.(3)
b. Investments in unconsolidated subsidiaries
and associated companies: //////////////////
(1) Direct and indirect investments in real
estate ventures RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated /////////////////
subidiaries and associated companies RCFD 5375 36 8.b.(2)
(3) total (sum of items 8.b.(1) and 8.b.(2)) /////////////////
(must equal Schedule RC, item 8) RCFD 2130 36 8.b.(3)
c. Total assets of unconsolidated subsidiares
and associated companies RCFD 5376 9,831 8.c.
9. Noncumulative perpetual preferred stock and
related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and
related surplus" RCFD 3378 0 9.
10. Mutual fund and annuity sales in domestic
offices during the quarter include proprietary ////////////////////
include proprietary, private label, and
third party products): ////////////////////
a. Money market funds RCON 6441 169 10.a.
b. Equity securities funds RCON 8427 4,714 10.b.
c. Debt securities funds RCON 8428 1,625 10.c.
d. Other mutual funds RCON 8429 0 10.d.
e. Annuities RCON 8430 5,033 10.e.
f. Sales of proprietary mutual funds and
annuities (included in items 10.a through
10.e above) RCON 8430 2,101 10.f.
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Interbank holdings of capital instruments
(to be completed for the December report only): /////////////////
a. Reciprocal holdings of banking organizations'
capital instruments 3836 N/A M.1.a.
b. Nonreceiprocal holdings of banking
organizations' capital instruments 3837 N/A M.1.b.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-19
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets
<TABLE>
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10, C470
Column A, and in Memorandum items 2 through 4, (Column A) (Column B) (Column C)
Column A, as confidential. Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Dollar amounts in Thousands RCFD Bil Mil Thou RCFD Bil Ml Thou RCFD Bil Mil Thou
1. Loans secured by real estate: ///////////////// //////////////// /////////////////
a. To U.S. addressees (domicile) 1245 1246 2,354 1247 11,755 1.a.
b. To non-U.S. addressees (domicile) 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions ////////////////// //////////////// ////////////////
and acceptances of other banks: ////////////////// //////////////// ////////////////
a. To U.S. banks and other U.S. ////////////////// //////////////// ////////////////
depository institutions 5377 5378 0 5379 0 2.a.
b. To foreign banks 5380 5381 0 5382 0 2.b
3. Loans to finance agricultural ////////////////// //////////////// ////////////////
production and other loans to farmers 1594 1597 0 1583 182 3.
4. Commercial and industrial loans: ////////////////// //////////////// ///////////////
a. To U.S. addressees (domicile) 1251 1252 1,047 1253 6,358 4.a.
b. To non-U.S. addressees (domicile) 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, ////////////////// //////////////// //////////////
family, and other personal //////////////////
expenditures: ///////////////// /////////////////
a. Credit cards and related plans 5383 5384 22,847 5385 0 5.a
b. Other (includes single payment, ////////////////// //////////////// /////////////
installment, and all student loans). 5386 5387 13,237 5388 3,791 5.b
6. Loans to foreign governments and ////////////////// //////////////// ////////////
official institutions 5389 5390 0 5391 0 6.
7. All other loans 5459 5460 121 5461 1,114 7.
8. Lease financing receivables: ////////////////// //////////////// ///////////
a. Of U.S. addressees (domicile) 1257 1258 238 1259 993 8.a
b. of non-U.S. addressees (domicile) 1271 1272 0 1791 0 8.b
9. Debt securities and other assets ////////////////// //////////////// ///////////
(exclude other real estate owned and ////////////////// //////////////// ///////////
other repossessed assets) 3505 3506 0 3507 15,374 9.
============================================================================
Amounts reported in items 1 through 8 above include guaranteed and
unguaranteed portions of past due and nonaccrual loans and leases. Report
in item 10 below certain guaranteed loans and leases that have
already been included in the amounts reported in Items 1 though 8.
