_____________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-25226
EMERSON RADIO CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-3285224
_______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organzation) Number)
Nine Entin Road, Parsippany, NJ 07054
_______________________________________ _____________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 884-5800
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Shares, par value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Series A
Preferred Stock and Warrants.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days. [X] YES [ ] NO.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of the voting stock of the registrant held by non-
affiliates of the registrant at June 15, 1995 (computed by reference to
the last reported sale price of the Common Shares on the American Stock
Exchange on such date): $26,042,103.
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [X] YES [ ] NO.
Number of Common Shares outstanding at June 15, 1995: 40,252,772
DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement for the 1995
Annual Meeting of Stockholders: Part III
__________________________________________________________________________
PART I
Item 1. BUSINESS
General
Emerson Radio Corp. ("Emerson" or the "Company"), one of the nation's
largest volume consumer electronics distributors, directly and through
subsidiaries, designs, sources, imports and markets a variety of video and
audio consumer electronics and microwave oven products. The Company
distributes its products primarily through mass merchants and discount
retailers. The Company relies primarily on the strength of its "Emerson"
trademark, a nationally recognized trade name in the consumer electronics
industry. The trade name "Emerson Radio" dates back to 1912 and is one of
the oldest and most well respected names in the consumer products industry.
In addition, the Company offers a line of audio products for sale under the
"H.H. Scott" brand name. Approximately $15 billion of factory sales are
generated by the industry in the market segment in which the Company
competes. In calendar year 1994, Emerson was among the top three brand
names in unit sales volume of video cassette recorders ("VCRs") and TV/VCR
combinations and among the top five brand names in unit sales volume of
color televisions.
The Company believes it possesses an advantage over its competitors
due to (i) the Emerson brand recognition, (ii) its extensive distribution
base and established relations with customers in the mass merchant and
discount retail channels of distribution, (iii) its sourcing expertise and
established vendor relations, and (iv) an infrastructure boasting personnel
experienced in servicing and providing logistical support to the domestic
mass merchant distribution channel. Emerson intends to leverage its key
strengths to offer a broad variety of current and new consumer products to
retail customers in developing markets worldwide. The Company intends to
form joint ventures and enter into licensing agreements which will take
advantage of the Company's trademarks and utilize the Company's logistical
and sourcing advantages.
The Company's core business consists of the distribution and sale of
various low to moderately priced product categories, including black and
white and color televisions, VCRs, video cassette players ("VCPs"), TV/VCR
combination units, home stereo and portable audio products and microwave
ovens. The majority of the Company's marketing and sales of these products
is concentrated in the United States and, to a lesser extent, Canada and
certain other international regions. Emerson's major competition in these
markets are foreign-based manufacturers and distributors. See "Business -
Competition."
The Company successfully restructured its financial position (the
"Restructuring") through a plan of reorganization, confirmed by the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"), pursuant to the provisions of Chapter 11 of the Bankruptcy Code on
March 31, 1994 ("Plan of Reorganization"). Through the Restructuring, the
Company reduced its institutional debt by approximately $203 million.
Additionally, the Company increased its net sales by 34% in the fiscal year
ended March 31, 1995, the fiscal year immediately following its emergence
from bankruptcy, as compared to the prior fiscal year, and since the fiscal
year ended March 31, 1993, has reduced its annual fixed operating costs by
more than 50%.
The Company was originally formed in the State of New York in 1956
under the name Major Electronics Corp. In 1977, the Company reincorporated
in the State of New Jersey and changed its name to Emerson Radio Corp. On
April 4, 1994, the Company was reincorporated in Delaware by merger of its
predecessor into its wholly-owned Delaware subsidiary formed for such
purpose. References to "Emerson" or the "Company" refers to Emerson Radio
Corp. and its subsidiaries, unless the context otherwise indicates. The
Company's principal executive offices are located at Nine Entin Road,
Parsippany, New Jersey 07054-0430. The Company's telephone number in
Parsippany, New Jersey, is (201) 884-5800.
Company Products
The Company directly and through subsidiaries designs, sources,
imports and markets a variety of video and audio consumer electronics and
microwave oven products, primarily on the strength of its "Emerson"
trademark, a nationally recognized symbol in the consumer electronics
industry. The Company's core business currently consists of the
following video and audio product categories as well as microwave ovens:
Video Products Audio Products
Color Televisions Shelf systems
Black and White
Specialty Televisions CD stereo systems
Color Specialty Televisions Portable audio,
cassette and CD systems
Color TV/VCR Combination Units AM/FM Bicycle radios
Video Cassette Recorders Personal audio, cassette
and CD systems
Specialty Video Cassette Players Digital clock radios
All of the Company's products offer various features. Specialty
televisions include products with built-in stereo cassette players,
AM/FM radios and/or AC/DC capabilities. Color television units range in
screen size from 5 inches to 25 inches and specialty color televisions are
offered in 5 inch and 9 inch units. Combination units range in screen size
from 9 inches to 25 inches. Portable audio systems incorporate AM/FM radios
and/or cassette and/or CD players in a variety of models. Microwave
ovens range in size from 0.6 cubic feet to 1.2 cubic feet containing
features such as turntables, key pad touch controls, auto defrost and
multi-power levels. The Company is also introducing ready-to-assemble
furniture and personal safety products to complement its current
product line.
Growth Strategy
The Company believes that the "Emerson" trademark is widely
recognized on a world-wide basis. A principal component of the
Company's growth strategy is to utilize this brand name recognition together
with the Company's reputation for quality and cost competitive products to
aggressively promote its product lines within the United States and
Canada and targeted geographic areas on an international basis. The
Company's management believes that the Company will be able to compete more
effectively in the highly competitive consumer electronics and microwave oven
industries, domestically and internationally, by combining innovative
approaches to the Company's current product line and augmenting its product
line with complementary products. The Company intends to pursue such plans
either on its own, or by forging new relationships, including through license
arrangements, partnerships or joint ventures. The Company has successfully
negotiated definitive licensing arrangements with its largest supplier,
a distributor of consumer electronics accessories, and a manufacturer of
clocks and watches, and the Franklin Mint. See "Business-Licensing".
Further, the Company is currently involved in negotiations with different
parties with respect to additional similar transactions.
The Company's strategic focus is to: (i) develop and expand its
distribution of consumer electronics products in the domestic marketplace
to new customers and develop and distribute new products for its own
account, such as ready-to-assemble furniture and personal safety
products; (ii) capitalize on opportunities to license the "Emerson" and
"H.H. Scott" trade names; (iii) leverage and exploit its sourcing
capabilities, buying power and logistics expertise in the Far East either
internally or on behalf of third parties; and (iv) expand international
sales including not only core consumer electronic products but also other
consumer products such as ready-to-assemble furniture and personal safety
products.
Sales and Distribution
The Company has implemented an integrated system to coordinate the
purchasing, sales and distribution segments of its operations. The
Company is equipped to receive orders from its major accounts electronically
or by the conventional modes of facsimile, telephone or mail. The Company
does not have long-term contracts with any of its customers, but rather
receives orders on an ongoing basis. Products imported by the Company
(generally from the Far East) are shipped by ocean freight and then stored
in contracted public warehouse facilities for shipment to customers.
Products manufactured by a vendor in Indiana are stored in public warehouses
on an interim basis until shipped to the Company's customers. All
merchandise received by Emerson is automatically updated into the
Company's on-line inventory system. As a purchase order is received
and filled, warehoused product is labeled and prepared for outbound
shipment to Company customers by common, contract or small package carriers.
The Company also makes available to its customers (through
subsidiaries) a direct import program, pursuant to which products are
imported directly by the Company's customers. In the years ended March
31, 1995 and 1994 ("Fiscal 1995" and "Fiscal 1994", respectively), products
representing approximately 68% and 52% of net sales, respectively, were
imported directly from manufacturers to the Company's customers. If the
Company experiences a decline in the percentage of sales effected
through direct imports, its working capital and inventory requirements may be
incrementally affected. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition".
Domestic Marketing
In the United States, the Company markets its products primarily
through mass merchandisers and discount retailers. Wal-Mart Stores,
Inc. ("Wal-Mart") accounted for approximately 53% and 34%, and Target Stores,
Inc., accounted for approximately 10% and 12% of the Company's net sales
in Fiscal 1995 and Fiscal 1994, respectively. Net sales to Wal-Mart
include sales of certain video products which are subject to a license/supply
arrangement with the Company's largest supplier, effective March 31,
1995. Net sales of these products to Wal-Mart accounted for approximately
47% and 21% of consolidated net sales in Fiscal 1995 and Fiscal 1994,
respectively. See "Business-Licensing". No other customer accounted for
more than 10% of the Company's net sales in either period.
A portion of the Company's sales are made through sales representative
organizations which receive sales commissions and work closely with
Company sales personnel. The remainder of the Company's sales are made
to retail customers serviced principally by Company sales personnel.
The Company has six sales professionals based in the United States.
The domestic sales force is based in the Company's New Jersey corporate
headquarters, and in regional offices located in Georgia, Missouri
and California. The sales representative organizations sell, in addition
to the Company's products, allied, but generally non-competitive,
products. In most instances, either party may terminate a sales
representative relationship on 30 days' prior notice in accordance with
customary industry practice. The Company utilizes approximately 30
sales representative organizations, including one through which approximately
10% of the Company's net sales were made in Fiscal 1995. No other sales
representative organization accounted for more than 10% of the Company's
net sales in Fiscal 1995.
Foreign Marketing
While the major portion of the Company's marketing efforts are
directed toward the United States, approximately 7% of the Company's net
sales in Fiscal 1995 were made to foreign customers in Canada, Central
and South America, Spain and the Middle East. See Note M of Notes to
Consolidated Financial Statements and "Management's Discussion and
Analysis of Results of Operations and Financial Condition". The Company is
expanding its marketing and sales activities in certain international
geographic regions and has expanded such activities to cover other parts
of Europe, South America, the Far East and Mexico.
Licensing
The Company has successfully concluded licensing agreements with
(i) Otake Trading Co., Ltd. and certain affiliates ("Otake") for the sale of
video products bearing the "Emerson" trademark to Wal-Mart locations in the
United States and Canada, (ii) Jasco Products Co., Inc. ("Jasco"), the third
largest domestic electronics accessory company, for distribution of
electronic accessories in the United States, (iii) Herald Holding Limited
("Herald"), a publicly-traded Hong Kong Company, for the distribution of
clocks and watches in the United States bearing the "Emerson" trademark and
(iv) the Franklin Mint for distribution of classic Emerson Radio
reproductions. The Company intends to pursue additional licensing
opportunities and believes that such licensing activities will have a
positive impact on net operating results by generating royalty income
with minimal costs, if any, and without the necessity of utilizing working
capital or accepting customer returns. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition".
Design and Manufacturing
The Company's design team is responsible for product development
and operates closely with the Company's manufacturers. The Company's
engineers determine the detailed cosmetic and option specifications for new
products, which typically incorporate commercially available electronic parts
to be assembled according to the Company's designs. Accordingly, the
exterior designs and operating features of the Company's products reflect
the Company's judgment of current styles and consumer preferences. The
Company's designs are tailored to meet the needs of the local market,
particularly in the case of international distribution, where products are
generally introduced on a country-by-country basis.
The majority of the Company's products are manufactured by original
equipment manufacturers in accordance with the Company's specifications.
The manufacturers are primarily located in Hong Kong, South Korea,
Taiwan, China, Malaysia and Thailand. Certain of the Company's products are
also assembled by a contract manufacturer in Indiana.
During Fiscal 1995 and Fiscal 1994, approximately 89% and 84%,
respectively, of the cost value of the Company's purchases consisted of
imported finished goods. Otake, a manufacturer headquartered in Japan,
supplied approximately 73% and 59%, respectively, of the Company's total
purchases in Fiscal 1995 and Fiscal 1994. Approximately 52% and 30% of
the cost value of the Company's purchases in Fiscal 1995 and Fiscal 1994,
respectively, were video products purchased from Otake and sold to Wal-
Mart. As a result of the license/supply arrangement with Otake, the
Company expects to purchase a significantly lower proportion of its
finished goods from Otake over the three-year term of the agreements.
See "Business-Licensing". The license/supply arrangement also provides that
Otake will supply the Company with certain video products for sale to
other customers at preferred prices for a three-year term. Otake also
sells a line of video products under its Orion trademark. Kong Wah, a
manufacturer headquartered in Hong Kong, supplied approximately 10% of the
Company's total purchases in Fiscal 1994. No other supplier accounted for
more than 10% of the Company's total purchases in either period. The Company
considers its relationships with its suppliers to be satisfactory and
believes that, barring any unusual shortages or economic conditions, it
could develop alternative sources for any of the products it currently
purchases. Except with respect to the agreements with Otake, the
Company does not have a contractual agreement with any of its suppliers and
no assurance can be given that certain short-term shortages of product
would not result if the Company were required to seek alternative sources of
supply without adequate notice by the supplier or a reasonable opportunity
to seek alternate production facilities and component parts.
Warranties
The Company offers its United States and Canadian consumers limited
warranties comparable to those offered to consumers by its competitors
and accepts returns from its customers in accordance with customary industry
practices. Warranties for products sold internationally are, in certain
cases, provided on a region-by-region basis through local entities
retained by the Company.
Refurbished Products
The Company's customers return product to the Company for a variety
of reasons, including liberal retailer return policies, damage to goods
in transit and occasional cosmetic imperfections and mechanical failure.
Effective April 1, 1994, the Company formed a partnership
("Partnership") with Hopper Radio of Florida, Inc. ("Hopper"). The
Company and Hopper each own a 50% interest in the Partnership. The
Partnership was formed to purchase (i) all returned consumer electronics
products from the Company, refurbish them, if feasible, and sell them
refurbished or "As-Is", on a worldwide basis in all countries where the
Company has trademark rights and (ii) new consumer electronics products from
manufacturers sourced through a subsidiary of the Company or through
third parties, if such new products could be obtained on more favorable prices
and terms, for sale exclusively in Mexico and Central and South America.
The Partnership with Hopper has enabled the Company to control the
costs associated with product returns, by providing a stable selling
price for returned products and increased inventory turnover, by utilizing
the distribution network of Hopper to sell products, and by potentially
increasing the Company's sales of new products to Mexico and Central and
South America. The Partnership's profits and losses are allocated
evenly and the general managerial activities are under the control of Barry
Smith, who is also the President of Hopper. The Company previously
refurbished certain products which were either sold as refurbished or, if
not refurbished, sold "As-Is". See "Management's Discussion and Analysis of
Results of Operations and Financial Condition".
In forming the Partnership, the Company contributed returned product
to the Partnership equal in value to the amount of Hopper's initial cash
contribution of $500,000. The Company also agreed to (i) sell additional
returned products to the Partnership, pursuant to the terms of a sales
agreement, (ii) license to the Partnership its "Emerson" trademark for
sale of refurbished product worldwide and for sale of new products
exclusively in Mexico, Central and South America, (iii) provide the
Partnership with access to its vendors, (iv) relinquish its territories
for refurbished merchandise and (v) lease to the Partnership the
equipment to refurbish the returned merchandise. The Partnership agreement
similarly provides that Hopper is required to provide the Partnership with
(i) the set price list at which all merchandise shall be sold, to be approved
in advance by both partners, (ii) financing on terms to be agreed to by
both parties, and (iii) the physical location for refurbishing activities at
a rental rate of $2.00 per square foot, or as otherwise agreed to by the
parties.
Backlog
From time-to-time, the Company has substantial orders from customers
on hand. Management believes, however, that backlog is not a significant
factor in its operations. The ability of management to correctly
anticipate and provide for inventory requirements is essential to the
successful operation of the Company's business.
Trademarks
The Company owns the "Emerson", "H.H. Scott" and "Scott" trademarks
for certain of its home entertainment and electronic products in the
United States, Canada, Mexico and various other countries. Of the trademarks
owned by the Company, those registered in the United States must be
renewed at various times from 1996 to 2008 and those registered in Canada
must be renewed at various times from 1995 to 2007. The Company's trademarks
are also registered on a worldwide basis, which registrations must be
renewed at various times. The Company intends to renew all such trademarks.
The Company considers the "Emerson" trademark to be of material importance
to its business. The Company also owns the "Electrophonic" trademark and
is studying the introduction of this trademark on value priced audio
products in fiscal year 1996. The Company owns several other trademarks,
none of which is currently considered by the Company to be of material
importance to its business. The Company has licensed certain
applications of the "Emerson" trademark to Otake, Jasco, Herald and the
Franklin Mint on a limited basis. See "Business - Licensing".
Competition
The market segment of the consumer electronics industry in which
the Company competes generates approximately $15 billion of factory sales
annually and is highly fragmented, cyclical and very competitive,
supporting major American, Japanese and Korean companies, as well as
numerous small importers. The industry is characterized by the short
life cycle of products which requires continuous design and development
efforts. Market entry is comparatively easy because of low initial capital
requirements.
The Company primarily competes in the low to medium-priced sector
of the consumer electronics market. Management estimates that the Company
has several dozen competitors, many of which are much larger and have
greater financial resources than the Company. Emerson's major competitors
are foreign-based manufacturers and distributors. The Company competes
primarily on the basis of its products' reliability, quality, price and
design, the "Emerson" trademark and service to retailers and their
customers. The Company's products also compete at the retail level for
shelf space and promotional displays, all of which have an impact on the
Company's established and proposed distribution channels. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition".
Government Regulation
Pursuant to the Tariff Act of 1930, as amended, the Trade Act of
1974 and regulations promulgated thereunder, the United States government
charges tariff duties, excess charges, assessments and penalties on many
imports. These regulations are subject to constant change and revision
by government agencies and by action by the United States Trade
Representative and may have the effect of increasing the cost of goods
purchased by the Company or limiting quantities of goods available to the
Company from its overseas suppliers. A number of states have adopted
statutes regulating the manner of determining the amount of payments to
independent service centers performing warranty service on products such
as those sold by the Company. Additional Federal legislation and regulations
regarding the importation of consumer electronics products, including the
products marketed by the Company, have been proposed from time-to-time and,
if enacted into law, could adversely affect the Company's results of
operations.
Employees
As of June 15, 1995, the Company had approximately 200 employees.
The Company considers its labor relations to be generally satisfactory.
Item 2. PROPERTIES
The Company, directly and through its subsidiaries, leases warehouse
and office space in New Jersey, California, Canada, Georgia, Missouri,
the Far East and Spain under leases expiring at various times from calendar
1995 to 1998, at minimum aggregate rentals as follows:
Year Ending
March 31, (In Thousands)
1996 $1,507
1997 1,484
1998 1,071
1999 271
_____
$4,333
======
In the past several years, the Company has closed substantially
all of its leased or owned warehouse facilities in favor of utilizing public
warehouse space as part of the Company's effort to convert fixed costs
to variable costs. The cost for the public warehouse space is based on a
fixed percentage of the Company's sales from each respective location.
Such amounts are not included in the above table.
Item 3. LEGAL PROCEEDINGS
Bankruptcy Claims
Pursuant to the Plan of Reorganization and the Bankruptcy Code,
all claims against the Company existing as of September 29, 1993, were
discharged, except as specifically set forth in the Plan of Reorganization.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition". The Plan of Reorganization provides that unsecured
creditors other than the Company's bank group and the holders of the senior
notes 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 would bear interest at a rate based on the
London Interbank Offered Rate ("LIBOR") for one year obligations and would
be payable as follows: (i) 35% of the outstanding principal is due 12
months from the date of issuance, and (ii) the remaining balance would be
due 18 months from the date of issuance. The Company is presently
contesting claims submitted by several creditors.
The largest claim was filed on July 25, 1994 in connection with
the rejection of certain executory contracts with two Brazilian entities,
Cineral Electronica de Amazonia Ltda. and Cineral Magazine Ltda.
(collectively, "Cineral"). The contracts were executed in August 1993,
shortly before the Company's filing for bankruptcy protection. The
amount claimed was $93,563,457, of which $86,785,000 represents a claim for
loss of profits and $6,400,000 for plant installation and the establishment
of offices, which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and, therefore,
will be satisfied, to the extent the claim is allowed by the Bankruptcy
Court, in the manner other allowed unsecured claims were satisfied. The
Company believes the Bankruptcy Court will separately review the portion
of the claim for lost profits from the substantially smaller claim for
actual damages. The Company has objected to the claim, intends to
vigorously contest such claim and believes it has meritorious defenses to
the highly speculative portion of the claim for lost profits and the portion
of the claim for actual damages for expenses incurred prior to the execution
of the contracts. Additionally, the Company has instituted an adversary
proceeding in the Bankruptcy Court asserting damages caused by Cineral. A
motion filed by Cineral to dismiss the adversary proceeding has been
denied. The adversary proceeding and claim objection have been
consolidated into one proceeding. An adverse final ruling on the Cineral
claim could have a material adverse effect on the Company, even though
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 (Hong Kong)
Limited (a wholly owned subsidiary of the Company) and Teletech (Hong
Kong) Limited was commenced in the Supreme Court of Hong Kong High Court
(the "Teletech Action") by Emerson Radio (Hong Kong) Limited ("Emerson
(H.K.)") against Teletech (Hong Kong) Limited ("Teletech"). The Statement
of Claim (the "Claim"), filed and served in March 1991, alleges that
Teletech breached its agreements to sell cordless telephones and telephone
answering machines to Emerson (H.K.). The Claim seeks damages of
approximately $1,000,000.
In March 1991, Teletech filed a counterclaim that essentially denies
the allegations and alleges that Emerson (H.K.) breached its agreement
to purchase cordless telephones and telephone answering machines arising
from wrongful cancellation of placed orders. The counterclaim seeks damages
of approximately $1,700,000. In May 1991, Emerson (H.K.) filed a reply to
the counterclaim denying the allegations in the counterclaim. Discovery is
currently proceeding. This litigation was not affected by the bankruptcy
proceedings.
Tax Matters
In June and October 1988, the Franchise Tax Board of the State of
California issued Notices of Proposed Assessment to the Company proposing
additional state income tax of approximately $501,000 in the aggregate,
plus interest, for the fiscal years 1980, 1985 and 1986. In August and
November 1988, the Company filed protests with the Franchise Tax Board
taking exception to the Notices of Proposed Assessment. After disallowing
the Company's protest, on July 24, 1992, the Franchise Tax Board issued
a formal Notice of Action assessing a deficiency in the aggregate of
approximately $664,000, which includes interest through July 24, 1992.
On August 24, 1992, the Company filed an appeal with the California State
Board of Equalization. The Franchise Tax Board filed a response on
April 29, 1993, and the Company filed its reply on July 16, 1993.
On March 9, 1994, the Company filed an adversary complaint with
the Bankruptcy Court, to obtain a declaratory judgment against the Franchise
Tax Board with regard to this matter. The Franchise Tax Board filed its
response on April 6, 1994. Discovery is proceeding. The Franchise Tax
Board moved to dismiss the adversary proceeding and requested the
Bankruptcy Court to abstain. On October 19, 1994, the Bankruptcy Court
entered an order of abstention which directed the parties to litigate in
California. The Company has appealed.
On February 15, 1994, the Franchise Tax Board issued Notices of
Proposed Assessment to the Company proposing additional state income tax
of approximately $382,000 in the aggregate, plus interest, for the fiscal
years 1987, 1988 and 1989. The Company filed its protest with the
Franchise Tax Board on April 15, 1994, taking exception to the Notices
of Proposed Settlement.
Management believes that adequate amounts of tax reserves have
been provided for any adjustments which may result from the above assessments
and any possible additional adjustments for years not currently 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
("FIL"), the Company's largest shareholder prior to confirmation of the
Plan of Reorganization, with respect to various business relations and
transactions entered into between the shareholders, certain affiliates
and their principals, including Geoffrey Jurick, the Company's Chairman and
Chief Executive Officer, and Donald Stelling, former Chairman of the
Company. Mr. Stelling resigned on December 2, 1993 from the Company's
Board of Directors creating uncertainty about the ability of FIL to
honor its commitment to the Company and the Company's bank group to satisfy
its obligations to infuse $75 million in funds for the purpose of financing
the Restructuring. The $75 million commitment was made available by Mr.
Jurick and related companies, which utilized approximately $15.2 million in
funds which had been deposited by FIL into an escrow account for the purpose
of securing the Company's Debtor-in-Possession financing obtained in
connection with the Restructuring. Management believes that, as of the
present date, Messrs. Jurick and Peter Bunger, directors of the Company,
comprise the Board of Directors of FIL. 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 FIL. The proceeding was brought by one of its shareholders,
a Bahamian entity controlled by Petra Stelling, wife of Donald Stelling.
The liquidator appointed by the Bahamian Court for the winding-up of FIL
commenced litigation against Fidenas International Limited, L.L.C.
("Fidenas International"), presently the Company's largest stockholder,
and Mr. Jurick with respect to claims arising from the acquisition of the
Company's Common Stock by GSE Multimedia Technologies Corporation
("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 International, Inc. ("Elision") and
utilization of the $15.2 million in funds which secured the Company's
Debtor-in-Possession Financing and (ii) restraining the transfer,
disposition or further encumbrance of any shares of the Company owned by
Fidenas International, GSE, and Elision issued pursuant to the Plan of
Reorganization. The ancillary proceeding was dismissed by the 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 and affiliates in civil and criminal actions in Switzerland
for various claims relating to their business relationships and transactions.
Based on certain charges raised by the Stellings, the Swiss authorities
have commenced investigations of Messrs. Jurick, Bunger and Jerome Farnum
(also a director of the Company). In addition, the Swiss authorities
have questioned Messrs. Jurick and Farnum as part of an investigation of
possible violations by them of certain Swiss bank licensing laws. None
of Messrs. Jurick, Farnum or Bunger has been charged or indicted by the
Swiss authorities. The Federal Banking Commission of Switzerland has
issued a decree purporting to determine that certain entities affiliated
with Messrs. Jurick and Farnum are subject to Swiss banking laws and have
engaged in banking activities without a license; the Commission has
ordered (i) the liquidation of one affiliate and the assets of another,
(ii) the appointment of a Swiss accounting firm to conduct the decreed
liquidation and (iii) certain preliminary measures providing for the
appointment of the Swiss accounting firm to act as an observer with special
supervisory powers. The Company has been informed by counsel to those
entities that an appeal has been filed with respect to the decree and that
during the appeal, if timely filed, the provisions of the decree providing
for the liquidation shall not be implemented.
Though the Company is not a party to any of the proceedings in
Switzerland or in the Commonwealth of Bahamas, the Company intends to
monitor the litigation. 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 further
limiting the Company's ability to use its net operating loss
carryforwards ("NOLs") and tax credit carryovers ("TCCOs").
