-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UxM9ObtVaD5q8NYzqYT57EtE9K4hVPZpkl+0cLd/+2AFfYZXumNPNi2rRML4kP1Z oqkvoefaLVyrFEpz0SdJXg== 0000950123-98-010664.txt : 19981216 0000950123-98-010664.hdr.sgml : 19981216 ACCESSION NUMBER: 0000950123-98-010664 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19981215 GROUP MEMBERS: KENNETH GROSSMAN GROUP MEMBERS: OAKTREE CAPITAL MANAGEMENT LLC /ADV GROUP MEMBERS: OCM PRINCIPAL OPPORTUNITIES FUND, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EMERSON RADIO CORP CENTRAL INDEX KEY: 0000032621 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 223285224 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-17956 FILM NUMBER: 98769884 BUSINESS ADDRESS: STREET 1: NINE ENTIN RD STREET 2: PO BOX 430 CITY: PARSIPPANY STATE: NJ ZIP: 07054-0430 BUSINESS PHONE: 2018845800 FORMER COMPANY: FORMER CONFORMED NAME: MAJOR ELECTRONICS CORP DATE OF NAME CHANGE: 19770921 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: OAKTREE CAPITAL MANAGEMENT LLC /ADV CENTRAL INDEX KEY: 0000943457 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954521152 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 333 SOUTH GRAND AVE 28TH FLR STREET 2: 22ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2138306300 MAIL ADDRESS: STREET 1: 550 SOUTH HOPE ST STREET 2: 22ND FL CITY: LOS ANGELES STATE: CA ZIP: 90071 FORMER COMPANY: FORMER CONFORMED NAME: OAKTREE CAPITAL MANAGEMENT LLC /ADV DATE OF NAME CHANGE: 19970210 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1) EMERSON RADIO CORP. (Name of Issuer) Common Stock, par value $0.01 per share (Title of Class of Securities) 291087 (CUSIP Number) Kenneth S. Grossman Kenneth Liang c/o Juris Partners Managing Director & General Counsel 579 Fifth Avenue, Suite 1050 Oaktree Capital Management, LLC New York, New York 10017 333 South Grand Avenue, 28th Floor (212) 593-0909 Los Angeles, California 90071 (213) 830-6300 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 15, 1998 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2
SCHEDULE 13D - ----------------------------------------------- ------------------------------------------------ CUSIP NO. 291087 PAGE 2 OF 9 PAGES ------------------ ----- ----- - ----------------------------------------------- ------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Kenneth Grossman - --------------------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS PF - --------------------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - --------------------------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------------------------------------------------------------------ 8 SHARED VOTING POWER 3,483,134.7 ----------------------------------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER None ----------------------------------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,483,134.7 - --------------------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,483,134.7 - --------------------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.7% - --------------------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ---------------------------------------------------------------------------------------------------------------------------------
3
SCHEDULE 13D - ----------------------------------------------- ------------------------------------------------ CUSIP NO. 291087 PAGE 3 OF 9 PAGES ------------ ----- ----- - ----------------------------------------------- ------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Oaktree Capital Management, LLC - --------------------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - --------------------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - --------------------------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ---------------------------------------------------------------------------------------------------------- 8 SHARED VOTING POWER 3,483,134.7 ---------------------------------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER None ---------------------------------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,483,134.7 - -------------------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,483,134.7 - -------------------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.7% - -------------------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA;OO - -------------- --------------------------------------------------------------------------------------------------------------
4
