UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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.(Amendment No. )
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§240.14a-12
EMERSON RADIO CORP.
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TABLE OF CONTENTS
EMERSON RADIO CORP.
NINE ENTIN ROAD
P.O. BOX 430
PARSIPPANY, NEW JERSEY07054-0430
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 21, 2006
10, 2009
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 2006our 2009 Annual Meeting of Stockholders to be held at The Hanover
Marriott, 1401 Route 10, East, Whippany,the offices of our counsel, Lowenstein Sandler PC, located at 65 Livingston Avenue, Roseland, New Jersey 0798107068, on Tuesday, November 21, 2006,10, 2009, at 10:9:00 a.m. (local time).
At this year's stockholders'year’s stockholders’ meeting, you will be asked to (i) elect nineeight 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.MSPC Certified Public Accountants and Advisors, A Professional Corporation (“MSPC”) as our independent registered public accountants of Emerson for the fiscal year ending March 31, 20072010 and (iv)(iii) transact such other business as may properly come before the meeting and any adjournment(s) thereof. TheOur 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.MSPC. Accordingly, please give careful attention to these proxy materials.
Only stockholdersholders of record of Emerson'sour common stock as of the close of business on October 26, 2006,8, 2009 are entitled to notice of and to vote at suchour annual meeting and any adjournment(s) thereof. Emerson'sOur 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 priorare cordially invited to its use as specifiedattend the annual meeting. Whether you expect to attend the annual meeting or not, please vote, sign, date and return in the self-addressed envelope provided the enclosed proxy statement.
card as promptly as possible. If you attend the annual meeting, you may vote your shares in person, even though you have previously signed and returned your proxy.
By Order of the Board of Directors,
/s/ John Florian
----------------------------------------
JOHN FLORIAN
Deputy Chief Financial Officer,
Controller and
Andrew L. Davis
Secretary
Parsippany, New Jersey
November 1, 2006
October 19, 2009
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED HEREIN.
EMERSON RADIO CORP.
NINE ENTIN ROAD
Nine Entin Road
P.O. BOXBox 430
PARSIPPANY, NEW JERSEY
Parsippany, New Jersey07054-0430
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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:
10, 2009
To Our Stockholders:
This Proxy Statementproxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Emerson Radio Corp., a Delaware corporation, to our stockholders for usebe used at our Annual Meeting of Stockholders to be held at The Hanover Marriott, 1401 Route
10, East, Whippany,the offices of our counsel, Lowenstein Sandler PC, located at 65 Livingston Avenue, Roseland, New Jersey 0798107068, on Tuesday, November 21, 2006,10, 2009, at 10:9:00 a.m. (local time), or at any adjournment or adjournments thereof (the "Annual
Meeting"). Emerson'sthereof. Our stockholders of record as of the close of business on October 26, 2006 (the "Record Date")8, 2009 are entitled to vote at the Annual Meeting.our annual meeting. We expect to begin mailing this Proxy Statementproxy statement and the enclosed proxy card to our stockholders on or about October 19, 2009.
Important Notice of Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on November 1, 2006.
10, 2009.
Our proxy materials including our Proxy Statement for the 2009 Annual Meeting, 2009 Annual Report to Stockholders (which contains our Annual Report onForm 10-K for the year ended March 31, 2009) and proxy card are available on the Internet athttp://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=02008.
VOTING PROCEDURES AND REVOCABILITY OF PROXIES
The accompanying proxy card is designed to permit each of our stockholders as of the Record Daterecord date to vote on each of the proposals properly brought before the Annual Meeting.annual meeting. As of the Record Date,record date, there were 27,089,83227,129,832 shares of our common stock, par value $.01 per share, issued and outstanding and entitled to vote at the Annual Meeting.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.annual meeting. If a quorum is not present, the Annual Meetingannual 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 nineeight 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
proposalsthe appointment of MSPC. as our independent registered public accountants for the fiscal year ending March 31, 2010 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"“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,record date, The Grande Holdings Limited
("(“Grande
Holdings"Holdings”) had the
indirect power to vote approximately
50.9%57.6% 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 Meetingannual meeting and that each of the proposals will be approved. Holders of theour common stock will not have any dissenters'dissenters’ rights of appraisal in connection with any of the matters to be voted on at the Annual Meeting.
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)(ii) the ratification of the appointment of Moore Stephens, P.C.MSPC as
independent registered public accountants of Emerson for the fiscal year ending March 31, 2007. The2010. Our 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'sstockholder’s instructions. The proxies we have designated for the stockholders are Eduard WillGreenfield Pitts and John D. Florian.Andrew L. Davis. 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.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)(ii) the ratification of the appointment of Moore
Stephens, P.C.MSPC as our independent registered public accountants of Emerson for the fiscal year ending March 31, 20072010 and, at the discretion of the proxies designated by us, on any other matter that may properly come before the Annual
Meetingannual 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'sour Secretary in writing of your revocation, executing a subsequent proxy, or personally appearing at the Annual Meetingannual meeting and casting a contrary vote. However, no revocation shall be effective unless at or prior to the Annual Meetingannual meeting we have received notice of such revocation.
At least ten
(10) days before the
Annual Meeting of Stockholders,annual meeting, 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
located 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
Eight directors are proposed to be elected at the Annual Meeting.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.
The eight nominees for election as directors to serve until our next annual meeting of shareholders and until their successors have been duly elected and qualified are Christopher Ho, Adrian Ma, Greenfield Pitts, Duncan Hon, Eduard Will, Mirzan Mahathir, Kareem E. Sethi and Terence A. Snellings. All of the nominees named in this proxy statement are members of our presentcurrent 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 theour Board of Directors may recommend, (ii) theour Board of Directors may reduce the number of directors to eliminate the vacancy or (iii) theour Board of Directors may fill the vacancy at a later date after selecting an appropriate nominee.