10. Loans and leases reported in items 1 RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thous
through 8 above which are wholly or ////////////////// ///////////////// //////////////////
partially guaranteed by the U.S. ////////////////// ///////////////// //////////////////
Government 5612 5613 3,167 5614 182 10.
a. Guaranteed portion of loans and ////////////////// ///////////////// /////////////////
leases included in item 10 above 5615 5616 3,164 5617 147 10.a
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-20
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-N--Continued
C473
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing accruing
Dollar amounts in Thousands RCFD Bil Mil Thou RCFD Bil Ml Thou RCFD Bil Mil Thou
1. Restructured loans and leases ////////////////// //////////////// //////////////////
included in Schedule RC-N, items ////////////////// //////////////// //////////////////
1 through 8, above (and not ////////////////// //////////////// //////////////////
reported in Schedule RC-C, ////////////////// //////////////// //////////////////
part I, Memorandum item 2) 1658 1659 1661 M.1
2. Loans to finance commercial ////////////////// //////////////// //////////////////
real estate, construction, and ////////////////// //////////////// //////////////////
land development activities ////////////////// //////////////// //////////////////
(not secured by real estate) ////////////////// //////////////// //////////////////
included in Schedule RC-N, ////////////////// /////////////// //////////////////
items 4 and 7, above 6558 6559 0 6560 2,839 M.2.
3. Loans secured by real estate in ////////////////// //////////////// //////////////////
domestic offices (included ///////////////// //////////////// //////////////////
in Schedule RC-N, item 1, ///////////////// //////////////// //////////////////
above): RCON Bil Mil Thou RCON BilMil Thou RCON Bil Mil Thou
a. Construction and land ///////////////// /////////////// //////////////////
development 2759 2769 0 3492 2,164 M.3.a.
b. Secured by farmland 3493 3494 0 3495 16 M.3.b.
c. Secured by 1-4 family ///////////////// //////////////// //////////////////
residential properties: ///////////////// //////////////// //////////////////
(1) Revolving, open-end
loans secured by 1-4 ///////////////// //////////////// //////////////////
family residential ///////////////// //////////////// //////////////////
properties extended ///////////////// //////////////// //////////////////
under lines of credit. 5398 5399 360 5400 629 M.3.c.(1)
(2) All other loans secured ///////////////// ///////////////// //////////////////
by 1-4 family
residential properties 5401 5402 1,340 5403 5,291 M.3.c.(2)
d. Secured by multifamily (5 or ///////////////// ///////////////// //////////////////
more) residential properties 3499 3500 0 3501 0 M.3.d.
e. Secured by nonfarm ///////////////// //////////////// //////////////////
nonresidential properties 3502 3503 654 3504 3,655 M.3.e.
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
RCFD Bil Mil Thou RCFD Bil Ml Thou
4. Interest rate, foreign exchange ///////////////// ////////////////
rate, and other commodity and ///////////////// ///////////////
equity contracts: ////////////////
a. Book value of amounts carried
as assets 3522 3528 0 M.4.a.
b. Replacement cost of contracts
with a positive replacement
cost 3529 3530 0 M.4.b.
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-21
City, State Zip: Columbus, OH 43271-1066
DIC Certificate No.: 06559
Schedule RC-O--Other Data for Deposit Insurance Assessments
C475 -
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Unposted debits (see instructions): ////////////////////
a. Actual amount of all unposted debits 0030 N/A 1.a.
OR ////////////////////
b. Separate amount of unposted debits: ////////////////////
(1) Actual amount of unposted
debits to demand deposits 0031 0 1.b.(1)
(2) Actual amount of unposted debits
to time and savings deposits(1) 0032 0 1.b.(2)
2. Unposted credits (see instructions): ////////////////////
a. Actual amount of all unposted credits 3510 N/A 2.a.
