<PAGE>
PROSPECTUS
477,300 SHARES [LOGO]
ZENITH ELECTRONICS CORPORATION
COMMON STOCK
($1.00 PAR VALUE)
------------------------
Zenith Electronics Corporation ("Zenith" or the "Company") has registered
477,300 shares of its Common Stock, $1.00 par value (the "Common Stock"), which
may be offered by this Prospectus from time to time at prices and on terms to be
determined at the time of a sale or sales. The Common Stock may be sold on a
negotiated or competitive bid basis to or through underwriters or dealers
designated from time to time. See "Plan of Distribution."
Certain additional terms of the Common Stock in respect of which this Prospectus
is being delivered, including, where applicable, the names of the underwriters,
dealers or agents, the public offering price, the proceeds to the Company from
such sale, and any applicable commissions, discounts and other items
constituting compensation to such underwriters, dealers or agents, will (unless
otherwise set forth under "Plan of Distribution") be set forth in a Prospectus
Supplement (the "Prospectus Supplement").
The Common Stock is listed on the New York and Chicago Stock Exchanges under the
symbol "ZE" and is also registered on the Basel, Geneva and Zurich, Switzerland
Stock Exchanges. On February 3, 1994, the last reported sale price of the Common
Stock on the New York Stock Exchange was $8 3/4 per share. See "Price Range of
Common Stock."
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF FACTORS THAT SHOULD BE
CONSIDERED BY INVESTORS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is February 4, 1994.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY AGENT, UNDERWRITER OR DEALER. NEITHER THIS
PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY OR THEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Certain information, as
of particular dates, concerning the Company's directors and officers, their
compensation, the principal holders of securities of the Company and any
material interests of such persons in transactions with the Company is discussed
in proxy statements of the Company distributed to stockholders of the Company
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the following regional offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 13th Floor, Seven World Trade Center, New York, New York
10048. Copies of such materials may be obtained from the Public Reference Branch
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, such reports, proxy statements and other
information can be inspected at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005 and the Chicago Stock Exchange, 440 South
LaSalle Street, Chicago, Illinois 60605.
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-3 under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and exhibits thereto, as permitted by the rules and regulations of the
Commission. For further information pertaining to the Company and the securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto, which may be examined without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies thereof may be obtained from the Public Reference Branch of the
Commission upon payment at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission are incorporated by reference in this Prospectus:
(a)the Company's Annual Report on Form 10-K for the year ended December
31, 1992;
(b)the Company's Quarterly Reports on Form 10-Q for the quarterly periods
ended April 3, 1993, July 3, 1993 and October 2, 1993; and
(c)the Company's Current Reports on Form 8-K, dated March 11, 1993, March
26, 1993, May 21, 1993, July 29, 1993, September 21, 1993, October 21,
1993, November 19, 1993, November 24, 1993, December 14, 1993, December 15,
1993, January 11, 1994, January 13, 1994, January 31, 1994 and February 4,
1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of securities contemplated hereby shall be deemed to
be incorporated by reference in this Prospectus or any Prospectus Supplement and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference or deemed to be incorporated
by reference in this Prospectus or any Prospectus Supplement shall be deemed to
be modified or superseded for all purposes of this Prospectus or such Prospectus
Supplement to the extent that a statement contained herein, therein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein or in such Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any and all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: David S. Levin,
Secretary, Zenith Electronics Corporation, 1000 Milwaukee Avenue, Glenview,
Illinois 60025; telephone number (708) 391-8048.
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THE COMPANY
Zenith was founded in 1918 and has been a leader in consumer electronics,
first in radio and later in monochrome and color television and other video
products.
Zenith operations involve a dominant industry segment, the design,
development, and manufacture of video products (including color television sets
and other consumer products) along with parts and accessories for such products.
These products along with purchased video cassette recorders are sold
principally to retail dealers and wholesale distributors in the United States,
Canada and other foreign countries. The Company also sells directly to buying
groups, private label customers and the lodging, health care and rent-to-own
industries.
Zenith's video products also include color picture tubes that are produced
for and sold to other manufacturers; video monitors (including monitors that use
the Company's patented flat tension mask (FTM) picture tube) which are primarily
produced for and sold to computer manufacturers; and cable and subscription
television products which are sold primarily to cable television operators. The
Company also makes power supplies, hybrid microcircuits and high-security
electronic equipment.
The Company has reported substantial losses from its continuing operations
for the last eight years. These results reflect the cumulative effect of
frequent and significant color TV price reductions during the 1980s and, in more
recent years, also reflect recessionary conditions in the United States. In
addition, the Company has invested significant amounts in engineering and
research in recent years, which amounts have been expensed as incurred.