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 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 |
|
Christopher Ho | | | 59 | | | | 2006 | | | Christopher Ho has served as the Company’s Chairman since July 2006. Mr. Ho is presently the Chairman of 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 beneficially holds approximately 57.6% of the Company’s outstanding common shares. Mr. Ho also currently serves as Chairman of Lafe Corporation Ltd., a company listed on the Singapare Exchange, and a representative director of Sanusi Electric Co., Ltd., a company listed on the Tokyo Stock Exchange. Mr. 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 also is a certified public accountant (Hong Kong) and a member of the Hong Kong Institute of Certified Public 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(1) | | | 64 | | | | 2006 | | | Adrian Ma, a director of the Company since March 30, 2006, has been the Company’s Chief Executive Officer since March 30, 2006 and also served as its Chairman from March 30, 2006 through July 26, 2006. In addition, Mr. Ma is a director of Grande Holdings. He 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 also is Director of Lafe Technology Ltd., Vice Chairman and Managing Director of Ross Group Inc. and Deputy Chairman of Sansui Electric Co. Ltd. |
Greenfield Pitts | | | 59 | | | | 2006 | | | Greenfield Pitts has served as the Company’s Chief Financial Officer since February 2007 and a director since March 2006. Mr. Pitts has a 30-year background in international banking and was associated with Wachovia Bank, the Company’s present lender, for more than 25 years, with assignments in London, Atlanta and Hong Kong. From 1997 to 2006, he was in Hong Kong managing a joint venture between Wachovia and HSBC, later working in Corporate Finance for Wachovia Securities. |
Duncan Hon | | | 48 | | | | 2009 | | | Duncan Hon has been a director since February 2009. Mr. Hon currently serves as Chief Executive Officer of the Branded Distribution Division of Grande Holdings. Mr. Hon has also served as a director of Grande Holdings and several of its subsidiaries. From 2004 to 2007, Mr. Hon served as a director of Smart Keen International Limited, a Hong Kong company, providing financial consulting services. He is a member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants. |
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| | | | | | | | | | |
| | | | | Year
| | | |
| | | | | First
| | | |
| | | | | Became
| | | |
Name | | Age | | | Director | | | Principal Occupation or Employment |
|
Eduard Will(1) | | | 67 | | | | 2006 | | | Eduard Will has been the Company’s Vice Chairman since October 2007 and a Director since July 2006. From July 2006 until October 2007, Mr. Will served as the Company’s President- North American Operations. Prior to becoming President- North American Operations, Mr. Will was the Chairman of the Company’s Audit Committee from January 2006 through July 2006. From 2001 to 2002 Mr. Will served as Chief Executive Officer of Boca Research, Inc. 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 as Senior Adviser to Grande Holdings, KoolConnect Technologies Inc., Ricco Capital (Holdings) Ltd. (Hong Kong), South East Group (Hong Kong) and Integrated Data Corporation. |
Mirzan Mahathir(1) | | | 50 | | | | 2007 | | | Mirzan Mahathir has been a Director since December 2007. Mr. Mahathir currently manages his investments in Malaysia and overseas while facilitating business collaboration in the region. Previously, Mr. Mahathir worked for IBM Corporation and Salomon Brothers. Since 1992, Mr. Mahathir has served as the Executive Chairman and President of Konsortium Logistik Berhad, a Malaysian logistic solutions provider listed on the Kuala Lumpur Stock Exchange. He also is the Chairman and CEO of Crescent Capital Sdn Bhd, a Malaysian investment holding and independent strategic and financial advisory firm which he founded and the President of the Asian Strategy and Leadership Institute (ASLI), a leading organizer of business conferences, secretariat for business councils and Public Policy research centre. Currently, Mr. Mahathir holds directorships in Worldwide Holdings Berhad and AHB Holdings Berhad, companies listed on the Bursa Malaysia, San Miguel Corporation, a company listed on the Philippines Exchange, and Lafe Technology Ltd., a company listed on the Singapore Exchange. He is also a member of the UN/ ESCAP Business Advisory Council, the American Bureau of Shipping Southeast Asia Committee and the Wharton Business School Asian Executive Board. |
Kareem E. Sethi(2) | | | 32 | | | | 2007 | | | Kareem E. Sethi has been a Director since 2007. Mr. Sethi has served as Managing Director of Streetwise Capital Partners, Inc. since 2003. From 1999 until 2003, Mr. Sethi was Manager, Business Recovery Services for PricewaterhouseCoopers Inc. |
Terence A. Snellings(2) | | | 59 | | | | 2008 | | | Terence A. Snellings has been a Director since August 2008. Mr. Snellings has served as Director of Finance and Administration of Refugee Resettlement and Immigration Services of Atlanta, Inc., a non-profit agency that provides an entry into the American culture for refugees, since June 2006. From 1986 until April 2006, Mr. Snellings served as Managing Director of Wachovia Services, Ltd., where he managed investment banking origination activities of the Asia-Pacific Group within Wachovia Securities Corporate and Investment Banking Division. |
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| | |
(1) | | Corporate Governance, Nominating and Compensation Committee |
|
(2) | | 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 8, 2009, the beneficial ownership of (i) each current director; (ii) each of the Company’s Named Executive Officers; (iii) the Company’s current directors and executive officers as a group; and (iv) each stockholder known by the Company to own beneficially more than 5% of the Company’s outstanding shares of common stock. Common stock beneficially owned and percentage ownership as of October 8, 2009 was based on 27,129,832 shares outstanding. Except as otherwise noted, the address of each of the following beneficial owners isc/o Emerson Radio Corp., Nine 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) | | | 15,634,482 | | | | 57.6 | % |
Adrian Ma | | | 0 | | | | 0 | % |
Greenfield Pitts(3) | | | 50,000 | | | | * | |
John Spielberger | | | 0 | | | | 0 | % |
Duncan Hon | | | 0 | | | | 0 | |
Eduard Will(4) | | | 50,000 | | | | * | |
Mirzan Mahathir | | | 0 | | | | 0 | % |
Kareem E. Sethi | | | 0 | | | | 0 | % |
Terence A. Snellings | | | 0 | | | | 0 | % |
Lloyd I. Miller, III(5) | | | 2,071,870 | | | | 7.6 | % |
All Directors and Executive Officers as a Group (9 persons)(6) | | | 15,734,482 | | | | 58.0 | % |
| | |
(*) | | Less than one percent. |
|
(1) | | Based on 27,129,832 shares of common stock outstanding as of October 8, 2009. 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 60 days of October 8,, 2009 have been exercised. Except as otherwise indicated, the beneficial ownership table does not include common stock issuable upon exercise of outstanding options, which are not currently exercisable within 60 days of October 8, 2009. Except as otherwise indicated and based upon the Company’s review of information as filed with the U.S. Securities and Exchange Commission (“SEC”), the Company believes 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 15,634,482 shares of common stock (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 Shares. As the sole stockholder of N.A.K.S., Grande Holdings may be deemed to own beneficially the Shares. Mr. Ho is one of the beneficiaries under a discretionary trust which indirectly owns approximately 67% of the capital stock of Grande Holdings. Information with respect to the ownership of these shares was obtained from disclosures contained within a Schedule 13D/A filed on November 5, 2007 and information obtained from Mr. Ho. The Company has been advised that an updated Schedule 13D/A will be filed by Mr. Ho to reflect the current information. |
|
(3) | | Mr. Pitts’ ownership consists of 25,000 shares of common stock directly owned by him and options to purchase 25,000 shares of the Company’s common stock issued pursuant to Emerson’s 2004 Non-Employee Director Stock Option Plan that are exercisable within 60 days of October 8, 2009. |
|
(4) | | Mr. Will’s ownership consists of options to purchase 50,000 shares of the Company’s common stock pursuant to Emerson’s 2004 Non-Employee Director Stock Option Plan that are exercisable within 60 days of October 8, 2009. |
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| | |
(5) | | Lloyd I. Miller, III has sole voting and dispositive power with respect to 744,597 of the reported securities as (i) a manager of a limited liability company that is the general partner of a certain limited partnership and (ii) an individual. Lloyd I. Miller, III has shared voting and dispositive power with respect to 1,327,273 of the reported securities as an investment advisor to the trustee of certain family trusts. The address of Lloyd I. Miller, III is 4550 Gordon Drive, Naples, Florida 34102. Information with respect to the ownership of these shares was obtained from a Schedule 13G filed with the SEC on February 12, 2009. |
|
(6) | | See footnotes (2) through (4). |
BOARD OF DIRECTORS AND COMMITTEES
Board of Directors and Committees
As of October 8, 2009, Grande beneficially owned an aggregate of 15,634,482 shares of the Company’s common stock, which represents approximately 57.6% of the shares of common stock currently outstanding. Accordingly, the Company is a “controlled company”, as such term is defined in Section 801(a) of the Company Guide (“Controlled Company”). Because the Company is a Controlled Company, it is exempt from (i) the requirement that at least a majority of the directors on its Board of Directors be “independent” as defined under the NYSE Amex listing standards, (ii) the requirement to have the compensation of the Company’s executives determined by a compensation committee comprised solely of independent directors or by a majority of the board’s independent directors and (iii) 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.
The Company’s Board of Directors presently consists of eight directors — Messrs. Ho, Ma, Pitts, Hon, Will, Mahathir, Sethi and Snellings. Three of the eight current directors, Messrs. Mahathir, Sethi and Snellings, meet the definition of independence as established by the NYSE Amex listing standards and SEC rules. Until their respective resignations during Fiscal 2009, the following individuals also served on the Company’s Board of Directors — Messrs. Michael A.B. Binney, W. Michael Driscoll, David R. Peterson and Norbert Wirsching. The Company’s Board of Directors determined that W. Michael Driscoll and Norbert R. Wirsching, each of whom served as a member of our Board of Directors during Fiscal 2009, were “independent” as defined under the NYSE Amex listing standards.
The Board of Directors is responsible for the management and direction of our company and for establishing broad corporate policies. 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 nine formal meetings during Fiscal 2009 and also acted by unanimous written consent. During Fiscal 2009, 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 in which such director served during Fiscal 2009, except Mr. Ho, who attended five of the meetings of the Board of Directors. We have a policy of encouraging, but not requiring, our Board members to attend annual meetings of stockholders. Last year, five of our directors who were nominated for re-election attended our 2008 Annual Meeting.
The Company’s Board of Directors has two standing committees, the Audit Committee, which is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, and the Corporate Governance, Nominating and Compensation Committee.
