UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to____________
Commission File Number: 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 Milwaukee Avenue, Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
(708)391-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
---- ----
As of October 31, 1994, there were 44,961,300 shares of Common Stock,
par value $1 per share, outstanding.
<PAGE>
ZENITH ELECTRONICS CORPORATION
FORM 10-Q
INDEX
Page
Number
------
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations --
Three and Nine months ended October 1, 1994 and
October 2, 1993 3
Condensed Consolidated Balance Sheets --
October 1, 1994, December 31, 1993 and October 2, 1993 4
Condensed Consolidated Statements of Cash Flows --
Nine months ended October 1, 1994 and October 2, 1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Operations 8
Liquidity and Capital Resources 9
Outlook 10
Part II. Other Information:
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Millions, Except Per Share Amounts
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- --------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 419.4 $ 301.8 $1,015.5 $ 867.0
-------- -------- -------- --------
Costs, expenses and other:
Cost of products sold 382.3 284.6 928.7 828.8
Selling, general and administrative 28.6 22.5 78.4 68.2
Engineering and research 11.2 12.1 34.0 36.6
Other operating expense
(income), net (Note 2) (10.8) (7.0) (18.9) (16.5)
-------- -------- -------- --------
Operating income (loss) 8.1 (10.4) (6.7) (50.1)
Gain on asset sales, net (Note 3) 5.5 - 6.9 -
Interest expense (4.7) (4.2) (11.8) (11.1)
Interest income .2 .2 .4 .3
-------- -------- -------- --------
Income (loss) before income taxes 9.1 (14.4) (11.2) (60.9)
Income taxes (credit) (Note 4) (.3) .1 (.3) .1
-------- -------- -------- --------
Net income (loss) $ 9.4 $ (14.5) $ (10.9) $ (61.0)
======== ======== ======== ========
Net income (loss) per share of
common stock (Note 5) $ .21 $ (.44) $ (.27) $ (1.94)
======== ======== ======== ========
</TABLE>
[FN]
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Millions
<TABLE>
<CAPTION>
October 1, December 31, October 2,
1994 1993 1993
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash $ - $ 20.8 $ -
Receivables, net of allowance for
doubtful accounts of $3.1, $2.5
and $3.1, respectively 226.4 162.5 195.1
Inventories (Note 6) 289.5 206.2 248.5
Other 10.5 6.1 6.5
---------- ---------- ----------
Total current assets 526.4 395.6 450.1
Property, plant and equipment, net 158.6 153.9 171.2
Other 14.1 9.9 7.6
---------- ---------- ----------
Total assets $ 699.1 $ 559.4 $ 628.9
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C>
Current liabilities:
Short-term debt (Note 7) $ 34.0 $ - $ 61.5
Current portion of long-term debt - 34.5 -
Accounts payable 127.1 81.8 115.8
Income taxes payable 1.4 1.1 1.8
Accrued expenses 129.8 119.6 125.4
---------- ---------- ----------
Total current liabilities 292.3 237.0 304.5
Long-term debt (Note 8) 182.0 170.0 149.5
Stockholders' equity:
Preferred stock - - -
Common stock (Note 9) 44.9 35.9 34.1
Additional paid-in capital 279.4 205.1 193.4
Retained earnings (deficit) (99.0) (88.1) (52.1)
Treasury stock (.5) (.5) (.5)
---------- ---------- ----------
Total stockholders' equity 224.8 152.4 174.9
---------- ---------- ----------
Total liabilities and stockholders' equity $ 699.1 $ 559.4 $ 628.9
========== ========== ==========
</TABLE>
[FN]
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Millions
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Nine Months Ended
---------------------------
October 1, October 2,
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Income (loss) from operations $ (10.9) $ (61.0)
Adjustments to reconcile income (loss) to
net cash used by operations:
Depreciation 22.6 27.7
Employee retirement plan contribution in stock - 6.5
Gain on asset sales, net (6.9) -
Other (.3) .2
Changes in assets and liabilities:
Current accounts (101.7) (32.2)
Other assets 1.2 -
----------- -----------
Net cash used by operating activities (96.0) (58.8)
----------- -----------
Cash flows from investing activities:
Capital additions (41.4) (17.8)
Proceeds from asset sales 21.8 .1
----------- -----------
Net cash used by investing activities (19.6) (17.7)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net 34.0 51.4
Proceeds from issuance of long-term debt 12.0 -
Proceeds from issuance of common stock, net 83.3 19.3
Principal payments on long-term debt (34.5) -
----------- -----------
Net cash provided by financing activities 94.8 70.7
----------- -----------
Decrease in cash (20.8) (5.8)
Cash at beginning of period 20.8 5.8
----------- -----------
Cash at end of period $ - $ -
=========== ===========
Increase (decrease) in cash attributable to
changes in current accounts:
Receivables, net $ (64.7) $ (16.6)
Income taxes, net .4 .7
Inventories (86.8) (50.6)
Other assets (4.4) (.3)
Accounts payable and accrued expenses 53.8 34.6
----------- -----------
Net change in current accounts $(101.7) $ (32.2)
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 10.4 $ 14.2
Income taxes (.1) (.6)
</TABLE>
[FN]
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations
of the Securities and Exchange Commission. The accuracy of the amounts
in the financial statements is in some respects dependent upon facts that
will exist, and procedures that will be performed by the Company, later in
the year. In the opinion of management, all adjustments necessary for a fair
presentation of the financial statements have been included and are of a
normal, recurring nature. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's Form 10-K
for the year ended December 31, 1993.
Note 2 - Other operating expense (income)
Royalty income that related to tuning system patents (after deducting legal
expenses) was $7.6 million and $17.5 million for the three and nine months
ended October 1, 1994, respectively, and $6.4 million and $16.9 million for
the three and nine months ended October 2, 1993, respectively. These amounts
are included in Other Operating Expense (Income).
Note 3 - Asset sales
In the third quarter of 1994 the Company sold its 500,000-square-foot
warehouse/office complex in Northlake, IL, for $7.4 million, resulting in
a pretax gain of $5.4 million.
Note 4 - Income taxes
As of October 1, 1994, the Company had $388.8 million of net operating
loss carryforwards (NOLs) available for financial statement purposes. For
Federal income tax purposes, the Company had NOLs of $389.2 million
and unused tax credits of $4.9 million. The NOLs and tax credits expire
from 2000 to 2009.
Note 5 - Earnings per share
Primary earnings per share are based upon the weighted average number of
shares outstanding and common stock equivalents, if dilutive. Fully
diluted earnings per share, assuming conversion of the 6-1/4% convertible
subordinated debentures and the 8.5% convertible senior subordinated
debentures, are not presented because the effect of the assumed conversion
is antidilutive. The weighted average number of shares was 44.0 million
and 41.0 million for the three and nine months ended October 1, 1994,
respectively, and 32.8 million and 31.5 million for the three and nine months
ended October 2, 1993, respectively.
Note 6 - Inventories
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
October 1, December 31, October 2,
1994 1993 1993
---------- ------------ ----------
<S> <C> <C> <C>
Raw materials and work-in-process $ 167.9 $ 137.2 $ 157.1
Finished goods 130.7 78.1 96.7
---------- ------------ ----------
298.6 215.3 253.8
Excess of FIFO cost over LIFO cost (9.1) (9.1) (5.3)
---------- ------------ ----------
Total $ 289.5 $ 206.2 $ 248.5
========== ============ ==========
</TABLE>
<PAGE>
As of October 1, 1994, December 31, 1993 and October 2, 1993, $28.3
million, $24.1 million and $26.9 million, respectively, of inventories
were valued using the LIFO method.
An actual determination of inventory under the LIFO method can only be
made at the end of each year based on the inventory levels and costs at
that time. Accordingly, interim LIFO calculations are based on
management's estimates of expected year-end inventory levels and costs.
Since these estimates are subject to many factors beyond management's
control, interim results are subject to the final year-end LIFO inventory
determination.
Note 7 - Short-term debt and credit arrangements
In April 1994, the Company entered into the fifth amendment to its $90
million Credit Agreement. The amendment extended the termination
date from December 31, 1994 to June 30, 1996 on modestly improved
terms. In October 1994, the Company entered into the sixth amendment,
effective September 30, 1994, which changed the Maximum Capital Expenditure
financial covenant from a quarterly covenant to a yearly covenant.
