SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
EMERSON RADIO CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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EMERSON RADIO CORP.
NINE ENTIN ROAD
P.O. BOX 430
PARSIPPANY, NEW JERSEY 07054-0430
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 2006
Dear Stockholder:
As a stockholder of Emerson Radio Corp. ("we", "our" or "Emerson"),
you are hereby given notice of and invited to attend in person or by proxy
Emerson's 2006 Annual Meeting of Stockholders to be held at The Hanover
Marriott, 1401 Route 10, East, Whippany, New Jersey 07981 on Tuesday, November
21, 2006, at 10:00 a.m. (local time).
At this year's stockholders' meeting, you will be asked to (i) elect
nine directors to serve for a one-year term, (ii) approve an amendment to the
2004 Non-Employee Outside Director Stock Option Plan to increase the number of
shares of common stock available for issuance from 250,000 shares to 500,000
shares, (iii) ratify the appointment of Moore Stephens, P.C. as independent
registered public accountants of Emerson for the fiscal year ending March 31,
2007 and (iv) transact such other business as may properly come before the
meeting and any adjournment(s) thereof. The Board of Directors unanimously
recommends that you vote FOR the directors nominated, the amendment to the 2004
Non-Employee Outside Director Stock Option Plan and the ratification of Moore
Stephens, P.C. Accordingly, please give careful attention to these proxy
materials.
Only stockholders of record of Emerson's common stock as of the close
of business on October 26, 2006, are entitled to notice of and to vote at such
meeting and any adjournment(s) thereof. Emerson's transfer books will not be
closed.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, WE WANT TO HAVE THE MAXIMUM REPRESENTATION
AT THE ANNUAL MEETING AND RESPECTFULLY REQUEST THAT YOU DATE, EXECUTE AND MAIL
PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE FOR WHICH NO
ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. You may revoke
your proxy at any time prior to its use as specified in the enclosed proxy
statement.
By Order of the Board of Directors,
/s/ John Florian
----------------------------------------
JOHN FLORIAN
Deputy Chief Financial Officer,
Controller and Secretary
Parsippany, New Jersey
November 1, 2006
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED HEREIN.
EMERSON RADIO CORP.
NINE ENTIN ROAD
P.O. BOX 430
PARSIPPANY, NEW JERSEY 07054-0430
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PROXY STATEMENT
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FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 2006
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TO OUR STOCKHOLDERS:
This Proxy Statement is furnished to our stockholders for use at our
Annual Meeting of Stockholders to be held at The Hanover Marriott, 1401 Route
10, East, Whippany, New Jersey 07981 on Tuesday, November 21, 2006, at 10:00
a.m. (local time), or at any adjournment or adjournments thereof (the "Annual
Meeting"). Emerson's stockholders of record as of the close of business on
October 26, 2006 (the "Record Date") are entitled to vote at the Annual Meeting.
We expect to begin mailing this Proxy Statement and the enclosed proxy card to
our stockholders on or about November 1, 2006.
VOTING PROCEDURES AND REVOCABILITY OF PROXIES
The accompanying proxy card is designed to permit each of our
stockholders as of the Record Date to vote on each of the proposals properly
brought before the Annual Meeting. As of the Record Date, there were 27,089,832
shares of our common stock, par value $.01 per share, issued and outstanding and
entitled to vote at the Annual Meeting. Each outstanding share of our common
stock is entitled to one vote.
The holders of a majority of our outstanding shares of common stock,
present in person or by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. If a quorum is not present, the Annual Meeting
may be adjourned from time to time until a quorum is obtained. Assuming that a
quorum is present, directors will be elected by a plurality vote and the nine
nominees who receive the most votes will be elected. There is no right to
cumulate votes in the election of directors. The ratification of all other
proposals will require the affirmative vote of a majority of the shares present
and entitled to vote with respect to such proposal. Abstentions and broker
non-votes will be counted for the purpose of determining whether a quorum is
present and do not have an effect on the election of directors. Abstentions, but
not broker non-votes, are treated as shares present and entitled to vote, and
will be counted as a "no" vote on all other matters. Broker non-votes are
treated as not entitled to vote, and so reduce the absolute number, but not the
percentage of votes needed for approval of a matter. As of the Record Date, The
Grande Holdings Limited ("Grande Holdings") had the power to vote approximately
50.9% of
the outstanding shares of our common stock and Grande Holdings has advised us
that they intend to attend the Annual Meeting and intend to vote in favor of
each of the proposals. As a result, we expect that we will have a quorum present
at the Annual Meeting and that each of the proposals will be approved. Holders
of the common stock will not have any dissenters' rights of appraisal in
connection with any of the matters to be voted on at the Annual Meeting.
The accompanying proxy card provides space for you to vote in favor
of, or to withhold voting for: (i) the nominees for the Board of Directors, (ii)
the amendment to the 2004 Non-Employee Outside Director Stock Option Plan ("2004
Director Stock Option Plan") to increase the number of shares of common stock
available for issuance from 250,000 shares to 500,000 shares and (iii) the
ratification of the appointment of Moore Stephens, P.C. as independent
registered public accountants of Emerson for the fiscal year ending March 31,
2007. The Board of Directors urges you to complete, sign, date and return the
proxy card in the accompanying envelope, which is postage prepaid for mailing in
the United States.
When a signed proxy card is returned with choices specified with
respect to voting matters, the proxies designated on the proxy card will vote
the shares in accordance with the stockholder's instructions. The proxies we
have designated for the stockholders are Eduard Will and John D. Florian. If you
desire to name another person as your proxy, you may do so by crossing out the
names of the designated proxies and inserting the names of the other persons to
act as your proxies. In that case, it will be necessary for you to sign the
proxy card and deliver it to the person named as your proxy and for the named
proxy to be present and vote at the Annual Meeting. Proxy cards so marked should
not be mailed to us.
If you sign your proxy card and return it to us and you have made no
specifications with respect to voting matters, your shares will be voted FOR:
(i) the election of the nominees for director, (ii) the amendment of the 2004
Director Stock Option Plan to increase the number of shares of common stock
available for issuance and (iii) the ratification of the appointment of Moore
Stephens, P.C. as independent registered public accountants of Emerson for the
fiscal year ending March 31, 2007 and, at the discretion of the proxies
designated by us, on any other matter that may properly come before the Annual
Meeting or any adjournment(s).
You have the unconditional right to revoke your proxy at any time
prior to the voting of the proxy by taking any act inconsistent with the proxy.
Acts inconsistent with the proxy include notifying Emerson's Secretary in
writing of your revocation, executing a subsequent proxy, or personally
appearing at the Annual Meeting and casting a contrary vote. However, no
revocation shall be effective unless at or prior to the Annual Meeting we have
received notice of such revocation.
At least ten days before the Annual Meeting of Stockholders, we will
make a complete list of the stockholders entitled to vote at the meeting open to
the examination of any stockholder for any purpose germane to the meeting. The
list will be open for inspection during ordinary business hours at our offices
at Nine Entin Road, Parsippany, New Jersey 07054, and will also be made
available to stockholders present at the meeting.
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PROPOSAL I: ELECTION OF DIRECTORS
Nine directors are proposed to be elected at the Annual Meeting. If
elected, each director will hold office until the next annual meeting of our
stockholders or until his successor is elected and qualified. The election of
directors will be decided by a plurality vote.
All nominees named in this proxy statement are members of our present
Board of Directors. All nominees have consented to serve if elected and we have
no reason to believe that any of the nominees named will be unable to serve. If
any nominee becomes unable to serve, (i) the shares represented by the
designated proxies will be voted for the election of a substitute as the Board
of Directors may recommend, (ii) the Board of Directors may reduce the number of
directors to eliminate the vacancy or (iii) the Board of Directors may fill the
vacancy at a later date after selecting an appropriate nominee.
Nominations for election to the Board of Directors may be made by the
Board of Directors or by any stockholder of any outstanding class of capital
stock of Emerson entitled to vote for the election of directors. The following
procedures (the "Minimum Procedures") shall be utilized in considering any
candidate for election to the Board of Directors at an annual meeting, other
than candidates who have previously served on the Board of Directors or who are
recommended by the Board of Directors. A nomination must be delivered to the
Secretary of Emerson at our principal executive offices not later than the close
of business on the ninetieth (90th) day nor earlier than the close of business
on the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that if the date of the
annual meeting is more than thirty (30) days before or more than sixty (60) days
after such anniversary date, notice to be timely must be so delivered not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by us. The public announcement of an
adjournment or postponement of an annual meeting will not commence a new time
period (or extend any time period) for the giving of a notice as described
above. A nomination notice must set forth as to each person whom the proponent
proposes to nominate for election as a director: (a) all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected) and (b)
information that will enable our Board of Directors to determine whether the
candidate satisfies the minimum criteria and any additional criteria established
by our Board of Directors.
The current Board of Directors nominated the individuals named below
for election to our Board of Directors, and background information on each of
the nominees (as of October 26, 2006) is set forth below. See "Security
Ownership of Certain Beneficial Owners and Management" for additional
information about the nominees, including their ownership of securities issued
by Emerson.
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YEAR
FIRST
BECAME
NAME AGE DIRECTOR PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------------ --- -------- ------------------------------------------------------------------------
Michael A.B. Binney 46 2005 Since July 2006, our President-International Sales; since November 1991,
Executive Director of The Grande Holdings Limited ("Grande Holdings"), a
Hong Kong listed company engaged in a number of businesses including the
manufacture, sale and distribution of audio, video and other consumer
electronics and digital products.
