UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
incorporation or organization) Identification No.)
9 Entin Road Parsippany, New Jersey 07054
(Address of principal (Zip code)
executive offices)
(201)884-5800
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since
last report)
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 requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares of common stock outstanding as of
December 31, 1995: 40,252,772.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
Nine Months Ended Three Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $214,720 $529,111 $ 70,314 $194,333
Costs and Expenses:
Cost of sales . . . . . . . . . . 198,184 490,803 67,491 179,052
Other operating costs
and expenses. . . . . . . . . . . 3,529 6,777 983 1,910
Selling, general & administrative
expenses. . . . . . . . . . . . . 16,332 23,858 5,338 7,681
______ _______ ______ _______
218,045 521,438 73,812 188,643
_______ _______ ______ _______
Operating profit (loss). . . . . . . . (3,325) 7,673 (3,498) 5,690
Interest expense . . . . . . . . . . . 2,322 2,124 1,029 950
_____ _____ _____ _____
Earnings (loss) before income taxes. . . (5,647) 5,549 (4,527) 4,740
Provision <benefit> for income taxes . . 26 196 (129) 82
Net earnings (loss). . . . . . . . . . $(5,673) $ 5,353 $ (4,398) $ 4,658
======= ======= ======= =====
Net earnings (loss) per common share . $ (.15) $ .12 $ (.11) $ .10
======= ======= ======= =====
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . . . 40,253 46,537 40,253 48,879
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
Dec. 31, March 31,
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . $ 19,041 $ 17,020
Accounts receivable (less allowances of
$7,140 and $9,350, respectively) . . . . 29,576 34,309
Inventories . . . . . . . . . . . . . . . 42,385 35,336
Prepaid expenses and other current assets 10,974 15,715
_______ _______
Total current assets . . . . . . . . . . 101,976 102,380
Property and equipment - (at cost less
accumulated depreciation and amortization
of $5,753 and $7,102, respectively) . . . . 4,298 4,676
Other assets . . . . . . . . . . . . . . . . . 8,053 6,913
_______ _______
Total Assets . . . . . . . . . . . . . . $ 114,327 $ 113,969
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable . . . . . . . . . . . . . . $ 24,735 $ 27,296
Current maturities of long-term debt . . . 240 508
Accounts payable and other current
liabilities . . . . . . . . . . . . . . 14,083 18,982
Accrued sales returns . . . . . . . . . . 6,489 12,713
Income taxes payable . . . . . . . . . . . 214 283
_______ ______
Total current liabilities . . . . . . . 45,761 59,782
Long-term debt . . . . . . . . . . . . . . . 20,993 214
Other non-current liabilities . . . . . . . 354 322
Shareholders' Equity:
Preferred stock - $.01 par value, 10,000,000
and 1,000,000 shares authorized,
respectively, 10,000 shares issued and
outstanding. . . . . . . . . . . . . . . . 9,000 9,000
Common stock - $.01 par value, 75,000,000
shares authorized, 40,252,772. . . . . . . .
shares issued and outstanding. . . . . . . . 403 403
Capital in excess of par value . . . . . . . 107,944 107,969
Accumulated deficit . . . . . . . . . . . . (70,284) (64,086)
Cumulative translation adjustment . . . . . 156 365
______ _______
Total shareholders' equity . . . . . . 47,219 53,651
Total Liabilities and Shareholders' Equity $ 114,327 $ 113,969
======== =======
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of dollars)
Nine Months Ended
December 31,
1995 1994
Cash Flows from Operating Activities:
Net cash used by operating activities. . . $ (11,478) $(28,287)
________ ________
Cash Flows from Investing Activities:
Redemption of certificates of deposit. . . . 137 8,469
Additions to property and equipment. . . . (1,490) (2,733)
Other. . . . . . . . . . . . . . . . . . . (522) 29
Net cash (used) provided by investing ______ _____
activities . . . . . . . . . . . . . . . . (1,875) 5,765
______ _____
Cash Flows from Financing Activities:
Net proceeds from private placement of
Senior Subordinated Convertible
Debentures . . . . . . . . . . . . . . . 19,220 -
Net (repayments) borrowings under line of
credit facility. . . . . . . . . . . . . (2,561) 14,271
Net proceeds from public offering of common
stock. . . . . . . . . . . . . . . . . . - 5,701
Other . . . . . . . . . . . . . . . . . (1,285) (1,155)
Net cash provided by financing _______ ______
activities . . . . . . . . . . . . . . 15,374 18,817
________ ______
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . 2,021 (3,705)
Cash and cash equivalents at beginning
of year. . . . . . . . . . . . . . . . . 17,020 21,623
______ ______
Cash and cash equivalents at end of period . .$ 19,041(a) $ 17,918(a)
======= =======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . $ 2,751 $ 2,198
======== ======
Income taxes paid . . . . . . . . . . . . . $ 153 $ 298
======== ======
(a) The balances at December 31, 1995 and 1994 include $9.0 million and
$6.0 million, respectively, of cash and cash equivalents pledged
to assure the availability of certain letterof credit facilities.
The accompanying notes are an integral part of the interim consolidated
financial statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
The unaudited interim consolidated financial statements
reflect all adjustments that management believes are necessary to
present fairly the results of operations for the periods being
reported. The unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and accordingly do not include
all of the disclosures normally made in the Emerson Radio Corp.
(the "Company") annual consolidated financial statements. It is
suggested that these unaudited interim consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes thereto for the year ended March 31, 1995,
included in the Company's annual Form 10-K filing.
Due to the seasonal nature of the Company's consumer
electronics business, the results of operations for the three and
nine month periods ended December 31, 1995 are not necessarily
indicative of the results of operations for the full year ending
March 31, 1996.
NOTE 2
Net loss per common share for the three and nine month
periods ended December 31, 1995 are based on the net loss and
deduction of preferred stock dividend requirements and the
weighted average number of shares of common stock outstanding
during the periods. These per share amounts do not include
common stock equivalents assumed outstanding since they are anti-
dilutive.
Net earnings per common share for the three and nine month
periods ended December 31, 1994 are based on the weighted average
number of shares of common stock and common stock equivalents
outstanding during each period. 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 February 1995) to former creditors primarily to
satisfy an anti-dilution provision.
NOTE 3
The provision (benefit) for income taxes for the three and nine month
periods ended December 31, 1995 and 1994 consists primarily of
taxes related to international operations. The provision (benefit) for the
three and nine month periods ended December 31, 1995 also
includes a refund for overpayment of Federal alternative minimum
taxes and a reversal of an overaccrual of prior year taxes on
international operations. The Company did not recognize tax
benefits for losses incurred by its domestic operations (after
tax recognition of prior year book deductions) during the same periods.
NOTE 4
Spare parts inventories, net of reserves, aggregating
$2,321,000 and $2,763,000 at December 31, 1995 and March 31,
1995, respectively, are included in "Prepaid expenses and other
current assets".
NOTE 5
Long-term debt consists of the following:
(In thousands of dollars)
Dec. 31, March 31,
1995 1995
8-1/2% Senior Subordinated
Convertible Debentures
Due 2002. . . . . . . . . . . . $20,750 $ -
Notes payable to unsecured
creditors . . . . . . . . . . . 94 465
Equipment notes and other . . . . 389 257
______ ___
21,233 722
Less current obligations. . . . . 240 508
______ ____
$20,993 $ 214
======= =====
The 8-1/2% Senior Subordinated Convertible Debentures Due 2002
(the "Debentures") were issued in August 1995. The Debentures
bear interest at the rate of 8-1/2% per annum, payable quarterly on
March 15, June 15, September 15 and December 15, in each year.
The Debentures mature on August 15, 2002. The Debentures are
convertible into shares of the Company's Common Stock at any time
prior to redemption or maturity at an initial conversion price of
$3.9875 per share, subject to adjustment under certain
circumstances. The Debentures are redeemable, at the option of
the Company, after the expiration of three years from the date of
issuance, in whole or in part, at an initial redemption price of
104% of principal, decreasing by 1% per year until maturity. The
Debentures are subordinated to all existing and future Senior
Indebtedness (as defined in the Indenture governing the
Debentures). The Debentures restrict, among other things, the
amount of Senior Indebtedness and other indebtedness that the
Company and, in certain instances, its subsidiaries, may incur.
Each holder of Debentures has the right to cause the Company to
redeem the Debentures if certain Designated Events (as defined)
should occur. The Debentures are subject to certain restrictions
on transfer, although the Company has registered the transfer of
the Debentures and the underlying Common Stock.
NOTE 6
The 30 million shares of Common Stock issued to GSE
Multimedia Technologies Corporation, Fidenas International
Limited L.L.C. and Elision International, Inc. on March 31, 1994,
pursuant to the Company's bankruptcy restructuring plan, are the
subject of certain legal proceedings. Transfer of certain shares
owned by Fidenas International Limited L.L.C. have been enjoined
by court orders issued in the United States Bankruptcy Court for
the Southern District of New York and the Commonwealth of the
Bahamas. The Company is not a party to any of the proceedings
described in this paragraph; it is possible that a court of
competent jurisdiction may order the turnover of all or a portion
of the shares of Common Stock owned by such persons to a third
party. A turnover of a substantial portion of the Common Stock
could result in a "change of controlling ownership" prohibited
pursuant to the terms of the Company's loan and security
agreement with its primary United States lender and pursuant to
the terms of the Debentures. Additionally, such a change in
controlling ownership could result in a second "ownership change"
under Internal Revenue Code Section 382, which could affect the
Company's ability to use its net operating loss and tax credit
carryforwards and may cause an adjustment of the conversion price
of the Debentures. The Company does not believe the litigation or
the results thereof will have a material adverse effect on the
Company's financial position, but may result in certain changes
in ownership of the Company with any resulting consequences as
described in this paragraph.
The Company has filed a shelf registration statement
covering 5,000,000 shares of common stock owned by Fidenas
International Limited L.L.C., which has reserved the ability
to assign the right to sell certain of such shares to Elision
International, Inc. and/or GSE Multimedia Technologies Corporation,
to finance a settlement, if any, of the litigation described in the
immediately preceding paragraph. The shares covered by the shelf
registration are subject to certain contractual restrictions and may
be offered for sale or sold only by means of a prospectus
following registration under the Securities Act of 1933.
The Company is presently engaged in litigation regarding
several bankruptcy claims which have not been resolved since the
restructuring of the Company's debt. The largest claim was filed
July 25, 1994 in connection with the rejection of certain
executory contracts with two Brazilian entities, Cineral
Electronica de Amazonia Ltda. and Cineral Magazine Ltda.
(collectively, "Cineral"). The contracts were executed in August
1993, shortly before the Company's filing for bankruptcy
protection. The amount claimed was $93,563,457, of which
$86,785,000 represents a claim for lost profits and
$6,400,000 for plant installation and establishment of offices,
which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and,
therefore, will be satisfied, to the extent the claim is
allowed by the Bankruptcy Court, in the manner other allowed
unsecured claims are satisfied. The Company has objected to the
claim and intends to vigorously contest such claim and believes
it has meritorious defenses to the highly speculative portion
of the claim for lost profits and the portion of the claim
for actual damages for expenses incurred prior to the
execution of the contracts. Additionally, the Company has
instituted an adversary proceeding in the Bankruptcy Court
asserting damages caused by Cineral. A motion filed by Cineral
to dismiss the adversary proceeding has been denied. The
adversary proceeding and claim objection have been consolidated
into one proceeding. An adverse final ruling on the Cineral claim
could have a material adverse effect on the Company, even though
it would be limited to 18.3% of the final claim determined by a
court of competent jurisdiction; however, with respect to the
claim for lost profits, in light of the foregoing, the Company
believes the chances for recovery for lost profits are remote.
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 (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
a license agreement covering the use of the "Emerson and G-Clef"
trademark on sales of certain video products by the Otake
Defendants to a significant customer of the Company and a supply
agreement for the manufacture and sale of certain video products
for the Company by certain of the Otake Defendants (collectively,
the "Otake Agreements"). 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. During the nine months ended
December 31, 1995, such Otake Defendants supplied approximately
16% of the Company's total purchases.
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 the Otake 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 the
Otake Agreements, and seeking damages in the amount of
$2,452,656, together with interest thereon, attorneys' fees,
and certain other costs. The plaintiffs in this action
have also filed for certain injunctive relief relating to certain
of the allegations in their complaint. The Company is seeking to
have the Indiana action moved to the New Jersey court having
jurisdiction over the Company's previously-filed suit relating
to the Otake Agreements and consolidating the actions in such
court. The Company believes that the Indiana Court should so
transfer the Indiana suit, and should do so prior to ruling
on certain requests for injunctive relief sought by the
plaintiffs in the Indiana action. As noted earlier, the Company
is not as dependent on the Otake Defendants for its purchases as
in previous years, and, while the outcome of the New Jersey and
Indiana actions is 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. Also, the Company cannot determine
at this time the impact of the final outcome of the New Jersey
and Indiana actions on either of the Otake Agreements, or
whether any of the Otake Defendants will retain any rights to
license certain products with the "Emerson and G-Clef" trademark.
NOTE 7
The Company has a 50% investment in E & H Partners, a joint
venture that purchases, refurbishes and sells all of the
Company's product returns. The results of this joint venture are
accounted for by the equity method. The Company's equity in the
earnings of the joint venture is reflected as a reduction of cost
of sales in the Company's unaudited interim Consolidated
Statements of Operations. Summarized financial information
relating to the joint venture is as follows (in thousands):
Dec. 31, March 31,
1995 1995
Accounts receivable from
joint venture (a) $ 13,255(a) $15,283
Nine Months Ended
December 31,
1995 1994
Condensed income statement (d):
Net sales $21,147(b) $17,142
Net earnings 240(c) 2,396
____________________
(a) Secured by a lien on the partnership's inventory. Such lien
has been assigned to the Company's primary lender as collateral
for the U.S. line of credit facility.
