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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ] [ ] Confidential, for
Use of the
Commission Only (as
permitted by
Rule 14a-6(e)(2))
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EMERSON RADIO CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of filing fee (check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a- 6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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EMERSON RADIO CORP.
9 Entin Road
P.O. Box 430
Parsippany, New Jersey 07054-0430
(201) 884-5800
November 22, 1996
Dear Fellow Stockholder:
This year's Annual Meeting of Stockholders will be held at the offices of
Wolff & Samson, P.A., 5 Becker Farm Road, Roseland, New Jersey 07068 on
December 18, 1996, at 10:00 a.m. local time. You are cordially invited to
attend. The matters you are asked to consider are described in the attached
Proxy Statement and Notice of Annual Meeting. The Company's Board of Directors
recommends (i) election of management's nominees for the Board of Directors and
(ii) ratification of the selection by the Board of Directors of Ernst & Young
LLP as independent auditors for the Company for the fiscal year ending March 31,
1997.
To be certain that your shares are voted at the meeting, whether or not you
plan to attend in person, please sign, date, and return the enclosed proxy card
as soon as possible. Your vote is important.
At the meeting, the Company's activities during the past fiscal year and
its plans and prospects for the future will be reviewed. An opportunity will be
provided for questions by the stockholders.
I hope you will be able to join us.
Sincerely,
/s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chairman of the Board
THE TRUSTED NAME IN ELECTRONICS SINCE 1912
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 1996
Notice is hereby given that the Annual Meeting of Stockholders of Emerson
Radio Corp., a Delaware corporation (the "Company"), will be held at the offices
of Wolff & Samson, P.A., 5 Becker Farm Road, Roseland, New Jersey 07068, on
Wednesday, December 18, 1996, at 10:00 a.m., local time, for the following
purposes:
1. To elect Directors for terms expiring in 1997.
2. To ratify the selection by the Board of Directors of Ernst &
Young LLP as independent auditors for the Company for the
fiscal year ending March 31, 1997.
3. To transact such other business as may properly come before the
Annual Meeting and adjournments thereof.
The accompanying Proxy Statement contains information regarding the
business to be considered at the Annual Meeting.
Only stockholders of record at the close of business on November 15, 1996,
are entitled to notice of, and to vote at, the Annual Meeting of Stockholders or
any adjournment thereof. A list of stockholders will be made available at the
offices of the Company at least 10 days prior to such meeting for examination by
any stockholder for any purpose germane to the Annual Meeting.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. If you attend the Annual Meeting, you may vote in person, whether or
not you have returned your proxy. A proxy may be revoked at any time before it
is exercised.
By Order of the Board of Directors
/s/ Elizabeth J. Calianese
Elizabeth J. Calianese
Vice President-Human Resources and
Secretary
Parsippany, New Jersey
November 22, 1996
EMERSON RADIO CORP.
NINE ENTIN ROAD
PARSIPPANY, NEW JERSEY 07054
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy, mailed with this Proxy Statement, is solicited on
behalf of Emerson Radio Corp., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders of the Company to be held on Wednesday,
December 18, 1996, at 10:00 a.m., local time, at the offices of Wolff & Samson,
P.A., 5 Becker Farm Road, Roseland, New Jersey 07068.
This Proxy Statement and accompanying form of proxy will first be mailed on
or about November 22, 1996 to stockholders of record as of November 15, 1996.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Company's Board of Directors shall
consist of not less than three nor more than 15 persons, provided that, once
elected, no Director's term shall be reduced by a decrease in the number of
Directors authorized by the Board of Directors. The Board currently consists of
six members. Six Directors, each to serve until the 1997 Annual Meeting, will
be elected at the 1996 Annual Meeting.
Each nominee has consented to being named in the Proxy Statement and to
serve if elected. If prior to the Annual Meeting any nominee should become
unavailable to serve, the shares represented by a properly signed and returned
proxy will be voted for the election of such other person as may be designated
by the Board of Directors, or the Board may determine to leave the vacancy
temporarily unfilled.
Each of management's nominees for election as Directors are listed below
and each is currently a member of the Board of Directors.
GEOFFREY P. JURICK, 55, Chairman of the Board and Chief Executive Officer.
Mr. Jurick has served as Director since September 1990, Chief Executive Officer
since July 1992, and Chairman since December 1993. Mr. Jurick served as
President from July 1993 to October 1994. Since December 1993, Mr. Jurick has
served as a Director of Fidenas International Limited, L.L.C. and its
predecessor ("FIN") and, since May 1994, as an officer and general manager of
FIN. Mr. Jurick has served as a Director, Chairman, and Chief Executive Officer
of GSE Multimedia Technologies Corporation ("GSE"), which is traded in the
over-the-counter market, since May 1994. Since March 1996, Mr. Jurick has
served as Chairman of Elision International Ltd. ("Elision"). For more than
the past five years, Mr. Jurick has held a variety of senior executive positions
with several of the entities comprising the Fidenas group of companies ("Fidenas
Group"), whose activities encompass merchant banking, investment banking,
investment management, and corporate development.
EUGENE I. DAVIS, 41, President. Mr. Davis has served as President since
October 1994 and as a Director since September 1990. Mr. Davis served as
Interim Chief Financial Officer from February 1993 until November 1995 and as
Executive Vice President from July 1992 to October 1994. From June 1989 to July
1992, Mr. Davis was a shareholder and director of the law firm of Holmes Millard
& Duncan, P.C., in Dallas, Texas. Since August 1992, Mr. Davis has served as a
director of Tipperary Corporation, which is traded on the American Stock
Exchange. Since May 1995, Mr. Davis has also served as a Director of Beth
Israel Health Care Services, a private corporation and as a Director of Newark
Beth Israel Medical Center, an affiliate of the Saint Barnabas Health Care
System, the largest health care system in New Jersey. Mr. Davis is also a
Trustee, Governor and Secretary of Green Brook Country Club.
ROBERT H. BROWN, JR., 43, has been a Director since July 1992. Presently,
Mr. Brown is Executive Vice President of Rauscher Pierce Refsnes, Inc.
("Rauscher"), in Dallas, Texas. Since February 1994, Mr. Brown has been
Executive Vice President of Capital Markets of Rauscher. From January 1990
until February 1994, Mr. Brown was Senior Vice President and Director of the
Corporate Finance Department of Rauscher. Since May 1993, Mr. Brown has served
as a Director of Stevens Graphics Corp., which is traded on the American Stock
Exchange.
PETER G. BUNGER, 56, has been a Director since July 1992. Presently, he is
a consultant with Savarina AG. Since October 1992, Mr. Bunger has served as
Director of Savarina AG, engaged in the business of portfolio management
monitoring in Zurich, Switzerland, and since 1992, as Director of ISCS, a
computer software company. From December 1991 until December 1993, he was Vice
Chairman of Montcour Bank and Trust Company Limited, a bank organized in the
Bahamas and an affiliate of Fidenas International. From 1981 until 1992,
Mr. Bunger was owner and Managing Director of Peter G. Bunger Investment
Consulting, a firm which supervised, controlled, and analyzed investments for
individuals.
JEROME H. FARNUM, 60, has been a Director since July 1992. Since July
1994, Mr. Farnum has been an independent consultant. From 1979 until 1994,
Mr. Farnum served as a senior executive with several of the entities comprising
the Fidenas Group, in charge of legal and tax affairs, accounting, asset and
investment management, foreign exchange relations, and financial affairs.
RAYMOND L. STEELE, 61, has been a Director since July 1992. Mr. Steele has
been retired since September 1993. From August 1990 until September 1993,
Mr. Steele served as Executive Vice President of Pacholder Associates, Inc., a
company providing investment management and other financial advisory services to
institutional clients. Mr. Steele is a member of the Board of Directors of
Pharmhouse, Inc., a publicly-traded retail drug chain, Modernfall, Inc., and the
GFTA Advisory Board.