Peter G. Bunger 65 1992 Since 1990, a consultant with Savarina AG, an entity engaged in the
business of portfolio management monitoring in Zurich, Switzerland;
since October 1992, a Director of Savarina AG; from 2002 to September
2006, an independent consultant for Emerson's manufacturing efforts in
Europe; and from December 1996 through July 2005, a Director of Sport
Supply Group, Inc. ("SSG"), which is quoted on the over the counter
bulletin board (OTC: SSPY). Following the sale of Emerson's issued and
outstanding shares of common stock of SSG (approximately 53.2%
ownership) in July 2005, Mr. Bunger stepped down as a Director of SSG.
See "Certain Relationships and Related Transactions."
W. Michael Driscoll (1) 60 2006 Over thirty-six years experience as a director and executive officer of
various public and private companies; currently Chief Executive Officer
of Ithaca Technologies, LLC and serving on the Boards of Directors of
IPC Corporation Ltd., Singapore and Music Gear Incorporated, USA;
formerly Chairman of the Board of ThinSoft (Holdings) Ltd., Hong Kong
and President and Chief Executive Officer of Dazzle Multimedia
Corporation, Smith Corona Corporation, Austin Computer Systems, Inc. and
Technology Applications, Ltd., Thailand.
Jerome H. Farnum (1) 71 1992 Since July 1994, an independent consultant; for at least five years
prior to July 1994, a senior executive (in charge of legal and tax
affairs, accounting, asset and investment management, foreign exchange
relations and financial affairs) with several entities comprising the
Fidenas group of companies, whose activities encompassed merchant
banking, investment banking, investment management and corporate
development.
Greenfield Pitts 56 2006 Over twenty-five years experience with Wachovia Bank, Emerson's present
lender; thirty years experience with international banking; managed a
joint venture between Wachovia and HSBC.
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Norbert R. Wirsching (1) 69 2006 Forty-five years experience with consumer electronics industry; managed
international public and private companies, including: Director and
Chief Executive Officer of Capetronic Group Ltd. Global, Director and
Chief Executive Officer of Polly Peck International PLC, London,
Director Sansui Electric Company Ltd., Tokyo, Director of BSR
International, Hong Kong/London and Chairman of BSR USA; since 1994,
principal of N.R. Wirsching Enterprise, a consulting firm focusing on
international public and private companies, as well as merger and
acquisition services; involved in philanthropic organizations; Trustee
of Wooster School, an independent private school.
Eduard Will 64 2006 Since July 2006, our President-North American Operations; former
Chairman of our Audit Committee from January 2006 through July 2006;
over thirty-seven years experience as merchant banker, senior advisor
and director of various public and private companies; presently serving
on Board of Directors or acting as Senior Adviser to: KoolConnect
Technologies Inc., Wasatch Photonics Inc., Darby Overseas Investments,
Ltd. and Integrated Data Corporation.
Christopher Ho 56 2006 Since July 2006, our Chairman. Also the Chairman of Grande Holdings,
Hong Kong based group of companies engaged in various businesses
including the manufacture, sale and distribution of audio, video and
other consumer electronics and video products; certified public
accountant (Hong Kong); former partner in international accounting
firms; extensive experience in corporate finance, international trade
and manufacturing.
Adrian Ma 62 2006 Since March 2006, our Chief Executive Officer; since January 1999,
director of Grande Holdings; over thirty years experience as Executive
Chairman, Executive Director and Managing Director of various
organizations focused primarily in the consumer electronics industry;
Director of Lafe Technology Ltd., Vice Chairman and Managing Director of
Ross Group Inc. and Deputy Chairman of Sansui Electronics Co., Ltd.
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(1) Member of the Audit Committee
VOTE REQUIRED
Directors will be elected by a plurality of the votes cast by the
holders of our common stock voting in person or by proxy at the Annual Meeting.
Abstentions and broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will have no effect on the vote for
election of directors.
THE BOARD OF DIRECTORS URGES YOU TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of October 26, 2006, the beneficial
ownership of (i) each current and nominee for director; (ii) each of our
executive officers named in the Summary Compensation Table ("executive
officers"); (iii) our directors, nominees for director and executive officers as
a group and (iv) each stockholder known by us to own beneficially more than 5%
of our outstanding shares of common stock. Except as otherwise noted, the
address of each of the following beneficial owners is c/o Emerson Radio Corp., 9
Entin Road, Parsippany, New Jersey 07054.
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
------------------------------------- ------------------------ --------------------
Christopher Ho (2)* 13,780,600 50.9%
Adrian Ma* -0- -0-
Eduard Will (3)* -0- -0-
Michael A.B. Binney (4)* 8,333 **
John J. Raab (5) 66,667 **
John D. Florian -0- -0-
Peter G. Bunger (6)* 50,538 **
W. Michael Driscoll* -0- -0-
Jerome H. Farnum (7)* 25,000 **
Greenfield Pitts* -0- -0-
Norbert Wirsching* -0- -0-
Elizabeth J. Calianese (8) -0- -0-
Geoffrey P. Jurick (9) 398,910 1.5
Patrick Murray (10) -0- -0-
Guy A. Paglinco (11) 55,000 **
All Directors and Executive
Officers listed above as a Group (15
persons) (12) 14,385,048 52.5%
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(*) Director or nominee for director (all current directors are nominees for
director).
(**) Less than one percent.
(1) Based on 27,089,832 shares of common stock outstanding as of October 26,
2006. Each beneficial owner's percentage ownership of common stock is determined
by assuming that options that are held by such person (but not those held by any
other person) and that are exercisable or convertible within sixty days of
October 26, 2006 have been exercised. Except as otherwise indicated, the
beneficial ownership table does not include common stock issuable upon exercise
of outstanding options that are not currently exercisable within sixty days of
October 26, 2006. Except as otherwise indicated and based upon our review of
information as filed with the U.S. Securities and Exchange Commission ("SEC"),
we believe that the beneficial owners of the securities listed have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
(2) S&T International Distribution Ltd. ("S&T") is the record owner of
10,000,000 shares of common stock (the "Original Shares") and The Grande Group
Limited ("GGL") is the record owner of 3,780,600 shares of common stock (the
"Additional Shares" and together with the Original Shares, the "Shares"). As the
sole stockholder of S&T, Grande N.A.K.S. Ltd. ("N.A.K.S.") may be deemed to own
beneficially the Original Shares. As the sole stockholder of N.A.K.S. and GGL,
The Grande Holdings Limited ("Grande Holdings") may be deemed to own
beneficially the Shares. Mr. Ho has a beneficial interest in approximately 64%
of the capital stock of Grande Holdings. By virtue of such interest and his
position with Grande Holdings, Mr. Ho may be deemed to have power to vote and
power to dispose of the Shares beneficially held by Grande Holdings.
(3) Mr. Will has options to purchase 25,000 shares of our common stock issued
pursuant to Emerson's 2004 Director Stock Option Plan that are not exercisable
within sixty days of October 26, 2006.
(4) Represents options to purchase shares of our common stock that are currently
exercisable or exercisable within sixty days of October 26, 2006. Mr. Binney has
options to purchase 16,667 shares of our common stock issued pursuant to
Emerson's 2004 Director Stock Option Plan that are not exercisable within sixty
days of October 26, 2006.
(5) Represents options to purchase shares of our common stock that are currently
exercisable or exercisable within sixty days of October 26, 2006. Mr. Raab has
options to purchase 33,333 shares of our common stock issued pursuant to
Emerson's 2004 Employee Stock Option Plan that are not exercisable within sixty
days of October 26, 2006.
(6) Mr. Bunger's ownership consists of 33,871 shares of common stock directly
owned by him and options to purchase 16,667 shares of our common stock issued
pursuant to Emerson's 2004 Director Stock Option Plan that are exercisable
within sixty days of October 26, 2006. Mr. Bunger also has options to purchase
8,333 shares of our common stock issued pursuant to Emerson's 2004 Director
Stock Option Plan that are not exercisable within sixty days of October 26,
2006.
(7) Represents options to purchase shares of our common stock that are currently
exercisable or exercisable within sixty days of October 26, 2006. Mr. Farnum
also has options to purchase 25,000 shares of our common stock issued pursuant
to Emerson's 2004 Director Stock Option Plan that are not exercisable within
sixty days of October 26, 2006.
(8) Ms. Calianese resigned as our Senior Vice President, General Counsel and
Corporate Secretary effective December 16, 2005.
(9) Mr. Jurick's beneficial ownership consists of 265,576 shares of common stock
directly owned by him and options to purchase 133,334 shares of our common stock
issued pursuant to Emerson's 2004 Employee Stock Option Plan that are
exercisable within sixty days of October 26, 2006. Mr. Jurick also has options
to purchase 66,666 shares of our common stock issued pursuant to Emerson's 2004
Stock Option Plan that are not exercisable within sixty days of October 26,
2006. Mr. Jurick resigned as our Chairman and Chief Executive Officer on March
30, 2006 and was replaced by Adrian Ma. Mr. Jurick resigned as our President in
July 2006 and is currently serving as a consultant.
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(10) Mr. Murray resigned as our President-Emerson Radio Consumer Products
Corporation effective May 19, 2006.
(11) Mr. Paglinco's beneficial ownership consists of 20,000 shares of common
stock directly owned by him and options to purchase 35,000 shares of our common
stock issued pursuant to Emerson's 2004 Employee Stock Option Plan that are
exercisable within sixty days of October 26, 2006. Mr. Paglinco resigned as our
Vice President and Chief Financial Officer effective April 14, 2006.
(12) Includes 285,001 shares of common stock issuable upon exercise of options
that are exercisable within sixty days of October 26, 2006.