(b) Includes sales to the Company of $3,731,000 and $2,384,000
for the nine months ended December 31, 1995 and 1994,
respectively.
(c) Net earnings for the nine months ended December 31, 1995
includes a bad debt provision of approximately $1,575,000 for one
customer.
(d) E&H Partners was inactive for substantially all of the three
month period ended June 30, 1994.
The Company filed a complaint on July 5, 1995 in the
Superior Court of New Jersey, Morris County, alleging Hopper
Radio of Florida, Inc. ("Hopper"), the Company's partner in E&H
Partners, Barry Smith, the President of Hopper, and three former
employees of the Company (collectively, the "Hopper Defendants")
have formed a business entity for the purpose of engaging in the
distribution of consumer electronics and that the action of the
Hopper Defendants in connection therewith violated certain duties
owed to, and rights, including contractual rights arising from
two agreements, of the Company. E & H Partners has continued to
operate since the filing of said lawsuit. On January 25, 1996,
the New Jersey Court dismissed the Company's complaint as to
certain of the Hopper Defendants based upon the Court's
determination that certain clauses contained in the agreements
between the parties mandated Delaware as the more proper forum
for Emerson's lawsuit. The Company is considering an appeal
of this determination. The Company also filed suit on
January 27, 1996, in the Delaware Chancery Court, New Castle
County, as to those Hopper Defendants who do not reside in
New Jersey, which contains similar allegations to those
contained in the New Jersey suit. The Delaware suit also
seeks a preliminary injunction against those Hopper Defendants
covered by the Delaware suit. The Company is considering its
alternatives in this litigation, in light of certain procedural
requirements of the Delaware Chancery Court. The Company cannot predict
at this time how the New Jersey suit or the Delaware suit will, if at
all, affect the joint venture or the Company.
Note 8
Effective December 31, 1995, the Company and its primary
U.S. lender agreed to recast the adjusted net worth covenant of
its United States secured credit facility. The adjusted net
worth covenant, as amended, requires the Company to maintain
a net worth of not less than the sum of (i) the "Base Amount", plus
(ii) any proceeds received by the Company after December 31, 1995
from the sale of any equity or debt securities. The Base Amount is
defined to be the amount of (i) $38,000,000 through September 30,
1996, (ii) $40,000,000 from October 1, 1996 through and including
March 31, 1997 and (iii) $45,000,000 from and after April 1, 1997.
EMERSON RADIO CORP. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
On August 30, 1995, Emerson Radio Corp. (the "Company")
completed a private placement of $20,750,000 aggregate principal
amount of Debentures, resulting in net proceeds to the Company of
approximately $19,220,000 after the payment of commissions and
other expenses of such offering. The proceeds of this offering
were initially applied against the Company's United States
secured credit facility to reduce present working capital costs.
See Note 5 of Notes to Interim Consolidated Financial Statements
included elsewhere in this Form 10-Q. Management is utilizing its
new capital to repay an intercompany balance with a foreign
subsidiary, exploit new business opportunities via product line
additions and extensions and the expansion of its distribution
base, and may use such capital for acquisitions.
The Company also amended its secured credit facility with
its primary United States lender (the "Lender") effective as of
August 24, 1995. The amendment includes, among other things, a
reduction of 1% in the interest rate charged on borrowings, down
to 1.25% above the stated prime rate, an extension on the term
of the facility for one additional year to March 1998, an increase
in working capital requirements, a reduction of other loan fees and
charges under such facility and the release of the Lender's security
interests in the trademarks of the Company. In addition, the Company
recast its adjusted net worth covenant on such facility effective December 31,
1995 (See Note 8 of Notes to Interim Consolidated Financial Statements).
The trademarks are subject to a negative pledge covenant. The
modifications to its United States secured credit facility,
together with the net proceeds from the sale of the Debentures,
should enable the Company to reduce its effective cost of
borrowing while permitting the Company to expand its product
lines and distribution base.
On February 22, 1995, the Company and one of the Company's suppliers
and certain of its affiliates (collectively, the "Supplier") entered into
two mutually contingent agreements (the "Agreements"). Effective
March 31, 1995, the Company granted a license of certain trademarks to
the Supplier for a three-year term. The license permits the Supplier to
manufacture and sell certain video products under the "Emerson and G-Clef"
trademark to one of the Company's significant customers (the "Customer"),
in the U.S. and Canada. As a result, the Company will receive royalties
attributable to such sales over the three-year term of the Agreements
in lieu of reporting the full dollar value of such sales and
associated costs. The Company will continue to supply other products to
the Customer directly. Further, the Agreements provide that the
Supplier 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 the Supplier to
be credited against royalties earned from sales of video cassette
recorders and players, television/video cassette recorder and
player combination units, and color televisions to the Customer. In
addition, effective August 1, 1995, the Supplier assumed responsibility
for returns and after-sale and warranty services on all video
products manufactured by the Supplier and sold to the Customer, including
video products sold by the Company prior to August 1, 1995. As a
result, the impact of sales returns on the Company's net sales
and operating results have been significantly reduced, effective
with the quarter ended September 30, 1995. The Company expects to
report lower direct sales in the fiscal year ending March 31,
1996 ("Fiscal 1996") as a result of the Agreements, but no
negative material impact is expected on its net operating results
for such year. The Company expects to realize a more stable cash
flow over the three-year term of the Agreements, and
expects to reduce short-term borrowings used to finance accounts
receivable and inventory, thereby reducing interest costs. The
Company and the Supplier are currently involved in litigation over
certain matters concerning the terms of the Agreements.
(See Note 6 of Notes to Interim Consolidated Financial
Statements).
The Company reported a significant decline in its net direct
sales for the nine month period ended December 31, 1995 as
compared to the same period in the fiscal year ended March 31,
1995 ("Fiscal 1995") primarily due to the licensed video sales.
However, the Company's United States sales to other customers
also declined due to increased price competition, primarily in
video product categories, higher retail stock levels, a slowdown
in retail activity and the extremely high level of sales achieved
in the first nine months of Fiscal 1995. The Company expects its
United States sales for the fourth quarter of Fiscal 1996 to be
lower than the fourth quarter of Fiscal 1995, exclusive of the
licensed video sales, due to the continuing weak retail climate
and the increased level of price competition in video product
categories. Net sales of video product to the Customer in the fourth
quarter of Fiscal 1995 (quarter ended March 31, 1995) were
$54,270,000 or 43% of consolidated net sales. On a pro forma
basis, the Company's consolidated net sales, excluding video
product sold to the Customer, for the quarter ended March 31, 1995,
was $71,290,000.
The Company's operating results and liquidity are impacted
by the seasonality of its business. The Company records the
majority of its annual sales in the quarters ending September 30
and December 31 and receives the largest percentage of customer
returns in the quarters ending March 31 and June 30. Therefore,
the results of operations discussed below are not necessarily
indicative of the Company's prospective annual results of
operations.
Results of Operations
Consolidated net sales for the three and nine months ended
December 31, 1995 decreased $124,019,000 (or 64%) and
$314,391,000 (or 59%), respectively, as compared to the same
periods in Fiscal 1995. The effects of the Agreements described
above accounted for a substantial portion of the
decrease in sales (approximately 75%, or $93,500,000, and 85%, or
$267,273,000, net of licensing revenues received), and as a
result, sales to the Customer were reduced to 19% and 20% of
consolidated net sales for the three and the nine month periods
ended December 31, 1995, respectively, as compared to 51% and 53%
for the same periods in Fiscal 1995. Net sales to the Customer of
video products bearing the "Emerson and G-Clef" trademark were
reported by the Supplier to the Company to be $64,309,000 and
$200,536,000 for the three and the nine month periods ended
December 31, 1995, respectively, or 32% and 27% lower than recorded by
the Company in the same periods in Fiscal 1995. In addition, sales for
the three and nine month periods ended December 31, 1995 decreased as
a result of lower unit sales of televisions and television/video
cassette recorder combination units due to increased price
competition in these product categories partially offset by an
increase in unit sales of video cassette recorders and audio
products. Furthermore, a decrease in unit sales of microwave
ovens for the three months ended December 31, 1995 was partially
offset by sales of new product line introductions including a
home theater system, car audio and personal and home security
products. The Company's Canadian operations reported a decline of
$9.3 million and $15.8 million in net sales for the three and
nine month periods ended December 31, 1995, respectively, due to
declines in unit volume and sales prices due to a weak Canadian
economy. The Company's European sales decreased $4.9 million and
$13.1 million for the three and nine month periods ended December
31, 1995, respectively, relating to the Company's discontinuance
of its Spanish branch, and plan to sell products in Spain through
a distributor.
Cost of sales, as a percentage of consolidated sales, was
96% and 92% for the three and nine month periods ended December
31, 1995 as compared to 92% and 93%, respectively for the same
periods in Fiscal 1995. Gross profit margins in the three and
the nine month periods ended December 31, 1995 were lower on a
comparative basis due primarily to the recognition of large
purchase discounts in the prior year periods and the recognition
of a loss experienced by the Company's 50% owned joint venture
that sells product returns in the third quarter of the current
fiscal year. Additionally, the Company experienced lower sales
prices and the allocation of reduced fixed costs over a lower sales
base in the current fiscal year which were substantially offset by a change
in product mix, the recognition of licensing income, reduced reserve
requirements for sales returns and reduced fixed costs associated
with the downsizing of the Company's foreign offices.
The reduction in gross margins was also unfavorably impacted
by the accrual of $3.8 million and $7.7 million in the three and
nine month periods ended December 31, 1994, respectively, of
purchase discounts received from one of the Company's
suppliers based on purchases from the supplier in calendar years
1993 and 1994. Due to the increase in the value of the Japanese
Yen in 1995, and its impact on the cost of certain raw materials
and subassemblies of the Company's suppliers, the Company has not
received any purchase discounts from its suppliers in the first
half of Fiscal 1996, and the Company has also absorbed certain
price increases from its suppliers. Additionally, the Company
has not been able to recover such price increases from its
customers due to increased price competition. To mitigate the
impact of the value of the Yen, the Company has been able to
negotiate lower prices (including purchase discounts) from
various sources of supply for certain audio products, commencing
primarily in the second half of Fiscal 1996.
Other operating costs and expenses declined $927,000 and
$3,248,000 in the three and nine month periods ended December 31,
1995 as compared to the same periods in Fiscal 1995, primarily as
a result of a decrease in (i) handling and freight charges
associated with customer returns and exchanges due to the Agreements,
(ii) compensation expense and other expenses incurred
to process product returns and after-sale services, relating to
the Company's downsizing program and change in the resale arrangement
for product returns (See Note 7 of Notes to Interim Consolidated
Financial Statements).
Selling, general and administrative expenses ("S,G & A") as
a percentage of sales, was 8% for both the three and nine month
periods ended December 31, 1995, as compared to 4% and 5% for
the same periods in Fiscal 1995, respectively. In absolute
terms, S,G & A decreased by $2,343,000 and $7,526,000 in the
three and nine month periods ended December 31, 1995 as compared
to the same periods in Fiscal 1995, respectively. The decrease
for the three and nine month periods ended December 31, 1995 was
primarily attributable to lower selling expenses due to the lower
sales, a reduction in compensation and fixed overhead costs
relating to the Company's downsizing program in both the U.S. and
in its foreign offices and lower provisions for accounts
receivable reserves due to higher realization of accounts
receivable. Additionally, the decrease for the nine months ended
December 31, 1995 also included lower professional fees due to
bankruptcy costs incurred in the prior year. The increase in the
S,G & A as a percentage of sales is due primarily to the
allocation of fixed S,G & A costs over a significantly lower
sales base resulting from the licensing of video sales.
Additionally, the Company's exposure to foreign currency
fluctuations, primarily in Canada and Spain, resulted in the
recognition of net foreign currency exchange gains aggregating
$497,000 in the nine month period ended December 31, 1995
as compared to $72,000 in the same period in Fiscal 1995. However,
the Company incurred net foreign currency exchange losses
aggregating $174,000 in the three month period ended December 31,
1995 as compared to $753,000 for the same period in Fiscal 1995.
Interest expense increased by $79,000 and $198,000 in the
three and nine month periods ended December 31, 1995,
respectively, as compared to the same periods in Fiscal 1995. The
increase in interest expense was attributable to interest incurred
on the Debentures issued in August 1995, partially offset by lower
average borrowings and lower average interest rates associated
with the Company's United States secured credit facility.
As a result of the foregoing factors, the Company incurred
net losses of $4,398,000 and $5,673,000 for the three and nine
month periods ended December 31, 1995, as compared to net
earnings of $4,658,000 and $5,353,000 for the same periods in
Fiscal 1995, respectively.
Liquidity and Capital Resources
Net cash utilized by operating activities was $11,478,000
for the nine months ended December 31, 1995. Cash was used to
fund the loss from operations and higher inventory levels,
partially offset by a decrease in accounts receivable and the
receipt of funds for purchase discounts accrued in Fiscal 1995.
License revenues earned from sales of video products by the Supplier to
the Customer have not generated any cash in Fiscal 1996, since the
minimum royalty payment received by the Company in Fiscal 1995
has not been exceeded as of December 31, 1995.
Net cash utilized by investing activities was $1,875,000 for
the nine months ended December 31, 1995. Investing activities
consisted primarily of capital expenditures for the purchase of
new product molds.
