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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
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ZENITH ELECTRONICS CORPORATION
(NAME OF SUBJECT COMPANY)
ZENITH ELECTRONICS CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED RIGHTS)
(TITLE OF CLASS OF SECURITIES)
989349105
(CUSIP NUMBER OF CLASS OF SECURITIES)
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ALBIN F. MOSCHNER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ZENITH ELECTRONICS CORPORATION
1000 MILWAUKEE AVENUE
GLENVIEW, ILLINOIS 60025
(708) 391-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH COPIES TO:
RICHARD F. VITKUS THOMAS A. COLE
SENIOR VICE PRESIDENT-GENERAL SIDLEY & AUSTIN
COUNSEL AND SECRETARY ONE FIRST NATIONAL PLAZA
ZENITH ELECTRONICS CORPORATION CHICAGO, ILLINOIS 60603
1000 MILWAUKEE AVENUE (312) 853-7000
GLENVIEW, ILLINOIS 60025
(708) 391-7000
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This Amendment No. 3 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated July 21, 1995 and amended as of July 26,
1995 and August 4, 1995 (the "Schedule 14D-9"), filed by Zenith Electronics
Corporation, a Delaware corporation (the "Company"), relating to the tender
offer by LG Electronics Inc., a corporation organized under the laws of the
Republic of Korea (the "Purchaser"), disclosed in a Tender Offer Statement on
Schedule 14D-1, dated July 21, 1995, to purchase up to 18,619,000 shares of
common stock, $1.00 par value, of the Company, including the associated common
stock purchase rights issued pursuant to the Company's rights Agreement (the
"Common Stock"), at $10.00 per share, net to seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated July 21,
1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together with the Offer to Purchase, and any amendments or supplements thereto,
collectively constitute the "Offer"). Unless otherwise defined, all capitalized
terms used in this Amendment shall have the respective meanings attributed to
such terms in the Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
Section (b) (2)(i) of Item 3 of the Schedule 14D-9 is hereby amended and
restated in its entirety to read as follows:
(b) (2)
(i) THE STOCK PURCHASE AGREEMENT.
The following summary of terms of the Stock Purchase Agreement does not
purport to be complete and is qualified in its entirety by reference to the
text of the Stock Purchase Agreement, a copy of which is filed as an exhibit
hereto and is incorporated herein by reference.
Sale and Purchase of Issue Shares. Upon the terms and subject to satisfaction
or waiver of the conditions described below under "--Conditions" and the
further condition that the Purchaser shall have accepted for purchase pursuant
to the Offer not less than 18,619,000 shares of Common Stock, the Company has
agreed to issue and sell to the Purchaser, and the Purchaser has agreed to
purchase from the Company, 16,500,000 shares of Common Stock at a price of
$10.00 per share (the "Issue Shares"). The Purchaser has indicated to the
Company that pursuant to the Stock Purchase Agreement it will assign the right
to purchase 80% of the Issue Shares to LG Semicon Co., Ltd, a corporation
organized under the laws of the Republic of Korea and a majority owned
subsidiary of the Purchaser ("LG Semicon").
The Offer. Pursuant to the terms of the Stock Purchase Agreement, the
Purchaser was required to commence the Offer no later than five business days
after the public announcement that the Purchaser and the Company entered into
the Stock Purchase Agreement. The Offer was commenced on July 21, 1995 pursuant
to an Offer to Purchase dated July 21, 1995. Stockholders are urged to review
the Offer to Purchase and any supplements thereto to determine how to tender
shares of Common Stock pursuant to the Offer and to determine their rights to
withdraw shares of Common Stock previously tendered pursuant to the Offer. The
obligations of the Purchaser to accept for payment, and pay for, any shares of
Common Stock tendered pursuant to the Offer are subject (the following being
referred to as the "Offer Conditions") to the purchase by the Purchaser of the
Issue Shares, to be consummated simultaneously with the purchase of the Offer
Shares, and to the conditions that (i) the Stock Purchase Agreement shall not
have been terminated, (ii) there shall be validly tendered in accordance with
the terms of the Offer prior to the Expiration Date and not withdrawn at least
18,619,000 shares of Common Stock (the term "Expiration Date" shall mean 12:00
midnight, New York City time, on Tuesday, November 7, 1995, unless and until
the Purchaser, in its sole discretion (but subject to the terms of the Stock
Purchase Agreement), shall from time to time have extended the period of time
for which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire, and (iii) to the satisfaction or waiver of the
following conditions:
(a) Stockholder Approval. The Company's stockholders shall have approved
the transactions contemplated by the Stock Purchase Agreement, including
the issuance and sale to the Purchaser of the Issue Shares and the purchase
by the Purchaser of the Offer Shares as contemplated by
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the Stock Purchase Agreement, which transactions shall be described in a
proxy statement and related proxy materials, and submitted to a vote of the
Company's stockholders.
(b) No Prohibition. No statute, rule, regulation, judgment, order,
decree, ruling, injunction, or other action shall have been entered,
promulgated or enforced by any governmental, quasi-governmental, judicial,
self-regulatory or regulatory agency or entity or subdivision thereof with
jurisdiction over the Company or the Purchaser or any of their subsidiaries
or any of the transactions contemplated by the Stock Purchase Agreement
("Governmental Authorities") that purports, seeks, or threatens to (i)
prohibit, restrain, enjoin, or restrict in a material manner, the purchase
and sale of any Offer Shares as contemplated by the Stock Purchase
Agreement or (ii) impose material adverse terms or conditions (not set
forth in the Stock Purchase Agreement) upon the purchase and sale of any
Offer Shares as contemplated by the Stock Purchase Agreement.
(c) Regulatory Compliance. All material filings with all Governmental
Authorities required to be made in connection with the purchase and sale of
the Offer Shares as contemplated by the Stock Purchase Agreement shall have
been made, all waiting periods thereunder shall have expired or terminated
and all material orders, permits, waivers, authorizations, exemptions, and
approvals of such entities required to be in effect on the date of the
closing of the transactions contemplated by the Stock Purchase Agreement
(the "Closing") in connection with the purchase and sale of the Offer
Shares as contemplated by the Stock Purchase Agreement shall have been
issued, and all such orders, permits, waivers, authorizations, exemptions
or approvals shall be in full force and effect on the date of the Closing;
provided, however, that no provision of the Stock Purchase Agreement shall
be construed as requiring any party to accept, in connection with obtaining
any requisite approval, clearance or assurance of non-opposition, avoiding
any challenge, or negotiating any settlement, any condition that would (i)
materially change or restrict the manner in which the Company or the
Purchaser conducts or proposes to conduct its businesses, or (ii) impose
material terms or conditions (not set forth in the Stock Purchase
Agreement) upon the purchase and sale of any Offer Shares as contemplated
by the Stock Purchase Agreement. The required material filings with
Governmental Authorities include filings by the Company and the Purchaser
with the Federal Trade Commission and the United States Department of
Justice required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), filings by the Purchaser with the Bank of
Korea and other instrumentalities of the Republic of Korea and the filings
described in (d) below. The Purchaser and the Company made the requisite
filings under the HSR Act and have received notice that the required
waiting period under the HSR Act expired on September 1, 1995. The
Purchaser has informed the Company that the required filings to be made
with the Bank of Korea and other instrumentalities of the Republic of Korea
have been made and that the Purchaser has received final approval of the
transactions contemplated by the Stock Purchase Agreement by such entities.
