<PAGE> 1
CUSIP NO. 848915104 PAGE 1 OF 20 PAGES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SPORT SUPPLY GROUP, INC.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
848915104
(CUSIP Number)
<TABLE>
<S> <C>
Kenneth S. Grossman Kenneth Liang
c/o Juris Partners Managing Director & General Counsel
579 Fifth Avenue, Suite 1050 Oaktree Capital Management, LLC
New York, New York 10017 333 South Grand Avenue, 28th Floor
(212) 750-6750 Los Angeles, California 90071
(213) 830-6300
</TABLE>
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 31,1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 848915104 PAGE 2 OF 20 PAGES
<TABLE>
<CAPTION>
SCHEDULE 13D
<S> <C>
============== ==============================================================================================================
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Kenneth S. Grossman
============== ==============================================================================================================
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
============== ==============================================================================================================
3
SEC USE ONLY
============== ==============================================================================================================
4
SOURCE OF FUNDS
PF
============== ==============================================================================================================
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
============== ==============================================================================================================
6
CITIZENSHIP OR PLACE OF ORGANIZATION
New York
============== ==============================================================================================================
7
NUMBER OF SOLE VOTING POWER
SHARES
BENEFICIALLY None
OWNED BY
EACH 8
REPORTING SHARED VOTING POWER
PERSON WITH
None
9
SOLE DISPOSITIVE POWER
None
10
SHARED DISPOSITIVE POWER
None
============== ==============================================================================================================
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
403,100
============== ==============================================================================================================
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
============== ==============================================================================================================
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.4%
============== ==============================================================================================================
14
TYPE OF REPORTING PERSON
IN
============== ==============================================================================================================
</TABLE>
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CUSIP NO. 848915104 PAGE 3 OF 20 PAGES
<TABLE>
<CAPTION>
SCHEDULE 13D
<S> <C>
============== ==============================================================================================================
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Oaktree Capital Management, LLC
============== ==============================================================================================================
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
============== ==============================================================================================================
3
SEC USE ONLY
============== ==============================================================================================================
4
SOURCE OF FUNDS
OO
============== ==============================================================================================================
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
============== ==============================================================================================================
6
CITIZENSHIP OR PLACE OF ORGANIZATION
California
============== ==============================================================================================================
7
NUMBER OF SOLE VOTING POWER
SHARES 403,100
BENEFICIALLY
OWNED BY 8
EACH SHARED VOTING POWER
REPORTING None
PERSON WITH
9
SOLE DISPOSITIVE POWER
403,100
10
SHARED DISPOSITIVE POWER
None
============== ==============================================================================================================
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
403,100
============== ==============================================================================================================
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
============== ==============================================================================================================
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.4%
============== ==============================================================================================================
14
TYPE OF REPORTING PERSON
IA;OO
============== ==============================================================================================================
</TABLE>
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CUSIP NO. 848915104 PAGE 4 OF 20 PAGES
<TABLE>
<CAPTION>
SCHEDULE 13D
<S> <C>
============== ==============================================================================================================
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
OCM Principal Opportunities Fund, L.P.
============== ==============================================================================================================
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
============== ==============================================================================================================
3
SEC USE ONLY
============== ==============================================================================================================
4
SOURCE OF FUNDS
WC
============== ==============================================================================================================
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
============== ==============================================================================================================
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
============== ==============================================================================================================
7
NUMBER OF SOLE VOTING POWER
SHARES None
BENEFICIALLY
OWNED BY 8
EACH SHARED VOTING POWER
REPORTING None
PERSON WITH
9
SOLE DISPOSITIVE POWER
None
10
SHARED DISPOSITIVE POWER
None
============== ==============================================================================================================
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
403,100
============== ==============================================================================================================
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
============== ==============================================================================================================
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.4%
============== ==============================================================================================================
14
TYPE OF REPORTING PERSON
PN
============== ==============================================================================================================
</TABLE>
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CUSIP NO. 848915104 PAGE 5 OF 20 PAGES
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D (this "Statement") relates to common stock, par
value $0.01 per share (the "Common Stock") of Sport Supply Group, Inc., a
Delaware corporation (the "Issuer"). The address of the principal executive
office of the Issuer is 1901 Diplomat Drive, Farmer's Branch, Texas 75234.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c) & (f)
This Statement is filed on behalf of:
(i) Kenneth S. Grossman ("Grossman");
(ii) Oaktree Capital Management, LLC, a California limited liability
company ("Oaktree"); and
(iii) OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership of which Oaktree is the general partner (the "Oaktree
Fund").
