<PAGE>
PROSPECTUS [LOGO]
6,500,000 SHARES
ZENITH ELECTRONICS CORPORATION
COMMON STOCK
($1.00 PAR VALUE)
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Zenith Electronics Corporation ("Zenith" or the "Company") has registered
6,500,000 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, dealers or
agents designated from time to time. In addition, the Common Stock may be sold
by the Company to other purchasers directly or through agents. 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 28, 1995 the last reported sale price of the Common
Stock on the New York Stock Exchange was $8.125 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 March 1, 1995.
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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(S) IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT(S) 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: Citicorp
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, 1994; and
(b) the Company's Current Reports on Form 8-K dated February 9, 1995,
February 15, 1995 and February 23, 1995.
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 major retail dealers and independent and wholly-owned regional
wholesale distributors in the United States, Canada and other foreign countries.
The Company intends to changeover to an entirely direct-to-retail distribution
organization during 1995. The Company also sells directly to buying groups and
private label customers in 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 and Network Systems products such as cable
and telecommunication set-top devices, interactive television and data
communication products which are sold primarily to cable television operators
and other commercial users of these products.
The Company has sold or downsized its non-core business activities. The
Company sold its monochrome video monitor business in 1993 and its power supply
business in April 1994. Its activities in color video monitors sold to computer
manufacturers were scaled back in 1994 and will cease in the near future; its
activities in high-security electronic equipment have been discontinued.
The Company has reported substantial losses from its continuing operations
for each of the last ten years. These results reflect the cumulative effect of
frequent and significant color TV price reductions during the 1980s and, in the
early 1990s, also reflected 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.
On February 23, 1995, it was announced that Jerry K. Pearlman, Chairman and
Chief Executive Officer, plans to retire at the end of 1995 and that the
Company's Board of Directors plans to elect Albin F. Moschner, current President
and Chief Operating Officer, as Chief Executive Officer immediately after the
Company's April 25, 1995 annual meeting.
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.
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 each of the last ten 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 in the past
several years. Price competition continued in 1994 and early 1995, and the
Company selectively reduced color television prices to maintain its historical
competitive price position. This, along with other factors, has resulted in
substantially reduced profit margins for the Company. In recent years the
Company has benefitted from major cost-reduction programs, but lower prices and
inflationary cost increases have more than offset such cost reduction benefits.
In 1994 the benefits of increased sales volume, cost reductions, reduced duty
costs related to the North American Free Trade Agreement ("NAFTA") and reduced
activities in non-core businesses have not exceeded the effect of lower prices
and inflationary cost increases. A net loss of $14.2 million was incurred in
1994 and a net loss of $97 million was incurred in 1993 despite record industry
unit volume in each period. There can be no assurance that the Company's net
operating losses will not continue for the foreseeable future.
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The Company expects that a number of unusual factors will have an adverse
effect on first-quarter 1995 results:
- Start-up problems in January and early February at the Company's new
finished-goods warehouse in Ft. Worth, Texas, caused shipments to be
missed. These problems have now been resolved.
- TV shipments by the industry and the Company to the Mexican market were
almost completely curtailed after the peso devaluation. The Company
believes that Mexican dealers are selling off their pre-devaluation
inventory. With dealer costs up by forty to fifty percent in pesos, the
Company expects the Mexican market to recover slowly.
- The Company anticipates significant cost reduction benefits in 1995 as a
result of the peso devaluation. However, the devaluation impact will be
limited in the first quarter as manufacturing costs flow through inventory
before being reflected in operating results.
- The Company's year-end finished goods inventory was higher than target.
This, coupled with reduced shipments from the first two factors above,
caused the Company to cut first-quarter television set production by about
seventeen percent to bring inventories into line. This will result in a
first-quarter production rate lower than that expected for the rest of the
year, with attendant higher per-unit overhead costs.
- The first-quarter also will include severance costs related to significant
headcount reductions in Mexico planned for the first half of the year, as
well as start-up costs and duplicate overheads to support the changeover
to an entirely direct-to-retail distribution organization.
These unusual factors, along with an $11 million effect from price
reductions implemented in 1994 and in early 1995, are expected to result in
first-quarter 1995 operating results that will be significantly below the 1994
first-quarter results.