The Company, which is incorporated under the laws of the State of Delaware,
has its principal executive offices at 1000 Milwaukee Avenue, Glenview, Illinois
60025. Its telephone number is (708) 391-7000.
RECENT DEVELOPMENTS
On January 28, 1994, the Company entered into the Fourth Amendment (the
"Fourth Amendment") dated as of January 28, 1994 to its Credit Agreement dated
as of May 21, 1993 with General Electric Capital Corporation, as Agent and
Lender, The Bank of New York Commercial Corporation, as Lender, and Congress
Financial Corporation, as Lender, as amended (the "Credit Agreement"). The
Fourth Amendment revised certain financial covenants (restrictions on capital
expenditures, the quarterly minimum net worth test and the quarterly ratio of
liabilities to net worth requirement) as of December 31, 1993. See "Credit
Agreement." The Fourth Amendment was negotiated as a result of the Company's
previously announced plan to take a fourth quarter 1993 special charge of about
$30 million, primarily for non-cash fixed assets and inventory write downs, as
well as severance costs. The special charge relates to the Company's plan to
restructure certain product areas and re-engineer its core consumer electronics
and cable business, which will affect computer monitors and magnetics, product
areas in which the Company is bringing production capacity more in line with
expected levels of business.
On January 13, 1994, the Company redeemed all $34.5 million outstanding
principal amount of its 12 1/8% Notes due January 15, 1995 at a redemption price
equal to par plus accrued interest.
In November 1993, the Company issued and sold $55 million aggregate
principal amount of its 8.5% Senior Subordinated Convertible Debentures due 2000
(the "Debentures due 2000") in two separate private placements pursuant to a
purchase agreement dated as of November 19, 1993, as amended (the "First
Agreement"). The Debentures due 2000 are convertible into shares of Common Stock
at the initial conversion price of $9.76 per share, subject to adjustment to
prevent dilution. In January of 1994, the Company issued and sold $12 million
aggregate principal amount of its 8.5% Senior Subordinated Convertible
Debentures due 2001 (the "Debentures due 2001" and, collectively with the
Debentures due 2000, the "8.5% Debentures") in another private placement
pursuant to a purchase agreement dated as of January 11, 1994 (the "Second
Agreement" and, collectively with the First Agreement, the "Debenture
Agreements"). The Debentures due 2001 are convertible into shares of Common
Stock at the initial conversion price of $10.00 per share, subject to adjustment
to prevent dilution. Based upon the initial conversion prices of the 8.5%
Debentures, 6,835,246 shares of Common Stock (approximately 19.5% of the shares
of Common Stock outstanding on January 13, 1994) would be
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issuable upon conversion of all of the 8.5% Debentures. The net proceeds from
the sales of the 8.5% Debentures were used to repay borrowings under the Credit
Agreement and to redeem the 12 1/8% Notes on January 13, 1994.
INVESTMENT CONSIDERATIONS
THE FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN
INVESTMENT IN ANY SHARES OF COMMON STOCK OFFERED HEREBY:
LOSSES FROM CONTINUING OPERATIONS. The Company has reported substantial
losses from its continuing operations for the last eight years. The color
television market in the United States has been under intense pricing pressure
for many years and color television prices have dropped sharply, resulting in
substantially reduced profit margins. Although the Company has benefitted from
major cost-reduction programs, lower sales and inflationary cost increases have
more than offset such cost reduction benefits. In recent years, operating
results have also been adversely affected by significant restructuring charges,
start-up costs for new programs and costs related to downsizing certain non-
consumer businesses. The Company expects a loss in the fourth quarter and the
full year 1993 despite record industry unit volume. The Company also plans to
take a special charge of about $30 million in the fourth quarter of 1993. See
"Recent Developments." There can be no assurance that the Company's net
operating losses will not continue for the foreseeable future.
LIQUIDITY. Cash decreased from $176 million at December 31, 1989 to zero at
October 2, 1993. (Due to the seasonal nature of the Company's business, cash
available peaks after year ends). Of the total cash decrease, $67 million was
related to the disposition of the discontinued computer products business and
took place in 1990, while the remaining $109 million related to ongoing
operations, including cash used for operating activities, investing activities
and financing activities. The Company's borrowings during this period have
increased, and the Company entered into the Credit Agreement in May, 1993. The
maximum commitment of funds available for borrowing under the Credit Agreement
is $90 million, based upon a borrowing base formula related to eligible accounts
and eligible inventory (each as defined in the Credit Agreement). As of February
3, 1994, the Company had outstanding borrowings under the Credit Agreement of
$25 million. The Credit Agreement is scheduled to expire in December 1994. See
"Credit Agreement." Although the Company believes that its Credit Agreement,
together with extended-term payables available from a foreign supplier and its
continuing efforts to obtain other financing sources, will be adequate to meet
its seasonal working capital needs, there can be no assurance that the Company
may not experience liquidity problems in the future because of adverse market
conditions or other unfavorable events.
BUSINESS STRATEGY. The Company's business strategy involves improving the
profitability of core businesses and the introduction of new products, such as
high-definition television, home theater TVs and new digital cable products, as
well as the restructuring of certain business operations. These efforts to
improve profitability, develop and introduce new products and restructure
operations are expected to continue to involve significant expenditures by the
Company in 1994 and beyond. There can be no assurance that the Company will
achieve the improvement in financial results expected from this business
strategy.
COMPETITION. The Company's major product areas, including the color
television market, are highly competitive. The Company's major competitors are
foreign-owned global giants, generally with greater financial, marketing,
manufacturing and technical resources. In efforts to increase market share or
achieve higher production volumes, the Company's competitors have aggressively
lowered their selling prices. Some of the Company's foreign competitors have
been capable of offsetting the effects of U.S. price reductions through sales at
higher margins in their home markets and through direct governmental supports.