Grossman and the Oaktree Fund are referred to in this Statement together as the
"Investors."
(i) Grossman
The address of the principal business and principal office for Grossman is c/o
Juris Partners, 579 Fifth Avenue, Suite 1050, New York, New York 10017. The
principal business of Grossman is asset management, investment advisory
services, and investing in distressed and undervalued public and private
securities for his own and affiliated accounts. Grossman is a citizen of the
United States of America.
(ii) Oaktree
The address of the principal business and principal office for Oaktree is 333
South Grand Avenue, 28th Floor, Los Angeles, California 90071. The principal
business of Oaktree is to provide investment advice and management services to
institutional and individual investors. The members and executive officers of
Oaktree are listed below. The principal address for each member and executive
officer of Oaktree is 333 South Grand Avenue, 28th Floor, Los Angeles,
California 90071. All individuals listed below are citizens of the United States
of America.
Executive Officers and Members
Howard S. Marks Chairman and Principal
Bruce A. Karsh President and Principal
Sheldon M. Stone Principal
David Richard Masson Principal
Larry Keele Principal
Russel S. Bernard Principal
Stephen A. Kaplan Principal
David Kirchheimer Managing Director and Chief Financial and
Administrative Officer
Kenneth Liang Managing Director and General Counsel
(iii) The Oaktree Fund
The address of the principal business and principal office for the Oaktree Fund
is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. The
principal business of the Oaktree Fund is to invest in entities over which there
is a potential for the Oaktree Fund to exercise significant influence. The
Oaktree
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CUSIP NO. 848915104 PAGE 6 OF 20 PAGES
Fund is an investment partnership, and Oaktree is its sole general partner. (See
information in section (ii) above regarding Oaktree and its members and
executive officers.) The names and addresses of the portfolio managers of the
Oaktree Fund are listed below. All individuals listed below are citizens of the
United States of America.
Bruce A. Karsh
333 South Grand Avenue, 28th Floor
Los Angeles, California 90071
Stephen A. Kaplan
333 South Grand Avenue, 28th Floor
Los Angeles, California 90071
(d) & (e)
During the last five years, none of Grossman, Oaktree or the Oaktree Fund, nor
to the best of their knowledge any of their respective executive officers,
directors, general partners, members or portfolio managers (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Oaktree Fund owns 403,100 shares of Common Stock, having paid an aggregate
of $3,710,326.89 for such Common Stock. The purchases were made on the open
market over a period from February 2, 1998 to June 30, 1998 at per share prices
ranging between $7.62 and $10.00 and in blocks ranging between 300 shares and
60,000 shares. All purchases were made from working capital of the Oaktree Fund.
Grossman, including family members and affiliated entities, nominally owns 0
shares of Common Stock.
ITEM 4. PURPOSE OF TRANSACTION
The Investors acquired the Common Stock which they own for investment purposes.
The Investors have made a proposal (the "Proposal") to acquire a controlling
stake in Emerson Radio Corporation ("Emerson"). A copy of the Proposal is
attached hereto and incorporated herein by reference. If the Investors succeed
in acquiring control of Emerson, the Investors believe that as a result of
Emerson's ownership of Common Stock as of this date, such ownership, combined
with the shares of Common Stock owned by the Investors, will result in the
Investors indirectly controlling the Issuer. The Investors have previously
disclosed in their Schedule 13D relating to Emerson that if they do acquire a
controlling stake in Emerson, they anticipate that at least a majority of the
Board of Directors of Emerson will be nominees of the Investor. Given that the
Board of Directors of Emerson directs the voting of the shares of Common Stock
owned by Emerson, such ability to direct could result in changes in the Board of
Directors of the Issuer and such changed Board of Directors implementing
management changes at the Issuer.