BOARD OF DIRECTORS AND COMMITTEES
At the beginning of our fiscal year, our Board of Directors consisted
of Messrs. Bunger, Farnum, Morey, Jurick and Robert H. Brown, Jr. Mr. Brown
passed away on August 12, 2005. On March 2, 2006, Mr. Morey resigned as a
director, informing us by letter dated March 1, 2006 that he elected to resign
as a result of Mr. Jurick's sale of his shares of common stock. A copy of such
letter was filed as an exhibit to our current report on Form 8-K filed with the
SEC on March 7, 2006. Mr. Jurick resigned from the Board of Directors in July
2006. Since December 2005, we have added seven directors to the Board of
Directors: Messrs. Ho, Binney, Driscoll, Ma, Pitts, Will and Wirsching.
The Board of Directors meets periodically during our fiscal year to
review significant developments affecting us and to act on matters requiring
Board of Director approval. The Board of Directors held twenty-two (22) formal
meetings during fiscal year ended March 31, 2006 ("Fiscal 2006") and also acted
by unanimous written consent. During Fiscal 2006, each member of the Board of
Directors participated in at least 75% of the aggregate of all meetings of the
Board of Directors and the aggregate of all meetings of committees on which such
member served that were held during the period. During Fiscal 2006, the Board of
Directors had three standing committees, the Audit Committee, the Compensation
and Personnel Committee and the Nominating Committee. The functions of these
committees during Fiscal 2006 are described below. No member of any of the
committees is an employee of Emerson.
The Board of Directors is responsible for the management and direction
of Emerson and for establishing broad corporate policies. It has initiated
actions consistent with the Sarbanes-Oxley Act of 2002, the Securities and
Exchange Commission (the "SEC") and the American Stock Exchange. The Board of
Directors has determined that during Fiscal 2006 Messrs. Bunger, Driscoll,
Farnum, Pitts and Will satisfied the independence standards of the American
Stock Exchange and the SEC's Rule 10A-3. In addition, the Board of Directors has
determined that Messrs. Bunger, Driscoll, Farnum, Pitts and Wirsching currently
satisfy all such definitions of independence.
The Board of Directors has also determined that during Fiscal 2006,
Eduard Will constituted our "audit committee financial expert," as such term is
defined by the SEC. As a result of the appointment of Mr. Will as our
President-North American Operations in July 2006, the Board of Directors has
determined that Mr. Driscoll currently constitutes our "audit committee
financial expert" as such term is defined by the SEC. Emerson has a policy of
8
encouraging, but not requiring, its Board members to attend annual meetings of
stockholders. Last year each of Emerson's directors, at such time, attended the
annual meeting of stockholders.
As of October 26, 2006, Grande Holdings beneficially owned an
aggregate of 13,780,600 shares of our common stock, which represents
approximately 50.9% of the shares of common stock currently outstanding.
Accordingly, Emerson is a "controlled company," as such term is defined in
Section 801(a) of The American Stock Exchange Company Guide (the "Company
Guide"). As a "controlled company," Emerson is not required to comply with
Sections 802(a), 804 or 805 of the Company Guide relating to independent
directors, Board nominations and executive compensation, respectively.
Although a majority of our current directors meet the definition of
independence as established by the American Stock Exchange and SEC rules, under
Section 802(a) of the Company Guide, we are exempt from the requirement that at
least a majority of the directors on our Board of Directors be independent
directors as defined in Section 121A of the Company Guide because we are a
"controlled company," as such term is defined in Section 801(a) of the Company
Guide. As a result, in the future, we may not maintain a board of directors
comprised of a majority of independent directors that meet the definition of
independence as set forth in the American Stock Exchange and SEC rules.
Audit Committee. Our Audit Committee is presently comprised of Messrs.
Driscoll (Chairman), Farnum and Wirsching. The Audit Committee is empowered by
the Board of Directors to, among other things: (i) serve as an independent and
objective party to monitor Emerson's financial reporting process, internal
control system and disclosure control system; (ii) review and appraise the audit
efforts of Emerson's independent accountants; (iii) assume direct responsibility
for the appointment, compensation, retention and oversight of the work of the
outside auditors and for the resolution of disputes between the outside auditors
and Emerson's management regarding financial reporting issues and (iv) provide
the opportunity for direct communication among the independent accountants,
financial and senior management and the Board of Directors.
During Fiscal 2006, the Audit Committee performed its duties under a
written charter approved by the Board of Directors and formally met six (6)
times. A copy of our Audit Committee Charter is posted on our website:
www.emersonradio.com on the Investor Relations page.
Compensation and Personnel Committee. During Fiscal 2006, our
Compensation and Personnel Committee was comprised of Messrs. Bunger and Farnum
and (i) made recommendations to the Board of Directors concerning remuneration
arrangements for senior executive management; (ii) administered our stock option
plans and (iii) made such reports and recommendations, from time to time, to the
Board of Directors upon such matters as the Compensation and Personnel Committee
may deem appropriate or as may be requested by the Board of Directors. During
Fiscal 2006, the Compensation and Personnel Committee formally met one (1) time.
Under Section 805 of the Company Guide, we are exempt from the
requirement to have the compensation of our executives determined by a
compensation committee comprised solely of
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independent directors or by a majority of the board's independent directors
because we are a "controlled company," as such term is defined in Section 801(a)
of the Company Guide. As a result, we have disbanded the Compensation and
Personnel Committee.
Nominating Committee. During Fiscal 2006, the Nominating Committee was
comprised of Messrs. Bunger and Farnum and was empowered by the Board of
Directors to, among other functions: (i) recommend to the Board of Directors
qualified individuals to serve on Emerson's Board of Directors and (ii) identify
the manner in which the Nominating Committee evaluates nominees recommended for
the Board of Directors. Our Nominating Committee met two (2) times during Fiscal
2006.
Under Section 804 of the Company Guide, we are exempt from the
requirement to have director nominees selected by a nominating committee
comprised entirely of independent directors or by a majority of the independent
directors because we are a "controlled company," as such term is defined in
Section 801(a) of the Company Guide. As a result, we have disbanded the
Nominating Committee and the full Board of Directors will participate in the
consideration of director nominees in the future.
CODES OF ETHICS
We have adopted a Code of Ethics for Senior Financial Officers ("Code
of Ethics") that applies to our Chief Executive Officer, Chief Financial
Officer, Chief Accounting Officer, Controller and Treasurer. This Code of Ethics
was established with the intention of focusing Senior Financial Officers on
areas of ethical risk, providing guidance to help them recognize and deal with
ethical issues, providing mechanisms to report unethical conduct, fostering a
culture of honesty and accountability, deterring wrongdoing and promoting fair
and accurate disclosure and financial reporting.
We have also adopted a Code of Conduct for Officers, Directors and
Employees of Emerson Radio Corp. and Its Subsidiaries ("Code of Conduct"). We
prepared this Code of Conduct to help all officers, directors and employees
understand and comply with our policies and procedures. Overall, the purpose of
our Code of Conduct is to deter wrongdoing and promote (i) honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of
interest between personal and professional relationships; (ii) full, fair,
accurate, timely and understandable disclosure in reports and documents that we
file with, or submit to, the SEC and in other public communications made by us;
(iii) compliance with applicable governmental laws, rules and regulations; (iv)
prompt internal reporting of code violations to an appropriate person or persons
identified in this Code of Conduct and (v) accountability for adherence to the
Code of Conduct.
The Code of Ethics and the Code of Conduct are posted on our website:
www.emersonradio.com on the Investor Relations page. If we make any substantive
amendments to, or grant any waiver (including any implicit waiver) from a
provision of the Code of Ethics or the Code of Conduct, and that relates to any
element of the Code of Ethics definition enumerated in Item 406(b) of Regulation
S-K, we will disclose the nature of such amendment or waiver on our website or
in a current report on Form 8-K.
10
COMPENSATION OF DIRECTORS
During Fiscal 2006, our directors who were not employees, specifically
Messrs. Brown, (until his death in August 2005), Binney, Bunger, Farnum, Morey,
Driscoll, Pitts and Will were paid $31,250, $15,000, $42,500, $55,662, $45,720,
$4,167, $1,036 and $10,155, respectively, for serving on the Board of Directors
and on our various committees during the period. Each Outside Director is paid
an annual director's fee of $12,500; each member of the Compensation and
Personnel Committee is paid an additional fee of $5,000 per annum; each member
of the Nominating Committee is paid an additional fee of $5,000 per annum; each
member of the Audit Committee is paid an additional fee of $7,500 per annum;
and, each chairman of the Audit Committee and the Compensation and Personnel
Committee is paid an additional fee of $5,000 per annum. All directors' fees are
paid in four equal quarterly installments per annum. Directors who are our
employees were not paid for their services as directors during Fiscal 2006. As a
result of the number of board meetings held during Fiscal 2006, the Board of
Directors resolved in December of 2005, to compensate Messrs. Bunger, Farnum and
Morey an additional $20,000 each, payable in December 2005 and to raise the
annual compensation paid to non-employee directors to $45,000 from $12,500,
effective January 1, 2006. The December additional compensation is reflected in
the totals disclosed above. Additionally, each director who is not an employee
is eligible to participate in our 2004 Director Stock Option Plan. Directors of
Emerson are reimbursed their expenses for attendance at meetings. Further, we
offer to provide health care insurance to each Emerson director who is not an
employee. In Fiscal 2006, Messrs. Binney, Farnum, Morey and Will were each
granted stock options, pursuant to the 2004 Director Stock Option Plan, to
purchase 25,000 shares of common stock at an exercise price ranging from $3.07
to $3.28 per share. These options vest in equal installments over three years,
commencing one year from the date of grant, and their exercise is contingent
upon continued service as a member of our Board of Directors. In Fiscal 2006,
Mr. Bunger also received $48,000 in fees for the European manufacturing
consulting services he rendered to Emerson. Mr. Bunger's consulting services
with Emerson were discontinued in September 2006.