OR
b. Separate amount of unposted credits: ////////////////////
(1) Actual amount of unposted credits
to demand deposits 3512 0 2.b.(1)
(2) Actual amount of unposted credits
to time and savings deposits(1) 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's
own trust department (not included in total
deposits in domestic offices) 3520 0 3.
4. Deposits of consolidated subsidiaries in
domestic offices and in insured /////////////////////
branches in Puerto Rico and U.S. territories
and possessions (not included in total
deposits): ////////////////////
a. Demand deposits of consolidated subsidiaries 2211 4,590 4.a.
b. Time and savings deposits (1) of ////////////////////
consolidated subsidiaries 2351 11,833 4.b.
c. Interest accrued and unpaid on deposits of ////////////////////
consolidated subsidiaries 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and ////////////////////
U.S. territories and possessions: ////////////////////
a. Demand deposits in insured branches ////////////////////
(included in Schedule RC-E, Part II) 2229 0 5.a.
b. Time and savings deposits (1) in insured ////////////////////
branches (included in Schedule ////////////////////
RC-E, Part II) 2383 0 5.b.
c. Interest accrued and unpaid on deposits ///////////////////
in insured branches (included in Schedule ///////////////////
RC-G, item 1.b) 5515 0 5.c.
Item 6 is not applicable to state nonmember banks /////////////////
that have not been authorized by the Federal Reserve /////////////////
to act as pass-through correspondents. /////////////////
6. Reserve balances actually passed through to the /////////////////
Federal Reserve by the reporting bank on behalf /////////////////
of its respondent depository institutions that /////////////////
are also reflected as deposit liabilities of /////////////////
the reporting bank: /////////////////
a. Amount reflected in demand deposits
(included in Schedule RC-E, Part I, //////////////////
Memorandum item 4.a) 2314 0
b. Amount reflected in time and savings ///////////////////
deposits (1) (included in Schedule RC-E, //////////////////
Part I, Memorandum item 4.a) 2315 0 6.b.
7. Unamortized premiums and discounts on time and
savings deposits: (1)
a. Unamortized premiums 5516 0
b. Unamortized discounts 5517 0
8. To be completed by banks with "Oakar deposits." ///////////////////
Total "Adjusted Attributable Deposits" of all ///////////////////
institutions acquired under Section 5(d)(3) of ///////////////////
the Federal Deposit Insurance Act (from most //////////////////
recent FDIC Oakar Transaction Worksheet(s)) 5518 N/A 8.
9. Deposits in lifeline accounts 5596/////////////// 9.
10. Benefit-responsive "Depository Institution
Investment Contracts" //////////////////
(included in total deposits in //////////////////
domestic offices) 8432 0 10.
___________________________________
1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other
than demand deposits.
</Page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-22
City, State Zip: Columbus, OH 43271-1066
DIC Certificate No.: 06559
Schedule RC-O--Continued
Dollar Amounts in Thousands RCON Bil Mil Thou
11. Adjustments to demand deposits in domestic ////////////////////
offices reported in Schedule RC-E for ////////////////////
certain reciprocal demand balances: ////////////////////
a. Amount by which demand deposits ////////////////////
would be reduced if reciprocal ////////////////////
demand balances between the reporting ////////////////////
bank and savings associations ////////////////////
were reported on a net basis rather
than a gross basis in Schedule RC-E.. 8785 0 11.a.
b. Amount by which demand deposits would ////////////////////
be increased if reciprocal demand ////////////////////
balances between the reporting bank and ///////////////////
U.S. branches and agencies of ////////////////////
foreign banks were reported on a gross ///////////////////
basis rather than a net basis in ////////////////////
Schedule RC-E A181 0 11.b.
c. Amount by which demand deposits would ////////////////////
be reduced if cash items in process ////////////////////
of collection were included in the ////////////////////
calculation of net reciprocal demand ////////////////////
balances between the reporting bank and ////////////////////
the domestic offices of U.S. ////////////////////
banks and savings associations in ////////////////////
Schedule RC-E A182 0 11.c.