SCHEDULE 13D - ----------------------------------------------- ------------------------------------------------ CUSIP NO. 291087 PAGE 4 OF 9 PAGES ----------- ----- ----- - ----------------------------------------------- ------------------------------------------------ - --------------------------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON OCM Principal Opportunities Fund, L.P. - --------------------------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - --------------------------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - --------------------------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY None OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------------------------------------------------------------------ 8 SHARED VOTING POWER 3,483,134.7 ------------------------------------------------------------------------------------------------------------ 9 SOLE DISPOSITIVE POWER None ------------------------------------------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 3,483,134.7 - --------------------------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,483,134.7 - --------------------------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------------------\ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.7% - --------------------------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------- --------------------------------------------------------------------------------------------------------------
5 This Amendment No. 1 (this "Statement") amends and restates in its entirety the statement on Schedule 13D of Kenneth S. Grossman, Oaktree Capital Management, LLC and OCM Principal Opportunities Fund, L.P. filed with the Securities and Exchange Commission on May 13, 1998. ITEM 1. SECURITY AND ISSUER This Statement relates to Common Stock, par value $0.01 per share (the "Common Stock"), of Emerson Radio Corp., a Delaware corporation (the "Issuer"). The address of the principal executive office of the Issuer is Nine Entin Road, Parsippany, New Jersey, 07054. ITEM 2. IDENTITY AND BACKGROUND (a) - (c) & (f) This Statement is filed on behalf of: (i) Kenneth S. Grossman ("Grossman"); (ii) Oaktree Capital Management, LLC, a California limited liability company ("Oaktree"); and (iii) OCM Principal Opportunities Fund, L.P., a Delaware limited partnership of which Oaktree is the general partner (the "Oaktree Fund"). Grossman and the Oaktree Fund are referred to in this Statement together as the "Investors." (i) Grossman The address of the principal business and principal office for Grossman is c/o Juris Partners, 579 Fifth Avenue, Suite 1050, New York, New York 10017. The principal business of Grossman is asset management, investment advisory services, and investing in distressed and undervalued public and private securities for his own and affiliated accounts. Grossman is a citizen of the United States of America. (ii) Oaktree The address of the principal business and principal office for Oaktree is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. The principal business of Oaktree is to provide investment advice and management services to institutional and individual investors. The members and executive officers of Oaktree are listed below. The principal address for each member and executive officer of Oaktree is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. All individuals listed below are citizens of the United States of America. Executive Officers and Members Howard S. Marks Chairman and Principal Bruce A. Karsh President and Principal Sheldon M. Stone Principal David Richard Masson Principal Larry Keele Principal Russel S. Bernard Principal Stephen A. Kaplan Principal David Kirchheimer Managing Director and Chief Financial and Administrative Officer Kenneth Liang Managing Director and General Counsel (iii) The Oaktree Fund The address of the principal business and principal office for the Oaktree Fund is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. The principal business of the Oaktree Fund is to invest in entities over which there is a potential for the Oaktree Fund to exercise significant influence. The Oaktree Fund is an investment partnership, and 5 of 9 6 Oaktree is its sole general partner. (See information in section (ii) above regarding Oaktree and its members and executive officers.) The names and addresses of the portfolio managers of the Oaktree Fund are listed below. All individuals listed below are citizens of the United States of America. Bruce A. Karsh 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 Stephen A. Kaplan 333 South Grand Avenue, 28th Floor Los Angeles, California 90071 (d) & (e) During the last five years, none of Grossman, Oaktree or the Oaktree Fund, nor to the best of their knowledge any of their respective executive officers, directors, general partners, members or portfolio managers (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The Oaktree Fund owns $13,239,000 in principal amount of the Issuer's 8-1/2% Senior Subordinated Convertible Debentures Due 2002 (the "Debentures"), having paid an aggregate of $11,341,979.89 for such Debentures. All purchases were made from working capital of the Oaktree Fund. Grossman, including family members and affiliated entities, owns $650,000 in principal amount of the Debentures, having paid an aggregate of $447,687.50 for such Debentures. All purchases were made from personal funds. As of the date of this Statement, the Investors beneficially own 3,483,134.7 shares of Common Stock, which is approximately 6.7% of the Issuer's outstanding Common Stock issuable upon conversion of the $13,889,000 in principal amount of the Debentures. ITEM 4. PURPOSE OF TRANSACTION The Investors acquired the Debentures for investment purposes in connection with the Investors' investigation of a possible restructuring of the Issuer's balance sheet and asset deployment strategy in a manner which produces