11
OFFICERS
The following table sets forth certain information regarding the
current executive officers of Emerson:
NAME AGE POSITION FISCAL YEAR BECAME OFFICER
------------------- --- ----------------------- --------------------------
Christopher Ho 56 Chairman 2006
Adrian Ma 62 Chief Executive Officer 2006
and Director
Eduard Will 64 President-North 2006
American Operations and
Director
Michael A.B. Binney 46 President-International 2005
Sales and Director
John J. Raab 70 Senior Executive Vice 1995
President and Chief
Operating Officer
John D. Florian 49 Deputy Chief Financial 2006
Officer, Controller and
Secretary
CHRISTOPHER HO has served as our Chairman since July 2006. Mr. Ho is presently
the Chairman of The Grande Holdings Limited ("Grande Holdings"), a Hong Kong
based group of companies engaged in a number of businesses including the
manufacture, sale and distribution of audio, video and other consumer
electronics and video products. Grande Holdings is currently the holder of
approximately 50.9% of our outstanding shares of common stock. Christopher Ho
graduated with a Bachelor of Commerce degree from the University of Toronto in
1974. He is a member of the Canadian Institute of Chartered Accountants as well
as a member of the Institute of Management Accountants of Canada. He is also a
certified public accountant (Hong Kong) and a member of the Hong Kong Society of
Accountants. He was a partner in international accounting firms before joining
Grande Holdings and has extensive experience in corporate finance, international
trade and manufacturing.
ADRIAN MA has served as our Chief Executive Officer since March 30, 2006 and
served as our Chairman from March 30, 2006 through July 26, 2006. Mr. Ma
continues to serve as a Director. Mr. Ma is presently a director of Grande
Holdings. Mr. Ma has served as a director of Grande Holdings since January 15,
1999 and has more than 30 years experience as an Executive Chairman, Executive
Director and Managing Director of various organizations focused primarily in the
consumer electronics industry. Mr. Ma is also Director of Lafe Technology Ltd.,
Vice Chairman and Managing Director of Ross Group Inc. and Deputy Chairman of
Sansui Electronics Co., Ltd.
EDUARD WILL has served as our President-North American Operations since July
2006 and a Director since January 2006. Prior to becoming President-North
American Operations, Mr. Will served as the Chairman of our Audit Committee from
January 2006 through July 2006. Mr. Will has more than 37 years experience as a
merchant banker, senior advisor and director of various public and private
companies. Presently, Mr. Will is serving on the Board of Directors or acting
12
as Senior Adviser to: KoolConnect Technologies Inc.; Wasatch Photonics Inc.;
Ithaca Technologies, LLC; T&W Electronics Co.; Darby Overseas Investments, Ltd.
and Integrated Data Corporation.
MICHAEL A.B. BINNEY has served as our President-International Sales since July
2006 and as a Director since December 2005. He is a fellow member of the
Institute of Chartered Accountants in England and Wales and a fellow member of
the Hong Kong Institute of Certified Public Accountants. He was a professional
accountant for several years before joining the computer and electronics
industry. He is currently also an Executive Director of Grande Holdings, a
company listed on the Stock Exchange of Hong Kong as well as several other
public companies in Malaysia, Japan, Singapore and the United Kingdom.
JOHN J. RAAB has served as Chief Operating Officer and Senior Executive Vice
President-International since May 2003, Executive Vice President-International
from June 2000 to May 2003, Senior Vice President-International from October
1997 to June 2000 and Senior Vice President-Operations from October 1995 to
October 1997.
JOHN D. FLORIAN has served as Deputy Chief Financial Officer since May 2006,
Controller since January 2005 and Secretary since July 2006. From October 2002
through August 2004, Mr. Florian held the position of US Controller at DSM
Nutritional Products, Inc., formerly Roche Vitamins Inc. and Hoffmann-LaRoche
("DSM"). From December 2000 through September 2002, he served as Director of
Financial Accounting of DSM and prior to December 2000, Mr. Florian served as a
Financial Management Analyst at DSM. Mr. Florian earned a B.A. in Accounting
from William Paterson College and is a member of the New Jersey Society of
Certified Public Accountants ("NJSCPA").
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors, officers and stockholders who
beneficially own more than 10% of any class of our equity securities registered
pursuant to Section 12 of the Exchange Act to file initial reports of ownership
and reports of changes in ownership with respect to our equity securities with
the SEC and the American Stock Exchange. All reporting persons are required by
certain regulations to furnish us with copies of all Section 16(a) forms they
file with the SEC.
Based solely on our review of the copies of such forms received by us,
the following reports were not filed on a timely basis during Fiscal 2006:
Grande Holdings Ltd., a 10% holder of our common stock, filed a Form 4 on
February 27, 2006, reporting several purchases of common stock, beginning on
January 23, 2006; Jerome Farnum, a director of Emerson, filed a Form 4 on March
1, 2006, reporting sales of common stock beginning on February 24, 2006.
13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding
compensation paid to our Chief Executive Officer and each of our other four most
highly compensated executive officers (based on salary and bonus earned during
Fiscal 2006) for services rendered in all capacities to us during the 2006, 2005
and 2004 fiscal years:
SUMMARY COMPENSATION TABLE
OTHER SECURITIES ALL
ANNUAL UNDER- OTHER
NAME AND PRINCIPAL FISCAL COMPEN- LYING COMPEN-
POSITION(S) YEAR SALARY BONUS SATION OPTIONS SATION (1)
------------------------ ------ -------- -------- ------- ---------- ----------
GEOFFREY P. JURICK 2006 $715,000 $150,000 $80,000 200,000 --
CHAIRMAN OF THE 2005 500,000 125,000 80,000 200,000 --
BOARD, CHIEF 2004 500,000 -- 56,197 -- $ 3,186
EXECUTIVE OFFICER
AND PRESIDENT (2)(3)
ADRIAN MA 2006 0 -- -- -- --
CHAIRMAN OF THE
BOARD AND CHIEF
EXECUTIVE OFFICER (4)
JOHN J. RAAB 2006 $290,865 $ 50,000 -- 100,000 $21,712
SENIOR EXECUTIVE VICE 2005 266,863 75,000 -- 100,000 20,402
PRESIDENT AND CHIEF 2004 272,560 -- -- -- 20,622
OPERATING OFFICER (3)
GUY A. PAGLINCO 2006 $185,096 $100,000 -- 50,000 $29,172
VICE PRESIDENT, CHIEF 2005 153,204 -- -- -- 19,764
FINANCIAL OFFICER (5) 2004 123,890 12,500 -- -- 15,552
PATRICK MURRAY 2006 $387,308 $ 30,000 -- -- $31,918
PRESIDENT-EMERSON 2005 368,757 -- -- -- 28,553
RADIO CONSUMER 2004 376,627 -- -- -- 28,796
PRODUCTS CORPORATION (6)
ELIZABETH J. CALIANESE 2006 $205,412 $ 50,000 -- -- $23,591
SENIOR VICE PRESIDENT, 2005 213,491 47,500 -- 100,000 28,146
GENERAL COUNSEL 2004 218,047 -- -- -- 28,270
AND CORPORATE
SECRETARY (3)(7)
----------
(1) All other compensation consists of Emerson's contribution to our 401(k)
employee savings plan, group health, life insurance, disability insurance
and auto allowances.
14
(2) Other annual compensation consists of temporary lodging expenses. In
addition to the amounts set forth in the table above, Mr. Jurick received
$37,500 from SSG for services he rendered to SSG during 2006, and $152,000 in
years 2005 and 2004 respectively. On March 30, 2006, Mr. Jurick confirmed his
resignation as our Chairman and Chief Executive Officer and was replaced by
Adrian Ma. Mr. Jurick resigned as our President and a director in July 2006 and
currently serves as a consultant.
(3) In October 2004, Messrs. Jurick and Raab and Ms. Calianese were granted
stock options to purchase 200,000, 100,000 and 100,000 shares of common stock,
respectively, at an exercise price of $3.26, $2.96 and $2.96 per share,
respectively. In June 2005, Mr. Paglinco was granted stock options to purchase
50,000 shares of common stock at an exercise price of $2.62 per share. These
options vest in equal installments over three years, commencing one year from
the date of grant, and their exercise is contingent on continued employment with
Emerson. See Footnotes (5) and (7) below.
(4) Mr. Ma was appointed as our Chairman and Chief Executive Officer on March
30, 2006 upon the resignation of Mr. Jurick. Mr. Ma was replaced as our Chairman
upon the appointment of Mr. Ho in July 2006. Mr. Ma did not receive any salary
or other compensation in Fiscal 2006 and has elected not to receive any salary
or other compensation for his services as Chief Executive Officer during fiscal
2007.
(5) Mr. Paglinco resigned as our Vice President and Chief Financial Officer
effective April 14, 2006.
(6) Mr. Murray resigned as our President-Emerson Radio Consumer Products
Corporation effective May 19, 2006.
(7) Ms. Calianese resigned as our Senior Vice President, General Counsel and
Corporate Secretary effective December 16, 2005.
OPTION GRANTS DURING 2006 FISCAL YEAR
The following table provides certain information with respect to
options granted to our Chief Executive Officer and to each of the executive
officers named in the Summary Compensation Table during Fiscal 2006.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED (1) FISCAL 2006 SHARE DATE 5% 10%
------------------- ----------- ------------------ --------- ---------- ------- -------
GUY A. PAGLINCO (3) 50,000 100% $2.62 6/23/15 304,623 485,078
(1) The stock options were granted under the Emerson Radio Corp. 2004 Employee
Stock Incentive Plan, and, unless otherwise designated at the time of grant, are
exercisable commencing one year after the grant date in three equal annual
installments, with full vesting occurring on the third anniversary of the date
of the grant.