Memoranda (to be completed each quarter except as noted)
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Total deposits in domestic offices of the ////////////////////
bank (sum of Memorandum items 1.a.(1) and ////////////////////
1.b.(1) must equal Schedule RC, item 13.a): ////////////////////
a. Deposit accounts of $100,000 or less: ///////////////////
(1) Amount of deposit accounts of
$100,000 or less 2702 2,371,079 M.1.a.(1)
(2) Number of deposit accounts of ///////////////////
$100,000 or less (to be completed ////////////////////
for the June report only) Number
RCON 3779 554,382 //////////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: ////////////////////
(1) Amount of deposit accounts of
more than $100,000 2710 1,677,410 M.1.b.(1)
Number ////////////////////
(2) Number of deposit accounts of 3,464 ////////////////////
more than $100,000..RCON 2722 //////////////////// M.1.b.(2)
2. Estimated amount of uninsured deposits in
domestic offices of the bank:
a. An estimate of your bank's uninsured
deposits can be determined by
multiplying the number of deposit
accounts of more than $100,000 reported
in Memorandum item 1.b.(2) above by
$100,000 and subtracting the result
from the amount of deposit accounts
of more than $100,000 reported in
Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the
right whether your bank has a method
or procedure for determining a better
estimate of uninsured deposits YES NO
than the estimate described above RCON 6861 /// X M.2.a.
b. If the box marked YES has been
checked, report the estimate of RCON Bil Mil Thou
uninsured deposits determined by
using your bank's method or
procedure 5597 N/A M.2.b.
Person to whom questions about the Reports of Condition and Income C477-
should be directed:
Ruth Beam, Financial Officer (614) 248-8564
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</Page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date:6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-23
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-R -- Risk-Based Capital
This schedule must be completed by all banks as follows: Banks that
reported total assets of $1 billion or more in Schedule RC,item 12,
for June 30, 1994, must complete items 2 through 9 and Memoranda
items 1 and 2. Banks with assets of less than $1 billion must
complete items 1 and 2 below or Schedule RC-R in its entirety,
depending on their response to item 1 below.
1. Test for determining the extent to which Schedule
RC-R must be completed. To be completed only by banks
with total assets of less than $1 billion. Indicate
in the appropriate box at the right whether the bank C480 -
has total capital greater than or equal to eight YES NO
percent of adjusted total assets RCFD 6056 /////// 1.
For purposes of this test, adjusted total assets equals total
assets less cash, U.S. Treasuries, U.S. Government agency obligations,
and 80 percent of U.S. Government-sponsored agency obligations plus
the allowance for loan and lease losses and selected off-balance sheet
items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to
complete item 2 below. If the box marked NO has been checked, the bank
must complete the remainder of this schedule.
A No response to item 1 does not necessarily mean that the bank's
actual risk-based capital ratio is less than eight percent or that the bank
is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<S> <C> <C>
(Column A) (Column B)
Subordinated Debt(1) Other
and Intermediate Limited-
Item 2 is to be completed by Term Preferred Life Capital
all Banks Stock Instruments
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
2. Subordinated debt (1) and other //////////////////// ////////////////////
limited-life capital instruments //////////////////// ////////////////////
(original weighted average //////////////////// ////////////////////
maturity of at least five years) //////////////////// ///////////////////
with a remaining maturity of: //////////////////// ///////////////////
a. One year or less 3780 0 3786 0 2.a.
b. Over one year through
two years 3781 0 3787 0 2.b.
c. Over two years through
three years 3782 0 3788 0 2.c.
d. Over three years through
four years 3783 0 3789 0 2.d.
e. Over four years through
five years 3784 0 3790 0 2.e.
f. Over five years 3785 189,199 3791 0 2.f.