As of October 1, 1994, the Company had borrowings of $34.0 million
under the Credit Agreement.
The Credit Agreement (as amended) contains restrictive financial
covenants that must be maintained as of the end of each fiscal quarter,
including a minimum net worth amount and a liabilities to net worth ratio.
The financial covenant's requirements vary from quarter to quarter. As of
October 1, 1994, the ratio of liabilities to net worth was required to be not
greater than 4.95 to 1.0 and was actually 2.11 to 1.0, and net worth was
required to be equal to or greater than $108.0 million and was actually
$224.8 million. At the end of each future fiscal quarter through March 30,
1996, the liabilities to net worth ratio is required to be maintained at
various levels ranging from a high of 4.40 to 1.0 to a low of 3.50 to 1.0 and
minimum net worth is required to be maintained at amounts ranging from a high
of $166.0 million to a low of $143.0 million.
The Credit Agreement (as amended) also contains a restriction on capital
expenditures as of the end of each fiscal year. As of December 31, 1994
and 1995, the Company shall not make capital expenditures (as defined)
that exceed $68.0 and $38.0 million, respectively, for the year then ended.
Note 8 - Long-term debt
In January 1994 the Company redeemed $34.5 million of 12-1/8% notes
due January 1995 at a redemption price equal to par value plus accrued
interest. The Company also issued and sold $12.0 million aggregate
principal amount of 8.5% senior subordinated convertible debentures due
2001 (with similar terms to the $55.0 million 8.5% senior subordinated
convertible debentures due 2000 sold during 1993) in a private placement.
Note 9 - Stockholders' equity
During the first nine months of 1994, the Company sold 8.6 million shares
of authorized but unissued shares of common stock to investors under three
separate registration statements that had been filed with the Securities
and Exchange Commission. The Company also sold .4 million shares of
authorized but unissued shares of common stock through the exercise of
stock options. The combined result of these stock sales was to increase
equity by $83.3 million.
Note 10 - Reclassifications
Certain prior amounts have been reclassified to conform with the presentation
currently used.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Operations
Boosted by strong sales growth and lower costs, the Company reported a
net profit of $9.4 million, or 21 cents per share, for the third quarter of
1994, compared with a net loss of $14.5 million, or 44 cents per share, for
the same period a year ago. Third- quarter 1994 results include a $5 million
gain on the sale of real estate.
Operating income was up sharply due to higher sales of TV sets, picture
tubes and set- top cable decoders, lower costs resulting largely from new
re-engineering programs, a reduction in losses from non-core businesses (that
have been sold or downsized) and the benefits of the North American Free
Trade Agreement including lower duties and higher sales of picture tubes
and TVs.
Total sales in the quarter were up 39 percent to $419 million in 1994 from
$302 million in 1993. Sales for the core business, Consumer Electronics
and Network Systems, increased 44 percent or $126 million over last
year, despite $13 million of lower selling prices than a year ago. Non-core
business sales declined to $5 million from $14 million.
The Company's color TV unit sales to dealers reached record levels in the
third quarter of 1994, reflecting continued strength of the consumer
electronics industry and the acceptance of the Company's new color TV
line, particularly large-screen products, including the Company's re-
designed rear-projection home-theater models. The Company's domestic unit
sales growth rate exceeded the industry's, which was up by 15 percent
over the same quarter last year. As a result, the Company's U.S. color
TV market share increased. Exports also rose significantly.
Sales for Network Systems, particularly set-top cable decoders, also
increased strongly from third-quarter 1993 levels, partly due to the
acceptance of the Company's analog and wireless cable decoders. The Company
is targeting new customers, traditional cable systems, telephone companies
and wireless cable operators, to provide new opportunities for growth.
Cost reductions in the third quarter were on plan as the Company
continues to implement major re-engineering actions, which mainly involve
process improvements and programs to cut cycle times in the core
business. These cost reductions, along with lower import duties under the
North American Free Trade Agreement, were, in part, offset by inflationary
cost increases, primarily labor costs in Mexico and picture tube glass.
The effect of these cost reductions should continue through the rest
of the year as well and are expected to cut full-year 1994 costs by about
$45 million.
Selling, general and administrative expenses in the third quarter of 1994
were up $6.1 million or 27 percent from the prior year, primarily due to
increased advertising costs in support of the higher sales volume.
Results for the third quarter include $7.6 million of royalty revenues
from tuning system licenses (net of legal expenses). These revenues were
$6.4 million in the third quarter of 1993.
The Company is continuing to implement as planned the restructuring, re-
engineering and other actions designed to reduce on-going operating expenses
as described in the Company's Form 10-K for the year ended December 31, 1993.
No material changes have occurred or are anticipated in the programs or in
the estimated costs or benefits of the programs.
The Company recognized a $5.4 million gain on the sale of its 500,000
square-foot warehouse/office complex in Northlake, IL, in the third quarter.
That sale brought the amount of plant and office space that the Company
has sold in 1994 to more than 3 million square feet.
For the first nine months of 1994, the Company's results improved by
more than $50 million compared with 1993 nine-month results. The nine-month
net loss was $10.9 million, or 27 cents per share, in 1994 and $61.0
million, or $1.94 per share, in 1993. Sales were $1,015 million in the first
nine months of 1994, an improvement of 17 percent over the $867 million
reported in the same period last year. Core business sales increased $199
million in the nine months. Results for the first nine months of 1994
improved over the same period of 1993 due to substantially the same factors
as those described above for the third quarter.
<PAGE>
Liquidity and Capital Resources
Cash decreased $20.8 million during the nine months ended October 1,
1994. The decrease consisted of $96.0 million of cash used by operating
activities and $19.6 million, net, used to purchase fixed assets. These
uses of cash were offset by $94.8 million, net, of cash provided from
financing activities which included sales of the Company's common stock,
borrowings under the Company's $90 million credit agreement and the issuance
of long-term debt offset by cash used for the redemption of the Company's
12-1/8% notes due January 1995.
During the nine months ended October 1, 1994, the $96.0 million of cash
used by operating activities mainly funded a $101.7 million change in current
accounts offset by $4.8 million of net income from operations as
adjusted for depreciation and gains on the sales of assets. The change in
current accounts was mainly composed of a $86.8 million increase in
inventories (due mainly to increased levels of color television production to
support higher projected shipment schedules in future months when production is
at capacity) and a $64.7 million increase in receivables (due to higher sales),
partially offset by a $53.8 million increase in accounts payable and accrued
expenses.
During the nine months ended October 1, 1994, investing activities used
$19.6 million of cash which consisted of capital additions of $41.4 million
offset by $21.8 million of proceeds from asset sales. In the same period of
1993, investing activities used $17.7 million, net, of cash for capital
additions. Capital additions for the full year 1994 are expected to be about
$65 million, significantly higher than the $26.1 million for the full year
1993 due mainly to moving the Company's injection molding operation to Mexico,
modernizing the wood cabinet mill room and re-engineering activities related
to the core consumer electronics business.
During the nine months ended October 1, 1994, financing activities provided
$94.8 million of cash. Sales of the Company's common stock (including stock
options) provided $83.3 million of cash, borrowings under the Company's $90
million credit agreement provided $34.0 million of cash and the sale of 8.5%
senior subordinated convertible debentures due 2001 provided $12.0 million of
cash. This was offset by $34.5 million of cash used to redeem the Company's
outstanding 12-1/8% notes due January 1995 at a redemption price equal to par
value (plus accrued interest).
As of October 1, 1994, total interest-bearing obligations of the Company
consisted of $182.0 million of long-term debt and $20.4 million of extended-
term payables with a foreign supplier. The Company's long-term debt is
composed of $115.0 million of 6-1/4% convertible subordinated debentures due
2011 that require annual sinking fund payments of $5.8 million beginning in
1997, $55.0 million aggregate principal amount of 8.5% senior subordinated
convertible debentures due 2000 and $12.0 million aggregate principal amount
of 8.5% senior subordinated convertible debentures due 2001.
On April 21, 1994, the Company entered into an amendment to its $90 million
Credit Agreement to extend the termination date of the Credit Agreement from
December 31, 1994 to June 30, 1996 on modestly improved terms. The financial
covenants included in the Credit Agreement (as amended) relate to
restrictions on capital expenditures for each fiscal year, a quarterly
minimum net worth test and a quarterly leverage ratio require-
ment. (See Note 7 to Condensed Consolidated Financial Statements for further
discussion on the financial covenants.) On October 1, 1994, the Company had
$34.0 million of borrowings outstanding under the Credit Agreement.