There can be no assurance that such competition will not continue to adversely
affect the Company's performance or that the Company will be able to maintain
its market share in the face of such competition.
USE OF PROCEEDS
The Company's Credit Agreement requires that the net cash proceeds to the
Company from the sale of shares of Common Stock offered hereby be used first to
repay any borrowings and other
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amounts payable under the Credit Agreement. Such repayment would not reduce the
Company's ability to further borrow thereunder. As of February 3, 1994,
outstanding borrowings under the Credit Agreement were $25 million and bore
interest at the rate of 7 3/4% per annum. See "Credit Agreement."
Unless otherwise specified in the Prospectus Supplement, any remaining net
proceeds will be used for reducing short-term borrowings, capital expenditures
and/or engineering and research expenses or other general corporate purposes.
Pending such use, net proceeds not required to be used to repay borrowings under
the Credit Agreement may temporarily be invested in short-term marketable
securities.
CREDIT AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE
CREDIT AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CREDIT
AGREEMENT, AS AMENDED, A COPY OF WHICH IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT.
The Credit Agreement provides the Company with a credit facility having an
aggregate maximum commitment of $90 million based on a borrowing base formula
related to eligible accounts and eligible inventory (each as defined in the
Credit Agreement). The Credit Agreement includes terms, conditions,
representations and warranties, covenants, indemnities and events of default and
other provisions which are customary in such agreements.
The Credit Agreement terminates on December 31, 1994 (unless extended by
agreement of the lenders), at which time all outstanding indebtedness under such
credit facility would have to be repaid or refinanced. In the event that the
Company receives proceeds from the issuance of certain debt or equity securities
or from the sale of certain material assets, such proceeds must be applied to
prepay any outstanding borrowings under the Credit Agreement. In the event of
certain material asset transactions, the Credit Agreement requires a partial
reduction in the maximum commitment of the lenders. See "Use of Proceeds."
The Credit Agreement interest rate is the Base Rate (as defined) plus 1 3/4%
per annum on the outstanding borrowings. Additionally, the Company pays a 1/2%
non-use fee on the unused portion of the credit facility. Loans under the Credit
Agreement are secured by accounts receivable, inventory, general intangibles,
trademarks and the tuning system patent license agreements of the Company and
certain of its domestic subsidiaries.
The Credit Agreement contains covenants that include, among other things,
requirements to maintain certain financial tests and ratios (including a minimum
net worth and a liabilities to net worth ratio), and certain restrictions and
limitations, including those on capital expenditures, dollar limits on the
amount of inventory for certain of the Company's products, changes in control,
payments of dividends, sales of assets, investments, additional borrowings,
mergers and purchases of stock and assets.
The Credit Agreement contains restrictive financial covenants that must be
maintained as of the end of each fiscal quarter, including a liabilities to net
worth ratio and a minimum net worth amount. The ratio of liabilities to net
worth and minimum net worth amount varies from quarter to quarter. As of October
2, 1993, the ratio of liabilities to net worth was required to be not greater
than 2.93 to 1.0 and was actually 2.60 to 1.0, and net worth was required to be
equal to or greater than $170.0 million and was actually $174.9 million. The
Fourth Amendment to the Credit Agreement increased the allowed ratio of
liabilities to net worth as of December 31, 1993 from 2.29 to 1.0 to 3.70 to 1.0
and reduced the required net worth as of December 31, 1993 from $178.0 million
to $140.0 million. Also due to the Fourth Amendment, at the end of each of the
first three fiscal quarters of 1994, the liabilities to net worth ratio is
required to be maintained at various levels ranging from a high of 4.95 to 1.0
to a low of 3.70 to 1.0, and minimum net worth is required to be maintained at
amounts ranging from a high of $140 million to a low of $101 million. See
"Recent Developments."
The Credit Agreement prohibits dividend payments on Common Stock and any of
the Company's preferred stock, if issued. See "Dividend Policy."