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CUSIP NO. 848915104 PAGE 7 OF 20 PAGES
Oaktree, as the general partner of the Oaktree Fund, will evaluate the Issuer's
businesses and prospects, alternative investment opportunities and all other
factors deemed relevant in determining whether additional shares of the
Issuer's Common Stock will be acquired by the Oaktree Fund. The investment
strategy of Oaktree is generally to invest in entities in which there is a
potential to exercise significant influence over such entities. Additional
shares of Common Stock may be acquired in the open market or in privately
negotiated transactions, or some or all of the shares of the Issuer's Common
Stock beneficially owned by Oaktree and the Oaktree Fund may be sold. Other
than as disclosed herein, Oaktree currently has no agreements, beneficially or
otherwise which would be related to or would result in any of the matters
described in Item 4(a)-(j) of Schedule 13D; however, as part of its ongoing
review of investment alternatives, Oaktree may consider such matters in the
future and, subject to applicable law, may formulate a plan with respect to
such matters, and, from time to time, Oaktree may hold discussions with or make
formal proposals to management or the Board of Directors of the Issuer, other
shareholders of the Issuer independently or at a regularly scheduled or special
meeting of the shareholders or other third parties regarding such matters.
ITEM 5. INTEREST AND SECURITIES OF THE ISSUER
(a) Each of the Investors and Oaktree, as general partner of the Oaktree Fund,
may be deemed to beneficially own 403,100 shares of Common Stock or 5.4 % of the
Common Stock outstanding (based on 7,410,703 shares of Common Stock outstanding
on December 15, 1998, as reported on the Issuer's Proxy Statement on Schedule
14A filed as of December 17, 1998). To the best of the Investors' and Oaktree's
knowledge, none of the other people named in response to Item 2 own any
securities of the Issuer.
(b) Oaktree, as the general partner of the Oaktree Fund, has discretionary
authority and control over all of the assets of the Oaktree Fund pursuant to the
partnership agreement for the Oaktree Fund, including the power to vote and
dispose of the Issuer's Common Stock held in the name of the Oaktree Fund.
Pursuant to a letter agreement dated as of January 7, 1998, between the
Investors, Oaktree, as general partner of the Oaktree Fund, and the Oaktree
Fund have discretionary authority and control over the investments of the
Investors including the securities owned by Grossman, including discretionary
authority to vote and dispose of the Issuer's Common Stock held by Grossman.
Oaktree and each of the individuals listed in Item 2 disclaims ownership of the
shares of the Issuer's Common Stock reported herein and the filing of this
statement shall not be construed as an admission that any such person is the
beneficial owner of any securities covered by this statement.
(c) None of Grossman, Oaktree nor the Oaktree Fund, and to the best of their
knowledge, none of the other people named in response to Item 2 has effected
transactions involving the Issuer's Common Stock during the last 60 days.
(d) No other person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds of sale of, any of the Issuer's
Common Stock beneficially owned by Oaktree and the Oaktree Fund, except to the
extent that the investment advisory clients of Oaktree and the partners of the
Oaktree Fund may have such right subject to the notice, withdrawal and/or
termination provisions of advisory and partnership arrangements. No such client
or partner has an interest by virtue of such relationship that relates to more
than 5% of the Issuer's Common Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Oaktree, as general partner of the Oaktree Fund, receives a management fee for
managing the assets of the Oaktree Fund and has a carried interest in the
Oaktree Fund. Also incorporated by reference are the documents printed at
Exhibits 1.2 and 1.3 hereto.
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CUSIP NO. 848915104 PAGE 8 OF 20 PAGES
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following is filed herewith as an Exhibit to this Statement:
Exhibit 1.1 A written agreement relating to the filing of the
joint filing statement as required by Rule 13d-1(k)(1)
under the Securities Exchange Act of 1934, as amended.