The Official Liquidator appointed in the Commonwealth of Bahamas
for Fidenas International Bank Limited (which management believes to be a
holder of approximately 18% of the shares of Elision and approximately
11% of the shares of GSE) has filed an action in the Bahamas concerning the
ownership by Fidenas International of certain shares of Common Stock.
Transfer of the stock has been enjoined by the Bahamian courts. The
Liquidator has also filed an action in the United States District Court
on behalf of Fidenas International Bank Limited with respect to certain
shares of Common Stock issued to Fidenas International in conjunction with
the Restructuring. As of the date hereof, the transfer of such shares has
been restrained and discovery in the action has been commenced.
Stelling Litigation
The Company filed a suit in federal court in New Jersey on July
14, 1994, naming Mr. Stelling and his spouse as defendants alleging, among
other things, breaches by Mr. Stelling of fiduciary duties and breaches of
contract by Mr. Stelling, as agent, and Mrs. Stelling, as principal. The
suit sets forth requests for monetary damages as well as declaratory
judgments that the provisions of the Plan of Reorganization providing
for releases do not apply to the Stellings and that they are estopped from
claiming any interest in the Company. The Stellings have filed a motion
to dismiss the suit. As of the date hereof, no ruling has been made with
respect to such motion.
Other Litigation
The Company is involved in other legal proceedings and claims of
various types in the ordinary course of business. While any litigation
contains an element of uncertainty, management presently believes that
the outcome of each such proceeding or claim which is pending or known to be
threatened (including the actions noted above), or all of them combined,
will not have a material adverse effect on the Company's consolidated
financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's Common Stock has traded on the American Stock Exchange
since December 22, 1994 under the symbol MSN. The Common Stock began
trading publicly on September 1, 1994 in the over-the-counter market.
Prior thereto, there was no established public trading market for the
Common Stock.
Prior to confirmation of the Plan of Reorganization on March 31,
1994, there were approximately 4,500 shareholders of record of the
Common Stock of the Company. The shares of such shareholders were terminated
and cancelled on the effective date of the Plan of Reorganization. Such
shares had been traded on the New York Stock Exchange until trading was
suspended on October 6, 1993 and the shares delisted on April 15, 1994.
The following table sets forth, for the fiscal quarters indicated,
the range of high and low bid prices for the Company's Common Stock as
reported by the National Quotations Bureau for the period September 1,
1994 through December 21, 1994 and the range of high and low sales prices as
reported by the American Stock Exchange from December 22, 1994.
Quarter Ended High Low
September 30, 1994 $1-1/2 $1
December 31, 1994 2-7/8 15/16
March 31, 1995 3-3/8 2
The Series A Preferred Stock and Warrants outstanding are freely
tradeable; however, there is no established trading market for either
security.
(b) Holders
At June 15, 1995, there were approximately 500 shareholders of record
of the Company's Common Stock, and 21 holders of record of the Series A
Preferred Stock and 11 holders of the Warrants.
(c) Dividends
The Company's policy has been to retain all available earnings, if
any, for the development and growth of its business. The Company has
never paid cash dividends on its Common Stock. In deciding whether to pay
dividends on the Common Stock in the future, the Company's Board of
Directors will consider factors it deems relevant, including the Company's
earnings and financial condition and its working capital and anticipated
capital expenditures. The Company's United States credit facility contains
certain dividend payment restrictions on the Company's Common Stock.
Additionally, the Company's Certificate of Incorporation, defining the
rights of the Series A Preferred Stock, prohibits Common Stock dividends
unless the Series A Preferred Stock dividends are paid or put aside.
The Series A Preferred Stock earns dividends, payable on a quarterly basis,
at a 7% dividend rate through March 31, 1997, then declining by a 1.4%
dividend rate each succeeding year until March 31, 2001 when no further
dividends are payable.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Company changed its fiscal year end from December 31 to March
31, commencing with the period ended March 31, 1992. Previously, the Company
had changed its fiscal year end from March 31 to December 31, beginning
with the period ended December 31, 1990. The following table sets forth
selected consolidated financial data of the Company for the years ended
March 31, 1995, 1994 and 1993, the three months ended March 31, 1992, the
year ended December 31, 1991 and the nine months ended December 31, 1990.
The selected consolidated financial data should be read in conjunction
with the Company's consolidated financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" set forth elsewhere in this Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C>
Nine Three
Months Year Months Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1990 1991 1992 1993 1994 1995
(In thousands, except per share data)
<S>
Summary of Operations:
Net Sales:
Core Business $528,809 $716,651 $169,936 $741,357 $487,390 $654,671
Personal Computers
and Other 96,609 73,555 1,562
_______ _______ _______ ________ _______ _______
$625,418 $790,206 $171,498 $741,357 $487,390 $654,671
======== ======== ======== ======== ======== ========
Net Earnings (Loss) (1):
Before Extraordinary
Gain $(37,463) $(60,746) $ (6,976) $(56,000) $(73,654) $ 7,375
Extraordinary Gain 129,155
________ ________ ________ ________ _______ ______
$(37,463) $(60,746) $ (6,976) $(56,000) $ 55,501 $ 7,375
Balance Sheet Data at Period End:
Total Assets $300,366 $226,131 $216,693 $194,510 $119,021 $113,969
Current Liabilities(2)232,220 218,504 215,069 249,307 76,083 59,782
Long-Term Debt (2) 60 130 157 151 227 214
Shareholders'
Equity (Deficit) 65,139 4,550 (1,480) (57,895) 42,617 53,651
Working Capital
(Deficit) 31,111 (29,503) (36,003) (89,949) 32,248 42,598
Current Ratio 1.1 to 1 0.9 to 1 0.8 to 1 0.6 to 1 1.4 to 1 1.7 to 1
Per Common Share:
Net Earnings (Loss)
Per Common
Share (1) (3):
Before Extraordinary
Gain $(1.03) $( 1.60) $(0.18) $ (1.47) $ (1.93) $ 0.16
Extraordinary Gain 3.38
______ _______ _______ _______ ______ _______
$(1.03) $( 1.60) $(0.18) $ (1.47) $ 1.45 $ 0.16
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding 36,519 37,897 37,968 38,179 38,191 46,571
====== ===== ====== ====== ====== ======
Common Shareholders' Equity
(Deficit) (4) $ 1.78 $ 0.12 $(0.04) $(1.52) $ 0.98 $ 1.08
====== ======= ======= ======= ======= ======
_____________________________
(1) The net earnings for the fiscal year ended March 31, 1994 include
an extraordinary gain of $129,155,000, or $3.38 per common share, on
the extinguishment of debt settled in the Plan of Reorganization.
Accordingly, the Company recorded reorganization expenses of
$17,385,000 relating primarily to the writedown of assets transferred
to creditors under the Plan of Reorganization and professional fees and
other related expenses incurred during the bankruptcy proceedings. The
results of operations for the fiscal year ended March 31, 1993, the
three months ended March 31, 1992 and the year ended December 31, 1991
include restructuring and other nonrecurring charges aggregating
$35,002,000, $3,698,000 and $36,964,000, respectively. These charges
represent the cost of discontinuing the personal computer business,
professional fees and other expenses related to the Company's financial
restructuring, and the up-front costs and writedowns of certain assets
associated with implementing long-term cost reduction programs.
Charges for the fiscal year ended March 31, 1993 also include costs
related to the proxy contest settled in June 1992. The year ended
December 31, 1991 also includes charges related to the discontinuance
of the H.H. Scott domestic business. See Note C of Notes to
Consolidated Financial Statements.
(2) The aggregate outstanding principal balance of the Company's senior
notes has been classified as current as of March 31, 1993 and 1992, and
December 31, 1991 and 1990. See Note B of Notes to Consolidated
Financial Statements.
(3) Net earnings (loss) per common share for all periods, except the
year ended March 31, 1995, are based on the weighted average number of
old common shares outstanding during each fiscal year. Net earnings
per common share for the year ended March 31, 1995 is based on the
weighted average number of shares of new Common Stock and related
common stock equivalents outstanding during the year. Common Stock
equivalents include 9,081,000 shares assuming conversion of $10
million of Series A Preferred Stock at a price equal to 80% of the
weighted average market value of a share of Common Stock, determined on
a quarterly basis. Since the Series A Preferred Stock is not
convertible into Common Stock until March 31, 1997, the number of
shares issuable upon conversion may be significantly different.
(4) Calculated based on common shareholders' equity (deficit) divided by
actual shares of Common Stock outstanding. Common shareholders' equity
at March 31, 1995 and 1994 is equal to total shareholders' equity
less $10 million for the liquidation preference of the Series A
Preferred Stock.
</TABLE>
</PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
General
On March 31, 1994, the Company emerged from bankruptcy pursuant to
the Plan of Reorganization which resulted in a net reduction of
approximately $203 million in institutional debt, cancellation of the
Company's old common stock and other equity, the issuance of 30
million shares of new common stock for $30 million and the issuance of
certain equity securities to certain of the Company's former creditors. The
Restructuring substantially reduced the Company's debt service costs and
significantly improved the Company's financial condition. The Company
experienced a significant improvement in its United States sales in
Fiscal 1995 over Fiscal 1994. However, the Company expects sales for the
fiscal year ending March 31, 1996 ("Fiscal 1996") to decline from Fiscal 1995
due to a license agreement entered into with the Company's largest supplier
(as described below).
Effective March 31, 1995, the Company entered into two mutually
contingent agreements with its largest supplier which, among other
things, provide to the supplier the right to sell certain video products
under the "Emerson" trademark to the Company's largest customer (see
"Liquidity and Capital Resources"). As a result, the Company will receive
royalties attributable to such sales over the three-year term of the
agreements in lieu of reporting the full dollar value of such sales and
associated costs. Net sales of these products to this customer accounted
for approximately 47% of consolidated net sales for Fiscal 1995. The Company
expects to report lower sales in Fiscal 1996 as a result of these agreements,
but no material impact is expected on its net operating results for such year.
Exclusive of the licensed video sales, the Company expects its United
States sales for the first quarter of Fiscal 1996 to remain comparable with
or decline from the first quarter of Fiscal 1995. The sales outlook reflects
the higher level of sales achieved in Fiscal 1995, increased price
competition, retail stock levels and a slowdown in retail activity.
Results of Operations -- Fiscal 1995 Compared with Fiscal 1994
Consolidated net sales for Fiscal 1995 increased $167,281,000 as
compared to Fiscal 1994, resulting from a significant increase in unit
sales of VCRs, VCPs and TV/VCR combination units, partially offset by a
decline in unit sales of color televisions and audio products, as well as
lower sales prices for such products. The sales increase for the VCR,
VCP and TV/VCR product categories was attributable to significantly higher
sales to the Company's two largest customers, resulting from an improved
retail climate, low retail stock levels after the 1993 holiday season,
and an improved perception of the Company by retailers since its emergence
from bankruptcy. Net sales to the Company's largest customer approximated
53% of consolidated net sales for Fiscal 1995. The Company's Canadian
operations experienced a decline in net sales for Fiscal 1995 due to
declines in unit volume and sales prices (relating to a weak retail
climate) and unfavorable foreign currency exchange rates.
Cost of sales, as a percentage of consolidated sales, was
approximately 92% for Fiscal 1995 as compared to approximately 100% for
Fiscal 1994. Gross profit margins were favorably impacted by the allocation
of fixed overhead costs over a significantly higher sales base, a decline
in fixed overhead costs, reduced losses associated with product returns,
the recognition of $9.9 million of purchase discounts from a supplier,
$1.2 million of licensing income and reduced reserve requirements for
sales returns due primarily to an agreement with the Company's largest
supplier. See "Liquidity and Capital Resources". This improvement was
partially offset by a 1% decline in gross profit margins attributable to
lower sales prices in most product categories resulting from increased
price competition, and a change in product mix.
The Company's margins continue to be impacted by the pricing
category of the consumer electronics market in which the Company competes.
The Company's products are generally placed in the low-to-medium priced
category of the market. These categories tend to be the most competitive
and generate the lowest profits. The Company intends to focus on its
higher margin products and is reviewing new product categories that can
generate higher margins than the current business, either through license
arrangements, joint ventures or on its own.
Other operating costs and expenses declined $3,230,000 in Fiscal
1995 as compared to Fiscal 1994, primarily as a result of a decrease in
compensation and other expenses incurred to process product returns, due
to the Company's downsizing program and changes in the resale arrangement
for product returns. See "Business - Refurbished Products".
Selling, general and administrative expenses ("S,G&A"), as a
percentage of sales, was 5% and 7% for Fiscal 1995 and Fiscal 1994,
respectively. In absolute terms, S,G&A decreased $3,505,000 in Fiscal
1995. The decrease was primarily attributable to lower compensation
expense relating to the Company's downsizing program, lower selling
expenses, including decreases in promotional allowances granted to
customers, and improved foreign currency results. The Company's exposure
to foreign currency fluctuations, primarily in Canada and Spain, resulted
in net foreign currency exchange gains aggregating $354,000 in Fiscal,
1995 as compared to net foreign currency exchange losses of $1,406,000 in
Fiscal 1994. In Fiscal 1996, the Company intends to reduce its foreign
currency exposure by conducting its Canadian and European business in
U.S. dollars.
The Company has implemented additional cost reductions in the first
quarter of Fiscal 1996 by reducing the infrastructure of its foreign
offices, which should improve the Company's operating results in Fiscal
1996.
Interest expense decreased $7,361,000 in Fiscal 1995 as compared
to Fiscal 1994. The decrease was attributable to the extinquishment of
approximately $203 million of institutional debt in connection with the
Restructuring, effective March 31, 1994, and a moratorium on interest
accrued on pre-petition indebtedness during the pendency of the
Company's bankruptcy proceedings in Fiscal 1994.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses incurred
in the bankruptcy proceedings, and the writedown of certain assets
transferred to a liquidating trust pursuant to the bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment of
debt of $129,155,000 in Fiscal 1994. This gain related to the settlement of
the Company's pre-petition liabilities, as a result of the Company's
emergence from bankruptcy.
As a result of the foregoing factors, the Company earned $7,375,000
and $55,501,000 for Fiscal 1995 and Fiscal 1994, respectively.
Results of Operations -- Fiscal 1994 Compared with Fiscal 1993
Consolidated net sales for Fiscal 1994 decreased $253,967,000 as
compared to the fiscal year ended March 31, 1993 ("Fiscal 1993"),
resulting from a significant decrease in unit sales of VCR/VCP and television
products, as well as lower sales prices for the same product categories.
The sales decline was attributable to the effect of the Restructuring and
the Company's financial condition on the retailers' perception of the
Company, a cautious outlook maintained by retailers over inventory levels,
excess stock at the retail level and increased price competition in the
Company's major product categories.
Cost of sales, as a percentage of consolidated sales, was
approximately 100% for Fiscal 1994 as compared to approximately 91% for
Fiscal 1993. Gross profit margins were negatively impacted by a $6.3
million increase in the reserve for sales returns and were impacted
further by the allocation of fixed overhead costs over a significantly lower
sales base, sales price decreases which were in excess of price reductions
received from suppliers, and significant costs and inventory writedowns
associated with product returns. Additionally, gross margins earned by
the Company's foreign operations were adversely impacted by a decline in the
Canadian dollar and Spanish peseta of 9% and 16%, respectively, from March
31, 1993 to March 31, 1994. Although the Company entered into foreign
currency contracts to minimize its exposure to foreign currency fluctuations
in Europe, it lacked the necessary working capital to hedge all its foreign
currency commitments.
Other operating costs and expenses declined $7,025,000 in Fiscal
1994, as compared to Fiscal 1993, primarily as a result of a reduction in
compensation costs relating to the Company's downsizing program and lower
warranty expenses associated with the decline in the Company's net sales.
S, G & A, as a percentage of sales, was 7% for Fiscal 1994 and
Fiscal 1993. In absolute terms, S, G & A decreased by $14,956,000 in Fiscal
1994 as compared to Fiscal 1993. In terms of actual cost, the decrease in
Fiscal 1994 was primarily attributable to lower variable selling expenses,
including decreases in promotional allowances granted to customers,
sales commissions, facility and compensation costs relating to the Company's
downsizing program and a decrease in reserves against the Company's accounts
receivable.
Interest expense decreased by $8,014,000 in Fiscal 1994 as compared
to Fiscal 1993. The decrease was attributable to the moratorium on
interest accrued on pre-petition indebtedness for the six month period
ended March 31, 1994. Interest expense was only accrued and paid on the
Company's debtor-in-possession financing during the pendency of the
bankruptcy proceedings.
During Fiscal 1993, the Company recorded restructuring and other
nonrecurring charges aggregating $35,002,000. The provision included $31.9
million of charges related to the Company's core business operations of
consumer electronics products. These charges are primarily comprised of
certain costs associated with the consolidation of facilities, severance
of employees ($3,967,000 provision for termination of officers and other
employees), the writedown of certain assets, a provision relating to a
significant change in the resale arrangement for returned product, and
professional fees and other charges related to the Company's proposed
financial restructuring and to the proxy contest settled in June 1992.
The provision also included $3.1 million in charges relating to the final
wind-down of the Company's personal computer business.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses incurred
in the bankruptcy proceedings, and the writedown of certain assets
transferred to a liquidating trust pursuant to the bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment of debt
of $129,155,000 in Fiscal 1994. This gain related to the settlement of
the Company's pre-petition liabilities, as a result of the Restructuring.
As a result of the foregoing factors, the Company earned $55,501,000
for Fiscal 1994, compared to a net loss of $56,000,000 for Fiscal 1993.
Liquidity and Capital Resources
Net cash utilized by operating activities was $20,974,000 for Fiscal
1995. Cash was utilized to purchase inventory for sale which resulted
in increased sales and accounts receivable. The increase in accounts
receivable also reflects sales of returned product to a 50% owned joint
venture that has a net payable to the Company of $15,283,000 at March
31, 1995. See "Business - Refurbished Products". Further, a reduction in
accounts payable to the Company's largest supplier (as noted below) and
a reduction of a large customer's credit balance, negatively impacted
cash.
Net cash provided by investing activities was $5,691,000 for Fiscal
1995. Investing activities consisted primarily of a redemption of pledged
certificates of deposit, net of capital expenditures, primarily for new
product molds. The redemption of the pledged certificates of deposit
relates primarily to a draw-down of an $8 million standby letter of credit
by the Company's largest supplier against a certificate of deposit for
the same amount, fulfilling commitments made during the Restructuring.
In Fiscal 1995, the Company's financing activities provided
$10,680,000 of cash. The Company increased borrowings under its U.S. line
of credit facility by $7,256,000 to finance the higher accounts receivable
levels and reduce accounts payable. Additionally, the Company generated
net proceeds of $5,692,000 from an initial public offering of Common
Stock, as described below.
On September 29, 1993, the Company and five of its U.S. subsidiaries
filed voluntary petitions for relief under the reorganization provisions
of Chapter 11 of the United States Bankruptcy Code and operated as
debtors-in-possession under the supervision of the Bankruptcy Court while
their reorganization case was pending. The precipitating factor for
these filings was the Company's severe liquidity problems relating to its
high level of indebtedness and a significant decline in sales from the prior
year.
Effective March 31, 1994, the Bankruptcy Court entered an order
confirming the Plan of Reorganization. The Plan of Reorganization
provided for the implementation of a recapitalization of the Company. In
accordance with the Plan of Reorganization, the Company's pre-petition
liabilities (of approximately $233 million) were settled with the creditors
in the aggregate, as follows:
I. The Company's bank group (the "Bank Lenders") received $70
million in cash and the right to receive the initial $2 million of
net proceeds from the Company's anti-dumping duty receivable.
II. The institutional holders of the Company's senior notes
(the "Noteholders") initially received $2,650,000 in cash and
warrants to purchase 750,000 shares of Common Stock for a period of
seven years at an exercise price of $1.00 per share, provided that
the exercise price shall increase by 10% per year commencing in year
four, and further received $1 million, payable $922,498 in cash from
the initial public offering of Common Stock and $77,502 in Common
Stock calculated on the basis of $1.00 per share.
III. The Bank Lenders and Noteholders received their pro rata
percentage of the following:
A. $2,350,000 in cash (however $350,000 of this amount
was distributable to the holders of allowed unsecured
claims);
B. 10,000 shares of Series A Preferred Stock with a face
value of $10 million (estimated fair market value of
approximately $9 million at March 31, 1994);
C. 4,025,277 shares of Common Stock, including 691,944
shares issued in February 1995 pursuant to an
anti-dilution provision;
D. The net proceeds from the sale of the Company's
Indiana land and building; and
E. The net proceeds to be received from the Company's
anti-dumping duty receivable in excess of $2 million .
IV. Holders of allowed unsecured claims received a pro-rata
portion of the $350,000 distribution and interest bearing promissory
notes equal to 18.3% of the allowed claim amount, payable in two
installments over 18 months. See "Legal Proceedings".
In accordance with the Plan of Reorganization, the Company completed
an initial public offering of its Common Stock in September 1994 to
shareholders of record as of March 31, 1994, excluding FIL. The Company
sold 6,149,993 shares of Common Stock for $1.00 per share resulting in
proceeds to the Company, net of issuance costs, of $5,692,000.
The Company maintains an asset-based revolving credit facility with a
U.S. financial institution (the "Lender"). The facility provides for
revolving loans and letters of credit, subject to individual maximums
which, in the aggregate, cannot exceed the lesser of $60 million or a
"Borrowing Base" amount based on specified percentages of eligible
accounts receivable and inventories. Credit extended under the line is
secured by the U.S. and Canadian assets of the Company. The interest rate
on these borrowings is 2.25% above the prime rate. At March 31, 1995, the
weighted average interest rate on the outstanding borrowings was 11.25%.
The facility is also subject to an unused line fee of 0.5% per annum.
Pursuant to the terms of this credit facility, the Company is restricted
from, among other things, paying cash dividends (other than on the Series A
Preferred Stock), redeeming stock, and entering into certain transactions
and is required to maintain certain working capital and equity levels (as
defined). The Company is required to maintain a minimum net worth of
$42,000,000, excluding net proceeds received by the Company from the sale
of equity securities, which minimum will increase to $50,000,000, effective
January 1, 1996. At March 31, 1995, there was $27,296,000 outstanding
under the revolving loan facility, and $3,622,000 of outstanding letters
of credit issued for inventory purchases.
The Company's Hong Kong subsidiary maintains various credit facilities
aggregating $114.3 million with a bank in Hong Kong consisting of the
following: (i) a $12.3 million credit facility which is generally
used for letters of credit for a foreign subsidiary's direct import
business and affiliates' inventory purchases, (ii) a $2 million standby
letter of credit facility, and (iii) a $100 million credit facility, for
the benefit of a foreign subsidiary, which is for the establishment of
back-to-back letters of credit with the Company's largest customer. At
March 31, 1995, the Company's Hong Kong subsidiary had pledged $4 million
in certificates of deposit to this bank to assure the availability of
these credit facilities. At March 31, 1995, there were $5,974,000 and
$8,415,000, respectively, of letters of credit outstanding under the
$12.3 million and $100 million credit facilities.
The Company's Hong Kong subsidiary secured an additional credit
facility in Fiscal 1995 with another bank in Hong Kong. The facility
provides for a $10 million line of credit for documentary letters of
credit and a $10 million back-to-back letter of credit line, collateralized
by a $5 million certificate of deposit. At March 31, 1995, the Company's
Hong Kong subsidiary had pledged $5,041,000 in certificates of deposit to
assure the availability of these credit facilities. At March 31, 1995,
$3,871,000 of the letter of credit line was utilized.
On February 22, 1995, the Company and Otake entered into two
mutually contingent agreements (the "Agreements"). Effective March 31,
1995, the Company granted a license of certain trademarks to Otake for a
three-year term. The license permits Otake to manufacture and sell certain
video products under the "Emerson" trademark to Wal-Mart in the U.S. and
Canada, and precludes Otake from supplying product to Wal-Mart other than
under the "Emerson" or Orion trademarks. The Company will continue to supply
other products to Wal-Mart directly. Further, the Agreements provide
that Otake will supply the Company with certain video products for
sale to other customers at preferred prices for a three-year term.
Under the terms of the Agreements, the Company will receive non-
refundable minimum annual royalties from Otake to be credited against
royalties earned from sales of VCRs, VCPs and TV/VCR combination units
and color televisions to Wal-Mart. In addition, effective August 1,
1995, Otake will assume responsibility for returns and after-sale and
warranty services on all video products manufactured by Otake and sold
to Wal-Mart, including video products sold by the Company prior to
April 1, 1995.
As a result of the Agreements, the Company's gross margins are
expected to improve based on a change in mix to higher margin products
and from a reduction in costs for product returns which have historically
been higher for video products. Additionally, the Company expects to realize
a more stable cash flow and reduce short-term borrowings used to finance
accounts receivable and inventory, thereby reducing interest costs.
Since the emergence of the Company from bankruptcy, management
believes that it has been able to compete more effectively in the highly
competitive consumer electronics and microwave oven industries in the
United States and Canada by combining innovative approaches to the
Company's current product line and augmenting its product line with
complementary products. The Company also intends to undertake efforts to
expand the international distribution of its products into areas where
management believes low to moderately priced, dependable consumer
electronics and microwave oven products will have a broad appeal. The
Company has in the past and intends in the future to pursue such plans
either on its own or by forging new relationships, including license
arrangements, partnerships or joint ventures.
In the past fiscal year, the Company successfully concluded licensing
agreements for existing core business products and new products. The
Company intends to pursue additional licensing opportunities and believes
that such licensing activitites will have a positive impact on net
operating results by generating royalty income with minimal costs, if any,
and without the necessity of utilizing working capital or accepting
customer returns.
Short-Term Liquidity. At present, management believes that cash flow
from operations and the institutional financing noted above will be
sufficient to fund all of the Company's cash requirements for the next
year.
The Company's liquidity is also impacted by the seasonality of its
business. The Company records the majority of its annual sales in the
quarters ending September 30 and December 31. This requires the Company to
open significantly higher amounts of letters of credit during the quarters
ending June 30 and September 30, therefore significantly increasing the
Company's working capital needs during this period. Additionally, the
Company receives the largest percentage of customer returns in the quarter
ending March 31. The high level of returns during this period adversely
impacts the Company's collection activity during this period, and therefore
its liquidity. The Company believes that its recent Agreements with Otake
(as noted above) should favorably impact the Company's cash flow over the
three-year term of the Agreements.
Long-Term Liquidity. The revolving credit facility with the Lender
imposes financial covenants on the Company that could materially affect
its liquidity in the future. However, management believes that the financing
noted above and cash flow from operations will provide sufficient liquidity
to meet the Company's operating and debt service cash requirements on a
long-term basis for its current core business.