(d) Exon-Florio. The Purchaser and the Company shall have delivered to
the Committee on Foreign Investment in the United States ("CFIUS")
appropriate notification and report forms pursuant to Section 721 of the
Defense Production Act of 1950, as amended (the "Exon-Florio Amendment"),
and (i) more than thirty days shall have passed from the calendar day
following acceptance by CFIUS of such notice without advice from CFIUS of
the commencement of an investigation of the transactions contemplated by
the Stock Purchase Agreement, (ii) the Purchaser and the Company shall have
been advised by CFIUS that CFIUS has determined not to undertake an
investigation of the transactions contemplated by the Stock Purchase
Agreement, or (iii) if CFIUS commences an investigation of the transactions
contemplated by the Stock Purchase Agreement, such investigation shall have
been resolved to the mutual satisfaction of the Purchaser and the Company.
The required filings pursuant to the Exon-Florio Amendment were delivered
by the Purchaser and the Company and accepted by CFIUS on September 7,
1995. The Purchaser received written notice on October 10, 1995 from CFIUS
that, based on its review, CFIUS has determined that there are no issues of
national security sufficient to warrant an investigation under the Exon-
Florio Amendment. The receipt of this notice satisfies this condition.
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(e) Directors. Provision shall have been made to the satisfaction of
Purchaser that, immediately following the Closing, the Board of Directors
of the Company will be composed of ten directors and six of such directors
shall be designees of the Purchaser, one of such directors shall be Albin
F. Moschner, the Company's President and Chief Executive Officer, and three
of such directors shall be persons who are not (apart from such
directorship) affiliates, officers, employees, agents, principals or
partners of the Purchaser or the Company or any subsidiary of either of
them and who are, if they are willing to serve, members of the Board of
Directors of the Company immediately prior to the Closing. It is
anticipated that Peter S. Willmott, Andrew McNally IV and T. Kimball
Brooker, along with Albin F. Moschner, will continue as directors of the
Company and that the other current directors of the Company will resign.
(f) Performance. The Company shall have performed in all material
respects its obligations under the Stock Purchase Agreement to the date of
the Closing.
(g) Amended Bylaws. The Company shall have amended its Bylaws in the form
attached to the Stock Purchase Agreement as Exhibit A (the "Amended
Bylaws") immediately prior to the Closing and such amendments shall have
been duly authorized, approved and effected.
(h) Amendment of Rights Agreement. The Company's rights agreement with
The Bank of New York, as successor rights agent (the "Rights Agreement"),
shall have been amended by the Company (the "Amendment to Rights
Agreement") to specifically exclude the Purchaser and its affiliates from
the definition of "Acquiring Person" (as defined in the Rights Agreement)
and to otherwise avoid any adverse consequence to Purchaser or the Company,
including, without limitation, the occurrence of a "Distribution Date" (as
defined in the Rights Agreement) as a consequence of the transactions
contemplated by the Stock Purchase Agreement, the Company Letter (as
defined below), the Tender Offer Statement on Schedule 14D-1 and related
Offer to Purchase, form of letter of transmittal and summary advertisement
to be used in connection with the Offer (the "Offer Documents"), the
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the
Offer and the Amended Bylaws (collectively, together with any amendments
thereof, and all supplements, annexes and exhibits thereto, the
"Transaction Documents").
(i) Closing Deliveries. The Company shall have delivered, or shall be
delivering concurrently with the Closing, the documents and instruments
required to be delivered by the Company pursuant to the Stock Purchase
Agreement.
(j) Representations and Warranties True. Except as otherwise contemplated
by the Stock Purchase Agreement and except for the representations and
warranties of the Company with respect to capital stock set forth in the
Stock Purchase Agreement which shall be accurate in all respects as of the
date when made and at and as of the Closing as though newly made at and as
of that time, the representations and warranties of the Company contained
in the Stock Purchase Agreement which are qualified as to materiality shall
be true and correct and which are not so qualified shall be true and
correct in all material respects, in each case, as of the date when made
and at and as of the Closing as though newly made at and as of that time,
except that the Company's financial statements shall continue to be true
only as of the respective dates covered thereby.
(k) Certificate. The Company shall have delivered to the Purchaser a
certificate dated as of the Closing and signed by the Chief Financial
Officer and the General Counsel of the Company certifying as to (i) the
accuracy, as of the date when made and at and as of the Closing as though
newly made at and as of that time, of the representations and warranties of
the Company set forth in the Stock Purchase Agreement with respect to
capital stock and the representations and warranties contained in the Stock
Purchase Agreement that are qualified as to materiality, (ii) the accuracy,
as of the date when made and at and as of the Closing as though newly made
at and as of that time, in all material respects of the representations and
warranties of the Company contained in the Stock Purchase Agreement that
are not so qualified, provided that the Company's representations and
warranties contained in the Stock Purchase Agreement as to the Company's
financial statements shall continue to be true only as of the respective
dates covered thereby and
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(iii) the performance of the obligations required by the Company to be
performed under the Stock Purchase Agreement as of the Closing.
(l) Credit Agreements. The Company shall have secured amendments to or
waivers under, in each case, in form and substance reasonably satisfactory
to the Purchaser, its material credit agreements and arrangements such that
none of the transactions contemplated by the Stock Purchase Agreement or
the other Transaction Documents, will constitute a breach or default of or
an event that, with notice or lapse of time or both would be a breach or
default, under such credit agreements or arrangements.