VOTE REQUIRED FOR ELECTION OF DIRECTORS
To be elected as a Director, each nominee must receive the favorable vote
of a plurality of the total number of shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting or any adjournment
thereof. Accordingly, if a quorum is present at the Annual Meeting, the six
persons receiving the greatest number of votes will be elected to serve as
Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR EACH OF THE SIX NOMINEES NAMED ABOVE
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended March 31, 1996 ("Fiscal 1996"), the Board of
Directors met seven times and acted by unanimous consent eleven times.
The Audit Committee, which currently consists of Robert H. Brown, Jr.,
Raymond L. Steele, and Jerome H. Farnum, (i) annually recommends selection of
the Company's independent auditors to the Board of Directors; (ii) consults with
the independent auditors concerning the audit; (iii) evaluates non-audit
services and financial statements and accounting developments that may affect
the Company; and (iv) consults with management concerning matters similar to
those discussed with outside auditors. The Audit Committee met three times
during Fiscal 1996.
The Compensation and Personnel Committee, which consisted of Messrs. Brown,
Steele, and Peter G. Bunger, (i) makes recommendations to the full Board
concerning remuneration arrangements for executive management; (ii) administers
the Company's 1994 Stock Compensation Program; and (iii) makes such reports and
recommendations, from time to time, to the Board of Directors upon such matters
as the committee may deem appropriate or as may be requested by the Board.
During Fiscal 1996, the Compensation Committee met one time and acted by
unanimous consent one time. See "Report of Compensation and Personnel
Committee" on page 11.
The Company does not have a Nominating Committee. Nominations for
Directors of the Company are considered by the entire Board. Stockholders
wishing to recommend a candidate for consideration by the Board can do so in
writing to the Secretary of the Company at its corporate offices in Parsippany,
New Jersey, giving the candidate's name, biographical data, and qualifications.
Any such recommendation must be accompanied by a written statement from the
individual giving his or her consent to be named as a candidate and, if
nominated and elected, to serve as a director.
During Fiscal 1996, each member of the Board attended not less than 66% of
the aggregate number of (i) Board Meetings and (ii) meetings of committees of
which such person was a member.
COMPENSATION OF DIRECTORS
Directors of the Company who are employees do not receive compensation for
serving on the Board. Non-employee Directors are paid $20,000 per annum in
quarterly installments. The Chairmen of the Audit Committee and Compensation
and Personnel Committee each receive an additional $10,000 per annum. Pursuant
to the terms of the Company's 1994 Non-Employee Director Stock Option Plan, each
non-employee Director was granted options to purchase 25,000 shares of Common
Stock on October 7, 1994. On October 7, 1994, each Chairman was also granted
options to purchase an additional 25,000 shares of Common Stock.
OFFICERS
The following table sets forth certain information regarding the officers
of the Company as of the date hereof:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Geoffrey P. Jurick 55 Chairman of the Board and Chief Executive
Officer, Director
Eugene I. Davis 41 President, Director
John P. Walker 33 Executive Vice President, Chief Financial
Officer
Marino Andriani 49 President, Emerson Radio Consumer Products
Corporation, a wholly-owned subsidiary of the
Company
John J. Raab 60 Senior Vice President--Operations
Eddie Rishty 36 Senior Vice President--Controller and
Logistics
Elizabeth J. Calianese 39 Vice President--Human Resources, Secretary
Christina A. Iatrou 34 Assistant Secretary
</TABLE>
GEOFFREY P. JURICK has served as Director since September 1990, Chief
Executive Officer since July 1992, and Chairman since December 1993. Mr. Jurick
served as President from July 1993 to October 1994. See "Election of
Directors".
EUGENE I. DAVIS has served as President since October 1994 and as a
Director since September 1990. Mr. Davis served as Interim Chief Financial
Officer from February 1993 until November 1995 and as Executive Vice President--
Corporate Development and Regulatory Affairs from July 1992 to October 1994.
See "Election of Directors."
JOHN P. WALKER has served as Executive Vice President and Chief Financial
Officer since April 1996 and was Senior Vice President from April 1994 until
March 1996. Mr. Walker was Vice President--Finance from February 1993 to April
1994, Assistant Vice President--Finance from June 1991 to January 1993, and
Director of Financial Management from September 1989 to May 1991.
MARINO ANDRIANI has served as President of Emerson Radio Consumer Products
Corporation, a wholly-
owned subsidiary of the Company, since February 1996. From December 1994 until
February 1996, Mr. Andriani was President of Appliance Corp. of America, a
Welbilt Consumer Products Company. Prior thereto, Mr. Andriani was Executive
Vice President--Sales of the Company from September 1990 to March 1993.
JOHN J. RAAB has served as Senior Vice President--Operations since October
1995 and was Vice President--Far East Operations from March 1995 until September
1995. Prior thereto, he was President and Chief Operating Officer of Robeson
Industries Corp. from March 1990 to March 1995. Robeson Industries Corp. filed
for relief under Chapter 11 of the United States Bankruptcy Code and emerged
from Bankruptcy and was sold in the end of 1994.
EDDIE RISHTY has served as Senior Vice President--Controller and Logistics
since April 1996, was Vice President--Controller from July 1993 until March
1996, and was Corporate Controller from October 1991 to June 1993. Prior
thereto, Mr. Rishty was Assistant Controller from April 1989 to September 1991.
ELIZABETH J. CALIANESE has served as Secretary since January 1996, as Vice
President--Human Resources since May 1995 and as Deputy General Counsel since
May 1995. From April 1991 to May 1995, Ms. Calianese served as Assistant
General Counsel. Prior thereto, from June 1989 until March 1991, Ms. Calianese
was a corporate attorney with the Company.
CHRISTINA A. IATROU has served as Assistant Secretary since August 1996 and
as Assistant General Counsel since May 1995. From October 1987 to May 1995, Ms.
Iatrou was a senior associate with the law firm of Crocco & DeMaio, P.C., in New
York City.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 15, 1996, by (i) each
Director and nominee for Director of the Company, (ii) executive officers and
Directors of the Company as a group and (iii) each person or entity known by the
Company to be the beneficial owner of more than 5% of the Company's outstanding
Common Stock. For purposes of this Proxy Statement, beneficial ownership of
securities is defined in accordance with the rules of the Securities and
Exchange Commission and means generally the power to vote or exercise investment
discretion with respect to securities, regardless of any economic interests
therein. Except as otherwise indicated and based upon the Company's review of
information as filed with the Securities and Exchange Commission, the Company
believes that the beneficial owners of the securities listed below have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Common Stock
Beneficially owned
as of November 15, 1996
NOMINEES FOR DIRECTOR Amount(2) Percent of Class
<S> <C> <C>
Geoffrey P. Jurick (1)(3) 29,552,642 72.6%
Eugene I. Davis(3) 450,000 1.1%
Robert H. Brown, Jr. 33,334 (4)
Peter G. Bunger 16,667 (4)
Jerome H. Farnum 16,667 (4)
Raymond L. Steele 33,334 (4)
PRINCIPAL STOCKHOLDERS
Fidenas International Limited, L.L.C.(1) 29,152,542 72.3%
831 Route 10
Suite 38, #113
Whippany, NJ 07981
Elision International, Inc. 1,600,000 4.0%
275 Wyman Street
Waltham, MA 02154
GSE Multimedia Technologies Corporation 12,000,000 29.8%
Kostheimer-Landstrasse 36
55246 Mainz--Kostheim
Germany D6502
All Directors and Officers as a Group
(12 persons)(5)(6) 30,322,642 73.2%
</TABLE>
(1) Consists of 15,552,542, 1,600,000 and 12,000,000 shares of Common Stock
held by FIN, Elision, and GSE, respectively. FIN is record holder of
847,458 shares of Common Stock and formerly held such shares as nominee.
The nominee relationship has been terminated and FIN and Mr. Jurick
disclaim beneficial ownership of such shares. Mr. Jurick indirectly owns,
through a controlled holding company, approximately 95% of FIN. In
addition, Mr. Jurick is the manager of FIN. FIN owns approximately 14.3%
of Elision. Mr. Jurick indirectly owns, through certain holding companies
and beneficial interests in affiliates, a controlling interest in each of
GSE and Elision. In accordance with a Stipulation and Order of Settlement,
dated June 11, 1996 (the "Stipulation"), on its effective date, the shares
of Common Stock held by Elision and GSE will be transferred and registered
in the name of FIN. See "Legal Proceedings--Litigation Regarding Certain
Outstanding Common Stock."