Inflation and Foreign Currency
Except as disclosed above, neither inflation nor currency fluctuations
had a significant effect on the Company's results of operations during Fiscal
1995, Fiscal 1994 or Fiscal 1993. The Company's exposure to currency
fluctuations has been minimized by the use of U.S. dollar denominated
purchase orders, and by sourcing production in more than one country.
However, the strength of the Japanese Yen in 1995 is beginning to raise the
costs of certain raw materials and subassemblies of the Company's suppliers
which may be passed on to the Company in the form of price increases in
Fiscal 1996. There can be no assurance that the Company will be able to
recover such potential price increases from the selling price to its
customers.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item
8 are set forth at the pages indicated in Item 14(a) below.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 11. EXECUTIVE COMPENSATION
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, STATEMENT SCHEDULE AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedule:
Report of Ernst & Young LLP F-1
Consolidated Statements of Operations for the years ended
March 31, 1995, 1994 and 1993 F-2
Consolidated Balance Sheets at March 31, 1995 and 1994 F-3
Consolidated Statements of Changes in Shareholders' Equity
for the years ended March 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements F-6
Schedule VIII -- Valuation and Qualifying Accounts
and Reserves F-26
ALL OTHER SCHEDULES ARE OMITTED BECAUSE THEY ARE NOT APPLICABLE OR THE
REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR NOTES
THERETO.
(b) No reports on Form 8-K were filed by the Company during the last
quarter of the fiscal year ended March 31, 1995.
(c) Exhibits
(2) Confirmation Order and Fourth Amended Joint Plan of
Reorganization of Emerson Radio Corp. ("Old Emerson") and
certain subsidiaries under Chapter 11 of the United States
Bankruptcy Code, dated March 31, 1994 (incorporated by
reference to Exhibit (2) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the
Securities and Exchange Commission ("SEC") on August 9, 1994).
(3) (a) Certificate of Incorporation of Emerson (incorporated by
reference to Exhibit (3) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (b) Certificate of Designation for Series A Preferred Stock
(incorporated by reference to Exhibit (3) (b) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of Merger by and between
Old Emerson and Emerson Radio (Delaware) Corp. (incorporated by
reference to Exhibit (3) (c) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (d) Certificate of Merger of Old Emerson with and into Emerson
Radio (Delaware) Corp. (incorporated by reference to Exhibit
(3) (d) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(3) (e) By-Laws of Emerson adopted March 1994 (incorporated by
reference to Exhibit (3) (e) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares of Common Stock,
dated as of March 31, 1994 (incorporated by reference to
Exhibit (4) (a) of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (a) Agreement, dated as of November 14, 1973, between National
Union Electric Corporation ("NUE") and Emerson (incorporated by
reference to Exhibit (10) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of February 28, 1979, by and
between NUE and Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (c) Agreement, dated July 2, 1984, between NUE and Emerson
(incorporated by reference to Exhibit (10) (c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between NUE and Emerson
(incorporated by reference to Exhibit (10) (d) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-Petition
Creditors (incorporated by reference to Exhibit (10) (e) of
Emerson's Registration Statement on Form S-1, Registration No.
33-53621, declared effective by the SEC on August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31, 1994, by and among
Emerson, Majexco Imports, Inc. and Congress Financial
Corporation ("Congress") (incorporated by reference to Exhibit
(10) (f) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation Program (incorporated
by reference to Exhibit (10) (i) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (h) Employment Agreement between Emerson and Eugene I. Davis
(incorporated by reference to Exhibit 6(a)(4) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (i) Employment Agreement between Emerson and Albert G. McGrath, Jr.
(incorporated by reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (k) Employment Agreement between Emerson Radio (Hong Kong) Ltd. and
Geoffrey P. Jurick (incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form 10-Q for quarter
ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio International Ltd.
(formerly Emerson Radio (B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993, by and between
Hartz Mountain Parsippany and Emerson with respect to the
premises located at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10) (ww) of Emerson's
Annual Report on Form 10-K for the year ended December 31,
1992).
(10) (n) Employment Agreement, dated July 13, 1993, between Emerson and
Merle Eakins (incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form 10-K for the year
ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994, between Emerson and
John Walker (incorporated herein by reference to Exhibit
(10)(ee) of Emerson's Statement on Form S-1, Registration No.
33-53621, declared effective by the SEC on August 9, 1994).
(10) (p) Liquidity Trust Agreement, dated as of March 31, 1994, by and
among Emerson, Majexco Imports, Inc., H.H. Scott, Inc., and
Stuart D. Gavsy, Esq., as Trustee (incorporated by reference to
Exhibit (10) (ff) of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994, between Emerson and
Hopper Radio of Florida, Inc.*
(10) (r) Sales Agreement, dated April 1, 1994, between Emerson and E & H
Partners.*
(10) (s) Agreement, dated July 1, 1994, between Emerson and Alex Wijnen
relating to termination of employment and agreement on
consulting services.*
(10) (t) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio International Ltd. and Peter G. Bunger.*
(10) (u) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio Europe B.V. and Peter G. Bunger.*
(10) (v) Employment Agreement, dated October 3, 1994, between Emerson
and Andrew Cohan.*
(10) (w) License Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(1) of
Emerson's Quarterly Report on Form 10-Q for quarter ended
December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(2) of
Emerson's Quarterly Report on Form 10-Q for quarter ended
December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan.*
(11) Computation of Primary Earnings Per Share.*
(21) Subsidiaries of the Company as of March 31, 1995.*
(27) Financial Data Schedule for year ended March 31, 1995.*
___________________
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EMERSON RADIO CORP.
By:/s/ Geoffrey P. Jurick
______________________
Geoffrey P. Jurick
Chairman of the Board
Dated: June 19, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Geoffrey P. Jurick
__________________
Geoffrey P. Jurick Chairman of the Board, June 19, 1995
Chief Executive Officer
/s/ Eugene I. Davis
_________________
Eugene I. Davis President and Director June 19, 1995
/s/ Robert H. Brown, Jr.
____________________
Robert H. Brown, Jr. Director June 19, 1995
/s/ Peter G. Bunger
________________
Peter G. Bunger Director June 19, 1995
/s/ Jerome H. Farnum
________________
Jerome H. Farnum Director June 19, 1995
/s/ Colin G. Honess
_______________
Colin G. Honess Director June 19, 1995
/s/ Raymond L. Steele
_________________
Raymond L. Steele Director June 19, 1995
/s/ Peter Roggendorf Director June 19, 1995
________________
Peter Roggendorf
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Emerson Radio Corp.
We have audited the accompanying consolidated balance sheets of Emerson
Radio Corp. and Subsidiaries as of March 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years ended March 31, 1995, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Emerson Radio Corp. and Subsidiaries at March 31, 1995 and 1994
and the consolidated results of its operations and cash flows for the years
ended March 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As discussed in Note H to the financial statements, in the year ended March
31, 1994, the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
New York, New York
May 24, 1995
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended March 31,
1995 1994 1993
Net sales $ 654,671 $ 487,390 $741,357
Costs and expenses: _________ _________ ________
Cost of sales 604,329 486,536 674,855
Other operating costs and expenses 8,771 12,001 19,026
Selling, general and administrative
expenses 31,047 34,552 49,508
Restructuring and other
nonrecurring charges 35,002
_______ _______ _______
644,147 533,089 778,391
_______ _______ ______
Operating profit (loss) 10,524 (45,699) (37,034)
Interest expense 2,882 10,243 18,257
Earnings (loss) before ______ _______ _______
reorganization costs and taxes 7,642 (55,942) (55,291)
Reorganization items: ______ ________ _______
Writedown of assets 12,914
Professional fees and other related expenses 4,545
Interest earned on accumulated cash (74)
_____ _______ ______
- 17,385 -
_____ _______ ______
Earnings (loss) before income taxes
and extraordinary gain 7,642 (73,327) (55,291)
Provision for income taxes 267 327 709
Earnings (loss) before _____ ________ ________
extraordinary gain 7,375 (73,654) (56,000)
Extraordinary gain on extinguishment
of debt 129,155
_______ _______ _________
Net earnings (loss) $ 7,375 $ 55,501 $(56,000)
======= ========= ========
Net earnings (loss) per common share:
Before extraordinary gain $0.16 ($ 1.93) ($ 1.47)
Extraordinary gain 3.38
_____ _________ _________
Net earnings (loss) $0.16 $ 1.45 ($ 1.47)
_____ ________ __________
Weighted average number of
common and common equivalent
shares outstanding 46,571 38,191 38,179
______ ______ ______
Pro Forma:
Loss per common share $ (1.51)
Weighted average number of _________
common shares outstanding 33,333
_________
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
ASSETS 1995 1994
Current Assets:
Cash and cash equivalents $ 17,020 $ 21,623
Accounts receivable (less allowances
of $9,350 and $6,442, respectively) 34,309 20,131
Inventories 35,336 45,980
Prepaid expenses and other current assets 15,715 20,597
_______ _______
Total current assets 102,380 108,331
Property and equipment, net 4,676 5,256
Other assets 6,913 5,434
_______ __________
Total Assets $ 113,969 $ 119,021
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 27,296 $ 20,040
Current maturities of long-term debt 508 1,498
Accounts payable and other
current liabilities 18,982 37,378
Accrued sales returns 12,713 16,634
Income taxes payable 283 533
______ ______
Total current liabilities 59,782 76,083
Long-term debt 214 227
Other non-current liabilities 322 94
Shareholders' Equity:
Preferred stock -- $.01 par value,
1,000,000 shares authorized, 10,000
issued and outstanding 9,000 9,000
Common stock -- $.01 par value,
75,000,000 shares authorized;
40,252,772 and 33,333,333 shares
issued and outstanding, respectively 403 333
Capital in excess of par value 107,969 103,427
Accumulated deficit (64,086) (70,761)
Cumulative translation adjustment 365 618
______ ______
Total shareholders' equity 53,651 42,617
Total Liabilities and Shareholders' ______ ______
Equity $113,969 $119,021
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<CAPTION>
Common Shares Issued
<C> <C> <C> <C>
<C> <C> Capital Cumulative
Preferred Number Par in Excess Accumulated Translation
Stock of Shares Value of Par Value Deficit Adjustment
<S>
Balance -- March 31, 1992 37,978,119 $ 3,798 $ 63,881 $(70,262) $ 1,103
Issuance of shares upon
exercise of stock options and
distribution of stock grants 59,333 6 113
Issuance of stock and warrants to
Semi-Tech 153,847 15 (15)
Redemption of stock purchase rights (271)
Other 22 (285)
Net loss (56,000)
_______ __________ _____ ______ ________
Balance -- March 31, 1993 38,191,299 3,819 63,730 (126,262) 818
Cancellation of common stock (38,191,299) (3,819) 3,819
Issuance of common stock 30,000,000 300 29,700
Issuance of preferred and
common stock and warrants
pursuant to bankruptcy
settlement $ 9,000 3,333,333 33 6,192
Other (14) (200)
Net earnings 55,501
_____ __________ ___ _______ ________
Balance -- March 31, 1994 9,000 33,333,333 333 103,427 (70,761) 618
Issuance of common stock in public
offering, net of expenses 6,149,993 62 5,630
Issuance of common stock to former
creditors 769,446 8 (8)
Payment to former creditors (922)
Preferred stock dividends (700)
Other (158) (253)
Net earnings
7,375
_______ __________ _____ ________ __________
Balance -- March 31, 1995 $ 9,000 40,252,772 $ 403 $107,969 $ (64,086) $ 365
======= ========== ===== ======== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
Years Ended March 31,
1995 1994 1993
Cash Flows from Operating Activities:
Net earnings (loss) $ 7,375 $ 55,501 $(56,000)
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 3,876 7,327 6,419
Extraordinary gain (129,155)
Restructuring and other
nonrecurring charges (237) (9,711) 16,350
Reorganization expenses 12,914
Asset valuation and
loss reserves (2,031) 8,415 6,495
Other (969) 2,643 1,570
Changes in assets and liabilities:
Accounts receivable (14,805) 12,081 26,769
Inventories 11,032 34,942 (28,884)
Prepaid expenses and other
current assets (5,598) 6,181 4,694
Other assets (605) 89 (498)
Accounts payable and other
current liabilities (18,633) 27,287 2,981
Income taxes payable (379) (924) (194)
_______ _______ ______
Net cash provided (used)
by operations (20,974) 27,590 (20,298)
________ ______ ________
Cash Flows from Investing Activities:
Additions to property and
equipment (2,874) (3,552) (4,859)
Redemption of (investment in)
certificates of deposit 8,455 (500) (4,000)
Other 110 114 (134)
Net cash provided (used) by _____ _______ _______
investing activities 5,691 (3,938) (8,993)
_____ _______ _______
Cash Flows from Financing Activities:
Net borrowings under line of
credit facility 7,256 20,040 25,366
Proceeds from issuances of
common stock 5,692 30,000 125
Retirement of long-term debt (500) (30) (600)
Payment to former creditors (922)
Payment of preferred stock
dividends (525)
Redemption of stock
purchase rights (271)
Payment of pre-petition obligations (75,000)
Payment of debt costs (2,139)
Other (321) (83) (49)
_____ _______ _____
Net cash provided (used) by
financing activities 10,680 (27,212) 24,571
Net decrease in cash and cash _______ ________ _______
equivalents (4,603) (3,560) (4,720)
Cash and cash equivalents at
beginning of year 21,623 25,183 29,903
Cash and cash equivalents at ________ ________ _________
end of year $ 17,020 $ 21,623 $ 25,183
======== ======== =========
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
Note A -- Significant Accounting Policies:
(1) Basis of Presentation:
The consolidated financial statements include the accounts of Emerson
Radio Corp. and its majority-owned subsidiaries (the "Company"). All
significant intercompany transactions and balances have been eliminated. A
50% ownership of a domestic joint venture is accounted for by the equity
method (see Note N). Historical cost accounting was used to account for
the plan of reorganization (the "Plan of Reorganization") (see Note B)
since the transaction did not meet the criteria required for fresh-start
reporting.
Certain prior year information has been reclassified to conform with
the current year presentation.
(2) Cash and Cash Equivalents:
Short-term investments with original maturities of three months or
less at the time of purchase are considered to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates fair value.
(3) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(4) Property and Equipment:
Property and equipment, stated at cost, is being depreciated for
financial accounting purposes on the straight-line method over its estimated
useful life. Leasehold improvements are amortized on a straight-line basis
over the shorter of the useful life of the improvement or the term of the
lease. Upon the sale or retirement of property and equipment, the costs and
related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in income. The cost of repairs and
maintenance is charged to expense as incurred.
(5) Warranty Claims:
The Company provides an accrual for future warranty costs when the
product is sold.
(6) Income Taxes:
Deferred income taxes are accounted for on the liability method in
accordance with Statement of Financial Accounting Standards No. 109.
Provision is made for federal income tax which may be payable on earnings
of foreign subsidiaries to the extent that the Company anticipates they
will be remitted.
(7) Earnings (Loss) per Share:
Net earnings per common share for the year ended March 31, 1995 is
based on the weighted average number of shares of Common Stock and common
stock equivalents outstanding during the year. Common stock equivalents
include shares issuable upon conversion of the Company's Series A Preferred
Stock, exercise of stock options and warrants, and shares issued in the
year ended March 31, 1995 primarily to satisfy an anti-dilution provision.
The Series A Preferred Stock is not convertible into Common Stock until
March 31, 1997, and the shares of Common Stock issuable upon conversion is
dependent on the market value of the Common Stock at the time of conversion
(See Note J(6)). Net earnings (loss) per common share for the years ended
March 31, 1994 and 1993 are based on the weighted average number of shares
of Common Stock outstanding prior to confirmation of the Plan of
Reorganization (See Note B) and cancelled as a part thereof, and do not
include common stock equivalents assumed outstanding since they were not
dilutive.
Pro forma loss per common share for the year ended March 31, 1994
gives effect to the bankruptcy restructuring and is based on the number of
shares of Common Stock issued and outstanding at March 31, 1994. The pro
forma loss per common share does not include common stock equivalents
assumed outstanding since they are anti-dilutive. The pro forma loss per
common share also gives effect to the following adjustments:
(i) Elimination of extraordinary gain of $129,155,000 and
reorganization expenses of $17,385,000;
(ii) Reduction of $6,666,000 in interest expense to give
effect to the reorganized debt structure. The pro forma interest
expense is based on the maximum amount of borrowings ($45 million)
permitted under the new credit facility at the interest rate that
would have been in effect for the year ended March 31, 1994 (8.25%).
Additionally, the amortization of closing fees on the credit facility
is included in the pro forma interest expense above;
(iii) Assumed dividends on the Series A Preferred Stock
aggregating $700,000 for the year ended March 31, 1994.
(8) Foreign Currency:
The assets and liabilities of foreign subsidiaries have been
translated at current exchange rates, and related revenues and expenses
have been translated at average rates of exchange in effect during the
year. Related translation adjustments are reported as a separate component
of shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in the Consolidated Statements of Operations and
amounted to a gain of $220,000 and losses of $1,489,000 and $1,073,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
The Company entered into foreign currency exchange contracts to hedge
exposures related to foreign currency fluctuations for its European
operations. Gains and losses were recognized in the same period as the
transactions being hedged. At March 31, 1995, the Company has no forward
exchange contracts outstanding. In the fiscal year ending March 31, 1996,
the Company intends to reduce its foreign currency exposure by conducting
its Canadian and European businesses in U.S. dollars.
Note B -- Reorganization:
On September 29, 1993, the Company and five of its U.S. subsidiaries
filed voluntary petitions for relief under the reorganization provisions
of Chapter 11 of the United States Bankruptcy Code and operated as
debtors-in-possession under the supervision of the Bankruptcy Court while
their reorganization cases were pending. The precipitating factor for
these filings was the Company's severe liquidity problems relating to its
high level of indebtedness and a significant decline in sales from the
prior year.
Effective March 31, 1994, the Bankruptcy Court entered an order
confirming the Plan of Reorganization. The Plan of Reorganization provided
for the implementation of a recapitalization of the Company. In accordance
with the Plan of Reorganization, the Company's pre-petition liabilities (of
approximately $233 million) were settled with the creditors in the
aggregate, as follows:
I. The Company's bank group (the "Bank Lenders") received $70
million in cash and the right to receive the initial $2 million of
net proceeds from the Company's anti-dumping duty receivable (see
Note I (3)).
II. The institutional holders of the Company's senior notes
(the "Noteholders") initially received $2,650,000 in cash and
warrants to purchase 750,000 shares of Common Stock for a period of
seven years at an exercise price of $1.00 per share, provided that
the exercise price shall increase by 10% per year commencing in year
four, and further received $1 million, payable $922,498 in
cash from the initial public offering of Common Stock (see Note
J(8)) and $77,502 in Common Stock calculated on the basis of
$1.00 per share.
III. The Bank Lenders and Noteholders received their pro rata
percentage of the following:
A. $2,350,000 in cash (however $350,000 of this amount
was distributable to the holders of allowed unsecured
claims);
B. 10,000 shares of Series A Preferred Stock with a face
value of $10 million (estimated fair market value of
approximately $9 million at March 31, 1994);
C. 4,025,277 shares of Common Stock, including 691,944
shares issued in February 1995 pursuant to an anti-dilution
provision;
D. The net proceeds from the sale of the Company's
Indiana land and building; and
E. The net proceeds to be received from the Company's
anti-dumping duty receivable in excess of $2 million (see
Note I (3)).
IV. Holders of allowed unsecured claims received a pro-rata
portion of the $350,000 distribution and interest bearing promissory
notes equal to 18.3% of the allowed claim amount, payable in two
installments over 18 months (see Note G).
Pursuant to the provisions of the Plan of Reorganization, as of March
31, 1994, the equity of the Company's stockholders, and the equity interest
of holders of stock options and warrants were cancelled.
Based on the settlement of the Chapter 11 proceedings, the Company
recognized an extraordinary gain of $129.2 million from the extinguishment
of debt. Additionally, the Company recognized a writedown of $12.9 million
to estimated fair market value on the assets transferred for the benefit of
the Bank Lenders and Noteholders.
Pursuant to the Plan of Reorganization, and in consideration for $30
million, the reorganized Company issued 30 million shares of Common Stock,
currently held by the following parties:
Number of Shares
Fidenas International Limited L.L.C.
("Fidenas International") 16,400,000
Elision International, Inc. ("Elision") 1,600,000
GSE Multimedia Technologies Corporation ("GSE") 12,000,000
The Company's Chairman and Chief Executive Officer is an officer and
beneficial owner of 40% of Fidenas Investment Limited ("FIL"), the
Company's largest shareholder prior to confirmation of the Plan of
Reorganization with an approximate 20% ownership interest.
This officer has a controlling beneficial ownership interest in each
of the three entities listed above which purchased the Company's Common
Stock, and therefore holds an approximate 75% interest in the Company's
outstanding Common Stock at March 31, 1995.
Note C -- Restructuring and Other Nonrecurring Charges:
During the year ended March 31, 1993, the Company recorded
restructuring and other nonrecurring charges aggregating $35,002,000. The
provision included $31.9 million of charges related to the Company's core
business operations of consumer electronics products. These charges were
comprised primarily of certain costs associated with the consolidation of
facilities, severance of employees ($3,967,000 provision for termination of
officers and other employees), the writedown of certain assets, a provision
relating to a significant change in the resale arrangement for returned
product, and professional fees and other charges related to the Company's
proposed financial restructuring and to a proxy contest settled in June
1992. The provision also included $3.1 million in charges relating to the
final wind-down of the Company's personal computer business.
Note D -- Inventories:
Inventories are comprised primarily of finished goods. Spare parts
inventories, net of reserves, aggregating $2,763,000 and $4,140,000 at
March 31, 1995 and 1994, respectively, are included in "Prepaid expenses
and other current assets".
Note E -- Property and Equipment:
Property and equipment is comprised of the following:
March 31,
1995 1994
(In thousands)
Furniture and fixtures $ 5,854 $ 6,025
Molds and tooling 3,806 2,948
Machinery and equipment 1,847 2,509
Leasehold improvements 271 454
______ ______
11,778 11,936
Less accumulated depreciation and amortization 7,102 6,680
_____ ______
$ 4,676 $ 5,256
======== ========
Depreciation and amortization of property and equipment amounted to
$3,267,000, $6,679,000 and $5,062,000, for the years ended March 31,
1995, 1994 and 1993, respectively.
Pursuant to the Plan of Reorganization, the Company transferred its
land and building in Indiana to a liquidating trust established for the
benefit of the Bank Lenders and Noteholders. In connection with this
transfer, the Company recorded a writedown of approximately $2.3 million to
reduce the carrying value to estimated fair market value at March 31, 1994.
Note F -- Notes Payable:
Effective March 31, 1994, the Company entered into a three year Loan
and Security Agreement with a U.S. financial institution (the "Lender")
providing for an asset-based revolving credit facility. The facility
provides for revolving loans and letters of credit, subject to individual
maximums and, in the aggregate, not to exceed the lesser of $60 million or
a "Borrowing Base" amount based on specified percentages of eligible
accounts receivable and inventories. All credit extended under the line of
credit is secured by the U.S. and Canadian assets of the Company. The
interest rate on these borrowings is 2.25% above the prime rate. At March
31, 1995 and 1994, the weighted average interest rate on the outstanding
borrowings was 11.25% and 8.5%, respectively. The facility is also subject
to an unused line fee of 0.5% per annum. Pursuant to the Loan and Security
Agreement, the Company is restricted from, among other things, paying cash
dividends (other than on the Series A Preferred Stock), redeeming stock,
and entering into certain transactions and is required to maintain certain
working capital and equity levels (as defined). At March 31, 1995, there
was $27,296,000 outstanding under the revolving loan facility and
approximately $3,622,000 of outstanding letters of credit issued for
inventory purchases. The fair market value of the short-term notes payable
to the Lender at March 31, 1995 and 1994 is estimated to be $27,296,000 and
$20,040,000, respectively, which is the historical cost.
During the pendency of the bankruptcy proceedings, the Company
obtained debtor-in-possession financing ("DIP Financing") from the Lender.
The terms of the DIP Financing provided for a revolving credit facility in
an aggregate principal amount of $14.9 million and bore interest at the
prime rate plus 0.5% per annum. Repayment of the proceeds was guaranteed
by FIL. All principal and accrued interest on the DIP Financing was paid
and the DIP Financing was terminated as of March 31, 1994.
Cash paid for interest was $3,371,000, $11,251,000 and $20,108,000
for the years ended March 31, 1995, 1994 and 1993, respectively.
In the six months ended March 31, 1994, interest expense was only
accrued and paid on the Company's DIP Financing loan. No interest was
accrued during the pendency of the bankruptcy proceedings on the debt
owed to the Bank Lenders or the Noteholders. Had the contractual interest
been accrued during this period, interest expense would have been
approximately $10.2 million higher than the amount reported on the
Consolidated Statement of Operations for the year ended March 31, 1994.
Note G -- Long-Term Debt:
Long-term debt consists of the following:
March 31,
1995 1994
(In thousands)
Notes payable to unsecured creditors $ 465 $ 842
Equipment notes and other 257 383
11 1/2% convertible subordinated note 500
____ _____
722 1,725
Less current obligations 508 1,498
______ ______
$ 214 $ 227
====== ======
Pursuant to the Plan of Reorganization, the holders of allowed
unsecured claims received interest bearing promissory notes equal to 18.3%
of the claim amount. The notes are due in two installments: 35% of the
outstanding principal is due 12 months from the date of issuance, and the
remaining balance is due 18 months from the date of issuance. The notes
bear interest at the London Interbank Offered Rate in effect at the date of
issuance for one year obligations.