Although the Company believes that the Credit Agreement, together with
extended-term payables expected to be available from a foreign supplier
and its continuing efforts to obtain other financing sources, will be
adequate to meet its seasonal working capital, capital expenditure and
other requirements in 1994 and 1995, there can be no assurance that the
Company will not experience liquidity problems in the future because of
adverse market conditions or other unfavorable events. In addition, the
Company is reviewing possible capital investment projects over the next
three years along with a related Credit Agreement Amendment and options
for additional financing that would be required to support those projects.
If undertaken, the projects are expected to reduce costs and increase
production capacity primarily in the Company's picture tube operation.
<PAGE>
Outlook
The overall outlook for the Company (including its competitive condition
and business strategy) is essentially the same as described in the "Outlook"
section of "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the Company's Form 10-K
for the year ended December 31, 1993. As indicated above, competitive pricing
conditions continue.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On April 27, 1993, the U.S. Environmental Protection Agency sent written
notices to all potentially responsible parties, advising the parties of the
EPA's proposed plan of remediation at the American Chemical Services site
near Griffith, Indiana. The EPA notified the parties that they would be
expected to make a good faith offer to perform the remedial action and
thereafter to negotiate and enter into a consent decree with the agency.
The EPA estimates that the cost of remedial action could range from $38 to
$64 million, depending upon the type of remedy actually needed to effect the
cleanup. The Company is alleged to have contributed less than one-tenth
of one percent of the hazardous waste identified at the site. On July 12,
1994, the Company entered into a de minimus settlement with the EPA and
the State of Indiana. The Company's share of the settlement is
approximately $117,000. The settlement was published in the Federal
Register for public comment and is subject to final approval by the EPA.
During the three months ended October 1, 1994, no other reportable
events or material developments occurred with respect to the legal
proceedings described under Part II, Item 1 in the Company's Quarterly
Reports on Form 10-Q for the Quarters ended July 2, 1994 and April 2,
1994, and under Item 3 in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
Item 2. Changes in Securities
(b) The Credit Agreement, as amended, prohibits dividend payments on
the Company's common stock, restricts dividend payments on any of its
preferred stock, if issued, and prohibits the redemption or repurchase
of stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4a) Indenture, dated as of April 1, 1986, for 6-1/4% Convertible
Subordinated Debentures due 2011 with The First National Bank of
Boston, Trustee (incorporated by reference to Exhibit 1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March
30, 1991)
(4b) Stockholder Rights Agreement, dated as of October 3, 1986 (incorporated
by reference to Exhibit 4c of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 28, 1991)
(4c) Amendment, dated April 26, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4d of the Company's Quarterly
Report on Form 10-Q for the quarter ended April 3, 1993)
<PAGE>
(4d) Amended and Restated Summary of Rights to Purchase Common Stock
(incorporated by reference to Exhibit 4e of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4e) Amendment, dated July 7, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4f of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4f) Agreement, dated May 23, 1991, among Zenith Electronics Corporation,
The First National Bank of Boston and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8, dated May 30,
1991)
(4g) Amendment, dated May 24, 1991, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 2 of Form 8, dated May 30,
1991)
(4h) Agreement, dated as of February 1, 1993, among Zenith Electronics
Corporation, Harris Trust and Savings Bank and The Bank of New York
(incorporated by reference to Exhibit 1 of Form 8 dated March 25,
1993)
(4i) Credit Agreement, dated as of May 21, 1993, with General Electric Capital
Corporation, as agent and lender, and the other lenders named therein
(incorporated by reference to Exhibit 4 of the Company's Current Report
on Form 8-K, dated May 21, 1993)
(4j) Amendment No. 1 dated November 8, 1993, to the Credit Agreement dated
May 21, 1993, with General Electric Capital Corporation, as agent and
lender, and the other lenders named therein (incorporated by reference
to Exhibit 4(b) of the Company's Current Report on Form 8-K, dated
November 19, 1993)
(4k) Amendment No. 3 dated January 7, 1994, to the Credit Agreement dated
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 (incorporated by reference to
Exhibit 4(b) of the Company's Current Report on Form 8-K dated January
11, 1994)
(4l) Fourth Amendment dated January 28, 1994, to the Credit Agreement dated
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 (incorporated by reference to
Exhibit 4 of the Company's Current Report on Form 8-K dated January 31,
1994)
(4m) Fifth Amendment dated April 21, 1994, to the Credit Agreement dated
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 (incorporated by reference to
Exhibit 4 of the Company's Current Report on Form 8-K dated April 21,
1994)
(4n) Debenture Purchase Agreement dated as of November 19, 1993, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
November 19, 1993)
<PAGE>
(4o) Amendment No. 1 dated November 24, 1993, to the Debenture Purchase
Agreement dated as of November 19, 1993, with the institutional investor
named therein (incorporated by reference to Exhibit 4(a) of the
Company's Current Report on Form 8-K dated November 24, 1993)
(4p) Amendment No. 2 dated January 11, 1994, to the Debenture Purchase
Agreement dated as of November 19, 1993, (incorporated by reference
to Exhibit 4(c) of the Company's Current Report on Form 8-K dated
January 11, 1994)
(4q) Debenture Purchase Agreement dated as of January 11, 1994, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
January 11, 1994)
(10a) Form of Employment Agreement with Philip S. Thompson and Richard F.
Vitkus
(10b) Form of Supplemental Agreement with Philip S. Thompson and
Richard F. Vitkus
(10c) Form of Indemnification Agreement with Philip S. Thompson and
Richard F. Vitkus
(b) Reports on Form 8-K:
A report on Form 8-K dated July 21, 1994, was filed by the Company
stating under Item 5 that Zenith Electronics Corporation had issued
a press release announcing second quarter 1994 financial results.
A report on Form 8-K dated August 1, 1994, was filed by the Company
stating under Item 5 that Zenith Electronics Corporation had issued
a first-half 1994 report.
A report on Form 8-K dated August 19, 1994, was filed by the Company
stating under Item 5 that Zenith Electronics Corporation had entered into a
Sales Agency Agreement for the sale of up to 600,000 shares of the Company's
common stock to certain investors at negotiated prices.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
(Registrant)
Date: November 14, 1994 By:/s/ Kell B. Benson
----------------------------
Kell B. Benson
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Page
Exhibit: Number
- --------- ------
(10a) Form of Employment Agreement with Philip S. Thompson 15
and Richard F. Vitkus
(10b) Form of Supplemental Agreement with Philip S. Thompson and 23
Richard F. Vitkus
(10c) Form of Indemnification Agreement with Philip S. Thompson 37
and Richard F. Vitkus
EXHIBIT (10a)
AGREEMENT
This Agreement entered into by and between ZENITH ELECTRONICS CORPORATION
(hereinafter called "Zenith"), a Delaware corporation with principal offices
at 1000 Milwaukee Avenue, Glenview, Illinois 60025 and _______________
(hereinafter called "Employee").
In consideration of the mutual obligations and provisions herein contained,
the parties hereto agree as follows:
ARTICLE I
The present Agreement as of _______________________ (hereinafter called
"the Agreement") supersedes any and all prior Employment Agreements between
the Parties, but does not in any way affect any other agreement between the
parties.
ARTICLE II
SECTION 1: EMPLOYMENT. (a) Zenith hereby agrees to employ Employee
in an executive capacity in accordance with Zenith's compensation policies
applicable from time to time, for a period commencing on ________________ and
ending on the last day of the month in which his sixty-fifth (65th) birthday
occurs or as soon thereafter as may be permitted by law (hereinafter referred
to as the "expiration date" of the period of employment), provided however,
that Zenith and Employee may mutually agree to extend Employee's period of
employment. During the period of his employment, Employee agrees to devote
his best efforts to the business of Zenith and to all duties that may be
assigned to him by Zenith from time to time.
(b) As used in this Agreement, the term "salary" shall exclude bonuses
and all remuneration of any kind except regular base salary.
SECTION 2: ERISA EXCESS BENEFIT. (a) Definitions. For purposes
of this paragraph (a) of Section 2 of Article II of this Agreement,
the following definitions shall apply:
(1) PS EXCESS Profit Sharing Excess means the amounts (including
Zenith's contributions, reallocated relinquishments and earnings thereon)
that were not credited to the Zenith Salaried Profit Sharing Retirement
Plan (hereinafter referred to as "the Profit Sharing Plan") Retirement
and Optional Accounts of employee because they were in excess of the
maximum annual contribution limitation under ERISA or of any other
annual limit imposed under the Internal Revenue Code of 1986, as
amended from time to time.