Audit Committee. The Company’s Audit Committee currently consists of Mr. Sethi and Mr. Snellings, each of whom meets the definition of independence as established by the NYSE Amex and SEC rules. Mr. Sethi is currently the Chairman of the Audit Committee and the “audit committee financial expert.” Pursuant to Section 803(B)(2)(c) of the NYSE Amex Company Guide (the “Company Guide”), the Company is required to have an audit committee of at least two independent members, as defined by the listing standards of the NYSE Amex. During a portion of Fiscal 2009, the Audit Committee consisted of Mr. Sethi, Mr. Driscoll and Mr. Wirsching, each of whom meets the definition of independence as established by the NYSE Amex and SEC rules. For a brief period following the resignations of Mr. Driscoll and Mr. Wirsching
7
in July 2008 and until the appointment of Mr. Snellings to the Company’s Board of Directors and Audit Committee on August 12, 2008, the Company’s Audit Committee consisted of only one independent director and therefore during this brief period the Company was not in compliance with Section 803(B)(2)(c) of the Company Guide. Following the appointment of Mr. Snellings to the Audit Committee on August 12, 2008, the Company regained compliance with the applicable NYSE Amex listing standards set forth in Section 803(B)(2)(c) of the Company Guide.
The Audit Committee is empowered by the Board of Directors, among other things, to: (i) serve as an independent and objective party to monitor the Company’s financial reporting process, internal control system and disclosure control system; (ii) review and appraise the audit efforts of the Company’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 the Company’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 2009, the Audit Committee performed its duties under a written charter approved by the Board of Directors and formally met three times. A copy of the Company’s Audit Committee Charter is posted on the Company’s website: www.emersonradio.com on the Investor Relations page.
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.
During a portion of Fiscal 2009, the Audit Committee consisted of Mr. Sethi, Mr. Driscoll and Mr. Wirsching, each of whom meets the definition of independence as established by the NYSE Amex and SEC rules. For a brief period following the resignations of Mr. Driscoll and Mr. Wirsching in July 2008 and until the appointment of Mr. Snellings to the Company’s Board of Directors and Audit Committee on August 12, 2008, the Company’s Audit Committee consisted of only one independent director, Mr. Sethi. On August 12, 2008, our Board of Directors appointed Terence A. Snellings to serve on the Audit Committee, and appointed Mr. Sethi to serve as the Chairman of our Audit Committee. Our Board of Directors has determined that each of Messrs. Sethi and Snellings is independent as defined by the listing standards of the NYSE Amex and applicable SEC rules.
In this context, the Audit Committee has reviewed the audited consolidated financial statements and has met and held discussions with management and MSPC, 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. Emerson’s 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 MSPC matters required to be discussed by Statement on Auditing Standards No. 61, as amended, and as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T, which includes, among other items, matters related to the conduct of the audit of Emerson’s financial statements:
| | |
| • | methods to account for significant unusual transactions; |
|
| • | the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus; |
|
| • | the process used by management in formulating particularly sensitive accounting estimates and the basis for MSPC’s conclusions regarding the reasonableness of those estimates; and |
|
| • | 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). |
8
MSPC also provided the Audit Committee with written disclosures and the letter required by applicable standards of the PCAOB which relate to the independent registered Public Accounting firm’s independence. In addition, the Audit Committee discussed with MSPC its independence from the Company. The standards further require the independent registered Public Accounting firm to disclose annually in writing all relationships that, in their 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 MSPC, as well as the Audit Committee’s review of the representations of management and the report of MSPC to the Audit Committee, the Audit Committee recommended to the Board of Directors that Emerson’s audited consolidated financial statements be included in our Annual Report onForm 10-K for the fiscal year ended March 31, 2009, for filing with the Securities and Exchange Commission.
The Audit Committee has selected MSPC 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
Kareem E. Sethi (Chairman)
Terence A. Snellings
Corporate Governance, Nominating and Compensation Committee. Under Sections 804 and 805 of the Company Guide, the Company is exempt from the requirement to have the compensation of its executives determined by a compensation committee comprised solely of independent directors or by a majority of the board’s independent directors and 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 the Company is a Controlled Company. In April 2008, the Company’s Board of Directors established a Corporate Governance, Nominating and Compensation Committee, which was to be comprised of three members, at least two of whom were to be “independent” as such term is defined in Section 803A of the Company Guide. On June 24, 2008, our Corporate Governance, Nominating and Compensation Committee was fully constituted with three directors, Messrs. Ma, Peterson and Sethi, two of whom the Board had determined were independent as such term is defined in Section 803A of the Company Guide. Following Mr. Peterson’s resignation as a director on July 15, 2008, the Board of Directors resolved on September 19, 2008 to reconstitute the Corporate Governance, Nominating and Compensation Committee as being comprised of Messrs. Ma, Will and Mahathir, one of whom the Board had determined was “independent” as defined under the NYSE Amex listing standards. The Corporate Governance, Nominating and Compensation Committee met formally three times during Fiscal 2009.
The Company’s Board of Directors currently is considering the adoption of a charter of the Corporate Governance, Nominating and Compensation Committee. The Company expects that the charter, as finally adopted, will provide that the Corporate Governance, Nominating and Compensation Committee will be responsible for, among other things (i) the development and implementation of a set of corporate governance principles applicable to the Company; (ii) the determination of the slate of director nominees for election to the Company’s Board and recommendation to the Board individuals to fill vacancies occurring between annual meetings of shareholders; and (iii) the recommendation to the Board for compensation arrangements of the Company’s directors and executive officers.
Procedures for Considering Nominations Made by Stockholders. Nominations for election to the Board of Directors may be made by theour Board of Directors or by any stockholder of any outstanding class of our 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 theour 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'syear’s annual meeting;provided, however, that if the date of
9
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'sperson’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
Qualifications. Our Board of Directors nominatedhas adopted guidelines describing the individuals named belowminimum qualifications for electionnominees and the qualities or skills that are necessary for directors to possess. Each nominee (i) must satisfy any legal requirements applicable to members of the Board of Directors; (ii) must have business, professional or other experience that will enable such nominee to provide useful input to the Board of Directors in its deliberations; and (iii) must have knowledge of the types of responsibilities expected of members of the board of directors of a public company.
Identification and Evaluation of Candidates for the Board. Candidates to serve on the Board of Directors will be identified from all available sources, including recommendations made by stockholders, members of our management and members of our Board of Directors. Our Board of Directors has a policy that there will be no differences in the manner in which our Board of Directors
evaluates nominees recommended by stockholders and
background informationnominees recommended by it or management, except that no specific process shall be mandated with respect to the nomination of any individuals who have previously served on
eachthe Board of Directors. The evaluation process for individuals other than existing members of the
nominees (asBoard 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.
3
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.
4
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.
- ----------
(1) MemberDirectors will include a review of the Audit Committee
VOTE REQUIREDinformation provided to the Board of Directors will be elected by a plurality of the votes cast by the holdersproponent and a review of our common stock voting in person or by proxy atsuch other information as the Board of Directors shall determine to be relevant. Third Party Recommendations. In connection with the Annual
Meeting.
Abstentions and broker non-votes will each be counted as present for purposesMeeting, the Board of
determining the presenceDirectors did not receive any nominations from any stockholder or group 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.
5
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 beneficiallystockholders which owned more than 5% of our outstanding sharescommon stock for at least one year. Process for Sending Communications to the Board of common stock. Except as otherwise noted, the
addressDirectors
The Board of
eachDirectors has established a procedure that enables stockholders to communicate in writing with members of the
following beneficial owners is Board of Directors. Any such communication should be addressed to the Company’s Secretary and should be sent to such individual atc/o Emerson Radio Corp.,
9Nine 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%
6
(*) Director or nomineeAny such communication must state, in a conspicuous manner, that it is intended 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,distribution to 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.
7
(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, ourentire 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 usDirectors. Under the procedures established 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 directorsupon the Secretary’s receipt of such a communication, the Company’s Secretary will send a copy of such communication 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 inidentifying it as a communication received from a stockholder. Absent unusual circumstances, at least 75% of the aggregate of all meetingsnext regularly scheduled meeting of the Board of Directors and the aggregate of all meetings of committees on whichheld more than two days after such member served that were held during the period. During Fiscal 2006,communication has been distributed, the Board of Directors had three standing committees,will consider the Audit Committee, the Compensation
and Personnel Committee and the Nominating Committee. The functions of these
committees during Fiscal 2006 are described below. No membersubstance of any such communication. Codes of the
committees is an employee of Emerson.