Note H -- Income Taxes:
The income tax provision consists of the following:
Years Ended March 31,
1995 1994 1993
(In thousands)
Current:
Federal $ 40 $215
Foreign, State and Other 227 $327 494
____ ____ ____
$267 $327 $709
==== ==== ====
The difference between the effective rate reflected in the provision
for income taxes and the amounts determined by applying the statutory U.S.
rate of 34% to earnings (loss) before income taxes are analyzed below:
Years Ended March 31,
1995 1994 1993
(In thousands)
Statutory tax (benefit) $ 2,598 $(24,931) $(18,799)
Utilization of net operating loss
carryforwards (632)
U.S. and foreign net operating
losses without tax benefit 1,675 24,975 20,752
Foreign income subject to foreign
tax, not subject to U.S. tax (785) (1,431)
Tax recognition of prior year book
deductions (888)
Rate differential on foreign income (1,959) 327 (638)
Nondeductible bankruptcy expenses 137 1,545
Nondeductible debt restructuring expenses (1,540) 521
Other, net 121 (49) 304
______ _______ ______
Total income tax provision $ 267 $ 327 $ 709
====== ======= ======
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," under which
the liability method (rather than the deferred method) is used in
accounting for income taxes. Under the liability method, deferred tax
assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The change had no effect on the results
of operations for the year ended March 31, 1994.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
March 31,
1995 1994
(In thousands)
Deferred tax assets:
Accounts receivable reserves $ 7,653 $8,287
Inventory reserves 1,188 1,394
Net operating loss carryforwards 10,588 11,550
Other 1,014 1,131
______ ______
Total deferred tax assets 20,443 22,362
Valuation allowance for deferred tax assets
(20,189) (22,011)
________ ________
Net deferred tax assets 254 351
Deferred tax liabilities: ________ ________
Other (254) (351)
________ ________
Total deferred tax liabilities (254) (351)
________ ________
Net deferred taxes $ -- $ --
======== ========
Total deferred tax assets of the Company at March 31, 1995 represent
the tax-effected annual limitation multiplied by the net operating loss
carryforward period and tax-effected deductible temporary differences. The
Company has established a valuation reserve against any expected future
benefits.
Cash paid for income taxes was $725,000, $946,000 and $453,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
Income before taxes of foreign subsidiaries was $3,786,000 and
$5,334,000 for the years ended March 31, 1995 and 1993, respectively.
Losses before taxes of foreign subsidiaries was $16,042,000 for the year
ended March 31, 1994. Unremitted earnings of foreign subsidiaries which
have been, or are intended to be permanently reinvested (and for
which no Federal income tax has been provided) aggregated $3,396,000
and $1,086,000 at March 31, 1995 and 1994, respectively.
As of March 31, 1995, the Company has a net operating loss
carryforward of approximately $95,270,000, of which $31,692,000,
$13,385,000 and $50,193,000 will expire in 2006, 2007 and 2009,
respectively. This net operating loss carryforward reflects downward
adjustments made in 1995 pursuant to IRS examinations completed for the
years ended March 31, 1990 and 1989 totaling $20,346,000. As of March 31,
1995, foreign tax credit carryforwards of $929,000 are available and if
not utilized, will expire in 1996. In addition, as of March 31, 1995, the
Company has deductible temporary differences of approximately $26,003,000
principally attributable to accounts receivable reserves related to sales
returns and inventory reserves. The utilization of these net operating
losses and tax credits will be limited based on the effects of the Plan of
Reorganization consummated on March 31, 1994. Pursuant to the Plan of
Reorganization, the Bank Lenders, the Noteholders, Fidenas International,
Elision and GSE initially received 100% of the Common Stock. As a
result, an ownership change occurred with respect to the Company, and
subjected the Company's net operating losses and tax credits to the
limitation provided for in Section 382 and 383, respectively, of the
Internal Revenue Code. Subject to special rules regarding increases in the
annual limitation for the recognition of net unrealized built-in gains, the
Company's annual limitation will be approximately $2.2 million.
Note I -- Commitments, Contingencies and Related Party Transactions:
(1) Leases:
The Company leases warehouse and office space at minimum aggregate
rentals as follows:
Year Ending
March 31, Amount
(In thousands)
1996 $ 1,507
1997 1,484
1998 1,071
1999 271
2000 --
______
$4,333
======
Rent expense aggregated $2,731,000, $2,663,000 and $3,520,000 for the
years ended March 31, 1995, 1994 and 1993, respectively. Rental income
from the sublease of warehouse space aggregated $273,000, $89,000 and
$201,000 in the years ended March 31, 1995, 1994 and 1993, respectively.
The Company's previous headquarters was leased from a limited
partnership, 51% of which was indirectly owned by four former executive
officers of the Company. The lease, which was scheduled to expire in April
1995 (excluding renewal options), terminated in July 1993, as noted below.
Rent expense related to this lease amounted to $491,000 and $1,575,000 for
the years ended March 31, 1994 and 1993, respectively. In March 1993, the
Company entered into an agreement with the general partner of the limited
partnership under which the Company was released without penalty from
its lease obligations with respect to the above location, effective July
1993, in consideration for executing a five year lease (commencing on the
same date) for office space with an affiliate of the general partner. The
new lease provides for the annual payment of rent of approximately
$813,000, and that the Company pay for its proportionate share of increases
in real estate taxes.
(2) Letters of Credit:
Outstanding letters of credit for the purchase of inventory, not
reflected in the accompanying financial statements, aggregated $11,863,000
(including $3,622,000 issued under the Loan and Security Agreement -- see
Note F) at March 31, 1995.
The Company's Hong Kong subsidiary also maintains various credit
facilities aggregating $114.3 million with a bank in Hong Kong consisting
of the following: (i) a $12.3 million credit facility which is generally
used for letters of credit for a foreign subsidiary's direct import
business and affiliates' inventory purchases, (ii) a $2 million standby
letter of credit facility, and (iii) a $100 million credit facility, for
the benefit of a foreign subsidiary, which is for the establishment of
back-to-back letters of credit with the Company's largest customer. At
March 31, 1995, the Company's Hong Kong subsidiary had pledged $4 million in
certificates of deposit to this bank to assure the availability of these
credit facilities. At March 31, 1995, there were $5,974,000 and $8,415,000
of letters of credit outstanding under the $12.3 million and $100 million
credit facilities, respectively.
The Company's Hong Kong subsidiary secured an additional credit
facility in the year ended March 31, 1995 with another bank in Hong Kong.
The facility provides for a $10 million line of credit for documentary
letters of credit and a $10 million back-to-back letter of credit line,
collateralized by a $5 million certificate of deposit. At March 31,
1995, the Company's Hong Kong subsidiary had pledged $5,041,000 in
certificates of deposit to assure the availability of these credit
facilities. At March 31, 1995, $3,871,000 of the letter of credit line was
utilized.
The Company has discounted unmatured notes received from its European
customers for payments of accounts receivable with various foreign banks.
At March 31, 1995, $1,282,000 of discounted notes have not matured.
(3) Anti-Dumping Duty Receivable:
The Company was a participant in matters pending before the United
States Customs Service and the United States Department of Commerce
pertaining to the assessment and deposit of anti-dumping duties on
importations of color televisions from both the Republic of Korea and
Taiwan. Such deposits were based on U.S. Commerce Department deposit
requirements in effect at the time and were deemed excessive based on the
U.S. Commerce Department's determinations of anti-dumping margins; however,
the deposits will not be refunded until litigation challenging the U.S.
Commerce Department determination of anti-dumping margins is completed.
Pursuant to the Plan of Reorganization, the Company transferred the
anti-dumping duty deposits and related interest, net of anti-dumping duty
liabilities, to a liquidating trust for the benefit of the Bank Lenders and
Noteholders in exchange for a reduction in outstanding indebtedness. In
preparation for the transfer, the Company reviewed the anti-dumping duty
deposit records of the U.S. Customs Service and noted significant
discrepancies between the Company's records and those of the U.S. Customs
Service on anti-dumping duties eligible for refund. The Company believes
that the U.S. Customs Service erroneously liquidated certain anti-dumping
duty entries that should be suspended in accordance with court orders and
misclassified certain anti-dumping duty deposits as regular duty payments.
The magnitude of these differences, including interest accruing thereon,
was estimated at $6.6 million. The net anti-dumping duty receivable was
transferred to the liquidating trust at a fair market value of $4 million
based on third-party analysis, resulting in a writedown of approximately
$10.6 million (based on a book value of $14.6 million).
(4) Other Matters:
A law firm of which two officers of the Company (one of whom is a
director) were members until July 1992 and August 1992, respectively,
received fees of $541,000 in the year ended March 31, 1993, primarily as
reimbursement of amounts incurred by FIL in a 1992 proxy contest. Another
law firm which represented FIL in the proxy contest was paid fees
aggregating $200,000 in the year ended March 31, 1993 by the Company in
reimbursement of amounts incurred by FIL in the proxy contest. Upon
settlement of the proxy contest, such law firm was retained as the
Company's outside counsel and provided legal services to the Company for
fees aggregating $737,000, $1,070,000 and $259,000 for the years ended
March 31, 1995, 1994 and 1993, respectively. A family member of an officer
of the Company joined such law firm, as of counsel, subsequent to its
retention by the Company.
Effective April 1, 1995, the Company's Canadian subsidiary entered
into a series of three-year agreements with a company owned by a former
employee of the Canadian subsidiary, and who is also the daughter of a
former officer of the Canadian subsidiary. The agreements provide for this
Canadian company to perform certain after sale services, act as the
exclusive parts distributor for the Company's Canadian subsidiary and
purchase all products returned by the Company's Canadian customers.
In the year ended March 31, 1994, the Company paid $208,000 to a
designee of FIL for expenses incurred relating to the DIP Financing and
$187,000 to guarantee the DIP Financing. Additionally, the Company
reimbursed Fidenas International $568,000 for various legal, accounting and
filing fees relating to the capital infusion and debt restructuring in the
year ended March 31, 1994.
At March 31, 1994, the Company's Hong Kong subsidiary had $1 million
on deposit with a bank that is an affiliate of Fidenas International.
These funds were withdrawn shortly thereafter.
The Company paid fees to a former executive officer of the Company,
in accordance with a three-year consulting agreement, aggregating $204,000
and $490,000 for the years ended March 31, 1994 and 1993, respectively.
In accordance with the employment contract of an officer of the
Company, the Company has provided a non-interest bearing relocation bridge
loan to the officer of $120,000, secured by the equity in the former
personal residence of the officer. The maturity date of the loan has been
extended and is due in the fiscal year ending March 31, 1996.
The Company has employment agreements with certain of its officers,
that expire at various dates through 1997, and provide for minimum payments
aggregating $3,601,000.
Note J -- Shareholders' Equity:
(1) In connection with the settlement of shareholder litigation in
1991, the Company was required to redeem the common stock purchase rights
(the "Rights") previously granted under the Company's 1989 Shareholder
Rights Agreement at a redemption price of $.01 per Right. In the year
ended March 31, 1993, the Company paid approximately $271,000 to holders of
record on March 13, 1992 to redeem the Rights and granted additional rights
which expired without exercise in July 1992.
(2) In June 1991, the Company entered into a Securities Purchase
Agreement (as amended, the "Securities Purchase Agreement") with a
subsidiary of Semi-Tech (Global) Limited ("Semi-Tech") providing for the
purchase of 10 million common shares and the issuance of stock purchase
warrants. In April 1992, the Securities Purchase Agreement was
terminated in exchange for payment by the Company of $500,000 in cash
and the issuance of 153,847 common shares (then equal in value to $500,000).
Concurrently, the Company and Semi-Tech entered into a three-year
Supply Agreement (the "Supply Agreement"). Pursuant to the Supply
Agreement, the Company issued to Semi-Tech a four-year warrant (valued
at $600,000) to purchase 1 million common shares at $4.00 per share and a
five-year warrant to purchase 500,000 common shares at $4.00 per share.
The Supply Agreement and the warrants were cancelled pursuant to the
Plan of Reorganization.
(3) All stock options outstanding at March 31, 1994 under the 1987
Stock Option Plan and the 1980 Employees' Stock Participation Plan were
cancelled pursuant to the Plan of Reorganization.
(4) In July 1994, the Company's Board of Directors adopted, and the
stockholders subsequently ratified, a Stock Compensation Program
("Program") intended to secure for the Company and its stockholders the
benefits arising from ownership of the Company's Common Stock by those
selected directors, officers, other key employees, advisors and consultants
of the Company who are most responsible for the Company's success and
future growth. The maximum aggregate number of shares of Common Stock
available pursuant to the Program is 2,000,000 shares and the Program is
comprised of 4 parts -- the Incentive Stock Option Plan, the Supplemental
Stock Option Plan, the Stock Appreciation Rights Plan and the Stock Bonus
Plan. A summary of transactions since the inception of the Program is as
follows:
Number of Price Aggregate
Shares Per Share Price
Granted 1,860,000 $1.00 - $1.10 $1,920,000
Cancelled (30,000) $1.00 (30,000)
_________ _____________ __________
Outstanding -- March 31, 1995 1,830,000 $1.00 - $1.10 $1,890,000
========= ==========
The term of each option is ten years, except for options issued to
any person who owns more than 10% of the voting power of all classes of
capital stock for which the term is five years. Options may not be
exercised during the first year after the date of the grant. Thereafter
each option becomes exercisable on a pro rata basis on each of the first
through third anniversaries of the date of the grant. The exercise price
of options granted must be at least equal to the fair market value of the
shares on the date of the grant, except that the option price with respect
to an option granted to any person who owns more than 10% of the voting
power of all classes of capital stock shall not be less than 110% of the
fair market value of the shares on the date of the grant.
(5) In October 1994, the Company's Board of Directors adopted,
subject to stockholder approval, the 1994 Non-Employee Director Stock
Option Plan. The maximum number of shares of Common Stock available under
such plan is 300,000. A summary of transactions since inception of the
plan is as follows:
Number of Price Aggregate
Shares Per Share Price
Granted 175,000 $1.00 $175,000
_______ ________
Outstanding -- March 31, 1995 175,000 $1.00 $175,000
======= ========
The provisions for exercise price, term and vesting schedule are the
same as noted above for the Stock Compensation Program.
(6) Pursuant to the Plan of Reorganization, on March 31, 1994, the
Company issued Series A Preferred Stock with a face value of $10 million
and an estimated fair market value of approximately $9 million. The
preferred stock is convertible into Common Stock at any time during the
period beginning on March 31, 1997 and ending on March 31, 2002; the
preferred stock is convertible into Common Stock at a price per share of
Common Stock equal to 80% of the market value of a share of Common Stock on
the date of conversion. The preferred stock bears dividends commencing
June 30, 1994 on a cumulative basis at the following rates:
Dividend Rate
Year 1 to 3 7.0%
Year 4 5.6%
Year 5 4.2%
Year 6 2.8%
Year 7 1.4%
Thereafter None
The preferred stock is non-voting. However, the terms of the
preferred stock provide that holders shall have the right to appoint two
directors to the Company's Board of Directors if the preferred stock
dividends are in default for six consecutive quarters.
(7) Pursuant to the Plan of Reorganization, the Noteholders received
warrants for the purchase of 750,000 shares of Common Stock. The warrants
are exercisable for a period of seven years from March 31, 1994 and provide
for an exercise price of $1.00 per share for the first three years,
escalating by $.10 per share per annum thereafter until expiration of the
warrant.
(8) In accordance with the Company's Plan of Reorganization, the
Company completed an initial public offering of its Common Stock in
September 1994 to shareholders of record (in those states in which the
offering could be made) as of March 31, 1994, excluding FIL. The
Company sold 6,149,993 shares of Common Stock for $1.00 per share resulting
in proceeds to the Company, net of issuance costs, of approximately
$5,692,000. Pursuant to the terms of the Plan of Reorganization, in
January 1995, the Company paid approximately $922,000 to satisfy certain
obligations owed to former creditors, and in February 1995 issued 691,944
and 77,502 shares of Common Stock to former creditors, primarily to satisfy
an anti-dilution provision. The remainder of such funds were used for
working capital and other corporate purposes.
Note K -- License Agreements:
(1) In February 1995, the Company and Otake Trading Co. Ltd. and
certain affiliates ("Otake"), the Company's largest supplier, entered into
two mutually contingent agreements (the "Agreements"). Effective March 31,
1995, the Company granted a license of certain trademarks to Otake for a
three-year term. The license permits Otake to manufacture and sell certain
video products under the "Emerson" trademark to Wal-Mart Stores, Inc. ("Wal-
Mart"), the Company's largest customer, in the U.S. and Canada, and
precludes Otake from supplying product to Wal-Mart other than under the
Emerson or Orion trademarks. The Company will continue to supply other
products to Wal-Mart directly. Further, the Agreements provide that Otake
will supply the Company with certain video products for sale to other
customers at preferred prices for a three-year term. Under the terms of
the Agreements, the Company will receive non-refundable minimum annual
royalties from Otake to be credited against royalties earned from sales of
video cassette recorders and players, television/video cassette recorder
and player combinations, and color televisions to Wal-Mart. In addition,
effective August 1, 1995, Otake will assume responsibility for returns and
after-sale and warranty services on all video products manufactured by
Otake and sold to Wal-Mart, including video products sold by the Company
prior to April 1, 1995.
Additionally, the Company and Otake agreed on a series of purchase
discounts, consistent with agreements and past practices between Otake and
the Company. Through March 31, 1995, Otake has paid the Company $6.3
million against an aggregate $10.2 million of purchase discounts for
product purchased from January 1, 1993 to March 31, 1995, and the
balance of $3.9 million is due in September 1995. The Company
recognized $9.9 million of discounts in the year ended March 31, 1995,
of which $4.3 million of discounts were attributable to purchases prior
to April 1, 1994.
(2) In October 1994, the Company entered into a license agreement
with Jasco Products Co., Inc., ("Jasco") whereby the Company granted a
license of certain trademarks to Jasco for use on non-competing consumer
electronic accessories. Under the terms of the agreement, the Company
will receive minimum annual royalties through the life of the agreement,
which expires on December 31, 1997, and the agreement is automatically
renewable for three successive three-year periods based upon Jasco's
compliance with the agreement. The Company recognized license fee
income of approximately $1,125,000 in the year ended March 31, 1995.
Note L -- Legal Proceedings:
FIL Litigation:
The 30 million shares of Common Stock issued to GSE, Fidenas
International and Elision on March 31, 1994, pursuant to the Plan of
Reorganization, are the subject of certain legal proceedings. Transfers of
certain shares owned by Fidenas International have been enjoined by court
orders issued in the United States Bankruptcy Court for the Southern
District of New York and in the Commonwealth of Bahamas. The Company is
not a party to any of the proceedings described herein; it is possible that
a court of competent jurisdiction may order the turnover of all or a
portion of the shares of Common Stock owned by such persons to a third
party. A turnover of a substantial portion of the Common Stock could
result in a "change of controlling ownership" prohibited pursuant to the
terms of the Company's Loan and Security Agreement with its primary lender.
Additionally, such a change in control could result in a second "ownership
change" under Internal Revenue Code Section 382, which could affect the
Company's ability to use its net operating loss and tax credit
carryforwards. The Company does not believe the litigation or the results
thereof will have a material adverse effect on the Company or on the
Company's financial position.
Bankruptcy Claims:
The Company is presently engaged in litigation regarding several
bankruptcy claims which have not been resolved since the restructuring of
the Company's debt. The largest claim was filed July 25, 1994 in
connection with the rejection of certain executory contracts with two
Brazilian entities, Cineral Electronica de Amazonia Ltda. and Cineral
Magazine Ltda. (collectively, "Cineral"). The contracts were executed in
August 1993, shortly before the Company's filing for bankruptcy protection.
The amount claimed was $93,563,457, of which $86,785,000 represents a claim
for loss of profits and $6,400,000 for plant installation and establishment
of offices, which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and, therefore, will
be satisfied, to the extent the claim is allowed by the Bankruptcy Court,
in the manner other allowed unsecured claims were satisfied. The Company
has objected to the claim and intends to vigorously contest such claim and
believes it has meritorious defenses to the highly speculative portion of
the claim for lost profits and the portion of the claim for actual damages
for expenses incurred prior to the execution of the contracts.
Additionally, the Company has instituted an adversary proceeding in the
Bankruptcy Court asserting damages caused by Cineral. A motion filed by
Cineral to dismiss the adversary proceeding has been denied. The adversary
proceeding and claim objection have been consolidated into one proceeding.
An adverse final ruling on the Cineral claim could have a material adverse
effect on the Company, even though it would be limited to 18.3% of the
final claim determined by a court of competent jurisdiction; however, with
respect to the claim for lost profits, in light of the foregoing, the
Company believes the chances for recovery for lost profits are remote.
Other Litigation:
The Company is involved in other legal proceedings and claims of
various types in the ordinary course of business. While any litigation
contains an element of uncertainty, management presently believes that the
outcome of each such proceeding or claim which is pending or known to be
threatened (including the actions noted above), or all of them combined,
will not have a material adverse effect on the Company's consolidated
financial position.
Note M -- Business Segment Information and Major Customers:
The consumer electronics business is the Company's only business
segment. Operations in this business segment are summarized below by
geographic area:
<TABLE>
<S> <C> <C> <C> <C>
Year Ended March 31, 1995 U.S. Foreign Eliminations Consolidated
(In thousands)
Sales to unaffiliated customers $ 608,717 $45,954 $ -- $ 654,671
Transfers between geographic areas 5,954 184 (6,138) --
________ ______ ________ ________
Total net revenues $ 614,671 $46,138 $ (6,138) $ 654,671
======== ====== ======== =========
Earnings (loss) before income
taxes $ 12,238 $(4,596) $ -- $ 7,642
======== ======= ======== ========
Identifiable assets $ 98,604 $15,470 $ (105) $ 113,969
======== ====== ========= ========
Year Ended March 31, 1994
Sales to unaffiliated customers $ 433,495 $53,895 $ -- $ 487,390
Transfers between geographic areas 2,587 -- (2,587) --
________ ______ _________ ________
Total net revenues $ 436,082 $53,895 $ (2,587) $ 487,390
Loss before reorganization ======== ====== ========= =========
costs and income taxes $ (50,718) $(5,224) $ -- $ (55,942)
========= ======= ========= =========
Identifiable assets $ 99,726 $19,295 $ -- $ 119,021
======== ====== ========= =========
Year Ended March 31, 1993
Sales to unaffiliated customers $ 693,997 $47,360 $ -- $ 741,357
Transfers between geographic areas 3,803 -- (3,803) --
_________ ______ _________ _________
Total net revenues $ 697,800 $47,360 $ (3,803) $ 741,357
Loss before income taxes $ (53,279) $(2,012) $ -- $ (55,291)
========= ======= ========= ==========
Identifiable assets $ 175,363 $19,147 $ -- $ 194,510
======== ====== ========= =========
</TABLE>
Transfers between geographic areas are accounted for on a cost basis.
Identifiable assets are those assets used in operations in each geographic
area.
At March 31, 1995 and 1994, identifiable assets include $37,492,000
and $51,390,000, respectively, of assets located in foreign countries.
The Company's net sales to one customer aggregated approximately 53%,
34% and 39%, of consolidated net sales for the years ended March 31, 1995,
1994 and 1993, respectively. At March 31, 1995 and 1994, the Company had a
liability balance to this customer for product returns. The Company's net
sales to another customer aggregated 10%, 12% and 11% for the years ended
March 31, 1995, 1994 and 1993, respectively. Trade receivables from this
customer approximated 10% and 11% of accounts receivable at March 31, 1995
and 1994, respectively, and are not collateralized.
Note N -- Investment in Joint Venture
The Company has a 50% investment in E & H Partners, a joint venture
that purchases, refurbishes and sells all of the Company's product returns.
The results of this joint venture are accounted for by the equity method.
The Company's equity in the earnings of the joint venture is reflected as a
reduction of cost of sales in the Company's Consolidated Statements of
Operations. Summarized financial information relating to the joint venture
is as follows:
March 31, 1995
(In thousands)
Accounts receivable from joint venture $15,283(a)
Investment in joint venture 1,565
Condensed balance sheet:
Current assets $26,749
Noncurrent assets 161
______
Total $26,910
======
Current liabilities $23,780
Partnership equity 3,130
______
Total $26,910
======
Year Ended
March 31, 1995
(In thousands)
Sales to joint venture $32,500
Condensed income statement:
Net sales 24,760(b)
Net earnings 2,130
___________________
(a) Secured by a lien on the partnership's inventory. Such lien has been
assigned to the Lender as collateral for the U.S. line of credit
facility.
(b) Includes sales to the Company of $3,796,000.
EMERSON RADIO CORP. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
Column A Column B Column C Column D Column E
Balance at Charged to Balance
beginning costs and at end of
Description of year expenses Deductions year
Allowance for doubtful accounts:
Year ended:
March 31, 1995 $ 1,639 $ 1,574 $ 280(A) $ 2,933
March 31, 1994 2,374 998 1,733(A) 1,639
March 31, 1993 2,390 2,043 2,059(A) 2,374
Inventory reserves:
Year ended:
March 31, 1995 $ 644 $ 251 $ 425(B) $ 470
March 31, 1994 1,559 6,619 7,534(B) 644
March 31, 1993 1,817 4,587 4,845(B) 1,559
(A) Accounts written off, net of recoveries.
(B) Net realizable value reserve removed from account when inventory is sold.
INDEX TO EXHIBITS
PAGE NUMBER
IN
SEQUENTIAL
NUMBERING
EXHIBIT DESCRIPTION SYSTEM
(2) Confirmation Order and Fourth Amended Joint Plan of
Reorganization of Emerson Radio Corp. ("Old Emerson")
and certain subsidiaries under Chapter 11 of
the United States Bankruptcy Code, dated March 31, 1994
(incorporated by reference to Exhibit (2) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the Securities and Exchange
Commission ("SEC") on August 9, 1994).
(3)(a) Certificate of Incorporation of Emerson (incorporated by
reference to Exhibit (3) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(3) (b) Certificate of Designation for Series A Preferred
Stock (incorporated by reference to Exhibit (3) (b)
of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by
the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of Merger by
and between Old Emerson and Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)(c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (d) Certificate of Merger of Old Emerson with and into Emerson
Radio (Delaware) Corp. (incorporated by reference to Exhibit (3)
(d) of Emerson's Registration Statement on Form S-1, Registration
No. 33-53621, declared effective by the SEC on August 9, 1994).
(3) (e) By-Laws of Emerson adopted March 1994 (incorporated by reference
to Exhibit (3)(e) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the SEC
on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares of Common Stock,
dated as of March 31, 1994 (incorporated by reference to
Exhibit (4) (a) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (a) Agreement, dated as of November 14, 1973, between National Union
Electric Corporation ("NUE") and Emerson (incorporated by reference
to Exhibit (10)(a) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the
SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of February 28, 1979, by and
between NUE and Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (c) Agreement, dated July 2, 1984, between NUE and Emerson
(incorporated by reference to Exhibit (10) (c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between NUE and Emerson
(incorporated by reference to Exhibit (10) (d) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-Petition Creditors
(incorporated by reference to Exhibit (10) (e) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31, 1994, by and
among Emerson, Majexco Imports, Inc. and Congress Financial
Corporation ("Congress") (incorporated by reference to
Exhibit (10) (f) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation Program (incorporated
by reference to Exhibit (10) (i) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (h) Employment Agreement between Emerson and Eugene I. Davis
(incorporated by reference to Exhibit 6(a)(4) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30,
1992).
(10) (i) Employment Agreement between Emerson and Albert G. McGrath,
Jr. (incorporated by reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June
30, 1992).