3. Not applicable
</TABLE>
<TABLE>
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 Assets Credit Equiv-
are to be completed by banks that Recorded alent Amount
answered NO to item 1 above and by on the of Off-Balance
banks with total assets of $1 billion Balance Sheet Sheet Items(2)
or more.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RCFD Bil Mil Thou RCFD Bil Mil Thou
4. Assets and credit equivalent /////////////////// ////////////////////
amounts of off-balance sheet /////////////////// ////////////////////
items assigned to the /////////////////// ////////////////////
Zero percent risk category: ////////////////// ////////////////////
a. Assets recorded on the
balance sheet: //////////////////// ///////////////////
(1) Securities issued by, /////////////////// ///////////////////
other claims on, and /////////////////// ///////////////////
claims unconditionally/////////////////// ///////////////////
guaranteed by, the /////////////////// ///////////////////
U.S. Government and /////////////////// ///////////////////
agencies and other ////////////////// ///////////////////
OECD central ////////////////// ///////////////////
governments 3794 157,856 /////////////////// 4.a.(1)
(2) All other 3795 42,242 /////////////////// 4.a.(2)
b. Credit equivalent amount /////////////////// //////////////////
of off-balance sheet items /////////////////// 3796 0 4.b.
__________________________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported
in column A.
</Page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-24
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Schedule RC-R -- Continued
</TABLE>
<TABLE>
<S> <C> <C>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
5. Assets and credit equivalent amounts ////////////////// ///////////////////
of off-balance sheets items ////////////////// ///////////////////
assigned to the 20 percent risk ////////////////// ///////////////////
category: ////////////////// ///////////////////
a. Assets recorded on the ////////////////// //////////////////
balance sheet: ////////////////// //////////////////
(1) Claims conditionally ////////////////// //////////////////
guaranteed by the U.S. ////////////////// //////////////////
Government and its ////////////////// //////////////////
agencies and other ////////////////// //////////////////
OECD central governments 3798 128,228 ////////////////// 5.a.(1)
(2) Claims collateralized by
securities issued by the U.S.
Government and its agencies
and other OECD central
governments; by securities
issued by U.S. Government-
sponsored agencies; and
by cash on deposit 3799 0 ////////////////// 5.a.(2
(3) All other 3800 902,061 ////////////////// 5.a.(3)
b. Credit equivalent amount of off- ///////////////// //////////////////
balance sheet items ///////////////// 3801 626,807 5.b.
6. Assets and credit equivalent amounts of ///////////////// //////////////////
off-balance sheet items assigned to ///////////////// //////////////////
the 50 percent risk category: ///////////////// //////////////////
a. Assets recorded on the balance ///////////////// ///////////////////
sheet 3802 191,310 ////////////////// 6.a.
b. Credit equivalent amount of off- ////////////////// //////////////////
balance sheet items ///////////////// 3803 4,782 6.b.
7. Assets and credit equivalent amounts ///////////////// //////////////////
of off-balance sheet items assigned to ///////////////// //////////////////
the 100 percent risk category: ///////////////// //////////////////
a. Assets recorded on the balance
sheet 3804 5,402,116 ////////////////// 7.a.
b. Credit equivalent amount of
off-balance sheet items ////////////////// 3805 571,796 7.b.
8. On-balance sheet asset values
excluded from the calculation ////////////////// //////////////////
of the risk-based capital ratio(2) 3806 (54) ////////////////// 8.
9. Total assets recorded on the balance ////////////////// //////////////////
sheet (sum of items 4.a, 5.a, 6.a, ////////////////// //////////////////
7.a, and 8, column A)(must equal ////////////////// //////////////////
Schedule RC, item 12 plus items ////////////////// //////////////////
4.b and 3807 6,823,759 ////////////////// 9.
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Current credit exposure across all off-balance ////////////////////
sheet derivative contracts covered by the ////////////////////
risk-based capital standards 8764 145,629 M.1.