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SELECTED CONSOLIDATED FINANCIAL DATA
The following consolidated results of operations data relating to the years
ended December 31, 1992, December 31, 1991 and December 31, 1990 and the
following consolidated balance sheet data at December 31, 1992 and December 31,
1991 are derived from and should be read in conjunction with the consolidated
financial statements, including the notes thereto, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated
by reference herein. The consolidated results of operations data relating to the
years ended December 31, 1989 and December 31, 1988 and the consolidated balance
sheet data at December 31, 1990, December 31, 1989 and December 31, 1988 are
derived from the Company's previously audited financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1992(2) 1991 1990 1989 1988
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(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales............................... $ 1,243.5 $ 1,321.6 $ 1,409.9 $ 1,548.9 $ 1,401.0
----------- ----------- ----------- ----------- -----------
Cost of products sold................... 1,179.3 1,208.4 1,295.9 1,407.0 1,248.2
Selling, general and administrative..... 94.0 101.2 106.5 103.9 109.1
Engineering and research................ 55.4 54.1 55.9 51.4 59.0
Other operating expense (income), net... (24.3) .5 (2.0) (2.7) (1.1)
Restructuring and other charges......... 48.1 -- -- -- --
----------- ----------- ----------- ----------- -----------
Operating income (loss)................. (109.0) (42.6) (46.4) (10.7) (14.2)
Interest expense........................ (13.7) (12.4) (12.6) (6.0) (6.5)
Interest income......................... .9 3.6 4.6 .8 .9
Gain on sale of properties, and other,
net.................................... -- -- 1.1 1.1 6.6
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes....... (121.8) (51.4) (53.3) (14.8) (13.2)
Income taxes (credit)................... (15.9) .2 .9 .2 .8
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations............................. (105.9) (51.6) (54.2) (15.0) (14.0)
Income (loss) from discontinued
operations(1).......................... -- -- (11.0) (51.4) 22.7
----------- ----------- ----------- ----------- -----------
Net income (loss)....................... $ (105.9) $ (51.6) $ (65.2) $ (66.4) $ 8.7
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PER SHARE DATA:
Income (loss) from continuing
operations............................. $ (3.59) $ (1.79) $ (2.02) $ (.56) $ (.54)
Income (loss) from discontinued
operations(1).......................... -- -- (.41) (1.92) .87
----------- ----------- ----------- ----------- -----------
Net income (loss) per share............. $ (3.59) $ (1.79) $ (2.43) $ (2.48) $ .33
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA (END OF PERIOD):
Assets of continuing operations......... $ 578.6 $ 686.9 $ 722.7 $ 920.7 $ 724.2
Assets of discontinued operations(1).... -- -- -- -- 442.8
----------- ----------- ----------- ----------- -----------
Total assets........................ $ 578.6 $ 686.9 $ 722.7 $ 920.7 $ 1,167.0
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
OTHER DATA (CONTINUING OPERATIONS):
Depreciation............................ $ 37.7 $ 37.9 $ 38.8 $ 40.5 $ 38.9
Capital additions, net.................. 25.7 23.9 30.8 32.9 19.9
Cash.................................... 5.8 36.3 56.3 175.7 26.3
Working capital......................... 170.6 254.3 283.8 333.1 107.0
Short-term debt......................... 10.1 -- -- 38.9 106.9
Long-term debt.......................... 149.5 149.5 151.1 150.9 308.6
Stockholders' equity.................... 210.1 308.8 345.9 404.5 470.0
<FN>
- ------------------------------
(1) On December 28, 1989, the Company sold its computer products business to
Groupe Bull and received a closing-date payment of $496.4 million in cash.
The 1990 results reflect an $11.0 million adjustment to the previously
recorded gain on such sale based upon the receipt of an additional, final
post-closing payment of $15.0 million.
(2) Includes $48.1 million of restructuring and other charges, $26.0 million
of royalty income and $15.9 million of income tax credits.
</TABLE>
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CAPITALIZATION
The following table sets forth a summary of the short-term debt and
capitalization of the Company, on a consolidated basis (a) at October 2, 1993,
and (b) as adjusted to reflect the issuance and sale by the Company of $67
million principal amount of 8.5% Debentures and the use of the net proceeds
therefrom to repay borrowings under the Credit Agreement and to redeem the
12 1/8% Notes on January 13, 1994. See "Recent Developments."
<TABLE>
<CAPTION>
OCTOBER 2, 1993
-----------------------
ACTUAL AS ADJUSTED
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(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
SHORT-TERM DEBT:
Total short-term debt.............................. $ 61.5 $ 29.0
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LONG-TERM DEBT:
12 1/8% Notes due 1995................................. $ 34.5 -$-
6 1/4% Convertible Subordinated Debentures due 2011.... 115.0 115.0
8.5% Senior Subordinated Convertible Debentures due
2000.................................................. -- 55.0
8.5% Senior Subordinated Convertible Debentures due
2001.................................................. -- 12.0
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Total long-term debt............................... 149.5 182.0
------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 100,000,000 shares
authorized;
34,111,358 shares issued(1)........................... 34.1 34.1
Additional paid-in capital............................. 193.4 193.4
Retained earnings (deficit)............................ (52.1) (52.1)
Cost of 21,000 common shares in treasury............... (.5) (.5)
------- -------------
Total stockholders' equity......................... 174.9 174.9
------- -------------
Total long-term debt and stockholders' equity...... $ 324.4 $356.9
------- -------------
------- -------------
<FN>
- ------------------------
(1) Shares of Common Stock issued and outstanding as of October 2, 1993 do not
include, as of February 2, 1994, (i) 10,515,246 shares reserved for
conversion of the 8.5% Debentures and the 6 1/4% Convertible Subordinated
Debentures, (ii) 2,674,136 shares reserved for sale to directors, officers
and key employees of the Company under approved stock option plans, (iii)
18,198,207 shares reserved for issuance under the Company's Stockholder
Rights Plan (see "Description of Capital Stock -- Stockholder Rights
Plan"), (iv) 96,552 shares issued January 13, 1994 in a private placement
in settlement of a patent infringement action, (v) 995,904 shares issued
January 28, 1994 to the Company's employee profit sharing plans and (vi)
approximately 1,772,700 shares sold by the Company after October 2, 1993
and prior to February 4, 1994 through an agent by means of ordinary
broker's transactions on the New York Stock Exchange. The Company has the
ability to sell up to approximately 477,300 additional shares pursuant to
this Prospectus. At the Company's Annual Meeting of Stockholders held on
May 4, 1993, the stockholders approved the authorization of 8,000,000
shares of preferred stock of which none are issued or outstanding as of the
date of this Prospectus.