(m) Items in Company Letter. The Purchaser shall be satisfied that
certain claims and matters described in the letter, dated as of the date of
the Stock Purchase Agreement, from the Company to the Purchaser (the
"Company Letter"), individually, collectively with each other or
collectively with any breaches of representations and warranties and/or
other facts and circumstances which have not been disclosed as of the date
of the Stock Purchase Agreement have not resulted in, and would not
reasonably be expected to result in, a "Material Adverse Effect." "Material
Adverse Effect" means a material adverse effect, or the occurrence or
existence of facts or circumstances reasonably expected to result in a
material adverse effect, on the business, assets, results of operations,
properties, financial or operating condition or prospects of the Company
and its subsidiaries taken as a whole, or the ability of the Company (and,
to the extent applicable, its subsidiaries) to perform its (or their)
obligations under the Stock Purchase Agreement or consummate the
transactions contemplated thereby. For purposes of this definition a
consolidated net loss by the Company and its subsidiaries for the quarter
ended June 30, 1995 of $45.3 million or less shall not be deemed to have a
Material Adverse Effect.
The Purchaser may increase the Offer Price and may make any other changes in
the terms and conditions of the Offer, provided that the Purchaser may not
decrease the Offer Price, change the form of consideration payable in the
Offer, decrease the maximum number of shares of Common Stock sought pursuant to
the Offer, add to or modify the Offer Conditions, or otherwise amend the Offer
in any manner adverse to the Company's stockholders.
The Stock Purchase Agreement requires that the Offer expire at midnight, New
York City time, on the date that is sixty days from the date the Offer is first
published or sent to stockholders. The Purchaser must extend the Offer (i) if
at the scheduled expiration date of the Offer any of the Offer Conditions has
not been satisfied or waived, until such time as such Offer Conditions are
satisfied or waived and (ii) for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission or the
staff thereof applicable to the Offer; provided, however, that the Purchaser
may terminate the Offer if the Stock Purchase Agreement is terminated.
Provided that the Stock Purchase Agreement has not been terminated and that
all Offer Conditions have been satisfied or waived by the Purchaser, the
Purchaser is required to accept for payment and purchase, in accordance with
the terms of the Offer, shares of Common Stock validly tendered and not
withdrawn pursuant to the Offer (up to the amount sought pursuant to the Offer
or such greater amount as the Purchaser, in its sole discretion, shall
determine) at the Closing. The Purchaser has indicated to the Company that
pursuant to the Stock Purchase Agreement it will assign the right to purchase
80% of the Offer Shares to LG Semicon, a majority owned subsidiary of the
Purchaser.
Representations and Warranties. The Stock Purchase Agreement contains
customary representations and warranties of the Company relating, with respect
to the Company and its subsidiaries, to, among other things, (a) organization,
standing and similar corporate matters; (b) the authorization, execution,
delivery, performance and enforceability of the Stock Purchase Agreement and
related matters; (c) capital structure; (d) government authorization; (e) the
compliance with all licenses and permits necessary to conduct its businesses
and the non-contravention of the Stock Purchase Agreement and related
transactions with any judgment, decree, order, law, statute, rule or
regulation; (f) the compliance of the Company and its subsidiaries and the non-
contravention of the Stock Purchase Agreement and related transactions with the
Company's and its subsidiaries'
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certificates of incorporation and bylaws or any material agreements, mortgages,
indentures, debentures, trusts, leases, licenses, or other instruments or
obligations to or by which it or any of its properties is subject or bound; (g)
the compliance as to form of the documents filed by the Company and its
subsidiaries with the Securities and Exchange Commission and the accuracy of
information contained therein and the absence of undisclosed liabilities; (h)
the absence of any event, occurrence, development, breach or default which
individually or collectively has had or would be expected to result in a
Material Adverse Effect; (i) the absence of pending or threatened litigation
which could reasonably be expected to have a Material Adverse Effect; (j) the
filing of tax returns and payment of taxes; (k) registration rights and the
exemption from registration and prospectus delivery requirements; (l) adequate
insurance protection and compliance with such policies and bonds; (m) the
absence of certain transactions between the Company or its subsidiaries and any
of either's directors, officers or their immediate families; (n) benefit plans
and other matters relating to the Employee Retirement Income Security Act of
1974, as amended; (o) possession of all necessary rights and licenses in all
intellectual property; (p) the absence of Environmental Claims and compliance
with all Environmental Laws (as such terms are defined in the Stock Purchase
Agreement); (q) broker's fees and expenses; and (r) the accuracy of the Company
Letter.
The Stock Purchase Agreement contains customary representations and
warranties of the Purchaser relating to (a) organization, standing and similar
corporate matters; (b) the authorization, execution, delivery, performance and
enforceability of the Stock Purchase Agreement; (c) the non-contravention of
the Stock Purchase Agreement and related transactions with any charter
provision, bylaw, material contract, order, law or regulation to which the
Purchaser is a party or by which it is bound or obligated; (d) government
authorization; (e) investment intent and sophistication of the Purchaser; (f)
the accuracy of information supplied by the Purchaser in connection with the
Offer and the proxy statement; and (g) broker's fees and expenses.
Conduct of Business of the Company. The Stock Purchase Agreement provides
that until the Closing, the business and operations of the Company and each of
its subsidiaries shall be conducted in the ordinary course of business
consistent with past practice, and the Company and its subsidiaries will each
use its best efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain existing
relationships with licensors, licensees, suppliers, contractors, distributors,
customers and others having business relationships with it.
Accordingly, except as otherwise expressly approved by the Purchaser in
writing, neither the Company nor any of its subsidiaries may, prior to the
Closing, engage or agree to engage in an enumerated list of transactions
generally characterized as being outside the ordinary course of business.
Transactions requiring the Purchaser's prior approval include, without
limitation (but subject to certain exceptions stated in the Stock Purchase
Agreement), actions by the Company or its subsidiaries to (i) authorize for
issuance, issue, sell, deliver or agree or commit to issue, sell or deliver any
voting stock or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights) or amend any of the
terms of any such securities or agreements outstanding as of the date of the
Stock Purchase Agreement; (ii) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of the securities of the Company or its subsidiaries, or redeem or
otherwise acquire any of its securities or any securities of its subsidiaries
not owned directly or indirectly by the Company; (iii) incur or assume any debt
or issue any debt securities, become liable or responsible for the obligations
of any other person, make any loans or investments in any other person, pledge
or otherwise encumber shares of capital stock of the Company or any of its
subsidiaries, or mortgage or pledge any of its material assets or create any
lien thereupon; (iv) enter into, adopt, or amend or terminate any compensation,
severance, termination, or benefits arrangement, or pay any benefit not
required by any plan or arrangement; (v) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division
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thereof or any equity interest therein, or acquire, sell, lease or dispose of
any assets of the Company and its subsidiaries; (vi) enter, or permit any of
its subsidiaries to enter, into any joint venture, partnership or exclusive
licensing agreement; (vii) authorize any new capital expenditure or
expenditures; and (viii) amend or propose to amend its certificate of
incorporation or bylaws or alter the corporate structure or ownership of any
subsidiary.