(10) (k) Employment Agreement between Emerson Radio (Hong Kong) Ltd.
and Geoffrey P. Jurick (incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form 10-Q
for quarter ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio International Ltd.
(formerly Emerson Radio (B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993, by and between
Hartz Mountain Parsippany and Emerson with respect to the
premises located at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10)(ww) of
Emerson's Annual Report on Form 10-K for the year ended
December 31, 1992).
(10) (n) Employment Agreement, dated July 13, 1993, between Emerson
and Merle Eakins (incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form 10-K for the year
ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994, between Emerson and
John Walker (incorporated herein by reference to Exhibit
(10)(ee) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (p) Liquidity Trust Agreement, dated as of March 31, 1994, by and
among Emerson, Majexco Imports, Inc., H.H. Scott, Inc., and Stuart
D. Gavsy, Esq., as Trustee (incorporated by reference to Exhibit
(10) (ff) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994, between Emerson
and Hopper Radio of Florida, Inc.*
(10) (r) Sales Agreement, dated April 1, 1994, between Emerson and E & H
Partners.*
(10) (s) Agreement, dated July 1, 1994, between Emerson and Alex Wijnen
relating to termination of employment and agreement on consulting
services.*
(10) (t) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio International Ltd. and Peter G. Bunger.*
(10) (u) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio Europe B.V. and Peter G. Bunger.*
(10) (v) Employment Agreement, dated October 3, 1994, between Emerson
and Andrew Cohan.*
(10) (w) License Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(1) of Emerson's
quarterly report on Form 10-Q for quarter ended December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(2) of Emerson's
quarterly report on Form 10-Q for quarter ended December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan.*
(11) Computation of Primary Earnings Per Share.*
(21) Subsidiaries of the Registrant as of March 31, 1995.*
(27) Financial Data Schedule for year ended March 31, 1995.*
___________________
* Filed herewith.
</PAGE>
PARTNERSHIP AGREEMENT
OF
E & H PARTNERS
Effective as of April 1, 1994
PARTNERSHIP AGREEMENT
OF
E & H PARTNERS
This Partnership Agreement effective as of April 1, 1994, by and
among Emerson Radio Corp., a New Jersey corporation with its principal
office located at 9 Entin Road, Parsippany, New Jersey 07054
("Emerson") and Hopper Radio of Florida, Inc., a Florida corporation,
with its principal office located at 7145 West 20th Avenue, Hialeah, Florida
33014 ("Hopper").
WHEREAS, the parties wish to form a general Partnership under the
laws of the State of Delaware for the purposes hereinafter described;
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth and other good and valuable consideration, the receipt of which is
hereto hereby acknowledged, the parties hereby agree as follows:
I. DEFINITIONS. Certain defined terms used in this Agreement are
set forth in Exhibit A.
II. ORGANIZATION.
2.1 Formation. The parties hereby form a general Partnership
pursuant to the provisions of this Agreement and the laws of the State of
Delaware.
2.2 Name. The name of the Partnership shall be E & H Partners.
2.3 Trade Name. The Partnership shall conduct its business
under any trade name selected by the Partners.
2.4 Term. The term of the Partnership shall commence as of
the date hereof and shall continue until terminated in accordance with the
provisions of this Agreement.
2.5 Principal Office and Qualifications.
2.5-1 The principal office of the Partnership shall be
located at 7145 West 20th Avenue, Hialeah, Florida 33014, or such other
place as may from time to time be determined by the Partners.
2.5-2 The Partners shall use their best efforts to
qualify the Partnership to do business in each jurisdiction where the
activities of the Partnership make such qualification necessary.
III. PURPOSE; LICENSES; OTHER BUSINESS.
3.1 Purposes. The Partnership is being organized for the
following:
3.1-1. To purchase consumer electronics products from
Emerson which products are returned to Emerson by its customers and are
available for resale "AS-IS" ("Merchandise"), to refurbish such
Merchandise, if feasible, and to sell such Merchandise as refurbished or
"as is" worldwide in all countries in which Emerson has trademark rights
to the Emerson brand name and trademark ("Merchandise Territory") in
accordance with the Sales Agreement between Emerson and E & H Partners
("Sales Agreement") made as of the date hereof.
3.1-2. To purchase new consumer electronics products
("New Products") from manufacturers sourced through Emerson Radio
International Ltd. upon the terms to be determined by the parties thereto,
or through third party sources if such New Products can be obtained on more
favorable prices and terms, and to sell the New Products solely in the
countries of Mexico, Central and South America in which Emerson has
trademark rights to the Emerson brand name and trademark and upon the terms
to be determined by the Partners ("New Product Territory"). The Partners
shall select an importer of record.
3.2. Licenses. Emerson agrees to license to the Partnership
the trademark design and logo associated with the Emerson name in
connection with the Partnership's purposes as specifically defined herein
upon the terms to be agreed to by the Partners.
3.3 Other Business. In the event the Partnership performs a
service for either Partner for their individual benefit and not for the
benefit of the Partnership, the Partnership shall charge such Partner a fee
for providing such services. However, prior to performing such services,
the Partners must agree that the Partnership may perform such services and
agree to the amount of fee to be charged.
IV. INITIAL CAPITAL CONTRIBUTIONS.
4.1 Proportions. Unless otherwise agreed by all of the
Partners, all Initial Capital Contributions ("Initial Contributions") from
the Partnership shall be made as follows:
4.1-1 Emerson shall (a) contribute Merchandise to the
Partnership equal to the amount of Hopper's Initial Cash Contribution
including working capital for the first ninety (90) days of operation for
including but not limited to costs of labor, rent, overhead, materials,
refurbishing and sales expense which amount shall not exceed Five Hundred
Thousand ($500,000) U.S. dollars; (b) sell the Merchandise to E & H
Partners at the prices set forth in the Sales Agreement, as same may be
amended; (c) license to the Partnership its trademark, design and logo upon
terms to be agreed to by the Partners; (d) provide E & H Partners access to
its vendors through Emerson, (e) relinquish the territories for refurbished
Merchandise as set forth herein and in the Sales Agreement; and f) lease to
the partnership the equipment to refurbish the Merchandise which Emerson
currently owns at its facility located in Princeton, Indiana at a lease
rate of $1.00/year which equipment Emerson represents is presently in good
working condition. However E & H Partners shall be responsible for the
repair and maintenance of such equipment. It is agreed by the Partners that
Emerson's Initial Contribution shall constitute Emerson owning 50%
Percentage Interest in the Partnership.
4.1.-2 Hopper shall (a) provide the set price list
at which all Merchandise shall be sold which shall be approved in advance
by the Partners. In order for Hopper to sell such Merchandise at prices
below such approved price list, Hopper shall obtain Emerson's prior written
approval, (b) provide E & H Partners with financing subject to both
Partners agreeing to the terms of the financing; c) provide the physical
location for the partnership to perform its refurbishing of merchandise at
a rental rate of $2.00/ft. or as otherwise agreed to by the Partners;
d) provide the employees for the Partnership and the overhead cost for the
first ninety (90) days of operation including but not limited to costs
of labor, rent, overhead, materials, refurbishing, sales expenses, initial
purchase of Merchandise, which amounts in the aggregate shall not exceed
Five Hundred Thousand ($500,000) U.S. dollars. It is agreed by the
Partners that Hopper's Initial Contribution shall constitute Hopper owning
50% Percentage Interest in the Partnership.
The Partners shall agree to the value to be assigned to each Partner's
Initial Contribution.
4.2 Forfeiture. Each Partner hereby acknowledges and agrees
that the Partnership and each of the Partners are relying upon the prompt
performance in making all Initial Contributions. Accordingly, each Partner
hereby pledges to the Partnership and each other Partner its Percentage
Interest to secure its obligations to make all Initial Contributions
pursuant to Section 4.1 hereof. If any Partner fails to make its Initial
Contribution, it shall be deemed to be a Defaulting Partner and its
Percentage Interest shall be subject to foreclosure and shall be
extinguished as damages for such default. Each Partner acknowledges that
if it is a Defaulting Partner, it shall lose its entire investment in the
Partnership.
4.3 No Withdrawal of Interest. No Partner shall have the
right to withdraw any part of its Initial Contribution or to receive any
distribution, except in accordance with the provisions of this Agreement.
No interest shall be paid on any Initial Contribution.
4.4 Advances by Partners. If any Partner shall advance
funds to the Partnership other than as provided in this Article, the
amount of such advance shall not be deemed a Capital Contribution unless the
Partners expressly agree otherwise in writing. The amount of such advance
shall be agreed to in advance by the Partners and shall be debt due from
the Partnership to such Partner for all purposes and shall be evidenced
by a promissory note of the Partnership payable to the order of the lending
Partner. The lending Partner shall have all rights of a creditor against
the Partnership for all purposes. The Partners may cause the Partnership
to repay any advances to the Partnership in accordance with their terms out
of available funds prior to any distributions to the Partners under any
other provision of this Agreement. Any advance made by a Partner shall
bear such interest and shall have such other terms as are determined by
the Partners.
4.5 Services by Partners. In the event either Partner, in
its individual capacity and not as a Partner of the Partnership, provides
services to the Partnership for the Partnerships benefit, such Partner
shall charge the Partnership a fee for such services. However, prior to
the acceptance by the Partners of such services, the Partners must agree
that the Partnership may accept such services and agree to the amount of
fee to be charged. In accordance herewith, it is hereby agreed and
understood that, except for the sales expense during the initial ninety
(90) days of operation as defined in Section 4.1 hereof, in its capacity as
selling agent for the Partnership, Hopper shall be paid a fee of gross
sales payable as agreed to by the Partners.
V. CAPITAL ACCOUNTS.
An individual Capital Account shall be maintained for each
Partner, and the Partner's Initial Contribution shall be credited to that
account. Capital Accounts shall be maintained in accordance with section
1.704-1(b) (2) (iv) of the Regulations. In applying the preceding
sentence, where any item may be treated in more than one manner under
such Regulations, the decision as to which permissible manner is selected
shall be made by the Partners. Notwithstanding anything herein to the
contrary, consistent with section 1.704-1(b) (2) (iv) of the Regulations,
the Capital Accounts of all Partners shall be adjusted to reflect the fair
market value of the Partnership's assets (including intangible assets) in
connection with (and to be effective immediately prior to) any contribution
of capital to or distribution of property from the Partnership, other than a
contribution or distribution which is pro rata among all Partners, or upon
the liquidation of the Partnership. The Partners understand and acknowledge
that the Capital Accounts as so maintained shall be the basis upon which
the Partners' Percentage Interests in the Partnership are determined for
all purposes hereunder.
VI. ALLOCATION OF PROFITS AND LOSSES.
6.1 Allocations to be Pro Rata. Profits or Losses for any
Accounting Period shall be allocated fifty percent (50%) to each Partner
for that Accounting Period.
6.2 Definition of Profits and Losses. Profits or Losses
shall mean, for each Accounting Period, the amount of net profit or net
loss as shown of the financial statements of the Partnership (which
financial statements shall be consolidated with those of any subsidiaries
the Partnership may at any time own) for such Accounting Period prepared
pursuant to Article XIII in accordance with generally accepted accounting
principles, consistently applied ("GAAP"); provided, however, that for
purposes of adjusting the Partner's Capital Accounts in accordance with
Article V to reflect such Profits or Losses, the Profits or Losses
determined in accordance with GAAP shall be adjusted as shall be deemed
necessary by the Partners, in order to make such definition of Profits
and Losses consistent with the principles set forth in section 1.704-1(b)(2)
of the Regulations. Any elections or other decisions relating to the
manner in which the income, deductions, gains, losses and credits of the
Partnership shall be allocated for tax purposes among the Persons who
were Partners during a given Accounting Period shall be made by the Partners
in such manner as they deem equitable; provided that any such allocation
shall be in accordance with the Code and the Regulations.
VII. DISTRIBUTIONS.
7.1 Time and Amount of Distributions. Distributions of
cash shall be made from the Partnership to the Partners on a quarterly basis
or at such other times as the Partners may determine; provided, however,
that for any calendar year the Partnership shall distribute cash no less than
the "Tax Distribution Amount" (as defined in Section 7.3). The Partners
shall make such minimum distributions at such times during the calendar
year and during the 75 days following the end of the calendar year as
shall enable the Partners to use such distributions to satisfy their
estimated and final income tax liabilities for the calendar year. Further,
the Partners shall cause the Partnership to make additional distributions to
the Partners to the extent they, in their discretion, determine that the
Partnership shall have excess cash flow which is not necessary for current
and reasonably foreseeable future capital expenditures, lease obligations,
operating expenses and working capital.
7.2 Distributions to be Pro Rata. All distributions to
the Partners shall be made in proportion to the Partners' Percentage
Interests at the time of distribution.
7.3 Tax Distribution Amount. For purposes of this Agreement,
the "Tax Distribution Amount" for any calendar year shall be an amount
equal to fifty percent (50%) of the aggregate taxable income taxed to
the Partners for federal income tax purposes for such calendar year; provided,
however, that if the maximum marginal federal individual income tax rate,
including any surtax, shall increase beyond the rate applicable during
1993, or if at any time after 1993 the maximum marginal federal corporate
income tax rate shall exceed the maximum marginal federal income tax
rate (including any surtax), then an equitable adjustment to the Tax
Distribution Amount shall be made.
VIII REPRESENTATIONS AND WARRANTIES.
8.1 Representations and Warranties of Emerson Radio Corp.
Emerson Radio Corp. hereby represents and warrants to the other Partner
as follows:
8.1-1 It has been duly organized and is validly existing
and in good standing under the laws of the State of New Jersey and has
the requisite power and authority to carry on its business.
8.1-2 Subject to the approval of the United States
Bankruptcy Court, it has the full right, power and authority to execute
and deliver this Agreement and to perform each of its obligations hereunder
and no consent from any third party is required for its execution, delivery
and performance hereof.
8.1-3 Subject to the appropriate Bankruptcy Court
order, the consummation of the transactions contemplated hereby will not
violate, conflict with or result in a breach of any terms of any instrument
or other agreement to which it is a party, nor to the best of its knowledge,
will it conflict with any applicable law, regulation, ordinance or order.
8.1-4 Subject to the approval of the United States
Bankruptcy Court, it has duly executed and delivered this Agreement and
that all actions necessary to make this Agreement its valid and binding
obligation have been taken and this Agreement is not subject to any
restriction which prohibits or would be violated by the execution and
delivery hereof or consummation of the transactions contemplated hereby.
8.1-5 It has reviewed the terms of and understands
that the Partnership will be executing, delivering and performing pursuant
to the terms of the Sales Agreement.
8.2 Representations and Warranties of Hopper. Hopper hereby
represents and warrants to the other Partner as follows:
8.2-1 It has been duly organized and is validly existing
and in good standing under the laws of the State of Florida and has the
requisite power and authority to carry on its business.
8.2-2 It has the full right, power and authority to
execute and deliver this Agreement and to perform each of its obligations
hereunder and no consent of any third party is required for its
execution, delivery and performance hereof.
8.2-3 The consummation of the transactions contemplated
hereby will not violate, conflict with or result in a breach of any terms
of any instrument or other agreement to which it is a party, nor to the
best of its knowledge, will it conflict with any applicable law, regulation,
ordinance or order.
8.2-4 It has duly executed and delivered this Agreement
and all actions necessary to make this Agreement its valid and binding
obligation have been taken and this Agreement is not subject to any
restriction which prohibits or would be violated by the execution and
delivery hereof or consummation of the transactions contemplated hereby.
8.2-5 It has reviewed the terms of and understands that
the Partnership will be executing, delivering and performing pursuant to
the terms of the Sales Agreement.
IX. MANAGEMENT OF PARTNERSHIP; RIGHTS, POWERS AND DUTIES OF THE
GENERAL MANAGER.
9.1 General Manager.
Barry Smith of Hopper shall be General Manager of the
Partnership ("General Manager") and shall have operational control of the
day-to-day business of the Partnership and all transactions in the ordinary
course of business, including but not limited to all matters pertaining
to (i) the production, purchase, marketing and sale of the Partnership's
Merchandise and New Products (ii) the retention and termination of
employees of the Partnership; and (iii) all of the Partnership's
administrative matters. Not- withstanding the above, the General Manager
shall only operate the day-to-day business of the Partnership in accordance
with operating budgets and forecasts as approved in advance by the
Partners. If Barry Smith resigns as the General Manager, ceases to be a
principal of Hopper, becomes insolvent or bankrupt, the Partners shall
designate a new General Manager.
9.2 Specific Powers. In furtherance of the foregoing, the
General Manager shall have all powers which are necessary to carry out
the duties as specifically defined in section 9.1 herein.
9.3 Liability of The General Manager. The General Manager
shall not be liable to the Partnership or to any Partner for (i) the
performance of, or the omission to perform, any act if in good faith the
General Manager determined that such conduct was in the best interest of
the Partnership, in accordance with his duties as defined in section 9.1
and such conduct did not constitute fraud or reckless or intentional
misconduct, (ii) the termination of the Partnership and this Agreement
pursuant to the terms hereof, and (iii) the performance of, or the
omission to perform, any act in good faith reliance on advice of legal
counsel, accountants or other professional consultants to the Partnership
9.4 Indemnification of The General Manager. The Partnership,
its receiver or its trustee shall indemnify, defend and hold the General
Manager and his permitted successors and assigns harmless from and
against any expense, loss, damage or liability incurred or connected with,
or any claim, suit, demand, loss, judgment, liability, cost or expense
(including reasonable attorneys' fees) arising from or connected with the
Partnership or any act or omission of the General Manager (including claims,
suits or demands by another Partner), and amounts paid in settlement of any
of the foregoing, provided that the same were not the result of fraud or
reckless or intentional misconduct on the part of the General Manager. The
Partners, in their discretion, may advance to the General Manager the costs
of defending any claim, suit or action against the General Manager connected
with the Partnership or any act or omission by the General Manager if the
General Manager undertakes to repay the advanced funds, with interest, if
the General Manager is not entitled to indemnification under this Section
9.4.
X. TRANSFER OF INTERESTS IN PARTNERSHIP.
10.1 Restrictions on Transfers. Except as otherwise permitted
by this Agreement, no Partner shall Transfer all or any portion of its
interest in the Partnership.
10.2 Permitted Transfers. A Partner shall only be permitted
to Transfer all or any portion of its interest in the Partnership
("Partnership Interest") to a wholly owned subsidiary, or a wholly owned
subsidiary of a wholly owned subsidiary, of the transferring Partner.
10.3 Conditions Precedent To Transfer. Notwithstanding any
provision of Section 10.2, no Transfer shall be permitted, except in the
case of a Transfer occurring involuntarily by operation of law, unless
the transferor and transferee shall execute and deliver to the Partnership
such opinions of counsel and documents and instruments of conveyance as may
be necessary or appropriate in the opinion of counsel to the Partnership to
effect such Transfer and to confirm the agreement of the transferee to
be bound by the provisions of this Agreement (including this Article).
10.4 Effect of Disposition. Following any disposition of a
Partner's entire Partnership Interest, the Partner shall have no further
rights as a Partner in the Partnership (including any rights as a
General Manager).
10.5 Transferee's Capital Account. In any interest in the
Partnership is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
XI. COVENANT AGAINST COMPETITION. Emerson hereby expressly
acknowledges and agrees that, for a period of one (1) year following
termination of this Agreement as provided herein, it will not directly
or indirectly through its employees, agents or representatives, sell
remanufactured products to or contact Hopper's existing customers as of
the effective date of this Agreement, to the extent Hopper substantiates
such customers were existing Hopper customers at such time and identifies
such customers to Emerson in writing at time of termination, unless Emerson
obtains Hopper's prior written consent. It is Hopper's option whether
it will so identify customers at time of termination.
XII. DISSOLUTION AND TERMINATION.
12.1 Events Causing Dissolution. The Partnership shall be
dissolved and its affairs wound up upon the first to occur of the following:
12.1-1 a determination by the Partners to dissolve the
Partnership;
12.1-2 the occurrence of the dissolution, insolvency,
bankruptcy, death or incompetency of a Partner if such event leaves only
one other Partner remaining as a Partner;
12.1-3 the entry of a judgment of dissolution by a
court of competent jurisdiction;
12.1-4 if either Partner provides six (6) months'
written notice to the other Partner that it wishes to dissolve the
Partnership.
12.2 Liquidation.
12.2-1 Upon a dissolution of the Partnership requiring
the winding-up of its affairs, the General Manager (which term for
purposes of this Article XII shall mean a Person appointed by the Partners
if the General Manager at time of dissolution cannot or will not then serve)
shall wind up its affairs. The assets of the Partnership shall be sold
within a reasonable period of time to the extent necessary to pay or
provide for the payment of all debts and liabilities of the Partnership,
and may be sold to the extent deemed practicable and prudent by the Partners.
12.2-2 The net assets of the Partnership remaining after
satisfaction of all such debts and liabilities and the creation of any
reserves under Subsection 12.2-4, shall be distributed to the Partners
in accordance with their positive Capital Account balances as of the date
of such distribution, after giving effect to all contributions, distributions
and allocations for all periods, including the period during which such
liquidation occurs. Any property distributed in kind in the liquidation
shall be valued at fair market value.
12.2-3 Distributions to Partners pursuant to this
Article XII shall be made by the end of the taxable year of the liquidation,
or, if later, within ninety (90) days after the date of such liquidation
in accordance with Regulation Section 1.704-1(b)(2)(ii)(g).
12.2-4 The Partners shall withhold from distribution
under this Section 12.2 such reserves which are required by applicable law
and such other reserves for subsequent computation adjustments and for
contingencies, including contingent liabilities relating to pending or
anticipated litigation or to Internal Revenue Service examinations. Any
amount held as a reserve shall reduce the amount payable under this
Section 12.2 and shall be held in a segregated interest-bearing account. The
unused portion of any reserve shall be distributed with interest thereon
pursuant to this Section 12.2 after the Partners shall have determined that
the need therefore shall have ceased.
12.3 Partner's Deficit Capital Account. If the Partnership is
"liquidated" within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g),
distributions shall be made only to Partners with positive Capital Accounts
in compliance with Regulation Section 1.704-1(b)(2)(ii)(b)(2). If any
Partner's Capital Account shall have a deficit balance after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs, that Partner shall
contribute to the capital of the Partnership the amount necessary to restore
such deficit balance to zero, in compliance with Regulation Section
1.704-1(b)(2)(ii)(b)(3), and if the Partnership is dissolving and being
wound up pursuant to this Article XII the amount so contributed shall be
treated as proceeds from the liquidation of Partnership assets for purposes
of, and shall be distributed pursuant to, this Article XII.
XIII. BOOKS AND REPORTS.
13.1 Maintenance of Records. The Partners shall appoint a
third party accountant ("accountant") to maintain true and correct books
and records of the Partnership in accordance with GAAP. Such books and
reports shall be maintained at the accountant's offices or at such other
location as agreed to by the Partners. Each Partner, and any duly
authorized employee, agent or representative thereof, shall have the right
to inspect, copy and make extracts or compilations from or, at such
Partner's request, have the accountant send to such Partner copies of such
books and reports.
13.2 Reports to Partners. As soon as practicable after the
end of each Fiscal Year, the accountant (i) shall cause to be prepared and
sent to each Partner a balance sheet and a statement of income of the
Partnership which shall be audited by a certified public accountant, and
(ii) shall cause to be prepared and sent to each Partner a report setting
forth in sufficient detail all such information and data with respect to
the Partnership for such fiscal Year as shall enable such Partner to
prepare its Federal, state and local income tax returns in accordance with
the laws, rules and regulations then prevailing. The accountant shall also
cause to be prepared and filed all Federal, state and local tax returns
required of the Partnership. All balance sheets, statements, reports and
tax returns required pursuant to this Section 13.2 shall be prepared at the
expense of the Partnership.
XIV. PARTNERSHIP EXPENSES. The Partners agree that the Partnership
shall pay the reasonable costs and expenses of the Partners incurred
directly in connection with the business of the Partnership, provided such
costs and expenses are approved in advance by the Partners.
XV. AMENDMENT OF PARTNERSHIP AGREEMENT. This Agreement may be
amended only by the written agreement of the Partners.
XVI. NOTICES. All notices, consents, waivers, requests or other
instruments or communications given pursuant to this Agreement shall be in
writing, signed by the party giving the same, and shall be delivered by
hand or sent by registered or certified United States mail, return receipt
requested, postage prepaid, or by a recognized overnight delivery service,
addressed, in the case of the Partnership, to the Partnership at its
principal place of business, with a copy to each Partner, at the address
set forth in the Partnership's books and records. Any Partner may, by
notice to the Partnership and each other Partner given in the manner
specified in this Article, specify any other address for the receipt of
such notices, instruments or other communications. Any notice, instrument
or other communication shall be deemed properly given when personally
delivered, on the fifth day after being so mailed by certified or
registered mail, or on the next business day after being so sent by
overnight delivery service.
XVII. (OMITTED)
XVIII. MISCELLANEOUS.
18.1 Interpretations.
18.1-1 Article, Section and Subsection headings are not
to be considered part of this Agreement, are included solely for convenience
and are not intended to be full or accurate descriptions of the contents
thereof.
18.1-2 The use of the terms ""herein", hereunder",
"hereof" and like terms shall be deemed to refer to this entire Agreement
and not merely to the particular provision in which the term is contained,
unless the context clearly indicates otherwise.
18.1-3 The use of the word "including" or a like term
shall be construed to mean "including but not limited to".
18.1-4 Exhibits and schedules to this Agreement are an
integral part of this Agreement.
18-1-5 Words importing a particular gender shall include
every other gender and words importing the singular shall include the
plural and visa-versa, unless the context clearly indicates otherwise.
18.1-6 Any reference to a provision of the Code or
Regulations shall be construed to be a reference to any successor provision
thereof.
18-1-7 This Agreement is the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements relating to such subject matter. Any matter
concerning the Partnership or Partnership business which is not
specifically set forth herein must be unanimously approved in writing by
the Partners.
18.2 Severability. If any provision of this Agreement shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby, and each provision hereof shall be valid and shall be
enforced to the fullest extent permitted by law.
18.3 Counterparts. This Agreement may be executed in several
counterparts, and as so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or to the same counterpart.
18.4 Benefits and Obligations. The covenants and agreements
herein contained shall inure to the benefit of, and be binding upon, the
parties hereto and their respective heirs, administrators, legal
representatives, successors and assigns. No provision of this Agreement
shall inure to the benefit of, or be enforceable by, any creditors,
contractors or other third parties.