a favorable return on the Investors' investment. Potential restructuring strategies include, but are not limited to, the acquisition of a controlling Common Stock stake by the Investors or others, the redemption of Debentures and/or the Issuer's outstanding Preferred Stock, an exchange of the Investors' securities, property, or cash for assets of the Issuer including the securities of the Issuer's minority owned subsidiary, a sale of the Issuer's shares of such subsidiary in one or more public or private transactions or a divestiture or spin-off of such subsidiary, a change of certain members of the Issuer's present Board of Directors, a possible replacement or renegotiation of the Issuer's working capital facility or other extraordinary transactions. As a result of these investigations, the Investors have decided to attempt to acquire a controlling Common Stock stake in the Issuer. In furtherance of that attempt, the Investors have made a proposal, attached hereto as Exhibit 1.3 and incorporated herein by reference (the "Proposal"), to Petra Stelling, Thomas Hackett and Barclays Bank (collectively,the "Creditors"), which if consummated would result in the Investors acquiring an additional 29,152,542 shares of Common Stock. The Creditors have advised the Investors that they will recommend to the United States District Court for the District of New Jersey (the "Court") that the Investors be permitted to commence a due diligence investigation of the Issuer as contemplated by the Proposal and have also indicated their support of the Proposal. Consummation of the transaction described in the Proposal is subject to a number of conditions described therein. 6 of 9 7 Should the Investors acquire a controlling stake in the Issuer, it is anticipated that as a result of such acquisition at least a majority of the Issuer's Board of Directors will be nominees of the Investors and that the chief executive officer of the Issuer will be replaced. Currently, the Investors do not anticipate changing any other senior members of the Issuer's management but reserve the right, after completion of their due diligence and the transaction contemplated by the Proposal, to replace other senior members of the Issuer's management. The Investors reserve the right to withdraw or modify the Proposal at any time, to continue to pursue other possible restructuring strategies as outlined above, and subject to applicable law and the Issuer's charter, to seek to call a special meeting of shareholders, to propose business or nominate directors at any special or scheduled meeting of shareholders, to seek proxies, consents and/or ballots in support of nominees at special or scheduled meetings of shareholders or otherwise or in support of or against other matters that may come before the Issuer's shareholders for their vote or consent. The Investors intend to review on a continuing basis their investment in the Debentures. The Investors may, from time to time, retain, convert, sell or exchange all or a portion of their holdings of the Debentures in the open market or in privately negotiated transactions. Any actions that the Investors might undertake with respect to the Debentures will be dependent upon their review of numerous factors, including, among other things, the availability of Debentures for purchase, the price levels of such Debentures, general market and economic conditions as well as those in the areas in which the Issuer's properties are located, ongoing evaluation of the Issuer's business, financial condition, properties, operations and prospects, the relative attractiveness of alternative business and investment opportunities, the actions of the Management, the Board of Directors and/or the Creditors of the Issuer and other future developments including future rulings of the Court, if any. Although the foregoing reflects activities presently contemplated by the Investors with respect to the Issuer, the foregoing is subject to change at any time, and there can be no assurance that the Investors, either alone or with others, will take any of the actions referred to above. Except as set forth above, the Investors have no present plans or proposals which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST AND SECURITIES OF THE ISSUER (a) Each of the Investors and Oaktree, as general partner of the Oaktree Fund, may be deemed to beneficially own 3,483,134.7 shares of Common Stock or 6.7% of the Common Stock outstanding (based on 48,621,815 shares of Common Stock outstanding on November 9, 1998 as reported on the Issuer's Quarterly Report on Form 10-Q for the quarterly period ending October 2, 1998). This consists entirely of 3,483,134.7 shares of Common Stock issuable upon conversion of $13,889,000 of the Debentures based on a conversion price of $3.9875. To the best of the Investors' and Oaktree's knowledge, none of the other people named in response to Item 2 own any securities of the Issuer. (b) Oaktree, as the general partner of the Oaktree Fund, has discretionary authority and control over all of the assets of the Oaktree Fund pursuant to the partnership agreement for the Oaktree Fund, including the power to vote and dispose of the Issuer's