Other Potential Bidders. The Stock Purchase Agreement requires the Company
and its affiliates and their respective officers, directors, employees,
representatives and agents immediately to cease any existing discussions or
negotiations with any third party regarding (i) the acquisition of more than
20% of the total assets of the Company or any of its subsidiaries, (ii) the
acquisition of 20% or more of the Shares, all of the Company's voting stock or
the equity securities of any subsidiary of the Company, or (iii) the merger or
other combination of the Company or any of its subsidiaries (each a "Third
Party Acquisition"). The Company shall not, unless and until the Stock Purchase
Agreement is terminated in accordance with its terms, as described below,
directly or indirectly, (i) initiate, solicit or encourage any discussions
regarding a Third Party Acquisition, or (ii) hold any such discussions or enter
into any agreement concerning any Third Party Acquisition; provided that if the
Company's Board of Directors determines in good faith, after consultation with
and based upon written advice of outside legal counsel, that a failure to do so
would be contrary to its fiduciary obligations, the Company may (A) in response
to a request therefor, furnish information with respect to the Company to any
person pursuant to a customary confidentiality agreement and discuss such
information with such person and (B) upon receipt by the Company of a proposal
with respect to a Third Party Acquisition, following delivery to the Purchaser
of the Notice of Superior Proposal (described below), participate in
negotiations regarding such proposal. The Company's Board of Directors shall
not (i) approve or recommend any Third Party Acquisition or (ii) approve or
authorize the Company's entering into any agreement with respect to any such
Third Party Acquisition, provided that if the Company's Board receives a bona
fide proposal for a Third Party Acquisition that the Board determines in its
good faith reasonable judgment (based on the advice of a financial advisor of
nationally recognized reputation) provides a greater aggregate value to the
Company and/or the Company's stockholders than the transactions contemplated by
the Stock Purchase Agreement (a "Superior Proposal"), the Board may, to the
extent required under its fiduciary duties, approve or recommend any such
Superior Proposal, approve or authorize the Company's entering into an
agreement with respect to such Superior Proposal, approve the solicitation of
additional takeover or other investment proposals or terminate the Stock
Purchase Agreement, in each case at any time after the fifth business day
following notice to the Purchaser (a "Notice of Superior Proposal") advising
the Purchaser that the board has received a Superior Proposal and specifying
the structure and material terms of such Superior Proposal, and provided that
the Superior Proposal continues to be a Superior Proposal in light of any
improved transaction proposed by the Purchaser prior to the expiration of such
five-business-day period.
Director and Officer Liability. The Stock Purchase Agreement provides that
from and after the Closing, the Purchaser shall cause the Company to indemnify
and hold harmless each person who is, or has been at any time prior to the date
of the Stock Purchase Agreement or who becomes prior to the Closing, an officer
or director of the Company or is or was serving at the request of the Company
as a director or officer of any affiliate of the Company, an employee benefit
plan, or a related trust, in respect of acts or omissions occurring prior to
the Closing (the "Indemnified Parties") (including but not limited to the
transactions contemplated by the Stock Purchase Agreement), to the extent
provided under the Company's Certificate of Incorporation, Bylaws and indemnity
agreements between the Company and any of its officers in effect, and, with
respect to the Company's Certificate of Incorporation and Bylaws, shall not
permit the amendment of such provisions in any manner adverse to the
Indemnified Parties for three years after the date of the Stock Purchase
Agreement. For six years after the Closing, the Purchaser shall cause the
Company to maintain its current or substantially equivalent policies of
officers' and directors' liability insurance covering each of the Persons
currently covered by its current policy, or who becomes covered by such policy
prior to the Closing; provided that the
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Company shall not be obligated to pay premiums in excess of 150% of the premium
to be paid by the Company for such insurance in the fiscal year ending December
31, 1995, but provided further that the Company must provide such coverage as
may be obtained for 150% of the premium for such insurance in the fiscal year
ending December 31, 1995.
Conditions. The obligations of the Purchaser and of the Company respecting
the sale and purchase of the Issue Shares are conditioned upon (i) the
Company's stockholders having approved the transactions contemplated by the
Stock Purchase Agreement, (ii) no Governmental Authority having taken action to
restrict, in a material manner, the purchase of the Issue Shares or to impose
material adverse terms or conditions thereon, (iii) all material filings with
all Governmental Authorities required in connection with the transactions
contemplated by the Stock Purchase Agreement having been made, all waiting
periods thereunder having expired or been terminated and all material orders,
permits, waivers, authorizations, exemptions or approvals having been obtained
and remaining in effect, and (iv) the Purchaser and the Company shall have
delivered to CFIUS appropriate notification and report forms pursuant to the
Exon-Florio Amendment and satisfactory resolution thereof. The Purchaser and
the Company have received notice that the waiting period under the HSR Act with
respect to the transactions contemplated by the Stock Purchase Agreement
expired on September 1, 1995. The Purchaser has informed the Company that the
required filings to be made with the Bank of Korea and other instrumentalities
of the Republic of Korea have been made and that the Purchaser has received
final approval of the transactions contemplated by the Stock Purchase Agreement
by such entities. The required filings pursuant to the Exon-Florio Amendment
were delivered by the Purchaser and the Company and accepted by CFIUS on
September 7, 1995. The Purchaser received written notice on October 10, 1995
from CFIUS that, based on its review, CFIUS has determined that there are no
issues of national security sufficient to warrant an investigation under the
Exon-Florio Amendment. The receipt of this notice satisfies this condition.
