SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Emerson Radio Corp.
(Name of Registrant as Specified in Its Charter)
Eugene I. Davis
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4)
and 0-11.
(1) Title of each class of securities in which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transactions computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting free was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing party:
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(4) Date filed:
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October 27, 1995
Dear Fellow Stockholder:
This year's Annual Meeting of Stockholders will be held at the
Parsippany Hilton, One Hilton Court, Parsippany, New Jersey 07054 on
November 28, 1995, at 10:00 a.m. local time. You are cordially invited to
attend. The matters you are asked to consider are described in the
attached Proxy Statement and Notice of Annual Meeting. The Company's Board
of Directors recommends (i) election of management's nominees for the Board
of Directors; (ii) approval of an amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares of Preferred
Stock, $.01 par value, from 1,000,000 to 10,000,000; (iii) approval of the
1994 Non-Employee Director Stock Option Plan; and (iv) ratification of the
selection by the Board of Directors of Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending March 31, 1996.
To be certain that your shares are voted at the meeting, whether or
not you plan to attend in person, please sign, date and return the enclosed
proxy card as soon as possible. Your vote is important.
At the meeting, the Company's activities during the past fiscal year
and its plans and prospects for the future will be reviewed. An opportunity
will be provided for questions by the stockholders.
I hope you will be able to join us.
Sincerely,
Geoffrey P. Jurick
Chairman of the Board
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held November 28, 1995
Notice is hereby given that the Annual Meeting of Stockholders of
Emerson Radio Corp., a Delaware corporation (the "Company"), will be held
at the Parsippany Hilton, One Hilton Court, Parsippany, New Jersey 07054,
on Tuesday, November 28, 1995 at 10:00 a.m. local time for the following
purposes:
1. To elect Directors for terms expiring in 1996.
2. To approve an amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares
of Preferred Stock, $.01 par value, from 1,000,000 to
10,000,000.
3. To approve the 1994 Non-Employee Director Stock Option
Plan.
4. To ratify the selection by the Board of Directors of
Ernst & Young LLP as independent auditors for the Company
for the fiscal year ending March 31, 1996.
5. To transact such other business as may properly come
before the Annual Meeting and adjournments thereof.
The accompanying Proxy Statement contains information regarding the
business to be considered at the Annual Meeting.
Only stockholders of record at the close of business on October 20,
1995, are entitled to notice of, and to vote at, the Annual Meeting of
Stockholders or any adjournment thereof. A list of stockholders will be
made available at the offices of the Company at least 10 days prior to such
meeting for examination by any stockholder for any purpose germane to the
Annual Meeting.
You are cordially invited to attend the Annual Meeting. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND
DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. If you attend the Annual Meeting, you may vote in
person, whether or not you have returned your proxy. A proxy may be
revoked at any time before it is exercised.
By Order of the Board of Directors
Albert G. McGrath, Jr.
Senior Vice-President, Secretary and
General Counsel
Parsippany, New Jersey
October 27, 1995
EMERSON RADIO CORP.
9 ENTIN ROAD
PARSIPPANY, NEW JERSEY 07054
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy, mailed with this Proxy Statement, is
solicited on behalf of Emerson Radio Corp., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to
be held on Tuesday, November 28, 1995 at 10:00 a.m. local time at the
Parsippany Hilton, One Hilton Court, Parsippany, New Jersey 07054.
This Proxy Statement and accompanying form of proxy will first be
mailed to stockholders of record on or about October 27, 1995.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Company's Board of Directors
shall consist of not less than three nor more than 15 persons provided
that, once elected, no Director's term shall be reduced by a decrease in
the number of Directors authorized by the Board of Directors. The Board
currently consists of six members. Six Directors, each to serve until the
1996 Annual Meeting, will be elected at the 1995 Annual Meeting.
Each nominee has consented to being named in the Proxy Statement and
to serve if elected. If prior to the Annual Meeting any nominee should
become unavailable to serve, the shares represented by a properly signed
and returned proxy will be voted for the election of such other person as
may be designated by the Board of Directors, or the Board may determine to
leave the vacancy temporarily unfilled.
Each of management's nominees for election as Directors are listed
below and each is currently a member of the Board of Directors.
GEOFFREY P. JURICK, 54, Chairman of the Board and Chief Executive Officer.
Mr. 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 Fidenas Investment Limited.
Since December 1993, Mr. Jurick has served as a Director of Fidenas
International Limited, L.L.C. and its predecessor ("Fidenas International")
and, since May 1994, as an officer and general manager of Fidenas
International. Mr. Jurick has served as a Director, Chairman and Chief
Executive Officer of GSE Multimedia Technologies Corporation ("GSE"), which
is traded in the over-the-counter market, since May 1994. 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, 40, President. Mr. Davis has served as President since
October 1994, Interim Chief Financial Officer since February 7, 1993 and as
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. 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 served as 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.
ROBERT H. BROWN, Jr., 42, has been a Director since July 7, 1992.
Presently, he is Executive Vice-President of Rauscher Pierce Refsnes, Inc.
("Rauscher"). Since February 1994, Mr. Brown has been Executive Vice-
President of Capital Markets of 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, 54, has been a Director since July 7, 1992. Presently, he
is a consultant with Savarina AG. 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. From 1981 until
1992, Mr. Bunger was owner and Managing Director of Peter G. Bunger
Investment Consulting, a firm which supervised, controlled, and analyzed
investments for individuals.
JEROME H. FARNUM, 59, has been a Director since July 7, 1992. Presently,
he is an independent consultant. 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, 60, has been a Director since July 7, 1992. He has been
retired since September 1993. From August 1990 until September 1993,
Raymond L. 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.
Vote Required for Election of Directors
To be elected as a Director, each nominee must receive the favorable
vote of a plurality of the total number of shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual
Meeting or any adjournment thereof. Accordingly, if a quorum is present at
the Annual Meeting, the six persons receiving the greatest number of votes
will be elected to serve as Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF
THE SIX NOMINEES NAMED ABOVE
Meetings of the Board of Directors and Committees
During the fiscal year ended March 31, 1995 ("Fiscal 1995"), the
Board of Directors met 12 times and acted by unanimous consent five times.
The Audit Committee, which currently consists of Robert H. Brown,
Jr., Raymond L. Steele and Peter Bunger, (i) annually recommends selection
of the Company's independent auditors of the Board of Directors; (ii)
consults with the independent auditors concerning the audit; (iii)
evaluates non-audit services and financial statements and accounting
developments that may affect the Company; and (iv) consults with management
concerning matters similar to those discussed with outside auditors. The
Audit Committee met twice during Fiscal 1995.
The Compensation and Personnel Committee, which currently consists of
Messrs. Brown and Steele, (i) makes recommendations to the full Board
concerning remuneration arrangements for executive management; (ii)
administers the Company's 1994 Stock Compensation Program; and (iii) makes
such reports and recommendations from time to time to the Board of
Directors upon such matters as the committee may deem appropriate or as may
be requested by the Board. During Fiscal 1995, the Compensation Committee
met three times and acted by unanimous consent twice. See "Report of
Compensation and Personnel Committee" on page 19.