In the nine months ended December 31, 1995, the Company's
financing activities provided $15,374,000 of cash. Cash was
provided by the private placement of $20,750,000 aggregate
principal amount of Debentures. The proceeds of approximately
$19,220,000, net of issuance costs, was initially used to reduce
borrowings under the U.S. line of credit facility, and have since
been used to repay an intercompany balance with a foreign
subsidiary, and to fund costs for product line additions and
extension and expansion of the Company's distribution base.
The Company maintains an asset-based revolving line of
credit facility with the Lender. 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 all U.S. and Canadian assets
of the Company except for trademarks, which are subject to a negative
pledge covenant. The interest rate on all borrowings is 1.25% above the
prime rate. At December 31, 1995, there was approximately
$24.7 million outstanding on the Company's revolving loan
facility, and approximately $2.5 million of letters of credit
outstanding issued for inventory purchases. Based on the "Borrowing
Base" amount at December 31, 1995, $6.1 million of the credit facility
was not utilized. Pursuant to the terms of the credit facility, as
amended, the Company is required to maintain a minimum adjusted net
worth of $38,000,000, effective December 31, 1995. This minimum
will increase to $40,000,000 effective October 1, 1996 and then to
$45,000,000 effective April 1, 1997.
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
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 December 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 December 31, 1995, there were
approximately $4.2 million and $2.7 million of letters of credit
outstanding on the $12.3 million and $100 million credit
facilities, respectively.
The Company's Hong Kong subsidiary maintains an additional
credit facility with another bank in Hong Kong. The facility
provides for a $10 million line of credit for documentary letters
of credit and a $10 million back-to-back letter of credit line
collateralized by a $5 million certificate of deposit. At
December 31, 1995, the Company's Hong Kong subsidiary had pledged
$5.0 million in certificates of deposit to assure the
availability of these credit facilities. At December 31, 1995,
there were approximately $3.3 million of letters of credit
outstanding on these credit facilities.
In November 1995, the Company's Board of Directors approved
a plan to repurchase up to 2 million of its common shares, or
about 20 percent of the Company's current float of approximately
10 million shares, from time to time in the open market.
Although there are 40,252,772 shares outstanding, approximately
29.2 million shares are held directly or indirectly by
affiliated entities of Geoffrey Jurick, Chairman and Chief Executive
Officer of the Company. The Company has agreed with Mr. Jurick
that such shares will not be subject to repurchase. The stock repurchase
program is subject to consent of certain of the Company's lenders,
certain court imposed restrictions, price and availability of
shares, compliance with securities laws and alternative capital
spending programs, including new acquisitions. The repurchase of
common shares is intended to be funded by working capital,
if and when available. It is uncertain at this time when the
Company might be able to so repurchase any of its shares of Common
Stock.
Management's strategy to compete more effectively in the
highly competitive consumer products market in the United States
and Canada is to combine innovative approaches to the
Company's current product line, such as value-added promotions, augment
its product line on its own or through acquisitions with higher
margin complementary products, including higher-end consumer
electronics products, personal and home security products, a
home theater system, clocks and watches, and car audio products.
The Company also also intends to engage in the marketing of
distribution, sourcing and other services to third parties. In addition,
Company intends to undertake efforts to expand the international
distribution of its products into areas where management believes low to
moderately priced, dependable consumer electronics and microwave
oven products will have a broad appeal. The Company has in the past
and intends in the future to pursue such plans either on its own
or by forging new relationships, including through license
arrangements, partnerships or joint ventures.
Management believes that future cash flow from operations
and the institutional financing described above will be
sufficient to fund all of the Company's cash requirements for
the next year for its core business and to exploit certain new
business opportunities. Cash flow from operations may be
negatively impacted by a decrease in the proportion of the
Company's direct import sales to consolidated sales. A lower
percentage of direct import sales may require increased use of
the Company's credit facility with the Lender and may restrict
growth of the Company's sales. However, management believes that
it has sufficient working capital to finance its sales plan for
the next year.
EMERSON RADIO CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings.
The information required by this item is
included in Notes 6 and 7 of Notes to Interim
Consolidated Financial Statements filed in Part I
of Form 10-Q for the quarter ended December 31,
1995, and is incorporated herein by reference.
ITEM 2. Changes in Securities.
(a) On February 14, 1996, the Company filed
a certificate of Amendment to its Certificate of
Incorporation to increase the number of authorized
shares of preferred stock from one million to ten
million.
ITEM 4. Submission of Matters to a Vote of Security
Holders.
(a) An Annual Meeting of Stockholders was
held on November 28, 1995.
(b) The following directors were elected at
the Annual Meeting of Stockholders and constituted
the entire Board of Directors following the
Meeting:
Robert H. Brown, Jr.
Peter G. Bunger
Raymond L. Steele
Jerome H. Farnum
Geoffrey P. Jurick
Eugene I. Davis
(c) Other matters voted at Annual Meeting:
(i) Election of Directors:
For Against
Robert H. Brown, Jr. 37,730,390 129,984
Peter G. Bunger 37,730,270 130,194
Raymond L. Steele 37,729,129 131,265
Jerome H. Farnum 37,730,629 129,745
Geoffrey P. Jurick 37,730,390 129,984
Eugene I. Davis 37,730,270 130,194
(ii) Amendment of certificate of
incorporation to increase the number of
authorized shares of preferred stock from one
million to ten million - 31,990,968 shares for,
1,554,343 shares against and 60,775 shares
abstained.
(iii) Adoption of 1994 Non-Employee
Director Stock Plan - 37,331,250 shares for,
371,241 shares against and 102,128 shares
abstained.
(iv) Appointment of Ernst & Young, LLP
to audit financial statements of the Company for
the fiscal year ending in 1996 - 37,758,853
shares for, 43,238 shares against and 58,553
shares abstained.
ITEM 5. Other Information.
(a) The Company and First Cambridge
Securities Corporation ("First Cambridge")
entered into a one-year consulting agreement
dated as of December 8, 1995. Pursuant to the
consulting agreement, First Cambridge agreed to
provide financial consulting services in exchange
for $6,000 per month and stock purchase warrants
to be issued to First Cambridge, and/or officers
of First Cambridge it so designates (see Exhibits
10 e and 10 f below). The stock purchase warrants
were issued to two officers of First Cambridge and
entitle the holders thereof to purchase an aggregate
of 250,000 shares of the Company's common stock at
an exercise price of $4.00 per share, and expire on
December 8, 2000.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3(a) Amendment dated February 14, 1996
to the Certificate of Incorporation of Emerson
Radio Corp. ("Emerson").
3(b) Amendment dated November 28, 1995
to the By-Laws of Emerson adopted March 1994.
10(a) Agreement dated as of January 1, 1996,
between Emerson and Albert G. McGrath, Jr.
relating to termination of employment and agreement on
consulting services.
10(b) Agreement dated as of January 31,
1996, between Emerson and Merle Eakins relating
to termination of employment and agreement on
consulting services.
10(c) Amendment No. 2 to Financing
Agreements, dated as of February 13, 1996.
10(d) Consulting Agreement, dated as of
December 8, 1995 between Emerson and First
Cambridge Securities Corporation.
10(e) Common Stock Purchase Warrant
Agreement to purchase 50,000 shares of Common
Stock, dated as of December 8, 1995
between Emerson and Michael Metter.
10(f) Common Stock Purchase Warrant
Agreement to Purchase 200,000 shares of Common
Stock, dated as of December 8, 1995 between
Emerson and Kenneth A. Orr.
27 Financial Data Schedule for the nine
months ended December 31, 1995.
(b) Reports on Form 8-K:
During the three month period ended
December 31, 1995, no Form 8-K was filed by the
Company.
EMERSON RADIO CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION - CONTINUED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
EMERSON RADIO CORP.
(Registrant)
Date: February 14, 1996 /s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chief Executive Officer
Date: February 14, 1996 /s/ Eugene I. Davis
Eugene I. Davis
President
INDEX TO EXHIBITS
PAGE NUMBER
IN SEQUENTIAL NUMBERING
EXHIBIT DESCRIPTION SYSTEM
3(a) Amendment dated February 14,
1996 to the Certificate of
Incorporation of Emerson Radio Corp.
("Emerson").
3(b) Amendment dated November 28,
1995 to the By-Laws of Emerson
adopted March 1994.
10(a) Agreement dated as of January 1,
1996, between Emerson and Albert G.
McGrath, Jr. relating to termination
of employment and agreement on
consulting services.
10(b) Agreement dated as of January 31,
1996, between Emerson and Merle
Eakins relating to termination of
employment and agreement on
consulting services.
10(c) Amendment No. 2 to Financing
Agreements, dated as of February 13,
1996.
10(d) Consulting Agreement, dated as of
December 8, 1995 between Emerson and
First Cambridge Securities
Corporation.
10(e) Common Stock Purchase Warrant
Agreement to purchase 50,000 shares
of Common Stock, dated as of
December 8, 1995 between Emerson and
Michael Metter.
10(f) Common Stock Purchase Warrant
Agreement to Purchase 200,000 shares
of Common Stock, dated as of
December 8, 1995 between Emerson and
Kenneth A. Orr.
27 Financial Data Schedule for the
nine months ended December 31, 1995.
EXHIBIT 3(a)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMERSON RADIO CORP.
Emerson Radio Corp., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that:
I. The proposed amendment of the Certificate of Incorporation of the
Corporation, set forth below, was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
II. Article numbered Fourth, Section A. of the Corporation's Certificate
of Incorporation is amended to read in its entirety as follows:
"A. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is eighty five million
(85,000,000) consisting of:
(a) ten million (10,000,000) shares of Preferred Stock,
par value one cent ($.01) per share (the "Preferred Stock"); and
(b) seventy-five million (75,000,000) shares of Common
Stock, par value one cent ($.01) per share (the "Common Stock").
IN WITNESS WHEREOF, said Emerson Radio Corp. has caused this
certificate to be signed by Eugene I. Davis, its President, this 14th day of
February, 1996.
By:/s/ Eugene I. Davis
Eugene I. Davis, President
EXHIBIT 3(b)
RESOLVED, that the By-Laws of the Corporation be, and the same
hereby are, amended to include the following provisions relating
to nominations to the Board of Directors:
Section 2.14 Nomination for Director. Nominations for election
to the Board may be made by the Board or by any stockholder of any
outstanding class of capital stock of the Corporation entitled to
vote for the election of Directors. Nominations, other than those
made by or on behalf of the Board, shall be made in writing and
shall be delivered to the President or the Chairman of the Board
of the Corporation not less than (20) days prior to the applicable
meeting; provided, however, that if the Corporation furnished less
than thirty (30) days' notice of any meeting, such notification
must be delivered not later than ten (10) days following the
date on which the Corporation provided such notice but in no event
less than five (5) days prior to the meeting. The notification
shall contain the following information to the extent known to the
notifying stockholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the
name and residence address of the notifying stockholder; (e) the
number of shares of capital stock of the Corporation owned by the
notifying stockholder; and (f) all other information required
(in the President's judgement) to be included in the Corporation's
proxy statement with respect to the applicable meeting of
stockholders. Nominations not made in accordance herewith may,
in his discretion, be disregarded by the Chairman of the meeting,
and upon his instructions, the inspectors of election shall
disregard all votes cast for each such nominee.
EXHIBIT 10(a)
AGREEMENT
THIS AGREEMENT, dated as of January 1, 1996 (the "Effective Date")
is made by and between Albert G. McGrath, Jr., having an address at 71 White
Oak Ridge Road, Short Hills, New Jersey 07078 ("McGrath"), and EMERSON RADIO
CORP., a Delaware corporation having an address at Nine Entin Road,
Parsippany, New Jersey 07054 (the "Company").
WITNESSETH
WHEREAS, McGrath and the Company entered into an Employment Agreement
(the "Employment Agreement") dated as of August 15, 1992; and
WHEREAS, McGrath has performed services pursuant to the Employment
Agreement and the Company has compensated McGrath for such services; and
WHEREAS, McGrath and the Company desire to modify the relationship
contemplated by the Employment Agreement in accordance with the terms hereof;
and
WHEREAS, the parties wish to set forth the terms and conditions of the
relationship between McGrath and the Company commencing as of the Effective
Date and continuing thereafter for a period of twelve months until
December 31, 1996 (the "Term"); and
WHEREAS, the parities 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, a
gent 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 McGrath as an
officer of the Company and any other employment McGrath has or had with the
Company shall be and hereby is terminated by mutual consent as of the
Effective Date and he shall be paid his salary and receive all benefits
under the Employment Agreement up to December 31, 1995. All duties and
obligations of McGrath under the Employment Agreement and in respect of any
such employment are ended as of the Effective Date, and all duties and
obligations of the Company to McGrath in respect thereof are terminated at
such time, except as otherwise provided herein.
2.2. McGrath hereby resigns, without any further action required,
from all offices of the Company, effective as of the Effective Date. McGrath
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
McGrath, all of McGrath's affirmative obligations under the Employment
Agreement will have been performed in full.
2.3. McGrath 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 (or person substantially performing such functions), provided that
the furnishing of such services does not unduly interfere with the performance
by McGrath with any duties required of him by his employer or by self-
employment. Such matters shall include, to the extent necessary, but not be
limited to: (a) the Cineral litigation, (b) the Otake and related persons
litigation and (c) various trademark and license matters.