Exhibit 1.2 Letter Agreement, dated as of January 7, 1998, between
the Investors. (Portions of this document have been
omitted pursuant to a request for confidential treatment.)
Exhibit 1.3 Proposal, dated as of December 15, 1998, submitted by
the Investors to Petra Stelling, Thomas Hackett and
Barclays Bank (referred to collectively in the Proposal as
the "Creditors").
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CUSIP NO. 848915104 PAGE 9 OF 20 PAGES
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and belief,
each of the undersigned certify that the information set forth in this Statement
is true, complete and correct.
Dated as of this 10th day of February, 1999.
KENNETH S. GROSSMAN
/s/ KENNETH S. GROSSMAN
- ------------------------
By: Kenneth S. Grossman
OAKTREE CAPITAL MANAGEMENT, LLC
/s/ KENNETH LIANG
- --------------------------------------------
By: Kenneth Liang
Title: Managing Director and General Counsel
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
/s/ KENNETH LIANG
- ----------------------------------------------
By: Kenneth Liang
Title: Managing Director and General Counsel
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CUSIP NO. 848915104 PAGE 10 OF 20 PAGES
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
1.1 A written agreement relating to the filing of the joint
filing statement as required by Rule 13d-1(k)(1) under the
Securities Exchange Act of 1934, as amended.
1.2 Letter Agreement, dated as of January 7, 1998, between the
Investors. (Portions of this document have been omitted
pursuant to a request for confidential treatment.)
1.3 Proposal, dated as of December 15, 1998, submitted by the
Investors to the Creditors.
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CUSIP NO. 848915104 PAGE 11 OF 20 PAGES
EXHIBIT 1.1
JOINT FILING AGREEMENT
Each of the undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D will be filed on behalf
of each of the undersigned without the necessity of filing additional joint
filing statements. Each of the undersigned acknowledge that each undersigned is
responsible for the timely filing of such amendments and for the completeness
and accuracy of the information concerning such undersigned contained therein,
but is not responsible for the completeness and accuracy of the information
concerning each other undersigned except to the extent that such undersigned
knows or has reason to believe that such information is inaccurate.
Dated as of February 10, 1999
KENNETH S. GROSSMAN
By /s/ Kenneth S. Grossman
Kenneth S. Grossman
OAKTREE CAPITAL MANAGEMENT, LLC
By: /s/ Kenneth Liang
Kenneth Liang
Title: Managing Director and General
Counsel
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Kenneth Liang
Kenneth Liang
Title: Managing Director and General
Counsel
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CUSIP NO. 848915104 PAGE 12 OF 20 PAGES
EXHIBIT 1.2
OAKTREE CAPITAL
MANAGEMENT LLC
STEPHEN A. KAPLAN 550 SOUTH HOPE STREET, 22nd FLOOR
Principal LOS ANGELES, CALIFORNIA
TEL: (213) 694-1513
FAX: (213) 694-1593
January 7, 1998
Kenneth S. Grossman
620 Fifth Avenue, 7th Floor
New York, NY 10020
Dear Ken:
This letter sets forth our binding agreement relating to existing and proposed
investments currently under consideration (the "Investments") in Emerson Radio
Corporation and its subsidiaries including Sport Supply, Inc. ("Emerson Radio")
or such entities' securities in which the OCM Principal Opportunities Fund, L.P.
including any affiliate ("Oaktree") may invest.
1. Oaktree and Kenneth S. Grossman, P.C. ("Grossman") will form a
partnership, limited liability company, or other entity, the form of
which will be mutually determined taking into account the nature of
the transaction and each parties tax concerns (the "Joint Venture"),
for the purpose of making an investment in Emerson Radio including,
but not limited to, the purchase of 8.5% Senior Subordinated
Convertible Debentures due 2002 of Emerson Radio (the "Convertible
Notes"). The likely nature of the Joint Venture will be for each party
to hold the securities it purchases in its own account with this
letter governing the distributions and rights of each party. Both
parties will devote such time and resources to the Joint Venture as
required. Specifically Ken Grossman will devote such time as is
necessary to oversee the purchase, structure, and management of the
Investments and will operate at the direction of Oaktree as set forth
in paragraph 9 hereof.