(2) ERISA means The Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
(b) The contract benefit payable to Employee under this Section
(b) of Section 2 of Article II of this Agreement shall be the PS Excess,
payable as a lump sum within ninety (90) days after termination
of Employee's employment, or as soon thereafter as the amount of the
contract benefit can be determined.
(c) Any other provision of this agreement to the contrary notwithstanding,
no payments shall be made to Employee pursuant to this Section 2 of Article
II: (1) if Employee's employment is terminated prior to Employee's fifty-
fifth (55th) birthday; or (2) if Employee's employment is terminated for
cause at any time.
(d) For purposes of this Agreement "discharge for cause" shall mean
termination by Zenith of Employee's employment for proven dishonesty, gross
misconduct, misappropriation of Zenith's funds or property, or other
dishonest or fraudulent conduct.
SECTION 3: TERMINATION OF EMPLOYMENT. Zenith may terminate at will the
employment of Employee and/or relieve him of his duties and, if Employee
has been elected an officer by Zenith's Board of Directors, by action of
the Board of Directors may remove him from his officership at any time
prior to the expiration date of the period of employment. In the event of
such termination of employment (other than discharge for cause), Employee
shall be entitled to receive his salary prorated on a daily basis to the
effective date of such termination. He shall also be entitled to
separation payments in an amount equal to his salary prorated on a
daily basis from the effective date of termination of his employment to
the ninetieth (90th) day following the effective date of such termination
of employment or to the expiration date of the period of employment,
whichever first occurs, payable in equal semi-monthly installments over
such period.
ARTICLE III
SECTION 1: DISABILITY BENEFITS - SHORT TERM. The purpose of this
Section l of Article III is to give Employee protection for a limited
time as to his salary and protection of any right he may have under
any short term disability programs, if during his employment by Zenith
he suffers a disability as hereinafter defined.
If during the period of his employment by Zenith, Employee becomes unable
to work because of sickness or personal injury (such occurrence or
occurrences are referred to in this Agreement as a "disability"), the
following provisions in this Article III shall apply during the period
provided for in the next paragraph of this Section 1 of Article III and
shall override anything in other articles in this Agreement inconsistent
therewith during such period.
The period of the first one hundred eighty (180) days of such disability,
if it lasts that long, or the full period of the disability, if it
lasts less than one hundred eighty (180) days, whichever occurs, is
hereinafter referred to in this Section 1 of Article III as "such period",
provided, however, that if such period as above determined extends
beyond the seventieth (70th) birthday of Employee, such period shall be
deemed to end on such seventieth (70th) birthday. The employment
by Zenith of Employee shall continue during such period and Zenith shall
pay to Employee his full salary during such period. Zenith shall not have
the right to terminate its employment of Employee or to give notice to
Employee of its election to terminate during such period, but Zenith may
at any time during such period relieve Employee of his duties, and if
Employee has been elected an officer by Zenith's Board of Directors,
the Board of Directors may at anytime remove him from his officership.
SECTION 2: DISABILITY BENEFITS - LONG TERM.
(a) Purpose: The purpose of this Section 2 of Article III is to make
available to Employee, under the terms and conditions hereinafter stated,
benefits from Zenith if Employee suffers a total long term disability,
as hereinafter defined, during his employment by Zenith. As of the
effective date of this Agreement, Zenith provides a long term disability
plan for salaried employees. Pursuant to the terms of said plan, employees
of Zenith who desire to participate in the benefits provided by said plan
pay all the premiums charged under said plan. The benefits provided by
this Section 2 of Article III shall be in addition to the benefits provided
by such plan, provided however that no benefits shall be payable under
this Section 2 of Article III if Employee is not a participant in Zenith's
long term disability plan.
(b) Definitions. As used in this Section 2 of Article III, the following
terms shall have the following respective meanings:
(1) "Disability" means the inability of Employee arising during his
employment by Zenith to perform the duties pertaining to the employment
position held by Employee with Zenith at the inception of such disability,
if such inability is due to sickness or injury. If such disability continues
for a period of more than 180 days, it shall become a "total long term
disability" effective upon the expiration of such 180 days. The terms
"disability" and "total long term disability" exclude disability resulting
from intentional self-inflicted injuries or sickness.
(2) "Maximum monthly salary" of Employee means the maximum amount of
monthly salary specified in the long term disability plan on which the
benefit payments under such plan will be calculated and based. (As of the
present date, benefits under such plan are 66-2/3% of monthly salary. The
maximum monthly salary is $6,000 and the maximum monthly benefit is $4,000.)
(c) Benefits Payable. The amount of monthly benefits payable by Zenith
to Employee during a total long term disability of Employee shall be 66-2/3%
of the amount, if any, by which the actual monthly salary he was receiving
immediately prior to the commencement of his disability exceeds his maximum
monthly salary as heretofore defined but if such actual monthly salary
exceeds $12,500, then the amount of such benefits payable by Zenith to
Employee shall be limited to 66-2/3% of the amount by which $12,500 exceeds
his maximum monthly salary.
(d) Exclusion. No benefits shall be payable under this Section 2 of
Article III if the long term disability plan referred to herein has been
terminated prior to the date of commencement of the disability.
(e) Period of Benefit Payments. Benefits shall be payable by Zenith
to Employee upon the commencement of the total long term disability (180
days after inception of disability) and thereafter as long as both of the
following conditions continue to be met:
(i) The long term disability continues, and
(ii) The Employee is under the care of a physician.But, in all events, the
benefits shall cease and terminate upon the first to occur of the following:
(i) The cessation of the total long term disability.
(ii) The death of the Employee.
(iii) The breach by Employee of any of his obligations under the Medical
Examination and Data Paragraph.
(iv) The cessation of payment of benefits to Employee under the long term
disability plan for any reason not specified above.
(f) Reduction or Termination of Benefits. If during the period of
total long term disability Employee becomes employed by any employer
(including Zenith) in a position other than the employment position held
by Employee with Zenith at the inception of such disability or if it is
determined that Employee is able from a medical standpoint to work in
another such position, Zenith shall then or at any time or times thereafter
have the right to reduce the amount of benefits provided herein to any lesser
amount specified by Zenith or discontinue such benefits altogether.
(g) Effect of Termination of Long Term Disability Plan. In the event
the Employee elects not to participate or elects to terminate his
participation in the plan referred to in Paragraph (a) of this Section 2 of
Article III, then this Section 2 of Article III shall be of no further
force and effect, and Zenith shall have no obligation to provide the
benefits described in this Section 2 of Article III. In the event
Employee does participate in and does not terminate his participation
in the long term disability plan, and the long term disability plan
is terminated by Zenith subsequent to the commencement of the disability,
Employee shall nevertheless continue to be entitled to the benefits provided
by this Section 2 of Article III and, in addition, Zenith shall be obligated
to provide, and Employee shall be entitled to receive long term disability
benefits in the same amounts and under the same terms and conditions as if
the long term disability plan remained in full force and effect. Provided
however, nothing herein contained shall prohibit Zenith from at any time,
or from time to time, establishing a substitute plan or plans for the
long term disability plan, in which event: (1) Zenith shall be relieved
of its obligation to continue payment of benefits under the terminated
long term disability insurance plan and shall be obligated to provide
benefits under the substituted plan or plans; and (2) "Maximum monthly
salary" defined in Paragraph (b) (2) of Section 2 of this Article III
above shall mean the maximum monthly salary specified in such substitute
plan or plans.
(h) Determinations. All determinations as to whether a disability or
total long term disability exists at any time or has ceased to exist, all
determinations as to date of commencement or cessation of such disability
or total long term disability and all determinations as to whether Employee
is medically able to work in another position as provided in Subsection
(f) of this Section 2 of Article III shall be made by Zenith's Corporate
Medical Director (or if at any time no person holds such a position with
Zenith, then by any physician designated by Zenith from time to time),
which determination shall be final and binding on the Parties hereto
regardless of whether such determination is or is not in accord with any
medical or other decision made under the long term disability plan referred
to above.