(2) Based on 40,295,196 shares of Common Stock outstanding as of November 15,
1996, plus shares of Common Stock under option of any director or executive
officer, exercisable within 60 days. Does not include (i) shares of Common
Stock issuable upon conversion of 10,000 shares of Series A Preferred
Stock, (ii) Common Stock issuable upon conversion of certain warrants
issued to the Company's former creditors, (iii) Common Stock issuable upon
exercise of outstanding options, which are not currently exercisable within
60 days, (iv) Common Stock issuable upon conversion of the Company's 8 1/2%
Senior Subordinated Convertible Debentures Due 2002 (the "Debentures"), or
(v) Common Stock issuable upon the exercise of warrants granted to (a)
Dresdner Securities (USA) Inc. ("the placement agent") and authorized
dealers in connection with the private placement of the Debentures, (b)
First Cambridge Securities Corporation ("First Cambridge"), and/or
representatives of First Cambridge it so designates, in connection with a
consulting agreement, or (c) Starr Securities, Inc. ("Starr"), and/or
representatives of Starr it so designates, in connection with a consulting
agreement.
(3) Includes options, exercisable within 60 days, to purchase 400,000 shares of
Common Stock. Does not include options to purchase an aggregate of 200,000
shares of Common Stock not currently exercisable.
(4) Represents less than 1.0% of the outstanding Common Stock.
(5) Includes 1,120,000 shares of Common Stock subject to unexercised stock
options which were exercisable within 60 days under the Company's Stock
Compensation Program.
(6) Does not include options to purchase an aggregate of 615,000 shares of
Common Stock not currently exercisable within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the execution of the Stipulation among Mr. Jurick,
Barclays Bank PLC, Petra Stelling, the Official Liquidator of Fidenas
International Bank Limited, FIN, Elision, GSE, and the Official Liquidator of
Fidenas Investment Limited, the Company will advance certain expenses and fees
including certain expenses of the Advisor and Settlement Agent, to be appointed
pursuant to the terms of the Stipulation (initially, TM Capital Corp.), in each
instance to be reimbursed from the proceeds of the first sale of the Settlement
Shares (all defined terms as hereinafter defined). The maximum amount to be
paid by the Company for the initial advance for such reasonable fees and
expenses is $250,000 ("initial advance") which amount is to be reimbursed from
the proceeds of the first sale of Settlement Shares and which is to be paid
prior to any payment of the Aggregate Amount (as hereinafter defined) as set
forth in the Stipulation. After full reimbursement to the Company of the
initial advance, from time to time the Company shall pay, on a revolving basis,
additional reasonable expenses, not to exceed $75,000 at any one time, incurred
by the Settlement Agent (including those incurred in its capacity as Collateral
Agent) and the Advisor. The Company shall be reimbursed for such further
advances from the proceeds of the first sale of Settlement Shares following an
advance of any portion of the $75,000. Additionally, to the extent not
reimbursed from the sales of Settlement Shares as set forth herein, the Company
shall be reimbursed for the expense incurred in connection with the registration
of Settlement Shares from the first proceeds of sales of such Settlement Shares.
See "Legal Proceedings--Litigation Regarding Certain Outstanding Common Stock."
The law firm of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A., was
retained as the Company's outside counsel following the settlement of a proxy
contest conducted in 1992. Payments aggregating approximately $1,070,000 were
made by the Company for the fiscal year ended March 31, 1994. The firm was
retained by the Company as special corporate counsel during the Restructuring
proceedings and received payment for services rendered and expenses incurred
during such proceedings. In addition, the firm provides ongoing services for
the Company. The firm received approximately $637,000 and $737,000 during
Fiscal 1996 and the year ended March 31, 1995 ("Fiscal 1995"), respectively. A
family member of Mr. Davis joined such law firm subsequent to its retention by
the Company and served of counsel to such law firm. During Fiscal 1996, such
family member became a member of another law firm and such law firm now serves
as the Company's regular outside counsel. The Company was billed approximately
$95,000 for legal services during Fiscal 1996 by such law firm.
In connection with the execution of his employment agreement with the
Company, Eugene I. Davis, the Company's President, agreed to relocate his
residence to the general locality of the Company's principal executive offices.
To assist in such relocation, in the fiscal year ended March 31, 1993 ("Fiscal
1993"), the Company provided to Mr. Davis an interest-free bridge loan of
$120,000. The maturity date of Mr. Davis' loan has been extended and is due in
the fiscal year ending March 31, 1997.
Mr. Pablo Bunger, the brother of Peter Bunger, a director of the Company,
was the Managing Director of the Company's Spanish branch. Pursuant to a
consulting arrangement, Mr. Pablo Bunger received compensation and reimbursement
of expenses aggregating $28,000 and $118,000 in Fiscal 1996 and Fiscal 1995,
respectively. The Company has closed the Spanish branch, in favor of an
independent distributorship, and the consulting arrangement was terminated.
The Company has reorganized its Canadian operations. In connection with
such reorganization, Emerson's Canadian subsidiary has entered into a series of
agreements with Tammy Venator, doing business as Venator Electronics Sales and
Services Ltd. ("Venator"). Ms. Venator is the daughter of Theo Heuthorst,
former President of Emerson's Canadian subsidiary, and she was formerly the
National Service Manager of such subsidiary. Effective April 1, 1995, Emerson's
Canadian subsidiary entered into several three-year agreements with Venator
providing for (i) Venator receiving returned products, (ii) Venator purchasing
returned products on an "as-is" basis for refurbishing and resale by Venator,
(iii) Venator processing warranty claims submitted by service centers authorized
to engage in warranty service of Emerson products sold in Canada, (iv) Venator
distributing parts to customers and service centers for Emerson products, which
it will purchase from the Company's Canadian subsidiary at a premium over their
costs, and (v) Venator maintaining an effective service center network to
accommodate all customers of Emerson's Canadian subsidiary, maintaining a
factory service center, and maintaining a parts distribution center and
providing other after sales services. The Company was billed $37,569 for
services provided with respect to the above-mentioned agreements during Fiscal
1996. In addition, the Company billed Venator approximately $269,000 for spare
part purchases and returned product purchases over the same period. The Company
was owed approximately $68,000 for these purchases as of March 31, 1996 and the
Company owed Venator approximately $2,000 for services provided as of March 31,
1996. Through these agreements, the Company reduced its costs of operations in
Canada, while maintaining its market presence in Canada. The Company believes
that the terms on which it entered into the agreements with Venator described
above are no less favorable than could have been obtained from an unrelated
third party. Subsequently, the Company is in the process of finalizing the
closure of its Canadian operations in favor of an independent distributorship.
In Fiscal 1996 and Fiscal 1995, the Company sold finished goods and spare
parts to GSE for approximately $178,000 and $341,000, respectively, on terms no
more favorable than those available to third parties. The Company was owed
approximately $18,000 for these purchases as of March 31, 1996, which has
subsequently been paid.
In October 1994 and February 1995, the Company employed two individuals who
were professional advisers to Mr. Jurick and certain entities with which
Mr. Jurick is affiliated or associated. One individual was paid $38,587 and
$52,885 by the Company for Fiscal 1996 and Fiscal 1995, respectively, as well as
receiving automobile benefits and related expenses in the amount of $1,256 and
$3,027, respectively. The other individual was paid $41,716 and $6,856 by the
Company in Fiscal 1996 and Fiscal 1995, respectively, as well as receiving
automobile benefits in the amount of $897 and $1,295, respectively. The
services of both individuals were terminated in Fiscal 1996. In addition to
services rendered to the Company, each of the individuals, while employed by the
Company devoted substantial amounts of time to services for Mr. Jurick and his
associated or affiliated entities, and consequently, Mr. Jurick may be deemed to
receive an indirect benefit from the payment by the Company of the salary and
other expenses of these two individuals.