LIQUIDITY. Cash decreased from $36 million at December 31, 1991, to $9
million at December 31, 1994. (Due to the seasonal nature of the Company's
business, cash available peaks after year ends). The decrease over the three
years consisted of $86 million of cash used by operating activities and $83
million used to purchase fixed assets, net of proceeds from asset sales. These
uses of cash were offset by $142 million of cash provided from financing
activities which included sales of the Company's Common Stock 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, in early 1994. Cash decreased $12 million during
the twelve months ended December 31, 1994. The decrease consisted of $42 million
of cash used by operating activities and $31 million used to purchase fixed
assets, net of $28 million of proceeds from asset sales. These uses of cash were
offset by $61 million (net) of cash provided from financing activities which
included sales of the Company's Common Stock in the amount of $84 million and
the issuance of long-term debt in the amount of $12 million offset by cash used
for the redemption of the Company's 12 1/8% Notes due January 1995 in the amount
of $35 million. The Company's borrowings since 1991 have increased, and in 1993
the Company entered into its current 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 maximum commitment of funds
available for borrowing under the Credit Agreement is $90 million, but is
limited by a defined borrowing base formula related to eligible accounts and
eligible inventory (each as defined in the Credit Agreement). As of February 28,
1995, the Company had outstanding borrowings under the Credit Agreement of
approximately $46.7 million. The Credit Agreement terminates on June 30, 1996
(unless extended by agreement of the lenders), at which time all outstanding
indebtedness thereunder would have to be refinanced. There can be no assurance
that the Credit Agreement will be extended or refinanced. See "Credit
Agreement." Although the Company believes that its Credit Agreement, together
with extended-term payables expected to be available from a foreign supplier and
its continuing efforts to obtain other financing sources, including sales of
Common Stock pursuant to this Prospectus, will be adequate to meet its seasonal
working capital, capital
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expenditure and other requirements in 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 such event, the Company would
be required to seek other sources of liquidity, if available. In addition, the
Company is reviewing possible capital investment projects over the next three
years (which may require an amendment to the Credit Agreement) and options for
additional financing that would be required to support these projects. If
undertaken, the projects are expected to reduce the costs and increase
production capacity primarily in the Company's picture tube operations. There
can be no assurance that these projects will be undertaken (or that such Credit
Agreement amendment will be obtained, if requested).
BUSINESS STRATEGY. The goals of the Company's business strategy are to
improve profitability, to introduce new products, to develop new products (such
as digital cable products incorporating the Company-developed transmission
technology selected in February 1994 by the HDTV Grand Alliance and the FCC
Advisory Committee review panel), and to re-engineer operations, including the
changeover to an entirely direct-to-retail distribution organization. This
strategy is expected to continue to involve significant expenditures by the
Company in 1995 and beyond. There can be no assurance that the Company will
achieve the goals of its business strategy, including efforts to improve
financial results later in 1995.
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 worldwide television volume
and overall resources. In efforts to increase market share or achieve higher
production volumes, the Company's competitors have aggressively lowered their
selling prices in the past several years. 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. Price competition continued in 1994 and early 1995, and the Company
selectively reduced color television prices to maintain its historical
competitive price position.
DILUTION: CONVERSION OF CONVERTIBLE SECURITIES. The Company's $55 million
aggregate principal amount of 8.5% Senior Subordinated Convertible Debentures
due 2000 (the "Debentures due 2000") and $12 million aggregate principal amount
of 8.5% Senior Subordinated Convertible Debentures due 2001 (the "Debentures due
2001" and, collectively with the Debentures due 2000, the "8.5% Debentures") are
convertible into Common Stock at an initial conversion price of $9.76 and $10.00
per share, respectively, subject in each case to adjustment in certain events.
If all of the 8.5% Debentures were converted into Common Stock at the initial
conversion prices, 6,835,246 shares of Common Stock would be issued. No
prediction can be made as to the effect, if any, that the conversion of the 8.5%
Debentures into Common Stock or the fact that the 8.5% Debentures are
outstanding and unconverted will have on the market price of Common Stock
prevailing from time to time. The conversion of 8.5% Debentures into Common
Stock could adversely affect prevailing market prices of the Common Stock. The
Company's 6 1/4% Convertible Subordinated Debentures due 2011 are convertible at
$31.25 per share, subject to adjustment in certain events.