3. Payments to McGrath.
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 McGrath in the ordinary course of business the aggregate sum of
Two Hundred Ten Thousand and no/100 dollars ($210,000) 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 policy
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 McGrath 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. [INTENTIONALLY OMITTED]
5. Vacation Benefits.
5.1. The parties agree that any accrual of vacation benefits by
McGrath shall and does permanently cease as of the Effective Date.
5.2 McGrath 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.
McGrath 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 McGrath
may have under any such pension benefits or Employee Savings Plan as of the
Effective Date.
7. Health, Life, Disability and Liability Insurance Plans.
7.1. McGrath 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 McGrath fulfill such
requirements as may be reasonably requested by the Company's insurers.
7.2. If McGrath 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 McGrath 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 McGrath's health insurance coverage
terminates solely because of a change in insurance carrier, McGrath 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.
McGrath 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 McGrath. The parties agree that under no
circumstances shall the Company be required to make any payments other than
insurance premiums.
7.4. For purposes of COBRA, 29 U.S.C. Section 1161-1168, McGrath's
termination is denominated as of December 31, 1996.
7.5. The Company shall, at its sole expense, (i) continue the
existing legal malpractice insurance coverage and (ii) pay for the benefit
of McGrath all sums which are or may be construed as deductible amounts not
otherwise payable by the insurer pursuant to the coverage described in
7.5(i) above each such obligation to be honored in accordance with the
terms of and for the period required under Section 4 of the Employment
Agreement.
8. Full Satisfaction.
McGrath 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 (other than the options to
purchase 66,667 shares of the Company's Common Stock which have vested pursuant
to the terms of the applicable plan; the remaining options to purchase 133,333
shares of the Company's Common Stock having been cancelled as of the Effective
Date), severance pay, salary, bonuses and perquisites that McGrath has or may
have against the Company, whether matured or unmatured and whether known or
unknown, arising out of the Employment Agreement, McGrath's employment
relationship, status as an officer, the termination of McGrath's status as an
officer of the Company or any other agreement or promise, whether oral or
written, which McGrath may have with the Company. The Company shall request
the Committee administering the Emerson Radio Corp.Stock Compensation Program
to extend the applicable exercise date from 90 days to six months pursuant
to Article 13 of such program
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, McGrath 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 know at present), which McGrath 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. Section 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, affectation 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 McGrath'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 McGrath's employment relationship or the termination of
McGrath'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
McGrath from all actions, causes of actions, suits, covenants, contracts,
controversies, agreements, promises, claims, and demands in law or equity
(regardless of whether or not know at present), which the Company ever had,
now has, or, excluding breaches of this Agreement, hereafter may have against
McGrath.
9.3. Notwithstanding the provision of Section 9.1, any claims by
McGrath (a) for indemnification, contribution, advance, reimbursement or
defense under any provisions of the Company's and its successors' and/or
assigns' charter, By-laws, and any applicable policy, or applicable law,
(b) arising out of or relating to events, acts or omissions under the Company's
director and officer liability insurance coverage and (c) 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. McGrath 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. McGrath
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
January 1, 1996 the non-compete covenant in paragraph 6(c) of the Employment
Agreement and of the application to McGrath of any other Company policies
regarding non-competition, and subject to the attorney/client and work product
privileges applicable to McGrath's services to the Company, McGrath 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 McGrath during his employment by the Company which is
confidential, provided that nothing in this paragraph shall prevent McGrath
from using his own skill in business in which he may lawfully be engaged.
McGrath 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, McGrath
represents that he has surrendered or will surrender to the Company any and
all 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, attorney/client and work product
privileged information, 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 statement, marketing, customers or customers lists, dealings with
government agencies, and any information of a like nature furnished to or
obtained by McGrath from the Company during his employment by the Company
relating to activities of third parities which said third party or parties
have transmitted to the Company under any agreement or arrangement to hold
the same secret or confidential and any and all documents, memoranda, records,
files, letters, specifications or other papers, computer disks or other
affairs of the Company.
10.4 The Company shall cause to be returned to McGrath all of
McGrath's personal property that is in the possession of the Company
and McGrath shall cause to be returned to the Company all of the Company's
equipment that is in the possession of McGrath.
10.5 McGrath hereby covenants with the Company that he will not,
for any reason whatsoever and whether directly or indirectly, either alone
of 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 McGrath that its executive
officers, board members and public relations firm will not, for any reasons
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 McGrath 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 McGrath from discussing this Agreement in confidence
with his attorneys, financial advisers, or members of his immediate family or
with any federal or sate taxing authority; provided, however, that before
disclosing any such information to any such person, McGrath 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 parities.
12.3. In the event a court of competent jurisdiction determines
there exists any default or breach by the Company or McGrath of this
Agreement, (i) INTENTIONALLY OMITTED and (ii) the release under Section
9 by the non-breaching party shall be void and he or it shall be free to
pursue any claims which existed piror 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 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 McGrath, but it
shall be binding upon, and shall inure to the benefit of his heirs, executors,
administrator, devises and legal representatives.
12.10. McGrath acknowledges and agrees that he is entitled to at
least twenty-one days within which to consider this Agreement and the Company
advised him to consult an attorney prior to executing this Agreement.
12.11. McGrath'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 McGrath. The
parities understand and agree that McGrath 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 McGrath'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 McGrath:
Mr. Albert G. McGrath, Jr.
71 White Oak Ridge Road
Short Hills, New Jersey 07078
Notices to the Company:
Mr. Eugene I. Davis
President
Emerson Radio Corp.
Nine Entin Road
P.O. Box 430
Parsippany, New Jersey 07054-0430
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. MCGRATH ACKNOWLEDGES AND AGREES THAT HE HAS READ AND FULLY
UNDERSTANDS THE MEANING OF EACH PROVISION OF THIS AGREEMENT, INCLUDING
SPECIFICALLY THE RELEASES CONTAINED HEREIN. MCGRATH 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.
12.14. McGrath irrevocably consents that any legal action or
proceeding against him or any of his property, or brought by him, with respect
to this Agreement may only be brought in any state or federal court located
in the County of Morris, State of New Jersey, as the Company may elect, and by
execution and delivery of this Agreement McGrath hereby submits to and accepts
with regard to any such action or proceeding for himself and in respect of
his property, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts. McGrath hereby irrevocably waives to the fullest extent
permitted by law, any objection which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in a state or federal court located in
the County of Morris and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in a state or federal court
located in the County of Morris has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
WITNESS:
/s/ Sharon Wilkin /s/ Albert G. McGrath, Jr.
Sharon Wilkin Albert G. McGrath, Jr.
ATTEST: EMERSON RADIO CORP.
/s/ Albert G. McGrath, Jr. /s/ Geoffrey P. Jurick
Albert G. McGrath, Jr. Geoffrey P. Jurick, Chief
Executive Officer
ACKNOWLEDGMENT
STATE OF NEW JERSEY )
) ss:
COUNTY OF MORRIS )
On January 12, 1996, before me, Rosemary A. Falb, personally came
Geoffrey P. Jurick, Chief Executive Officer of EMERSON RADIO CORP.
(the "Company"), to me known, and known to me to hold the position of
Chief Executive Officer with the Company, and who executed the foregoing
Agreement on behalf of the Company, and duly acknowledged to me that he
executed the same and was authorized to do so on behalf of the Company.
/s/ Rosemary A. Falb
Rosemary A. Falb
Notary Public
ACKNOWLEDGMENT
STATE OF NEW JERSEY )
)ss:
COUNTY OF MORRIS )
On January 12, 1996, before me, Rosemary A. Falb, personally
came Albert G. McGrath, Jr., to me known, and known to me to be the
individual described herein, and who executed the foregoing Agreement and
duly acknowledged to me that he voluntarily executed the same.
/s/ Rosemary A. Falb
Rosemary A. Falb
Notary Public
EXHIBIT 10(b)
January 31, 1996
Mr. Merle Eakins
5305 Shady Pines
Knoxville, TN 37919
Dear Merle:
This letter when signed by you will confirm the terms upon which you are
leaving the employ of Emerson Radio Corp. ("Emerson"). You should read it
carefully and consult with your own counsel. It includes a release and
waiver of any claims you may have against Emerson and its affiliated
entities, including any claims for age or other discrimination.
1. You will have resigned as of the close of business today, January 31,
1996 ("Termination Date"), and you and we agree that except as
specifically set forth in this letter agreement, your employment and
your Employment Agreement, dated as of July 13, 1993, between you and
us are each terminated by your resignation as of the Termination
Date.
2. Your obligations relating to maintaining the confidential nature of
our information entrusted to you, whether or not in writing, and all
financial information known to you and trade secrets, provided in the
Emerson Radio Corp. Employee Confidentiality and Non-Disclosure
Policy ("policy") attached to this letter agreement, the terms of
which are incorporated herein, along with the non-solicitation
obligations set forth in your employment agreement shall continue.
Nothing in the policy, however, shall be deemed to extend your
employment beyond January 31, 1996. The parties hereby agree,
however, that you are released from the provisions of your employment
agreement pertaining to non-competition. Notwithstanding the above,
except for the non-competition provision, the parties agree that the
terms and conditions in your employment agreement which survive
termination shall not be affected and shall remain unchanged and in
full force and effect.
3. Although Emerson is not obligated to do so, and as full consideration
for your commitments herein and the releases provided below, upon
acceptance by you, Emerson shall, in exchange for your agreement to
provide consulting services to Emerson through July 31, 1996, pay to
you an amount equal to $97,500.00 in twelve equal semi-monthly
payments of $8,125.00 through July 31, 1996 ("Consulting Period").
As and for your consulting services, you agree to make yourself
reasonably available to Emerson and its officers for the purpose of,
among other things, ongoing or existing projects and transitional
matters with respect to marketing and sales. Emerson agrees to
reimburse you for any reasonable expenses related to your consulting
services upon Emerson's prior written approval, including reasonable
charges for travel, telephone, etc.
4. The following benefits shall terminate as of the date of your
resignation: Medical and dental coverages, basic and supplemental
life insurance, and any other benefits or privileges obtained as an
employee of the Company, except as set forth herein. Additionally,
since you are no longer an employee, you are not eligible to receive
the automobile allowance, to continue contributing to the Employee
Savings Plan or to have long term disability coverage after your
resignation, and you are not accruing vacation or sick leave through
the Consulting Period. Emerson agrees to make the COBRA premium
payments and the group term life insurance premium payments (to the
extent paid for by the Company while you were employed with the
Company and if available in accordance with the policy for such
insurance) on your behalf until the earlier of your obtaining other
full-time employment or the end of the Consulting Period.
You will receive information on continuing your medical and dental
coverages as provided under COBRA.
The total vested value of your account in Emerson's Employee Savings
Plan as of your resignation date will be distributed to you in
accordance with the Plan's procedure. You will be receiving in the
mail from the Company information pertaining to the required
withholding of federal income taxes from your distribution from the
Savings Plan.
The parties hereby acknowledge that the options granted to you to
purchase up to a total of 40,000 shares of Emerson Common Stock,
pursuant to Emerson's Stock Compensation Program, became one-third
vested as of the first anniversary date of the respective option
grants. Notwithstanding the provisions of your employment agreement
regarding the vesting of your remaining two-thirds interest in the
options granted to you under said Plan, pursuant to which the options
are to vest in equal one-third shares on the second and third
anniversary dates of the respective option grants, Emerson agrees to
accelerate the date of the vesting of your second one-third interest
in the total options granted to you under the Plan, to the
Termination Date, for a total vested option to purchase 26,667
shares. The remaining one-third interest in your total options is
hereby canceled and you agree that upon the signing of this letter
agreement, you shall return the option agreements in your possession,
which shall be replaced by Emerson with a replacement agreement
reflecting your total vested interest to the Termination Date. The
parties agree that the period during which the vested options shall
be exerciseable shall be extended for six months following the end of
the Consultancy Period, and the Company agrees to use its best
efforts to obtain the approval of the Personnel and Compensation
Committee, as required under the Program, for such extension and the
accelerated vesting described above. You agree that you shall sell
the Company's stock, if at all, pursuant to the provisions of a
certain lock-up agreement, as modified by letter agreement dated
August 25, 1995, which agreement was signed by you in connection with
the offering by Emerson of 8-1/2% Senior Subordinated Convertible
Debentures due 2002. You and we agree that, in accordance with the
terms of such modification, you are not being terminated for cause.
5. You agree not to seek re-employment or re-instatement with or seek to
provide personal services to the Company or any of its affiliates,
except as provided in this Agreement. This provision is intended to
protect Emerson and its affiliates from a charge or complaint of
retaliation and from any other charge or complaint.
6. This Agreement shall not constitute nor in any manner be construed as
an admission by Emerson that it engaged in any wrongful act, violated
any statute, law, ordinance, or executive order or breached any
obligation whatsoever to you. Emerson expressly denies that it has
engaged in any wrongful act, violation, or breach of any kind or
description. Rather, this Agreement expresses the intention of the
parties to resolve all disputes without the time and expense of
contested litigation.