Ethics
The
Board of Directors is responsible for the management and direction
of Emerson and for establishing broad corporate policies. ItCompany 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
9
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"Ethics”) that applies to ourits 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
10
report unethical conduct, fostering a culture of honesty and accountability, deterring wrongdoing and promoting fair and accurate disclosure and financial reporting.
We have
The Company has also adopted a Code of Conduct for Officers, Directors and Employees of Emerson Radio Corp. and Its Subsidiaries ("(“Code of Conduct"Conduct”). We prepared this Code of Conduct to help all officers, directors and employees understand and comply with ourits policies and procedures. Overall, the purpose of ourthe Company’s 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
filethe Company files with, or submitsubmits to, the SEC and in other public communications made by us;the Company; (iii) compliance with applicable governmental laws, rules and regulations; (iv) prompt internal reporting of code violations to an appropriate person or persons identified in thisthe Code of ConductConduct; and (v) accountability for adherence to the Code of Conduct.
The Code of Ethics and the Code of Conduct are posted on
ourthe Company’s website: www.emersonradio.com on the Investor Relations page. If
we makethe Company makes 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)406 (b) of
Regulation S-K, we the Company will disclose the nature of such amendment or waiver on
ourits website or in a current report on
Form 8-K.
10
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive officers (1) of Emerson:
| | | | | | | | | | |
| | | | | | Year
|
Name | | Age | | Position | | Became Officer |
|
Adrian Ma | | | 64 | | | Chief Executive Officer and Director | | | 2006 | |
Greenfield Pitts | | | 59 | | | Chief Financial Officer and Director | | | 2007 | |
John Spielberger | | | 46 | | | President-North American Operations | | | 2007 | |
| | |
(1) | | One of our directors, Duncan Hon, is currently serving as acting Deputy CEO of Emerson, and the Company currently contemplates appointing Mr. Hon to the position of Deputy CEO in the near future. |
Adrian Mahas served as the Company’s Chief Executive Officer since March 30, 2006 and served as the Company’s Chairman of the Board of Directors from March 30, 2006 through July 26, 2006. Mr. Ma continues to serve as a director. See Mr. Ma’s biographical information above.
Greenfield Pittshas served as the Company’s Chief Financial Officer since February 2007 and a director since March 2006. See Mr. Pitts’ biographical information above.
John Spielbergerhas served as the Company’s President-North American Operations since October 2007. From 1995 until 2007, Mr. Spielberger served as a Senior Vice President with Sony BMG Music Entertainment Sales Co., an entertainment software sales and marketing distribution company. Prior to this, Mr. Spielberger held various positions with RCA Records Label, a music company. Mr. Spielberger holds a Bachelor of Science degree in Business Management and Marketing from Cornell University and a Masters of Business Administration from the University of Michigan.
11
EXECUTIVE COMPENSATION OF DIRECTORS
Summary Compensation Table
The following Summary Compensation Table sets forth information concerning compensation for services rendered in all capacities to us and our subsidiaries for Fiscal 2009 and Fiscal 2008 which was awarded to, earned by or paid to each person who served as our principal executive officer at any time during Fiscal 2009 and the two most highly compensated executive officers other than the principal executive officer who were serving as executive officers as of March 31, 2009 (collectively, the “Named Executive Officers”).
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | All Other
| | | | |
Name and
| | | | | | | | | | | Option
| | | Compensation
| | | | |
Principal Position | | Fiscal Year | | | Salary ($) | | | Bonus ($)(2) | | | Awards ($)(1) | | | ($)(3) | | | Total ($) | |
|
Adrian Ma(4) | | | 2009 | | | $ | 350,000 | | | | — | | | | — | | | | — | | | $ | 350,000 | |
President and Chief Executive Officer | | | 2008 | | | | | | | $ | 50,000 | | | | — | | | | — | | | $ | 50,000 | |
Greenfield Pitts(5) | | | 2009 | | | $ | 250,000 | | | | — | | | $ | 9,500 | | | $ | 23,459 | | | $ | 282,959 | |
Chief Financial Officer | | | 2008 | | | $ | 250,000 | | | $ | 100,000 | | | | 9,500 | | | $ | 22,841 | | | $ | 382,341 | |
John Spielberger(6) | | | 2009 | | | $ | 250,000 | | | | — | | | | — | | | $ | 23,461 | | | $ | 273,461 | |
President-North American Operations | | | 2008 | | | $ | 105,769 | | | $ | 60,000 | | | | — | | | $ | 9,437 | | | $ | 175,206 | |
| | |
(1) | | Represents the expense to the Company pursuant to applicable accounting standards for the respective year for stock options granted as long-term incentives pursuant to the Company’s 2004 Non-Employee Outside Director Stock Option Plan or its 2004 Employee Stock Option Plan. All options received by Mr. Pitts in the table above were received by him as a non-employee director and prior to his being named as an executive officer. Immediately following the adoption by the Company’s stockholders of an amendment to the Company’s 2004 Non-Employee Outside Director Stock Option Plan (the “Non-Employee Director Plan”) to increase the number of shares available for issuance thereunder from 250,000 to 500,000 shares in November 2006, Mr. Pitts received an option to purchase up to 25,000 shares of the Company’s common stock. Mr. Pitts began to serve as a director at a time when he was not an employee of the Company and no additional shares were available under the Non-Employee Director Plan. See Notes to the Company’s financial statements for the fiscal years ended March 31, 2009 and 2008 for the assumptions used for valuing the expense. |
|
(2) | | Represents bonus paid for such fiscal year. |
|
(3) | | Represents the incremental cost to the Company of all personnel benefits, including medical and dental insurance and the Company’s match for its 401(K) plan, to our Named Executive Officers. Such personnel benefits are available to all employees of the Company in accordance with the Company’s standard employment practices. |
|
(4) | | Mr. Ma commenced employment as the Company’s Chief Executive Officer on March 30, 2006 and began receiving a salary effective April 2008. |
|
(5) | | Mr. Pitts commenced employment as the Company’s Chief Financial Officer on February 19, 2007. |
|
(6) | | Mr. Spielberger commenced employment as the Company’s President-North American Operations on October 29, 2007. |
Employment Agreements.
During Fiscal 2006,2009, the Company had employment agreements with certain of its Named Executive Officers, each of which is described below.
Greenfield Pitts. Greenfield Pitts, our Chief Financial Officer, entered into an employment agreement with the Company on April 3, 2007, which sets forth the terms and conditions pursuant to which Mr. Pitts shall serve as the Company’s Chief Financial Officer. The agreement provides for an annual base salary of $250,000 and a discretionary bonus at the end of the Company’s fiscal year as recommended by the Board of
12
Directors. The initial term expired on March 31, 2008. During the term extensions, the Company has the right to terminate the agreement upon 90 days prior written notice and Mr. Pitts has the right to terminate the agreement upon 90 days prior written notice.
John Spielberger. John Spielberger, the Company’s President-North American Operations, entered into an employment agreement with the Company on October 15, 2007, which provides that Mr. Spielberger shall serve as the Company’s President-North American Operations. The agreement provides for an annual base salary of $250,000 and a discretionary bonus at the end of the Company’s fiscal year as recommended by the Board of Directors. The initial term expired on October 31, 2008. During the term extensions, the Company has the right to terminate the agreement upon 90 days prior written notice and Mr. Spielberger has the right to terminate the agreement upon 90 days prior written notice.