(2) The dollar amounts under these columns are the result of calculations at the
assumed compounded market appreciation rates of 5% and 10% as required by the
SEC over a ten-year term and therefore, are not intended to forecast possible
future appreciation, if any, of the stock price. The disclosure assumes the
options will be held for the full ten-year term prior to exercise. Such options
may be exercised prior to the end of such ten-year term. The actual value, if
any, an executive officer may realize will depend on the excess of the stock
price over the exercise
15
price on the date the option is exercised. There can be no assurance that the
stock price will appreciate at the rates shown in the table.
(3) Mr. Paglinco resigned as our Vice President and Chief Financial Officer
effective April 14, 2006.
OPTION EXERCISES DURING FISCAL 2006 AND FISCAL 2006 YEAR END VALUES
The following table provides information related to options exercised
by our executive officers during Fiscal 2006 and the number and value of options
held at the end of Fiscal 2006 by our executive officers. We do not have any
outstanding stock appreciation rights.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END AT FY-END
ACQUIRED VALUE (#) ($)(1)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
-------------------------- ----------- -------- -------------- ---------------
Geoffrey P. Jurick (2) 66,666/133,334 $32,000/$64,000
Adrian Ma (3) -- -- 0 0
John J. Raab -- -- 33,333/66,667 $26,000/$52,000
Guy A. Paglinco (4) -- -- 0/50,000 $0/$56,000
Patrick Murray (5) -- -- -- --
Elizabeth J. Calianese (6) -- -- -- --
(1) Based on $3.74 per share, the closing price for our common stock as reported
by the American Stock Exchange on March 31, 2006. Value is calculated on the
basis of the difference between $3.74 and the option exercise price of "in the
money" options, multiplied by the number of shares of our common stock
underlying the option.
(2) On March 30, 2006, Mr. Jurick confirmed his resignation as our Chairman and
Chief Executive Officer and was replaced by Adrian Ma. Mr. Jurick resigned as
our President and a director in July 2006 and currently serves as a consultant.
(3) Mr. Ma was appointed as our Chairman and Chief Executive Officer on March
30, 2006 upon the resignation of Mr. Jurick. Mr. Ma was replaced as our Chairman
upon the appointment of Mr. Ho in July 2006. Mr. Ma has not been granted any
options.
(4) Mr. Paglinco resigned as our Vice President and Chief Financial Officer
effective April 14, 2006.
(5) Mr. Murray resigned as our President-Emerson Radio Consumer Products
Corporation effective May 19, 2006.
(6) Ms. Calianese resigned as our Senior Vice President, General Counsel and
Corporate Secretary effective December 16, 2005.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about our common stock that may
be issued upon the exercise of options and rights under our 1994 Stock
Compensation Program, 1994 Non-
16
Employee Director Stock Option Plan, Emerson Radio Corp. 2004 Employee Stock
Incentive Plan and 2004 Non-Employee Outside Director Stock Option Plan and
exercise of warrants, as of March 31, 2005 (the "Plans"). The 1994 Plans expired
in July 2004 and the remainder of the Plans were the only equity compensation
plans in existence as of March 31, 2006.
NUMBER OF SECURITIES TO
BE WEIGHTED AVERAGE EXERCISE NUMBER OF SECURITIES
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING REMAINING AVAILABLE FOR
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER
WARRANTS AND RIGHTS RIGHTS EQUITY COMPENSATION PLANS
(A) (B) (C)
----------------------- ------------------------- -------------------------
Equity compensation plans 686,168 $3.02 2,125,000
approved by security holders
Equity compensation plans 100,000 4.00 --
not approved by security holders
------- ----- ---------
TOTAL 786,168 $3.14 2,125,000
======= ===== =========
CERTAIN EMPLOYMENT AGREEMENTS
Effective September 1, 2001, John J. Raab, Chief Operating Officer and
Senior Executive Vice President, entered into a three-year employment agreement
(the "Raab Employment Agreement") with us, providing for an annual compensation
of $250,000, which was increased to $257,500, effective April 1, 2002, and
$275,000, effective April 1, 2003. By letter agreement dated effective as of
September 1, 2004, the term of the Raab Employment Agreement was extended
through and including August 31, 2007 and his annual compensation was increased
to $286,000, effective April 1, 2005. In addition to his base salary, Mr. Raab
may also receive an additional annual performance bonus to be recommended by the
Compensation and Personnel Committee of our Board of Directors, subject to the
final approval of our Board of Directors. In the event that Mr. Raab were to be
terminated due to permanent disability, without cause or as a result of
constructive discharge, the estimated dollar amount to be paid after March 31,
2006, to such individual, based on the terms of his contract, would be $405,167.
Eduard Will, our President-North American Operations, entered into an
employment agreement (the "Will Employment Agreement") with us on July 27, 2006
that provides that Mr. Will shall serve as our President-North American
Operations through June 30, 2007. Following the initial term of the agreement
(June 30, 2007), we have the right to terminate the agreement upon ninety days
prior written notice and Mr. Will has the right to terminate the agreement upon
thirty days prior written notice. In addition, during the initial term, Mr. Will
has the right to terminate the agreement upon ninety days prior written notice.
The agreement provides for annual compensation of $250,000. In addition to his
base salary, Mr. Will may also receive an additional annual performance bonus to
be recommended by the Compensation and Personnel Committee of our Board of
Directors, subject to the final approval of our Board of Directors.
On March 30, 2006, Mr. Jurick confirmed his resignation as our
Chairman and Chief Executive Officer. Mr. Jurick resigned as our President and a
director in July 2006. Mr. Jurick is currently serving as a consultant to us.
Pursuant to the terms of the non-written agreement, Mr. Jurick is entitled to
receive $350,000 per year for providing consulting services to us. The agreement
with Mr. Jurick is terminable by either party upon thirty days prior written
notice.
17
Pursuant to the terms of an agreement dated March 23, 2006 between us
and Guy A. Paglinco, our former Chief Financial Officer (the "Paglinco
Agreement") who resigned in April 2006, we paid Mr. Paglinco (a) his base salary
earned but unpaid through April 14, 2006, (b) reimbursement for unused sick days
and vacation days through April 14, 2006 and (c) any amounts vested under any
Company compensation plan or program. In addition, we entered into a one-year
consulting agreement with Mr. Paglinco, pursuant to which Mr. Paglinco will
provide consulting services to us and we, in consideration therefor, will pay to
him in installments an amount equal to $182,000 and reimburse him for certain
healthcare continuation payments. In addition, all stock options granted to Mr.
Paglinco under the 2004 Employee Stock Incentive Plan automatically vested.
Elizabeth J. Calianese, our former Senior Vice President, General
Counsel and Corporate Secretary, resigned in December 2005 and in October 2006,
we agreed to pay her severance in the amount of $300,000 and agreed to continue
to provide her health insurance coverage for a period of 18 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Geoffrey P. Jurick served as Chairman of the Board, Chief Executive
Officer and President of Emerson and participated in deliberations concerning
Emerson senior executive officer compensation throughout fiscal year ended March
31, 2006. Until July 1, 2005, Mr. Jurick had also served as Chairman of the
Board and Chief Executive Officer of SSG and had participated in deliberations
concerning its senior executive officer compensation. As set forth in the
Summary Compensation Table above, Mr. Jurick also received $37,500 per annum in
salary from SSG for the services he rendered to SSG during Fiscal 2006. Mr.
Bunger is a Director of Emerson who serves on the Emerson Compensation and
Personnel Committee and, until July 1, 2005, had been a Director of SSG and a
member of the SSG Compensation Committee. See "Certain Relationships and Related
Transactions".
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
The Compensation and Personnel Committee of our Board of Directors
(the "Compensation Committee") oversees our senior executive compensation
strategy. The strategy is implemented through policies designed to support the
achievement of our business objectives and the enhancement of stockholder value.
Our Compensation Committee reviews, on an ongoing basis, all aspects of senior
executive compensation and its policies support the following objectives:
o The reinforcement of management's concern for enhancing stockholder
value.
o The attraction, hiring and retention of qualified executives.
o The provision of competitive compensation opportunities for
exceptional performance.
18
The basic elements of our senior executive compensation strategy are:
BASE SALARY. Base salaries for our senior executive managers
represent compensation for the performance of defined functions and
assumption of defined responsibilities. The Compensation Committee
reviews each senior executive's base salary on an annual basis. In
determining salary adjustments, the Compensation Committee considers
our growth in earnings and revenues and the executive's performance
level, as well as other factors relating to the executive's specific
responsibilities. Also considered are the executive's position,
experience, skills, potential for advancement, responsibility and
current salary in relation to the expected level of pay for the
position. Our Compensation Committee exercises its judgment based upon
the above criteria and does not apply a specific formula or assign a
weight to each factor considered.
ANNUAL INCENTIVE COMPENSATION. At the beginning of each
year, our Board of Directors establishes our performance goals for
that year, which may include target increases in sales, net income and
earnings per share, as well as more subjective goals with respect to
marketing, product introduction and expansion of customer base.
Bonuses awarded to executive officers are discretionary based
primarily upon individual achievement.
LONG-TERM INCENTIVE COMPENSATION. Our long-term incentive
compensation for management and employees consists of stock options
awarded under our stock option plans.
Our Compensation Committee views the granting of stock options as a
significant method of aligning management's long-term interests with those of
the stockholders and determines awards to executives based on its evaluation of
criteria that include responsibilities, compensation, as well as past and
expected contributions to the achievement of our long-term performance goals.
Stock options are designed to focus executives on our long-term performance by
enabling them to share in any increases in value of our stock.