Assuming no conversion of convertible securities the net tangible book value
per share at December 31, 1994 was approximately $5.00. The net tangible book
value per share at December 31, 1994, assuming an average sale price of $8.125
per share (the closing price of the Common Stock on the New York Stock Exchange
on February 28, 1995) and $14.125 per share (the high sales price of the Common
Stock on the New York Stock Exchange in the preceding 12 months) for the shares
of Common Stock offered hereby and receipt by the Company of the estimated net
proceeds of the sale of all the shares of Common Stock offered hereby, is
approximately $5.39 and $6.14, respectively. The amount of increase in net
tangible book value per share attributable to the estimated cash payments to be
made by purchasers of Common Stock (assuming a price of $8.125 per share and
$14.125 per share) is approximately $.39 and $1.14, respectively. The immediate
dilution from the assumed average sale price of $8.125 and $14.125 which would
be absorbed by such purchasers (assuming all shares of Common Stock offered
hereby were sold at the assumed prices) is approximately $2.74 and $7.99,
respectively. These calculations are based upon a range of assumed average sale
prices which have been chosen
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solely for the purpose of illustrating the potential dilutive effect of the sale
of shares of Common Stock offered hereby and which may or may not reflect actual
sales prices of the Common Stock made pursuant to this Prospectus. The immediate
dilution absorbed by purchasers at the time of such sales will vary based upon,
among other things, the purchase price paid by the purchasers in such sales.
NET OPERATING LOSS CARRYFORWARDS. At December 31, 1994, the consolidated
group of which the Company is the parent had for federal income tax purposes
approximately $389 million of net operating loss carryforwards ("NOLs") (which
expire from 2004 through 2009) and $5.6 million of unused tax credits (which
expire from 1995 through 2002). The Company expects these NOLs and tax credits
to be available in the future to reduce the federal income tax liability of the
group. However, should there occur an "ownership change" of the Company as
defined under Section 382 of the Internal Revenue Code of 1986, the group's
ability to use the NOLs and available tax credits would be materially and
adversely affected.
An ownership change occurs when the stock ownership by those stockholders
owning 5% or more of a corporation's stock ("5% stockholders") increases by more
than 50 percentage points over a period of not more than three years. Public
offerings of the number of shares of Common Stock offered hereby are generally
taken into account in the ownership change calculations as if the stock were
acquired by a single, new 5% stockholder. If a corporation experiences an
ownership change, its subsequent utilization of NOLs is limited annually to the
product of (i) a tax-exempt rate of return announced by the Internal Revenue
Service from time to time (currently 5.06%) and (ii) the equity value of the
corporation immediately before the ownership change,subject to certain
adjustments. This limitation, appropriately modified, also applies to the
utilization of most unused tax credits following an ownership change. Proposed
Treasury regulations prescribe a more detailed, but in this case substantially
similar, procedure for applying the rules of Section 382 to a consolidated group
of corporations.
Sale of the shares of Common Stock offered hereby are not expected to give
rise to an ownership change of the Company or its consolidated group. The
Company has knowledge of increases in the ownership of the Company's Common
Stock by 5% stockholders aggregating approximately 35 percentage points in the
three years ended December 31, 1994 (on a pro forma basis, giving effect to the
sale of the shares of Common Stock offered hereby, but without regard to
acquisitions of shares of Common Stock offered hereby by persons who might
thereby become separate 5% stockholders). However, acquisitions of significant
interests in the Company's Common Stock have occurred in the past, and future
stock transactions, which may not be within the control of the Company, may
result in an ownership change when aggregated with the shares of Common Stock
offered hereby and these other past Common Stock transactions.
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 amounts payable under the Credit Agreement. Such
repayment would not reduce the Company's ability to further borrow thereunder.
As of February 28, 1995, outstanding borrowings under the Credit Agreement were
approximately $46.7 million and bore interest at the rate of 10 3/4% per annum.
See "Credit Agreement."
Unless otherwise specified in a Prospectus Supplement, any remaining net
proceeds will be used for reducing short-term borrowings, if any, for capital
investment projects to reduce the costs and increase production capacity
primarily in the Company's picture tube operations and/or forengineering and
research expenses or for other general corporate purposes. An amendment to the
Credit Agreement may be necessary to the extent that any capital expenditures
for capital investment projects would exceed the current limitations contained
in the Credit Agreement. There can be no assurance that the lenders under the
Credit Agreement will approve such an amendment, if requested by the Company.