(i) Medical Examinations and Data. Zenith at its own expense shall
have the right and opportunity to make a medical examination of the person
of Employee in the event of a sickness or injury of Employee which constitutes
or might constitute a disability or a total long term disability as herein
defined and as often as Zenith may require. Such examination shall be
conducted by Zenith's Corporate Medical Director or any physician designated
by Zenith from time to time. Employee agrees to submit to all such
examinations. In addition, Zenith shall be entitled to examine and obtain
copies of all medical records pertaining to such sickness or injury of
any licensed physician, hospital, organization, institution or person and
Employee agrees to furnish Zenith with written authorization to examine and
obtain copies of such records as often as required by Zenith.
ARTICLE IV
SECTION 1: SPECIAL LIFE INSURANCE BENEFIT. (a) Zenith agrees to
maintain a plan providing special life insurance benefits to selected
executives including Employee. The Life Insurance Benefits provided
in this Article IV shall be in addition to any group term life insurance
program applying generally to salaried employees.
(b) In the event Employee's employment with Zenith is terminated
for any reason whatsoever, other than by death, prior to age fifty-five
(55), no benefits whatsoever shall be paid pursuant to this Article IV.
SECTION 2: BENEFIT AMOUNT - PRERETIREMENT. If Employee shall die prior
to retirement, Zenith shall pay to the beneficiary designated in accordance
with Section 2 of Article V hereof, (or, in default of such designation,
to Employee's estate) a lump sum equal to one and one-half (1-1/2) times
Employee's base salary at date of death.
SECTION 3: BENEFIT AMOUNT - POSTRETIREMENT. The life insurance benefits
provided under this Article IV shall continue for a period of ten (10) years
from date of retirement.
(a) If Employee shall die within one year after date of retirement,
Zenith shall pay to the beneficiary designated in accordance with
Section 2 of Article V hereof (or, in default of such designation, to
Employee's estate) a lump sum equal to one and one-half (1-1/2) times
Employee's base salary in effect on the date of Employee's retirement.
(b) Thereafter, on each yearly anniversary after commencement of said
ten (10) year period, the amount of such life insurance benefits shall be
decreased by ten percent (10%) of the amount of such benefit in effect at
the commencement of such ten (10) year period. If Employee is alive on the
tenth (10th) anniversary of the commencement of such ten (10) year period,
the life insurance benefits provided under this Article IV shall cease
and expire and be of no further force and effect and Zenith shall have no
further obligation under this Article IV.
SECTION 4: PURCHASE OF LIFE INSURANCE POLICY.
(a) Zenith may, but is not required to purchase a life insurance policy,
to fund the life insurance benefits payable to Employee under this Article
IV. If such an insurance policy is purchased by Zenith, said policy
shall name Zenith as owner and beneficiary and, when purchased, shall remain
a general unsecured, unrestricted asset of Zenith, and neither Employee nor
any beneficiary of Employee shall have any rights with respect to, or claim
against, such policy. Such policy, if and when purchased by Zenith shall not
be deemed to be held under any trust for the benefit of Employee or any
beneficiary of Employee, nor shall such policy be deemed to be held in
trust as collateral security for fulfilling the obligations of Zenith
under this Article IV. The benefits provided to Employee and any beneficiary
of Employee under this Article IV are based upon the general credit of Zenith
and are otherwise unsecured.
(b) In the event Zenith shall purchase a life insurance policy as set
forth in paragraph (a) of this Section 5 of Article IV, and if a medical
examination or examinations of Employee and/or the furnishing of a health
statement signed by Employee (which statement may include an authorization
by Employee to any licensed physician or any organization, institution, or
person that has knowledge of Employee or his dependents to give such
information to the insurer), is requested by the insurer, then Employee
agrees to submit to such examination or examinations or to provide such
health statement in whatever form required by the insurer. If Employee
refuses to submit to such examination or examinations or to provide such
health statement, then neither Employee nor any beneficiary of Employee shall
have any right to the life insurance benefits provided under this Article IV
and Zenith shall have no further obligation under this Article IV.
SECTION 5: DISCHARGE FOR CAUSE. If Employee is discharged for cause,
neither Employee nor any beneficiary of Employee shall have any right to
the life insurance benefits provided under this Article IV and Zenith
shall have no further obligation under this Article IV.
ARTICLE V
SECTION 1: NOTICES. Any notice or designation given by one Party under
this Agreement shall be in writing and shall be deemed given when mailed
to or personally served upon the other party.
SECTION 2: DESIGNATION OF BENEFICIARY. In the event of the death of
Employee, any installment payments of separation payments if termination
of employment occurs pursuant to Section 3 of Article II, and any
incentive award awarded before or after the death of Employee but unpaid
at his death, or such special life insurance benefit as may be due in
accordance with Article IV shall be made when they fall due to the
beneficiary or beneficiaries in accordance with the most recent written
designation by Employee on file with Zenith and in default of such
designation to his estate.
SECTION 3: MERGER OR CONSOLIDATION. In the event that Zenith, or
any corporation resulting from any merger or consolidation referred
to in this Section, shall at any time be merged or consolidated
into or with any other corporation or corporations or in the event
that substantially all of the assets of Zenith or such resulting corporation
shall be sold or otherwise transferred to another corporation,the provisions
of this Agreement shall be binding upon and inure to the benefit of the
corporation resulting from such merger or consolidation or to which such
assets shall be sold or transferred. Neither this Agreement nor any
rights or duties arising thereunder shall be assignable by Employee,
by Zenith, or by any corporation resulting from any such merger or
consolidation or to which such assets shall be sold or transferred, except
to the continuing or the resulting corporation. Likewise, this Agreement
is an incident of any such merger or consolidation or such sale or transfer.
SECTION 4: LAW GOVERNING. The construction, interpretation and remedies
for enforcement of this Agreement shall be governed by the laws of the State
of Delaware.
IN WITNESS WHEREOF, Zenith has caused this Agreement to be executed by its
Vice President-Human Resources and _________________________ has hereunto
subscribed his name this ____ day of ____________________, 19____.
ZENITH ELECTRONICS CORPORATION
By____________________________
_____________________________
EXHIBIT 10 (b)
August 29, 1994
Mr. _____________________
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Dear Mr. _______________:
Supplemental Letter Agreement
The Company has recognized that corporate takeovers have a widespread
distracting effect on the management personnel of a corporation. To
counter this effect, many companies have taken steps to protect their
corporate interests and those of their stockholders by reassuring and
encouraging dedicated and competent members of management to remain in
their employment and to continue their high performance without fear of
possible financial hardship resulting from a sudden loss of their
positions upon change of corporate control.
In recognition of these concerns, the Board of Directors has determined
that it would be in the best interests of the Company to encourage the
continued employment and dedication of members of management, including
yourself, to their assigned duties by providing an equitable severance
payment in the event of a change of control resulting in a need or decision
to seek other employment and accordingly, this Supplemental Letter Agreement
and the attached Addendum (collectively the "Agreement") will, upon your
acceptance and signature hereto, set forth the severance benefits which the
Company agrees will be provided to you in the unlikely event your employment
is terminated under the circumstances described in the Agreement following
a change in control of the Company.
The Company expressly reserves the right to terminate your employment
or the benefits provided herein at any time subject to the terms and
conditions of the Agreement. Nor are you obligated to remain in the employ
of the Company except that if you are employed by the Company at the time
that a third party, in order to effect a change in control, begins a
tender or exchange offer, circulates a proxy to stockholders, or takes
other publicly announced steps to effect a change in control, you agree
to remain in the employ of the Company until ninety (90) days after
the change in control has occurred or the earlier abandonment by the third
party of efforts to effect a change in control.
The Agreement does not entitle you to any payments or other benefits
unless a change in the control of the Company occurs during the term of
the Agreement and your employment is terminated within twenty-four
(24) months after such change in control by the Company other than
for Cause or by reason of your death, Retirement or Disability or by
you other than for Good Reason.
August 29, 1994
Page Two
The Severance Pay will be calculated in accordance with the formula set
forth in paragraphs 2 and 6 of the attached Addendum to Supplemental
Letter Agreement.