The Company does not have a Nominating Committee. Nominations for
Directors of the Company are considered by the entire Board. Stockholders
wishing to recommend a candidate for consideration by the Board can do so
in writing to the Secretary of the Company at its corporate offices in
Parsippany, New Jersey, giving the candidate's name, biographical data and
qualifications. Any such recommendation must be accompanied by a written
statement from the individual giving his or her consent to be named as a
candidate and, if nominated and elected, to serve as a director.
During Fiscal 1995, each member of the Board attended not less than
75% of the aggregate number of (i) Board Meetings and (ii) meetings of
committees of which such person was a member.
Compensation of Directors
Directors of the Company who are employees do not receive
compensation for serving on the Board. Non-employee Directors are paid
$20,000 per annum in quarterly installments. The Chairmen of the Audit
Committee and Compensation and Personnel Committee each receive an
additional $10,000 per annum. Pursuant to the terms of the Company's 1994
Non-Employee Director Stock Option Plan, each non-employee Director was
granted, subject to stockholder approval, options to purchase 25,000 shares
of Common Stock on October 7, 1994. See "Proposal to Approve the Company's
1994 Non-Employee Director Stock Option Plan." On October 7, 1994, each
Chairman was also granted, subject to stockholder approval, options to
purchase an additional 25,000 shares of Common Stock. See "Proposal to
Approve the Company's 1994 Non-Employee Director Stock Option Plan."
Officers
The following table sets forth certain information regarding the
officers of the Company as of the date hereof:
Name Age Position
Geoffrey P. Jurick (1) 54 Chairman of the Board and Chief 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
John J. Raab 59 Senior Vice-President - Operations
Eddie Rishty 35 Vice-President - Controller
Merle W. Eakins 48 Vice-President - Sales
Andrew Cohan 40 Vice-President - Merchandising
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
(1) Member of Executive 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. See
"Election of Directors".
Eugene I. Davis has served as President since October 1994, Interim Chief
Financial Officer since February 7, 1993 and as a Director since September
1990. Mr. Davis served as Executive Vice-President from July 7, 1992 to
October 1994. See "Election of Directors."
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.
John J. Raab joined the Company in March 1995 as Vice-President Far East
Operations and became Senior Vice President - Operations on October 1, 1995.
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.
Merle W. Eakins joined the Company as Vice-President-Sales in July 1993.
Prior thereto, Mr. Eakins was employed by 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 from February 1984
to June 1992. Both McCrory Stores Corporation and Ames Department Stores
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 to 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 to September
1994, and was Director of Technical Sales Services for the Company from May
1993 to April 1994. Prior thereto and for more than the preceding 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 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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 18, 1995,
by (i) each Director and nominee for Director of the Company, (ii)
executive officers and Directors of the Company as a group and (iii) each
person or entity who is a beneficial owner of more than 5% of the Company's
outstanding Common Stock. For purposes of this Proxy Statement, beneficial
ownership of securities is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to vote or
exercise investment discretion with respect to securities, regardless of
any economic interests therein. The information below is based upon the
disclosures made in public filings with the Securities and Exchange
Commission.
Common Stock
Beneficially owned
as of October 18, 1995
Nominees for Director Amount (3) Percent of class
Geoffrey P. Jurick (1) (5) (7) 29,352,642 72.6%
Eugene I. Davis (5) 290,000 (6)
Robert H. Brown, Jr. 16,667 (6)
Peter G. Bunger 8,333 (6)
Jerome H. Farnum 8,333 (6)
Raymond L. Steele 16,667 (6)
Principal Stockholders
Fidenas International Limited, L.L.C.(2) 29,152,542 72.4%
831 Route 10
Suite 38, #113
Whippany, NJ 07981
Elision International, Inc. (4) 1,600,000 4.0%
275 Wyman Street
Waltham, MA 02154
GSE Multimedia Technologies Corporation 12,000,000 29.8%
Kostheimer-Landstrasse 36
55246 Mainz - Kostheim
Germany D6502
All Directors and Officers 29,872,642 73.1%
as a Group (15 persons) (7) (8)
(1) Consists of 15,552,542, 1,600,000 and 12,000,000 shares of Common
Stock held by Fidenas International, Elision International, Inc.
("Elision") and GSE, respectively. Fidenas International is record
holder of 847,458 shares of Common Stock and formerly held such
shares as nominee. The nominee relationship has been terminated and
Fidenas International and Mr. Jurick disclaim beneficial ownership.
Mr. Jurick indirectly owns, through a controlled holding company,
approximately 95% of Fidenas International. In addition, Mr. Jurick
is the manager 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.
(2) Includes 12,000,000 shares of Common Stock owned by GSE and 1,600,000
shares of Common Stock by Elision. Fidenas International, GSE and
Elision may be deemed to be under common control. Does not include
847,458 shares held by Fidenas International, as record holder pursuant
to a subsequently terminated nominee relationship, to which Fidenas
International disclaims beneficial ownership.
(3) Based on 40,252,772 shares of Common Stock outstanding as of October
20, 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 conversion
of the certain warrants issued to the Company's former creditors,
(iii) Common Stock issuable upon exercise of outstanding options,
which are not currently exercisable within 60 days; (iv) Common Stock
issuable upon conversion of the Company's 8-1/2% Senior Subordinated
Convertible Debentures Due 2002 or (v) Common Stock issuable upon the
exercise of warrants granted to the placement agent and 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 approximately 18% of the shares of Elision and 11% of the
shares of GSE, was filed by a majority of the shareholders of the
bank in the Commonwealth of Bahamas on July 29, 1994. See "Legal
Proceedings."
(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) Represents less than 1.0% of the outstanding Common Stock.
(7) 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.
(8) 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
Chapter 11 Plan of Reorganization
Debtor-in-Possession Financing
During the pendency of the Company's Chapter 11 reorganization,
successfully completed on March 31, 1994 (the "Restructuring" or "Plan of
Reorganization"), 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 was 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 of Reorganization
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.
Certain of the officers and Directors of the Company are affiliated with
Fidenas International, Elision and GSE. In connection with the capital
infusion, reimbursement of $568,000 for various legal, accounting and
filing fees was 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 the fiscal year ended March 31,
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. 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 ("Fiscal 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 their claims under their respective employment agreements,
Mr. Holleran's obligation to repay such loan was discharged and Mr.
Wijnen's loan will be repaid through consulting services to be rendered in
calendar 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. Pablo 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, though the Company
has sent notice of its intention to terminate the distribution relationship.
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 sales services. 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 $163,000 for these purchases as
of March 31, 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.
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
individuals who were, and continue to act as, professional advisers to 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, 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 in 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 was terminated
as of July 31, 1995 and the other continued to be employed by the Company and
to receive the benefits described herein until September 22, 1995. In
addition to services rendered to the Company, each of the individuals
continue to devote 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 the purpose 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
John P. Walker, an employee of the Company, will also serve as an officer
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.