Outstanding Equity Awards at Fiscal Year End
The following table provides certain information concerning outstanding equity awards held by each of our Named Executive Officers at March 31, 2009.
| | | | | | | | | | | | | | | | |
| | | | Option Awards |
| | Number of Securities
| | Number of Securities
| | | | |
| | Underlying
| | Underlying
| | | | |
| | Unexercised Options
| | Unexercised Options
| | Option Exercise
| | Option Expiration
|
Name | | (#) Exercisable | | (#) Unexercisable | | Price ($) | | Date |
|
Adrian Ma | | | 0 | | | | 0 | | | | — | | | | — | |
Greenfield Pitts | | | 16,667 | | | | 8,333 | | | $ | 3.19 | | | | 11/21/2016 | |
John Spielberger | | | 0 | | | | 0 | | | | — | | | | — | |
Compensation of Directors
During Fiscal 2009, our directors who were not employees (“Outside Directors”), specifically Messrs. Brown, (until his death in August 2005), Binney, Bunger, Farnum, Morey,
Driscoll, PittsHo, Hon, Mahathir, Peterson, Sethi, Snellings, Will and WillWirsching were paid $31,250, $15,000, $42,500, $55,662, $45,720,
$4,167, $1,036$33,750, $17,500, $120,625, $5,875, $52,958, $13,125, $60,514, $36,667, $52,597 and $10,155,$18,333, respectively, for serving on the Board of Directors and on our various committees during the period. Each The Company does not compensate directors who are employees of the Company for their services as directors.
Outside Director isDirectors are each paid an annual director'sdirector’s fee of $12,500;$45,000. Beginning October 15, 2008, the Board of Directors resolved that each memberOutside Director serving on a committee of the Compensation and
Personnel Committee is paidBoard of Directors would receive an additional fee of $5,000$15,000 per annum; each memberannum with no additional fee paid an Outside Director serving as chairman of a committee. The Company does not pay any additional fees for attendance at meetings of the Nominating Committee is paid an additional feeBoard of $5,000 per annum; each
member ofDirectors or the Audit Committee is paid an additional fee of $7,500 per annum;
and, each chairman ofcommittees, but the Audit Committee and the Compensation and Personnel
Committee is paid an additional fee of $5,000 per annum.Company’s directors are reimbursed their expenses for attendance at meetings. All directors'directors’ fees are paid in four equal quarterly installments per annum.annum and are pro-rated in situations where an Outside Director serves less than a full one year term.
On September 5, 2008, the Board of Directors who are our
employees were not paid for their servicesresolved that Mr. Ho would begin receiving a director fee as directors during Fiscalan Outside Director effective April 1, 2008 and that Mr. Ho would receive a retroactive director fee as an Outside Director dating from the time he joined the Board of Directors of the Company on July 26, 2006. As a result of the numberthis resolution, Mr. Ho was paid an aggregate amount of board meetings held during Fiscal 2006, the Boarddirector’s fees in fiscal 2009 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. $120,625.
Additionally, each director who is not an employee
of the Company is eligible to participate in
ourthe Company’s 2004
Non-Employee Outside 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 $2.62 per share. These
options vest in equal installments over three years, commencing one year from
the date of grant, and their exercise is contingent on continued employment with
Emerson. See Footnotes (5) and (7) below.
(4) Mr. Ma was appointed as our Chairman and Chief Executive Officer on March
30, 2006 upon the resignation of Mr. Jurick. Mr. Ma was replaced as our Chairman
upon the appointment of Mr. Ho in July 2006. Mr. Ma did not receive any salary
or other compensation in Fiscal 2006 and has elected not to receive any salary
or other compensation for his services as Chief Executive Officer during fiscal
2007.
(5) Mr. Paglinco resigned as our Vice President and Chief Financial Officer
effective April 14, 2006.
(6) Mr. Murray resigned as our President-Emerson Radio Consumer Products
Corporation effective May 19, 2006.
(7) Ms. Calianese resigned as our Senior Vice President, General Counsel and
Corporate Secretary effective December 16, 2005.
OPTION GRANTS DURING 2006 FISCAL YEAR
The following table provides certain information with respect to options grantedthe compensation earned or paid to our Chief Executive Officer and to each of the executive
officers named in the Summary Compensation TableCompany’s Outside Directors during Fiscal 2009.
Directors Compensation
| | | | | | | | | | | | | | | | |
| | Fees Earned or Paid
| | | | All Other
| | |
Name | | in Cash ($) | | Option Awards ($)(1) | | Compensation ($) | | Total ($) |
|
Michael A.B. Binney(2) | | $ | 33,750 | | | $ | 0 | | | $ | 0 | | | $ | 33,750 | |
W. Michael Driscoll(3) | | $ | 17,500 | | | $ | 0 | | | $ | 0 | | | $ | 17,500 | |
Christopher Ho(4) | | $ | 120,625 | | | $ | 0 | | | $ | 0 | | | $ | 120,625 | |
Duncan Hon(5) | | $ | 5,875 | | | $ | 0 | | | $ | 0 | | | $ | 5,875 | |
Mirzan Mahathir | | $ | 52,958 | | | $ | 0 | | | $ | 0 | | | $ | 52,958 | |
David R. Peterson(6) | | $ | 13,125 | | | $ | 0 | | | $ | 0 | | | $ | 13,125 | |
Kareem E. Sethi | | $ | 60,514 | | | $ | 0 | | | $ | 0 | | | $ | 60,514 | |
Terence A. Snellings(7) | | $ | 36,667 | | | $ | 0 | | | $ | 0 | | | $ | 36,667 | |
Eduard Will | | $ | 52,597 | | | $ | 19,772 | | | $ | 0 | | | $ | 72,369 | |
Norbert Wirsching(8) | | $ | 18,333 | | | $ | 0 | | | $ | 0 | | | $ | 18,333 | |
| | |
(1) | | Represents the expense to the Company for stock options granted as long-term incentives pursuant to the Company’s 2004 Non-Employee Outside Director Stock Option Plan. See notes to the Company’s financial statements for the fiscal years ended March 31, 2009 and 2008 for the assumptions used for valuing the expense. At March 31, 2009, Mr. Will had options to purchase an aggregate of 50,000 shares of the Company’s common stock. |
|
(2) | | Mr. Binney served as the Company’s President-International Operations until he resigned from this position on May 7, 2008, at which time he began receiving a director’s fee as an Outside Director. Mr. Binney resigned from the Board of Directors of the Company in January 2009. |
|
(3) | | Mr. Driscoll resigned as a director on July 14, 2008. |
|
(4) | | On September 5, 2008, the Board of Directors resolved that Mr. Ho would begin receiving a director fee as an Outside Director effective April 1, 2008 and that Mr. Ho would receive a retroactive director fee as an Outside Director dating from the time he joined the Board of Directors of the Company on July 26, 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/As a result of this resolution, Mr. Ho was paid an aggregate amount of director’s fees in fiscal 2009 of $120,625. | (5) | | Mr. Hon began to serve as a director on February 12, 2009. | | (6) | | Mr. Peterson resigned as a director on July 15, 304,623 485,078
2008. | | (7) | | Mr. Snellings began to serve as a director on August 12, 2008. | | (8) | | Mr. Wirsching resigned as a director on July 28, 2008. |
(1) The stock options were granted under the Emerson Radio Corp. 2004 Employee
Stock Incentive 14
Equity Compensation Plan and, unless otherwise designated at the time of grant, are
exercisable commencing one year after the grant date in three equal annual
installments, with full vesting occurring on the third anniversary of the date
of the grant.
(2) The dollar amounts under these columns are the result of calculations at the
assumed compounded market appreciation rates of 5% and 10% as required by the
SEC over a ten-year term and therefore, are not intended to forecast possible
future appreciation, if any, of the stock price. The disclosure assumes the
options will be held for the full ten-year term prior to exercise. Such options
may be exercised prior to the end of such ten-year term. The actual value, if
any, an executive officer may realize will depend on the excess of the stock
price over the exercise
15
price on the date the option is exercised. There can be no assurance that the
stock price will appreciate at the rates shown in the table.
(3) Mr. Paglinco resigned as our Vice President and Chief Financial Officer
effective April 14, 2006.