Our Compensation Committee encourages executives, individually and
collectively, to maintain a long-term ownership position in our stock. The
Compensation Committee believes this ownership, combined with a significant
performance-based incentive compensation opportunity, forges a strong link
between our executives and stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Geoffrey P. Jurick served as our Chief Executive Officer, Chairman
of the Board of Directors and President throughout substantially all of Fiscal
2006. The Compensation Committee considered the results in all aspects of our
business, and Mr. Jurick's performance during Fiscal 2006.
Mr. Jurick's annual compensation for Fiscal 2006 was comprised of an
annual base salary of $715,000. In Fiscal 2006, Mr. Jurick also received $37,500
in salary for the services he
19
rendered to SSG. See "Summary Compensation Table". Mr. Jurick resigned as Chief
Executive Officer and Chairman of the Board of Directors on March 30, 2006.
Adrian Ma replaced Mr. Jurick as Chief Executive Officer and Chairman, but did
not receive any compensation for his role as Chief Executive Officer during
Fiscal 2006. Christopher Ho replaced Mr. Ma as Chairman of the Board of
Directors on July 26, 2006.
POLICY ON QUALIFYING COMPENSATION
Our Board of Directors has considered the potential impact of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Section
162(m) generally provides that a publicly held company's deduction for
compensation paid to its covered employees is limited to $1 million per year,
subject to certain exceptions. Our policy is to qualify, to the extent
reasonable, our executive officers' compensation for deductibility under
applicable tax laws. However, the Board of Directors believes that its primary
responsibility is to provide a compensation program that will attract, retain
and reward the executive talent necessary to our success. Consequently, the
Board of Directors recognizes that the loss of a tax deduction could be
necessary in some circumstances.
This report is submitted by the members of the Board of Directors and
the Compensation and Personnel Committee that were in existence at the end of
Fiscal 2006.
Board of Directors Compensation and Personnel Committee
------------------- ------------------------------------
Adrian Ma, Chairman Peter G. Bunger
Peter G. Bunger Jerome H. Farnum
Jerome H. Farnum
Michael A.B. Binney
Eduard Will
W. Michael Driscoll
Greenfield Pitts
Geoffrey P. Jurick
This report shall not be deemed "soliciting material" or incorporated
by reference in any filing by us under the Securities Act of 1933, as amended
(the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that we specifically incorporate this
information by reference, and shall not otherwise be deemed filed under either
act.
AUDIT COMMITTEE MATTERS
Audit Committee Charter. The Audit Committee performed its duties
during Fiscal 2006 under a written charter approved by the Board of Directors. A
copy of the charter was filed as Annex A to our Proxy Statement for Fiscal 2005,
filed as of November 10, 2005. A copy of the charter is also posted on our
website: www.emersonradio.com on the Investor Relations page.
20
Audit Committee Financial Expert. The Board of Directors has
determined that during Fiscal 2006, Mr. Eduard Will constituted our "audit
committee financial expert," as such term is defined by the SEC. Following Mr.
Will's appointment as President-North American Operations in July 2006, the
Board of Directors determined that Mr. W. Michael Driscoll constitutes our
"audit committee financial expert," as such term is defined by the SEC.
Independence of Audit Committee Members. Our common stock is listed on
the American Stock Exchange and we are governed by the listing standards of such
exchange. All members of the Audit Committee of the Board of Directors have been
determined to be "independent directors" under the listing standards of AMEX.
REPORT OF THE AUDIT COMMITTEE
This report shall not be deemed "soliciting material" or incorporated
by reference in any filing by us under the Securities Act or the Exchange Act
except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under either act.
Through March 2006, the Audit Committee was comprised of Messrs. Will
(Chairman), Morey and Farnum. Following Mr. Morey's resignation in March 2006,
the Board of Directors appointed Mr. W. Michael Driscoll to the Audit Committee.
All members of the Audit Committee have been determined to be independent as
defined by the listing standards of the American Stock Exchange. The Board of
Directors appointed Mr. Pitts to the Audit Committee following Mr. Will's
appointment as President-North American Operations in July 2006. Following Mr.
Pitts resignation in October, 2006, the Board of Directors appointed Mr.
Wirsching to the Audit Committee.
In this context, the Audit Committee has reviewed the audited
consolidated financial statements and has met and held discussions with
management and Moore Stephens, P.C. ("Moore Stephens"), Emerson's independent
auditors. Management has represented to the Audit Committee that Emerson's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles. Our independent auditors are responsible for
performing an independent audit of Emerson's financial statements in accordance
with auditing standards generally accepted in the United States and for issuing
a report on those financial statements. The Audit Committee is responsible for
monitoring and overseeing these processes. The Audit Committee also discussed
with the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61, which includes, among other items, matters related to
the conduct of the audit of Emerson's financial statements:
o methods to account for significant unusual transactions;
o the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus;
o the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and
21
o disagreements, if any, with management over the application of
accounting principles, the basis for management's accounting estimates
and the disclosures in the financial statements (there were no such
disagreements).
The independent auditors also provided the Audit Committee with
written disclosures and the letter required by Independence Standards Board
Standard No. 1, which relates to the auditors' independence from Emerson and its
related entities, and the Audit Committee discussed with the independent
auditors their independence. This standard further requires the auditors to
disclose annually in writing all relationships that, in the auditors'
professional opinion, may reasonably be thought to bear on their independence,
confirm their perceived independence and engage in the discussion of
independence.
Based on the Audit Committee's discussions with management and the
independent auditors, as well as the Audit Committee's review of the
representations of management and the report of the independent auditors to the
Audit Committee, the Audit Committee recommended to the Board of Directors that
Emerson's audited consolidated financial statements be included in the Annual
Report on Form 10-K for the fiscal year ended March 31, 2006, and filed with the
SEC.
The Audit Committee has selected Moore Stephens to be retained as
Emerson's independent certified public accountants to conduct the annual audit
and to report on, as may be required, the consolidated financial statements that
may be filed by Emerson with the SEC during the ensuing year.
Members of the Audit Committee
W. Michael Driscoll (Chairman)
Jerome H. Farnum
Norbert R. Wirsching
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL ACCOUNTANT
In accordance with the requirements of the Sarbanes-Oxley Act of 2002
and the Audit Committee's charter, all audit and audit-related work and all
non-audit work performed by our independent accountants, Moore Stephens, is
approved in advance by the Audit Committee, including the proposed fees for such
work. The Audit Committee is informed of each service actually rendered. Prior
to May 17, 2006, when Moore Stephens was retained by us as our independent
accountants, BDO Seidman, LLP ("BDO") served as our independent accountants
during Fiscal 2005.
o Audit Fees. Audit fees billed to us by BDO and Moore
Stephens for the audit of the financial statements included
in our Annual Reports on Form 10-K, and reviews by BDO of
the financial statements included in our Quarterly Reports
on Form 10-Q, for the fiscal years ended March 31, 2005 and
2006 totaled approximately $242,000 and $314,700,
respectively.
22
o Audit-Related Fees. We were billed $16,000 and $0 by BDO and
Moore Stephens for the fiscal years ended March 31, 2005 and
2006, respectively, for assurance and related services that
are reasonably related to the performance of the audit or
review of Emerson's financial statements and are not
reported under the caption Audit Fees above.
o Tax Fees. BDO billed us an aggregate of $196,000 and
$139,600, for the fiscal years ended March 31, 2005 and
2006, respectively, for tax services, principally related to
the preparation of income tax returns and related
consultation.
o All Other Fees. BDO and Moore Stephens billed us $0 and $0
for the fiscal years ended March 31, 2005 and 2006,
respectively, for permitted non-audit services, principally
consultation related to mergers and acquisitions.
Applicable law and regulations provide an exemption that permits
certain services to be provided by our outside auditors even if they
are not pre-approved. We have not relied on this exemption at any time
since the Sarbanes-Oxley Act was enacted.
CHANGE IN ACCOUNTANTS
As discussed above and previously reported in a Form 8-K dated May 23,
2006, on May 17, 2006, we retained the services of Moore Stephens as our
independent auditors to replace our former independent auditors, BDO, who
resigned as our independent registered public accounting firm on March 7, 2006.
BDO served as our independent registered public accountant since March 31, 2004.
Prior to March 31, 2004, Ernst & Young, LLP ("E&Y") served as our independent
registered public accountant.
The engagement of Moore Stephens and the replacement of BDO was
approved by our Board of Directors on the recommendation of our Audit Committee.
During our two most recent fiscal years ended March 31, 2004 and March 31, 2005,
respectively, and any subsequent interim period to May 17, 2006, we did not
consult with Moore Stephens regarding any matters noted in Item 304(a) of
Regulation S-K. BDO has provided tax services to us during the fiscal years
ended March 31, 2004, 2005 and 2006 and is expected to continue to provide such
services to us.
There were no "disagreements" within the meaning of Item 304(a)(1)(iv)
of Regulation S-K, or any events of the type listed in Item 304(a)(1)(v)(A)
through (D) of Regulation S-K, involving BDO that occurred within our most
recent fiscal year ended March 31, 2005. BDO's report on our financial
statements for the fiscal year ended March 31, 2005 did not contain any adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
There were no "disagreements" within the meaning of Item 304(a)(1)(iv)
of Regulation S-K, or any events of the type listed in Item 304(a)(1)(v)(A)
through (D) of Regulation S-K, involving E&Y, that occurred within our fiscal
year ended March 31, 2004. E&Y's report on
23
our financial statements for the fiscal year ended March 31, 2004 did not
contain any adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the most recent fiscal year and through March 7, 2006, there
had been no disagreements with BDO on any matter of accounting principles or
practices, financial statement disclosures, or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of BDO, would have
caused BDO to make reference to the subject matter of the disagreement in
connection with its reports on the financial statements for such periods.