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK
The Company's Certificate of Incorporation provides for the authority
to issue 1,000,000 shares of Preferred Stock having a par value of $.01
per share ("Preferred Stock"). The proposed amendment to the Company's
Certificate of Incorporation would amend Section A. of Article Fourth of
the Certificate to increase the authorized shares of the Company's
Preferred Stock from 1,000,000 to 10,000,000 shares. The text of the
present form of Section A. of Article Fourth is annexed as Appendix and
the proposed form of Section A. of Article Fourth is annexed as Appendix B.
At October 20, 1995, 10,000 shares of Preferred Stock were issued and
outstanding, leaving a balance of 990,000 shares of Preferred Stock
available for other purposes.
The Company has not made any decision respecting the issuance of
additional shares of Preferred Stock. However, management deems it wise to
increase the number of authorized shares of Preferred Stock at this time,
because, in its opinion, it is important that management have available to
it the means and flexibility to take advantage of any opportunities that
may occur without incurring the expense or delay involved with holding a
special meeting of stockholders to increase the number of authorized
shares. Some or all of such additional shares would be available for sale
to raise additional equity for the Company or for issuance in the event the
Company acquired a business for consideration which was payable in whole or
in part in shares of the Company's Stock. Further authorization for the
issuance of such shares by a vote of stockholders would not be solicited
prior to such issuance unless required by law. Stockholders have no pre-
emptive right to subscribe for or purchase any additional shares issued by
the Company. Upon effectiveness of the proposed amendment, the Company
will have 9,990,000 shares of the 10,000,000 total authorized shares
available for issuance.
Vote Required for Approval of Amendment
Approval of the amendment to the Certificate of Incorporation
requires the affirmative vote of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE TO APPROVE THE
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
PROPOSAL TO APPROVE THE COMPANY'S 1994
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
General
On October 7, 1994, the Company's Board of Directors adopted, subject
to approval by the Company's stockholders, the Company's 1994 Non-Employee
Director Stock Option Plan (the "Director's Plan") and reserved for
issuance thereunder 300,000 shares of Common Stock. The text of the
Directors' Plan is annexed as Appendix C. The material features of
the Directors' Plan are discussed below, but the description is subject to,
and is qualified in its entirety by, the full text of the Directors' Plan.
The purpose of the Directors' Plan is to provide additional
incentives to attract and retain qualified competent non-employee
Directors, upon whose efforts and judgment the success of the Company is
largely dependent, through the encouragement of stock ownership in the
Company by such persons. In furtherance of this purpose, the Directors'
Plan authorizes the granting of nonqualified stock options to purchase
Common Stock to non-employee Directors. The Company currently has four non-
employee Directors.
Approval of the Directors' Plan by the Company's stockholders is one
of the conditions of Rule 16b-3, a rule promulgated by the Securities and
Exchange Commission, that provides an exemption from the operation of the
"shortswing profit" recovery provisions of Section 16(b) of the Securities
Exchange Act for the grant and resale of options (and the underlying
securities) and certain other transactions by Directors under the
Directors' Plan.
The Directors' Plan is administered by the Directors' Stock Option
Committee (the "Plan Committee"), which is currently comprised of Eugene I.
Davis and Geoffrey P. Jurick. Pursuant to the Directors' Plan, non-
employee Directors are granted options to purchase shares of Common Stock
as follows: (i) options to purchase 25,000 shares of Common Stock were
automatically granted to all current non-employee Directors as of the date
the Directors' Plan was adopted by the Board of Directors; (ii) options to
purchase 25,000 shares of Common Stock will be granted to each non-employee
Director who joins the Company as of the first date subsequent to the
expiration of one year following the date on which such director is first
elected to serve on the Board; and (iii) options to purchase 25,000 shares
of Common Stock will be granted to each non-employee Director who, as of
the close of business on the Anniversary Date [defined to be the later of
(x) the first day subsequent to the expiration of one year following the
date on which a director is first elected to serve, or (y) the date of
adoption of the Directors' Plan], is chairman of a duly constituted
committee of the Board. No person shall be entitled to receive options
covering more than 50,000 shares of Common Stock pursuant to the Plan,
subject to certain anti-dilutive adjustments. For purposes of the
Directors' Plan, a Director is a non-employee Director if he or she has not
served as an employee of the Company or any of its subsidiaries during the
12 months immediately preceding an Anniversary Date. The Plan Committee
has the authority to adopt such rules and regulations and make such
determinations as are not inconsistent with the Directors' Plan. Except as
set forth under "Options Granted Under the Directors' Plan" below, it is
impossible at this time to indicate the precise number of options that will
be granted to non-employee Directors under the Directors' Plan, as the
future composition of the Board cannot be determined.
The shares of Common Stock acquired upon exercise of options granted
under the Directors' Plan will be authorized and unissued shares of Common
Stock. The Company's stockholders will not have any preemptive rights to
purchase or subscribe for the shares reserved for issuance under the
Directors' Plan. If any option granted under the Directors' Plan should
expire or terminate for any reason, other than by reason of having been
exercised in full, the unpurchased shares subject to that option will again
be available for issuance pursuant to the Directors' Plan.
Terms and Conditions
All options granted under the Directors' Plan shall be evidenced by a
written agreement between the Company and the optionee. The terms and
conditions of such agreement, including those relating to the grant, the
time of exercise and other terms of the options, must be consistent with
the Directors' Plan.
Under the Directors' Plan, the exercise price per share for all
options shall be the fair market value of the underlying shares of Common
Stock on the date of grant. For purposes of the Directors' Plan, "fair
market value" shall mean the closing price (or if such price is
unavailable, the average of the high bid price and low asked price) of the
Common Stock on the date of grant, as reported by the American Stock
Exchange. If no closing price or bid and asked prices are available, the
fair market value shall be determined in good faith by the Committee in
accordance with generally accepted valuation principles and such other
factors as the Plan Committee reasonably deems relevant.
No option granted under the Directors' Plan is assignable or
transferable, other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act ("ERISA"), or the rules thereunder, in which
event the terms of the Directors' Plan shall apply to the transfer. During
the lifetime of an optionee, an option is exercisable only by him or her.
An option granted under the Directors' Plan will not become exercisable
until six months after the date on which it is granted, and will remain
exercisable for a period of three years thereafter. The unexercised
portion of any option granted to a non-employee Director under the
Directors' Plan will automatically terminate three months after the date on
which such person ceases to be a Director, except, in the case of the death
of such person, the option will remain exercisable by his or her estate or
heirs for a period of one year.
To prevent dilution of the rights of a holder of an option, the
Directors' Plan provides for adjustment of the number of shares of which
options may be granted, the number of shares subject to outstanding options
and the exercise price of outstanding options in the event of any
subdivision or consolidation of shares, any stock dividend,
recapitalization or other capital adjustment of the Company. Provisions
governing the effect upon options of a merger, consolidation or other
reorganization of the Company are also included in the Directors' Plan.
Options Granted Under the Directors' Plan
On October 7, 1994, each of the Company's current non-employee
Directors was granted options to purchase 25,000 shares of Common Stock at
a purchase price of $1.00 per share. Additionally, options to purchase an
additional 25,000 were granted to the chairman of the Audit Committee and
the Compensation and Personnel Committee. The options were granted under
Rule 701 of the Securities Act of 1933, as amended. Such grants are
expressly subject to the stockholders' ratification of the Directors' Plan
at the Annual Meeting.