2. The Joint Venture will be capitalized by Oaktree contributing **%(1)
of all capital needed and Grossman or its designee contributing **% of
all capital needed; provided that Grossman shall not be obligated to
contribute more than $** to the Joint Venture but at its option
Grossman may contribute more than $** at the above percentages. Each
party will also contribute any Convertible Notes it owns to the Joint
Venture, the cost basis of which will be credited to such party's
capital contribution. The Joint Venture shall have the option to
purchase, as a single block, the Emerson Radio common shares owned by
Grossman. The exercise price, which will be credited to Grossman's
capital contribution,
- --------
(1) Portions of this document marked as ** have been omitted pursuant to a
request for confidential treatment.
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CUSIP NO. 848915104 PAGE 13 OF 20 PAGES
shall be the average market price for the ten trading days prior to
the options exercise date. All reasonable out of pocket costs and
expenses incurred by either party relating to the Emerson Radio
investment will be paid or reimbursed by Oaktree. Ken Grossman will
not incur out of pocket expenses or costs in excess of $** without the
express approval of Oaktree.
3. Distributions from the Joint Venture, or if the Joint Venture is not
formed, distributions from the Investments, shall be made when
realized in accordance with the percentage of capital contributed by
each party; provided that once Oaktree receives distributions from the
Joint Venture in order for Oaktree to realize a ** rate of return on
its total invested capital (the "IRR") equal to **% per annum (the
"Preferred Distributions"), Oaktree shall transfer to Grossman
additional distributions equal to **% of the distributions payable to
Oaktree beyond the Preferred Distributions in consideration for
Grossman's introducing and structuring the transaction. The IRR shall
be determined using all cash disbursements (including direct expenses)
and cash receipts by or to Oaktree related to the Joint Venture.
Oaktree will not allocate any indirect expenses (including salaries,
rent, insurance or similar items) to the Joint Venture for the
purposes of calculating the IRR. Neither party will receive any other
compensation in connection with the Emerson Radio investment;
provided, however, that each party shall be able to collect fees or
other compensation in connection with any board of director
responsibilities.
4. In the event that Oaktree obtains voting control of Emerson's board of
directors (the "Board"), it will make reasonable efforts to cause
Grossman or its designee to be elected to the Board and to receive
compensation in connection with this role no less favorable than any
other non-management director; provided, however, that in such
capacity Grossman or its designee must act at the direction of
Oaktree.
5. Oaktree and Grossman hereby agrees that both parties will keep the
terms of this letter and proposed transaction confidential and shall
not disclose to any third party except to their respective attorneys,
accountants and advisers who need to know and agrees to keep such
information confidential. Grossman agrees to cease any discussions
regarding the Emerson Radio investment or Convertible Notes, which are
not in furtherance of the interests of the Joint Venture, with any
other party immediately.
6. The parties will execute mutually acceptable definitive documents that
Oaktree will prepare as soon as possible.
7. Grossman represents and warrants to Oaktree that ** has no interest in
the Joint Venture and hereby indemnifies and holds Oaktree harmless
from any claim of ** relating to the activities of the joint venture.
8. Grossman further represents and warrants to Oaktree that it owns
$650,000 face value of Convertible Notes and 100,000 shares of Emerson
common stock. Oaktree represents and warrants to Grossman that it owns
$1 million face value of Convertible Notes.
9. Oaktree shall have complete discretion and control over the
investments of the Joint Venture including the price paid for any
securities or assets purchased by the Joint
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CUSIP NO. 848915104 PAGE 14 OF 20 PAGES
Venture, the timing and price of the sale of such securities and
assets and all strategy decisions in connection therewith. Grossman
shall have the right to review and to have his counsel review any 13-D
or other filings with the Securities and Exchange Commission in
connection with the Investments not less than three days in advance of
such filings.