During the fiscal year ended March 31, 2004, there were no
disagreements with E&Y on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of E&Y, would have caused E&Y
to make reference to the subject matter of the disagreement in connection with
its reports on the financial statements for such periods.
During the two most recent fiscal years and through March 7, 2006,
there have been no reportable events as described in Item 304(a)(1)(v)(A)
through (D) of Regulation S-K.
We provided BDO with a copy of the disclosures made pursuant to the
Form 8-K (which disclosures are consistent with the disclosures noted above) and
BDO furnished us with a letter addressed to the SEC stating that it agrees with
the statements made by us in the Form 8-K filing, a copy of which was filed as
an exhibit to the Form 8-K.
24
COMPARISON OF CUMULATIVE TOTAL RETURN
SHARE PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns on
our common stock for the period April 1, 2001 to March 31, 2006, with the
cumulative total return over the same period for the American Stock Exchange and
a peer group of companies. Companies used for the peer group are Boston
Acoustics, Inc., Cobra Electronics Corp., Concord Camera Corp., Koss Corp. and
Pioneer Corporation. Boston Acoustics, Inc. merged with D&M Holdings in August
2005, and as a result was only included in the peer group index through 2005. In
selecting companies to be part of the peer group, we focus on publicly traded
companies that design and/or distribute consumer electronic products that have
characteristics similar to ours in terms of one or more of the following: (i)
type of product, (ii) distribution channels, (iii) sourcing or (iv) sales
volume. The comparison assumes the investment of $100 in our common stock on
April 1, 2001, and reinvestment of all dividends. The information in the graph
was provided by Coredata, Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN OF
EMERSON RADIO CORP., PEER GROUP INDEX AND BROAD MARKET INDEX
FISCAL YEAR ENDING
[LINE CHART]
------------------------ FISCAL YEAR ENDING ---------------------
COMPANY/INDEX/MARKET 3/31/2001 3/31/2002 3/31/2003 3/31/2004 3/31/2005 3/31/2006
EMERSON RADIO CORP. 100.00 99.23 529.23 293.85 270.77 287.69
PEER GROUP INDEX 100.00 76.25 81.91 116.02 72.23 56.91
AMEX MARKET INDEX 100.00 99.18 94.72 133.87 140.24 172.13
THE STOCK PRICE PERFORMANCE DEPICTED IN THE ABOVE GRAPH IS NOT NECESSARILY
INDICATIVE OF FUTURE PRICE PERFORMANCE. THE SHARE PRICE PERFORMANCE GRAPH WILL
NOT BE DEEMED "SOLICITING MATERIAL" OR BE INCORPORATED BY REFERENCE IN ANY
FILING BY US UNDER THE SECURITIES ACT OR THE EXCHANGE ACT EXCEPT TO THE EXTENT
THAT WE SPECIFICALLY INCORPORATE THE GRAPH BY REFERENCE.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH SPORT SUPPLY GROUP, INC.
On July 1, 2005, we and Emerson Radio (Hong Kong) Limited ("Emerson
HK"), our wholly owned subsidiary, sold all of the issued and outstanding shares
of SSG common stock, which we owned, aggregating 4,746,023 shares, or
approximately 53.2% ownership of SSG, for $32 million or $6.74 per share.
Prior to July 1, 2005, our Board of Directors included the following
people that were associated with SSG: Geoffrey P. Jurick, our former Chairman
and Chief Executive Officer and current President and Chairman and Chief
Executive Officer of SSG, and Peter G. Bunger, a director of both companies and
member of the Compensation Committee of each company.
During 1997, we entered into a management services agreement with SSG
in an effort to share certain administrative and logistic functions and to
enable SSG and Emerson to reduce certain costs. In connection with the sale of
our interest in SSG, the management services agreement was amended to permit
termination of various defined Transition Services on one hundred twenty (120)
days' prior notice by either Emerson or SSG in order to facilitate the parties'
transition of the Transition Services to another provider. We incurred net fees
of $40,000, $206,000, $319,000 for services provided pursuant to this agreement
during Fiscal 2006, 2005 and 2004, respectively.
Effective January 1, 2006, we entered into a lease for office space in
Hong Kong with Grande and an agreement for services in connection with this
office space rental from Grande Holdings. The agreements expire on December 31,
2006, unless terminated earlier by either party upon three (3) months' prior
written notice of termination by either party. For the fiscal year ended March
31, 2006, we incurred expenses to Grande Holdings of approximately $53,000 under
these arrangements.
FUTURE TRANSACTIONS
We have adopted a policy that all future affiliated transactions will
be made or entered into on terms no less favorable to us than those that can be
obtained from unaffiliated third parties. In addition, all future affiliated
transactions, must be approved by a majority of the independent outside members
of our Board of Directors who do not have an interest in the transactions.
26
PROPOSAL 2: APPROVAL OF THE AMENDMENT TO THE 2004 NON- EMPLOYEE OUTSIDE
DIRECTOR STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE
At the Annual Meeting, the stockholders are being asked to approve an
amendment to Emerson's 2004 Non-Employee Outside Director Stock Option Plan (the
"Director Plan") in order to increase the number of shares available for
issuance thereunder by 250,000 shares, from 250,000 shares to 500,000 shares. As
of October 26, 2006, 250,000 options were outstanding under the Director Plan
and zero shares of common stock were available for issuance under the Director
Plan. Approval of the amendment to the Director Plan is intended to ensure that
Emerson can continue to provide an incentive to outside directors by enabling
them to share in the future growth of Emerson. The Director Plan was adopted by
the Board of Directors on July 19, 2004 and approved by the stockholders in
August 2004. On October 25, 2006, the Board of Directors adopted this amendment
to the plan and recommends that the stockholders approve such amendment.
Emerson believes that stock-based awards are a key component to its
ability to retain and attract qualified individuals to serve as outside
directors of Emerson, and to provide incentives for qualified individuals to
remain on the Board as outside directors.
DESCRIPTION OF THE DIRECTOR PLAN
The following summary description of the principal terms of the
Director Plan is qualified in its entirety by the full text of the Plan.
ADMINISTRATION
The Director Plan currently is administered by our Board of Directors
and may in the future be administered by a committee of the Board of Directors
consisting solely of members of the Board who are not outside directors (the
administrator of the Director Plan, whether it be the Board of Directors or such
committee, is hereinafter referred to as the "Administrator"). Subject to
applicable law and the terms of the Director Plan, the Administrator's
responsibilities include approving the forms of agreement for use under the
Director Plan, determining the exercise price of options granted under the
Director Plan, adopting, amending and rescinding rules and regulations for
administration of the Director Plan, interpreting the Director Plan and making
all other determinations deemed necessary or advisable for administering the
Director Plan.
ELIGIBILITY
The Director Plan authorizes the grant of non-statutory stock options
to persons who, on the date such options are granted, have not been employed by
Emerson or any of Emerson's subsidiaries as an employee during the twelve-months
preceding such date of grant ("Outside Directors").
27
OPTION GRANTS
The Director Plan currently provides that each Outside Director will
receive a grant of options to purchase twenty-five thousand (25,000) shares of
common stock on the day first elected to serve on the Board. Further, each
non-employee director who is chairman of a duly constituted committee of the
Board shall also automatically be granted options to purchase an additional
twenty-five thousand (25,000) shares of common stock.
Subject to the approval of the stockholders of the amendment to
increase the number of shares available for issuance under the Director Plan
from 250,000 shares to 500,000 shares, the Board of Directors has adopted an
amendment to the Director Plan pursuant to which immediately following the
Annual Meeting, each Outside Director who did not receive options on the day
first elected to serve on the Board and/or on the first day to serve as the
chairman of one of the Board committees because no additional shares were
available under the Director Plan at such time shall receive options to purchase
such number of shares of common stock such Outside Director would have been
entitled to receive had there been a sufficient number of shares available under
the Director Plan. Accordingly, if the amendment to the Director Plan is
approved by our stockholders at the Annual Meeting, immediately following the
Annual Meeting, Mr. Driscoll will receive options to purchase 50,000 shares and
Messrs. Farnum, Will, Pitts and Wirsching will each receive options to purchase
25,000 shares, each of whom began to serve as a director and/or the chairman of
one of the Board committees at a time when no additional shares were available
under the Director Plan.
EXERCISE PRICE
The exercise price of each option granted under the Director Plan
shall be 100% of the fair market value on the date of the grant, which shall
equal the closing price of the common stock as reported on the American Stock
Exchange for the last market trading day prior to the time of grant. Upon
exercise of an option, the exercise price may be paid (a) in cash or by
certified check, bank draft or money order, (b) through delivery of shares of
common stock having a fair market value equal to the purchase price, (c) through
delivery of a promissory note or (d) a combination of these methods. The
Administrator is also authorized to establish a cashless exercise program.
EXERCISE PERIOD
Options under the Director Plan vest in equal installments over three
years, commencing one year from the date of grant, and their exercise is
contingent upon continued service as a member of our Board of Directors.
Each option shall cease to be exercisable ten years after the date on
which it is granted. No options may be granted under the Director Plan after
July 19, 2014, but the Director Plan will continue thereafter while previously
granted options remain subject to the Director Plan.
All outstanding options shall be deemed fully vested prior to the
consummation of a plan of reorganization such as a merger or consolidation
involving Emerson, any liquidation or
28
dissolution of Emerson or any sale of substantially all of Emerson's assets. The
optionee shall be entitled (a) to exercise his or her options within thirty days
after receipt of notice from Emerson regarding the plan of reorganization, (b)
in the event of a merger or consolidation in which stockholders of Emerson will
receive shares of another corporation, to agree to convert his or her options
into comparable options to acquire such shares, (c) in the event of a merger or
consolidation in which stockholders of Emerson will receive cash or other
property (other than capital stock), to agree to convert his or her options into
such consideration (in an amount representing the appreciation over the exercise
price of such options) or (d) to surrender such options or any unexercised
portion thereof.