</TABLE>
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York and Chicago Stock
Exchanges. Set forth below are the high and low sale prices per share (as
reported on the New York Stock Exchange) for the fiscal quarters indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1991:
First Quarter.......... $ 9 3/8 $ 6 1/8
Second Quarter......... 8 5/8 6 3/8
Third Quarter.......... 7 1/4 5 3/8
Fourth Quarter......... 7 5/8 5 1/8
1992:
First Quarter.......... 11 1/8 7 1/4
Second Quarter......... 9 3/8 6 3/4
Third Quarter.......... 8 6 1/8
Fourth Quarter......... 7 5
1993:
First Quarter.......... 8 3/8 5 7/8
Second Quarter......... 10 1/2 6 1/2
Third Quarter.......... 8 3/8 6 1/4
Fourth Quarter......... 8 1/8 6 1/4
1994:
First Quarter (through
February 3, 1994)..... 8 3/4 7
</TABLE>
The last reported sale price for the Common Stock on the New York Stock
Exchange on February 3, 1994 was $8 3/4 per share.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock since 1982 and
does not anticipate paying any in the foreseeable future. Dividends may be paid
on the Common Stock, when and if declared by the Company's Board of Directors,
out of funds legally available therefor. In general, the Credit Agreement
provides that the Company and its subsidiaries cannot pay dividends, make any
other distributions or redeem, purchase, prepay or otherwise acquire or retire
any class of stock of the Company or its subsidiaries and restricts dividend
payments on any of the Company's preferred stock, if issued. In addition, the
agreements under which the 8.5% Debentures were issued each provide that the
aggregate amount of the dividend payments, distributions or purchases or
redemptions of any class of capital stock of the Company or its subsidiaries
from and after November 19, 1993 cannot exceed the sum of (i) 80% of the
Company's cumulative consolidated operating net income (or if a loss, 100% of
such loss) plus (ii) the aggregate net proceeds received by the Company from
certain issuances of its capital stock (except redeemable stock) less the
aggregate amount of proceeds used to prepay, redeem, retire or otherwise acquire
securities subordinate in right of payment to the 8.5% Debentures.
DESCRIPTION OF CAPITAL STOCK
THE FOLLOWING SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO,
AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE FOLLOWING DOCUMENTS:
(I) THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, (II) THE
COMPANY'S BY-LAWS, AS AMENDED TO DATE (THE "BY-LAWS"), AND (III) THE RIGHTS
AGREEMENT, AS AMENDED, BETWEEN THE COMPANY AND THE BANK OF NEW YORK, AS RIGHTS
AGENT (THE "RIGHTS AGREEMENT"). A COPY OF EACH OF THE RESTATED CERTIFICATE OF
INCORPORATION, BY-LAWS AND RIGHTS AGREEMENT IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT.
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The Company's Restated Certificate of Incorporation, as amended, authorizes
the issuance of 100,000,000 shares of Common Stock, par value $1.00 per share,
of which 36,396,414 shares were outstanding on February 2, 1994, and 8,000,000
shares of preferred stock, par value $1.00 per share (the "Preferred Stock"), of
which none is outstanding as of the date of this Prospectus.
PREFERRED STOCK
Under the Restated Certificate of Incorporation, the Board of Directors of
the Company is authorized, without the necessity of further action or
authorization by the stockholders (unless required in a specific case by
applicable law or regulations or stock exchange rules), to issue Preferred Stock
from time to time in one or more series and to determine all relevant terms of
each such series, including but not limited to the following: (a) the number of
shares constituting such series; (b) the dividend rates and priority, if any,
and whether the dividends would be cumulative and, if so, from what date or
dates; (c) whether the holders of the shares of such series would have full,
limited or no voting powers; (d) whether, and upon what terms, the shares of
such series would be convertible into, or exchangeable for, other securities;
(e) whether and upon what terms, the shares of such series would be redeemable;
(f) whether a sinking fund would be provided for the redemption of the shares of
such series and, if so, the terms thereof; and (g) the preference, if any, to
which shares of such series would be entitled in the event of voluntary or
involuntary liquidation of the Company. The Restated Certificate of
Incorporation, however, provides that, with respect to voting powers, holders of
a series of Preferred Stock (i) will not be entitled to more than the lesser of
(x) one vote per $100 of liquidation value or (y) one vote per share and (ii)
will not be entitled to a class vote (other than as required by law and other
than the limited right to elect two additional directors in the event of the
failure to pay in full dividends on any series of Preferred Stock for any six
quarterly dividend periods).
Even though the voting rights of any Preferred Stock that may be issued will
be limited, the issuance of Preferred Stock could be used to discourage attempts
to acquire control of the Company which the Board of Directors oppose. The Board
of Directors has represented that it will not authorize the Company to issue,
without prior stockholder approval, any series of Preferred Stock to any
individual or group (i) for any defensive or anti-takeover purpose, (ii) with
features intended to make any attempted acquisition of the Company more
difficult or costly or (iii) for the purpose of creating a block of voting power
which has agreed to support the Board and management on a controversial issue.