Amendments
No option may be granted under the Directors' Plan after April 14,
2003, and any option outstanding on such date will remain outstanding until
it has either expired or has been exercised. The Plan Committee may amend,
suspend or terminate the Directors' Plan at any time, provided that such
amendment may not adversely affect the rights of an optionee under an
outstanding option without the affected optionee's written consent. In
addition, no such amendment may: (a) without first obtaining stockholder
approval, increase the number of shares of Common Stock reserved for
issuance, change the class of persons eligible to receive options, or
involve any other change or modification requiring stockholder approval
under Rule 16b-3 under the Exchange Act; or (b) give discretion to the Plan
Committee with respect to the grant of options; or extend the termination
date of the Directors' Plan.
Federal Income Tax Consequences
The Directors' Plan is not qualified under the provisions of Section
401(a) of the Internal Revenue Code of 1986, as amended, nor is it subject
to any of the provisions of the Employee Retirement Income Security Act of
1974, as amended. An optionee granted an option under the Directors' Plan
will generally recognize, at the date of exercise of such option, ordinary
income equal to the difference between the exercise price and the fair
market value of the shares of Common Stock subject to the option. This
taxable ordinary income will be subject to Federal income tax withholding
and the Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income recognized by the optionee,
provided that such amount constitutes an ordinary and necessary business
expense to the Company and is reasonable.
NEW PLAN BENEFITS
1994 Non-Employee Director Stock Option Plan
Name and Position Dollar Value($)(1) Number of Options
Granted
Raymond L. Steele, $ 106,250 50,000
Director
Robert H. Brown, 106,250 50,000
Director
Jerome H. Farnum, 53,125 25,000
Director
Peter G. Bunger, 53,125 25,000
Director
Group $ 318,750 150,000
(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.
Vote Required for Approval and Recommendation
The Plan Committee approved the Directors' Plan and is recommending
its ratification by the stockholders because it believes that the
Directors' Plan, as proposed, is in the Company's best interests. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy, will be required
for ratification of the Directors' Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ADOPTION
OF THE PLAN
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation of Executive Officers
The following executive compensation disclosures reflect all plan and
non-plan compensation awarded to, earned by, or paid to the named executive
officers of the Company. The "named executive officers" are the Company's
Chief Executive Officer (the "CEO"), regardless of compensation level, and
the four most highly compensated executive officers, other than the CEO
serving as such on March 31, 1995. Where a named executive officer has
served during any part of Fiscal 1995, the disclosures reflect compensation
for the full year in each of the periods presented.
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
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDER- LTIP OTHER
FISCAL COMPEN- STOCK LYING PAY- COMPEN-
Name and Principal YEAR SALARY BONUS SATION AWARDS OPTIONS OUTS SATION
Position(s) (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, 1995 175,000 75,000 19,958 - 200,000 - 5,451
SENIOR VICE-PRESIDENT1994 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 89,125 - - - 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, $39,570 and $0 for Mr. Eakins
paid by the Company in Fiscal 1995, 1994 and 1993, 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 incentive stock options ("ISO's")
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>
<CAPTION>
OPTION GRANTS IN FISCAL 1995
<S> <C> <C> <C> <C> <C> <C>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Grants Price Appreciation
% of Total 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, JR 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 incentive stock options ("ISO's") were granted under the 1994
Stock Compensation Program, and are exercisable commencing one year
after the grant date in the 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:
OPTION EXERCISES IN FISCAL 1995
AND MARCH 31, 1995 OPTION VALUES
<TABLE>
<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, JR. 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.
Employment and Severance Agreements
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) 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 of the
Company 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 adopted by
the Board of Directors ("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 addition to his base salary, Mr. Walker is entitled to an
annual bonus equal to an amount up to 30% of Mr. Walkers' 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.
Anti-Takeover Effect of Certain Provisions
The provisions of the employment agreements may be deemed to have an
anti-takeover effect and may delay, defer, or prevent a tender offer or
takeover attempt that a stockholder may consider to be in the stockholder's
best interest, including attempts that might result in a premium over the
market price for shares held by stockholders.
Report of Compensation and Personnel Committee
The Compensation and Personnel Committee of the Board of Directors (
the "Compensation Committee"), which is composed of two independent non-
employee Directors (see page 3), oversees the Company's executive compensation
strategy. The strategy is implemented through policies designed to support
the achievement of the Company's business objectives and the enhancement of
stockholder value. The Compensation Committee reviews, on an ongoing basis, all
aspects of executive compensation and analyzes information from several
nationally recognized independent compensation surveys.
The Compensation Committee's executive compensation policies support
the following objectives:
The reinforcement of management's concern for enhancing stockholder value.
The attraction and retention of qualified executives.
The provision of competitive compensation opportunities for exceptional
performance.
The basic elements of the Company's executive compensation strategy are:
Base salary. Base salaries for the executive managers of the
Company represent compensation for the performance of defined
functions and assumption of defined responsibilities. The
Compensation Committee reviews each executive's base salary on an
annual basis. In determining salary adjustments, the Compensation
Committee considers the Company's growth in earnings and revenues and
the executive's performance level, as well as other factors relating
to the executive's specific responsibilities. Also considered are the
executive's position, experience, skills, potential for advancement,
responsibility and current salary in relation to the expected level
of pay for the position. The considerations of the Compensation
Committee are impacted by the information provided by the
compensation surveys analyzed by the Compensation Committee. These
surveys include companies with which the Company competes for senior-
level executives. The Compensation Committee exercises its judgment
based upon the above criteria and does not apply a specific formula
or assign a weight to each factor considered. The Committee decided
upon salary changes for executive officers effective April 1, 1995
after reviewing each officer's duties and performance level for the
previous year, considering the Chief Executive Officer's
recommendations and noting that the majority of management did not
receive base salary increases during the fiscal years ended
March 31, 1993, 1994 or 1995.
Annual incentive compensation. At the beginning of each year,
the Board of Directors establishes performance goals of the Company
for that year, which may include target increases in sales, net
income and earnings per share, as well as more subjective goals with
respect to marketing, product introduction and expansion of customer
base.
Long-term incentive compensation. The Company's long-term
incentive compensation for management and employees consists of the
1994 Stock Compensation Program.
The Compensation Committee views the granting of stock options as a
significant method of aligning management's long-term interests with those
of the stockholders. The Compensation Committee determines awards to
executives based on its evaluation of criteria that include
responsibilities, compensation, past and expected contributions to the
achievement of the Company's long-term performance goals, and current
competitive practice as indicated by the compensation surveys reviewed by
the Company. Stock options are designed to focus executives on the long-
term performance of the Company by enabling executives to share in any
increases in value of the Company's stock.
The Compensation Committee encourages executives, individually and
collectively, to maintain a long-term ownership position in the Company's
stock. The Compensation Committee believes this ownership, combined with a
significant performance-based incentive compensation opportunity, forges a
strong linkage between the Company's executives and its stockholders.