Common Stock held in the name of the Oaktree Fund. Pursuant to a letter agreement dated as of January 7, 1998, between the Investors, Oaktree and the Oaktree Fund have discretionary authority and control over the investments of the Investors including the securities owned by Grossman, including discretionary authority to vote and dispose of the Issuer's Common Stock held by Grossman. (c) None of Grossman, Oaktree nor the Oaktree Fund, and to the best of their knowledge, none of the other people named in response to Item 2, has effected transactions involving the Issuer's Common Stock or Debentures during the last 60 days. Oaktree, as general partner of the Oaktree Fund, may be deemed to beneficially own the shares of the Issuer's Common Stock which were purchased by the Oaktree Fund. Oaktree and each of the individuals listed in Item 2 disclaims ownership of the shares of the Issuer's Common Stock reported herein, and the filing of this Statement shall not be construed as an admission that any such person is the beneficial owner of any securities covered by this Statement. (d) No other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds of sale of, any of the Issuer's Common Stock beneficially owned by Oaktree and the Oaktree Fund, except to the extent that the investment advisory clients of Oaktree and the partners of the Oaktree Fund may have such right subject to the notice, withdrawal and/or termination provisions of advisory and partnership arrangements. No such 7 of 9 8 client or partner has an interest by virtue of such relationship that relates to more than 5% of the Issuer's Common Stock. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The specified matter is incorporated by reference to Exhibits 1.2 and 1.3 hereto. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS The following is filed herewith as an Exhibit to this Statement: Exhibit 1.1 A written agreement relating to the filing of the joint filing statement as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended. (Incorporated by reference to Exhibit 1.1 to the Schedule 13D filed on May 13, 1998.) Exhibit 1.2 Letter Agreement, dated as of January 7, 1998, between the Investors. (Portions of this document have been omitted pursuant to a request for confidential treatment.) (Incorporated by reference to Exhibit 1.2 to the Schedule 13D filed on May 13, 1998.) Exhibit 1.3 Proposal, dated as of December 15, 1998, submitted by the Investors to the Creditors. 8 of 9 9 SIGNATURE After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certify that the information set forth in this Statement is true, complete and correct. Dated as of this 15th day of December, 1998. KENNETH S. GROSSMAN /s/ Kenneth S. Grossman ---------------------------------------------- By: Kenneth S. Grossman OAKTREE CAPITAL MANAGEMENT, LLC /s/ Kenneth Liang ---------------------------------------------- By: Kenneth Liang Title: Managing Director and General Counsel OCM PRINCIPAL OPPORTUNITIES FUND, L.P. By: Oaktree Capital Management, LLC Its: General Partner /s/ Kenneth Liang ---------------------------------------------- By: Kenneth Liang Title: Managing Director and General Counsel 9 of 9 10 EXHIBIT INDEX
Exhibit Number Description -------------- ----------- 1.1 A written agreement relating to the filing of the joint filing statement as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended. (Incorporated by reference to Exhibit 1.1 to the Schedule 13D filed on May 13, 1998.) 1.2 Letter Agreement, dated as of January 7, 1998, between the Investors. (Portions of this document have been omitted pursuant to a request for confidential treatment.) (Incorporated by reference to Exhibit 1.2 to the Schedule 13D filed on May 13, 1998.) 1.3 Proposal, dated as of December 15, 1998, submitted by the Investors to the Creditors.
EX-99.1.3 2 PROPOSAL 1 Exhibit 1.3 December 15, 1998 PRIVATE AND CONFIDENTIAL Ms. Petra Stelling c/o David H. Wollmuth, Esq. Wollmuth Maher & Deutsch 516 5th Avenue 12th Floor New York, NY 10036 Mr. Thomas F. Hackett c/o Nancy Prahofer, Esq. Dechert, Price & Rhodes 30 Rockefeller Plaza New York, NY 10112 Mr. Ronald Spitzer c/o Margot Schonholtz, Esq. Zalkin, Rodin & Goodman LLP 750 3rd Avenue New York, NY 10017 Dear Sirs and Mesdames: I. The Proposal Pursuant to our conversations with you and the Special Master appointed pursuant to the Settlement Agreement, the OCM Principal Opportunities Fund, L.P. (the "OCM Fund"), in collaboration with Kenneth S. Grossman (collectively, the "Oaktree Group"), is pleased to submit the enclosed term sheet (the "Proposal") for a transaction (the "Transaction") relating to certain shares of Emerson Radio Corporation ("Emerson" or the "Company"). We are aware of the issues confronting you and the Company as they relate to the Stipulation of Settlement and Order entered June 11, 1996 (the "Settlement Agreement"). Based upon our understanding of the situation, and the discussions we have had, we believe that this Proposal represents an opportunity to resolve the pending litigation (the "Litigation") in a timely manner. 