7. In exchange for the Company's payment of the consideration set forth
in this Agreement, and your agreement to be available at reasonable
times, each party hereby fully releases and discharges the other
party from any and all actions, causes of action, suits, contracts,
promises, claims, controversies, obligations, costs, losses,
liabilities, damages and demands of whatsoever character, whether or
not known, suspected or claimed, which they have or hereafter may
have against each other, including, but not limited to, claims
related to the payment of compensation and benefits, claims for
breach of the Employment Agreement, claims for wrongful discharge,
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, 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,
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 your employment with Emerson
or the termination of such employment, claims pursuant to common law
under tort, contract or any other theories now or hereafter
recognized, claims related in any way to the stock options of
Emerson, and any other claims arising directly or indirectly by any
reason whatsoever out of your employment relationship or the
termination of your employment relationship with Emerson, including
any and all actions, causes of action, claims, wage claims,
obligations, costs, losses, liabilities, damages and demands arising
out of or in any way related to your employment or affiliation with
Emerson or any of its affiliates, your resignation from Emerson, any
alleged breach of contract, breach of implied covenant of good faith
and fair dealing, retaliatory or discriminatory conduct, harassment,
or negligent or intentional infliction of emotional distress by the
other party, but not claims based upon events which occur subsequent
to the Termination Date. The parties expressly acknowledge that this
Agreement is intended to include in this effect, without limitation,
all claims which are not known or suspected to exist in their favor
at the time of execution hereof, and that the release contemplates
the extinguishment of any such claim or claims. This release applies
to claims that you know of and those that you do not presently know
about, as well as any claims under the Age Discrimination in
Employment Act or any other federal, state or local law dealing with
discrimination. This Agreement shall be and remain in effect as a
full and complete general release notwithstanding the discovery or
existence of any additional or different facts.
8. You represent to us that prior to the Termination Date, you did
return all of the confidential or proprietary information in your
possession, along with any Company property, including but not
limited to all keys, credit cards, telephone calling cards, computer
printouts, passwords, diskettes, disks, data, files, lists,
memoranda, letters, and other writing (on any medium) and you shall
continue beyond your resignation to maintain the confidentiality
thereof. You also represent that you know of no viruses or worms in
the software used by the Company for which you were responsible. You
understand and agree that any disclosure thereof could adversely
affect the Company and its subsidiaries and affiliates, and that the
Company will have the right to seek and obtain a restraining order or
injunction against you without proving damage or posting a bond or
surety, if you breach such obligation or attempt to do so.
9. In the event any provision of this Agreement is held to be void or
unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall nevertheless be binding upon the
parties with the same force and effect as though the void or
unenforceable part had been severed and deleted.
10. This letter agreement shall be construed in accordance with the laws
of New Jersey and shall be binding upon the successors and assignees
of Emerson and your heirs and assignees. This Agreement constitutes
the entire agreement between the parties and it is expressly
understood and agreed that this Agreement may not be altered,
amended, modified or otherwise changed in any respect or particular
whatsoever, except by a writing duly executed by the parties or an
authorized representative of the parties hereto, and the parties
hereto acknowledge and agree that they will make no claims at any
time or place that this Agreement has been altered, modified,
supplemented or otherwise changed by oral communication of any kind
of character.
You represent that you understand all of the provisions herein, and
that you are voluntarily entering into this Agreement. In entering into
this Agreement, you have not relied upon any inducements, promises or
representations made by Emerson, or any of its affiliates except as set
forth herein. You acknowledge that you have been advised by Emerson that
you should consult your own counsel before executing this Agreement and
that the terms herein shall remain open for 21 days from the Termination
Date. You further acknowledge that you have been advised by your attorney
with respect to the legal effects and consequences of this Agreement.
Finally you understand that you have seven (7) days from the date you
execute this Agreement to revoke this Agreement.
If the foregoing is acceptable, please sign below.
Sincerely,
Emerson Radio Corp.
by: /s/ Eugene I. Davis
Eugene I. Davis
President
Accepted and Agreed
this 31st day of January
Merle Eakins
EXHIBIT 10(c)
AMENDMENT NO. 2 TO FINANCING AGREEMENTS
February 13, 1996
Emerson Radio Corp.
Majexco Imports, Inc.
9 Entin road
Parsippany, New Jersey 07054
Gentlemen:
Congress Financial Corporation ("Lender'), Emerson Radio Corp.
("Emerson") and Majexco Imports, Inc. ("Majexco"; together with Emerson,
individually and collectively, the "Borrower") have entered into certain
financing arrangements pursuant to the Loan and Security Agreement, dated
March 31, 1994, currently between Lender and Borrower, as amended by Amendment
No. 1 to Financing Agreements, dated August 24, 1995 (the "Loan Agreement"),
together with various other agreements, documents and instruments at any
time executed and/or delivered in connection therewith or related thereto
(as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, collectively, the "Financing
Agreements"). All capitalized terms used herein and not herein defined shall
have the meanings given to them in the Financing Agreements.
Borrower has requested that Lender agree to certain amendments
to the Financing Agreements, and lender is willing to agree to such amendments,
subject to the terms and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Adjusted Net Worth Covenant.
(a) Section 1.2(b) of the Loan Agreement is hereby deleted
in its entirety and replaced with the following effective with respect to
the calculation of Adjusted Net Worth as of December 31, 1995 and at any
time thereafter:
"(b) indebtedness of such Person and its
subsidiaries incurred after December 31, 1995
which is subordinated in right of payment to the
full and final payment of all of the Obligations
on terms and conditions acceptable to Lender."
(b) Section 9.14 of the Loan Agreement shall be deleted in
its entirety and replaced with the following effective with respect to the
calculation of Adjusted Net Worth as of December 31, 1995 and at any time
thereafter:
"9.14 Adjusted Net Worth. As of the end of
each fiscal quarter of Emerson, Emerson shall
maintain, on a consolidated basis with its
subsidiaries, Adjusted Net Worth of not less
than the sum of (i) the Base Amount, plus
(ii) any proceeds received by Emerson or its
subsidiaries after December 31, 1995 from the
sale of any equity securities (including any
equity securities issued pursuant to the Rights
Offering or the exercise of Warrants issued
pursuant to the Plan, plus (iii) subject to
the provisions hereof, any proceeds received
by Emerson or its subsidiaries after December
31, 1995 from the sale by Emerson or its
subsidiaries of debt securities subordinated
to the extent required under Section 1.2(b).
As used herein, "Base Amount" shall mean
(i) the amount of $38,000,000 as at December 31,
1995 and for the period from January 1, 1996
through and including September 30, 1996,
(ii) the amount of $40,000,000 from October 1,
1996 through and including March 31, 1997, and
(iii) the amount of $45,000,000 from and after
April 1, 1997. If the dates upon which Emerson's
fiscal quarters end are not the same as the dates
upon which calendar year quarters end, then the
dates referred to above shall be deemed to
refer to the end of Emerson's fiscal quarters
ending closest to such dates (whether before
or after such dates)."
2. Working Capital Covenant. Section 9.13 of the Loan Agreement
shall be deleted in its entirety and replaced with the following:
"9.13 Working Capital. As of the end of
each fiscal quarter of Emerson, Emerson shall
maintain, on a consolidated basis with its
subsidiaries, Working Capital of not less
than (i) the amount of $20,000,000 from April
1 through and including September 30 in each
year, commencing April 1, 1995 and (ii) the
amount of $35,000,000 from October 1 in each
year through March 31 in the following year,
commencing October 1, 1995. If the dates
upon which Emerson's fiscal quarters end
are not the same as the dates upon which
calendar year quarters end, then the dates
referred to above shall be deemed to refer
to the end of Emerson's fiscal quarters
ending closest to such dates (whether
before or after such dates)."
3. Conditions Precedent. The effectiveness of this Amendment
shall be subject to the satisfaction of the following conditions:
(a) the receipt by Lender of an original of this Amendment,
duly authorized, executed and delivered by Borrower, consented and agreed to
by Obligors; and
(b) after giving affect to the amendments set forth in
Section 1 hereof, no Event of Default shall exist or have occurred and be
continuing and no condition shall exist or event shall have occurred and be
continuing which, with notice or passage of time, or both, would constitute
an Event of Default.
4. Effect of this Amendment.
(a) Entire Agreement; Ratification and Confirmation of
the Financing Agreements. This Amendment contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all
prior or contemporaneous term sheets, proposals, discussions, negotiations,
correspondence, commitments and communications between or among the parties
concerning the subject matter hereof. This Amendment may not be modified or
any provision waived, except in writing signed by the party against whom such
modification or waiver is sought to be enforced. Except as specifically
modified pursuant hereto, the Financing Agreements are hereby ratified,
restated and confirmed by the parties hereto as of the effective date hereof.
To the extent of conflict between the terms of this Amendment and the
Financing Agreements, the terms of this Amendment shall control.
(b) Governing Law. This Amendment and the rights and
obligations hereunder of each of the parties hereto shall be governed by and
interpreted and determined in accordance with the laws of the State of New
York.
(c) Binding Effect. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) Counterparts. This Amendment may be executed in any
number of counterparts, but all of such counterparts shall together constitute
but one and the same agreement. In making proof of this Amendment it shall
not be necessary to produce or account for more than one counterpart thereof
signed by each of the parties hereto.
By the signature hereto of each of the duly authorized officers, all of
the parties hereto mutually covenant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: /s/ Kenneth G. Donahue
Kenneth G. Donahue
Title: Assistant Vice President
AGREED AND ACCEPTED:
EMERSON RADIO CORP.
By: /s/ Eugene I. Davis
Eugene I. Davis
Title: President
MAJEXCO IMPORTS, INC.
By: /s/ Eugene I. Davis
Eugene I. Davis
Title: President
CONSENTED TO AND AGREED:
H.H. SCOTT, INC.
EMERSON COMPUTER CORP.
EMERSON TECHNOLOGIES AND
DEVELOPMENT CORP.
By:/s/ Eugene I. Davis
Eugene I. Davis
Title: President
EMERSON TECHNOLOGIES, L.P.
By: EMERSON TECHNOLOGIES
AND DEVELOPMENTS CORP.,
its general partner
By:/s/ Eugene I. Davis
Eugene I. Davis
Title: President
EMERSON RADIO CANADA LTD.
By:/s/ Eugene I. Davis
Eugene I. Davis
Title: Executive Vice President
EMERSON RADIO & TECHNOLOGIES N.V.
By: /s/ Eugene I. Davis
Eugene I. Davis
Title: Director
EXHIBIT 10(d)
CONSULTING AGREEMENT
This Consulting Agreement, dated as of December 8, 1995,is between
Emerson Radio Corp., a Delaware corporation ("Company"),and First Cambridge
Securities Corporation, a Connecticut corporation ("Consultant").
W I T N E S S E T H:
WHEREAS, Company desires to contract with Consultant for certain
consulting services, and Consultant is willing to render such services as
hereinafter more fully set forth;
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. Engagement of Consultant. Company hereby engages and retains
Consultant to render to Company the consulting services described in Section
2 hereof (the "Consulting Services") for the period commencing on the date
hereof and ending on the first anniversary hereof (the "Consulting Period").
Consultant represents and warrants that it is a corporation incorporated and
organized under the laws of the State of Connecticut, is qualified to do
business in all jurisdictions and is in good standing in its state of
incorporation and all other jurisdictions in which it would be required to
qualify to do business and has full corporate power and authority to enter
into this Agreement and to comply with its obligations hereunder. Consultant
also represents and warrants that it is duly licensed by and a member in
good standing with the National Association of Securities Dealers, Inc., and
is duly licensed as a broker or dealer in all states in which it will conduct
business under this Agreement.
2. Description of Consulting Services. The Consulting Services
rendered by Consultant hereunder will consist of consultations with management
of Company as such management may from time to time require during the term
of this Agreement. Such consultation will be with respect to the operation
and financing of Company's business, Company's relations with its securities
holders and such other matters as may be agreed upon between Company and
Consultant. In addition to such consultation, Company may request that
Consultant prepare written reports on financial matters, attend meetings of
Company's Board of Directors, or review, analyze, and report on proposed
investment policies and/or public and private financing. Consultant
acknowledges and agrees that its employees may be required to travel out of
the New York City metropolitan area, but only if Company has given Consultant
oral or written notice to do so a reasonable time prior to such required
travel.
3. Compensation for Services Rendered. As compensation for the
Consulting Services provided for herein, Company agrees to pay to Consultant
the sum of $6,000 per month for the term of this Agreement and to deliver to
Consultant and/or officers of Consultant designated by Consultant upon
execution and delivery of this Agreement, a stock warrant agreement or
agreements ("Warrants") substantially in the form attached hereto as Exhibit
A. Such Warrant(s) will grant to Consultant or its permitted designees the
right to purchase an aggregate of 250,000 shares of Company's Common Stock at
a price of $4.00 per share during a period of five years after the date
hereof. The Warrants will vest and be exercisable, pro rata to Consultant
and its permitted designees, if any, on the basis of the number of shares of
Common Stock subject to the Warrants when originally granted to Consultant and
such designees, for the following aggregate amount of shares in accordance with
the following schedule: (i) the Warrants will vest and may be exercised after
six months from the date hereof to purchase 125,000 shares and (ii) the
Warrants will vest and may be exercised after the first anniversary of this
Agreement to purchase an additional 125,000 shares. Company agrees that, for
a period of five years from the date of this Agreement, if Company intends
to file a Registration Statement or Registration Statements for the public sale
of securities (other than on a Form S-4, S-8, or comparable Registration
Statement, and other than any Registration Statement which has been declared
effective prior to the date hereof or has been filed prior to the date hereof
but has not yet been declared effective), it will notify all of the holders
of the Warrants and/or underlying securities, and if so requested it will
include therein information to permit a public offering of the securities
underlying such Warrants at the expense of Company (excluding fees and expenses
of the holder's counsel and any underwriting or selling commissions) (a
"Piggyback Registration"). If a Piggyback Registration is an underwritten
primary registration on behalf of Company, and the managing underwriter(s)
advise Company in writing that in their good faith opinion, based upon market
conditions, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, Company
will include in such registration (i) first, the securities Company proposes
to sell, (ii) second, the securities underlying the Warrants requested to be
included in such registration and other securities requested to be included
in such registration pursuant to contractual arrangements between Company
and such other security holders ("Registration Rights Holders"), pro rata
among the holders of such securities underlying the Warrants and the
Registration Rights Holders on the basis of the number of securities requested
to be included in such registration by such holders and the Registration
Rights Holders, and (iii) third, other securities requested to be included in
such registration. In addition, for a period of five years from the date of
this Agreement, upon the written demand of holder(s) representing a majority
of the securities underlying the Warrants, Company agrees, on one occasion
only, to promptly, and as soon as reasonably practicable, register (a "Demand
Registration") the underlying securities at the expense of Company (excluding
fees and expenses of the holder's counsel and any underwriting or selling
commissions); provided that Company will only be required to file a
Registration Statement or amendment thereto no later than 135 days after
any fiscal year end of Company and at such time as it has available for
utilization therein the audited consolidated financial statements of Company as
of the preceding fiscal year end. The Piggyback Registration and Demand
Registration rights described herein are subject to the definitive terms
thereof as shall be set forth in the Warrants to be granted under this
Agreement. Company also agrees to reimburse Consultant for its reasonable
expenses in complying with its obligations under this Agreement, but subject
to the prior written approval of Company in accordance with its customary
practices and procedures.