Compensation of the Chief Executive Officer
Mr. Geoffrey P. Jurick is the Chief Executive Officer and Chairman of
the Board of Directors of the Company. The Compensation Committee
considered the Company's results in all aspects of its business in its
review of Mr. Jurick's performance during Fiscal 1995.
The Company's financial condition improved after successfully
emerging from a bankruptcy proceeding. As a result of the proceeding, the
Company reduced its institutional debt by approximately $203 million. In
Fiscal 1995, stockholders' equity grew 26% to $53.7 million, and working
capital increased 32% to $42.6 million. Additionally, the Company continues
very active efforts to introduce new products into the marketplace and
develop new markets.
Pursuant to an employment agreement between the Company and Mr.
Jurick, Mr. Jurick's base salary is reviewed annually and is subject to
discretionary increases by the Board of Directors. The Board approved an
increase in Mr. Jurick's annual base salary from $390,000 to $490,000,
effective April 1, 1995. On July 7, 1994, the Board granted Mr. Jurick
stock options for 600,000 shares, which will vest in equal annual
increments over a three-year period.
Policy on Qualifying Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), for tax years beginning on or after January 1, 1994, provides that
public companies may not deduct in any year compensation in excess of $1
million paid to any of the individuals named in the Summary Compensation
Table that is not, among other requirements, "performance based," as
defined in Section 162(m). None of the named individuals received
compensation in excess of $1 million during Fiscal 1995.
COMPENSATION AND PERSONNEL COMMITTEE
Raymond L. Steele, Chairman
Robert H. Brown, Jr.
The foregoing report of the Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference the Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under either act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From April 1994 until July 10, 1995, the Compensation and Personnel
Committee of the Board of Directors consisted of Messrs. Brown, Steele and
Colin Honess. Mr. Honess resigned from the Committee and the Board of
Directors effective July 10, 1995. Until January of 1995, Mr. Honess
served as President and Director of Fidenas International Bank Limited, a
banking institution organized under the laws of the Commonwealth of Bahamas.
The bank is the subject of liquidation proceedings pending in Nassau,
Bahamas. Mr. Jurick was affiliated with the bank.
COMPARISON OF CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the proxy
statement into any filing under the Securities Act of 1933, as amended or
the Securities Exchange Act of 1934, as amended, except to the extent that
the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
The graph below compares the cumulative total stockholders' return on
the Company's Common Stock for the period December 22, 1994 to March 31,
1995, with the cumulative total return over the same period of the American
Stock Exchange and a peer group of companies selected by the Company for
purposes of comparison, which includes Cobra Electronics, Matushita
Electric Industrial Co. Ltd., Philips Electronics N.V., Sony Corp. and
Zenith Electronics. The peer group assumes the investment of $100 in the
Company's Common Stock, on December 22, 1994 and reinvestment of all
dividends, if any. The information in the graph was provided by Media
General Financial Services ("MGFS"). The comparison of the returns are as
follows:
<TABLE>
<CAPTION> COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDING
COMPANY 12/22/94 12/31/94 01/31/95 02/28/95 03/31/95
EMERSON RADIO CP 100.00 110.81 121.62 129.73 135.14
PEER GROUP 100.00 100.23 98.86 100.49 106.58
BROAD MARKET 100.00 100.00 100.81 102.77 106.82
THE BROAD MARKET INDEX CHOSEN WAS:
AMERICAN STOCK EXCHANGE
THE PEER GROUP CHOSEN WAS:
Customer Selected Stock List
THE PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
COBRA ELECTRONICS CP
MATSUSHITA ELECTRIC INDL
PHILIPS ELECTRONICS NV
SONY CP
ZENITH ELECTRONICS CP
</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.
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 London Interbank Offered Rate for one year
obligations of 5.63%, as of June 22, 1994, and are due and payable in two
installments, (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 are 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 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.
Teletech Litigation
In December 1990, an action entitled Emerson Radio (H.K.) 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 in the above 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 Court to abstain. On
October 19, 1994, the Court entered an order of abstention which directed
the parties to litigate in California. The Company appealed to the District
Court of New Jersey which affirmed the order of the Bankruptcy Court. 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 Assessment.
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 Fidenas Investment Limited with
respect to various business relations and transactions entered into between
the shareholders, certain affiliates and their principals, including Mr.
Jurick and Donald Stelling, former Chairman of the Board of the Company.
Mr. Stelling resigned on December 2, 1993 from the Company's Board of
Directors creating uncertainty about the ability of Fidenas Investment
Limited 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 Fidenas Investment Limited
into an escrow account for the purpose of securing the Company's DIP
Financing obtained in connection with the Restructuring. At the date of
this Memorandum, Messrs. Jurick and Bunger, Directors of the Company,
comprise the Board of Directors of Fidenas Investment Limited. The use 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 Fidenas Investment Limited. The proceeding was brought by
one of its shareholders, a Bahamian entity controlled by Petra Stelling,
wife of Donald Stelling, former Chairman of the Board of the Company. The
liquidator appointed by the Bahamian Court for the winding-up of Fidenas
Investment Limited 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 use 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 United
States 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 (including Mr. Bunger) and affiliates in civil and criminal
actions in Switzerland for various claims relating to their business
relationships and transactions. The Swiss authorities have commenced
investigations of Messrs. Jurick, Farnum and Bunger with respect to
certain charges raised by the Stellings. 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. 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 was filed
with respect to the decree. The Company has been advised the appeal
was withdrawn on September 21, 1995 and a permanent liquidator appointed
for one of the affiliated entities.
Though the Company is not a party to any of the proceedings in
Switzerland or in the Commonwealth of Bahamas, the Company has and intends
to continue to monitor the litigation. The Company believes none of the
litigation will have a material adverse effect on the Company or its assets
although 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 United States credit facility.
Additionally, such a change in control could result in a second "ownership
change", as defined in Section 382 of the Code, further limiting the
Company's ability to use its net operating loss carryforwards and the
credit carryforwards.
The official liquidator appointed in the Commonwealth of Bahamas for
Fidenas International Bank Limited 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 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, the subject shares deposited into the
registry of the Court pending further order 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 the 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 actions of each such proceedings 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.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of change in ownership of Common Stock and
other equity securities of the Company. Executive officers, Directors and
greater than ten percent stockholders are required by SEC Regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other
reports were required, during the year ended March 31, 1995, all Section
16(a) filing requirements applicable to the officers, Directors and greater
than ten percent beneficial owners were complied with except that (i)
initial reports of ownership were made for each officer and Director on
January 10, 1995 after shares of Common Stock began trading on the American
Stock Exchange on December 22, 1994, (ii) the initial reports filed by
Geoffrey Jurick and Gerald Calabrese inadvertently omitted beneficial
ownership of 100 and 987 shares of Common Stock, respectively, which
omissions were subsequently cured and (iii) and Fidenas International
Limited LLC and GSE Multimedia Technologies Corp. did not timely file
initial reports of ownership. It is the practice of the Company to attend
to the filing of Section 16(a) forms on behalf of the officers of the
Company.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company selected the firm of Ernst &
Young LLP as independent auditors for the fiscal year ending March 31, 1996
to audit the Company's financial statements and to perform other accounting
services. The Board of Directors considers this firm well qualified. The
selection of Ernst & Young LLP is submitted to the stockholders for
ratification. The affirmative vote of a majority of the shares of Common
Stock present or represented and entitled to vote on the ratification at
the Annual Meeting is required for approval. A representative of Ernst &
Young LLP is expected to attend the Annual Meeting of Stockholders with the
opportunity to make a statement if such representative desires to do so and
to be available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS RATIFY
THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
STOCKHOLDER PROPOSALS
Any stockholder of the Company desiring to present a proposal for
action at the Annual Meeting of Stockholders to be held in 1996 must
deliver the proposal to the executive offices of the Company no later than
March 1, 1996, unless the Company notifies the stockholders otherwise. Only
those proposals that are proper for stockholder action and otherwise proper
may be included in the Company's Proxy Statement for the Annual Meeting.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the meeting. Abstentions and broker non-votes are
counted for purposes of determining whether a quorum is present. If a
quorum is not present or represented by proxy, the stockholders entitled to
vote thereat, present in person or represented by proxy, have the power to
adjourn the meeting from time to time, without notice other than an
announcement at the meeting until a quorum is present or represented. At
any such adjourned meeting at which a quorum is present or represented, any
business may be transacted that might have been transacted at the meeting
as originally called.