In addition to the Severance Pay, the Company has also provided for
amounts to redress damages you may sustain to the value of your Zenith
stock holdings resulting from a tender offer and change in control. As
an officer of the Company, you may not be in a position to tender your
stock or exercise your options and tender the stock because of the
provisions of Section l6(b) of the Securities Exchange Act of 1934
and relevant regulations or because in your independent judgment you may
believe that the tender is not in the best interest of the Corporation
and its shareholders. In such event you may be deprived of the full value
of your stock. In addition, if the tender offer provides for a higher
price for a percentage of shares first tendered and a lower price for
subsequent purchases, you will sustain an immediate commensurate loss
in the value of your shares as a result of the tender offer and change in
control. The Company also recognizes that, because of your status as
an officer, you may sustain other damages to the value of your stock
options and other related contractual rights as a result of a tender
offer and change in control of the Company. The Company has provided
reasonable redress for all of these damages in paragraph 6 of the attached
Addendum to Supplemental Letter Agreement.
The Severance Pay and additional amounts payable to you under the Agreement
will be paid in a single lump sum following your termination except as
otherwise provided in the Agreement.
The Company shall also maintain, at its expense for your benefit for two
years after the Date of Termination of your employment, benefit plans and
programs in which you had participated on that date. The Company will
pay on your behalf any premiums payable by it or by you to the insurance
company(ies) during such two-year period. Exceptions as to the Company's
Profit Sharing and Stock Incentive Plans are set forth in the attached
Addendum.
This Agreement is in addition to your present employment agreement and
does not in any way affect or alter your rights under said employment
agreement.
If the terms of this Agreement are acceptable to you, please sign two (2)
copies of this Agreement and the Addendum and return one (1) copy of each
to the Secretary of the Company.
Very truly yours,
ZENITH ELECTRONICS CORPORATION
By: __________________________
AGREED:
____________________________
Date: _______________________
ADDENDUM TO
SUPPLEMENTAL LETTER AGREEMENT
This document is an Addendum to the Supplemental Letter Agreement
dated______________________, 1994, between Zenith Electronics Corporation
(the "Company"), Glenview, Illinois, and _____________________ (the
"Employee").
1. Definitions.
A. "Company" shall mean Zenith Electronics Corporation, a Delaware
corporation, and its successors by merger, consolidation or other
reorganization including (unless the context otherwise requires) its
subsidiaries and operating divisions.
B. "Employee" shall mean the employee named in the Agreement and
whose signature is affixed hereto.
C. "Monthly Compensation" shall mean the highest aggregate amount
of compensation paid as regular salary (excluding bonuses or incentive
pay) to the Employee by the Company with respect to any calendar month
during the three (3) year period immediately preceding such Employee's
termination of employment, plus one-twelfth (l/l2) of the annual
incentive payment to which Employee would have been or was entitled for
the full year in which the change in control occurred (it being understood
that the amount of such annual incentive payment shall be based upon
the incentive compensation target award level in effect for that year).
D. "Severance Pay" shall mean the amount payable to the Employee
pursuant to and as calculated in accordance with Section 2 hereof.
E. "Severance Benefits" shall mean the benefits to which the
Employee is entitled pursuant to Section 6 hereof.
F. "Years" shall mean the total period of the Employee's active
employment by the Company at the date of the most recent termination thereof.
2. Severance Pay Formula.
Severance Pay payable to you under the Agreement shall be an amount equal
to your Monthly Compensation multiplied by thirty-six (36).
3. Term.
The Agreement shall commence on the date hereof and shall continue until
the first to occur of (i) termination of your employment prior to a change
in control of the Company as defined in Section 4 hereof, or (ii) the date
of receipt by you of written notice from the Company that the Board of
Directors has determined that you are no longer a key executive of the
Company entitled to the benefits of this Agreement, provided that no such
determination shall be made by the Board of Directors, and if made, shall
have no effect (i) during any period of time when the Company has knowledge
that any third person has taken steps reasonably calculated to effect a
change in control until, in the opinion of the Board of Directors, the
third person has abandoned or terminated its efforts to effect a change
in control, or (ii) after a change in control has occurred.
4. Change in Control.
No Severance Pay and Severance Benefits shall be payable hereunder
unless there shall have been a change in control of the Company and
the Employee's employment by the Company shall thereafter have been
terminated in a manner entitling the Employee to Severance Pay and
Severance Benefits in accordance with Section 5. For purposes of this
Agreement, "changes in control of the Company" shall take place when
either of the following events will have occurred:
(a) A third person, including a "group" as defined in Section l3(d)(3)
of the Securities Exchange Act of l934, acquires shares of capital stock
of the Company having twenty-five percent (25%) or more of the total
number of votes that may be cast for the election of directors of the
Company; or
(b) As a result of any tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of
the foregoing transactions (a "transaction") the persons who were directors
of the Company before the transaction shall during any two consecutive years
thereafter cease to constitute a majority of the Board of Directors of the
Company.
5. Termination Following Change in Control.
If a change or changes in control of the Company occurs, and within
twenty-four (24) months from the date of any such change in control
the Employee's employment is terminated, the Employee shall be entitled
to the Severance Pay and Severance Benefits provided in Section 6 hereof
unless such termination is:
A. Because of the Employee's death, Retirement or Disability;
B. By the Company for Cause; or
C. By the Employee other than for Good Reason.
(1) Disability; Retirement.
(a) Termination by the Company of employment based on "Disability"
shall mean termination because of the Employee's absence from his duties
with the Company on a full-time basis for one hundred eighty (l80) consecutive
business days, as a result of incapacity due to injury or physical
or mental illness.
(b) Termination by the Company or the Employee of employment based
on "Retirement" shall, for the purposes of this Agreement, mean retirement
at age seventy (70) or voluntary earlier retirement with the written
consent of the Employee.
(2) Cause.
Termination by the Company of employment for "Cause" shall mean
termination upon:
(a) The willful and continued failure by the Employee to substantially
perform his duties with the Company (other than any such failure resulting
from his incapacity due to injury or physical or mental illness) after a
demand for substantial performance is delivered to the Employee by the
Company which specifically identifies the manner in which the Company
believes that the Employee has not substantially performed his duties; or
(b) The willful engaging by the Employee in misconduct demonstrably
injurious to the Company monetarily or otherwise.
For purposes of this subparagraph (2), no act, or failure to act on the
Employee's part, shall be considered "willful" unless done, or omitted to be
done, by the Employee not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to the Employee a copy of a written Notice of Termination
from the Company, after reasonable notice to the Employee and an
opportunity for the Employee, together with his counsel, to be heard
before the Board of Directors, finding that in the good faith opinion
of the Board of Directors Cause existed and specifying the particulars
thereof in detail.
(3) Good Reason.
Termination by the Employee of employment for "Good Reason"
shall mean termination based on any of the following which occurs
within twenty-four (24) months from the date of a change in control:
(a) Without the Employee's express written consent, the assignment
to the Employee of any duties materially inconsistent with the Employee's
positions, duties, responsibilities and status with the Company immediately
prior to a change in control, or a change (other than a bona fide promotion)
in the Employee's title or office from that in effect immediately prior to
a change in control, or any removal of the Employee from or any failure to
re-elect the Employee to any of such positions, except in connection with
the termination of his employment for Cause, Disability or Retirement or
by death or by the Employee other than for Good Reason;
(b) A reduction by the Company in the Employee's salary as in effect
on the date hereof or as the same may be increased from time to time,
unless such reduction results from a blanket reduction of general
applicability to exempt salaried personnel; or the failure by the Company
to increase such base salary for the year in which a change of control
occurs and each year thereafter by an amount which at least equals, on a
percentage basis, the mean average percentage increase in base salary for
all officers of the Company during the two full calendar years immediately
preceding a change in control of the Company unless such failure is of
general applicability to exempt salaried personnel;
(c) A failure by the Company to continue the Company's bonus
incentive plans (the "Incentive Plans") as the same may be modified from
time to time but substantially in the form in effect immediately prior to
the change in control or a failure by the Company to continue the Employee
as a participant in the Incentive Plans on at least the basis of his
participation immediately prior to the change in control or to pay the
Employee any installment of a previous award under the Incentive Plans;
(d) Without the Employee's express written consent, the Company
requiring the Employee to be based anywhere other than within fifty (50)
miles of his present office location, except for required travel on Company
business to an extent substantially consistent with the Employee's business
travel obligations immediately prior to such change in control;
(e) The failure by the Company to continue in effect any benefit
or compensation plan, stock ownership, stock purchase or stock option
plan, pension plan, life insurance plan, health and accident plan or
long-term disability plan in which the Employee is participating at the
time of a change in control of the Company (or plans providing the
Employee with substantially similar benefits) or the taking of any action by
the Company which would materially adversely affect participation by the
Employee in or materially reduce the Employee's benefits under any of
such plans or deprive the Employee of any material fringe benefit enjoyed
by the Employee at the time of the change in control;
(f) Any purported termination of the Employee's employment which is not
effective pursuant to a Notice of Termination satisfying the requirements
of subparagraph (4) below (and, if applicable, subparagraph (2) above).