10. It is the parties' intention that this letter agreement be binding and
conclusive as between them even if no further documentation evidencing
the Joint Venture is executed.
If the foregoing is acceptable to you, please sign a copy of this letter and fax
it to me at (213) 694-1593, and I will then have the attorneys start preparing
more definitive documents to structure the Joint Venture and the Emerson Radio
investment. We look forward to working with you.
Should you have any questions, please feel free to give me a call at (213)
694-1513.
OCM Principal Opportunities Fund, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
/s/ Stephen A. Kaplan
By: Stephen A. Kaplan
Agreed and accepted to:
Kenneth S. Grossman, P.C.
/s/ Kenneth S. Grossman
By: Kenneth S. Grossman
Its: President
<PAGE> 1
CUSIP No. 848915104 PAGE 15 OF 20 PAGES
Exhibit 1.3
December 15, 1998 PRIVATE AND CONFIDENTIAL
Ms. Petra Stelling
c/o David H. Wollmuth, Esq.
Wollmuth Maher & Deutsch
516 5th Avenue 12th Floor
New York, NY 10036
Mr. Thomas F. Hackett
c/o Nancy Prahofer, Esq.
Dechert, Price & Rhodes
30 Rockefeller Plaza
New York, NY 10112
Mr. Ronald Spitzer
c/o Margot Schonholtz, Esq.
Zalkin, Rodin & Goodman LLP
750 3rd Avenue
New York, NY 10017
Dear Sirs and Mesdames:
I. The Proposal
Pursuant to our conversations with you and the Special Master appointed pursuant
to the Settlement Agreement, the OCM Principal Opportunities Fund, L.P. (the
"OCM Fund"), in collaboration with Kenneth S. Grossman (collectively, the
"Oaktree Group"), is pleased to submit the enclosed term sheet (the "Proposal")
for a transaction (the "Transaction") relating to certain shares of Emerson
Radio Corporation ("Emerson" or the "Company"). We are aware of the issues
confronting you and the Company as they relate to the Stipulation of Settlement
and Order entered June 11, 1996 (the "Settlement Agreement"). Based upon our
understanding of the situation, and the discussions we have had, we believe that
this Proposal represents an opportunity to resolve the pending litigation (the
"Litigation") in a timely manner.
<PAGE> 2
CUSIP No. 848915104 PAGE 16 OF 20 PAGES
II. Confidentiality
This letter and the Proposal are being provided to you subject to your agreement
not to disclose the existence or contents of this letter or the Proposal to any
person other than United States District Court Judge Nicholas Politan and the
Special Master and his representatives and advisors, except as required by
applicable law and until and to the extent that the Oaktree Group makes its own
public disclosure of the Proposal.
III. Due Diligence
Subject to your written agreement to provide certain protections to the Oaktree
Group (the "Due Diligence Agreement"), it is our intention to commence a due
diligence investigation of Emerson as soon as the Company's management is ready
to accommodate us. The Oaktree Group has extensive experience conducting due
diligence reviews, and we believe the process can be accomplished with minimal,
if any, disruption to the day-to-day management and operations of the Company.