2 II. Confidentiality This letter and the Proposal are being provided to you subject to your agreement not to disclose the existence or contents of this letter or the Proposal to any person other than United States District Court Judge Nicholas Politan and the Special Master and his representatives and advisors, except as required by applicable law and until and to the extent that the Oaktree Group makes its own public disclosure of the Proposal. III. Due Diligence Subject to your written agreement to provide certain protections to the Oaktree Group (the "Due Diligence Agreement"), it is our intention to commence a due diligence investigation of Emerson as soon as the Company's management is ready to accommodate us. The Oaktree Group has extensive experience conducting due diligence reviews, and we believe the process can be accomplished with minimal, if any, disruption to the day-to-day management and operations of the Company. The Due Diligence Agreement will provide that the Creditors (i) will not discuss the Transaction with potential purchasers of the Settlement Shares, encourage the making of or otherwise solicit competing bids for the Settlement Shares or negotiate with any potential purchaser of the Settlement Shares as long as due diligence is ongoing, such period not to exceed sixty days from the date due diligence activities commence (the "Diligence Period"), and (ii) will immediately communicate to the Oaktree Group the terms of any alternative proposal for the disposition of the Settlement Shares or for any other resolution of the Litigation. The Due Diligence Agreement will further provide that as reimbursement and compensation for the Oaktree Group's time spent and expenses incurred in connection with its due diligence investigation of the Company and work on other aspects of the Proposal, (i) upon the closing of any sale of the Settlement Shares to a buyer other than the Oaktree Group (an "Alternative Transaction"), pursuant to which the Creditors receive sale proceeds in excess of $14,876,270, the Oaktree Group will receive $250,000 in cash or (ii) upon the closing of any Alternative Transaction, pursuant to which the Creditors receive sale proceeds in excess of the Purchase Price (as defined in the Proposal) but less than $14,876,270, the Oaktree Group will receive one hundred percent (100%) of the difference between the Purchase Price and the proceeds of the Alternative Transaction not to exceed $250,000 (in either case, the "Due Diligence Fee"). The Due Diligence Agreement will also provide that if the Creditors breach the Due Diligence Agreement (other than by their acceptance of an Alternative Transaction), then the Oaktree Group shall be entitled to payment of $250,000 as liquidated damages, provided that the liquidated damages shall be payable only from the proceeds (including cash dividends) of the Settlement Shares and provided further that the Oaktree Group shall be entitled to interest on the liquidated damages at the rate of ten per cent (10%) per annum from the date of breach to the date of payment. The Due Diligence Agreement will further provide that no later than the end of the Diligence Period, the Oaktree Group will notify the Creditors in writing whether or not it will pursue the Transaction (the "Notice Date"). If the Oaktree Group notifies the Creditors that it will pursue the Transaction, the terms of the Due Diligence Agreement will remain in effect for an additional 120 day period from the Notice Date (the "No-Shop Period"), unless the No-Shop Period is terminated earlier or extended by the unanimous written consent of the Creditors and the Oaktree 2 3 Group. Any and all obligations under the Due Diligence Agreement and any definitive agreements for the Transaction, including any obligation on the part of the Creditors to pay any Due Diligence or Break-Up Fee (as defined in the Proposal) for any reason, shall terminate if (i) the acquisition of the Settlement Shares by the Oaktree Group is not consummated within 120 days after the Notice Date for any reason other than breach by the Creditors or the Creditors' acceptance of an Alternative Transaction, (ii) the Oaktree Group provides the Creditors notice that it will not pursue the Transaction, or (iii) any condition set forth in Section F (iii) of the Proposal cannot be satisfied other than because of a breach by the Creditors or the Creditors' acceptance of an Alternative Transaction. For the purposes of the Due Diligence Agreement and any other definitive Transaction agreement, a breach of the Creditors shall include their failure to use commercially reasonable efforts to consummate the Transaction within 120 days after the Notice Date. IV. Description of The Oaktree Group Oaktree Capital Management LLC ("Oaktree"), which acts as general partner of the OCM Fund, is a Los Angeles based private investment firm which manages approximately $11 billion in niche investment markets for institutions and high net worth individuals. The founding principals of Oaktree formed the company in April 1995 after having managed related funds at Trust Company of the West since 1985. Oaktree invested in Emerson through Oaktree's Principal Activities Group, which focuses on providing capital to sponsor management buyouts and other private and public equity investments. The Principal