Notwithstanding the foregoing, the Employee agrees that in the event
a third person begins a tender or exchange offer, circulates a proxy
statement to shareholders or takes steps to effect a change in control
of the Company, as defined in Section 4 hereof, the Employee will not
thereafter voluntarily leave the employ of the Company until the third
person has abandoned or terminated such efforts to effect a change in
control; or if such efforts are successful, for ninety (90) days after
a change in control of the Company shall have occurred.
(4) Notice of Termination.
Any termination by the Company pursuant to subparagraphs (l) or (2)
above or by the Employee pursuant to subparagraph (3) above shall be
communicated by written "Notice of Termination" to the other party hereto.
For purposes of the Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in the Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
(5) Date of Termination.
"Date of Termination" shall mean:
(a) If the Employee's employment is terminated by reason of his death
or Retirement, the date of death or retirement;
(b) If the Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that the Employee
shall not have returned to the performance of his duties on a full-time basis
during such thirty (30) day period);
(c) If the Employee's employment is terminated by the Company for Cause
pursuant to subparagraph (2) above, the date specified in the Notice of
Termination;
(d) If the Employee's employment is terminated by the Employee for Good
Reason, the date specified in the Notice of Termination; and
(e) If the Employee's employment is terminated for any other reason, the
date on which a Notice of Termination is given.
Notwithstanding the foregoing, if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or by a binding
and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction entered upon such arbitration award (the
time for appeal from such judgment, order or decree having expired and no
appeal having been perfected).
6. Severance Payments and Benefits.
If within twenty-four (24) months after a change in control of the Company
shall have occurred, Notice of Termination is given either:
A. by the Company other than for Cause or by reason of the Employee's death,
Retirement or Disability, or
B. by the Employee for Good Reason;
then the Employee shall be entitled to the benefits provided below:
(1) The Company shall pay to the Employee in a lump sum Severance Pay
calculated in accordance with Section 2 hereof not later than the tenth
(l0th) day following the Date of Termination, except as otherwise provided
below, and the following other amounts:
(a) An amount equal to the excess, if any of:
(i) the highest price per Common share actually paid pursuant to the
tender or exchange offer or other change in control of the Company over
(ii) the attainable sales price per common share, determined by
reference to the established market if the shares are then traded on an
established market or, if not, by the sales price per share attainable by
Employee in a private transaction as determined in good faith by the Employee,
in either case determined as of the date of delivery of the Notice of
Termination, multiplied by
(iii) the number of Zenith shares you own on the date referred to in
(i) above. In making this calculation there shall be excluded any shares
sold pursuant to the tender or exchange offer or other change in control of
the Company.
(b) After termination, as defined in paragraphs 6A and 6B above, the
consequent expiration of your stock option rights under Employee Stock
Purchase Plans IV and V or any successor employee stock option or stock
purchase plans or other extinguishment of such rights resulting from a
change in control, an amount equal to the damages you will thereby sustain.
This amount shall be calculated in the following manner:
(i) an amount equal to the aggregate spread between the exercise prices
of all options held by you immediately prior to your termination whether or
not then fully exercisable and the higher of:
(1) the closing price on the New York Stock Exchange on the date of such
termination; or
(2) the highest price per Company share actually paid pursuant to the
tender or exchange offer or other change in control of the Company.
In making this calculation, there shall be excluded any options as to
which the exercise price per share is higher than the price per share of
Company shares referred to in (1) and (2). This amount is payable only with
respect to option rights not exercised by you prior to their expiration or
extinguishment referred to in (b) above.
(ii) the above amount, if any, will become payable on the first business
day following the said expiration or extinguishment of your option rights.
(c) The Employee's full base salary and vacation pay earned or accrued
but unutilized through the Date of Termination at the salary rate in effect
at the time Notice of Termination is given, plus the amount of any incentive
compensation for a past fiscal year which has not yet been awarded or paid
to the Employee under the Incentive Plan, including any deferred awards
(it being understood that with respect to any incentive compensation
which has not yet been awarded the individual performance component of the
award shall be determined on the basis of target award levels).
(d) In lieu of any award under the Incentive Plan or similar or
successor plans, if any, then in effect, for the year in which the
Date of Termination occurs (if awards are granted under said Plan for
said year), an award determined on a pro rata basis based on the length
of the Employee's service during the year during which Date of Termination
occurs (it being understood that the amount of such annual incentive
payment shall be based on the incentive compensation target award level
in effect for that year.)
(e) In the event Employee is a participant in any long-term incentive
program maintained by the Company at the date on which a Notice of
Termination is given, a lump sum cash payment shall be made to Employee
equal to (i) the value of any Zenith shares (exclusive of any Zenith shares
theretofore distributed to Employee pursuant to the award) and (ii) any cash
(exclusive of any cash theretofore distributed to Employee pursuant to the
award) to which Employee would have been entitled for the full measuring
period specified in the long-term incentive award had the Employee
continued in the employ of the Company for such full measuring period and
all target levels specified in the award been achieved. For purposes of this
paragraph, the value of any Zenith shares shall mean the higher of (x) the
closing price on the New York Stock Exchange on the Date of Termination of
employment, or (y) the highest price per Zenith share actually paid pursuant
to the tender or exchange offer or other change in control of the Company.
Any Zenith shares theretofore distributed to Employee pursuant to such award
shall be deemed owned by Employee for purposes of Section 6(B)(1)(a)(iii)
hereof.
(2) (a) The Company shall maintain at its expense in full force and effect,
for the continued benefit of the Employee for two (2) years after the Date of
Termination, all employee benefits plans and programs including, without
limitation, group medical and dental, health and accident, long-term
disability and group life insurance, and the executive insurance program
in which the Employee was entitled to or did participate immediately prior
to the Notice of Termination; provided that in the event the Employee's
continued participation in any such plan or program is barred under the terms
of any such plan or program by reason of the Employee not continuing as an
active Employee of the Company, the Company shall arrange to provide the
Employee with benefits substantially similar to those which the Employee
was entitled to receive under such plans and programs.
(b) During the two year period referred to above, the Company shall
pay on behalf of the Employee without any cost to the Employee any premiums
to be paid by the Employee to the insurance company on the insurance policy
issued under the executive insurance program relating specifically to the
Employee ("the Insurance Policy"). The Employee shall be responsible for any
personal income taxes incurred by the Employee as a result of the Company
paying such premiums. Nothing in this Agreement shall be construed as
granting to Employee any new rights or benefits under the Company's Profit
Sharing Plan or Stock Option and Stock Appreciation Plans.
(3) The Employee shall not be required to mitigate the amount of any
payment or benefit provided for in this Section 6 by seeking other employment
or otherwise. The amount of any such payment or benefit shall not be reduced
by any compensation earned or benefit received by the Employee as the result of
either other employment after the Date of Termination or otherwise; provided,
however, that if the Employee commences other employment after the Date of
Termination which provides the Employee with comparable group medicalor dental,
health and accident, long-term disability or group life insurance,the Company
shall cease to provide any one of such benefits at such time as the Employee
becomes eligible to receive a corresponding benefit from the new employer.
7. Provisional Reduction in Severance Pay and Severance Pay Benefits.
In the event that the aggregate value (determined in accordance with
applicable federal income tax law, rules and regulations) of all payments
to be made and benefits to be provided to Employee under this Agreement
shall result in "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended, (or corresponding
provisions of future law), (the "Code"), then and in that event if (i) such
aggregate value as reduced by any excise tax payable by Employee by reason
of the receipt thereof and by any federal income tax (computed at the top
marginal rate) payable by the employee by reason of the receipt thereof,
shall be less than (ii) the maximum aggregate value of all payments which
could have been paid to the Employee without his incurring any excise tax
liability under the Code by reason of the receipt thereof, reduced by any
federal income tax (computed at the top marginal rate) payable by the employee
by reason of the receipt thereof, then and in that event the aggregate payments
and benefits under this Agreement shall be limited to the maximum aggregate
value of all payments and benefits which can be made to the Employee under this
Agreement without his incurring an excise tax liability under the Code. In
the event a reduction in the aggregate value of all payments to be made under
this Agreement is required, the Company shall determine which of the payments
will be so reduced. The determinations required by this Section 7 shall be
made by the Company based upon consultation with the independent public
accountants then regularly retained by the Company. The Company's
determination shall be final and binding on all parties.