In the event that an option granted under the Director Plan terminates
without having been exercised in full, the number of shares of common stock as
to which such option was not exercised shall be available for future grants
within certain limits under the Director Plan.
TRANSFERABILITY
Options granted under the Director Plan are nontransferable, except by
will or by the laws of descent and distribution. During a recipient's lifetime
an option may be exercised only by the recipient unless otherwise determined by
the Administrator. In the event of an optionee's death or disability, his or her
options shall terminate one year after the date of death or disability. During
such time after death, an option may only be exercised by the optionee's
personal representative, executor or administrator, as the case may be. In the
event that an optionee ceases to serve on the Board of Directors for any reason
other than cause, death or disability, his or her options shall automatically
terminate three months after the date on which such service terminates. If the
optionee is removed from the Board of Directors for cause, his or her options
shall automatically terminate on the date such removal is effective.
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, alter, suspend or
terminate the Director Plan; provided, however, that Emerson shall obtain
stockholder approval of any such amendment to the extent necessary to comply
with requirements relating to the administration of stock option plans under
U.S. state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the common stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where options
are, or will be, granted under the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of the federal income tax consequences of
option grants under the Director Plan. The following summary is based upon an
analysis of the Internal Revenue Code of 1986, as amended (the "Code") as
currently in effect, existing laws, judicial decisions, administrative rulings,
regulations and proposed regulations, all of which are subject to change and
does not address state, local or other tax laws.
29
Options granted under the Director Plan are non-statutory options.
Subject to certain exceptions not discussed herein, neither Emerson nor the
optionee will recognize taxable income or loss upon the grant of non-statutory
stock options under the Director Plan. In general, the optionee will recognize
taxable ordinary income equal to the excess of the stock's fair market value on
the date of exercise over the option exercise price. Emerson generally will
receive a corresponding tax deduction equal to the amount includable in the
optionee's income.
Upon disposition of the shares acquired by exercise of an option, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such shares plus any amount
recognized as ordinary income upon exercise of such option. Such gain or loss
will be long or short-term depending on whether the shares were held for more
than one year.
On October 26, 2006, the closing price of the common stock on the
American Stock Exchange was $2.92. Except with respect to the description of
compensation for our outside directors, future grants under the Director Plan
have not yet been determined.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the meeting at
which a quorum representing a majority of all outstanding shares of our common
stock is present and voting, either in person or by proxy, is required to adopt
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO
THE COMPANY'S 2004 NON-EMPLOYEE OUTSIDE DIRECTOR STOCK OPTION PLAN DESCRIBED
ABOVE IN PROPOSAL TWO.
30
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF MOORE STEPHENS, P.C. AS
INDEPENDENT AUDITORS OF EMERSON FOR THE FISCAL YEAR ENDING 2007
The Audit Committee has appointed Moore Stephens as independent
registered accountants to audit the financial statements of Emerson for the
fiscal year ending March 31, 2007, and has further directed that management
submit the selection of independent registered accountants for ratification by
our stockholders at the Annual Meeting of Stockholders. Stockholder ratification
of the selection of Moore Stephens is not required by our by-laws or otherwise.
However, we are submitting the selection of Moore Stephens to the stockholders
for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Audit Committee will reconsider whether or not
to retain Moore Stephens. Even if the selection is ratified, the Audit Committee
in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if it is determined that such a
change would be in the best interests of Emerson and its stockholders.
Representatives of the firm of Moore Stephens are expected to be
present at the Annual Meeting of Stockholders and will have an opportunity to
make a statement, if they so desire, and will be available to respond to
appropriate questions.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the meeting at
which a quorum representing a majority of all outstanding shares of our common
stock is present and voting, either in person or by proxy, is required for the
ratification of our independent registered accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF MOORE STEPHENS, P.C. AS INDEPENDENT AUDITORS OF EMERSON FOR THE FISCAL YEAR
ENDING MARCH 31, 2007.
31
STOCKHOLDER COMMUNICATIONS AND PROPOSALS
The Board of Directors has established a procedure that enables
stockholders to communicate in writing with members of the Board. Any such
communication should be addressed to Emerson's Secretary and should be sent to
such individual c/o Emerson Radio Corp., 9 Entin Road, Parsippany, New Jersey
07054. Any such communication must state, in a conspicuous manner, that it is
intended for distribution to the entire Board of Directors. Under the procedures
established by the Board, upon the Secretary's receipt of such a communication,
Emerson's Secretary will send a copy of such communication to each member of the
Board, identifying it as a communication received from a stockholder. Absent
unusual circumstances, at the next regularly scheduled meeting of the Board held
more than two days after such communication has been distributed, the Board will
consider the substance of any such communication.
SEC regulations permit stockholders to submit proposals for
consideration at annual meetings of stockholders. Any such proposals for
Emerson's Annual Meeting of Stockholders to be held in 2007 must be submitted to
Emerson on or before July 5, 2007, and must comply with applicable regulations
of the SEC in order to be included in proxy materials relating to that meeting.
See "Election of Directors" for information on stockholder submissions of
nominations for election to the Board of Directors.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of our Board of Directors.
We will pay the cost of soliciting proxies in the accompanying form. Our
officers may solicit proxies by mail, telephone, telegraph or fax. Upon request,
we will reimburse brokers, dealers, banks and trustees, or their nominees, for
reasonable expenses incurred by them in forwarding proxy material to beneficial
owners of our shares of common stock. We have retained the services of American
Stock Transfer & Trust Company to solicit proxies by mail, telephone, telegraph
or personal contact.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matter requiring a vote of stockholders arise, the proxies in the enclosed form
confer upon the person or persons entitled to vote the shares represented by
such proxies discretionary authority to vote the same in accordance with their
best judgment in the interest of Emerson.
FINANCIAL STATEMENTS
A copy of our Annual Report on Form 10-K for the fiscal year ended
March 31, 2006, including financial statements, accompanies this Proxy
Statement. The Annual Report is not to be regarded as proxy soliciting material
or as a communication by means of which any solicitation is to be made.
32
We filed an amendment to our Annual Report on Form 10-K in August 2006
in order to include certain information regarding our management, compensation
and other matters. All of the information included in such amendment has been
updated and is included in this proxy statement. A copy of our Annual Report on
Form 10-K and Form 10-K/A for the fiscal year ended March 31, 2006, filed with
the SEC, is available (excluding exhibits) without cost to stockholders upon
written request made to Investor Relations, Emerson Radio Corp., Nine Entin
Road, Parsippany, New Jersey 07054-0430 or on-line at our web site:
www.emersonradio.com.
By Order of the Board of Directors,
/s/ John Florian
----------------------------------------
JOHN FLORIAN
Deputy Chief Financial Officer,
Controller and Secretary
NOVEMBER 1, 2006
33
EMERSON RADIO CORP.
NINE ENTIN ROAD
P.O. BOX 430
PARSIPPANY, NEW JERSEY 07054-0430
PROXY CARD
The undersigned hereby appoints Eduard Will and John D. Florian, and each of
them, proxies of the undersigned with full power of substitution, to vote for
and on behalf of the undersigned at the Emerson Radio Corp. Annual Meeting of
Stockholders to be held on November 21, 2006 and at any adjournments or
postponements thereof (the "Meeting"), upon the following matters and upon any
other business that may properly come before the Meeting, as set forth in the
related Notice of Meeting and Proxy Statement, both of which have been received
by the undersigned.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If this proxy is executed but no direction is made,
this proxy will be voted FOR the board's nominees for director named herein, the
amendment to the 2004 Non-Employee Outside Director Stock Option Plan to
increase the number of shares of common stock available for issuance from
250,000 shares to 500,000 shares and the ratification of the appointment of
Moore Stephens, P.C. as independent registered public accountants of Emerson for
the fiscal year ending March 31, 2007.
(CONTINUED ON THE REVERSE SIDE)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSALS 1, 2 AND 3
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
WITHHOLD FOR ALL
AUTHORITY EXCEPT
FOR ALL FOR ALL (See instructions
NOMINEES NOMINEES below)
---------- ----------- -----------------
1. To elect nine
directors:
---------- ----------- -----------------
NOMINEES:
o Michael A.B. Binney
o Peter G. Bunger
o Jerome H. Farnum
o W. Michael Driscoll
o Greenfield Pitts
o Norbert R. Wirsching
o Eduard Will
o Christopher Ho
o Adrian Ma
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: o
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--------------------------------------------------------------------------------
2. Amendment to the 2004
Non-Employee Outside
Director Stock Option Plan
to increase the number of
shares available for
issuance from 250,000
shares to 500,000 shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. Ratification of
appointment of Moore
Stephens, P.C. as
independent registered
public accountants of
Emerson for the fiscal
year ending March 31, 2007
--------------------------------------------------------------------------------
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In their discretion, the above named proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof and upon matters incident to the conduct of the meeting.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED FOR THE BOARD'S NOMINEES FOR DIRECTOR NAMED HEREIN, THE
AMENDMENT TO THE 2004 NON-EMPLOYEE OUTSIDE DIRECTOR STOCK OPTION PLAN AND THE
RATIFICATION OF THE APPOINTMENT OF MOORE STEPHENS, P.C. AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS OF EMERSON FOR THE FISCAL YEAR ENDING MARCH 31,
2007.
Please sign this proxy and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend.
Signed:
Signed: Dated: , 2006
NOTE: Please sign exactly as your name or names appears hereon. When shares are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
----------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method. |_|
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