OPTION EXERCISES DURING FISCAL 2006 AND FISCAL 2006 YEAR END VALUES
The following table provides information related to options exercised
by our executive officers during Fiscal 2006 and the number and value of options
held at the end of Fiscal 2006 by our executive officers. We do not have any
outstanding stock appreciation rights.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END AT FY-END
ACQUIRED VALUE (#) ($)(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
Information The following table gives information about ourthe Company’s common stock that may be issued upon the exercise of options and rights under our 1994 Stock Compensation Program, 1994 Non-
16
EmployeeNon-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, 20052009 (the "Plans"“Plans”). The 1994 Plans expired in July 2004 and the remainder of theremaining Plans wereare 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 "Certain2009. | | | | | | | | | | | | | | | | | | | | | Number of Securities
| | | | Number of Securities to
| | | Weighted Average
| | | Remaining Available
| | | | be Issued Upon Exercise
| | | Exercise Price of
| | | for Future Issuance
| | | | of Outstanding Options,
| | | Outstanding Options,
| | | Under Equity
| | | | Warrants and Rights
| | | Warrants and Rights
| | | Compensation Plans
| | | | (a) | | | (b) | | | (c) | | | Equity compensation plans approved by security holders | | | 134,000 | | | $ | 2.99 | | | | 2,878,334 | | | | | | | | | | | | | | | Equity compensation plans not approved by security holders | | | 100,000 | | | | 4.00 | | | | — | | | | | | | | | | | | | | | Total | | | 234,000 | | | $ | 3.42 | | | | 2,878,334 | |
Certain Relationships and Related Transactions".
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
The Compensation and Personnel CommitteeTransactions From time to time, the Company engages in business transactions with its controlling shareholder, Grande Holdings. As 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.
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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 thoseOctober 8, 2009, Grande Holdings beneficially owned approximately 57.6% 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 toCompany’s outstanding common stock. Mr. Ho, 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 of the Company, also serves as Chairman of Grande Holdings. Set forth below is a summary of such transactions. Majority Shareholder Grande Holding’s Ownership Interest in Emerson. At October 8, 2009, approximately 57.6% of the Company’s outstanding common stock was owned by direct or indirect subsidiaries of the Grande Holdings. Related Party Transactions Product Sourcing Transactions. Since August 2006, Emerson has been providing to Sansui Sales PTE Ltd (“Sansui Sales”) and President throughoutAkai Sales PTE Ltd (“Akai Sales”), both of which are subsidiaries of Grande, assistance with acquiring certain products for sale. Emerson issues purchase orders to third-party suppliers who manufacture these products, and Emerson issues sales invoices to Sansui Sales’ and Akai Sales’ at gross amounts for these products. Financing is provided by Sansui Sales’ and Akai Sales’ customers in the form of transfer letters of credit to the suppliers, and goods are shipped directly from the suppliers to Sansui Sales’ and Akai Sales’ customers. Emerson recorded income totaling $10,000 and $102,000 for providing this service in fiscal 2009 and 2008, respectively. As of March 31, 2009 and March 31, 2008, Sansui Sales and Akai Sales collectively owed Emerson $7,600 and $134,000, respectively, relating to this activity. Sales of goods. In addition to the product sourcing transactions described in the preceding paragraph, Emerson has also purchased products on behalf of Sansui Sales and Akai Sales from third-party suppliers and sold these goods to Sansui Sales and Akai Sales. These transactions, the latest of which occurred in February 2008, were similar to the transactions described in the preceding paragraph; however, instead of utilizing transfer letters of credit provided by Sansui Sales’ and Akai Sales’ customers, Emerson used its own cash to pay Sansui Sales’ and Akai Sales’ suppliers. Emerson invoices Sansui Sales and Akai Sales an amount that is marked up between two and three percent from the cost of the product. As a result of this arrangement, Emerson recorded sales to Sansui Sales and Akai Sales, collectively, of $0 and $242,000 in fiscal 2009 and 2008, respectively. Sansui Sales and Akai Sales collectively owed Emerson $1,500 and $5,000 relating to these activities, at March 31, 2009 and March 31, 2008, respectively. Akai Sales deducted $9,600 for storage charges from its June 30, 2008 settlement payment to Emerson for this activity, which was deemed to be in error by Emerson, which resulted in an outstanding balance owed to Emerson of $9,600 at March 31, 2009. At 15
March 31, 2009 and March 31, 2008, Emerson had outstanding liabilities to suppliers of product invoiced to Sansui Sales and Akai Sales totaling $0 and $3,000, respectively. Leases and Other Real Estate Transactions. Effective May 15, 2009, Emerson entered into an amended lease agreement with Grande pursuant to which the space rented from Grande was increased from 18,476 square feet to 19,484 square feet. This amended agreement by its terms expires on December 31, 2009. Rent expense and related service charges with Grande totaled $414,000 and $270,000 for fiscal 2009 and fiscal 2008, respectively. Rent and related service charges described in this activity are included in the Consolidated Statements of Operations as a component of selling, general, and administrative expenses. Emerson owed Grande $41,600 and $0 related to this activity at March 31, 2009 and March 31, 2008, respectively. A security deposit of $81,900 on the leased property is held by Grande as of March 31, 2009. Emerson is also due an $11,500 refund from Grande for previously paid warehouse charges. Emerson utilizes the services of Grande employees for certain administrative and executive functions. Grande pays Emerson’s quality assurance personnel in Renminbi in China on Emerson’s behalf for which Emerson subsequently pays a reimbursement to Grande. Payroll and travel expenses, including utilization of Grande employees as well as payroll and travel expenses paid on Emerson’s behalf and reimbursed to Grande, were $85,000 and $515,000 for fiscal 2009 and fiscal 2008, respectively. Emerson owed Grande $0 at March 31, 2009 and $70,000 related to this activity at March 31, 2008. In December 2008, Emerson signed a lease agreement with Akai Electric (China) Ltd. concerning the rental of office space, office equipment, and lab equipment for Emerson’s quality assurance personnel in Zhong Shan, China. The initial lease term began in July 2007 and ended June 2009, and the agreement renews automatically at the end of the term unless canceled by either party. Rent charges with Akai Electric (China) Ltd. totaled $264,000 for fiscal 2009. Emerson owed Grande $9,500 related to the agreement at March 31, 2009. A security deposit of $31,600 on the leased property is held by Akai Electric (China) Ltd. as of March 31, 2009. From May to October 2007, Emerson occupied office space in Shenzhen, China under a lease agreement with Akai AV Multimedia (Zhongshan) Co Ltd, an affiliate of Grande. Rent expense and related charges totaled $12,000 for the three months ended December 31, 2007 and $108,000 for the nine months ended December 31, 2007. The agreement was not renewed after its termination in October 2007. In May 2007 Emerson paid a $10,000 commission to Vigers Hong Kong Ltd, a property agent and a subsidiary of Grande, related to the sale of a building owned by Emerson to an unaffiliated buyer. Also, Emerson received a deposit of approximately $300,000 from the buyer on this date. The sale was concluded on September 27, 2007, on which date Emerson received the balance of the purchase price of approximately $1,700,000 and paid an additional $10,000 commission to Vigers. Toy Musical Instruments. In May 2007, Emerson entered into an agreement with Goldmen Electronic Co. Ltd. (“Goldmen”), pursuant to which the Company agreed to pay $1,682,220 in exchange for Goldmen’s manufacture and delivery to Emerson of musical instruments in order for it to meet its delivery requirements of these instruments in the first week of September 2007. In July 2007, the Company learned that Goldmen had filed for bankruptcy and was unable to manufacture the ordered musical instruments. Promptly thereafter, Capetronic Displays Limited (“Capetronic”), a subsidiary of Grande, agreed to manufacture the musical instruments at the same price and on substantially the same terms and conditions. Accordingly, on July 12, 2007, Emerson paid Tomei Shoji Limited, an affiliate of Grande, $125,000 to acquire from Goldmen and deliver to Capetronic the molds and equipment necessary for Capetronic to manufacture the musical instruments. In July 2007, Emerson made two upfront payments to Capetronic totaling $546,000. On July 20, 2007, Capetronic advised Emerson that it was unable to manufacture the musical instruments because it did not have the requisite governmental licenses to do so. In June 2008, Capetronic repaid the $546,000 advance it received from Emerson in July 2007. In August 2008, Capetronic requested that Emerson reimburse it for the costs it had incurred to purchase the production materials required to produce the musical instruments. After a review of the facts, the material 16