This representation does not preclude the Board from authorizing the issuance of
a series of Preferred Stock in a public offering.
COMMON STOCK
Holders of the Common Stock are entitled to one vote for each share held of
record, in person or by proxy, at all meetings of the stockholders and on all
propositions before such meetings. The Common Stock does not have cumulative
voting rights in the election of directors. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. All outstanding
shares of Common Stock are fully paid and nonassessable. In the event of
liquidation, dissolution or winding up of the affairs of the Company, the assets
remaining after provision for payment of creditors and after distribution in
full of the preferential amount to be distributed to the holders of shares of
any Preferred Stock, are distributable pro rata among holders of Common Stock.
The transfer agent and registrar of the Company's Common Stock is The Bank
of New York, 101 Barclay Street, New York, New York 10286.
STOCKHOLDER RIGHTS PLAN
Pursuant to a Stockholder Rights Plan adopted in 1986 and subsequently
amended, the Company distributed one common stock purchase right (collectively,
the "Rights") for each outstanding share of Common Stock and will issue a Right
with each share of Common Stock that subsequently becomes outstanding (including
shares of Common Stock offered hereby) unless the Board of Directors provides
otherwise at the time of issuance of such share. The Company will issue a Right
with each share of Common Stock offered hereby. Each Right will entitle the
holder thereof, until October 14, 1996 (or, if earlier, the redemption of the
Rights) to purchase one-half of one share of Common Stock at an exercise
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price of $37.50, subject to certain antidilution adjustments. The Rights will be
represented by the Common Stock certificates and will not be exercisable, or
transferable apart from the Common Stock, until the earlier of (i) the tenth day
after the date (the "Stock Acquisition Date") of a public announcement that a
person or group of associated or affiliated persons (an "Acquiring Person") has
acquired beneficial ownership of 25% or more of the Common Stock or (ii) the
tenth day after the date of the commencement by any person or group of, or first
public announcement of the intent of any person or group to commence, a tender
or exchange offer, the consummation of which would result in such person or
group having beneficial ownership of 25% or more of the Common Stock (the
earlier of such days being referred to herein as the "Distribution Date"). The
Rights will at no time have any voting rights.
In the event that any person becomes an Acquiring Person (i.e. beneficial
owner of 25% or more of the Company's Common Stock), proper provision shall be
made so that each holder of a Right will thereafter have the right to receive
upon such exercise, that number of shares of Common Stock having a market value
of two times the exercise price of the Right. This provision is generally
referred to as the "flip-in" provision. Thus, a holder of a Right could purchase
shares of Common Stock having a market value of $75.00 upon payment of $37.50.
Notwithstanding the foregoing, following the occurrence of such event, all
Rights that are or (under certain circumstances) were beneficially owned by an
Acquiring Person will be null and void.
In the event that on or after the Stock Acquisition Date (i) the Company is
acquired in a merger or other business combination transaction or (ii) 50% or
more of its assets or earning power are sold (in one transaction or a series of
transactions), proper provision shall be made so that each holder of a Right
(other than an Acquiring Person) shall thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction would have a market value of two times the exercise price of
the Right. This provision is generally referred to as the "flip-over" provision.
At any time until the Stock Acquisition Date, the Company may redeem the
Rights in whole, but not in part, at a price of $.05 per Right, subject to
adjustment (the "Redemption Price"). After the Stock Acquisition Date, the
Company's right of redemption will be reinstated if an Acquiring Person reduces
his beneficial ownership to 10% or less of the outstanding shares of Common
Stock in a transaction or series of transactions not involving the Company,
provided that there is no other Acquiring Person at the time.
In addition, if a bidder who does not beneficially own more than 1% (or who
owned more than 1% of the Common Stock on April 26, 1988 but does not acquire
any additional shares after such date and prior to the submission of the
proposal described below) of the Common Stock (and who has not within the past
year owned in excess of 1% (subject to the exception set forth above) of the
Common Stock and has not disclosed, or caused the disclosure of, an intention
which relates to or would result in the acquisition of influence of control of
the Company) proposes to acquire all of the Common Stock for cash at a price
which a nationally recognized investment banker selected by such bidder states
in writing is fair, and such bidder has obtained written financing commitments
(or otherwise has financing) and complies with certain procedural requirements,
then the Company, upon the request of the bidder, will hold a special
stockholders meeting to vote on a resolution requesting the Board of Directors
to accept the bidder's proposal.
If a majority of the outstanding shares entitled to vote on the proposal
vote in favor of such resolution, then for a period of 60 days after such
meeting the Rights will be automatically redeemed at the Redemption Price
immediately prior to the consummation of any tender offer for all of such shares
at a price per share in cash equal to or greater than the price offered by such
bidder; PROVIDED, HOWEVER, that no such redemption will be permitted or required
after any person has become an Acquiring Person.