The Due Diligence Agreement will provide that the Creditors (i) will not discuss
the Transaction with potential purchasers of the Settlement Shares, encourage
the making of or otherwise solicit competing bids for the Settlement Shares or
negotiate with any potential purchaser of the Settlement Shares as long as due
diligence is ongoing, such period not to exceed sixty days from the date due
diligence activities commence (the "Diligence Period"), and (ii) will
immediately communicate to the Oaktree Group the terms of any alternative
proposal for the disposition of the Settlement Shares or for any other
resolution of the Litigation. The Due Diligence Agreement will further provide
that as reimbursement and compensation for the Oaktree Group's time spent and
expenses incurred in connection with its due diligence investigation of the
Company and work on other aspects of the Proposal, (i) upon the closing of any
sale of the Settlement Shares to a buyer other than the Oaktree Group (an
"Alternative Transaction"), pursuant to which the Creditors receive sale
proceeds in excess of $14,876,270, the Oaktree Group will receive $250,000 in
cash or (ii) upon the closing of any Alternative Transaction, pursuant to which
the Creditors receive sale proceeds in excess of the Purchase Price (as defined
in the Proposal) but less than $14,876,270, the Oaktree Group will receive one
hundred percent (100%) of the difference between the Purchase Price and the
proceeds of the Alternative Transaction not to exceed $250,000 (in either case,
the "Due Diligence Fee"). The Due Diligence Agreement will also provide that if
the Creditors breach the Due Diligence Agreement (other than by their acceptance
of an Alternative Transaction), then the Oaktree Group shall be entitled to
payment of $250,000 as liquidated damages, provided that the liquidated damages
shall be payable only from the proceeds (including cash dividends) of the
Settlement Shares and provided further that the Oaktree Group shall be entitled
to interest on the liquidated damages at the rate of ten per cent (10%) per
annum from the date of breach to the date of payment.
The Due Diligence Agreement will further provide that no later than the end of
the Diligence Period, the Oaktree Group will notify the Creditors in writing
whether or not it will pursue the Transaction (the "Notice Date"). If the
Oaktree Group notifies the Creditors that it will pursue the Transaction, the
terms of the Due Diligence Agreement will remain in effect for an additional 120
day period from the Notice Date (the "No-Shop Period"), unless the No-Shop
Period is terminated earlier or extended by the unanimous written consent of the
Creditors and the Oaktree
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CUSIP No. 848915104 PAGE 17 OF 20 PAGES
Group. Any and all obligations under the Due Diligence Agreement and any
definitive agreements for the Transaction, including any obligation on the part
of the Creditors to pay any Due Diligence or Break-Up Fee (as defined in the
Proposal) for any reason, shall terminate if (i) the acquisition of the
Settlement Shares by the Oaktree Group is not consummated within 120 days after
the Notice Date for any reason other than breach by the Creditors or the
Creditors' acceptance of an Alternative Transaction, (ii) the Oaktree Group
provides the Creditors notice that it will not pursue the Transaction, or (iii)
any condition set forth in Section F (iii) of the Proposal cannot be satisfied
other than because of a breach by the Creditors or the Creditors' acceptance of
an Alternative Transaction. For the purposes of the Due Diligence Agreement and
any other definitive Transaction agreement, a breach of the Creditors shall
include their failure to use commercially reasonable efforts to consummate the
Transaction within 120 days after the Notice Date.
IV. Description of The Oaktree Group
Oaktree Capital Management LLC ("Oaktree"), which acts as general partner of the
OCM Fund, is a Los Angeles based private investment firm which manages
approximately $11 billion in niche investment markets for institutions and high
net worth individuals. The founding principals of Oaktree formed the company in
April 1995 after having managed related funds at Trust Company of the West since
1985. Oaktree invested in Emerson through Oaktree's Principal Activities Group,
which focuses on providing capital to sponsor management buyouts and other
private and public equity investments. The Principal Activities Group has made
substantial investments in over 30 companies and manages in excess of $1 billion
in committed capital for the purpose of investing in companies that are in need
of growth capital, recapitalization or financial restructuring. The Oaktree
Group has the financial resources to fund and execute the Transaction and would
not require financing as a condition to closing.
Kenneth S. Grossman is an investor in distressed and undervalued public and
private securities for his own and affiliated accounts.
V. Nonbinding Nature of Letter and Proposal
This letter and the Proposal are not an offer and are not intended to constitute
a binding and enforceable contract. It is acknowledged and agreed that the
Oaktree Group and the Creditors shall have no obligations to each other pursuant
to this letter, the Proposal or otherwise with respect to the Transaction, other
than the requirement to keep the letter and Proposal confidential pursuant to
Section II hereof, unless and until the Due Diligence Agreement or other
definitive Transaction agreements (which will include the conditions set forth
in Section F of the Term Sheet) are executed and delivered by the Creditors and
the Oaktree Group.