The obligation of the Purchaser to purchase the Issue Shares is further
conditioned upon (i) provision having been made to the satisfaction of
Purchaser that the Company's Board of Directors will be composed of ten persons
immediately following the Closing, six of whom are to be designees of
Purchaser, one of whom is to be the Company's President and Chief Executive
Officer immediately prior to the Closing and three of whom shall be, if they
are willing to serve, members of the Board of Directors immediately prior to
the Closing who are not otherwise affiliated with the Company or the Purchaser
or any subsidiary of either of them, (ii) the Company having performed in all
material respects its obligations under the Stock Purchase Agreement, (iii) the
Amended Bylaws having been duly authorized, approved and effected, (iv) the
Rights Agreement having been amended by the Company to specifically exclude the
Purchaser and its affiliates from the definition of "Acquiring Person" (as
defined in the Rights Agreement) and to otherwise avoid any adverse
consequences to Purchaser or the Company, including, without limitation, the
occurrence of a "Distribution Date" (as defined in the Rights Agreement) as a
consequence of the transactions contemplated by the Transaction Documents, (v)
there having been validly tendered and not withdrawn pursuant to the Offer not
less than 18,619,000 Shares, (vi) the Company having delivered, prior to or
concurrently with the Closing, the documents and instruments required to be
delivered by the Company, (vii) except as otherwise contemplated by the Stock
Purchase Agreement and except for the representations and warranties of the
Company set forth in the Stock Purchase Agreement which shall be accurate in
all respects as of the date when made and at and as of the Closing, the
representations and warranties of the Company contained in the Stock Purchase
Agreement which are qualified as to materiality being true and correct and
which are not so qualified being true and correct in all material respects, in
each case, as of the date when made and at and as of the Closing, except that
the Company's financial statements shall continue to be true only as of the
respective dates covered thereby; (viii) the Company having delivered to the
Purchaser a certificate dated as of the Closing and signed by the Chief
Financial Officer and the General Counsel of the Company certifying as to the
accuracy of certain of the representations and warranties of the Company set
forth in the Stock Purchase Agreement and the performance of the obligations
required by the Company to be performed under the Stock Purchase Agreement as
of the Closing; (ix)
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the Company having secured amendments to or waivers under, in each case, in
form and substance reasonably satisfactory to the Purchaser, its material
credit agreements and arrangements such that one of the transactions
contemplated by the Stock Purchase Agreement or the other Transaction
Documents, will constitute a breach or default of or an event that, with notice
or lapse of time or both would be a breach or default under, such credit
agreements or arrangements; and (x) the Purchaser being satisfied that certain
claims and matters described in the Company Letter, individually, collectively
with each other or collectively with any breaches of representations and
warranties and/or other facts and circumstances which have not been disclosed
as of the date of the Stock Purchase Agreement have not resulted in, and would
not reasonably be expected to result in, a Material Adverse Effect.
The obligation of the Company to issue and sell the Issue Shares to the
Purchaser is further conditioned upon (i) the Purchaser having performed in all
material respects its obligations under the Stock Purchase Agreement, (ii)
except as otherwise contemplated by the Stock Purchase Agreement, the
representations and warranties of the Purchaser set forth in the Stock Purchase
Agreement which are qualified as to materiality being true and correct and
which are not so qualified, being true in all material respects, as of the date
when made and at and as of the Closing as though newly made at and as of that
time, (iii) the Purchaser having delivered, or be delivering concurrently with
the Closing, the documents and instruments required to be delivered by the
Purchaser pursuant to the Stock Purchase Agreement, (iv) the Purchaser having
delivered a certificate dated as of the Closing and signed by a duly authorized
officer of the Purchaser certifying as to the accuracy in all material respects
of the representations and warranties of the Purchaser and the performance of
the obligations of the Purchaser under the Stock Purchase Agreement and (v) the
Purchaser having accepted for purchase pursuant to the Offer not less than
18,619,000 Shares.
Termination. The Stock Purchase Agreement provides that the Company may
terminate the Stock Purchase Agreement if (i) there has not been a material
uncured breach by the Company of any representation, warranty, covenant or
agreement and there has been a material breach by the Purchaser of any
representation, warranty, covenant or agreement that has not been cured within
ten days' notice of such breach and the Company's intention to terminate, (ii)
upon payment to the Purchaser of $7,023,800 (2% of the aggregate proceeds to be
received by the Company and stockholders of the Company who tender shares of
Common Stock in the Offer upon consummation of the transactions contemplated by
the Stock Purchase Agreement) (the "Termination Fee") and either (a) five
business days have elapsed following the Purchaser's receipt of a Notice of
Superior Proposal and the Superior Proposal continues to be a Superior Proposal
in light of any improved transaction proposed by the Purchaser prior to the
expiration of the five-business-day period following receipt by the Purchaser
of such notice, or (b) the Board of Directors of the Company has withdrawn,
modified or changed in an adverse manner its approval or recommendations of the
Offer or other transactions contemplated by the Stock Purchase Agreement or
recommended another offer, or has adopted any resolutions to effect any of the
foregoing to the extent that the Board determines in good faith, after
consultation with and based upon written advice of outside legal counsel, that
a failure to do so would be contrary to its fiduciary obligations.
The Purchaser may terminate the Stock Purchase Agreement if there has not
been a material uncured breach by the Purchaser of any representation,
warranty, covenant or agreement and there has been a material breach by the
Company of any representation, warranty, covenant or agreement that has not
been cured within ten days' of receipt of written notice of such breach and the
Purchaser's intention to terminate. In addition, the Purchaser may terminate
any or all of its obligations under the Stock Purchase Agreement if (a) the
Board of Directors of the Company has withdrawn, modified or changed in a
manner adverse to the Purchaser, its approval or recommendation of the Offer or
other transactions contemplated by the Stock Purchase Agreement or recommended
another offer, or has adopted any resolutions to effect any of the foregoing,
(b) a Third Party Acquisition has occurred or any definitive agreement or
agreement in principle has been executed with respect to a Third Party
Acquisition, (c) the Company does not conduct a stockholders' meeting and take
all reasonable action
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to obtain stockholder approval of the Proposed Transaction, because the Board
has determined in good faith, after consultation with and based upon written
advice of outside legal counsel, that taking such action consistent with the
Certificate of Incorporation, Bylaws and applicable law as may be required
would be contrary to its fiduciary obligations, or (d) the Company does not use
all reasonable efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to cause satisfaction of the conditions to, and
to consummate and make effective, the transactions contemplated by the Stock
Purchase Agreement and the other Transaction Documents, because the Board has
determined in good faith, after consultation with and based upon written advice
of outside legal counsel, that taking such action would be contrary to its
fiduciary obligations. The Company shall pay to the Purchaser the Termination
Fee if the Purchaser terminates pursuant to clauses (a), (b), (c) or (d) of the
preceding sentence.
Additionally, either the Purchaser or the Company may terminate the Stock
Purchase Agreement (i) to the extent that performance thereof if prohibited,
enjoined, or otherwise materially restrained by any final, non-appealable
judgment, ruling, order or decree of any Governmental Authority, provided that
the party seeking to terminate its obligations shall have used its best efforts
to remove such prohibition, injunction, or restraint, (ii) if the purchase by
the Purchaser of the Issue Shares and the Offer Shares shall not have been
completed by March 31, 1996 and the failure of such purchase to have been
completed on or before such date did not result from the failure by the party
seeking termination to fulfill in all material respects any undertaking or
commitment that is required to be fulfilled by such party prior to such time,
(iii) if the Company's stockholders do not approve the transactions
contemplated by the Stock Purchase Agreement (provided that the Company
immediately pays to the Purchaser the Termination Fee if the stockholders did
not approve the transactions contemplated by the Stock Purchase Agreement
because of a Superior Proposal) or (iv) by mutual written consent of the
Purchaser and the Company.