Immediately upon the action of the Board of Directors of the Company
ordering redemption of the Rights or upon the effectiveness of the redemption
pursuant to the stockholder vote, the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
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At any time after any person has become an Acquiring Person, the Board of
Directors of the Company may exchange the Rights (other than the Rights owned by
such person or group which have become void), in whole or in part, for Common
Stock at an exchange ratio of one-half of a share of Common Stock per Right
(subject to adjustment), PROVIDED, that no such exchange shall be effected
unless (i) the market value of one-half of a share of Common Stock exceeds the
Redemption Price per Right and (ii) the exchange has been approved by a majority
of the Disinterested Directors (as defined).
Prior to the Distribution Date, the Company may, without the approval of the
holders of Common Stock, amend any provision of the Rights Agreement, except
that no such amendment shall be made which reduces the Redemption Price,
shortens the "Final Expiration Date" (as defined), or increases the "Purchase
Price" (as defined) or the number of one-halves of a share of Common Stock for
which a Right is exercisable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being acquired.
The Rights should not interfere with any merger or other business combination
approved by the Board of Directors of the Company since the Board of Directors
may, at its option, at any time prior to the Stock Acquisition Date redeem all
but not less than all the then outstanding Rights at the Redemption Price.
The Rights Agreement dated as of October 3, 1986 and as subsequently amended
between the Company and The Bank of New York, successor Rights Agent, specifies
the terms of the Rights, and the foregoing description of the Rights is
qualified in its entirety by reference to such Rights Agreement. A copy of the
Rights Agreement is available upon written request, which should be directed to
David S. Levin, Secretary, Zenith Electronics Corporation, 1000 Milwaukee
Avenue, Glenview, Illinois 60025.
REGISTRATION RIGHTS
GoldStar Co., Ltd ("GoldStar"), the holder of 1,450,000 shares of Common
Stock, and the Company have entered into a Registration Rights Agreement, dated
as of February 25, 1991, (the "Registration Rights Agreement"), granting
GoldStar the right to two demand registrations under the Securities Act of 1933,
as amended, of Common Stock and unlimited piggyback registrations over a period
of three years from the date thereof. Such registration rights may be
transferred to any subsequent holder of at least 300,000 shares; provided, that
the total number of demand registrations shall not be affected thereby. The
Company will not be required to effect any demand registration unless the
registration request relates to Voting Securities (as defined in the
Registration Rights Agreement) representing at least 2% of the total voting
power of all outstanding Voting Securities.
DELAWARE STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock, for a period of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved by the Board of Directors
and the holders of at least 66 2/3% of the outstanding voting stock of the
corporation (excluding shares held by the Interested Stockholder), Section 203
prohibits significant business transactions such as a merger with, disposition
of assets to or receipt of disproportionate financial benefits by the Interested
Stockholder, or any other transaction that would increase the Interested
Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans).
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be sold by the Company on a
negotiated or competitive bid basis through underwriters or dealers or directly
to other purchasers or through agents.
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Any such underwriter, dealer or agent involved in the offer and sale of the
Common Stock and any applicable commissions, discounts and other items
constituting compensation to such underwriters, dealers or agents will, unless
otherwise set forth herein, be set forth in the Prospectus Supplement.
The distribution of the shares of Common Stock offered hereby may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
Unless otherwise indicated in the Prospectus Supplement, the obligations of
any underwriters to purchase an offering of Common Stock will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all of the shares of Common Stock if any are purchased. If a dealer is utilized
in the sale of the Common Stock, the Company will sell the Common Stock to the
dealer as principal. The dealer may then resell the Common Stock to the public
at varying prices to be determined by the dealer at the time of sale.
If so indicated in the Prospectus Supplement, the Company may authorize
underwriters, dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase shares of Common Stock from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the shares of Common Stock shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters, dealers and such other persons will not have any responsibility in
respect of the validity or performance of such contracts. The Prospectus
Supplement will set forth the commission payable for solicitation of such
contracts.
Any underwriters, dealers and agents that participate in the distribution of
the Common Stock may be deemed to be underwriters as the term is defined in the
Securities Act, and any discounts or commissions received by them from the
Company and any profits on the resale of the Common Stock by them may be deemed
to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
The Company and Kidder, Peabody & Co. Incorporated ("Kidder, Peabody") have
entered into a Sales Agency Agreement, as amended on February 4, 1994 (the
"Sales Agency Agreement"), copies of the form of the Sales Agency Agreement and
the amendment thereto are filed as exhibits to this Registration Statement and
are incorporated by reference herein. Subject to the terms and conditions of the
Sales Agency Agreement, the Company may issue and sell up to 2,250,000 shares of
Common Stock from time to time through Kidder, Peabody, as exclusive sales agent
for the Company (of which approximately 1,772,700 shares have been sold through
February 3, 1994 and approximately 477,300 shares remain available for sale
under the Sales Agency Agreement). Such sales, if any, will be made by means of
ordinary brokers' transactions on any national securities exchange, including
the New York Stock Exchange, on which such shares of Common Stock are listed.