On all matters (including election of Directors) submitted to a vote
of the stockholders at the Meeting or any adjournment thereof, each
stockholder will be entitled to one vote for each share of Common Stock
owned of record by such stockholder at the close of business on October 20,
1995. Abstentions and broker non-votes will be treated as a vote for each of
the proposals recommended by the Board of Directors other than the proposal
for the amendment to the Company's Certificate of Incorporation.
ACTIONS TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and
returned will be totaled at the meeting and any adjournment thereof and
will be voted in accordance with the instructions thereon. Any proxy upon
which no instructions have been indicated with respect to a specified
matter will be voted as follows with respect to such matters:
(1) For election of management's Directors to serve until the
Annual Meeting in 1996;
(2) For approval of an amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares of
Preferred Stock, $.01 par value, from 1,000,000 to 10,000,000;
(3) For approval of the 1994 Non-Employee Director Stock Option
Plan; and
(4) For ratification of the selection by the Board of Directors of
Ernst & Young LLP as independent auditors for the Company for
the year ending March 31, 1996.
Each of the nominees for election as director has agreed to serve if
elected. The Company knows of no reason why any of the nominees for
election as directors would be unable to serve. Should any or all of the
nominees be unable to serve, all proxies returned to the Company will be
voted in accordance with the best judgment of the persons named as proxies,
except where a contrary instruction is given.
The Company knows of no other matters, other than those stated above,
to be presented for consideration at the Annual Meeting. If, however,
other matters properly come before the Annual Meeting or any adjournments
thereof, it is the intention of the persons named in the accompanying proxy
to vote such proxy in accordance with their judgment on any such matters.
The persons named in the accompanying proxy may also, if it is deemed
advisable, vote such proxy to adjourn the Annual Meeting from time to time.
PROXY SOLICITATION
The expenses of the solicitation of proxies will be borne by the
Company. Solicitation of proxies may be in person or by mail, telephone or
telegraph by Directors, current executive officers and regular employees of
the Company. The Company will request banking institutions, brokerage
firms, custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of Common Stock of the Company held of
record by such persons, and the Company will reimburse the reasonable
forwarding expenses. The Company has retained the services of American
Stock Transfer to solicit proxies by mail, telephone, telegraph or personal
contact. The estimated cost of the solicitation will be approximately
$15,000 plus out-of-pocket expenses.
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written notice to the
Company of such revocation; (b) by voting in person at the Annual Meeting;
or (c) by executing and delivering to the Company a later-dated proxy.
OUTSTANDING COMMON STOCK
The only outstanding voting securities of the Company are shares of
its Common Stock, each share of which entitles the holder thereof to one
vote. At October 20, 1995, there were outstanding and entitled to vote
40,252,772 shares of its Common Stock. Only stockholders of record at the
close of business on October 20, 1995 are entitled to notice of, and
to vote at, the 1995 Annual Meeting of Stockholders and any adjournments
thereof.
By Order of the Board of Directors
Albert G. McGrath, Jr.
Senior Vice-President, Secretary and
General Counsel
Parsippany, New Jersey
October 27, 1995
(#19)
Appendix A
Present:
Article Fourth
A. The total number of shares of all classes of
stock which the Corporation shall have authority to issue
is seventy six million (76,000,000) consisting of:
(a) one million (1,000,000) shares of Preferred
Stock, par value one cent ($.01) per share (the
"Preferred Stock"); and
(b) seventy-five million (75,000,000) shares of
Common Stock, par value one cent ($.01) per share (the
"Common Stock").
Appendix B
Proposed:
Article Fourth
A. The total number of shares of all classes of
stock which the Corporation shall have the authority to
issue is eighty five million (85,000,000) consisting of:
(a) ten million (10,000,000) shares of Preferred
Stock, par value one cent ($.01) per share (the
"Preferred Stock"); and
(b) seventy-five million (75,000,000) shares of
Common Stock, par value one cent ($.01) per share (the
"Common Stock").
Appendix C
EMERSON RADIO CORP.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of this Stock Option Plan
("Plan"), to be known as the "Emerson Radio Corp. 1994 Non-Employee
Director Stock Option Plan" is to attract and retain qualified personnel to
accept and continue in positions of responsibility as outside directors
with Emerson Radio Corp., a Delaware corporation ("Company").
2. Definitions. As used in the Plan, unless the context
requires otherwise, the following terms shall have the following meanings:
(a) "Anniversary Date" shall mean, for each Outside Director, the
later of (x) the first day subsequent to the expiration of one year
following the date on which such Outside Director is first elected to
serve on the Board or (y) the Effective Date.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Certificate" shall mean the Certificate of Incorporation on
file with the Secretary of State of Delaware.
(d) "Committee" shall mean a committee of the Board designated by
the Board and consisting solely of members of the Board who are not
Outside Directors.
(e) "Common Stock" shall mean the Company's common stock, par value
$0.01 per share, authorized for issuance pursuant to the Certificate
or if, pursuant to the adjustment provisions of Section 11 hereof,
another security is substituted for the Common Stock, such other
security.
(f) "Effective Date" shall mean the date the Plan is adopted by the
Board.
(g) "Fair Market Value" shall mean the fair market value of the
Common Stock on the Anniversary Date. If on such date (or, if such
date is not a business day, on the next business date next succeeding
such date) the Common Stock is listed on a stock exchange or is
quoted on the automated quotation system of NASDAQ, the Fair Market
Value shall be the closing sale price (or if such price is
unavailable, the average of the high bid price and low asked price)
on such date. If no such closing sale price or bid and asked prices
are available, the Fair Market Value shall be determined in good
faith by the Committee in accordance with generally accepted
valuation principles and such other factors as the Committee
reasonably deems relevant.
(h) "Option" shall mean the right, granted pursuant to Section 7 of
the Plan, to purchase one or more shares of Common Stock.
(i) "Optionee" shall mean a person to whom an option has been
granted under the Plan.