Peter G. Bunger, a Director of the Company, had been engaged as a
consultant to two foreign subsidiaries of the Company. The agreements,
effective as of October 1, 1994, provided for aggregate annual compensation of
$140,000, had terms of two years and authorized reimbursement for reasonable
travel and business expenses. Pursuant to the consulting agreements, Mr. Bunger
received compensation and reimbursement of expenses aggregating $48,333 in
Fiscal 1996. These agreements were terminated as of September 30, 1995. In
November 1996, Mr. Bunger was again retained as a consultant, and will be paid
on a per diem basis at the approximate rate of $10,000 for each month when he is
present in Hong Kong and providing services to the Company.
In Fiscal 1995, the Company paid Elision the sum of $34,275 for consulting
services with respect to management information services. Elision owns
1,600,000 shares of Common Stock. Mr. Jurick indirectly owns a controlling
interest in Elision.
The Company has adopted a policy that all future affiliated transactions
and loans will be made or entered into on terms no less favorable to the Company
than those that can be obtained from unaffiliated third parties. In addition,
all future affiliated transactions and loans, and any forgiveness of loans, must
be approved by a majority of the independent outside members of the Company's
Board of Directors who do not have an interest in the transactions.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF EXECUTIVE OFFICERS
The following executive compensation disclosures reflect all plan and
non-plan compensation awarded to, earned by, or paid to the named executive
officers of the Company. The "named executive officers" are the Company's Chief
Executive Officer (the "CEO"), regardless of compensation level, the four most
highly compensated executive officers, other than the CEO serving as such on
March 31, 1996 and one individual for whom disclosure would have been provided
but for the fact that this individual was not serving as an executive officer on
March 31, 1996. Where a named executive officer has served during any part of
Fiscal 1996, the disclosures reflect compensation for the full year in each of
the periods presented.
THREE-YEAR COMPENSATION SUMMARY
The following table summarizes for the years indicated the compensation
awarded to, earned by, or paid to the named executives for services rendered in
all capacities to the Company:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
All
Other Securi- Other
Annual Restric- ties Com-
Comp- ted Under- LTIP pen-
Name & Principal Fiscal ensa- Stock lying Pay- sa-
Position(s) Year Salary Bonus tion Awards Options outs tion-
(1) (4) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey P. Jurick 1996 $490,000 $137,500 $102,661 -- -- -- 1,693
Chairman of the 1995 378,333 275,000 78,702 -- 600,000 -- 311
Board and Chief 1994 250,000 195,000 -- -- -- -- --
Executive Officer
Eugene I. Davis 1996 450,000 87,500 90,745 -- -- -- 12,997
President 1995 360,000 175,000 102,024 -- 600,000 -- 6,986
1994 360,000 150,000 102,385 -- -- -- 5,524
John P. Walker 1996 165,000 40,000 24,307 -- -- -- 4,912
Executive Vice 1995 110,000 75,000 20,420 -- 200,000 -- 3,841
Prsident and 1994 110,000 85,000 9,483 -- -- -- 1,918
Chief Financial
Officer
John J. Raab 1996 178,846 -- 9,131 -- 50,000 -- 1,882
Senior Vice 1995 -- -- -- -- -- -- --
President- 1994 -- -- -- -- -- -- --
Operations(3)
Eddie Rishty 1996 130,000 20,000 21,360 -- -- -- 3,814
Senior Vice 1995 110,000 40,000 9,289 -- 30,000 -- 3,261
President- 1994 105,154 25,000 8,082 -- -- -- 2,485
Controller &
Logistics
Albert G.McGrath, 1996 157,500 -- 17,574 -- -- -- 4,645
Jr., Senior Vice 1995 175,000 75,000 19,958 -- 200,000 -- 5,451
President, 1994 175,000 100,000 18,462 -- -- -- 4,671
Secretary and
General Counsel(3)
</TABLE>
(1) Consists of (i) car allowance and auto expenses afforded to the listed
Company executive officers, including $39,967 and $30,546 paid to
Mr. Davis, and $20,745 and $19,114 paid to Mr. Walker, respectively, in
Fiscal 1996 and 1995, and $20,433 paid to Mr. Rishty in Fiscal 1996,
(ii) tax preparation services provided to Mr. Davis, (iii) expenses paid by
the Company on behalf of Mr. Davis, covering his club membership, and
(iv) relocation and temporary lodging expenses and associated tax gross-ups
in the amount of $102,661, $73,394, and $0 for Mr. Jurick, $24,493,
$43,002, and $64,643 for Mr. Davis and $0, $0, and $9,137 for Mr. McGrath
paid by the Company in Fiscal 1996, 1995 and 1994, respectively. See
"Certain Relationships and Related Transactions."
(2) Consists of the Company's contribution to its 401(k) employee savings plan,
life insurance and disability insurance.
(3) Mr. Raab became an executive officer of the Company in March 1995.
Effective January 1, 1996, Mr. McGrath resigned from his position at the
Company and simultaneously entered into a one-year consulting agreement
with the Company. Pursuant to the agreement, Mr. McGrath received payments
aggregating $48,462 in Fiscal 1996 which are not included in the above
table.
(4) In July 1994, the Company granted stock options to purchase 600,000,
600,000, 200,000, and 200,000 shares of common stock to each of
Messrs. Jurick, Davis, McGrath, and Walker, respectively, exercisable at an
exercise price of $1 per share (except $1.10 in the case of Mr. Jurick).
In October 1994, Mr. Rishty was granted an option to purchase 30,000 shares
of common stock at an exercise price of $1 per share. In November 1995,
Mr. Raab was granted a stock option to purchase 50,000 shares of common
stock at an exercise price of $2.875 per share. Pursuant to the agreement
entered into with Mr. McGrath, options to purchase 133,333 shares were
cancelled. On June 28, 1996, Mr. McGrath exercised his remaining options
and acquired 42,424 shares of Common Stock. The options vest in annual
increments of one-third, commencing one year from the date of grant, and
their exercise is contingent on continued employment with the Company. In
November 1996, the Company accelerated Mr. Walker's options to provide for
immediate full vesting of such options.
STOCK OPTIONS
The following table sets forth information regarding the grant of stock
options during Fiscal 1996 to the named executive officers:
<TABLE>
OPTION GRANTS IN FISCAL 1996
<CAPTION>
Individual Grants
% of Total
Options Potential Realizable
Granted to Value at Assumed
Employees Annual Rates of Stock
Number in Exercise Expira- Price Appreciation
of Options Fiscal Price Per tion for Option Term(2)
Name Granted 1996 Share Date(1) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Geoffrey P. Jurick -- -- -- -- -- --
Eugene I. Davis -- -- -- -- -- --
John P. Walker -- -- -- -- -- --
John J. Raab 50,000 40% $2.875 11/28/05 $90,404 $229,100
Eddie Rishty -- -- -- -- -- --
Albert G. McGrath, Jr. -- -- -- -- -- --
</TABLE>
(1) The stock options were granted under the 1994 Stock Compensation Program,
and are exercisable commencing one year after the grant date in the three
equal annual installments, with full vesting occurring on the third
anniversary of the date of the grant.
(2) The dollar amounts under these columns are the result of calculations at
the assumed compounded market appreciation rates of 5% and 10% as required
by the Securities and Exchange Commission over a ten-year term and
therefore, are not intended to forecast possible future appreciation, if
any, of the stock price.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during Fiscal 1996 and
unexercised options held at March 31, 1996:
<TABLE>
OPTION EXERCISES IN FISCAL 1996
AND MARCH 31, 1996 OPTION VALUES
<CAPTION>
Number of Value of Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired March 31, 1996 March 31, 1996
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
Geoffrey P. Jurick -- -- 200,000/400,000 $292,500/$585,000
Eugene I. Davis -- -- 200,000/400,000 $312,500/$625,000
John P. Walker -- -- 66,667/133,333 $104,167/$208,333
John J. Raab -- -- 0/ 50,000 $ 0/$ 0
Eddie Rishty -- -- 10,000/ 20,000 $ 15,625/$ 31,250
Albert G. McGrath, Jr. -- -- 66,667/ 0 $104,167/$ 0
</TABLE>
(1) Calculated based on the difference between the aggregate fair market value
of the shares subject to options at March 31, 1996 and the aggregate option
exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
On August 13, 1992, the Board of Directors of the Company approved the
Employment Agreements of certain of the Company's senior management, including
certain of the senior management included in the table set forth above. A
description of the material terms of such employment agreements, each of which
is effective as of July 7, 1992 (unless stated to the contrary) follows.