4. Nonexclusivity of this Agreement. Company expressly understands
and agrees that Consultant will not be prevented or barred from rendering
services of the same nature as or a similar nature to those described herein,
or of any nature whatsoever, for or on behalf of any person, firm, corporation
or entity other than Company. Consultant understands and agrees that
Company will not be prevented or barred from retaining other persons or
entities to provide services of the same nature as or similar nature to
those described herein or of any nature whatsoever. Consultant may also
perform services for Company other than those contained in this Agreement
for such compensation and under such terms and conditions as may be agreed
upon in writing by Company and Consultant.
5. Confidentiality. Consultant acknowledges that certain information
provided to Consultant by Company may be of a confidential nature which
Company has developed for its own internal use ("Confidential Information").
Such Confidential Information, if disclosed to Consultant, will be disclosed
on a confidential basis subject to the following terms and conditions:
(a) Consultant recognizes and acknowledges (i) the competitive
value and confidential nature of the Confidential Information and the damage
that could result to Company if information contained therein is disclosed
to any unauthorized third party, (ii) that by virtue of his knowledge of
the Confidential Information Consultant may be deemed an "insider" as that
term is defined or utilized under state and/or federal securities laws
and (iii) that the disclosure of Confidential Information by Consultant may
violate state and federal securities laws. The Confidential Information
will be used solely for providing Consulting Services hereunder and will
not be used by Consultant in any way detrimental to Company.
(b) The Confidential Information will be revealed only to those
persons whose knowledge of the information is required to allow Consultant
to perform its duties hereunder.
(c) During the Consulting Period and for a period of three years
after its termination, Consultant will not proceed with, cause or assist in
any manner any transaction or offer looking to the acquisition directly or
indirectly by purchase or otherwise of Company or any interest in or asset
of Company.
(d) Notwithstanding anything to the contrary set forth herein, if
Consultant is requested or becomes legally compelled to disclose any of the
Confidential Information or work product developed hereunder or to take any
other action prohibited hereby, Consultant will provide Company with prompt
written notice so that Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement. If
such protective order or other remedy is not obtained or Company waives in
writing compliance with provisions of this Agreement, Consultant will furnish
only that portion of the Confidential Information or work product that is
legally required to be furnished and will exercise his best efforts to obtain
reliable assurances that confidential treatment will be accorded such
Confidential Information or work product.
(e) Consultant will be responsible for any breach of the provisions
hereof by Consultant or any other person to whom Consultant makes disclosures
and shall ensure that such persons shall also agree to be bound by the
provisions of this Section 5.
6. Disclaimer of Responsibility for Acts of Company. The obligations
of Consultant described in this Agreement consist solely of the furnishing of
information and advice to Company. Consultant's status hereunder is that of
independent contractor and in no event will Consultant be required or
permitted by this Agreement to act as the agent or employee of Company or
otherwise to represent or make decisions for Company. All final decisions with
respect to acts of Company or its affiliates, whether or not made pursuant to
or in reliance on information or advice furnished by Consultant hereunder,
will be those of Company or such affiliates and Consultant will under no
circumstances be liable for any expense incurred or loss suffered by Company
as a consequence of such decisions. Similarly, Company will under no
circumstances be liable for any expense incurred or loss suffered by
Consultant, his affiliates, or agents as a result of actions taken by
Consultant hereunder or for any claims, costs, expenses, damages or causes of
action arising out of any actions or omissions of Consultant which are beyond
the scope of Consultant's authority hereunder. In acting pursuant to this
Agreement, Consultant agrees to comply with all applicable laws, including the
Securities Act of 1933, the Securities Exchange Act of 1934, state securities
laws and the rules and regulations thereunder.
7. Amendment. No amendment to this Agreement will be valid unless
such amendment is in writing and is signed by authorized representatives
of all the parties to this Agreement.
8. Waiver. Any of the terms and conditions of this Agreement may be
waived at any time and from time to time in writing by the party entitled to
the benefit thereof, but a waiver in one instance will not be deemed
to constitute a waiver in any other instance. A failure to enforce any
provision of this Agreement will not operate as a waiver of the provision
or of any other provision hereof.
9. Severability. If any provision of this Agreement will be held to
be invalid, illegal or unenforceable in any circumstances, the remaining
provisions will nevertheless remain in full force and effect and will be
construed as if the unenforceable portion or portions were deleted.
10. Governing Law. This agreement will be governed by and construed
and enforced in accordance with the laws of the State of New Jersey.
11. Choice of Forum. The parties hereto agree that should any suit,
action or proceeding arising out of this Agreement be instituted by any party
hereto (other than a suit, action or proceeding to enforce or realize upon
any final court judgment arising out of this Agreement), such suit, action or
proceeding will be instituted only in a state or federal court in Essex
County, New Jersey. Each of the parties hereto consents to the is personal
jurisdiction of any state or federal court in Essex County, New Jersey and
waives any objection to the venue of any such suit, action or proceeding.
The parties hereto recognize that courts outside Essex County, New Jersey may
also have jurisdiction over suits, actions or proceedings arising out of this
Agreement, and in the event that any party hereto will institute a proceeding
involving this Agreement in a jurisdiction outside Essex County, New Jersey,
the party instituting such proceeding will indemnify any other party hereto
for any losses and expenses that may result from the breach of the foregoing
covenant to institute such proceeding only in a state or federal court in
Essex County, New Jersey, including without limitation any additional expenses
incurred as a result of litigating in another jurisdiction, such as reasonable
fees and expenses of local counsel and travel and lodging expenses for parties,
witnesses, experts and support personnel.
12. Service of Process. Service of any and all process that may be
served on any party hereto in any suit, action or proceeding arising out of
this Agreement may be made in the manner and to the address set forth in
Section 16 and service thus made will be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
13. Notices. All notices, requests, payments instructions, claims or
other communications hereunder will be in writing and will be deemed to be
given or made when delivered by first-class, registered or certified mail to
the following address or addresses or such other address or addresses as the
parties may designate in writing in accordance with this Section:
If to Company:
Emerson Radio Corp.
Nine Entin Road
Parsippany, New Jersey 07054-0430
Attn: President
If to Consultant:
First Cambridge Securities Corporation
375 Park Avenue
Suite 310
New York, New York 10032
Attn: President
14. Assignment. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
This Agreement contemplates personal services and may not be assigned
by Consultant without the prior written consent of Company.
15. Execution in Counterparts. This Agreement may be executed by the
parties in separate counterparts, each of which when so executed and delivered
will be deemed to be an original and all of which when taken together will
constitute one and the same agreement.
EMERSON RADIO CORP.
By:/s/ Geoffrey P. Jurick
Geoffrey P. Jurick, Chairman and CEO
First Cambridge Securities Corporation
By:/s/ Kenneth A. Orr
Kenneth A. Orr, Chairman and CEO
EXHIBIT 10(e)
THE GRANT OF THIS WARRANT AND THE PURCHASE OF THE COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT AGREEMENT
This COMMON STOCK PURCHASE WARRANT AGREEMENT (the "Warrant Agreement")
is entered into effective as of the 8th day of December, 1995, by and
between EMERSON RADIO CORP., a Delaware corporation (the "Company"), and
MICHAEL METTER and his successors and permitted assigns ("Holder"),
Mr. Metter being the President of FIRST CAMBRIDGE SECURITIES CORPORATION, a
Connecticut corporation ("First Cambridge").
WHEREAS, on even date herewith, the Company and First Cambridge entered
into that certain Consulting Agreement (the "Consulting Agreement")
whereby the Company engaged First Cambridge to render to the Company certain
consulting services more particularly described in Section 2 thereof
(the "Consulting Services"); and
WHEREAS, in consideration for the Consulting Agreement and for the
Consulting Services to be provided thereunder, the Company has agreed to
issue to First Cambridge, and/or officers of First Cambridge designated
by it upon its execution and delivery of the Consulting Agreement, Holder
being so designated by the execution by First Cambridge of this Warrant
Agreement, Common Stock Purchase Warrants (the "Warrants") to purchase an
aggregate of 250,000 shares of the Company's common stock, par value $0.01
per share (the "Common Stock"), pursuant to the requirements relating to
the exercise thereof set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder, the parties hereto agree as follows:
1. Grant of Warrants. For value received, the Company hereby grants
Holder, subject to the terms and conditions hereinafter set forth, the right
to purchase up to a maximum of 50,000 shares of the Common Stock of the
Company (the "Shares"), subject to adjustment as set forth herein.
2. Exercise of Warrants. The Warrants will vest and may be exercised
by the Holder as to (i) 50% of the Shares covered hereby at any time after
June 8, 1996, and (ii) all or any part of the Shares covered hereby at
any time after December 8, 1996, in either event until December 8, 2000,
when such Warrants shall expire, at an exercise price of $4.00 per share.
The Holder shall deliver to the Company written notice of Holder's
intent to exercise the Warrants at Nine Entin Road, Parsippany, New Jersey
07054-0430, or at such other address as the Company shall designate in
writing to the Holder, together with this Warrant Agreement and a check
payable to the order of the Company for the aggregate purchase price of
the Shares so purchased. Upon exercise of the Warrants as aforesaid, the
Company shall as promptly as practicable, and in any event within 10 days
thereafter, execute and deliver to the Holder a certificate or certificates
in the name of the Holder for the total number of whole Shares for which
the Warrants are being exercised. If the Warrants shall be exercised
with respect to less than all of the Shares, the Holder shall be entitled
to receive a similar warrant of like tenor and date covering the number of
Shares in respect of which the Warrants were not exercised. The Warrants
covered by this Warrant Agreement shall lapse and be null and void if
not exercised by the Holder on or before 5:00 p.m., New York City time, on
December 8, 2000.
3. Covenants of the Company. The Company covenants and agrees that
all the Shares which may be issued upon the exercise of the Warrants
represented by this Warrant Agreement will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company further covenants and
agrees that during the period within which the Warrants represented by
this Warrant Agreement may be exercised, the Company will at all times have
authorized and reserved a sufficient number of Shares to provide for the
exercise of the Warrants represented by this Warrant Agreement.
4. Adjustments of Warrant Exercise Price and Number of Shares.
(a) If the Company shall, without the payment of new value,
at any time declare a stock dividend on its outstanding shares of Common
Stock or effectuate a stock split or reverse stock split, by subdivision
or consolidation in any manner, regarding the number of shares of the
Common Stock then outstanding into a different number of shares of the Common
Stock, with or without par value, then thereafter the number of Shares
which the holder shall have the right to purchase (calculated immediately
prior to such change), shall be increased or decreased, as the case may
be, in direct proportion to the increase or decrease in the number of shares
of the Common Stock of the Company issued and outstanding by reason of
such dividend or change, and the Warrant Exercise Price of the Shares
after such change shall in the event of an increase in the number of shares
of the Common Stock be proportionately reduced, and in the event of a
decrease in the number of shares of the Common Stock be proportionately
increased.
(b) Notwithstanding anything herein to the contrary, for
purposes of this Section 4, the Holder agrees that no adjustment shall be
made to the Warrant Exercise Price or the number of Shares issuable upon
the exercise of this Warrant Agreement upon issuance of Common Stock (or
any other securities) of the Company for any purposes other than as set
forth in Sections 4(a) and 5 herein.
5. Survival of Mergers and Reorganizations. In the event of the
reclassification or change in the outstanding Shares (other than a change
in par value, or from par value to no par value, of from no par value, or
as a result of a subdivision, combination or stock dividend), or in the
event of a sale of all or substantially all of the assets of the Company,
or in the event of any consolidation of the Company with, or merger of
the Company into, another corporation, the Company, or such successor
corporation, as the case may be, shall provide that, the Holder shall
thereafter be entitled to purchase the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, sale, or merger by a holder of the number of Shares which
this Warrant Agreement entitled the holder thereof to purchase immediately
prior to such reclassification, change, consolidation, sale, or merger.
Such corporation, which thereafter shall be deemed to be the Company
for purposes of this Warrant Agreement, shall provide for adjustments, if
any, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant Agreement.
6. Sale of Assets, Dissolution. In the event of a merger,
consolidation, or the sale of all or substantially all the assets of the
Company, or in the event of any distribution of all or substantially all of
its assets in dissolution or liquidation, the Company shall mail notice the
reof by registered mail to the Holder and shall make no distribution to the
stockholders of the Company until the expiration of 10 days from the date
of mailing of the aforesaid notice; provided, however, that in any such
event, if the Holder shall not exercise the Warrants within 10 days from
the date of mailing such notice all rights herein granted and not so
exercised within such 10 day period shall thereafter become null and void.