Transaction Expenses. The Stock Purchase Agreement provides that, except for
any Termination Fee, each of the parties shall pay its own expenses incurred in
connection with the negotiation and preparation of the Stock Purchase Agreement
and the other Transaction Documents, the performance of its covenants
thereunder, and the effectuation of the transactions contemplated thereby,
including, without limitation, all fees and disbursements of its respective
legal counsel, advisors and accountants. Each of the parties shall indemnify
and hold harmless the other against any claim for fees or commissions of
brokers, finders, agents or bankers retained or purportedly retained by the
indemnitor party in connection with the transactions contemplated by the Stock
Purchase Agreement and the other Transaction Documents.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Section (b) of Item 4 of the Schedule 14D-9 is hereby amended and restated in
its entirety to read as follows:
(b) Background; Reasons for the Recommendations.
The Company's primary business has been the consumer electronics business in
the United States. This business in the United States has been marked by
intense competition, with the Company's major competitors being significantly
larger foreign owned companies, 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. Despite the Company's
significant cost reduction measures, the Company's achievement of record unit
sales in 1994, recent growth in the Company's market share in the United
States, significant sales growth in Latin America and its growing Network
Systems products business, the Company has incurred losses in all but one of
the years since 1985.
As part of its strategy to return to profitability, the Company developed a
plan in 1994 to expand and modernize its Melrose Park, Illinois color picture
tube plant by adding a fifth color picture tube
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production line, capable of handling larger, wider-screen tubes, and by
increasing automation on existing production lines. In seeking the $150 million
funding necessary for this program, the Company
initiated discussions in June 1994 with the Purchaser with respect to a
possible joint venture involving the Melrose Park plant. At a meeting on
November 15, 1994 among Jerry K. Pearlman, Chairman of the Company (and at the
time its chief executive officer), certain other officers of the Company, and
Mr. Cha Hong (John) Koo, President of the Purchaser, and certain other officers
of the Purchaser, the Company suggested that, as an alternative, the Purchaser
consider an equity investment in the Company. However, the Purchaser indicated
that at that time it was interested only in the joint venture. The Company and
the Purchaser executed a Mutual Non-Disclosure Agreement dated as of November
25, 1994. Numerous discussions concerning the possible joint venture were held
between the Purchaser and the Company over the next several months. In late
March 1995, the Purchaser submitted a proposal to the Company for the joint
venture offering to contribute $100 million in cash and $35 million in
promissory notes in return for a 49.0% equity interest in the joint venture.
The parties subsequently discussed a number of revised proposals, with the last
proposal being submitted to the Company at the June 27, 1995 meeting of the
Company's Board of Directors described below.
The Company's selection of the Purchaser as a possible joint venture partner
grew out of a long-standing business relationship with the Purchaser, as well
as the Company's high regard for the Purchaser's manufacturing and automation
expertise. This relationship began in the mid-1970's when the Purchaser
produced radios for the Company. Since then, the Company has purchased
electronic components from the Purchaser and in recent years the Company has
produced color picture tubes and other components for the Purchaser, and the
Purchaser has produced VCRs and TV-VCR combination products for the Company. In
1991, the Purchaser purchased 1,450,000 shares of newly issued shares of the
Company's Common Stock. At that time, the Company and the Purchaser also
entered into a number of additional technology agreements, providing for, among
other things, expanded cooperative engineering efforts on products, including
high definition television.
In January 1995, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") began assisting the Company in exploring possible strategic
alternatives, especially focusing on alternatives for raising equity capital to
fund the Melrose Park expansion and modernization program.
On February 23, 1995, the Company announced that, effective on April 24, 1995
(the date of its annual meeting of stockholders), Mr. Albin F. Moschner would
become President and Chief Executive Officer and Mr. Pearlman would retire,
remaining as Chairman until December 31, 1995.
In March and early April, 1995, the Company began the process for a public
equity offering, but this process ended in mid-April in light of the Company's
first quarter results and its expectations for the year.
During the week of April 2, 1995, the Chairman of the Executive Committee of
the Board of the Company, Mr. T. Kimball Brooker, was contacted by
representatives of a non-United States entity involved in the consumer
electronics business (the "Other Consumer Products Entity") which had an
interest in a possible change of control transaction involving the Company.
On April 12, 1995, representatives of the Company, including Messrs.
Pearlman, Moschner and Brooker, held an introductory meeting with the chief
executive officer and other representatives of the Other Consumer Products
Entity. At this meeting, the representatives of the Other Consumer Products
Entity and the representatives of the Company discussed the need for the Other
Consumer Products Entity to review certain information and documents relating
to the Company before the Other Consumer Products Entity would be able to
decide if it wanted to submit a proposal and the need for an agreement to
govern the terms of such review. No proposal for a transaction between the
Company and the Other Consumer Products Entity was made at the April 12, 1995
meeting.
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As of April 24, 1995, the Company retained Merrill Lynch in connection with
either (i) a possible offering by the Company of equity or equity-linked
securities, (ii) a possible investment by the Purchaser in one of the Company's
operating facilities or businesses or in the Company or (iii) another
alternative strategic transaction involving the sale of an interest in, or all
of, the Company's stock or assets.
On April 28, 1995, the Company entered into a confidentiality agreement with
the Other Consumer Products Entity and subsequently provided such entity with
confidential information concerning the Company. The confidentiality agreement
provided for a two-week period ending May 15, 1995 during which the Company
agreed that it would not sell, or enter into discussions with any third party
regarding the sale of, stock of the Company. The confidentiality agreement
permitted the Company to continue discussions with the Purchaser with respect
to a possible equity investment by the Purchaser in the Company's picture tube
operations. The confidentiality agreement also contained "standstill"
provisions which precluded such entity for a period of 18 months from, among
other things, acquiring shares of Common Stock of the Company without the
Company's consent, provided that such provisions would terminate if the Company
entered into negotiations with a third party for the issue and sale of 25% or
more of the Company's stock.