Geoffrey P. Jurick, Chairman and Chief Executive Officer of the Company,
entered into five-year employment agreements ("Jurick Employment Agreements")
with the Company and two of its wholly-owned subsidiaries, Emerson Radio (Hong
Kong) Limited and Emerson Radio International Ltd. (formerly Emerson Radio
(B.V.I.) Ltd.) (hereinafter, collectively the "Companies"), providing for an
aggregate annual compensation of $250,000, which was increased to $390,000 in
May 1994 and to $490,000 effective April 1, 1995. In addition to his base
salary, Mr. Jurick is entitled to an annual bonus upon recommendation by the
Compensation and Personnel Committee of the Company's Board of Directors,
subject to the final approval of the Company's Board of Directors.
Subject to certain conditions, each of the Jurick Employment Agreements
grants to Mr. Jurick severance benefits, through expiration of the respective
terms of each of such agreements, commensurate with Mr. Jurick's base salary, in
the event that his employment with the Companies terminates due to permanent
disability, without cause or as a result of constructive discharge (as defined
therein). In the event that Mr. Jurick's employment with the Companies
terminates due to termination for "cause," because Mr. Jurick unilaterally
terminates the agreements or for reasons other than constructive discharge or
permanent disability, Mr. Jurick shall only be entitled to base salary earned
through the applicable date of termination. Similar provisions are set forth in
each of the contracts described below.
Eugene I. Davis, President of the Company, entered into a five-year
employment agreement ("Davis Employment Agreement") with the Company, providing
for an annual compensation of $360,000, which was increased to $450,000
effective April 1, 1995. In addition to his base salary, Mr. Davis is entitled
to an annual bonus equal to an amount up to 30% of Mr. Davis' base salary, based
upon attainment of objectives identified in the Company's five-year business
plan adopted by the Board of Directors ("Business Plan"). Mr. Davis may also
receive an additional annual performance bonus to be recommended by the
Compensation and Personnel Committee of the Company's Board of Directors,
subject to the final approval of the Company's Board of Directors.
Pursuant to the Davis Employment Agreement, the Company granted to
Mr. Davis an option to purchase 500,000 shares of common stock. Such option was
cancelled pursuant to the Plan of Reorganization; however, the Company
subsequently granted Mr. Davis options to purchase 600,000 shares of Common
Stock. The Company has also agreed for the term of the Davis Employment
Agreement and three years thereafter, to pay for and maintain legal malpractice
insurance covering Mr. Davis for occurrences and actions taken by him at any
time prior to or during the term of such agreement on behalf of the Company or
its employees. The Company has also agreed to pay all sums, which may be
deductible amounts, not otherwise paid by such insurer.
John P. Walker, Executive Vice President and Chief Financial Officer,
entered into a three-year employment agreement with the Company effective as of
April 1, 1994 providing for an annual compensation of $110,000, which was
increased to $165,000 effective April 1, 1995 and increased to $210,000
effective April 1, 1996. In addition to his base salary, Mr. Walker is entitled
to an annual bonus equal to an amount up to 30% of Mr. Walker's base salary,
upon attainment of objectives identified by the Executive Committee. Mr. Walker
may also receive an additional annual performance bonus to be recommended by the
Compensation and Personnel Committee of the Company's Board of Directors,
subject to the final approval of the Company's Board of Directors. The Company
has authorized an amendment to Mr. Walker's employment agreement to provide for
certain severance benefits in the event Mr. Walker leaves the Company's employ
for any reason other than a Termination for Cause, as defined in Mr. Walker's
employment agreement.
If Messrs. Jurick, Davis and Walker were to be terminated due to permanent
disability, without cause or as a result of constructive discharge, the
estimated dollar amount to be paid after March 31, 1996 to each such individual,
based on the terms of their respective contracts, would be $622,000, $571,000
and $210,000, respectively.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
The provisions of the employment agreements may be deemed to have an
anti-takeover effect and may delay, defer, or prevent a tender offer or takeover
attempt that a stockholder may consider to be in the stockholder's best
interest, including attempts that might result in a premium over the market
price for shares held by stockholders.
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
The Compensation and Personnel Committee of the Board of Directors (the
"Compensation Committee"), which contained three independent non-employee
Directors (see page 2), oversees the Company's executive compensation strategy.
The strategy is implemented through policies designed to support the achievement
of the Company's business objectives and the enhancement of stockholder value.
The Compensation Committee reviews, on an ongoing basis, all aspects of
executive compensation and analyzes information from several nationally
recognized independent compensation surveys.
The Compensation Committee's executive compensation policies support the
following objectives:
- The reinforcement of management's concern for enhancing
stockholder value.
- The attraction and retention of qualified executives.
- The provision of competitive compensation opportunities for
exceptional performance.
The basic elements of the Company's executive compensation strategy are:
BASE SALARY. Base salaries for the executive managers of the Company
represent compensation for the performance of defined functions and
assumption of defined responsibilities. The Compensation Committee reviews
each executive's base salary on an annual basis. In determining salary
adjustments, the Compensation Committee considers the Company's growth in
earnings and revenues and the executive's performance level, as well as
other factors relating to the executive's specific responsibilities. Also
considered are the executive's position, experience, skills, potential for
advancement, responsibility, and current salary in relation to the expected
level of pay for the position. The considerations of the Compensation
Committee are impacted by the information provided by the compensation
surveys analyzed by the Compensation Committee. These surveys include
companies with which the Company competes for senior-level executives. The
Compensation Committee exercises its judgment based upon the above criteria
and does not apply a specific formula or assign a weight to each factor
considered. The Committee decided upon salary changes for executive
officers effective April 1, 1995 and additional salary increases for
Messrs. Walker and Rishty effective April 1, 1996, after reviewing each
officer's duties and performance level for the previous year, considering
the Chief Executive Officer's recommendations, noting that the majority of
management did not receive base salary increases during the fiscal years
ended March 31, 1993, 1994, or 1995, and, as to Messrs. Walker and Rishty,
the promotions they received in April 1996.
ANNUAL INCENTIVE COMPENSATION. At the beginning of each year, the
Board of Directors establishes performance goals of the Company for that
year, which may include target increases in sales, net income and earnings
per share, as well as more subjective goals with respect to marketing,
product introduction and expansion of customer base.
LONG-TERM INCENTIVE COMPENSATION. The Company's long-term incentive
compensation for management and employees consists of the 1994 Stock
Compensation Program.
The Compensation Committee views the granting of stock options as a
significant method of aligning management's long-term interests with those of
the stockholders. The Compensation Committee determines awards to executives
based on its evaluation of criteria that include responsibilities, compensation,
past and expected contributions to the achievement of the Company's long-term
performance goals, and current competitive practice as indicated by the
compensation surveys reviewed by the Company. Stock options are designed to
focus executives on the long-term performance of the Company by enabling
executives to share in any increases in value of the Company's stock.
The Compensation Committee encourages executives, individually and
collectively, to maintain a long-term ownership position in the Company's stock.
The Compensation Committee believes this ownership, combined with a significant
performance-based incentive compensation opportunity, forges a strong linkage
between the Company's executives and its stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Geoffrey P. Jurick is the Chief Executive Officer and Chairman of the
Board of Directors of the Company. The Compensation Committee considered the
Company's results in all aspects of its business in its review of Mr. Jurick's
performance during Fiscal 1996.
The Company's financial condition improved after successfully emerging from
a bankruptcy proceeding, but the Company operated at a significant loss during
Fiscal 1996. As a consequence, Mr. Jurick's bonus for Fiscal 1996 was set at
50% of his bonus in Fiscal 1995 and he did not receive a raise in salary. The
Company continues very active efforts to introduce new products into the
marketplace and develop new markets.