Such sales will be effected during a series of one or more (up to a maximum of
52) pricing periods (each a "Pricing Period"), each consisting of five
consecutive calendar days in duration. During any Pricing Period, no more than
60,000 shares ("Average Market Shares") will be sold subject to the calculation
of Net Proceeds as defined below. The aggregate number of shares of Common Stock
sold in all Pricing Periods will not exceed 2,250,000. In addition, for each
Pricing Period, an Average Market Price (as hereinafter defined) will be
computed. With respect to any Pricing Period, "Average Market Price" shall equal
the average of the arithmetic mean of the daily high and low sale prices of the
Common Stock reported on the New York Stock Exchange for each trading day of
such Pricing Period.
The net proceeds to the Company with respect to sales of Average Market
Price Shares will equal 94.25 percent of the Average Market Price for each share
of Common Stock sold during the Pricing
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Period (subject to adjustment in certain circumstances), plus Excess Proceeds
(as defined below), if any. The compensation to Kidder, Peabody for such sales
in any Pricing Period will equal the difference between the actual sale prices
at which such sales are effected and the net proceeds to the Company for such
sales, but in no case will exceed ten percent of such actual sales prices. To
the extent that such actual sales prices are less than the Average Market Price,
the compensation to Kidder, Peabody would be correspondingly reduced; to the
extent that such actual sales prices are greater than the Average Market Price,
the compensation to Kidder, Peabody will be correspondingly increased (but in no
event will exceed ten percent of the actual sales price). In the event that the
average actual sales price in any Pricing Period equals 94.25 percent of Average
Market Price (or less) for such Pricing Period, all of the proceeds from such
sales would be for the account of the Company and no compensation would be
payable to Kidder, Peabody. To the extent that Kidder, Peabody's compensation
under the foregoing formula would otherwise exceed ten percent of the actual
sales prices in any Pricing Period, the excess over ten percent will constitute
additional net proceeds to the Company (the "Excess Proceeds").
Any shares of Common Stock sold by Kidder, Peabody during the Pricing Period
on behalf of the Company other than Average Market Price Shares ("Additional
Shares") will be at a fixed commission rate of $0.125 per share. In no event
will the compensation to Kidder, Peabody be in excess of any applicable National
Association of Securities Dealers, Inc. requirements.
Settlements of sales of Additional Shares will occur on the fifth business
day following the date on which such sales are made. Settlements for sales of
Average Market Price Shares will occur on a weekly basis on each Monday (or the
next succeeding business day if such Monday is not a business day) following the
end of each Pricing Period. Purchases of Common Stock from Kidder, Peabody as
sales agent for the Company will settle regular way on the national securities
exchange where such purchases were executed. Compensation to Kidder, Peabody
with respect to sales of Average Market Price Shares will be paid out of the
proceeds of such settlements. There is no arrangement for funds to be received
in an escrow, trust or similar arrangement.
At the end of each Pricing Period, the Company will file a Prospectus
Supplement under Rule 424(b)(3) promulgated under the Act, which Prospectus
Supplement will set forth the number of such shares of Common Stock sold through
Kidder, Peabody as sales agent (identifying separately the number of Average
Market Shares and any Additional Shares), the high and low prices at which
Average Market Shares were sold during such Pricing Period, the net proceeds to
the Company and the compensation payable by the Company to Kidder, Peabody with
respect to such sales pursuant to the formula set forth above. Unless otherwise
indicated in a Prospectus Supplement, Kidder, Peabody as sales agent will act on
a best efforts basis.
In connection with the sale of the Common Stock on behalf of the Company,
Kidder, Peabody may be deemed to be an "underwriter" within the meaning of the
Act, and the compensation of Kidder, Peabody may be deemed to be underwriting
commissions or discounts. The Company has agreed to provide indemnification and
contribution to Kidder, Peabody against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. Kidder, Peabody may
engage in transactions with, or perform services for, the Company in the
ordinary course of business.
The offering of Common Stock pursuant to the Sales Agency Agreement will
terminate upon the earlier of (i) the sale of all 2,250,000 shares of Common
Stock subject thereto, (ii) termination of the Sales Agency Agreement and (iii)
September 30, 1994. The Sales Agency Agreement may be terminated by the Company
in its sole discretion on the date occurring 60 days after the date of the Sales
Agency Agreement and every 60 days thereafter. The Company may also terminate
the Sales Agency Agreement at any time if the Company chooses to effect any
offering of equity securities or equity-related securities other than pursuant
to the Sales Agency Agreement.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed upon for the Company by John Borst, Jr., Vice
President-General Counsel of the Company, and by
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Sidley & Austin, Chicago, Illinois. As of December 31, 1993, Mr. Borst owned
beneficially 4,925 shares of Common Stock (of which 2,021 shares are held in the
Zenith Salaried Profit Sharing Retirement Plan) and held options to purchase
37,596 shares, of which 25,596 were exercisable as of such date, of Common
Stock.
EXPERTS
The Consolidated Financial Statements and Schedules of Zenith Electronics
Corporation and Subsidiaries included and incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1992, which
are incorporated herein by reference in this Prospectus, have been audited by
Arthur Andersen & Co., independent public accountants, as indicated in their
reports with respect thereto, (which contain an explanatory paragraph that
states the Company has incurred losses from continuing operations of $105.9
million, $51.6 million and $54.2 million in 1992, 1991 and 1990, respectively,
and that management's plan for meeting obligations as they come due is
summarized in Note 2 to the consolidated financial statements) and have been so
incorporated in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
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