(j) "Outside Director" shall mean any member of the Board who, on
such person's Anniversary Date, shall not have served as an employee
of the Company or any of the Company's subsidiaries during the twelve
months proceeding such Anniversary Date.
3. Stock Subject to the Plan. There will be reserved for
issuance upon the exercise of Options granted from time to time under
the Plan an aggregate of 300,000 shares of Common Stock, subject to
adjustment as provided in Section 11 hereof. The Committee shall
determine from time to time whether all or part of such 300,000
shares shall be authorized but unissued shares of Common Stock or
issued shares of Common Stock which shall have been reacquired by the
Company and which are held in its treasury. If any Option granted
under the Plan should expire or terminate for any reason without
having been exercised in full, the unpurchased shares shall become
available for the grant of Options under the Plan.
4. Administration of the Plan. The Plan shall be administered by
the Committee. Subject to the provisions of the Plan, the Committee shall
have full discretion:
(a) To determine the exercise price of Option granted hereunder in
accordance with Section 7(b) hereof;
(b) To interpret the Plan;
(c) To promulgate, amend and rescind rules and regulations relating
to the Plan, provided, however, that no such rules or regulations
shall be inconsistent with any of the terms of the Plan;
(d) To subject any Option to such additional restrictions and
conditions (not inconsistent with the Plan) as may be specified when
granting the Option; and
(e) To make all other determinations in connection with the
administration of the Plan.
5. Eligibility. The only persons who shall be eligible to
receive Options under the Plan shall be persons who, on their applicable
Anniversary Date, constitute Outside Directors.
6. Term. No Option shall be granted under the Plan more than ten
years after the date that the Plan is first adopted by the Board.
7. Grant of Stock Options. The following provisions shall apply
with respect to Options granted hereunder:
(a) Grant. At the close of business on the Anniversary Date of
each Outside Director during the term of the Plan, the Company shall
grant an option to purchase twenty five thousand (25,000) shares of
Common Stock (subject to adjustment pursuant to Section 11 hereof),
to such director and an additional option to purchase twenty five
thousand (25,000) shares of Common Stock to each Outside Director
who, as of the close of business on the Anniversary Date applicable
to such Outside Director, is chairman of a duly constituted committee
of the Board, it being understood that no person shall be entitled to
receive Options covering more than 50,000 shares of Common Stock
(subject to adjustment pursuant to Section 11 hereof) pursuant to the
Plan.
(b) Option Price. The price at which shares of Common Stock
shall be purchased upon exercise of an Option shall be established by
the Committee in its sole discretion at a price not to exceed the
Fair Market Value of such shares on the Anniversary Date.
(c) Expiration. Except as otherwise provided in Section 10 hereof,
each option shall cease to be exercisable ten years after the date on
which it is granted.
8. Exercise of Options. Unless the exercise date of an Option
is accelerated pursuant to Section 12 hereof, the following provisions
shall apply, subject to the restrictions set forth in Section 10 with
respect to the exercise of Options:
(a) during the first year after the Anniversary Date, such Option
shall not be exercisable; and
(b) during the second year after the Anniversary Date, such Option
may only be exercised as to up to 33% of the shares of Common Stock
initially covered thereby; and
(c) during the third year after the Anniversary Date, such Option
may only be exercised as to up to 66 2/3% of the shares of Common
Stock initially covered thereby; and
(d) an Option may be exercised in its entirety or as to any portion
thereof at any time during the fourth year after the Anniversary Date
and thereafter until the term of such Option expires or otherwise
ends.
9. Method of Exercise. To the extent permitted by Section 8
hereof, Optionees may exercise their Options from time to time by giving
written notice to the Company. The date of exercise shall be the date on
which the Company receives such notice. Such notice shall be on a form
furnished by the Company and shall state the number of shares to be
purchased and the desired closing date, which date shall be least fifteen
days after the giving of such notice, unless an earlier date shall have
been mutually agreed upon. At the closing, the Company shall deliver to
the Optionee (or other person entitled to exercise the Option) at the
principal office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates for such shares against payment
in full of the Option price for the number of shares to be delivered, such
payment to be by a certified or bank cashier's check and/or, if permitted
by the Committee of capital stock of the Company having a Fair Market Value
(as determined pursuant to Section 2(f)) on the date of exercise equal to
the excess of the purchase price for the shares purchased over the amount
(if any) of the certified or bank cashier's check. If the Optionee (or
other person entitled to exercise the Option) shall fail to accept delivery
of any or pay for all or any part of the shares specified in his notice
when the Company shall tender such shares to him, his right to exercise the
Option with respect to such unpurchased shares may be terminated.
10. Termination of Board Status. In the event that an Optionee
ceases to serve on the Board for any reason other than death or disability,
such Optionee's Options shall automatically terminate three months after
the date on which such service terminates, but in any event not later than
the date on which such Options would terminate pursuant to Section 7(c)
hereof. In the event that an Optionee is removed from the Board by means
of a resolution which recites that the Optionee ceases to serve on the
Board by reason of death or disability, an Option exercisable by him shall
terminate one year after the date of death or disability of the Optionee,
but in any event not later than the date on which such Options would
terminate pursuant to Section 7(c) hereof. During such time after death,
an option may be executed only by the Optionee's personal representative,
executor or administrator, as the case may be. No exercise permitted by
this Section 10 shall entitle an Optionee or his personal representative,
executor or administrator to exercise any portion of any Option beyond the
extent to which such Option is exercisable pursuant to Section 8 hereof on
the date such Optionee ceases to serve on the Board.
11. Changes in Capital Structure. In the event that, by reason of a
stock dividend, recapitalization, reorganization, merger, consolidation,
reclassification, stock split-up, combination of shares, exchange of shares
or comparable transaction occurring on a date subsequent to the Effective
Date, the outstanding shares of Common Stock of the Company are hereafter
increased or decreased, or changed into or exchanged for a different number
or kind of shares or other securities of the Company or of any other
corporation, then appropriate adjustments shall be made by the Committee to
the number and kind of shares reserved for issuance under the Plan upon the
grant and exercise of Options and the number and kind of shares subject to
the automatic grant provisions of Section 7(a) hereof. In addition, the
Board shall make appropriate adjustments to the number and kind of shares
subject to outstanding Options, and the purchase price per share under
outstanding Options shall be appropriately adjusted consistent with such
change. In no event shall fractional shares be issued or issuable pursuant
to any adjustment made under this Section 11. The determination of the
Committee as to any such adjustment shall be final and conclusive.
12. Mandatory Exercise. Notwithstanding anything to the
contrary set forth in the Plan, in the event that (x) the Company should
adopt a plan of reorganization pursuant to which (i) it shall merge into,
consolidate with, or sell substantially all of its assets to, any other
corporation or entity or (ii) any other corporation or entity shall merge
into the Company in a transaction in which the Company shall become a
wholly-owned subsidiary of another entity, or (y) the Company should adopt
a plan of complete liquidation, then (I) all Options granted hereunder
shall be deemed fully vested and (II) the Company may give an Optionee
written notice therefor requiring such Optionee either (a) to exercise his
or her Options within thirty days after receipt of such notice, including
all installments whether or not they would otherwise be exercisable at the
date, (b) in the event of a merger or consolidation in which shareholders
of the Company will receive shares of another corporation, to agree to
convert his or her Options into comparable options to acquire such shares,
(c) in the event of a merger or consolidation in which shareholders of the
Company will receive cash or other property (other than capital stock), to
agree to convert his or her Options into such consideration (in an amount
representing the appreciation over the exercise price of such Options) or
(d) to surrender such Options or any unexercised portion thereof.