Pursuant to an employment agreement between the Company and Mr. Jurick,
Mr. Jurick's base salary is reviewed annually and is subject to discretionary
increases by the Board of Directors. The Board approved an increase in
Mr. Jurick's annual base salary from $390,000 to $490,000, effective April 1,
1995, but he did not receive a raise in salary in 1996. On July 7, 1994, the
Board granted Mr. Jurick stock options for 600,000 shares, which will vest in
equal annual increments over a three-year period. Pursuant to the Stipulation,
Mr. Jurick's total cash and non-cash compensation is subject to certain
limitations. See "Legal Proceedings--Litigation Regarding Certain Outstanding
Common Stock."
POLICY ON QUALIFYING COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), for tax years beginning on or after January 1, 1994, provides that
public companies may not deduct in any year compensation in excess of $1 million
paid to any of the individuals named in the Summary Compensation Table that is
not, among other requirements, "performance based," as defined in Section
162(m). None of the named individuals received compensation in excess of $1
million during Fiscal 1996.
COMPENSATION AND PERSONNEL COMMITTEE
Raymond L. Steele, Chairman
Robert H. Brown, Jr.
Peter G. Bunger
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under either act.
COMPARISON OF CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The graph below compares the cumulative total stockholders' return on the
Company's Common Stock for the period December 22, 1994 to March 31, 1996, with
the cumulative total return over the same period of the American Stock Exchange
and a peer group of companies selected by the Company for purposes of
comparison, which includes Cobra Electronics Corp., Matushita Electric
Industrial Co. Ltd., Philips Electronics N.V., Sony Corp., and Zenith
Electronics Corp. The peer group assumes the investment of $100 in the Company's
Common Stock, on December 22, 1994 and reinvestment of all dividends, if any.
The information in the graph was provided by Media General Financial Services
("MGFS"). The comparison of the returns are as follows:
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN
OF EMERSON RADIO CORP., PEER GROUP INDEX
AND BROAD MARKET INDEX
<CAPTION>
12/22/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96
<S> <C> <C> <C> <C> <C> <C>
EMERSON RADIO 100.00 135.14 116.22 129.73 83.78 110.81
CORP.
PEER GROUP 100.00 103.85 124.45 140.65 111.53 114.53
BROAD MARKET 100.00 106.85 115.40 125.33 125.80 131.38
</TABLE>
THE BROAD MARKET INDEX CHOSEN WAS:
AMERICAN STOCK EXCHANGE
THE PEER GROUP INDEX CHOSEN WAS:
CUSTOMER SELECTED STOCK LIST
THE PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
COBRA ELECTRONICS CORP.
MATSUSHITA ELEC IND CO
PHILIPS ELECTRONICS NV
SONY CORP.
ZENITH ELECTRONICS CORP.
LEGAL PROCEEDINGS
BANKRUPTCY CLAIMS
Pursuant to the Plan of Reorganization ("Plan") 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. The Plan 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 unsecured claim was filed on or about July 25, 1994 in
connection with the rejection of certain executory contracts entered into with
two Brazilian entities, Cineral Electronica de Amazonia Ltda. and Cineral
Magazine Ltda. (collectively, "Cineral") 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 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, on or about
September 30, 1994, the Company instituted an adversary proceeding asserting
damages caused by Cineral and seeking declaratory relief and replevin. A motion
filed by Cineral to dismiss the adversary proceeding was denied and the
adversary proceeding and claim objection have been consolidated into one
proceeding and discovery commenced. This action has been stayed since June 1995
by order of the Bankruptcy Court pending settlement negotiations. 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, in light of the foregoing, the
Company believes the chances for recovery for lost profits are remote.
TELETECH LITIGATION
In December 1990, Emerson Radio (Hong Kong) Limited ("Emerson (H.K.)") (a
wholly owned subsidiary of the Company) commenced an action in the Supreme Court
of Hong Kong High Court against Teletech (Hong Kong) Limited ("Teletech")
seeking approximately $1,000,000 in damages as a result of Teletech's breach of
its agreements to sell cordless telephones and telephone answering machines to
Emerson (H.K.). In March 1991, Teletech filed a counterclaim which denies the
allegations, alleges that Emerson (H.K.) breached its agreement to purchase
cordless telephones and telephone answering machines and 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. The case is presently
dormant and was not affected by the bankruptcy proceedings.
OTAKE LITIGATION
On December 20, 1995, the Company filed suit in the United States District
Court for the District of New Jersey against Orion Sales, Inc., Otake Trading
Co. Ltd., Technos Development Limited, Shigemasa Otake, and John Richard Bond,
Jr. (collectively, the "Otake Defendants"), alleging breach of contract, breach
of covenant of good faith and fair dealing, unfair competition, interference
with prospective economic gain, and conspiracy in connection with certain
activities of the Otake Defendants under certain agreements between the Company
and the Otake Defendants. Mr. Bond is a former officer and sales representative
of the Company, having served in the latter capacity until he became involved
working for the other Otake Defendants. Certain of the other Otake Defendants
have supplied the majority of the Company's purchases until the Company's most
recent fiscal year.
On December 21, 1995, Orion Sales, Inc. and Orion Electric (America), Inc.
filed suit against the Company in the United States District Court, Southern
District of Indiana, Evansville Division, alleging various breaches of certain
agreements by the Company, including breaches of the confidentiality provisions,
certain payment breaches, breaches of provisions relating to product returns,
and other alleged breaches of those agreements, and seeking damages in the
amount of $2,452,656, together with interest thereon, attorneys' fees, and
certain other costs. While the outcome of the New Jersey and Indiana actions
are not certain at this time, the Company believes it has meritorious defenses
against the claims made by the plaintiffs in the Indiana action. In any event,
the Company believes the results of that litigation should not have a material
adverse effect on the financial condition of the Company or on its operations.
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 and, after disallowing the
Company's protest, issued a formal Notice of Action assessing a deficiency in
the aggregate of approximately $664,000, which includes interest through
July 24, 1992. The matter was appealed to the California State Board of
Equalization.
On March 9, 1994, the Company filed an adversary complaint with the
Bankruptcy Court, to obtain a declaratory judgment. The Franchise Tax Board
filed its response and subsequently moved to dismiss the adversary proceeding
for the purpose of litigating the deficiency with the California State Board of
Equalization and requested the Bankruptcy Court to abstain. On October 19,
1994, the Bankruptcy Court entered an Order of Abstention which was subsequently
affirmed by the District Court of New Jersey and Third Circuit Court of Appeals.
At the time of the District Court's dismissal of the proceeding, the Company was
advised that the automatic stay under Section 362 of the Bankruptcy Code was
lifted and the proceedings have continued in California's State Board of
Equalization.
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 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, litigation arose among the
principal shareholders of Fidenas Investment Limited ("FIL"), the Company's
largest shareholder prior to confirmation of the Plan, with respect to various
business relations and transactions entered into among the shareholders, certain
affiliates, and their principals, including Geoffrey Jurick, the Company's
Chairman and Chief Executive Officer, and Petra and Donald Stelling (the former
Chairman of the Company). The various proceedings include a.) proceedings in the
Commonwealth of the Bahamas, by one of its shareholders, for the winding up of
FIL with the Liquidator appointed in such proceeding commencing various
litigation against the predecessor of FIN, presently the Company's largest
stockholder, and Mr. Jurick regarding claims arising from the acquisition of the
Company's Common Stock held in the names of FIN, GSE and Elision;
b.) investigations in Switzerland, instituted at the request of the Stellings,
against Mr. Jurick and certain business associates (including Mr. Peter Bunger
and Mr. Jerome Farnum, directors of the Company) resulting, in part, in a
determination by the Federal Banking Commission of Switzerland that various
entities associated with Mr. Jurick and Mr. Farnum engaged in banking activities
without a license; c.) the Company filing suit against the Stellings alleging
breaches of fiduciary duty and breaches of contract and seeking monetary and
injunctive relief; and d.) actions filed in the Bahamas and the United States by
an Official Liquidator appointed by the Commonwealth of the Bahamas for Fidenas
International Bank Limited ("FiBank") with respect to certain shares of the
Company being issued to FIN resulting in an injunction being issued in the
Bahamian Court and the shares being deposited with such court. Additionally,
Barclays Bank PLC ("Barclays"), a creditor of Elision, requested and obtained a
preliminary injunction in Massachusetts state court enjoining Elision from
transferring any assets of Elision, other than in the ordinary course of
business. Barclays also obtained a default judgment against GSE in the state of
New York in the amount of $1,835,423.26.