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CUSIP No. 848915104 PAGE 18 OF 20 PAGES
We hope that this letter and the Proposal will enable us to proceed with a
Transaction, and we look forward to moving expeditiously to that end. Please
feel free to contact our counsel, James Ricciardi at (212) 351-3952, or to
contact Steve Kaplan at (213) 830-6350 or Ken Grossman at (212) 750-6750 to
discuss this matter.
Very truly yours,
By: /s/ Kenneth S. Grossman
-----------------------------
Kenneth S. Grossman
c/o Juris Partners
579 Fifth Avenue, Suite 1050
New York, NY 10017
By: /s/ Stephen A. Kaplan
-----------------------------
Stephen A. Kaplan
Principal, Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
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CUSIP No. 848915104 PAGE 19 OF 20 PAGES
Private and Confidential
December 15, 1998
PROPOSED TRANSACTION TERM SHEET
A. The Creditors will transfer or cause to be transferred to the Oaktree Group
or its designee 100% of the shares of Emerson common stock currently held
under the Settlement Agreement (the "Settlement Shares").1
B. The Oaktree Group or its designee will purchase 100% of the Settlement
Shares for $0.50 per share in cash ($14,576,270 in total proceeds, assuming
29,152,542 shares) (the "Purchase Price").
C. The Oaktree Group will effect a recapitalization of the Company which will
provide cash proceeds sufficient to permit the Company to repurchase the
Company's 8.5% Convertible Senior Subordinated Debentures, due 2002, that
are validly put to Emerson at 100% of face value plus accrued interest
because of a change in control.
D. The Oaktree Group will replace or renegotiate, if necessary, Emerson's
working capital facility with Congress Financial Corporation.
E. The definitive agreements for the Transaction will provide that (i) upon
the closing of any Alternative Transaction pursuant to which the Creditors
receive sale proceeds in excess of $15,676,270, the Oaktree Group will
receive a break-up fee of $1,000,000 or (ii) upon the closing of any
Alternative Transaction pursuant to which the Creditors receive sale
proceeds in excess of the Purchase Price but less than $15,676,270, the
Oaktree Group will receive one hundred percent (100%) of the difference
between the Purchase Price and the proceeds of the Alternative Transaction,
not to exceed $1,000,000 (in either case, the "Break-Up Fee") and (iii) if
the Creditors breach any of the definitive agreements (other than by their
acceptance of an Alternative Proposal), then the Oaktree Group shall be
entitled to $1,000,000 as liquidated damages, provided that the liquidated
damages shall be payable only from the proceeds (including cash dividends)
of the Settlement Shares and provided further that the Oaktree Group shall
be entitled to interest on the liquidated damages at the rate of ten per
cent (10%) per annum from the date of the breach to the date of payment.
The Break-Up Fee shall be in lieu of the Due Diligence Fee to be provided
for in the Due Diligence Agreement.
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1 Capitalized terms used herein and not defined herein have the
meanings given to them in the accompanying letter.
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CUSIP No. 848915104 PAGE 20 OF 20 PAGES
F. Consummation of the Transaction would be subject to, among other things:
(i) Oaktree's completion of business, accounting, and legal due diligence
regarding Emerson and its subsidiaries and affiliates, including, but not
limited to, the resolution of corporate governance and management issues
(including the composition of the Boards of Directors) at the Company and
Sport Supply Group and their affiliates, the results of which are
satisfactory to the Oaktree Group in its sole and absolute discretion, (ii)
negotiation and execution of definitive agreements, with appropriate
conditions, representations, warranties, indemnities and covenants, and
(iii) receipt of approval of the Court of the Transaction and other
consents and approvals as required, or as agreed among the Oaktree Group
and the Creditors.
G. Currently, the Oaktree Group does not anticipate changing Emerson's
operating management or its strategic course.
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