The Company shall not, however, be prevented from consummating any such merger,
consolidation, or sale without awaiting the expiration of such 10 day
period, it being the intent and purpose hereof to enable the Holder,
upon exercise of the Warrants, to participate in the distribution of the
consideration to be received by the Company upon any such merger,
consolidation, or sale or in the distribution of assets upon any dissolution or
liquidation.
7. No Fractional Shares. The number of Shares subject to issuance
upon the complete exercise of the Warrants shall be rounded down to the
nearest whole number of Shares so that no fractional Shares shall be issued
upon the complete exercise of the Warrants. The Holder shall not be
entitled to receive any compensation or property for such fractional Share
to which it may have been entitled to in the absence of this provision.
8. Notices. If there shall be any adjustment in accordance with
this Warrant Agreement, or if securities or property other than Shares of
the Company shall become purchasable in lieu of Shares upon exercise of
the Warrants, the Company shall forthwith cause written notice thereof to
be sent by registered mail, postage prepaid, to the Holder at its address
shown on the books of the Company, which notice shall be accompanied by a
certificate of either independent public accountants of recognized standing
or the Chairman, President, or any Vice President of the Company setting
forth in reasonable detail the basis for the Holder becoming entitled to
purchase such Shares and the number of Shares which may be purchased and the
exercise price thereof, or the facts requiring any such adjustment, or the
kind and amount of any such securities or property so purchasable upon the
exercise of the Warrants, as the case may be.
9. Taxes. The issue of any stock or other certificate upon the
exercise of the Warrant shall be made without charge to the Holder for any
stamp, duty, excise, or similar tax (but not including the Holder's income
or similar taxes) in respect of the issue of such certificate. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a
name other than that of the Holder, as the registered holder of this
Warrant Agreement, and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that
such tax has been paid.
10. Non-transferability of Warrants. The Warrants shall be
nontransferable without the express written consent of the Company.
11. Warrant Holder Not Stockholder. This Warrant Agreement does
not confer upon the Holder any right to vote or to consent or to receive
notice as a stockholder of the Company, as such in respect of any matters
whatsoever, or any other rights or liabilities as a stockholder, prior to
the exercise hereof as provided herein.
12. Investment Representations. The Holder, by acceptance hereof,
and with reference to the Warrants and the Shares issuable upon exercise
of the Warrants, represents and warrants that:
(a) The Holder is acquiring such securities for investment
purposes only, for its own account, and not with a view toward resale or other
distribution thereof, and has no present intention of selling or otherwise
disposing of such securities.
(b) The Holder is aware that the securities have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
or any state securities law, that upon exercise of the Warrants, the Shares
must be held indefinitely unless they are subsequently registered or an
exemption from such registration is available and that the Company is
under no obligation to register the offer and sale of the Shares under
the Securities Act or any applicable state securities laws, except as otherwise
set forth in Section 14 hereof.
(c) The Holder acknowledges that the Warrants may not be
made subject to a security interest, pledged, hypothecated, sold, or otherwise
transferred in the absence of an effective registration statement for such
Warrants under the Securities Act and such applicable state securities laws
or there is an applicable exemption therefrom. The Holder further acknowledges
that, unless the offer and sale of the Shares issuable upon exercise of the
Warrants have been registered under the Securities Act, the Shares issued
upon the exercise of the Warrants shall be restricted in the same manner and
to the same extent as the Warrants and the certificates representing such
Shares shall bear the following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, OR
TRANSFERRED UNTIL A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR THERE IS AN AVAILABLE EXEMPTION THEREFROM."
In making the above representations and warranties, the Holder intends
that the Company rely thereon and understands that, as the result of such
reliance, such securities are not being registered under the Securities
Act or any applicable state securities laws in reliance upon the applicability
of certain exemptions relating to transactions not involving a public
offering.
13. Lost Warrants. In case this Warrant Agreement shall be mutilated,
lost, stolen, or destroyed, the Company will issue a new Warrant Agreement
of like date, tenor, denomination and terms and conditions, and deliver the
same in exchange and substitution for and upon surrender and cancellation
of the mutilated Warrant Agreement, or in lieu of any Warrant Agreement
lost, stolen, or destroyed, upon receipt of evidence satisfactory to
the Company of the loss, theft, or destruction of such Warrant Agreement,
and upon receipt of indemnity satisfactory to the Company.
14. Registration Rights.
(a) The Company agrees that if at any time hereafter the Company
files with the Securities and Exchange Commission ("Commission") a
registration statement ("Registration Statement") under the Securities Act on
a form suitable for registering the Shares issuable upon exercise of the
Warrants (other than on Form S-4, S-8, or comparable registration statement,
and other than any registration statement which has been declared effective
by the Commission prior to the date hereof or has been filed with the
Commission prior to the date hereof but has not yet been declared effective),
it will give written notice to such effect to the Holder, at least 30
days prior to such filing, and, at the written request of the Holder,
made within 10 days after the receipt of such notice, will include therein
at the Company's cost and expense (except for the fees and expenses of
counsel to the Holder and underwriting discounts and commissions attributable
to the Shares of Warrant Common Stock [as hereinafter defined] included
therein) such of the Shares of Warrant Common Stock held by the Holder as
it shall request. If the registration is an underwritten primary registration
on behalf of the Company, and the managing underwriter(s) advise the Company
in writing that in their good faith opinion, based upon market conditions,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, the Company will include in
such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Warrant Common Stock requested to be included in such
registration and other securities requested to be included in such
registration pursuant to contractual arrangements between Company and such
other security holders ("Registration Rights Holders"), pro rata among the
holders of the Warrant Common Stock and the Registration Rights Holders on
the basis of the number of securities requested to be included in such
registration by such holders and the Registration Rights Holders, and
(iii) third, other securities requested to be included in such registration.
The Company, at its own expense, will cause the prospectus included in such
Registration Statement to meet the requirements of the Securities Act for such
period of time, not exceeding 180 days, as may be necessary to effect the sale
of the Shares included at the request of the Holder. The term "Warrant Common
Stock" shall mean the Shares issuable and issued pursuant to this Warrant
Agreement and all other Warrants originally granted to First Cambridge and/or
its officers as contemplated in the second recital hereof and pursuant to
all Warrants issued upon transfer, division, or combination of, or in
substitution for, any thereof. The rights of the Holder under this Section
14 shall apply to an unlimited number of offerings proposed by the Company.
(b) The Company promptly shall notify the Holder, as a
participating holder of Warrant Common Stock, of the occurrence of any event
as a result of which any prospectus included in a registration statement
filed pursuant to this Section 14 includes any misstatement of a material
fact or omission of any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(c) In addition, upon written notice received at any time on
or before 5:00 p.m., New York City time, on December 8, 2000, from the Holder
or other holders of a minimum of 50% or more of the Warrant Common Stock
originally subject to the Warrants granted to First Cambridge and/or its
officers as contemplated in the second recital hereof, that the Holder
contemplates the transfer of all or any of his or its Warrant Common Stock
under such circumstances that a public offering, within the meaning of the
Securities Act, will be involved, the Company shall, not more than once, at
the expense of the Company, except for the fees and expenses of counsel to
the Holder and other holders and underwriting discounts and commissions
attributable to the Shares of Warrant Common Stock included therein, as
promptly as possible after receipt of such notice, file a new registration
statement or, if available, an offering statement under Regulation A under
the Securities Act, with respect to the offering and sale or other disposition
of the Warrant Common Stock with respect to which it shall have received such
notice; provided, that the Company will only be required to file a registration
statement or offering statement or amendment thereto no later than 135 days
after any fiscal year end of the Company and at such time as it has available
for utilization therein the audited consolidated financial statements of the
Company as of the preceding fiscal year end. The Company must file a
registration statement or offering statement if the Shares of Warrant Common
Stock cannot be sold under Regulation A because of the limited exemption.
The Company agrees as soon as reasonably practicable to cause the above filing
to become effective. Within 10 days after receiving such notice, the Company
shall give notice to the other holders of the Warrants and Warrant Common Stock
advising that the Company is proceeding with such registration statement or
offering statement and offering to include therein Warrant Common Stock of
such Holder. The Company shall not be obligated to any such other Holder
unless such other Holder shall accept such offer by notice in writing to the
Company within 10 days thereafter.
(d) The Company's obligations under this Section 14 with
respect to the Holder, as the holder of Warrant Common Stock, are expressly
conditioned upon the Holder promptly, completely, and accurately furnishing
to the Company in writing such information concerning the Holder and the terms
of the Holder's proposed offering as the Company shall request for inclusion in
the Registration Statement.
15. Indemnification by Company. In the event of the registration
of the offer and sale of any of the Shares of Warrant Common Stock, the
Company will indemnify the Holder, if applicable, and hold the Holder harmless
against any losses, claims, damages, or liabilities, to which the Holder
may become subject under the Securities Act, or any similar federal statute,
and state Blue Sky and securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement under which the
offer and sale of the Shares of Warrant Common Stock were registered under such
Securities Act or similar federal statute, any state Blue Sky or securities
law, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Holder for any legal or any other expenses reasonably
incurred by the Holder in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that to the
extent that any such loss, claim, damage, or liability arises out of, or is
based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said final prospectus or any said amendment or supplement in
reliance upon, and in conformity with, information furnished to the Company,
the Company will not be so liable to the Holder.
16. Indemnification by the Holder. The Holder, if applicable, by
acceptance hereof, agrees to indemnify and hold harmless the Company, its
directors and officers, and each other person, if any, who controls the
Company, against any losses, claims, damages, or liabilities, joint or several,
to which the Company or any such director or officer or any such person may
become subject under the Securities Act, or any other statute or at common
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon the disposition by the Holder
of the Warrants or the Shares issuable upon the exercise hereof in violation
of the provisions of this Warrant Agreement or arises out of, or is based
upon, an untrue statement or alleged untrue statement or omission or alleged
omission made in any registration statement, any preliminary prospectus, or
final prospectus, or any amendment or supplement thereto in reliance upon, and
in conformity with, information furnished to the Company.
17. Applicable Law. This Warrant Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Agreement effective as of the day and year first above written.
EMERSON RADIO CORP.
By: /s/ Eugene I. Davis
Eugene I. Davis, President
MICHAEL METTER
/s/ Michael Metter
Michael Metter
FIRST CAMBRIDGE SECURITIES CORP.
By: /s/ Kenneth A. Orr
Kenneth A. Orr, Chairman and CEO
EXHIBIT 10(f)
COMMON STOCK PURCHASE WARRANT AGREEMENT
THE GRANT OF THIS WARRANT AND THE PURCHASE OF THE COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
This COMMON STOCK PURCHASE WARRANT AGREEMENT (the "Warrant
Agreement") is entered into effective as of the 8th day of December, 1995,
by and between EMERSON RADIO CORP., a Delaware corporation (the "Company"),
and Kenneth A. Orr and his successors and permitted assigns ("Holder"), Mr.
Orr being the Chairman of the Board and Chief Executive Officer of FIRST
CAMBRIDGE SECURITIES CORPORATION, a Connecticut corporation ("First
Cambridge").
WHEREAS, on even date herewith, the Company and First Cambridge
entered into that certain Consulting Agreement (the "Consulting Agreement")
whereby the Company engaged First Cambridge to render to the Company certain
consulting services more particularly described in Section 2 thereof
(the "Consulting Services"); and
WHEREAS, in consideration for the Consulting Agreement and for the
Consulting Services to be provided thereunder, the Company has agreed to
issue to First Cambridge, and/or officers of First Cambridge designated
by it upon its execution and delivery of the Consulting Agreement, Holder
being so designated by the execution by First Cambridge of this Warrant
Agreement, Common Stock Purchase Warrants (the "Warrants") to purchase a
n aggregate of 250,000 shares of the Company's common stock, par value $0.01
per share (the "Common Stock"), pursuant to the requirements relating to
the exercise thereof set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms
and provisions of the Warrants and the respective nights and obligations
thereunder, the parties hereto agree as follows:
1. Grant of Warrants. For value received, the Company hereby grants
older, subject to the terms and conditions hereinafter set forth, the right
to purchase up to a maximum of 200,000 shares of the Common Stock of the
Company (the "Shares"), subject to adjustment as set forth herein.
2. Exercise of Warrants. The Warrants will vest and may be exercised
by the Holder as to (i) 50% of the Shares covered hereby at any time
after June 8, 1996, and (ii) all or any part of the Shares covered hereby
at any time after December 8, 1996, in either event until December 8, 2000,
when such Warrants shall expire, at an exercise price of $4.00 per share.
The Holder shall deliver to the Company written notice of Holder's intent to
exercise the Warrants at Nine Entin Road, Parsippany, New Jersey 07054-0430,
or at such other address as the Company shall designate in writing to
the Holder, together with this Warrant Agreement and a check payable to the
order of the Company for the aggregate purchase price of the Shares so
purchased. Upon exercise of the Warrants as aforesaid, the Company shall
as promptly as practicable, and in any event within 10 days thereafter,
execute and deliver to the Holder a certificate or certificates in the
name of the Holder for the total number of whole Shares for which the
Warrants are being exercised. If the Warrants shall be exercised with
respect to less than all of the Shares, the Holder shall be entitled to
receive a similar warrant of like tenor and date covering the number
of Shares in respect of which the Warrants were not exercised. The Warrants
covered by this Warrant Agreement shall lapse and be null and void if not
exercised by the Holder on or before 5:00 p.m., New York City time, on
December 8, 2000.