On June 11, 1996, Barclays, Petra Stelling, the Official Liquidator of
FiBank, (collectively, the "Creditors"), Mr. Jurick, the Company (together with
the Creditors, the "Lead Parties"), FIN, Elision, GSE, and the Official
Liquidator of FIL signed the Stipulation providing for a settlement of all
litigation among them on a global basis. Under the Stipulation, Mr. Jurick and
FIN have agreed to pay the Creditors the aggregate sum of $49.5 million (the
"Settlement Amount") and Mr. Jurick will be paid the sum of $3.5 million,
contemplated to be solely from the proceeds of the sale of shares of Emerson's
Common Stock (the "Settlement Shares") owned by FIN, GSE, and Elision (the
"Jurick Payment" and, together with the Settlement Amount, the "Aggregate
Amount"). On the effective date of the Stipulation, all Settlement Shares owned
by GSE and Elision will be transferred to and registered in FIN's name, and all
Settlement Shares will be deposited with and remain in the custody of the Court,
to prevent defaults under the Company's borrowing facilities.
The Settlement Shares (consisting of 29,152,542 shares of Emerson's Common
Stock) will be divided into two pools, Pool A and Pool B. All Settlement Shares
will be pledged to secure all obligations under the Stipulation, but the Pool B
Shares will consist of the amount of shares as to which Mr. Jurick must retain
beneficial ownership, and generally will not be available for sale or release
from the custody of the Court or subject to foreclosure, to prevent defaults
under the Company's borrowing facilities.
FIN (which is controlled by Mr. Jurick) will retain title to and the voting
power over all Settlement Shares, but will provide notice to the Creditors prior
to certain stockholder votes. The Creditors may seek to have the Court direct
FIN to vote against any proposal of the Emerson Board, but the Emerson Board may
withdraw and not solicit any vote of its stockholders with respect to such
proposal.
The Stipulation contemplates the employment of a marketing advisor (the
"Advisor") and TM Capital Corp. has been so retained to serve as the initial
Advisor. The Advisor will formulate a marketing plan for the sale from time to
time of the Pool A Shares and will also appoint the Settlement Agent, who will
administer certain ministerial aspects of the settlement. The Pool A Shares
initially will consist of 15,286,172 Settlement Shares. Based on the closing
price of the Company's Common Stock on November 15, 1996, the Pool A Shares have
an aggregate market value of approximately $20.1 million. In formulating the
marketing plan, the Advisor will take into account the interests of all the Lead
Parties, including the interests of the Company's minority stockholders.
No definite time has been provided for the sale of the Settlement Shares or
the full payment of the Aggregate Amount. However, a Creditor may apply to the
Court, on notice to all other Lead Parties, to terminate the Stipulation, based
on the totality of the circumstances, on the grounds that its goals and purposes
are not reasonably likely to be realized. The Creditors will be able to resort
to consent judgments against Mr. Jurick and his affiliates if the Stipulation is
terminated.
The Company's rights and obligations under the Settlement Agreement include
the following:
1. The Company will advance certain expenses of the Advisor and the
Settlement Agent and advance the reasonable fees and expenses for
registration of the Settlement Shares, in each instance to be reimbursed
from the proceeds of the first sales of the Settlement Shares.
2. If an offer to purchase Settlement Shares that would result in a
Change of Control of the Company (i.e., beneficial ownership of 25% or more
of the Company's Common Stock) were to occur, the offeror will be required
to meet with the Company's independent directors and President, or their
successors (the "Special Committee"), and the Special Committee will
determine whether to approve such offer in the exercise of its fiduciary
duties under applicable Delaware law. Any of the Creditors may apply to
the Court to permit an exception, subject to the legal standard set forth
in the immediately preceding sentence.
3. The Company has agreed to register the offer and sale of the Pool
A Shares as set forth in the marketing plan. The Company previously has
filed a shelf registration statement covering five million Settlement
Shares owned by FIN to finance a settlement, which is subject to certain
contractual restrictions and may be offered for sale or sold only by means
of an effective registration statement.
4. The Lead Parties have agreed that Mr. Jurick will limit his total
annual cash compensation not to exceed $750,000 until the Settlement Amount
has been paid. The Company has also agreed not to grant Mr. Jurick any
additional non-cash compensation.
For the Stipulation to become effective, the certificates representing
certain of the Settlement Shares that are still held by the Swiss authorities
must be received by the Court, the Stipulation must be approved by the Court
following a hearing on notice to interested parties (held and so approved on
November 19, 1996), outstanding injunctions must be dissolved, and certain other
documents must be received by the Court. The Stipulation is to become effective
by December 31, 1996, or it may be withdrawn after that time if not yet
effective. Requests are to be made by Petra Stelling to the Swiss authorities
to discontinue the investigations involving Messrs. Jurick, Bunger, and Farnum,
as described above.
HOPPER LITIGATION
The Company filed a complaint on July 5, 1995 in the Superior Court of New
Jersey, Morris County, alleging that Hopper Radio of Florida, Inc. ("Hopper"),
Barry Smith, and three former employees of the Company (collectively, the
"Hopper Defendants") formed a business entity for a purpose in violation of
certain duties owed to, and rights including contractual rights from, two
agreements with the Company. On January 25, 1996, the New Jersey Court dismissed
the Company's complaint as to certain of the Hopper Defendants finding that
Delaware was the more proper forum for the Company's lawsuit. The Company filed
suit on January 27, 1996, in the Delaware Chancery Court, New Castle County, as
to those Hopper Defendants who did not reside in New Jersey, which contained
similar allegations to those in the New Jersey suit and sought a preliminary
injunction against those Hopper Defendants covered by the Delaware suit.
Effective April 24, 1996, the Company and Hopper entered into an amendment
which, among other things, amended certain provisions in the agreements and
settled all outstanding litigation between the Company, Hopper and the other
named parties. Under the amendment, Hopper advanced an additional $5 million to
the partnership with the Company, thereby increasing the liquidity of such
partnership and equalizing the investment of the partners and the sharing of
cash flows.
JENSEN LITIGATION
On May 10, 1996, International Jensen Incorporated ("Jensen") filed an
action in the United States District Court for the Northern District of
Illinois, Eastern Division, against the Company and its President, Eugene
I. Davis, for violations of proxy solicitation rules and for breach of a
confidentiality agreement with Jensen. On May 14, 1996, the Court entered a
temporary restraining order against the Company and its President, which
subsequently lapsed, based on Jensen's allegations. On May 20, 1996, the Company
filed a counterclaim and third party complaint in this action alleging that
Jensen and its Chairman, Chief Executive Officer and President, Robert G. Shaw,
fraudulently induced the Company to enter into a confidentiality agreement and
failed to negotiate with the Company in good faith. On July 2, 1996, the Company
amended its third party complaint to include Recoton Corporation ("Recoton"),
the competing bidder for Jensen, and William Blair Leveraged Capital Fund, L.P.
("Blair") for conspiring in the actions of Jensen and Mr. Shaw. The Company
voluntarily dismissed Blair, without prejudice, on August 2, 1996. On August 8,
1996, the Company filed a Second Amended Counterclaim and Third Party Complaint
alleging proxy violations and seeking a temporary restraining order to enjoin
Jensen from holding its August 28, 1996, Special Meeting of Stockholders to
approve the Recoton/Shaw transactions and from utilizing any proxies solicited
pursuant to such allegedly materially misleading proxy materials. The Court
determined to abstain from deciding this matter on August 26, 1996. On
October 22, 1996, Emerson and Jensen further amended their claims and Recoton
filed a separate action alleging that Emerson tortiously interfered with the
Jensen/Recoton transaction and seeking damages of not less than $5 million. The
Company and its President intend to vigorously defend Jensen's and Recoton's
claims against the Company and its President and to vigorously pursue its
counterclaim against Jensen and its third party complaints against Mr. Shaw and
Recoton. The Company believes that Jensen's and Recoton's claims are without
basis, that it has meritorious defenses against Jensen's and Recoton's claims,
and that the litigation or results thereof will not have a material adverse
effect on the Company's consolidated financial position.