On May 8, 1995, the Company received a proposal from the Other Consumer
Products Entity which provided for a two-step transaction. The first step was
to consist of the purchase by a publicly traded subsidiary of the Other
Consumer Products Entity (the "Consumer Products Subsidiary") of 9,300,000
newly issued shares of Common Stock in exchange for newly issued shares of
common stock of the Consumer Products Subsidiary (the market value of the
9,300,000 shares of Common Stock and the shares of common stock of the Consumer
Products Subsidiary each being approximately $70,000,000). The second step of
the proposed transaction was to consist of (i) the purchase of 20,000,000 newly
issued shares of Common Stock by the Consumer Products Subsidiary at the
current market price for $150,000,000 in cash, (ii) the purchase of 13,300,000
newly issued shares of Common Stock (valued at the market price per share) by
the Consumer Products Subsidiary in exchange for newly issued shares of common
stock of the Consumer Products Subsidiary (valued at the market price per
share), and (iii) the execution of certain "strategic alliance agreements"
between the Company and the Consumer Products Subsidiary. In addition, the May
8, 1995 proposal provided that the Consumer Products Subsidiary could purchase
additional shares of Common Stock in the market until it owned at least 51% of
the outstanding shares of Common Stock on a fully diluted basis and that, if
the Other Consumer Products Entity subsequently proposed a merger or similar
transaction involving the Company, such transaction would require approval of
the independent directors of the Company.
Between May 8, 1995 and May 24, 1995, senior management and advisors of the
Company had numerous meetings and phone conversations with representatives of
the Other Consumer Products Entity concerning possible synergies between the
Consumer Products Subsidiary and the Company, the structure of the proposed
transaction between the Consumer Products Subsidiary and the Company, and the
premium above the market price per share of the Common Stock to be paid by the
Consumer Products Subsidiary. On May 24, 1995, senior management of the Company
met with a representative of the Other Consumer Products Entity. At such
meeting, the representative of the Other Consumer Products Entity proposed a
revised two-step transaction structured along the same lines as had been
discussed among senior management of the Company and representatives of the
Other Consumer Products Entity. The first step was to consist of the purchase
of 9,300,000 shares of newly issued Common Stock by the Consumer Products
Subsidiary for $7.50 per share in cash and the execution of certain operational
agreements. The second step was to consist of (i) the purchase of 8,900,000
newly issued shares of Common Stock by the Consumer Products Subsidiary for
$8.25 per share in cash, (ii) the purchase of 38,000,000 newly issued shares of
Common Stock (valued at $8.25 per share) by the Consumer Products Subsidiary in
exchange for newly issued shares of common stock of the Consumer Products
Subsidiary having an equivalent value (based on the market price per share),
(iii) an option, exercisable by either the Company or the Consumer Products
Subsidiary upon certain
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conditions, providing for the exchange of the 38,000,000 shares of Common Stock
to be purchased by the Consumer Products Subsidiary pursuant to clause (ii)
above for the shares of common stock of the
Consumer Products Subsidiary to be issued to the Company as consideration
pursuant to such clause (ii), (iv) the issuance of warrants to purchase shares
of Common Stock to the Consumer Products Subsidiary at a price to be determined
by the parties, and (v) the lack of any limitation on additional acquisitions
of shares of Common Stock by the Consumer Products Subsidiary. The Company
responded to the May 24, 1995 proposal with a proposal with the same structure
but providing for a price per share of Common Stock of $10.25 for the first
step of the transaction and a value per share of Common Stock of $11.75 for
each of the second steps of the transaction.
Between May 24, 1995 and June 15, 1995, senior management of the Company and
representatives of the Other Consumer Products Entity had several telephone
conversations relating to their respective proposals. On June 15, 1995, the
Company sent the Other Consumer Products Entity a letter proposing a revised
transaction again consisting of two steps. In the first step there would be (i)
the purchase by the Consumer Products Subsidiary of 9,300,000 newly issued
shares of Common Stock at a purchase price of $9.00 per share in cash, and (ii)
the execution of certain operational agreements between the Company and the
Consumer Products Subsidiary. The second step would involve (i) the purchase by
the Consumer Products Subsidiary of 10,600,000 newly issued shares of Common
Stock at a purchase price of $11.00 per share in cash, (ii) the purchase by the
Consumer Products Subsidiary of 36,300,000 newly issued shares of Common Stock
(valued at $11.00 per share) in exchange for newly issued shares of common
stock of the Consumer Products Subsidiary (valued at the market price per
share), (iii) an option, exercisable by either the Company or the Consumer
Products Subsidiary upon certain conditions, providing for the exchange of the
36,300,000 shares of Common Stock to be purchased by the Consumer Products
Subsidiary pursuant to clause (ii) above for the shares of capital stock of the
Consumer Products Subsidiary to be provided as consideration pursuant to such
clause (ii), (iv) the issuance of warrants to purchase shares of Common Stock
to the Consumer Products Subsidiary at a price to be agreed upon by the
parties, and (v) the lack of any limitation on additional acquisitions of
shares of Common Stock by the Consumer Products Subsidiary. The Company's June
15, 1995 proposal was not responded to by, and no further proposals were
received from the Other Consumer Products Entity.
None of the proposals received from the Other Consumer Products Entity
involved payment to the Company's stockholders, and each such proposal was at a
per share value less than the Offer Price (such per share value being
determined by blending the per share value of the first step of each proposed
transaction with the per share value to be received in the multiple second step
transactions pursuant to each such proposal).
On May 16, 1995, after the expiration of the two-week exclusivity period
afforded to the Other Consumer Products Entity, Mr. Moschner spoke with Mr. Koo
and advised him that the Company had been approached on an unsolicited basis by
another entity (not identified to Mr. Koo) about a possible transaction that
would involve a change of control of the Company and that because of the
Company's long relationship with the Purchaser, Mr. Moschner wanted to inform
Mr. Koo of that fact.
On May 20 and May 22, 1995, certain executives of the Company met with
certain executives of the Purchaser and representatives of its financial
advisor, Salomon Brothers Inc. The Purchaser indicated that it would consider
making a proposal to the Company concerning a possible investment in the
Company, as well as proceeding with the joint venture.
On May 23, 1995, the Executive Committee of the Company's Board met with
Company executives, Merrill Lynch and the Company's legal advisors to review
the status of negotiations with the Other Consumer Products Entity and the
discussions with the Purchaser. The Executive Committee authorized discussions
to continue with both parties and authorized Merrill Lynch to contact two
"financial buyers" to ascertain their interest in a private equity investment.
The two "financial buyers"
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contacted were recommended by Merrill Lynch as being the most promising of the
limited number of "financial buyers" likely to have an interest in the Company.
Both of the "financial buyers" contacted by Merrill Lynch executed
confidentiality agreements containing "standstill" provisions precluding such
entities from, among other things, acquiring, or agreeing, offering, seeking or
proposing to acquire, directly or indirectly, shares of Common Stock without
the Company's consent.
On May 31, June 1 and June 2, 1995, the Purchaser and its legal and financial
advisors met with various Company executives to discuss due diligence matters.
Following these meetings, the Company was advised that the Purchaser would need
several weeks before it could get back to the Company with any proposal. The
Company advised the Purchaser of its desire to have a proposal before the
Company's regularly scheduled board meeting on June 27, 1995.