Activities Group has made substantial investments in over 30 companies and manages in excess of $1 billion in committed capital for the purpose of investing in companies that are in need of growth capital, recapitalization or financial restructuring. The Oaktree Group has the financial resources to fund and execute the Transaction and would not require financing as a condition to closing. Kenneth S. Grossman is an investor in distressed and undervalued public and private securities for his own and affiliated accounts. V. Nonbinding Nature of Letter and Proposal This letter and the Proposal are not an offer and are not intended to constitute a binding and enforceable contract. It is acknowledged and agreed that the Oaktree Group and the Creditors shall have no obligations to each other pursuant to this letter, the Proposal or otherwise with respect to the Transaction, other than the requirement to keep the letter and Proposal confidential pursuant to Section II hereof, unless and until the Due Diligence Agreement or other definitive Transaction agreements (which will include the conditions set forth in Section F of the Term Sheet) are executed and delivered by the Creditors and the Oaktree Group. 3 4 We hope that this letter and the Proposal will enable us to proceed with a Transaction, and we look forward to moving expeditiously to that end. Please feel free to contact our counsel, James Ricciardi at (212) 351-3952, or to contact Steve Kaplan at (213) 830-6350 or Ken Grossman at (212) 750-6750 to discuss this matter. Very truly yours, By: /s/ Kenneth S. Grossman ----------------------------- Kenneth S. Grossman c/o Juris Partners 579 Fifth Avenue, Suite 1050 New York, NY 10017 By: /s/ Stephen A. Kaplan ----------------------------- Stephen A. Kaplan Principal, Oaktree Capital Management, LLC 333 South Grand Avenue, 28th Floor Los Angeles, CA 90071 4 5 Private and Confidential December 15, 1998 PROPOSED TRANSACTION TERM SHEET A. The Creditors will transfer or cause to be transferred to the Oaktree Group or its designee 100% of the shares of Emerson common stock currently held under the Settlement Agreement (the "Settlement Shares").1 B. The Oaktree Group or its designee will purchase 100% of the Settlement Shares for $0.50 per share in cash ($14,576,270 in total proceeds, assuming 29,152,542 shares) (the "Purchase Price"). C. The Oaktree Group will effect a recapitalization of the Company which will provide cash proceeds sufficient to permit the Company to repurchase the Company's 8.5% Convertible Senior Subordinated Debentures, due 2002, that are validly put to Emerson at 100% of face value plus accrued interest because of a change in control. D. The Oaktree Group will replace or renegotiate, if necessary, Emerson's working capital facility with Congress Financial Corporation. E. The definitive agreements for the Transaction will provide that (i) upon the closing of any Alternative Transaction pursuant to which the Creditors receive sale proceeds in excess of $15,676,270, the Oaktree Group will receive a break-up fee of $1,000,000 or (ii) upon the closing of any Alternative Transaction pursuant to which the Creditors receive sale proceeds in excess of the Purchase Price but less than $15,676,270, the Oaktree Group will receive one hundred percent (100%) of the difference between the Purchase Price and the proceeds of the Alternative Transaction, not to exceed $1,000,000 (in either case, the "Break-Up Fee") and (iii) if the Creditors breach any of the definitive agreements (other than by their acceptance of an Alternative Proposal), then the Oaktree Group shall be entitled to $1,000,000 as liquidated damages, provided that the liquidated damages shall be payable only from the proceeds (including cash dividends) of the Settlement Shares and provided further that the Oaktree Group shall be entitled to interest on the liquidated damages at the rate of ten per cent (10%) per annum from the date of the breach to the date of payment. The Break-Up Fee shall be in lieu of the Due Diligence Fee to be provided for in the Due Diligence Agreement. - -------------------- 1 Capitalized terms used herein and not defined herein have the meanings given to them in the accompanying letter. 5 6 F. Consummation of the Transaction would be subject to, among other things: (i) Oaktree's completion of business, accounting, and legal due diligence regarding Emerson and its subsidiaries and affiliates, including, but not limited to, the resolution of corporate governance and management issues (including the composition of the Boards of Directors) at the Company and Sport Supply Group and their affiliates, the results of which are satisfactory to the Oaktree Group in its sole and absolute discretion, (ii) negotiation and execution of definitive agreements, with appropriate conditions, representations, warranties, indemnities and covenants, and (iii) receipt of approval of the Court of the Transaction and other consents and approvals as required, or as agreed among the Oaktree Group and the Creditors. G. Currently, the Oaktree Group does not anticipate changing Emerson's operating management or its strategic course. 6 -----END PRIVACY-ENHANCED MESSAGE-----