18.5 Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
18.6 Consent to Jurisdiction; Service of Process. Each
Partner, wherever resident or doing business, (i) hereby consents to the
venue and jurisdiction of, and hereby waives any defense based upon the
lack of jurisdiction or venue of, any Delaware court or the United States
District Court for the District of Delaware in connection with any suit
to enforce the rights of the parties hereunder or any right or action
related to this Agreement, and (ii) hereby agrees that process may be
served in any such action in any manner provided by the laws of the United
States District Court for the District of Delaware or the State of Delaware
for service of process or by mailing a copy of such process by certified
mail, return receipt requested.
18.7 Waiver of Partition. Except as specifically set forth
herein, each Partner irrevocably waivers any right that it may have to
maintain any action for partition with respect to the property of the
Partnership or to compel any sale or appraisal of Partnership assets.
18.8 Assumed Name and Amendments. The Partnership shall file
a certificate of assumed name of the Partnership in accordance with Title
56 of the New Jersey statutes, as amended from time to time, or any similar
provision of any other jurisdiction in which the Partnership does business,
and amend the same to the extent required by applicable law.
18.9 Nonsolicitation. The Partners agree not solicit each
others employees.
18.10 Non-Disclosure. The Partners hereby expressly acknowledge
and agree that (unless required by applicable law or court order and except
for disclosure to attorneys and accountants), without the prior consent of
each Partner, they may not disclose to any person or entity (i) that the
Partnership or this Agreement exists, (ii) any of the terms of the
Partnership or this Agreement, or (iii) any non-public information
regarding the Partnership or the operation of its business. In addition
to and not in limitation of the foregoing, no Partner (including its
Affiliates, employees and agents) may make any public statement or
other disclosure regarding the Partnership or its affairs without the prior
consent of each Partner.
18.11 No Third Party Beneficiaries. This Agreement and the
rights, representations and obligations hereunder do not and shall not
confer any rights to any third parties including, but not limited to, banks
and any other financial lenders of the Partnership or either Partner, and
no third parties shall have any rights under this Agreement.
18.12 Emergence from Bankruptcy The Partners hereby expressly
acknowledge and agree that the effectiveness of this Agreement, and the
rights and obligations hereunder, are conditioned upon 1) the emergence of
Emerson from the bankruptcy action presently filed in the U.S.
Bankruptcy Court of the District of New Jersey ("Bankruptcy"); and, 2) the
emergence from Bankruptcy is due to the funding of the confirmed Plan of
Reorganization by Fidenas Investment Limited or an affiliate thereof.
18.13 Attorneys Fees and Costs. It is agreed and acknowledged
by the Partners that, in any suit by either Partner to enforce the rights
under this Agreement, the prevailing Partner shall be entitled to receive
from the other Partner the reasonable attorneys fees and costs incurred
from such suit.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement as a Partner as of the day first set forth above.
HOPPER RADIO OF FLORIDA, INC. EMERSON RADIO CORP.
By: /s/Barry Smith By:/s/ Eugene I. Davis
______________________ _______________________________
Barry Smith, President Eugene I. Davis, Executive
Vice President
EXHIBIT A - DEFINITIONS
For purposes of this Agreement, the following terms shall have
the following meanings:
A.1 "Accounting Period" means the following fiscal periods:
the initial Accounting Period shall commence on the first day of the term
of the Partnership. Each subsequent Accounting Period shall commence
immediately after the close of the next preceding Accounting Period.
Each Accounting Period shall close at the close of business on the first to
occur of (i) the last day of a Fiscal Year of the Partnership, (ii) the
acceptance of a Capital Contribution from a new or existing Partner,
other than a Capital Contribution which is pro rata among all existing
Partners, (iii) the effective date of any withdrawal of a Partner, or
(iv) the date of the Partnership's liquidation.
A.2 "Affiliate" means with respect to any person or
entity, a person or entity which directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control
with, such person or entity.
A.3 "Agreement" means this Partnership Agreement, as amended
and in effect from time to time.
A.4 "Capital Account" means, with respect to any Partner,
the amount of such Partner's Capital Contributions, increased or decreased
as provided in this Agreement.
A.5 "Capital Contribution" means, with respect to any
Partner, the amount of money and the value of any property other than
money contributed to the Partnership by the Partner.
A.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
A.7 "Fiscal Year" means the calendar year; but, upon
commencement of the Partnership, "Fiscal Year" means the period from the
first day of the term of the Partnership to the next following December
31, and upon dissolution of the Partnership it shall mean the period from
the end of the last preceding Fiscal Year to the date of such dissolution.
A.8 "General Manager" means the person designated as the
General Manager pursuant to Section 9.1.
A.9 "Partner" means Emerson Radio Corp. and Hopper Radio
of Florida, Inc. and any Person subsequently admitted as a Partner of the
Partnership pursuant to the terms of this Agreement.
A.10 "Partners" means Emerson Radio Corp. and Hopper Radio
of Florida, Inc. collectively.
A.11 "Partnership" means the general Partnership subject to
this Agreement.
A.12 "Percentage Interest" means, with respect to any
Partner for any Accounting Period, the percentage obtained by dividing the
balance in such Partner's Capital Account at the beginning of the Accounting
Period by the aggregate balances in the Capital Accounts of all Partners at
such time, as adjusted, if at all, in accordance with the provisions of
Article V.
A.13 "Person" means an individual, a corporation, an
association, a Partnership, a joint venture, an estate, a trust, or any
other legal entity.
A.14 "Profits and Losses shall have the meaning set forth
in Article VI of this Agreement.
A.15 "Regulations" means the Income Tax Regulations
promulgated under the Code, as such Regulations may be amended from time
to time.
A.16 "Territory" shall mean the territories as defined in
Section III.
A.17 "Transfer" shall mean, as a noun, any voluntary or
involuntary transfer, sale, pledge, hypothecation, gift, or other
disposition and, as a verb, voluntarily or involuntarily to transfer,
sell, pledge, hypothecate, give or otherwise dispose of.
SALES AGREEMENT
This Agreement, effective as of April 1, 1994 is between Emerson
Radio Corp. ("Seller or the "Company"), a New Jersey corporation, having
its principal place of business at 9 Entin Road, Parsippany, New Jersey,
07054 and E & H Partners ("Partnership"), a Delaware Partnership, with
executive offices at 7145 West 20th Avenue, Hialeah, Florida 33014.
WHEREAS:
A. The Seller directly and through affiliates distributes a
variety of consumer electronics and microwave products under the Emerson
brand name primarily in the United States of America, Mexico and Canada,
but also, throughout the world;
B. From time-to-time certain of such products are returned by
Seller's customers in the United States to the Seller, some of which are
reported to exhibit electronic, mechanical and/or cosmetic imperfections.
Such products may be inspected and refurbished by or for the benefit of
Seller and may be resold as refurbished or "AS IS"; and
C. The Partnership desires to purchase from Seller products
available for re-sale "AS-IS", refurbish such products for resale and
resell such products and represents it has the capability, capacity,
personnel and experience to refurbish and resell such products.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration,
the Seller and Partnership hereby mutually agree as follows:
1. TERM
The terms set forth herein shall be effective commencing April 1,
1994 and continue through December 31, 1996 subject to earlier
termination as set forth herein or renegotiation by the parties.
2. PURCHASE AND EXCLUSIVE SALE REQUIREMENTS
Partnership agrees to purchase from Seller and Seller agrees to
sell exclusively to Partnership all consumer electronics and microwave
products returned by Seller's customers in the United States to Seller.
Such products shall be referred to hereinafter as the "Merchandise".
3. NOTICE OF AVAILABILITY
A. At least once a month, unless more frequently requested by
the Partnership not to exceed four (4) times a month, Seller shall deliver
to Partnership a schedule of the quantities of Merchandise to be sold to
Partnership hereunder ("Notice of Availability"). After receipt of the
Notice of Availability, Partnership shall take delivery of the Merchandise
listed in the Notice of Availability within a reasonable amount of time
not to exceed fifteen (15) business days of the Notice of Availability. A
Notice of Availability may be given as frequently as determined by
Seller in its own discretion.
B. Partnership represents that it is aware that Seller is
planning to enter into arrangements to sell consumer electronics products
in geographic regions and countries where Seller does not presently
distribute such products. The Partnership will not directly compete with
Seller in Seller's distribution channels on any current line models.
Notwithstanding the above, the Partnership may market the refurbished
Merchandise in all areas of the U.S.
4. PRICING
The price of the Merchandise to Partnership is set forth in the
presently effective price list ("Price List"), a copy of which is annexed
as Exhibit A. The Price List shall be subject to such increases or
decreases, as may be mutually agreed to by the parties, considering current
factory prices adjusted to percentage discounts against newest landed price
for similar or like models or market situation warrants adjustment. Seller
and Partnership agree to establish a price structure for discontinued non-
current Merchandise not reflected on Exhibit A.
5. PAYMENT
Due Date and Credit
Hopper Radio of Florida, Inc. shall arrange a credit facility for
payment by the Partnership to Emerson on terms to be agreed to by the
Partnership and Emerson.
6. AVAILABILITY AND DELIVERY
All of Partnership's purchases of Merchandise from Seller will be
sold and delivered F.O.B. Seller's facilities or such facilities designated
by Seller (the "Facilities"). Irrespective of any other provision hereof,
Partnership shall bear all risk of loss or damage to the Merchandise upon
Seller's delivery of the Merchandise to Partnership's agent at the
Facilities. All shipping, packing, warehousing, insurance, demurrage,
freight and other costs shall be borne by the Partnership. The Partnership
shall select a method of conveyance conforming to the standard commercial
practices of the Partnership.
7. SECURITY INTEREST
Partnership hereby grants to Seller a security interest in unpaid
Merchandise, and parts and accessories for same ("Collateral"), to secure
all liabilities (including renewals, extensions and substitutions of same)
of the Partnership to the Seller arising out of or relating to the purchase
by Partnership of the Merchandise. The failure of Partnership to pay the
purchase price of any Merchandise when due shall give the Seller the
right, without liability, to repossess the Collateral with or without
notice or demand and to avail itself of any legal or equitable remedy,
with or without terminating this Agreement. Seller shall have all the
rights of a secured party. Partnership agrees to execute and deliver a
Security Agreement and related Financing Statement (UCC-1) consistent with
the terms of this Agreement and take any and all other action as may be
required in order to assist Seller in perfecting the security interest in the
Collateral including execution and delivery of reasonably requested
documentation.
8. INSPECTION, REPAIR AND REFURBISHING
Upon receipt of the Merchandise, Partnership shall inspect each such
Merchandise and, if feasible in Partnership's sole discretion, repair and
refurbish same in accordance with applicable industry standards and
applicable law for resale as refurbished product. Packaging by Partnership
of the inspected and, if applicable, refurbished Merchandise shall plainly
indicate that the Merchandise has either been refurbished or is to be
resold "AS IS". Partnership agrees to employ sufficient and properly
trained personnel and maintain all necessary facilities, tools, equipment,
quality control and repair manuals and procedures necessary for the proper
performance of the inspection and refurbishing services to be provided by
Partnership. Upon reasonable notice, Partnership shall allow Seller to
inspect its refurbishing facilities. Partnership shall maintain and make
available to Seller such records, reports, samples and test results as
shall be agreed upon by the parties hereto.
9. PARTS AND ACCESSORIES
Seller agrees to sell and source for Partnership, and Partnership
agrees to buy from Seller, parts and accessories for the Merchandise upon
terms to be agreed upon by the parties unless the Partnership can obtain
equivalent or better parts and accessories from third parties at more
favorable prices and terms. Partnership agrees that no parts or accessory
orders placed by or at the request of Partnership may be cancelled.
10. TERRITORY
Partnership shall have the exclusive right to resell the Merchandise
refurbished by the Partnership worldwide in all countries where Seller has
trademark rights to the Emerson brand name and trademark ("Territory).
Partnership agrees to and shall not resell the Merchandise in any place
outside the Territory.
11. DUTY DRAWBACKS
At Seller's cost and expense, Partnership shall cooperate with and
take all actions reasonably necessary to afford Seller the benefit of and
assist Seller in securing any applicable duty drawbacks or refunds to which
it may be entitled from any governmental entity as a result of the sale of
the Merchandise to Partnership.
12. TAXES/DUTIES
Partnership will be responsible for and shall pay all applicable
duties, taxes, fees or additional charges (including any interest and
penalties thereon), if any, imposed by taxing authorities by direct reason
of the sale and delivery of the Merchandise. These duties, taxes, fees or
additional charges shall not include any taxes assessed on Seller's income.
In the event Partnership is purchasing for resale, a duly executed resale
certificate shall be delivered to Seller prior to delivery of Merchandise
by Seller, or Partnership shall pay to Seller all applicable sales, excise
or other applicable taxes which would have otherwise not been required to
be collected by Seller.
13. PARTNERSHIP'S AUTHORITY
Partnership hereby represents and warrants to Seller that:
(a) Partnership is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.
(b) Partnership has the full power and authority to execute
and deliver this Agreement and to perform all of its obligations
hereunder.
(c) The execution and delivery of this Agreement has been duly
authorized by all necessary action of Partnership and constitutes the
valid and legally binding obligation of Partnership enforceable
against Partnership in accordance with its terms.
14. SELLER'S AUTHORITY
Seller hereby represents and warrants to Partnership that:
(a) Seller is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Subject to Bankruptcy Court approval, Seller has the full
power and authority to execute and deliver this Agreement and to
perform all of its obligations hereunder.
(c) The execution and delivery of this Agreement has been duly
authorized by all necessary corporate action of Seller and, subject
to Bankruptcy Court approval, constitutes the valid and legally
binding obligation of Seller enforceable against Seller in accordance
with its terms.
15. FORCE MAJEURE
A. Neither party will have any liability to the other by
reason of any failure or delay in performance of any provision of this
Agreement, except for payment obligations, if and to the extent that such
failure or delay is due to any occurrence (other than financial) beyond the
reasonable control of the party failing or delaying to perform. "Beyond
reasonable control" includes, but is not limited to, (i) acts of God, (ii)
labor disputes, (iii) civil disturbances, (iv) fires, (v) floods,
(vi) explosions, (vii) riots, war, rebellion or sabotage, (viii)
transportation failure or delays or (ix) rules, regulations, orders, or
directives of any governmental body (including any agency or subdivision
thereof), provided that with respect to (ix), the party seeking relief has
completed and made all requisite applications and paid all requisite fees,
permits, imposts and taxes in a timely fashion.
B. A party seeking relief shall, as soon as practicable
after the impediment and its effects on its ability to perform become
known, give written notice to the other party. Written notice shall also
be given when the impediment ceases. Grounds of relief under this Section
relieves the failing party from damages and/or penalties, but not from the
duty to pay interest at the Prime Rate plus three percent (3%) per annum on
monies due and owing to the other party.
16. TERMINATION
A. If either party defaults on any material obligation required of
it or breaches any material term or provision of this Agreement, then the
other party may terminate this Agreement upon thirty (30) days prior
written notice unless such default is cured within said thirty (30) day
period.
B. This Agreement shall terminate by its own force without notice
from Seller in the event that (i) Partnership shall be dissolved or shall
lose its authorization to do business by forfeiture or otherwise, or shall
be adjudicated a bankrupt or insolvent, (ii) a trustee, liquidator or
receiver shall be appointed for the Partnership or a material or
substantial portion of its assets, subsidiaries or property, or any
substantial parts thereof, (iii) any court or governmental agency shall
have taken jurisdiction of the business or property of the Partnership or
any substantial part thereof or (iv) any proceedings for the reorganization,
dissolution, liquidation or winding up of the Partnership shall have been
commenced by a third party, and any such event described in (i) through
(iv) above has not been cured, dismissed or reversed within thirty (30)
days from the date of occurrence.
C. This Agreement shall terminate immediately by its own force,
without notice from Seller in the event that (i) Partnership makes an
assignment for the benefit of creditors, or a public admission of
insolvency, (ii) Partnership shall file a voluntary petition in
bankruptcy under any bankruptcy or insolvency law or any law providing
for Partnership's reorganization, dissolution, liquidation or winding up,
(iii) Partnership shall consent to the appointment of a receiver or trustee
of itself or of its property or any substantial part thereof or (v) the
Partnership is dissolved.
D. In the event that the (i) Partnership has rendered or renders
an incorrect, material representation in connection with the rights granted
Partnership hereunder, (ii) Partnership commits intentional or negligent
damage to Seller's business, reputation, client base, distribution
channels or assets or the value of any of Seller's tradenames, trademarks,
service marks, symbols, signs, good will or other distinctive marks (iii)
Partnership fails to timely pay for the Merchandise (iv) Partnership
registers or attempts to register in its own name, or the name of any
affiliate, any trademark owned by the Seller or similar to a trademark
owned by the Seller, (v) Partnership fails to timely purchase or accept
delivery of all Merchandise required hereunder, (vi) Partnership
breaches any of the representations and warranties set forth in Section 18
then, in addition to the rights granted, or available under law or in equity,
Seller may, by written notice to Partnership, require such breach or event
to be remedied and if such breach or event is not remedied within thirty (30)
days after such notice, Seller shall have the right to terminate this
Agreement and all of Seller's obligations hereunder forthwith by a further
notice in writing, such termination to be effective upon receipt of such
notice.
17. SELLER'S DISCLAIMER OF WARRANTIES
SELLER SELLS THE MERCHANDISE AND ANY PARTS AND ACCESSORIES TO
PARTNERSHIP, WITHOUT WARRANTY OF SELLER, ON AN "AS IS" BASIS ANY AND ALL
WARRANTIES EITHER EXPRESS OR IMPLIED INCLUDING, BUT NOT LIMITED TO, THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
HEREBY EXCLUDED. SELLER SHALL NOT BE LIABLE TO PARTNERSHIP FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY NATURE OR
KIND WHATSOEVER, OR FOR LOST PROFITS. PARTNERSHIP SHALL UNDER NO
CIRCUMSTANCE HAVE THE RIGHT TO RETURN THE MERCHANDISE TO SELLER, EXCEPT AS
SPECIFICALLY AGREED TO IN WRITING BETWEEN THE PARTIES.
HOWEVER, THIS DISCLAIMER OF WARRANTY SHALL NOT APPLY IF MERCHANDISE,
UNALTERED BY THE PARTNERSHIP IN ANY WAY, AT ANY TIME IS HELD BY ANY
GOVERNMENTAL AGENCY OR COURT JUDGMENT, ORDER OR RULING TO BE UNSAFE.
18. PARTNERSHIP'S REPRESENTATIONS, WARRANTIES AND OBLIGATIONS
Partnership represents that:
A. Partnership possesses all necessary registrations, licenses
and permits to engage in the activities contemplated by this Agreement and
Partnership and the Affiliates shall comply with all local laws, rules,
ordinances and regulations applicable wherever the Merchandise is sold
or resold relating to the activities to be performed hereunder, including,
but not limited to, the importation, distribution, sale, servicing and
marketing of the Merchandise.
B. The Partners of the Partnership are experienced in and
regularly deal with like merchandise and parts, are otherwise capable of
evaluating and dealing with the same and accepts the Merchandise and
parts and accessories without any warranty of Seller. Partnership shall
conspicuously mark the Merchandise and all packaging and documentation
for same to indicate that such Merchandise has been refurbished or is
available for re-sale only on an "AS IS" basis.
C. Partnership shall employ sufficient and properly trained
personnel and maintain all necessary facilities, tools, equipment, quality
control and procedures necessary for the proper performance of the
obligations arising under the terms of this Agreement.
D. Partnership and the Affiliates shall comply with any and all
applicable national, federal, state or local statutes, codes, rules,
regulations and laws, and all rules and regulations promulgated thereunder
or otherwise relating to the packaging, marking, advertisement and/or
identification of the Merchandise.
E. Partnership shall ensure that all Merchandise that is sold is
merchantable, commercially saleable and safe for use in the normal course.
Partnership shall ensure that all advertising for the resale of the
Merchandise clearly indicates that the Merchandise has been refurbished or
is available on an "AS IS" basis.
F. Partnership shall obtain all necessary listings, approvals
and ratings for the Merchandise where such approvals or ratings are required
by law or governmental regulations or customary industry practice wherever
the Merchandise is sold or resold only if the Partnership alters the
Merchandise. If the Partnership does not alter the Merchandise, the Seller
is responsible to obtain all necessary listings, approvals and ratings.
G. Partnership shall ensure that Merchandise sold to Partnership's
customers contains only Partnership's warranty, if any, and that the
Merchandise sold to Partnership's customers does not state or imply that
any warranty is granted which may create or infer liability on Seller.
H. Upon reasonable notice, the Partnership shall allow the Seller
the right to inspect the Partnership's Merchandise held for resale and
its facilities.
I. Partnership shall furnish to Seller satisfactory evidence of
Partnership's financial ability to perform the terms of this Agreement.
J. Seller will have the right, at any time during the term of
this Agreement, but at reasonable intervals, to receive from Partnership, at
Seller's prior written request, representative Merchandise currently
being sold, to assure that they conform to the terms of this Agreement.
K. Partnership shall be fully responsible, including all costs
therefore, for after-sales support for Merchandise. In the event that
Partnership for any reason fails to fulfill its warranty obligation,
Seller may, with reasonable notice and an opportunity to cure, assume such
obligation on its behalf, in which event Partnership shall reimburse
Seller for the reasonable and necessary costs of providing such service.
19. INDEMNIFICATION
The Partnership agrees to indemnify and hold harmless the Seller,
its subsidiaries, directors, officers and employees from and against any and
all claims, demands, judgments, loss, liability, damages, costs and
expenses of every nature and kind occurring anywhere in the world, including,
but not limited to, counsel fees and legal expenses arising from or
related to any action or omission of the Partnership, its Affiliates,
its agents, servants and employees, in connection with the Partnership's
operations or actions or obligations arising under this Agreement, or the
resale of the Merchandise, including but not limited to the Partnership's
failure to comply with the representations, warranties and obligations set
forth herein unless the claims arise solely from manufacturers defect.
20. PRODUCT RECALL
A. When Partnership has reason to believe that there is
reliable information which reasonably supports the conclusion that a
determined or undetermined number of items of Merchandise shipped by
Partnership to Partnership's customers fail to meet any law or government
regulation or standard, or contain defects or hazards which could cause
death or serious bodily injury to any person, or property damage
("defects"), Partnership shall do whatever is requested by applicable
governmental authorities and good business practice to safeguard the public
and users of the Merchandise, including but not limited to locating,
identifying and notifying customers and recalling such Merchandise.
Upon recalling such Merchandise, if the Partnership through altering,
remanufacturing, or selling, caused such defects, Partnership shall at
its sole option repair or replace such Merchandise or otherwise discharge
any obligations assessable upon a manufacturer or reseller of hazardous
products under applicable law or government regulation or standard. Any
costs incurred by Partnership in connection with complying with the
requirements of this paragraph shall be borne by Partnership.
B. If the Seller is subject to a product recall due to any defects
or hazards of Merchandise, as a result of refurbishing or alteration by
Partnership, shipped by Partnership to Partnership's customers, the
Partnership agrees to promptly repair or replace such Merchandise or
otherwise discharge promptly any obligations assessable upon the Seller.
If any such product recall is as a result of the Actions performed by
Partnership or if, Seller is subject to a product recall due to the failure
of the Merchandise to meet any law or government regulation, Partnership
agrees to bear all related costs and to indemnify the Seller for all costs
and expenses, including attorney's fees, arising from such product recall
borne by Seller, and to bear the cost of a reasonable advertising campaign
to repair the damage done to Seller's name and goodwill. Partnership shall
be required to take all such necessary action to assist Seller in complying
with this provision.
C. However, notwithstanding the above, if the defects are not caused
by the Partnership's refurbishing, altering or selling of the Merchandise,
all costs for recalling, repairing or replacing the Merchandise shall be
borne by Seller.
21. STATUS OF THE PARTIES
The relationship between the Seller and the Partnership created by
this Agreement shall be one of an independent contractor and neither is to
be deemed an agent or employee of the other for any purpose. Neither the
Seller nor the Partnership has the authority to bind the other to any third
person or otherwise unless expressly agreed to in writing by both parties.
This Agreement does not constitute a contract of employment, franchise,
partnership, agency or joint venture with respect to the Partnership or
employees of the Partnership. In no event shall the Partnership or its
employees, directly or indirectly, represent that they are employees or
agents of the Seller.
22. INSURANCE
The Partnership shall purchase and maintain insurance satisfactory to
the Seller of the kinds and in the amounts as agreed to by the parties or
in amounts required by law, whichever is greater, and furnish the Seller
with certificates of insurance (naming Seller as beneficiary) as evidence
thereof, in the prescribed form prior to the commencement of services, and
annually thereafter not less than thirty (30) days prior to the expiration
dates of said policies. Seller shall be named on all policies of insurance
procured by Partnership covering the same or similar losses and each policy
shall require that Seller shall be provided with a least 30 days prior
written notice in the event the policy is changed or cancelled.
23. NEW PRODUCTS
Seller reserves the right to introduce new categories of products, at
any time. In the event Seller does introduce such new products, it shall
so advise Partnership of the types, prices and quantities of new products
returned to Seller by its customers ("returned, new product") available
for sale "AS IS" ("Notice of Returned New Products"). Within five (5) days
following receipt of the Notice of Returned New Products, Partnership shall
advise Seller if it is interested in purchasing such returned, new products.
If it so elects, said returned, new products will be deemed "Merchandise"
under the terms of this Agreement and the terms of this Agreement shall
apply to the sale of such returned, new product. In the event Partnership
does not so elect to purchase the returned, new products, Seller may sell
such returned, new products to other third parties without any liability
to Partnership and without waiving any of its rights hereunder.
24. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between Seller and
Partnership with respect to the purchase and sale of the Merchandise and
no representation or statement not contained herein shall be binding upon
Seller or Partnership as a warranty or otherwise unless in writing and
executed by both parties hereto. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
25. ASSIGNMENT
This Agreement may not be transferred or assigned by either party,
nor may either party delegate or subcontract any of its duties hereunder,
without the express prior written consent of the other party, in each
instance, which either party may grant or withhold in its sole discretion.
For the purposes of this Agreement, the term "assigned" shall be deemed to
include, but not be limited to all transfers of control, whether
accomplished by means of (a) a transfer of stock, voting trust, or
otherwise to any person or entity not in control immediately prior to such
transfer; or (b) corporate merger, consolidation, combination or
reorganization; or (c) other means. Notwithstanding the above, Seller
may assign this Agreement without Partnership's consent to a majority
shareholder, subsidiary or a parent or successor entity.
26. ACCEPTANCE AND GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts executed and to
be performed in Delaware, including matters of construction, validity,
performance and enforcement, but excluding the choice of law rules. The
Seller and Partnership agree to the exclusive jurisdiction of the State of
Delaware to settle any dispute arising from this Agreement.