13. Option Grant. Each grant of an option under the Plan will
be evidenced by a document in such form as the Committee may from time to
time approve. Such document will contain such provisions as the Committee
may in its discretion deem advisable, including without limitation
additional restrictions or conditions upon the exercise of an Option,
provided that such provisions are not inconsistent with any of the
provisions of the Plan. The Committee may require an Optionee, as a
condition to the grant or exercise of an Option or the payment therefor, to
make such representations and warranties and to execute and deliver such
notices of exercise and other documents as the Committee may deem
consistent with the Plan or the terms and conditions of the option
agreement. Not in limitation of any of the foregoing, in any such case
referred to in the proceeding sentence the Committee may also require the
Optionee to execute and deliver documents (including the investment letter,
described in Section 14), containing such representations, warranties and
agreements as the Committee or counsel to the Company shall deem necessary
or advisable to comply with any exemption from registration under the
Securities Act of 1993, as amended, any applicable State securities laws,
and any other applicable law, regulation or rule.
14. Investment Letter. If required by the Committee, each
Optionee shall agree to execute a statement directed to the Company, upon
each and every exercise by such Optionee of any Options, that shares issued
thereby are being acquired for investment purposes only and not with a view
to the redistribution thereof, and containing an agreement that such shares
will not be sold or transferred unless either (1) registered under the
Securities Act of 1933, as amended, or (2) exempt from such registration in
the opinion of Company counsel. If required by the Committee, certificates
representing shares of Common Stock issued upon exercise of Options shall
bear a restrictive legend summarizing the restrictions on transferability
applicable thereto.
15. Requirements of Law. The granting of Options, the issuance
of shares upon the exercise of an Option, and the delivery of shares upon
the payment therefor shall be subject to compliance with all applicable
laws, rules, and regulations. Without limiting the generality of the
foregoing, the Company shall not be obligated to sell, issue or deliver any
shares unless all required approvals from governmental authorities and
stock exchanges shall have been obtained and all applicable requirements of
governmental authorities and stock exchanges shall have been complied with.
16. Tax Withholding. The Company, as and when appropriate, shall
have the right to require each Optionee purchasing or receiving shares of
Common Stock under the Plan to pay any federal, state, or local taxes
required by law to be withheld.
17. Nonassignability. No Option shall be assignable or transferable
by an Optionee except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the
Employee Retirement Income Security Act ("ERISA") or the rules thereunder,
in which event the terms of this Plan, including all restrictions and
limitations set forth herein, shall continue to apply to the transferee.
Except as otherwise provided in the immediately preceding sentence, during
an Optionee's lifetime, no person other than the Optionee may exercise his
or her Options.
18. Optionee's Rights as Shareholder and Board Member. An Optionee
shall have no rights as a shareholder of the Company with respect to any
shares subject to an Option until the Option has been exercised and the
certificate with respect to the shares purchased upon exercise of the
Option has been duly issued and registered in the name of the Optionee.
Nothing in the Plan shall be deemed to give an Optionee any right to a
continued position on the Board nor shall it be deemed to give any person
any other right not specifically and expressly provided in the Plan.
19. Termination and Amendment. The Board may at any time
terminate or amend the Plan as it may deem advisable, except that (i) the
provisions of this Plan relating to the amount of shares covered by
Options, the exercise price of Options or the timing of Option grants or
exercises shall not be amended more than once every six months, other than
to comport with changes in the Code, ERISA or the rules thereunder, (ii) no
such termination or amendment shall adversely affect any Optionee with
respect to any right which has accrued under the Plan in regard to any
Option granted prior to such termination or amendment, and (iii) no such
amendment shall be effective without approval of the stockholders of the
Company if the effect of such amendment is to (a) materially increase the
number of shares of Common stock authorized for issuance pursuant to the
Plan (otherwise than pursuant to Section 11), (b) increase the number of
shares of Common Stock subject to Options, (c) reduce the exercise price of
Options, (d) materially modify the requirements as to eligibility for
participation in the Plan or (e) materially increase the benefits accruing
to participants under the Plan.
20. Sunday or Holiday. In the event that the time for the
performance of any action or the giving of any notice is called for under
the Plan within a period of time which ends or falls on a Sunday or legal
holiday, such period shall be deemed to end or fall on the next date
following such Sunday or legal holiday which is not a Sunday or legal
holiday.
21. Stockholder Approval. This Plan shall be presented to the
Company's stockholders for their ratification and approval by vote of a
majority of such stockholders present or represented on the date of the
meeting of the stockholders at which this Plan is presented for approval.
Options may be granted prior to stockholder approval of this Plan.
- -----------------------------------------------------------------------------
FORM OF PROXY CARD
EMERSON RADIO CORP.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 28, 1995
The undersigned Stockholder of Emerson Radio Corp. (the "Corporation")
hereby appoints Geoffrey P. Jurick and Eugene I. Davis, or either of
them, acting singly in the absence of the others, attorneys and proxies,
with full power of substitution and revocation, to vote all of the shares
of Common Stock of the Corporation, which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Corporation
to be held at the Parsippany Hilton, One Hilton Court, Parsippany, New
Jersey, November 28, 1995 at 10:00 a.m. (local time) or any adjournment
or postponement thereof.
(To Be Signed on Reverse Side)
============================================================================
[ ] Please mark your
votes as in this
example
This proxy will be voted as specified. If no direction is given, this proxy
will be voted "FOR" proposals 1,2,3 and 4.
<TABLE>
<S> <C> <C> <C>
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees Nominees:
to the contrary) listed Geoffrey P. Jurick
Eugene I. Davis
1. Election of Directors [ ] [ ] Robert H. Brown, Jr.
Peter G. Bunger
Raymond L. Steele
Jerome H. Farnum
</TABLE>
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name below:
________________________________________________________
2. Approval of the amendment of the Company's FOR AGAINST ABSTAIN
Certificate of Incorporation increasing
the number of authorized number of Preferred [ ] [ ] [ ]
Stock, $.01 par value, from 1,000,000 to
10,000,000
3. Approval of the 1994 Non-Employee Director [ ] [ ] [ ]
Stock Option Plan
4. To ratify the selection of Ernst & [ ] [ ] [ ]
Young LLP as independent auditors
of the Company for fiscal year
1996.
SIGNATURE(S)_______________________________________________ DATE _________
(Note: Please sign name exactly as it appears on stock certificate.
Joint owners should each sign personally, give full title when signing
as attorney, director, administrator, trustee or guardian, etc. The
signature hereby acknowledges receipt of Notice of Annual Meeting
of Stockholders and Proxy Statement dated October 27, 1995.