purchase orders, the physical material at the Capetronic premises, and deducting an agreed upon scrap value of the material, Emerson paid $313,000 to Capetronic on September 30, 2008. These materials are the property of Capetronic. Capetronic is currently in physical possession of Emerson’s molds originally required to produce the musical instruments, which Emerson wrote off in fiscal 2008. Freight Forwarding Services. In June 2007, Emerson and Capetronic signed an agreement for Emerson to provide freight forwarding services to Capetronic. Under this agreement, which contains no specified termination date, Emerson will pay the costs of importation into the United States of Capetronic’s inventory on Capetronic’s behalf, and to arrange for the inventory to be received at a port of entry, cleared through the United States Customs Service using Emerson’s regularly engaged broker, and transfer the inventory to a common carrier as arranged by Capetronic’s customer. If Capetronic’s customer failed to make such arrangements with a common carrier, Emerson agreed to transfer the inventory to Emerson’s warehouse for storage or make other arrangements with a public warehouse. Following the transfer of Capetronic’s inventory, Emerson is required to provide Next Day delivery of all importation documents and bills of Fiscal
2006.lading to Capetronic’s customer. Capetronic agreed to reimburse Emerson for all costs incurred by Emerson in connection with the activity just described within thirty days of demand by Emerson, after which interest accrues. As compensation, Capetronic agreed to pay Emerson a service fee of 12% of the importation costs. Emerson billed Capetronic for the reimbursement of importation costs totaling $246,000 and a commission of $29,000 for the nine month period of December 31, 2007. Capetronic paid Emerson the full amount due of $275,000 on November 14, 2007. Hong Kong Electronics Fairs (“HKEF’). Emerson incurred costs totaling $152,633 for its participation in the 2008 HKEF. The Compensation Committee consideredtotal includes $5,138 billed by Grande to Emerson for services rendered in connection with the resultsevent, and, as of March 31, 2009, Emerson owes Lafe Technology (Hong Kong) Ltd $4,396 for storage and delivery charges. In addition, Emerson has billed $33,823 to its affiliates for expenses incurred on their behalf for the 2008 HKEF; and as of March 31, 2009, $19,657 from Nakamichi Corporation Ltd, $8,222 from Akai Sales PTE Ltd, and $5,944 from Sansui Sales PTE Ltd is due to Emerson. Between August and December 2007, Emerson paid invoices and incurred charges for goods and services relating to the 2007 HKEF of $153,069. Portions of these charges, totaling $87,353, have been allocated and invoiced to affiliates of Grande in all aspectsproportion to their respective share of our
business,space occupied and Mr. Jurick's performanceservices rendered during Fiscal 2006.
Mr. Jurick'sthe 2007 HKEF as follows: Nakamichi Corporation Ltd. $17,143, Akai Sales PTE Ltd $44,495 and Sansui Sales PTE Ltd $25,715. Akai Sales and Sansui Sales collectively owed Emerson $6,437 and $70,210 in connection with the 2007 HKEF as of March 31, 2009 and March 31, 2008, respectively. Also related to the 2006 and 2007 annual compensationHong Kong Electronics Fairs, Capetronic incurred charges and paid invoices on behalf of Emerson in the amount of $76,000 for Fiscalwhich Emerson reimbursed Capetronic $48,000 for the 2007 Hong Kong Electronics Fair in March 2008. Emerson paid Capetronic the remaining balance due of $28,000 for the 2006 Hong Kong Electronics Fair on September 30, 2008. Other. In June 2007 Emerson paid a one-time sales commission in an amount of $14,000 to a Director of Grande who, at the time, was comprisedalso a Director of Emerson. The commission was 50% of the net margin on a sale by Emerson to an unaffiliated customer. In January and February 2008, Emerson invoiced The GEL Engineering Corp. Ltd (“GEL”), an affiliate of Grande, for a portion of $7,900 travel expenses paid by Emerson, of which 70% pertained to travel for the benefit of GEL and 30% pertained to travel for Emerson. As of March 31, 2009 and March 31, 2008, GEL owed Emerson $5,500 as a result of this activity. In June 2008, Emerson paid Capetronic $160,000 for reimbursement of payroll and travel expenses that Capetronic paid on behalf of Emerson from October 2007 through May 2008 for expenses related to Emerson employees located in mainland China. In September 2008, Akai Sales invoiced Emerson for travel expenses and courier fees which Akai Sales paid on Emerson’s behalf. As of March 31, 2009 Emerson owed Akai Sales $2,700 as a result of this invoice. 17
In September 2008, the Emerson Board of Directors resolved that, effective as of April 1, 2008, the 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 of the Company shall be $350,000, and, that because all members of the Board are to be compensated according to a schedule approved by the Board, and because no such fees had been paid to the Chairman of the Board of Directors onfrom July 2006 through 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 as31, 2008, the Chairman of the Board shall be paid compensation in full for his services for that period of Directors ontime, to be calculated using the standard annual fee structure in place for board members then currently in effect. As a result of these resolutions, in September 2008 the Company began paying the Chief Executive Officer the stated annual salary, made a one time retroactive salary payment to the Chief Executive Officer of $145,833 covering the period April 1, 2008 through August 31, 2008, and made a one time cash payment of $75,625 to the Chairman of the Board covering the period July 26, 2006.
POLICY ON QUALIFYING COMPENSATION
Our2006 through March 31, 2008. In October 2008, the Emerson Board of Directors has consideredresolved that those remaining directors currently serving on the potential impactBoard who, from the date of Section
162(m)joining the Board, had received no compensation as either a Board member or as an employee of the Internal Revenue CodeCompany, receive a cash payment covering such periods of 1986, as amended (the "Code"). Section
162(m) generally provides thattime, to be calculated using the standard annual fee structure in place for board members then currently in effect. As a publicly held company's deduction for
compensation paidresult of this resolution, in October 2008 the Company made onetime cash payments of $90,000 and $37,500 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 thetwo members of the Board of Directors and
the Compensation and Personnel CommitteeDirectors. In November 2008, Emerson determined that wereit needed to temporarily maintain access to a material amount of Renminbi to ensure an uninterrupted supply of factory product 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"), exceptmainland China, due to the extenttightening of the local credit and exchange markets. Emerson does not have independent access to Renminbi because it does not maintain a physical presence in Mainland China. Emerson advanced to Zhongshan Tomei Audio & Video Products Company Ltd. (Zhongshan Tomei) an amount of HK$20,705,300 — approximately US$2,655,000 — for which Zhongshan Tomei was prepared to disburse, as may be needed, an equivalent amount of Renminbi to Emerson’s factory suppliers upon Emerson’s direction. Once the need to transact in Renminbi passed, US $2,670,922 was repaid to Emerson by Soshin Onkyo International Ltd in December 2008, resulting in a foreign exchange gain to Emerson of $16,000 in December 2008. This transaction was executed without the proper approvals per the Company’s internal policies governing related party transactions and led management to conclude that we specifically incorporatea material weakness over related party transactions existed as of March 31, 2009. In February 2009, Akai Sales invoiced Emerson for travel expenses which Akai Sales paid on Emerson’s behalf. As of March 31, 2009 Emerson owed Akai Sales $3,100 as a result of this informationinvoice. Review and Approval of Transactions with Related Parties It is the policy of the Company that all proposed transactions between the Company and related parties, as defined by reference, and shall not otherwiseapplicable accounting standards, which are (1) less than $500,000 but greater than $100,000 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 approvedpre-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 CommitteeCompany’s Chief Executive Officer, Chief 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 asOfficer and 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 definedand (2) greater than $500,000 be pre-approved by the SEC.
Independence of Audit Committee Members. Our common stock is listed on
theCompany’s Chief Executive Officer, Chief Financial Officer, President-North American Stock ExchangeOperations and we are governed by the listing standards of such
exchange. All members of the Audit Committee of the Board of Directors have been
determinedDirectors. Management of the Company concluded during its fiscal 2009 assessment of internal controls over financial reporting that the Company’s policy is not effective to be "independent directors" underprevent related party transactions which give rise to potential conflicts of interest. As a result, the listing standardsCompany entered into a material transaction in which a subsidiary advanced funds to a related party without proper approval. The transaction was noted immediately as an unapproved transaction, and all the advanced funds were repaid to the Company on a timely basis. Legal Proceedings In re: Emerson Radio Shareholder Derivative Litigation. In late 2008, the plaintiffs in two previously filed derivative actions (the Berkowitz and Pinchuk actions) filed a consolidated amended complaint naming as defendants two current and one former director of AMEX.