27. SEVERABILITY AND COUNTERPARTS
If any provision of this Agreement is prohibited by or deemed
unlawful or unenforceable under any applicable law of any jurisdiction,
such decision shall not affect the validity of the remaining provisions nor
shall such decision invalidate such provision in any other jurisdiction.
This Agreement may be executed in counterparts and each such counterpart
shall for all purposes constitute one Agreement binding on the parties
hereto notwithstanding that both parties are not signatory to the same
counterpart.
28. SECTION HEADINGS
Section headings are inserted for convenience only and shall not
affect any construction or interpretation of this Agreement. All reference
herein to sections, paragraphs, clauses and other subdivision of this
Agreement and the words "herein" "hereof" "hereto" "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph, clause or other subdivision hereof.
29. NOTICES
Any notice or other communication which shall be given to either
party in connection with this Agreement shall be in writing (including
telex or facsimile transmission) and shall be effective when received by
such party at the office designated herein or at any other office as
notified in writing.
30. AMENDMENT; WAIVER
No provision of this Agreement may be amended, waived or otherwise
modified except by an instrument in writing signed by the parties hereto.
The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement below to be effective the day and year first above written.
For Seller: For Partnership:
EMERSON RADIO CORP. HOPPER RADIO OF FLORIDA, INC.
By:/s/ Eugene I. Davis /s/ Barry Smith
_______________________ ___________________________
Eugene I. Davis Barry Smith
Executive Vice President President
AGREEMENT
THIS AGREEMENT, dated as of July 1, 1994, (the "Effective Date") is
made by and between ALEX WIJNEN, having an address at 14 Independence
Court, Madison, New Jersey 07940 ("Wijnen"), and EMERSON RADIO CORP., a
Delaware corporation having an address at Nine Entin Road, Parsippany,
New Jersey 07054 (the "Company").
W I T N E S S E T H
WHEREAS, Wijnen and the Company entered into an Employment Agreement
(the "Employment Agreement") dated as of July 7, 1992; and
WHEREAS, Wijnen has performed services pursuant to the Employment
Agreement and the Company has compensated Wijnen for such services; and
WHEREAS, Wijnen and the Company desire to modify the relationship
contemplated by the Employment Agreement in accordance with the terms
hereof; and
WHEREAS, the parties hereby mutually agree that the Employment
Agreement and all obligations thereunder shall be and hereby are
terminated effective June 30, 1994, in accordance with the terms and
conditions hereof; and
WHEREAS, the parties wish to set forth the terms and conditions of
the relationship between Wijnen and the Company commencing as of July 1,
1994 (the "Effective Date") and continuing thereafter for a period of
eighteen (18) months until December 31, 1995 (the "Term"); and
WHEREAS, the parties desire to protect the Company's proprietary
and confidential business information and other lawful business interests;
NOW THEREFORE, in consideration of the mutual obligations set forth
herein, receipt of which is hereby acknowledged, the parties agree as
follows:
1. Definitions.
The following capitalized words and phrases shall have the meanings
specified when used in this Agreement, unless the context clearly indicates
otherwise:
1.1. "Agreement" means this Agreement, as it may from time to
time be amended or modified.
1.2. "Company" shall mean Emerson Radio Corp. and any of its
divisions, subsidiaries, parents, affiliates, successors-in-interests,
predecessors-in-interests, benefit plans or assigns thereof, and any
officer, director, managing agent, employee, administrator, fiduciary,
agent or other representative of any of the foregoing.
2. Termination of Employment Agreement and Agreement to Provide
Consulting Services.
2.1. The Employment Agreement and employment of Wijnen as an
officer of the Company and any other employment Wijnen has or had with the
Company shall be and hereby is terminated by mutual consent as of the close
of business on June 30, 1994 and he shall be paid his salary and receive
all benefits under the Employment Agreement up to June 30, 1994. All
duties and obligations of Wijnen under the Employment Agreement and in
respect of any such employment are ended as of June 30, 1994, and all
duties and obligations of the Company to Wijnen in respect thereof are
terminated at such time, except as otherwise provided herein.
2.2. Wijnen hereby resigns, without any further action
required, from all offices of the Company, effective at the close of
business of June 30, 1994. Wijnen also waives any claim or right to
reinstatement. The Company hereby accepts such resignation from such
offices. Subject to the provisions of Section 9.3, the Company
acknowledges that upon the execution of this Agreement by Wijnen, all of
Wijnen's affirmative obligations under the Employment Agreement will have
been performed in full.
2.3. Wijnen agrees to provide to the Company consulting
services during the Term from time to time at the direct request of the
Company's President, Chief Executive Officer, Chief Financial Officer or
General Counsel provided that the furnishing of such services does not
unduly interfere with the performance by Wijnen with any duties required of
him by his employer or by self employment.
3. Payments to Wijnen.
3.1 In consideration of whatever consulting services are
referred to in Section 2.3 and the other consideration provided herein, the
Company agrees to pay Wijnen in the ordinary course of business the
aggregate sum of Two Hundred Eighty Thousand and no/100 dollars ($280,000)
to be paid in equal bi-weekly installments for a period of twelve (12)
months commencing on the Effective Date in accordance with the Company's
present payroll practice (the "Consulting Payments"). In the event that
the Company's present payroll practice is changed, the bi-weekly
installments shall be changed to conform with such payroll policy for any
Consulting Payments remaining due during the Term.
3.2. The Company may deduct or withhold from any payment
required to be made to Wijnen hereunder an amount as may be necessary to
satisfy the Company's obligation with respect to any applicable income and
employment tax withholding under applicable federal and state laws.
4. Additional Compensation to Wijnen.
Wijnen and the Company acknowledge the validity of indebtedness
owed by Wijnen to the Company in the amount of $130,000.00 and agree that
Wijnen shall be available to provide consulting services in the manner
contemplated by Section 2.3 for the period July 1, 1995 through December
31, 1995 for and in consideration of the forgiveness of such indebtedness,
such forgiveness to be made in the ordinary course of business pro rata
over 13 bi-weekly periods, commencing July 1, 1995 and ending December 31,
1995, for so long as Wijnen provides such services. In addition to the pro
rata forgiveness of debt conditioned upon the performance by Wijnen of such
consulting services as are referred to in Section 2.3 the Company shall pay
to Wijnen the aggregate sum of $10,000 to be paid, subject to any
requirements contemplated by Section 3.2, in equal bi-weekly
installments commencing July 1, 1995 and ending December 31, 1995.
5. Vacation Benefits.
5.1. The parties agree that any accrual of vacation benefits
by Wijnen shall and does permanently cease as of the close of business on
June 30, 1994.
5.2. Wijnen acknowledges that he has used and the Company has
fully compensated him for any accrued vacation benefits and no payment for
vacation benefits is due or owing or will be due and owing hereunder.
6. Pension Benefits.
Wijnen shall be entitled to continue to participate in and
remain eligible for the Company's Employee Savings Plan during the term
provided that the Company shall have no obligation whatsoever to pay or
otherwise provide for any contributions whatsoever. Nothing herein is
intended or should be construed as changing, rescinding or modifying any
vested rights to pension benefits or the Company's Employee Savings Plan
benefits Wijnen may have under any such pension benefits or Employee
Savings Plan as of the Effective Date.
7. Health, Life and Disability Insurance Plans.
7.1 Wijnen understands and agrees that the Company will
continue at its expense his existing coverage under the Company's health,
dental, life and disability insurance plans during the Term to the extent
legally permissible under the Company's health, life and disability
insurance plans and applicable federal and state law; provided that Wijnen
fulfill such requirements as may be reasonably requested by the Company's
insurers.
7.2. If Wijnen secures full-time employment before the
completion of the Term and becomes covered under any other employer's plan
to at least the same extent as the existing health, life and disability
coverage provided to Wijnen by the Company, he understands that coverage
under the Company's health, life and disability insurance plans shall end
upon the date of such coverage by the new employer's plan.
7.3. To the extent permissible by the Company's insurers and
applicable federal and state law, if Wijnen's health insurance coverage
terminates solely because of a change in insurance carrier, Wijnen shall be
accorded the right to participate at the Company's expense in and receive
benefits under and in accordance with the provisions of any Company plan
relating to medical insurance or reimbursement to the extent such plan is
in existence from time to time for the benefit of executives of the
Company. Wijnen shall then be entitled to participate in such medical plan
to the same extent as persons holding comparable positions in the Company
from time to time. The Company may discontinue any such plan at any time
or times, without any liability to Wijnen. The parties agree that under no
circumstances shall the Company be required to make any payments other than
insurance premiums.
7.4. For purpose of COBRA, 29 U.S.C. 1161-1168, Wijnen's
termination is denominated as of December 31, 1995.
8. Full Satisfaction.
Wijnen agrees that the payments and credits described in this
Agreement shall be in full satisfaction of any and all claims against the
Company for payment of any nature whatsoever, including but not limited to
all forms of compensation, benefits, stock options (whether or not vested),
severance pay, salary, bonuses and perquisites that Wijnen has or may have
against the Company, whether matured or unmatured and whether known or
unknown, arising out of the Employment Agreement, Wijnen's employment
relationship, status as an officer, the termination of Wijnen's status as
an officer of the Company or any other agreement or promise, whether oral
or written, which Wijnen may have with the Company.
9. Releases.
9.1. Except as set forth below, in consideration of the
provisions of this Agreement and for other good and sufficient
consideration, receipt of which is hereby acknowledged, Wijnen hereby fully
and forever releases and discharges the Company from all actions, causes of
actions, suits, covenants, contracts, controversies, agreements, promises,
claims, and demands in law or equity, (regardless of whether or not known
at present), which Wijnen ever had, now has, or hereafter may have against
the Company, including, but not limited to (a) claims related to the
payment of compensation and benefits, (b) claims for breach of the
Employment Agreement, (c) claims for wrongful discharge, (d) rights and
claims alleging a violation of the Age Discrimination in Employment Act of
1967, as amended, 29 U.S.C. 621 et seq., as of the date this Agreement is
executed, (e) claims pursuant to any federal, state or local law regarding
discrimination based on race, color, creed, age, sex, religion, marital
status, affectational or sexual orientation, disability, atypical
hereditary or cellular blood traits, ancestry, national origin, draft
liability or veteran status, (f) claims for alleged violation of any other
local, state, or federal law, regulations, ordinances or public policy
having any bearing whatsoever on the terms or conditions of Wijnen's
employment with the Company or the termination of such employment, (g)
claims pursuant to common law under tort, contract or any other theories
now or hereafter recognized, (h) claims related in any way to the stock
options of the Company and (i) any other claims arising directly or
indirectly by any reason whatsoever out of Wijnen's employment relationship
or the termination of Wijnen's employment relationship with the Company.
9.2. In consideration of the provisions of this Agreement and
for other good and sufficient consideration, receipt of which is hereby
acknowledged, the Company hereby fully and forever releases and discharges
Wijnen from all actions, causes of actions, suits, covenants, contracts,
controversies, agreements, promises, claims, and demands in law or equity,
(regardless of whether or not known at present), which the Company ever
had, now has, or, excluding breaches of this Agreement, hereafter may have
against Wijnen.
9.3. Notwithstanding the provisions of Section 9.1, any claims
by Wijnen (a) for indemnification and defense under any provisions of the
Company's and its successors' and/or assigns' charter, By-laws, and any
applicable policy, or by law and (b) relating solely to events arising
subsequent to the effective date of this Agreement or from any breaches of
this Agreement, shall not be released.
9.4. Wijnen understands that there are various state and
federal laws that prohibit employment discrimination on the basis, of age,
sex, race, color, national origin, religion, disability and other
categories, and that these laws are enforced by the courts and various
government agencies. Wijnen intends to give up any rights he may have
under these laws or any other laws with respect to his employment with the
Company, or the termination of that employment.
10. Protection of Confidential Information.
10.1. Except as otherwise provided by law or judicial order and
notwithstanding the fact that the parties hereby agree to terminate
effective June 30, 1994 the non-compete covenant in paragraph 6 (c) of the
Employment Agreement and of the application to Wijnen of any other Company
policies regarding non-competition, Wijnen whether directly or indirectly,
either alone or jointly with any person, firm or corporation and whether as
a principal, servant or agent, shall not at any time make, use for his own
purposes or divulge to any person, firm or corporation any information or
fact (excluding information which is generally available to the public or
which the Company has previously made publicly available and excluding such
information as is required to be divulged to a government agency or
pursuant to lawful process) relating to the management, business (including
prospective business), finances, inventions, technologies or technical
processes of the Company or its customers, or the terms of any contracts
between the Company and any of its customers, which have come to the
knowledge of Wijnen during his employment by the Company which is
confidential, provided that nothing in this paragraph shall prevent Wijnen
from using his own skill in business in which he may lawfully be engaged.
Wijnen agrees that he will not during the Term accept employment with or
furnish services for, directly or indirectly, Otake Corp., Orion Sales
Corp. Grand Prix or Sanyo Corp. or any of their respective affiliates.
10.2. Concurrently with the execution of this Agreement, Wijnen
represents that he has surrendered to the Company any and all documents,
memoranda, records, files, letters, specifications or other papers,
computer disks or other affairs of Company (the "Confidential Material").
10.3. "Confidential Material" shall mean all information of any
kind or nature pertaining to the Company which is not generally available
to the public, including, but not limited to, information relating to the
Company's agreements, proprietary rights, research, developments,
inventions, know-how, trade secrets, patents, patent applications,
environmental matters, documents of any kind and manuals, technical
advances, commercial arrangements, manufacture, engineering, products,
accounting, sales, strategies, tax returns, financial records and
statements, marketing, customers or customers lists, dealings with
government agencies, and any information of a like nature furnished to or
obtained by Wijnen from the Company during his employment by the Company
relating to activities of third parties which said third party or parties
have transmitted to the Company under any agreement or arrangement to hold
the same secret or confidential.
10.4. The Company shall cause to be returned to Wijnen all of
Wijnen's personal property that is in the possession of the Company and
Wijnen shall cause to be returned to the Company all of the Company's
equipment that is in the possession of Wijnen.
10.5. Wijnen hereby covenants with the Company that he will
not, for any reason whatsoever and whether directly or indirectly, either
alone or jointly with any person, firm or corporation and whether as
principal, servant or agent in any way make any negative comment about the
Company to third parties or disparage its business capabilities, products,
plans or management to any supplier, vendor, contractor, creditor,
shareholder, media, subcontractor, competitor or customer of the Company.
10.6. The Company hereby covenants with Wijnen that its
executive officers, board members and public relations firm will not, for
any reason whatsoever and whether directly or indirectly, either alone or
jointly with any person, firm or corporation and whether as principal,
servant or agent in any way make any negative comment about Wijnen to third
parties.
11. Confidentiality.
11.1. Except as provided in Sections 11.2 and 11.3 hereof and
as otherwise provided by law or judicial order, the parties agree that the
terms and conditions of this Agreement shall remain confidential between
them and shall not be disclosed to any other person.
11.2. Notwithstanding the provision of Section 11.1, nothing in
this Agreement shall prevent Wijnen from discussing this Agreement in
confidence with his attorneys, financial advisers or members of his
immediate family or with any federal or state taxing authority; provided,
however, that before disclosing any such information to any such person,
Wijnen shall advise such person that the terms of the Agreement are
confidential.
11.3. Notwithstanding the provision of Section 11.1, the
Company shall be entitled to make any disclosure which it deems necessary
in order to comply with any applicable securities statutes and regulations
and securities exchange rules.
12. Miscellaneous.
12.1. This Agreement contains the entire Agreement of the
parties with respect to its subject matter hereof and supersedes all prior
negotiations and agreements among them.
12.2. This Agreement may be modified, altered or terminated
only upon the express written consent of the parties hereto, which consent
must be signed by the parties.
12.3. In the event a court of competent jurisdiction determines
there exists any default or breach by the Company of this Agreement, (i)
all of Wijnen's obligations to the Company with respect to the $130,000
loan described in Section 4 shall be deemed to have been fulfilled and the
Company's right to collect any further payments shall be waived and (ii)
Wijnen's release under Section 9 shall be void and he shall be free to
pursue any claims which existed prior to execution of this Agreement.
12.4. The parties mutually warrant that they: (a) have
negotiated and consulted with counsel with respect to the terms hereof, (b)
have read this Agreement, (c) understand all the terms and conditions
hereof, (d) are not incompetent or had a guardian, conservator or trustee
appointed for them and (e) entered into this Agreement of their own free
will and volition.
12.5. The waiver of any party of a breach of any provision
hereof shall not operate or be construed as a waiver of any subsequent
breach by any party.
12.6. The article headings contained herein are for convenience
only and shall not in any way affect the interpretation, construction or
enforceability of any provision of this Agreement.
12.7. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey, exclusive of any
choice of law rules.
12.8. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same Agreement.
12.9. This Agreement shall not be assignable by Wijnen, but it
shall be binding upon, and shall inure to the benefit of, his heirs,
executors, administrator, devises and legal representatives.
12.10. Wijnen acknowledges and agrees that he is entitled
to at least twenty-one days within which to consider this Agreement and
that the Company advised him to consult an attorney prior to executing this
Agreement.
12.11. Wijnen's waiver of claims, if any, alleging a
violation for the Age Discrimination in Employment Act of 1967, as amended,
shall become effective and enforceable on the eighth day after execution by
Wijnen. The parties understand and agree that Wijnen may revoke his waiver
of claims under the Age Discrimination in Employment Act of 1967, as
amended, after having executed this Agreement by so advising the Company in
writing, provided such writing is received by the Company at the address
listed below for notices to the Company no later than 11:59 p.m. on the
seventh day after Wijnen's execution of this Agreement.
12.12. All notices, requests, demands and other communications
hereunder shall be sent to the following by certified mail, return receipt
requested.
Notices to Wijnen:
Mr. Alex G. Wijnen
14 Independence Court
Madison, New Jersey 07940
and a copy to:
David H. Ben-Asher, Esq.
Rabner, Allcorn, Baumgart,
Ben-Asher & Tucker
52 Upper Montclair Plaza
P.O. Box 890
Upper Montclair, New Jersey 07043
Notices to the Company:
Mr. Eugene I. Davis
Executive Vice President
Emerson Radio Corp.
Nine Entin Road
P.O. Box 430
Parsippany, New Jersey 07054-0430
and a copy to:
Jeff Davis, Esq.
Lowenstein, Sandler, Kohl,
Fisher & Boylan
A Professional Corporation
65 Livingston Avenue
Roseland, New Jersey 07068
Any party may designate other addresses and recipients at any time by
sending written notice of such changes to the other party hereto.
12.13. WIJNEN ACKNOWLEDGES AND AGREES THAT HE HAS READ AND
FULLY UNDERSTANDS THE MEANING OF EACH PROVISION OF THIS AGREEMENT,
INCLUDING SPECIFICALLY THE RELEASES CONTAINED HEREIN. WIJNEN FURTHER
ACKNOWLEDGES AND AGREES THAT HE HAS BEEN ADVISED IN WRITING BY THE COMPANY
TO CONSULT COUNSEL, THAT HE HAS HAD THE OPPORTUNITY TO CONSULT WITH AN
ATTORNEY CONCERNING THIS AGREEMENT AND THAT HE FREELY AND VOLUNTARILY
ENTERS INTO IT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
WITNESS:
____________________________ /s Alex Wijnen
___________________
Alex Wijnen
ATTEST: EMERSON RADIO CORP.
____________________________ /s/ Eugene I. Davis
_________________________
Eugene I. Davis
Executive Vice President
EMERSON RADIO INTERNATIONAL, LTD
Citco Building
Wickhams Cay
P.O. Box 662, Road Town
Tortola
British Virgin Island
Peter G. Bunger
Rosa Maris
29, Avenue des Papalins
MC 9800 Monaco
Re: Independent Consultant's Agreement
Dear Peter:
This letter, when signed by you (referred to herein as "you") and
returned to Emerson Radio International Limited ("Emerson" or "us"), shall
confirm your acceptance of our offer to engage you as an independent
consultant for Emerson on the following terms:
1. You are being retained to consult with the Board of Directors
of Emerson or any other officer, employee or agent of Emerson as designated
by the Board on (i) evaluation of opportunities to generate of sourcing
and/or licensing fees, (ii) identification and evaluation of international
markets for existing and new products under the "Emerson" name, and (iii)
development of activities in international markets (hereinafter collectively
referred to as "Services").
2. The term of this Agreement (the "Term") commences as of October
1994, and, subject to paragraph 4, ends on September 30, 1996. For all
services rendered by you during the Term, you shall receive annual
compensation in the aggregate amount of $40,000, payable in equal monthly
installments.
3. You hereby agree that all ideas, written materials, and other
developments or improvements conceived and creation of any work ("Work")
by you, alone or with others, during the term of this Agreement, including
but not limited to all programs, strategies, or promotions, etc., whether in
progress or completed that are within the scope of the Services of this
Agreement are for the sole benefit and the sole and exclusive property
of Emerson and that any and all trademarks, patents, copyrights, trade
secrets and Work shall be owned by and belong to Emerson absolutely. You
agree to assist Emerson, at its expense, to obtain copyrights, trademarks,
patents or any other applicable proprietary rights ("rights") on any such
Work and agree to execute all documents and do anything necessary to obtain
such rights in the name of Emerson as requested by Emerson. You agree that
to the extent that any Work is deemed by a Court in any competent
jurisdiction not to be the property of Emerson, you shall fully and
exclusively assign all rights, title and interest to the Work to Emerson
including but not limited to full and complete copyrights, trademarks,
patents and the right to copyright all Work. You shall cause your agents
to be bound by the terms of this paragraph 3.
4. During the Term, either party may terminate this Agreement by
reason of a breach hereof upon thirty (30) days written notice after giving
a written notice of default with seven (7) days to cure. If during the
term of this Agreement Emerson discontinues operating its present business
or you become incapacitated and cannot perform the Services for a period of
thirty (30) non-consecutive days during any calendar year, this Agreement
shall terminate immediately; provided however, that you shall be entitled
to receive all fees and reimbursements properly payable hereunder in the
event Emerson discontinues operating its present business.
5. You shall make periodic reports to Emerson on your Services as
requested by Emerson from time to time (but no less frequently than
monthly), shall retain all records regarding your Services for a period of
at least six (6) years and shall permit Emerson or its representatives
access to such records upon reasonable notice.
6. You shall pay your own taxes (regardless of the origin of the
taxing authority) with respect to all payments made to you hereunder and
agree to hold Emerson harmless from and against any claim by any
governmental taxing authority (i) that Emerson should have withheld any
sums from your compensation or otherwise made any payment on your behalf or
(ii) resulting from your engagement hereunder.
7. You represent that you are not subject to any restrictions
(contractual or otherwise) which prevent you from accepting this engagement.
You covenant and agree that provided Emerson is not in default under the
terms of this Agreement, you shall not render any services which
would conflict with your responsibilities hereunder or create a conflict of
interest.
8. During the course of your engagement, you will, at the absolute
discretion of the Board of Emerson, have access to certain confidential
information relating to the business, methods and practices of Emerson, its
plans for new products, its pricing policies, and its relationships with
its customers, accounts, directors, officers and employees. You
acknowledge that all of the foregoing is confidential, and that the use
(other than for the Services herein), disclosure or threatened disclosure
of any of such confidential and proprietary information would have a
material adverse effect upon Emerson's business and prospects.
Accordingly, you agree to keep confidential and not to use (other than for
the Services herein), disclose all or any part of the foregoing information
during the term and for a period of 3 years thereafter. Unless such
information becomes part of the public domain. Should you violate or
threaten to violate the provisions of this paragraph or those of paragraphs
7 and 21, you acknowledge that Emerson could be irreparably injured and
that it will not have an adequate remedy at law. Accordingly, you agree
that in any such event, Emerson may seek and obtain a temporary restraining
order, injunction or other appropriate equitable relief without proof of
actual damages or the posting of a bond or other security.
9. Your status under this Agreement shall be that of an independent
contractor and, except as specifically provided in this Agreement, you,
alone, shall bear all costs and expenses incurred by you or any person
engaged by you in performing your duties hereunder. Emerson shall, upon
presentation of appropriate documentation and in accordance with customary
Emerson procedures, reimburse you for all reasonable travel (via business
class) and other expenses incurred by you in the performance of the
Services which expenses and amounts are incurred with the prior written
approval of the Board or other authorized person as designated by the Board.
10. You shall have no authority to enter into any agreements or
commitments on behalf of Emerson, nor shall you represent or hold yourself
out to any person, firm or corporation as having any such authority.
11. You agree to indemnify, defend and hold Emerson harmless from
and against all demands, claims, damages, losses and defenses (including
reasonable costs, fees of attorneys, accountants and expert witnesses)
arising out of or resulting from the negligent performance of, or omission
to perform, the Services.
12. Emerson agrees to indemnify, defend and hold you harmless from
and against all demands, claims, damages, losses and defenses (including
reasonable costs, fees of attorneys, accountants and expert witnesses)
which may arise out of or resulting from its misconduct or negligence.
13. This Agreement supersedes and replaces any and all prior
agreements and understandings between you and Emerson and may not be
changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge
is sought. The failure by either party to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such terms, covenants or conditions, nor shall any waiver or
relinquishment of any right or power hereunder at any one time or
more times be deemed a waiver or relinquishment of such right or power
at any other time or times. The invalidity or unenforceability of any
provision of this Agreement shall in no way affect the validity or
enforceability of any other provision.
14. Any notice or other communication required or permitted by this
Agreement shall be sufficiently given or sent if delivered personally,
sent by telegram, or mailed by certified or registered mail, postage prepared
to the addresses set forth herein, or to such other address as may be
furnished in writing by either party to the other. All such notices and
communications shall be deemed to have been given as of the date
received if delivered personally, or the date so sent or so deposited in
overnight express mail (Federal Express or DHL) if otherwise given.
15. This Agreement shall be binding upon and inure to the benefit
of the parties and their legal representatives, successors and assigns.
16. This Agreement shall be governed by the laws of the British
Virgin Islands. The parties consent to the non-exclusive jurisdiction of
the Courts of the British Virgin Islands for the resolution of any and all
claims or disputes relating to this Agreement.
17. This Agreement is nonassignable unless agreed to in writing by
the parties.
18. Each party agrees to comply with all laws, rules and regulations
in its performance under this Agreement.
19. This Agreement does not confer any rights upon third parties.
20. Paragraphs 6, 8, and 11 shall survive termination or expiration
of this Agreement.
21. You shall use your own name in performance of the Services
herein and may not use the trademarks, tradenames or rights to use same
belonging to Emerson and/or its subsidiaries or affiliates without
Emerson's prior written consent in each instance.
If the above terms conform with your understanding, kindly sign
this letter in the appropriate space below.