8. No Guaranty by Company of Employment.
The Employee expressly acknowledges that the Agreement does not constitute
a guarantee of employment by the Company or an agreement by the Company to
employ the Employee.
9. Beneficiaries and Successors.
The provisions of Article V, Section 2 and 3 of the employment contract
between Employee and the Company are incorporated herein by reference
and made a part hereof.
l0. Notices.
Notices and all other communications provided for herein shall be
in writing and deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addressees.
All notices to the Company shall be directed to the attention of the
Secretary of the Company.
ll. Miscellaneous.
No provisions of the Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing, signed by
the Employee and such officer of the Company as may be designated by the
Board of Directors. No waiver by either party at any time of any breach by
the other party of, or compliance with, any provision of this Agreement
shall be deemed a waiver of similar or dissimilar provisions at the same or
at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in
this Agreement.
l2. Separability.
The invalidity or unenforceability of any provision of the Agreement
shall not affect the validity or enforceability of any other provision
of the Agreement, which shall remain in full force and effect.
l3. Arbitration.
Any dispute or controversy arising under or in connection with this
Agreement shall be resolved exclusively by binding non-appealable
arbitration in Chicago, Illinois, in accordance with the rules of the
American Arbitration Association then in effect.
The Company shall reimburse the Employee for all legal fees and expenses
incurred by the Employee in successfully seeking to obtain or enforce any
right or benefit provided by the Agreement and in the event it shall be
determined that the Employee is entitled to Severance Pay and Severance
Benefits hereunder, the Employee shall also be entitled to interest on the
Severance Pay and other amounts payable to the Employee at the prime rate
of interest of the First National Bank of Chicago during the period from the
date such amounts should have been paid to the date of payment.
l4. Nonassignability.
The right of the Employee to Severance Pay and Severance Benefits under
the Agreement shall not be assigned, transferred, pledged, hypothecated
or encumbered.
l5. Validity and Construction.
The validity, interpretation and performance of the Agreement shall be
governed by the laws of the State of Delaware.
ZENITH ELECTRONICS CORPORATION
By
______________________________
By
______________________________
Employee
EXHIBIT (10c)
INDEMNIFICATION AGREEMENT
AGREEMENT, made and entered into this ______ day of ______________, 1994
between ZENITH ELECTRONICS CORPORATION, a Delaware corporation (the
"Corporation") and _________________________ ("Indemnitee").
WHEREAS, the Corporation is a Delaware corporation engaged in the business
of manufacturing and selling consumer electronics products and other
electronic equipment;
and
WHEREAS, at the request of the Corporation, Indemnitee currently serves
as an officer of Zenith Electronics Corporation, and as such, may be
subjected to claims, suits or proceedings arising as a result of such
service; and
WHEREAS, as an inducement to Indemnitee to continue to serve as such
officer the Corporation has agreed to indemnify Indemnitee against
expenses and costs incurred by Indemnitee in connection with any such
claims, suits or proceedings, in accordance with, and to the fullest extent
authorized by the General Corporation Law of the State of Delaware as it
may be in effect from time to time; and
WHEREAS, the parties by this Agreement desire to set forth their agreement
as to such indemnification;
NOW, THEREFORE, the parties agree as follows:
1. The Corporation hereby agrees to indemnify and keep indemnified in
accordance with, and to the fullest extent authorized by, the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended (but in the case of any such amendment, only to the extent such
amendment permits broader indemnification rights than said law permitted
prior to such amendment), Indemnitee, from and against any expenses,
liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties, and amounts paid in settlement) actually and
reasonably incurred or suffered by Indemnitee in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not such action
is by or in the right of the Corporation or such other enterprise with
respect to which Indemnitee serves or has served as a director or officer,
by reason of the fact that Indemnitee is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans. For purposes of this Agreement, the terms "corporation", "other
enterprise," "fines," and "serving at the request of the Corporation" shall
have the meanings provided in Section 145 of the General Corporation Law of
the State of Delaware.
2. In the event that, under applicable law, the entitlement of Indemnitee
to be indemnified hereunder shall depend upon whether Indemnitee shall
have acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and with respect to
criminal actions or proceedings, had no reasonable cause to believe his
conduct was illegal, or shall have acted in accordance with some other defined
standard of conduct, the burden of proof of establishing that Indemnitee has
not acted in accordance with such standard shall rest with the Corporation
and Indemnitee shall be presumed to have acted in accordance with such
standard and entitled to indemnification unless, based upon a preponderance
of the evidence, it shall be determined by a court of competent jurisdiction
that Indemnitee has not met such standard. Indemnification to which Indemnitee
is entitled hereunder shall be made promptly upon the determination that
Indemnitee has met such standard by either (i) the Board of Directors of
the Corporation, (ii) independent legal counsel in a written opinion, which
counsel shall be acceptable to the Indemnitee and the Board of Directors,
or at the option of Indemnitee shall be selected by the Chief Judge of
the U.S. District Court for the Northern District of Illinois, (iii) the
stockholders of the Corporation, or (iv) a court of competent jurisdiction.
If a claim for indemnification under Section 1 hereof or for advancement
of expenses under Section 4 hereof shall not be paid in full within
thirty days after a written claim therefor has been delivered to the
Corporation, Indemnitee may at any time thereafter bring suit for the
recovery thereof and, if successful in whole or in part, Indemnitee shall
also be entitled to be paid the expense of prosecuting such suit.
3. Indemnitee shall notify the Corporation in writing of any matter with
respect to which Indemnitee intends to seek indemnification hereunder as
soon as reasonably practicable following the receipt by Indemnitee of
written threat thereof, provided that failure to so notify the Corporation
shall not constitute a waiver by Indemnitee of his rights hereunder.
4. In the event of any action, suit or proceeding against Indemnitee which
may give rise to a right of indemnification from the Corporation pursuant to
this Agreement, following written request to the Corporation by Indemnitee,
the Corporation shall advance to Indemnitee amounts to cover expenses
incurred by Indemnitee in defending such action, suit or proceeding in
advance of the final disposition thereof upon receipt of (i) satisfactory
evidence as to the amount of such expenses, and (ii) if, in the opinion of
counsel the Corporation, the General Corporation Law of Delaware so requires
that with respect to payment of expenses incurred in Indemnitee's capacity as
a director or officer (and not in any other capacity in which service was
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan), an undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
by final judgment of a court of competent jurisdiction that he is not entitled
to be indemnified by the Corporation hereunder. Indemnitee's written
certification together with a copy of the statement paid or to be paid by
Indemnitee shall constitute satisfactory evidence absent manifest error.
5. The indemnification rights granted to Indemnitee under this Agreement
shall not be deemed exclusive of, or in limitation of, any rights to which
Indemnitee may be entitled under Delaware law, the Corporation's Restated
Certificate of Incorporation or by-laws, by other agreement, vote of
stockholders or directors or otherwise.
6. The rights granted to Indemnitee hereunder shall inure to the benefit of
Indemnitee, his personal representative, heirs, executors, administrators and
beneficiaries, and this Agreement shall be binding upon the Corporation, its
successors and assigns.
7. This Agreement shall be governed by the laws of the State of Delaware.
In the event any provision of this Agreement shall be determined to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision of this
Agreement, and this Agreement shall be interpreted as though such invalid
or unenforceable provision was not a part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement the day and year first above stated.
ZENITH ELECTRONICS CORPORATION
By_____________________________
ATTEST:
_____________________________
INDEMNITEE
________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 230
<ALLOWANCES> 3
<INVENTORY> 290
<CURRENT-ASSETS> 526
<PP&E> 701
<DEPRECIATION> 542
<TOTAL-ASSETS> 699
<CURRENT-LIABILITIES> 292
<BONDS> 0
<COMMON> 45
0
0
<OTHER-SE> 180
<TOTAL-LIABILITY-AND-EQUITY> 699
<SALES> 1,016
<TOTAL-REVENUES> 1,016
<CGS> 929
<TOTAL-COSTS> 929
<OTHER-EXPENSES> 94
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (11)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