3. Covenants of the Company. The Company covenants and agrees that
all the Shares which may be issued upon the exercise of the Warrants
represented by this Warrant Agreement will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company further covenants and agrees
that during the period within which the Warrants represented by this
Warrant Agreement may be exercised, the Company will at all times have
authorized and reserved a sufficient number of Shares to provide for the
exercise of the Warrants represented by this Warrant Agreement.
4. Adjustments of Warrant Exercise Price and Number of Shares.
(a) If the Company shall, without the payment of new value,
at any time declare a stock dividend on its outstanding shares of Common
Stock or effectuate a stock split or reverse stock split, by subdivision
or consolidation in any manner, regarding the number of shares of the Common
Stock then outstanding into a different number of shares of the Common
Stock, with or without par value, then thereafter the number of Shares
which the holder shall have the right to purchase (calculated immediately
prior to such change), shall be increased or decreased, as the case may be,
in direct proportion to the increase or decrease in the number of shares
of the Common Stock of the Company issued and outstanding by reason of such
dividend or change, and the Warrant Exercise Price of the Shares after such
change shall in the event of an increase in the number of shares of the Common
Stock be proportionately reduced, and in the event of a decrease in the
number of shares of the Common Stock be proportionately increased.
(b) Notwithstanding anything herein to the contrary, for
purposes of this Section 4, the Holder agrees that no adjustment shall be
made to the Warrant Exercise Price or the number of Shares issuable upon
the exercise of this Warrant Agreement upon issuance of Common Stock (or
any other securities) of the Company for any purposes other than as set
forth in Sections 4(a) and 5 herein.
5. Survival of Mergers and Reorganizations. In the event of the
reclassification or change in the outstanding Shares (other than a change in
par value, or from par value to no par value, of from no par value, or as
a result of a subdivision, combination or stock dividend), or in the event
of a sale of all or substantially all of the assets of the Company, or in
the event of any consolidation of the Company with, or merger of the Company
into, another corporation, the Company, or such successor corporation, as the
case may be, shall provide that, the Holder shall thereafter be entitled to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation, sale,
or merger by a holder of the number of Shares which this Warrant Agreement
entitled the holder thereof to purchase immediately prior to such
reclassification, change, consolidation, sale, or merger. Such corporation,
which thereafter shall be deemed to be the Company for purposes of this Warrant
Agreement, shall provide for adjustments, if any, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant Agreement.
6. Sale of Assets, Dissolution. In the event of a merger,
consolidation, or the sale of all or substantially all the assets of the
Company, or in the event of any distribution of all or substantially all of its
assets in dissolution or liquidation, the Company shall mail notice thereof
by registered mail to the Holder and shall make no distribution to the
stockholders of the Company until the expiration of 10 days from the date
of mailing of the aforesaid notice; provided, however, that in any such
event, if the Holder shall not exercise the Warrants within 10 days from the
date of mailing such notice all rights herein granted and not so exercised
within such 10 day period shall thereafter become null and void. The Company
shall not, however, be prevented from consummating any such merger,
consolidation, or sale without awaiting the expiration of such 10 day
period, it being the intent and purpose hereof to enable the Holder,
upon exercise of the Warrants, to participate in the distribution of the
consideration to be received by the Company upon any such merger,
consolidation, or sale or in the distribution of assets upon any dissolution
or liquidation.
7. No Fractional Shares. The number of Shares subject to issuance
upon the complete exercise of the Warrants shall be rounded down to the
nearest whole number of Shares so that no fractional Shares shall be is
sued upon the complete exercise of the Warrants. The Holder shall not be
entitled to receive any compensation or property for such fractional Share
to which it may have been entitled to in the absence of this provision.
8. Notices. If there shall be any adjustment in accordance with
this Warrant Agreement, or if securities or property other than Shares of
the Company shall become purchasable in lieu of Shares upon exercise of
the Warrants, the Company shall forthwith cause written notice thereof to
be sent by registered mail, postage prepaid, to the Holder at its address
shown on the books of the Company, which notice shall be accompanied by a
certificate of either independent public accountants of recognized standing
or the Chairman, President, or any Vice President of the Company setting
forth in reasonable detail the basis for the Holder becoming entitled
to purchase such Shares and the number of Shares which may be purchased
and the exercise price thereof, or the facts requiring any such adjustment,
or the kind and amount of any such securities or property so purchasable
upon the exercise of the Warrants, as the case may be.
9. Taxes. The issue of any stock or other certificate upon the
exercise of the Warrant shall be made without charge to the Holder for any
stamp, duty, excise, or similar tax (but not including the Holder's income
or similar taxes) in respect of the issue of such certificate. The Company
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder, as the registered holder of
this Warrant Agreement, and the Company shall not be required to issue
or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
10. Non-transferability of Warrants. The Warrants shall be
nontransferable without the express written consent of the Company.
11. Warrant Holder Not Stockholder. This Warrant Agreement does
not confer upon the Holder any right to vote or to consent or to receive
notice as a stockholder of the Company, as such in respect of any matters
whatsoever, or any other rights or liabilities as a stockholder, prior to
the exercise hereof as provided herein.
12. Investment Representations. The Holder, by acceptance here
of, and with reference to the Warrants and the Shares issuable upon exercise
of the Warrants, represents and warrants that:
(a) The Holder is acquiring such securities for investment
purposes only, for its own account, and not with a view toward resale or
other distribution thereof, and has no present intention of selling or
otherwise disposing of such securities.
(b) The Holder is aware that the securities have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
or any state securities law, that upon exercise of the Warrants, the Shares
must be held indefinitely unless they are subsequently registered or an
exemption from such registration is available and that the Company is
under no obligation to register the offer and sale of the Shares under
the Securities Act or any applicable state securities laws, except as
otherwise set forth in Section 14 hereof.
(c) The Holder acknowledges that the Warrants may not be
made subject to a security interest, pledged, hypothecated, sold, or
otherwise transferred in the absence of an effective registration statement
for such Warrants under the Securities Act and such applicable state securities
laws or there is an applicable exemption therefrom. The Holder further
acknowledges that, unless the offer and sale of the Shares issuable upon
exercise of the Warrants have been registered under the Securities Act, the
Shares issued upon the exercise of the Warrants shall be restricted in
the same manner and to the same extent as the Warrants and the
certificates representing such Shares shall bear the following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, OR
TRANSFERRED UNTIL A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR THERE IS AN AVAILABLE EXEMPTION THEREFROM."
In making the above representations and warranties, the Holder in
tends that the Company rely thereon and understands that, as the result of
such reliance, such securities are not being registered under the Securities
Act or any applicable state securities laws in reliance upon the applicability
of certain exemptions relating to transactions not involving a public offering.
13. Lost Warrants. In case this Warrant Agreement shall be mutilated,
lost, stolen, or destroyed, the Company will issue a new Warrant Agreement of
like date, tenor, denomination and terms and conditions, and deliver the same
in exchange and substitution for and upon surrender and cancellation of the
mutilated Warrant Agreement, or in lieu of any Warrant Agreement lost, stolen,
or destroyed, upon receipt of evidence satisfactory to the Company of the
loss, theft, or destruction of such Warrant Agreement, and upon receipt of
indemnity satisfactory to the Company.
14. Registration Rights.
(a) The Company agrees that if at any time hereafter the Company
files with the Securities and Exchange Commission ("Commission") a
registration statement ("Registration Statement") under the Securities Act on
a form suitable for registering the Shares issuable upon exercise of the
Warrants (other than on Form S-4, S-8, or comparable registration statement, and
other than any registration statement which has been declared effective by the
Commission prior to the date hereof or has been filed with the Commission
prior to the date hereof but has not yet been declared effective), it will give
written notice to such effect to the Holder, at least 30 days prior to such
filing, and, at the written request of the Holder, made within 10 days after
the receipt of such notice, will include therein at the Company's cost and
expense (except for the fees and expenses of counsel to the Holder and
underwriting discounts and commissions attributable to the Shares of Warrant
Common Stock [as hereinafter defined] included therein) such of the Shares of
Warrant Common Stock held by the Holder as it shall request. If the
registration is an underwritten primary registration on behalf of the Company,
and the managing underwriter(s) advise the Company in writing that in their
good faith opinion, based upon market conditions, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Warrant Common
Stock requested to be included in such registration and other securities
requested to be included in such registration pursuant to contractual
arrangements between Company and such other security holders ("Registration
Rights Holders"), pro rata among the holders of the Warrant Common Stock and
the Registration Rights Holders on the basis of the number of securities
requested to be included in such registration by such holders and the
Registration Rights Holders, and (iii) third, other securities requested to
be included in such registration. The Company, at its own expense, will
cause the prospectus included in such Registration Statement to meet the
requirements of the Securities Act for such period of time, not exceeding
180 days, as may be necessary to effect the sale of the Shares included at the
request of the Holder. The term "Warrant Common Stock" shall mean the Shares
issuable and issued pursuant to this Warrant Agreement and all other Warrants
originally granted to First Cambridge and/or its officers as contemplated in
the second recital hereof and pursuant to all Warrants issued upon transfer,
division, or combination of, or in substitution for, any thereof. The
rights of the Holder under this Section 14 shall apply to an unlimited
number of offerings proposed by the Company.
(b) The Company promptly shall notify the Holder, as a
participating holder of Warrant Common Stock, of the occurrence of any event
as a result of which any prospectus included in a registration statement
filed pursuant to this Section 14 includes any misstatement of a material
fact or omission of any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(c) In addition, upon written notice received at any time on
or before 5:00 p.m., New York City time, on December 8, 2000, from the Holder
or other holders of a minimum of 50% or more of the Warrant Common Stock
originally subject to the Warrants granted to First Cambridge and/or its
officers as contemplated in the second recital hereof, that the Holder
contemplates the transfer of all or any of his or its Warrant Common Stock
under such circumstances that a public offering, within the meaning of the
Securities Act, will be involved, the Company shall, not more than once, at
the expense of the Company, except for the fees and expenses of counsel to
the Holder and other holders and underwriting discounts and commissions
attributable to the Shares of Warrant Common Stock included therein, as
promptly as possible after receipt of such notice, file a new registration
statement or, if available, an offering statement under Regulation A under
the Securities Act, with respect to the offering and sale or other disposition
of the Warrant Common Stock with respect to which it shall have received
such notice; provided, that the Company will only be required to file a
registration statement or offering statement or amendment thereto no later
than 135 days after any fiscal year end of the Company and at such time as it
has available for utilization therein the audited consolidated financial
statements of the Company as of the preceding fiscal year end. The Company
must file a registration statement or offering statement if the Shares of
Warrant Common Stock cannot be sold under Regulation A because of the limited
exemption. The Company agrees as soon as reasonably practicable to cause the
above filing to become effective. Within 10 days after receiving such notice,
the Company shall give notice to the other holders of the Warrants and Warrant
Common Stock advising that the Company is proceeding with such registration
statement or offering statement and offering to include therein Warrant Common
Stock of such Holder. The Company shall not be obligated to any such other
Holder unless such other Holder shall accept such offer by notice in writing
to the Company within 10 days thereafter.
(d) The Company's obligations under this Section 14 with
respect to the Holder, as the holder of Warrant Common Stock, are expressly
conditioned upon the Holder promptly, completely, and accurately furnishing
to the Company in writing such information concerning the Holder and the terms
of the Holder's proposed offering as the Company shall request for inclusion in
the Registration Statement.
15. Indemnification by Company. In the event of the registration
of the offer and sale of any of the Shares of Warrant Common Stock, the
Company will indemnify the Holder, if applicable, and hold the Holder harmless
against any losses, claims, damages, or liabilities, to which the Holder may
become subject under the Securities Act, or any similar federal statute,
and state Blue Sky and securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement under which the
offer and sale of the Shares of Warrant Common Stock were registered under
such Securities Act or similar federal statute, any state Blue Sky or
securities law, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Holder for any legal or any other expenses
reasonably incurred by the Holder in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that to
the extent that any such loss, claim, damage, or liability arises out of, or
is based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said final prospectus or any said amendment or supplement in
reliance upon, and in conformity with, information furnished to the Company,
the Company will not be so liable to the Holder.
16. Indemnification by the Holder. The Holder, if applicable, by
acceptance hereof, agrees to indemnify and hold harmless the Company, its
directors and officers, and each other person, if any, who controls the
Company, against any losses, claims, damages, or liabilities, joint or
several, to which the Company or any such director or officer or any such
person may become subject under the Securities Act, or any other statute
or at common law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon the disposition
by the Holder of the Warrants or the Shares issuable upon the exercise hereof
in violation of the provisions of this Warrant Agreement or arises out of, or
is based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in any registration statement, any preliminary
prospectus, or final prospectus, or any amendment or supplement thereto
in reliance upon, and in conformity with, information furnished to the
Company.
17. Applicable Law. This Warrant Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, without
regard to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Agreement effective as of the day and year first above written.
EMERSON RADIO CORP.
By: /s/ Eugene I. Davis
Eugene I. Davis, President
KENNETH A. ORR
/s/ Kenneth A. Orr
Kenneth A. Orr
FIRST CAMBRIDGE SECURITIES CORP.
By: /s/ Kenneth A. Orr
Kenneth A. Orr, Chairman and CEO
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<PERIOD-END> DEC-31-1995
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<CURRENT-ASSETS> 101,976
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<DEPRECIATION> 5,753
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<BONDS> 20,750
<COMMON> 403
0
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<TOTAL-LIABILITY-AND-EQUITY> 114,327
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<CGS> 198,184
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<INCOME-PRETAX> (5,647)
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