</TABLE>
<TABLE>
<S>
With a remaining maturity of
<C> <C>
(Column A) (Column B) (Column C)
2. Notional principal amounts of One year or less Over one year Over five years
off-balance sheet derivative
contracts(3): RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
a. Interest rate contracts 3809 8,489,408 8766 10,559,101 8767 479,592 M.2.a.
b. Foreign exchange contracts 3812 136,563 8769 0 8770 0 M.2.b.
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals ////////////////////// ////////////////////// //////////////////////
contracts ................ 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f.
1) Do not report in column B the risk-weighted amount of assets reported in
column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these securities in items
4 through 7 above. Item 8 also includes on-balance sheet asset values (or portions thereof) of off-
balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued
receivables as well as any portion of the allowance for loan and lease losses in excess of the amount
that may be included in Tier 2 capital.
3) Exclude foreign exchange contracts with an original maturity of 14 days
or less and all futures contracts.
</TABLE>
</PAGE>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-25
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1995
BANK ONE, COLUMBUS, NA Columbus , Ohio
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public,
along with the publicly available data in the Reports of Condition and
Income, in response to any request for individual bank report data.
However, the information reported in column A and in all of Memorandum item
1 of Schedule RC-N is regarded as confidential and will not be released to
the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE
THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF
INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE
CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE
NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF
THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No
comment" box below and should make no entries of any kind in the space
provided for the narrative statement; i.e., DO NOT enter in this space such
phrases as "No statement," "Not applicable," "N/A," "No comment," and
"None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation,
indentation, and standard spacing between words and sentences. If any
submission should exceed 750 characters, as defined, it will be truncated
at 750 characters with no notice to the submitting bank and the truncated
statement will appear as the bank's statement both on agency computerized
records and in computer-file releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted
for the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure;
the bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in
release to the public exactly as submitted (or amended as described in the
preceding paragraph) by the management of the bank (except for the
truncation of statements exceeding the 750-character limit described
above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE
SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE
STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A
STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL
STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK.
No comment (RCON 6979) C471 C472 -
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
For regulatory purposes, the Bank defers the recognition of certain excess
income relating to securitized loan sales until cash is received. The
effect of this accounting method has decreased net income for the current
year $12,464,000 and decreased retained earnings on a cumulative basis
$86,321,000.
Signature of Executive Officer of Bank Date of Signature
</page>
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 6/30/95 ST-BK:
39-1580
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- --------------------------------------------------------------------------
NAME AND ADDRESS OF BANK OMB No. For OCC: 1557-0081
CALL NO. 192 31 06-30-95 OMB No. For FDIC: 3064-0052
CERT: 06559 00088 STBK 39-1580 OMB No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/96
BANK ONE, COLUMBUS, NATIONAL ASSOCIA
100 EAST BROAD STREET SPECIAL REPORT
COLUMBUS, OH 43271 (Dollar Amounts in Thousands)
CLOSE OF BUSINESS FDIC Certificate Number
DATE: C-700 -
6/30/95 06559
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date of
the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions
of credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under
bank credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code
of Federal Regulations (Federal Reserve Board Regulation 0) for the
definitions of "executive officer" and "extension of credit," respectively.
Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
- ---------------------------------------------------------------------------
a. Number of loans made to executive officers since the
previous Call Report Date RCFD 3561 3 a.
b. Total dollar amount of above loans
(in thousands of dollars) RCFD 3562 405 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 9.00 % to RCFD 7702 18.65 % c.
/s/ Ruth Beam /s/ 7/28/95
SIGNATURE AND TITLE OF OFFICER AUTHORIZED DATE (Month, Day, Year)
TO SIGN REPORT
NAME AND TITLE OF PERSON TO WHOM AREA CODE/PHONE NUMBER/EXTENSION
INQUIRIES MAY BE DIRECTED (TEXT 8903) (TEXT 8904)
(614) 248-8564
Ruth Beam, Financial Officer
FDIC 8040/53 (6-95)
</PAGE>