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.
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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. COPIES OF THE CREDIT AGREEMENT AND THE AMENDMENTS THERETO
ARE FILED AS EXHIBITS TO THE REGISTRATION STATEMENT AND ARE INCORPORATED BY
REFERENCE HEREIN.
The Credit Agreement provides the Company with a credit facility having an
aggregate maximum commitment of $90 million but is limited by a defined
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 June 30, 1996 (unless extended by
agreement of the lenders), at which time all outstanding indebtedness thereunder
would have to be 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, specified 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
December 31, 1994, the ratio of liabilities to net worth was required to be not
greater than 3.50 to 1.0 and was actually 1.86 to 1.0, and net worth was
required to be equal to or greater than $158.0 million and was actually $228.3
million. At the end of each 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 restricts the amount of
capital expenditures by the Company in each fiscal year. For the fiscal years
1994 and 1995, the Company is permitted to make capital expenditures (as defined
in the Credit Agreement) of up to $68.0 and $38.0 million, respectively. In the
event the Company plans to undertake capital investment projects in 1995 which
would exceed the permitted expenditures, the Company would need to seek an
amendment to the Credit Agreement. There can be no assurance that the lenders
under the Credit Agreement will approve such an amendment, if requested by the
Company.
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, 1994, December 31, 1993 and December 31, 1992 and the
following consolidated balance sheet data at December 31, 1994 and December 31,
1993 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, 1994 and incorporated
by reference herein. The consolidated results of operations data relating to the
years ended December 31, 1991 and December 31, 1990 and the consolidated balance
sheet data at December 31, 1992, December 31, 1991 and December 31, 1990 are
derived from the Company's previously audited financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1994(2) 1993(3) 1992(4) 1991 1990
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales............................... 1,469.0 $1,228.2 $1,243.5 $1,321.6 $1,409.9
-------- -------- -------- -------- --------
Cost of products sold................... 1,350.2 1,163.9 1,179.3 1,208.4 1,295.9
Selling, general and administrative..... 117.1 92.5 94.0 101.2 106.5
Engineering and research................ 45.4 47.8 55.4 54.1 55.9
Other operating expense (income), net... (33.6) (25.2) (24.3) .5 (2.0)
Restructuring and other charges......... -- 31.0 48.1 -- --
-------- -------- -------- -------- --------
Operating income (loss)................. (10.1) (81.8) (109.0) (42.6) (46.4)
Gain on asset sales, and other, net..... 11.0 -- -- -- 1.1
Interest expense........................ (15.9) (15.5) (13.7) (12.4) (12.6)
Interest income......................... .5 .3 .9 3.6 4.6
-------- -------- -------- -------- --------
Income (loss) before income taxes....... (14.5) (97.0) (121.8) (51.4) (53.3)
Income taxes (credit)................... (.3) -- (15.9) .2 .9
-------- -------- -------- -------- --------
Income (loss) from continuing
operations............................. (14.2 ) (97.0) (105.9) (51.6) (54.2)
Income (loss) from discontinued
operations(1).......................... -- -- -- -- (11.0)
-------- -------- -------- -------- --------
Net income (loss)....................... $ (14.2) $ (97.0) $ (105.9) $ (51.6) $ (65.2)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
PER SHARE DATA:
Income (loss) from continuing
operations............................. $ (.34) $ (3.01) $ (3.59) $ (1.79) $ (2.02)
Income (loss) from discontinued
operations(1).......................... -- -- -- -- (.41)
-------- -------- -------- -------- --------
Net income (loss) per share............. $ (.34) $ (3.01) $ (3.59) $ (1.79) $ (2.43)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
BALANCE SHEET DATA (END OF PERIOD):
Total assets............................ 653.6 $ 559.4 $ 578.6 $ 686.9 $ 722.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
OTHER DATA (CONTINUING OPERATIONS):
Depreciation............................ 28.8 $ 35.4 $ 37.7 $ 37.9 $ 38.8
Capital additions, net.................. 31.4 25.7 25.7 23.9 30.8
Cash.................................... 8.9 20.8 5.8 36.3 56.3
Working capital......................... 227.6 158.6 170.6 254.3 283.8
Short-term debt......................... -- 34.5 10.1 -- --
Long-term debt.......................... 182.0 170.0 149.5 149.5 151.1
Stockholders' equity.................... 228.3 152.4 210.1 308.8 345.9
<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 $27.9 million of tuning system royalty income.