Very truly yours,
EMERSON RADIO INTERNATIONAL LIMITED
By: /s/ Geoffrey P. Jurick
_____________________________
Geoffrey P. Jurick
Director
AGREED AND ACCEPTED AS OF THE
FIRST DAY OF OCTOBER, 1994
By: /s/ Peter C. Bunger
______________________
Peter G. Bunger
EMERSON RADIO EUROPE B.V.
Drentastraat 20
1083 HK Amsterdam
Netherlands
Peter G. Bunger
Mythenquai 26
CH 8002 Zurich
Re: Independent Consultant's Agreement
Dear Peter:
This letter, when signed by you (referred to herein as "you") and
returned to Emerson Radio Europe B.V. ("Emerson" or "us"), shall confirm
your acceptance of our offer to engage you as an independent consultant for
Emerson on the following terms:
1. You are being retained to consult with the Board of Directors
of Emerson or any other officer, employee or agent of Emerson as designated
by the Board on (i) evaluation of opportunities to generate of sourcing
and/or licensing fees, (ii) identification and evaluation of international
markets for existing and new products under the "Emerson" name, and (iii)
development of activities in international markets (hereinafter collectively
referred to as "Services").
2. The term of this Agreement (the "Term") commences as of October
1994, and, subject to paragraph 4, ends on September 30, 1996. For all
services rendered by you during the Term, you shall receive annual
compensation in the aggregate amount of $100,000, payable in equal monthly
installments.
3. You hereby agree that all ideas, written materials, and other
developments or improvements conceived and creation of any work ("Work") by
you, alone or with others, during the term of this Agreement, including but
not limited to all programs, strategies, or promotions, etc., whether in
progress or completed that are within the scope of the Services of this
Agreement are for the sole benefit and the sole and exclusive property of
Emerson and that any and all trademarks, patents, copyrights, trade secrets
and Work shall be owned by and belong to Emerson absolutely. You agree to
assist Emerson, at its expense, to obtain copyrights, trademarks, patents
or any other applicable proprietary rights ("rights") on any such Work and
agree to execute all documents and do anything necessary to obtain such
rights in the name of Emerson as requested by Emerson. You agree that to
the extent that any Work is deemed by a Court in any competent jurisdiction
not to be the property of Emerson, you shall fully and exclusively assign
all rights, title and interest to the Work to Emerson including but not
limited to full and complete copyrights, trademarks, patents and the right
to copyright all Work. You shall cause your agents to be bound by the
terms of this paragraph 3.
4. During the Term, either party may terminate this Agreement by
reason of a breach hereof upon thirty (30) days written notice after giving
a written notice of default with seven (7) days to cure. If during the
term of this Agreement Emerson discontinues operating its present business
or you become incapacitated and cannot perform the Services for a period of
thirty (30) non-consecutive days during any calendar year, this Agreement
shall terminate immediately; provided however, that you shall be entitled
to receive all fees and reimbursements properly payable hereunder in the
event Emerson discontinues operating its present business.
5. You shall make periodic reports to Emerson on your Services as
requested by Emerson from time to time (but no less frequently than
monthly), shall retain all records regarding your Services for a period of
at least six (6) years and shall permit Emerson or its representatives
access to such records upon reasonable notice.
6. You shall pay your own taxes (regardless of the origin of the
taxing authority) with respect to all payments made to you hereunder and
agree to hold Emerson harmless from and against any claim by any
governmental taxing authority (i) that Emerson should have withheld any
sums from your compensation or otherwise made any payment on your behalf or
(ii) resulting from your engagement hereunder.
7. You represent that you are not subject to any restrictions
(contractual or otherwise) which prevent you from accepting this engagement.
You covenant and agree that provided Emerson is not in default under the
terms of this Agreement, you shall not render any services which would
conflict with your responsibilities hereunder or create a conflict of
interest.
8. During the course of your engagement, you will, at the absolute
discretion of the Board of Emerson, have access to certain confidential
information relating to the business, methods and practices of Emerson, its
plans for new products, its pricing policies, and its relationships with
its customers, accounts, directors, officers and employees. You
acknowledge that all of the foregoing is confidential, and that the use
(other than for the Services herein), disclosure or threatened disclosure
of any of such confidential and proprietary information would have a
material adverse effect upon Emerson's business and prospects.
Accordingly, you agree to keep confidential and not to use (other than
for the Services herein), disclose all or any part of the foregoing
information during the term and for a period of 3 years thereafter.
Unless such information becomes part of the public domain. Should you
violate or threaten to violate the provisions of this paragraph or those of
paragraphs 7 and 21, you acknowledge that Emerson could be irreparably
injured and that it will not have an adequate remedy at law. Accordingly,
you agree that in any such event, Emerson may seek and obtain a temporary
restraining order, injunction or other appropriate equitable relief
without proof of actual damages or the posting of a bond or other security.
9. Your status under this Agreement shall be that of an
independent contractor and, except as specifically provided in this
Agreement, you, alone, shall bear all costs and expenses incurred by you
or any person engaged by you in performing your duties hereunder. Emerson
shall, upon presentation of appropriate documentation and in accordance
with customary Emerson procedures, reimburse you for all reasonable
travel (via business class) and other expenses incurred by you in the
performance of the Services which expenses and amounts are incurred with
the prior written approval of the Board or other authorized person as
designated by the Board.
10. You shall have no authority to enter into any agreements or
commitments on behalf of Emerson, nor shall you represent or hold yourself
out to any person, firm or corporation as having any such authority.
11. You agree to indemnify, defend and hold Emerson harmless from
and against all demands, claims, damages, losses and defenses (including
reasonable costs, fees of attorneys, accountants and expert witnesses)
arising out of or resulting from the negligent performance of, or omission
to perform, the Services.
12. Emerson agrees to indemnify, defend and hold you harmless from
and against all demands, claims, damages, losses and defenses (including
reasonable costs, fees of attorneys, accountants and expert witnesses)
which may arise out of or resulting from its misconduct or negligence.
13. This Agreement supersedes and replaces any and all prior
agreements and understandings between you and Emerson and may not be
changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or
discharge is sought. The failure by either party to insist upon strict
compliance with any of the terms, covenants or conditions hereof shall
not be deemed a waiver of such terms, covenants or conditions, nor shall
any waiver or relinquishment of any right or power hereunder at any one time
or more times be deemed a waiver or relinquishment of such right or power
at any other time or times. The invalidity or unenforceability of any
provision of this Agreement shall in no way affect the validity or
enforceability of any other provision.
14. Any notice or other communication required or permitted by
this Agreement shall be sufficiently given or sent if delivered personally,
sent by telegram, or mailed by certified or registered mail, postage
prepared to the addresses set forth herein, or to such other address as may
be furnished in writing by either party to the other. All such notices and
communications shall be deemed to have been given as of the date received
if delivered personally, or the date so sent or so deposited in overnight
express mail (Federal Express or DHL) if otherwise given.
15. This Agreement shall be binding upon and inure to the
benefit of the parties and their legal representatives, successors and
assigns.
16. This Agreement shall be governed by the laws of The
Netherlands. The parties consent to the non-exclusive jurisdiction of the
Courts of The Netherlands for the resolution of any and all claims or
disputes relating to this Agreement.
17. This Agreement is nonassignable unless agreed to in writing by
the parties.
18. Each party agrees to comply with all laws, rules and
regulations in its performance under this Agreement.
19. This Agreement does not confer any rights upon third parties.
20. Paragraphs 6, 8, and 11 shall survive termination or expiration
of this Agreement.
21. You shall use your own name in performance of the Services
herein and may not use the trademarks, tradenames or rights to use same
belonging to Emerson and/or its subsidiaries or affiliates without
Emerson's prior written consent in each instance.
If the above terms conform with your understanding, kindly sign
this letter in the appropriate space below.
Very truly yours,
EMERSON RADIO EUROPE B.V.
By: /s/ Geoffrey P. Jurick
___________________
Geoffrey P. Jurick
Director
AGREED AND ACCEPTED AS OF THE
FIRST DAY OF OCTOBER, 1994
By: /s/ Peter G. Bunger
____________________
Peter G. Bunger
EMPLOYMENT AGREEMENT, dated as
of October 3, 1994, between EMERSON
RADIO CORP., a Delaware
corporation (the "Company"),
and Andrew Cohan ("Employee").
Employee is willing to serve as Vice President - Merchandising and
Special Projects of the Company and the Company desires to retain the
Employee in such capacity on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Employee hereby agree as follows:
1. EMPLOYMENT
(a) The Company agrees to employ Employee and Employee agrees
to serve the Company and its affiliates during the period beginning with
the date of this Agreement and ending October 3, 1997 (the "Employment
Period" or "Term").
(b) Employee shall serve as a Vice President - Merchandising
and Special Projects of the Company and shall serve in such other
capacities and offices in the Company or its affiliates as the Board of
Directors or the Chief Executive Officer may reasonably request given
Employee's skills and abilities.
(c) The term "Company" as used in this Agreement shall be
deemed to include any and all present and future subsidiaries and
affiliates of the Company.
2. DEVOTION OF TIME
During the Employment Period, Employee shall expend all of his
working time for the Company, shall devote his best efforts, energy and
skill to the services of the Company and the promotion of its interests,
and shall not take part in activities detrimental to the best interests of
the Company.
3. COMPENSATION
For all services rendered by the Employee in any capacity required
hereunder during the Term, including, without limitation, services as an
executive, officer, director, or member of any committee of the Company, or
any subsidiary, affiliate or division thereof, the Executive shall be
compensated as follows:
(a) Base Salary. The Company shall pay the Employee an
initial salary of $140,000 per annum or such higher annual amount as is
being paid from time to time pursuant to the terms hereof ("Base Salary").
The Base Salary shall be reviewed from time to time and subject to such
periodic increases as the Board of Directors shall deem appropriate in
accordance with the Company's customary procedures and practices regarding
the salaries of officers of the Company. Base Salary shall be payable in
accordance with the customary payroll practices of the Company, but in no
event less frequently than monthly.
(b) Bonus. The Employee shall be entitled to receive an
annual formula bonus equal to an amount up to thirty percent (30%) of the
Base Salary upon attainment of objectives identified by the Board of
Directors consistent with general policies adopted by the Board with
respect to executive and sales personnel. The Employee may also receive an
additional annual performance bonus to be recommended by the Compensation
and Personnel Committee of the Board of Directors and established and to be
payable from time to time at the sole discretion of the Board of Directors.
(c) Stock Option. Subject to approval of the Compensation
and Personnel Committee, the Company will grant the Employee, as of the
effective date of this Agreement, options to purchase 30,000 shares of the
Company's common stock, par value $0.10 per share (the "Stock"), at an
exercise price per share established by the Compensation and Personnel
Committee. One third of the shares subject to this option shall become
vested and exercisable upon each anniversary of the effective date of the
Agreement. If the outstanding shares of common stock are increased or
decreased, or are changed into or exchanged for a different number of or
kind of shares or securities, as a result of one or more reorganizations,
recapitalization, stock splits reverse stock splits, stock dividends or the
like, appropriate adjustments shall be made in the number of shares for the
unexercised portions of the option and appropriate adjustment shall be made
for the exercise price.
(d) Additional Benefits. Except as modified by this
Agreement, the Employee shall be entitled to participate in all
compensation or employee benefit plans or programs, and to receive all
benefits, perquisites and emoluments, for which any salaried employees of
the Company are eligible under any plan or program now or hereafter
established and maintained by the Company for senior officers, to the
fullest extent permissible under the general terms and provisions of such
plans or programs and in accordance with the provisions thereof, including
group hospitalization, health, dental care life or other insurance, tax-
qualified pension, savings, thrift and profit-sharing plans, termination
pay programs, sick-leave plans, travel or accident insurance, disability
insurance, automobile allowance or automobile lease plans, and executive
contingent compensation plans, including, without limitation, capital
accumulation programs and stock purchase, restricted stock and stock
option plans. Notwithstanding the foregoing, nothing in this Agreement
shall preclude the amendment or termination of any such plan or program,
provided that such amendment or termination is applicable generally to the
senior officers of the Company or any subsidiary or affiliate.
(e) Perquisites. The Company also will furnish the Employee,
without cost to him, with perquisites consistent with those afforded other
officers holding positions with the Company comparable to the position held
by the Employee, including the following:
(i) an allowance for the use of an automobile;
(ii) reimbursement of out-of-pocket expenses incurred in
the discharge of the Employee's duties pursuant to
this Agreement at the request of the Company; and
(iii) three weeks paid vacation.
4. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) Certain Terminations. In the event the Employee's
employment hereunder terminates due to either Permanent Disability, a
Without Cause Termination or a Constructive Discharge, the Company
shall, as liquidated damages or severance pay, or both, continue, subject
to the provisions of Section 5 below, to pay the Employee's Base Salary as
in effect at the time of such termination as such payments would otherwise
become due and payable until the expiration of the Term (the "Severance
Period") and the other benefits and qualified stock options provided
hereunder shall continue to vest pursuant to the terms hereof during the
Severance Period, provided, that in the case of Permanent Disability, such
payments shall be offset by any amounts otherwise paid to the Employee
under the Company's disability program generally available to other
employees. In addition, earned but unpaid Base Salary as of the date of
termination of employment shall be payable in full. Group hospitalization,
health, dental care, life or other insurance, travel or accident insurance
and disability insurance shall continue through the end of the Severance
Period.
(b) Other Terminations. In the event that the Employee's
employment hereunder terminates due to a Termination for Cause or the
Employee unilaterally severs the employment relationship or terminates
employment with the Company for reason other than a Constructive Discharge
or Permanent Disability, earned but unpaid Base Salary as of the date of
termination of employment shall be payable in full and vested qualified
stock options will remain vested in the Employee. However, no other
payments of any nature whatsoever, including unearned Base Salary, shall be
made, or benefits provided, by the Company under this Agreement except for
stock options to the extent already vested and exercisable hereunder,
benefits vested and payable under any retirement plan and benefits that
have already become vested under the terms of employee benefit programs
maintained by the Company or its affiliates of its employees. All options
not vested shall be canceled as of the date of termination.
(c) Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(i) The term "Termination for Cause" means, to the
maximum extent permitted by applicable law, (x) a termination of the
Employee's employment by the Company because the Employee has breached or
failed to perform his duties under this Agreement, applicable law or the by-
laws of the Company, including the unreasonable neglect or refusal to
perform duties assigned by the Board of Directors or Executive Committee,
(x) abuse of office or malfeasance by Employee, (y) conviction of the
Employee of a felony which the Board reasonably deems to be an "abuse of
office" or a crime of moral turpitude or (z) a breach of any
representation contained in this Agreement.
(ii) The term "Constructive Discharge" means a
termination of the Employee's employment by the Employee due to a failure
of the Company or its successors without the prior consent of the Employee
to fulfill the obligations under this Agreement in any material respect.
(iii) The term "Without Cause Termination" means
termination of the Employee's employment by the Company, upon 30 days'
notice to the Employee, other than due to (v) Permanent Disability, (x)
retirement, (y) expiration of the Term, or (z) Termination for Cause.
(iv) The term "Permanent Disability" means the inability
of the Employee, as determined by the Board and confirmed by competent
medical evidence, to work for a period of three continuous full calendar
months or 90 non-consecutive days during any twenty-four consecutive
calendar months due to illness or injury of a physical or mental nature.
To determine issues of disability, the Executive agrees to submit himself
for appropriate medical examination to physicians reasonably acceptable to
the Company and the Employee.
5. OTHER DUTIES OF EMPLOYEE DURING AND AFTER TERM.
(a) Confidential Information. The Employee recognizes and
acknowledges that all information pertaining to the affairs, business,
clients, customers, vendors, plans or prospects of the Company or any of
its subsidiaries or affiliates (any or all of such entities being
hereinafter referred to as the "Business"), as such information may exist
from time to times, other than information that the Company has previously
made publicly available, is confidential information and is a unique and
valuable asset of the Business, access to and knowledge of which are
essential to the performance of the Employee's duties under this Agreement.
The Employee shall not, except to the extent reasonably necessary in the
performance of his duties under this Agreement, divulge to any person,
firm, association, corporation, or governmental agency, any information
concerning the affairs, business, clients, customers, vendors, plans or
prospects of the Business (except such information as is required by law to
be divulged to a government agency or pursuant to lawful process) or make
use of any such information for his own purposes or for the benefit of any
person, firm, association or corporation (except the Business) and shall
use his reasonable best efforts to prevent the disclosure of any such
information by others. All records, memoranda, letters, books, papers,
reports, accounting, experience or other data, and other records and
documents relating to the Business, whether made by the Employee or
otherwise coming into his possession, are confidential information and are,
shall be and shall remain the property of the Business. No copies thereof
shall be made which are not retained by the Business, and the Employee
agrees, on termination of his employment or on demand of the Company, to
deliver the same to the Company.
(b) Patents. Any methods, developments, inventions and/or
improvements, whether patentable or unpatentable, which Employee may
conceive or make along the lines of the Company's business while in its
employ, shall be and remain the property of the Company. Employee further
agrees on request to execute patent applications based on such methods,
developments, inventions and/or improvements, including any other
instruments deemed necessary by the Company for the prosecution of such
patent application or the acquisition of Letters Patent of this and any
foreign country.
(c) Non-Compete/Non-Solicitation. Employee shall have access
to and shall be directly or indirectly responsible for the Company's
customer lists, pricing, policies, projections, product development, trade
secrets and other privileged and confidential information essential to the
Company's business. During the term of this Agreement and the Severance
Period, if applicable, the Employee shall not without express prior written
approval of the Company's Board, directly or indirectly, own or hold any
proprietary interest in, or be employed by or receive remuneration from,
any corporation, partnership, sole proprietorship or other entity engaged
in competition with the Company or any of its affiliates (a "Competitor"),
other than severance-type or retirement-type benefits from entities
constituting prior employers of the Employee. The Employee also agrees
that he will not solicit for the account of any Competitor, any vendor,
customer or client of the Company or its affiliates, or, in the event of
the Employee's termination of employment, any entity or individual that was
such a customer or client during the 12-month period immediately preceding
the Employee's termination of employment. The Employee also agrees not to
act on behalf of any Competitor to interfere with the relationship between
the Company or its affiliates and their employees.
For purposes of the preceding paragraph, (i) the term
"proprietary interest" means legal or equitable ownership, whether through
stockholding or otherwise, of an equity interest in a business, firm or
entity other than ownership of less than 5 percent of any class of equity
interest in a publicly held business, firm or entity and (ii) an entity
shall be considered to be "engaged in competition" if such entity is, or is
a holding company for, an entity engaged in the consumer electronics business.
(d) Remedies. The Company's obligation to make payments,
deliver shares of Stock or provide for any benefits under this Agreement
(except to the extent vested or exercisable) shall cease upon a violation
of the preceding provisions of this section. The Employee's agreement as
set forth in this Section 5 shall survive the Employee's termination of
employment with the Company. Employee acknowledges and agrees that, in the
event he violates any of the restrictions of this Section 5, the Company
will be without adequate remedy at law and will therefore be entitled to
enforce such restrictions by temporary or permanent injunctive or mandatory
relief obtained in an action or proceeding instituted in the courts of the
State of New Jersey or any other court of competent jurisdiction without
the necessity of proving damages and without prejudice to any other
remedies which it may have at law or in equity, and Employee hereby
consents to the jurisdiction of such court for such purpose, provided that
reasonable notice of any proceeding is given, it being understood that such
injunction shall be in addition to any remedy which the Company may have by
law or otherwise.
6. WITHHOLDING TAXES.
The Company may directly or indirectly withhold from any
payments made under this Agreement all Federal, state, city or other taxes
as shall be required pursuant to any law or governmental regulation or
ruling.
7. CONSOLIDATION, MERGER, OR SALE OF ASSETS.
Nothing in this Agreement shall preclude the Company or its
subsidiaries or affiliates from consolidation or merging into or with, or
transferring all or substantially all their or its assets, to, another
corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a consolidation,
merger or transfer of assets assumption, the term "Company" as used herein
shall mean such other corporation and this Agreement shall continue in full
force and effect.
8. NOTICES.
All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be
deemed to have been duly given if delivered or mailed, postage prepaid, by
same day or overnight mail as follows:
(a) To the Company:
Emerson Radio Corp.
9 Entin Road
Parsippany, New Jersey 07054
Attn: Chief Executive Officer
(b) To the Employee:
C/O Emerson Radio Corp.
9 Entin Road
Parsippany, New Jersey 07054
or such other address as either party shall have previously specified in
writing to the other.
9. RIGHTS TO PAYMENTS.
Employee shall not under any circumstances have any option or
right to require payments hereunder otherwise than in accordance with the
terms of this Agreement. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary,
to effect any such action shall be null, void and of no effect; provided,
however, that nothing in this Section 9. shall preclude the assumption of
such rights by executors, administrators or other legal representatives of
the Employee or his estate and their assigning any rights hereunder to the
person or persons entitled thereto.
10. SOURCE OF PAYMENT.
All payments provided for under this Agreement shall be paid in
cash from the general funds of the Company. The Company shall not be
required to establish a special or separate fund or other segregation of
assets to assure such payments, and, if the Company shall make any
investments to aid it in meeting its obligations hereunder, the Employee
shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate
written instrument relating to such investments. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship,
between the Company and the Employee or any other person. To the extent
that any person acquires a right to receive payments from the Company
hereunder, such right, without prejudice to rights which employees may
have, shall be no greater than the right of an unsecured creditor of the
Company.
11. REPRESENTATIONS.
(a) Employee hereby represents that, as of the day hereof,
neither his resume nor any other information relating to his employment
history or work experience that he has provided to the Company, whether
written or oral, contains any untrue statement or omission necessary to
make the statements contained therein not misleading. Employee undertakes
to immediately advise the Company of any change relating to such
information. Failure to comply with the terms of this Section 11 shall be
deemed to be a material breach of this Agreement.
(b) You represent and warrant to the Company that you are not
now under any obligations to any business, firm, corporation, association,
venture or other entity or person, and have no other interest which is
inconsistent or in conflict with this Agreement, or which would prevent,
limit or impair, in any way, the performance by you any of your covenants
or agreements contained herein, or any duties of your employment. You
further represent that you have not brought and will not bring or use in
the performance of your duties at the Company any proprietary or
Confidential Information (whether or not in writing) of a former employer
without that employer's written authorization. If the Company is made a
party to any proceedings in connection with any alleged violations of
any alleged agreements or contracts as represented herein, you agree to
indemnify and hold the Company harmless from and against any and all
liabilities and expenses, costs and attorneys fees of counsel chosen by
the Company which it may incur or sustain arising out of any claims, actions
or demands or proceedings for any such alleged violations.
12. RELOCATION EXPENSES
Employee shall permanently relocate his residence to the
location of the Company's principle office as soon as practicable. Company
shall provide to Employee such relocation expenses as are authorized
pursuant to the Company's relocation practice, a copy of which has been
furnished to Employee. Further, Employee shall be reimbursed for
reasonable overnight expenses incurred Monday through Thursday of each week
through June 1995.
13. BINDING AGREEMENT.
Expect as otherwise expressly provided herein, this Agreement
shall be binding upon, and shall inure to the benefit of, the Company, its
successors and assigns. This Agreement, as it relates to the Employee, is
a personal contract and the rights and interest of the Employee hereunder
may not be sold, transferred, assigned, pledged or hypothecated except as
expressly provided herein.
14. GOVERNING LAW.
The validity, interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of New Jersey.
15. ADDITIONAL DOCUMENTS.
Executive shall execute and deliver to the Company the Employee
Confidentiality and Non-Disclosure Policy and Inventions Policy, copies of
which are attached as Exhibits "A" and "B". It is intended that such
policies shall be supplemental to the obligations of the Employee set forth
herein.
16. SIGNING BONUS.
Upon execution of this Agreement by the Company, the Employee
shall be entitled to receive a signing bonus of $15,000 payable in 3 equal
installments commencing on the date of execution of this Agreement and
continuing thereafter on the first day of the third and sixth month
thereafter.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Employee has signed this
Agreement, all as of the first date above written.
EMERSON RADIO CORP.
a Delaware Corp.
By: /s/ Eugene I. Davis
____________________________
Name: Eugene I. Davis
Title: Executive Vice-President
EMPLOYEE
/s/ Andrew Cohan
______________________________
Andrew Cohan
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.
EXHIBIT 11
Emerson Radio Corp. and Subsidiaries
Exhibit to Form 10-K
Computation of Primary Earnings Per Share
(in thousands, except per share data)
Years Ended March 31,
1995 1994 1993
Net earnings (loss) $ 7,375 $55,501 ($56,000)
______ ______ ______
Weighted average number of actual
shares outstanding 36,530 38,191 38,179
Additional shares assuming conversion
or exercise of:
Preferred stock (a) 9,081
Stock options and warrants 960
_____ _______ ________
Weighted average number of common
and common equivalent shares outstanding 46,571 38,191 38,179
______ ______ ______
Primary earnings per share $ 0.16 $ 1.45 ($ 1.47)
======== ======== ======
___________________________
(a) Based on the assumed conversion of $10 million of Series A Preferred
Stock into Common Stock at a price per share equal to 80% of the
weighted average market value of a share of Common Stock, determined
on a quarterly basis. Since the Series A Preferred Stock is not
convertible into Common Stock until March 31, 1997, the number shares
issuable upon conversion may be significantly different then noted above.
EXHIBIT 21
Emerson Radio Corp. and Subsidiaries
Exhibit to Form 10-K
Subsidiaries of the Registrant
Name of Subsidiary Jurisdiction of Percentage of
Incorporation Ownership
Emerson Radio (Hong Kong) Ltd. Hong Kong 100%*
Emerson Radio International Ltd. British Virgin Islands 100%
Emerson Radio Canada Ltd. Canada 100%
* One share is owned by a resident director pursuant to local law.
</page>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 17,020
<SECURITIES> 0
<RECEIVABLES> 34,309
<ALLOWANCES> 4,150
<INVENTORY> 35,336
<CURRENT-ASSETS> 102,380
<PP&E> 11,778
<DEPRECIATION> 7,102
<TOTAL-ASSETS> 113,969
<CURRENT LIABILITIES> 59,782
<BONDS> 0
<COMMON> 403
0
9,000
<OTHER-SE> 44,248
<TOTAL-LIABILITY-AND-EQUITY> 113,969
<SALES> 654,671
<TOTAL-REVENUES> 654,671
<CGS> 604,329
<TOTAL-COSTS> 604,329
<OTHER-EXPENSES> 38,244
<LOSS-PROVISION> 1,574
<INTEREST-EXPENSE> 2,882
<INCOME-PRETAX> 7,642
<INCOME-TAX> 267
<INCOME-CONTINUING> 7,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,375
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
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