On July 30, 1996, the Company filed a complaint in the Court of Chancery of
the State of Delaware against Jensen, all of its directors, Blair, Recoton, and
certain affiliates of the foregoing alleging violations of Delaware law
involving Jensen's auction process, interference with prospective economic
advantage, and aiding and abetting breaches of fiduciary duties. The Court held
a preliminary injunction hearing on the matter on August 15, 1996 and denied the
motions for preliminary injunction. The Recoton/Shaw transactions with Jensen
were consummated on or about August 28, 1996.
OTHER LITIGATION
The Company is involved in other legal proceedings and claims of various
types in the ordinary course of business. While any litigation to which the
Company is a party contains an element of uncertainty, management presently
believes that the outcome of each such proceeding or claim which is pending or
known to be threatened (including the actions noted above), or all of them
combined, will not have a material adverse effect on the Company's consolidated
financial position.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of change in ownership of Common Stock and other equity securities of
the Company. Executive officers, Directors, and greater than ten percent
stockholders are required by SEC Regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the year ended March 31, 1996, compliance was made with all
Section 16(a) filing requirements applicable to the officers, Directors and
greater than ten percent beneficial owners. It is the practice of the Company
to attend to the filing of Section 16(a) forms on behalf of the officers and
directors of the Company.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company selected the firm of Ernst & Young
LLP as independent auditors for the fiscal year ending March 31, 1997 to audit
the Company's financial statements and to perform other accounting services.
The Board of Directors considers this firm well qualified. The selection of
Ernst & Young LLP is submitted to the stockholders for ratification. The
affirmative vote of a majority of the shares of Common Stock present or
represented and entitled to vote on the ratification at the Annual Meeting is
required for approval. A representative of Ernst & Young LLP is expected to
attend the Annual Meeting of Stockholders with the opportunity to make a
statement if such representative desires to do so and to be available to respond
to appropriate questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS RATIFY
THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
STOCKHOLDER PROPOSALS
Any stockholder of the Company desiring to present a proposal for action at
the Annual Meeting of Stockholders to be held in 1997 must deliver the proposal
to the executive offices of the Company no later than March 1, 1997, unless the
Company notifies the stockholders otherwise. Only those proposals that are
proper for stockholder action and otherwise proper may be included in the
Company's Proxy Statement for the Annual Meeting.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum is present. If a quorum is not present
or represented by proxy, the stockholders entitled to vote thereat, present in
person or represented by proxy, have the power to adjourn the meeting from time
to time, without notice other than an announcement at the meeting until a quorum
is present or represented. At any such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally called.
On all matters (including election of Directors) submitted to a vote of the
stockholders at the Meeting or any adjournment thereof, each stockholder will be
entitled to one vote for each share of Common Stock owned of record by such
stockholder at the close of business on November 15, 1996. Abstentions and
broker non-votes will be treated as a vote for each of the proposals recommended
by the Board of Directors.
ACTIONS TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and returned
will be totaled at the meeting and any adjournment thereof and will be voted in
accordance with the instructions thereon. Any proxy upon which no instructions
have been indicated with respect to a specified matter will be voted as follows
with respect to such matters:
(1) For election of management's Directors to serve until the Annual
Meeting in 1997; and
(2) For ratification of the selection by the Board of Directors of
Ernst & Young LLP as independent auditors for the Company for
the year ending March 31, 1997.
Each of the nominees for election as director has agreed to serve if
elected. The Company knows of no reason why any of the nominees for election as
directors would be unable to serve. Should any or all of the nominees be unable
to serve, all proxies returned to the Company will be voted in accordance with
the best judgment of the persons named as proxies, except where a contrary
instruction is given.
The Company knows of no other matters, other than those stated above, to be
presented for consideration at the Annual Meeting. If, however, other matters
properly come before the Annual Meeting or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their judgment on any such matters. The persons named in the
accompanying proxy may also, if it is deemed advisable, vote such proxy to
adjourn the Annual Meeting from time to time.
PROXY SOLICITATION
The expenses of the solicitation of proxies will be borne by the Company.
Solicitation of proxies may be in person or by mail, telephone or telegraph by
Directors, current executive officers and regular employees of the Company. The
Company will request banking institutions, brokerage firms, custodians, nominees
and fiduciaries to forward solicitation materials to the beneficial owners of
Common Stock of the Company held of record by such persons, and the Company will
reimburse the reasonable forwarding expenses. The Company has retained the
services of American Stock Transfer & Trust Company to solicit proxies by mail,
telephone, telegraph or personal contact. The estimated cost of the
solicitation will be approximately $15,000 plus out-of-pocket expenses.
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise (a) by giving written notice to the Company of
such revocation; (b) by voting in person at the Annual Meeting; or (c) by
executing and delivering to the Company a later-dated proxy.
OUTSTANDING COMMON STOCK
The only outstanding voting securities of the Company are shares of its
Common Stock, each share of which entitles the holder thereof to one vote. At
November 22, 1996, there were outstanding and entitled to vote 40,295,196 shares
of its Common Stock. Only stockholders of record at the close of business on
November 15, 1996 are entitled to notice of, and to vote at, the 1996 Annual
Meeting of Stockholders and any adjournments thereof.
By Order of the Board of Directors
/s/ Elizabeth J. Calianese
Elizabeth J. Calianese
Vice President--Human Resources and
Secretary
Parsippany, New Jersey
November 22, 1996
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON
WHOSE PROXY IS BEING SOLICITED UPON THE WRITTEN REQUEST OF
ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1996.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO ELIZABETH
J. CALIANESE, VICE PRESIDENT--HUMAN RESOURCES AND
SECRETARY, EMERSON RADIO CORP., NINE ENTIN ROAD,
PARSIPPANY, NJ 07054.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
EMERSON RADIO CORP.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 1996
The undersigned Stockholder of Emerson Radio Corp. (the "Corporation")
hereby appoints Geoffrey P. Jurick and Eugene I. Davis, or either of them,
acting singly in the absence of the other, attorneys and proxies, with full
power of substitution and revocation, to vote all of the shares of Common Stock
of the Corporation, which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Corporation to be held at the offices of Wolff &
Samson, P.A., 5 Becker Farm Road, Roseland, New Jersey, December 18, 1996 at
10:00 a.m. (local time) or any adjournment or postponement thereof.
(To Be Signed on Reverse Side)
SEE REVERSE SIDE
========================================================================
X
______________
Please mark your
votes as in this
example.
FOR all nomineees listed WITHHOLD AUTHORITY
at right (except as marked to vote for all nominees
to the contrary below) listed at right
1. Election of __________ _________ NOMINEES:
Directors Geoffrey P. Jurick
Eugene I. Davis
Robert H. Brown,Jr.
Peter G. Bunger
Raymond L. Steele
Jerome H. Farnum
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name below:
_________________________________________________________
FOR AGAINST ABSTAIN
2. To ratify the selection of
Ernst & Young LLP as
independent auditors of the
Corporation for fiscal year
ending March 31, 1997. _________ __________ _________
SIGNATURE(S)_____________________________________________
DATE_____________________________________________________
SIGNATURE(S)_____________________________________________
DATE_____________________________________________________
IF HELD JOINTLY
(NOTE: Please sign name exactly as it appears on stock certificate. Joint
owners should each sign personally, give full title when signing as attorney,
director, administrator, trustee or guardian, etc. The signature hereby
acknowledges receipt of Notice of Annual Meeting of Stockholders and Proxy
Statement dated November 22, 1996.)