(3) Includes $31.0 million of restructuring and other charges and $25.7
million of tuning system royalty income.
(4) Includes $48.1 million of restructuring and other charges, $26.0 million
of tuning system royalty income and $15.9 million of income tax credits.
</TABLE>
8
<PAGE>
CAPITALIZATION
The following table sets forth a summary of the short-term debt and
capitalization of the Company, on a consolidated basis at December 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
1994
---------------
(DOLLARS IN
MILLIONS)
<S> <C>
SHORT-TERM DEBT:
Total short-term debt.............................. $ --
-------
-------
LONG-TERM DEBT:
6 1/4% Convertible Subordinated Debentures due 2011.... $115.0
8.5% Senior Subordinated Convertible Debentures due
2000.................................................. 55.0
8.5% Senior Subordinated Convertible Debentures due
2001.................................................. 12.0
-------
Total long-term debt............................... 182.0
-------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value; 8,000,000 shares
authorized;
none outstanding...................................... --
Common stock, $1 par value; 100,000,000 shares
authorized;
45,698,372 shares issued(1)........................... 45.7
Additional paid-in capital............................. 285.4
Retained earnings (deficit)............................ (102.3)
Cost of 21,000 common shares in treasury............... (.5)
-------
Total stockholders' equity......................... 228.3
-------
Total long-term debt and stockholders' equity...... $410.3
-------
-------
<FN>
- ------------------------
(1) Shares of Common Stock issued and outstanding as of December 31, 1994 do
not include, as of February 28, 1995, (i) 10,515,246 shares reserved for
conversion of the 8.5% Debentures and the 6 1/4% Convertible Subordinated
Debentures, (ii) approximately 2,920,000 shares reserved for sale to,
directors, officers and key employees of the Company under approved stock
option plans and (iii) approximately 22,850,000 shares reserved for
issuance under the Company's Stockholder Rights Plan (see "Description of
Capital Stock -- Stockholder Rights Plan").
</TABLE>
9
<PAGE>
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>
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.............................. 13 1/2 7
Second Quarter............................. 10 1/2 8 1/4
Third Quarter.............................. 12 1/8 8 5/8
Fourth Quarter............................. 14 1/8 10 5/8
1995:
First Quarter (through February 28,
1995)..................................... 12 1/8 7 1/2
</TABLE>
The last reported sale price for the Common Stock on the New York Stock
Exchange on February 28, 1995 was $8.125 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.
DILUTION
The Debentures due 2000 and the Debentures due 2001 are convertible into
Common Stock at an initial conversion price of $9.76 and $10.00 per share,
respectively, subject in each case to adjustment in certain events. If all of
the 8.5% Debentures were converted into Common Stock at the initial conversion
prices, 6,835,246 shares of Common Stock would be issued. No prediction can be
made as to the effect, if any, that the conversion of the 8.5% Debentures into
Common Stock or the fact that the 8.5% Debentures are outstanding and
unconverted will have on the market price of Common Stock prevailing from time
to time. The conversion of 8.5% Debentures into Common Stock could adversely
affect prevailing market prices of the Common Stock. The Company's 6 1/4%
Convertible Subordinated Debentures due 2011 are convertible at $31.25 per
share, subject to adjustment in certain events.
Assuming no conversion of convertible securities, the net tangible book
value per share at December 31, 1994 was approximately $5.00. The net tangible
book value per share at December 31, 1994, assuming an average sale price of
$8.125 per share (the closing price of the Common Stock on the New York Stock
Exchange on February 28, 1995) and $14.125 per share (the high sales price of
the Common
10
<PAGE>
Stock on the New York Stock Exchange in the preceding 12 months) for the shares
of Common Stock offered hereby and receipt by the Company of the estimated net
proceeds of the sale of all the shares of Common Stock offered hereby, is
approximately $5.39 and $6.14, respectively. The amount of increase in net
tangible book value per share attributable to the estimated cash payments to be
made by purchasers of Common Stock (assuming a price of $8.125 per share and
$14.125 per share) is approximately $.39 and $1.14, respectively. The immediate
dilution from the assumed average sale price of $8.125 and $14.125 which would
be absorbed by such purchasers (assuming all shares of Common Stock offered
hereby were sold at the assumed prices) is approximately $2.74 and $7.99,
respectively. These calculations are based upon a range of assumed average sale
prices which have been chosen solely for the purpose of illustrating the
potential dilutive effect of the sale of shares of Common Stock offered hereby
and which may or may not reflect actual sales prices of the Common Stock made
pursuant to this Prospectus. The immediate dilution absorbed by purchasers at
the time of such sales will vary based upon, among other things, the purchase
price paid by the purchasers in such sales.