REPORTthe Company and alleging that the named defendants violated their fiduciary duties to the Company in connection with a number of related party transactions with affiliates of Grande Holdings, the Company’s controlling shareholder. In January 2009, the individual defendants filed an answer denying the material allegations of the complaint and the litigation currently is in the discovery stage. The recovery, if any, in this action will inure to the Company’s benefit. 18
PROPOSAL 2: RATIFICATION 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.
APPOINTMENT OF MSPC AS INDEPENDENT AUDITORS OF EMERSON FOR THE FISCAL YEAR ENDING 2010 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
resignedappointed MSPC as our independent registered public accounting firm on March 7, 2006.
BDO served as our independent registered public accountant since March 31, 2004.
Prioraccountants 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 onaudit 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, 2007,2010, and has further directed that management submit the selection of independent registered accountants for ratification by our stockholders at the Annual Meeting of Stockholders.annual meeting. Stockholder ratification of the selection of Moore StephensMSPC is not required by our by-laws or otherwise. However, we are submitting the selection of Moore StephensMSPC 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.MSPC. 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 StephensMSPC are expected to be present at the Annual Meeting of Stockholdersour annual meeting and will have an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions.
VOTE REQUIRED
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 the Company’s independent accountants, MSPC, 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. oAudit Fees. Audit fees billed to the Company by MSPC for the audit of the financial statements included in the Company’s Annual Reports onForm 10-K, and reviews by MSPC of the financial statements included in the Company’s Quarterly Reports onForm 10-Q, for the fiscal years ended March 31, 2008 and 2009 totaled approximately $247,400 and $270,000, respectively. oAudit-Related Fees. The Company was billed $117,200 and $125,000 by MSPC for the fiscal years ended March 31, 2008 and 2009, respectively, for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the caption Audit Fees above. Audit-related fees were principally related to procedures in connection with the audit of the Company’s majority shareholder’s consolidated financial statement for its fiscal years ended December 31, 2007 and December 31, 2008, portions of which were credited to our audit fees for the audit of our financial statements for our fiscal years ended March 31, 2008 and March 31, 2009. oTax Fees. SPC billed the Company an aggregate of $98,600 and $70,000 for the fiscal years ended March 31, 2008 and 2009, respectively, for tax services, principally related to the preparation of income tax returns and related consultation. oAll Other Fees. The Company was not billed by MSPC for the fiscal years ended March 31, 2008 and 2009, respectively, for any permitted non-audit services. Applicable law and regulations provide an exemption that permits certain services to be provided by the Company’s 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. 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. 19
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF MOORE STEPHENS, P.C.MSPC AS INDEPENDENT AUDITORS OF EMERSON FOR THE FISCAL YEAR ENDING MARCH 31, 2007.
31
2010. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors, officers, and stockholders who beneficially own more than 10% of any class of its 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 the Company’s equity securities with the Securities and Exchange Commission and the NYSE Amex. All reporting persons are required to furnish the Company with copies of all reports that such reporting persons file with the Securities and Exchange Commission pursuant to Section 16(a) of the Exchange Act. Based solely upon a review of Forms 3 and 4 and amendments to these forms furnished to the Company, all parties subject to the reporting requirements of Section 16(a) filed all such required reports during and with respect to Fiscal 2009. STOCKHOLDER COMMUNICATIONS AND PROPOSALS
The Our Board of Directors has established a procedure that enables stockholders to communicate in writing with members of the Board.our Board of Directors. Any such communication should be addressed to Emerson'sour Secretary and should be sent to such individualc/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'sSecretary’s receipt of such a communication, Emerson'sour Secretary will send a copy of such communication to each member of the Board of Directors, identifying it as a communication received from a stockholder. Absent unusual circumstances, at the next regularly scheduled meeting of the Board of Directors held more than two days after such communication has been distributed, the Board of Directors will consider the substance of any such communication.
SEC regulations permit stockholders Stockholder proposals to submit proposals for
considerationbe presented at annual meetings of stockholders. Any such proposals for
Emerson'sour Annual Meeting of Stockholders to be held in 20072010, for inclusion in our proxy statement and form of proxy relating to that meeting, must be submittedreceived by us at our offices located at 9 Entin Road, Parsippany, New Jersey 07054, addressed to Emersonthe Secretary, on or before July 5, 2007,April 23, 2010. If, however, our 2010 Annual Meeting of Stockholders is changed by more than thirty (30) days from the date of our annual meeting, the deadline is a reasonable time before we begin to print and mail our proxy materials for the 2010 Annual Meeting of Stockholders. Such stockholder proposals must comply with applicable regulationsour bylaws and the requirements of Regulation 14A of the SEC in order to be included in proxy materials relating to that meeting.Exchange Act. See "Election“Election of Directors"Directors” for information on stockholder submissions of nominations for election to the Board of Directors. Rule 14a-4 of the Exchange Act governs our use of discretionary proxy voting authority with respect to a stockholder proposal that is not addressed in the proxy statement. With respect to our 2010 Annual Meeting of Stockholders, if we are not provided notice of a stockholder proposal prior to July 7, 2010, we will be permitted to use our discretionary voting authority when the proposal is raised at the meeting, without any discussion of the matter in the proxy statement. 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. 20
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 proxiesproxies’ 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, 2006,2009, including financial statements, accompanies this Proxy
Statement.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 onForm 10-K in August 2006July 2009 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 onForm 10-K andForm 10-K/A for the fiscal year ended March 31, 2006,2009, 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 Jersey07054-0430 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 ANDREW L. DAVISSecretary
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 October 19, 2009 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
- --------------------------------------------------------------------------------
-2-
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. |_|
-3-
EMERSON RADIO CORP.PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERSTO BE HELD ON NOVEMBER 10, 2009The undersigned hereby appoints Greenfield Pitts and Andrew L. Davis, and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of Emerson Radio Corp. which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Emerson Radio Corp. to be held at the offices of our counsel, Lowenstein Sandler PC, located at 65 Livingston Avenue, Roseland, New Jersey 07068 on Tuesday, November 10, 2009, at 9:00 a.m. (local time), and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NO. 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.(Continued and to be signed on the reverse side.)14475 |
ANNUAL MEETING OF STOCKHOLDERS OFEMERSON RADIO CORP.November 10, 2009NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card are available at http://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=02008Please sign, date and mail your proxy card in the envelope provided as soon as possible.Please detach along perforated line and mail in the envelope provided.20830000000000000000 4111009THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED BELOW AND A VOTE “FOR” PROPOSAL 2.PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE xFOR AGAINST ABSTAIN1.To elect eight directors:2. To ratify the appointment of MSPC Certified Public Accountants and Advisors, A Professional Corporation as NOMINEES:the independent registered public accounting firm of Emerson FOR ALL NOMINEESO Christopher HoRadio Corp. for the fiscal year ending March 31, 2010.O Adrian MaWITHHOLD AUTHORITY O Greenfield PittsTHIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.FOR ALL NOMINEESO Eduard WillIT MAY BE REVOKED PRIOR TO ITS EXERCISE.O Duncan Hon FOR ALL EXCEPTO Mirzan Mahathir(See instructions below)RECEIPT OF NOTICE OF THE ANNUAL MEETING AND PROXY STATEMENTO Kareem E. SethiIS HEREBY ACKNOWLEDGED, AND THE TERMS OF THE NOTICE AND O Terence A. SnellingsPROXY STATEMENT ARE HEREBY INCORPORATED BY REFERENCE INTOTHIS PROXY. THE UNDERSIGNED HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN FOR SAID MEETING OR ANY AND ALL ADJOURNMENTS, POSTPONEMENTS AND CONTINUATIONS THEREOF.PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED ININSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” THE UNITED STATES. and fill in the circle next to each nominee you wish to withhold, as shown here: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.Signature of ShareholderDate:Signature of ShareholderDate:Note: Please sign exactly as your name or names appear on this Proxy. 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. |
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