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 AND IS INCORPORATED BY REFERENCE HEREIN.
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 approximately 45,700,000 shares were outstanding on February 28, 1995,
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
11
<PAGE>
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 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
12
<PAGE>
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.
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.
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
13
<PAGE>
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 in an
at-the-market equity offering(s) or on a negotiated or competitive bid basis
through underwriters or dealers or directly to other purchasers or through
agents. 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 NatWest Securities Limited ("Agent") intend to enter into a
Sales Agency Agreement (the "Sales Agency Agreement"), a copy of the form of
which is filed as an exhibit to the Registration Statement and is incorporated
by reference herein. Subject to the terms and conditions of the Sales Agency
Agreement, the Company may issue and sell up to 5,200,000 shares of Common Stock
(subject to the provisions described in the next paragraph) from time to time
through NatWest
14
<PAGE>
Securities Limited, as exclusive sales agent for the Company. Such sales, if
any, will be made pursuant to at-the-market offerings 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, or such lesser number of days to be agreed to by the Company
and the Agent. 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 5,200,000 (subject to the provisions described
in the next paragraph). 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 Company may sell, pursuant to this Prospectus and the Registration
Statement of which this Prospectus is a part, up to 5,200,000 shares of Common
Stock in at-the-market offerings. Pursuant to the terms of the Sales Agency
Agreement the initial amount of shares of Common Stock to be offered and sold
thereunder is 1,000,000, which may be increased from time to time up to a
maximum aggregate amount of 5,200,000 shares at the option of the Company with
the consent of the Agent.
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 Period (subject to adjustment in certain
circumstances), plus Excess Proceeds (as defined below), if any. The
compensation to Agent 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 Agent would be
correspondingly reduced; to the extent that such actual sales prices are greater
than the Average Market Price, the compensation to Agent 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 Agent.To the extent that Agent'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 Agent 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 for the first 200,000
Additional Shares and $0.25 per share for any Additional Shares in excess of
200,000. In no event will the compensation to Agent 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 Agent as sales agent
for the Company will settle regular way on the national securities exchange
where such purchases were executed. Compensation to Agent 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.
After 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
Agent as sales agent (identifying separately the number of Average Market Shares
and any Additional Shares), the high and low prices at which Average Market
15
<PAGE>
Shares were sold during such Pricing Period, the net proceeds to the Company and
the compensation payable by the Company to Agent with respect to such sales
pursuant to the formula set forth above. Unless otherwise indicated in a
Prospectus Supplement, NatWest Securities Limited as sales agent will act on a
best efforts basis.
In connection with the sale of the Common Stock on behalf of the Company,
NatWest Securities Limited may be deemed to be an "underwriter" within the
meaning of the Act, and the compensation of Agent may be deemed to be
underwriting commissions or discounts. The Company has agreed to provide
indemnification and contribution to Agent against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended. Agent may
pay commissions to an affiliate of Agent in connection with sales of shares of
Common Stock pursuant to the Sales Agency Agreement. In addition, Agent 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 shares of Common Stock subject
thereto and (ii) termination of the Sales Agency Agreement. 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 Richard F. Vitkus, Senior Vice
President-General Counsel of the Company, and by Sidley & Austin, Chicago,
Illinois. As of December 31, 1994, Mr. Vitkus owned beneficially 3,000 shares of
Common Stock and held options to purchase 8,000 shares of Common Stock, of which
none were exercisable as of such date.
EXPERTS
The Consolidated Financial Statements and Schedules of Zenith Electronics
Corporation and Subsidiaries included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994, which are incorporated herein by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and have been so incorporated in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
16