On June 20 and June 21, 1995, Mr. Moschner met with representatives of the
two financial buyers contacted by Merrill Lynch in early June. The
representatives of one of the entities indicated little interest in a
transaction at that time. The representatives of the other entity indicated
that they were unfamiliar with the consumer electronics industry and would
require a lengthy review of the industry and the Company before they could
decide whether they had any interest in a transaction involving the Company.
On June 22, 1995, legal and financial advisors for both the Company and the
Purchaser met to discuss the manner in which the Purchaser's proposal would be
presented to the Company.
On June 27, 1995, Mr. Pyong Won (Peter) Suh, Executive Vice President and
Chief Technology Officer of the Purchaser, two other officers of the Purchaser,
and representatives of Salomon Brothers Inc and the Purchaser's legal advisors
appeared at a regular meeting of the Company's Board of Directors. Mr. Suh
presented two alternative proposals--the first proposal being a tender offer by
the Purchaser to the Company's stockholders for 17,863,000 shares of Common
Stock at $10.00 per share in cash, the purchase of 7,882,000 shares of Common
Stock from the Company at $7.875 per share in cash and the purchase of
10,118,000 shares of Common Stock from the Company at $10.00 per share in cash;
the second proposal being the establishment of a joint venture to own the
Melrose Park color picture tube plant in which the Purchaser agreed to pay the
Company an aggregate of $150 million for its 49.9% ownership interest in the
joint venture, of which $100 million would be contributed directly to the joint
venture and the balance paid directly to the Company. In addition, under the
joint venture proposal, the Purchaser would require a right of first refusal if
the Company sought to license its name. Following a discussion with Merrill
Lynch and the Company's legal advisors, the Board of Directors authorized the
Company's officers to commence negotiations with the Purchaser concerning the
first proposal. In giving this authorization, the Board of Directors recognized
that the joint venture proposal did not provide stockholders of the Company
with the opportunity to obtain cash from the Purchaser for a portion of their
shares and that entering into a joint venture with respect to the Melrose Park
color picture tube plant could discourage potential purchasers of the Company
from seeking control of the Company or otherwise adversely affect a potential
purchaser's valuation of the Company. The Board of Directors also considered
Merrill Lynch's preliminary analysis and comparison of the two alternative
proposals. The Board of Directors was advised that a number of material terms
and conditions of the joint venture proposal had not been resolved and that the
value attributed to the joint venture proposal by Merrill Lynch would vary
depending on resolution of those issues. The Company then notified the Other
Consumer Products Entity that its obligations under the standstill provisions
contained in the April 28, 1995 confidentiality agreement were terminated as a
result of negotiations and offered to provide updated financial information to
the extent such entity continued to have an interest in pursuing discussions.
No such information has been requested.
Following the June 27 Board meeting, Mr. Moschner and Mr. Suh and their
respective financial advisors met to discuss the terms of the Purchaser's
proposal. On June 28, 1995, certain executives of the Company and of the
Purchaser met to discuss the synergies that could be expected to result from
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a closer relationship between the Company and the Purchaser, including
synergies relating to management of North American sales and marketing,
consolidation of North American warehousing, order processing and distribution,
globalization of the Company's brand name, globalization of the Company's
Network Systems business, consolidation of North American manufacturing and
sourcing of products, reduction of material costs, mutually beneficial
commercial transactions between the Company and the Purchaser, product
development and technology sharing, and the Company provided the Purchaser with
updated financial information about the Company.
On July 11, 1995, the Purchaser delivered a revised proposal to the Company
wherein it proposed to make a tender offer to the Company's stockholders for
18,619,000 shares of Common Stock at $10.00 per share in cash and to purchase
16,500,000 shares of Common Stock from the Company for $10.00 per share in
cash.
On July 12, 1995, the Company's Board of Directors held a special meeting to
consider the revised proposal. Following a presentation by Merrill Lynch, the
Board authorized the Company's officers to commence the negotiation of a
definitive agreement with the Purchaser. During the next several days,
discussions were held on a range of legal issues, including, without
limitation, the conditions to the consummation of the purchase of the Offer
Shares and the issuance and sale of the Issue Shares and the exceptions to the
representations and warranties and covenants of the Company contained in the
Stock Purchase Agreement, and the terms and conditions of the definitive
agreement were negotiated subject to approval by the Company's Board of
Directors.
On July 17, 1995, a special meeting of the Board of Directors was held at
which the Board reviewed the definitive agreement in detail and also considered
the factors described below. Merrill Lynch delivered its written opinion to the
Board as described below and the Board unanimously approved the terms of the
Offer and the Purchaser's investment as described above. On the same day,
following such Board approval, the Company and the Purchaser entered into the
Stock Purchase Agreement and publicly announced their agreement. A copy of the
written opinion of Merrill Lynch delivered to the Board, which sets forth
certain assumptions made, matters considered and limits of the review by
Merrill Lynch in rendering such opinion, is attached as an exhibit hereto;
STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY. The Board
was aware that Merrill Lynch became entitled to certain of the fees described
in Item 5 in connection with its engagement by the Company upon the
consummation of such transactions.
In determining to make its recommendations, the Board considered a number of
factors, including:
(i) The oral and written presentations of Merrill Lynch and the written
opinion of Merrill Lynch to the effect that, from a financial point of
view, the proposed consideration to be received by the Company and its
stockholders in the proposed transactions, taken as a whole, is fair to the
Company and such stockholders;
(ii) The fact that the Company's stockholders will be entitled to receive
$10.00 per share in cash for at least a portion of their Common Stock,
while having the opportunity to retain an equity interest in a strengthened
Company;
(iii) The fact that the $10.00 per share to be paid pursuant to the Offer
and for the Issue Shares represents a significant premium over the recent
trading prices of the Common Stock;
(iv) The Board's familiarity with the financial condition, results of
operations, business, technology, prospects and strategic objectives of the
Company and the conditions of the consumer electronics industry;
(v) The high regard of management for the integrity and operating ability
of the Purchaser;
(vi) The fact that the additional financing from the Issue Shares will
permit the Company to complete its planned expansion and modernization
program for the Melrose Park picture tube
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plant, and the Board's belief that such program is a necessary element to
the Company's efforts to achieve and sustain future profitability;
(vii) The fact that the Board concluded, based in part on the advice of
its financial advisors, that alternative financing of similar magnitude to
the Purchaser's proposal was not reasonably available at the current time;
(viii) The views of management (based, in part, on management's knowledge
of the industry and the Company's competitors) and the views of the
Company's financial advisor (based, in part, on their contacts with the
Other Consumer Products Entity and with the two "financial buyers"
discussed above) as to the unlikelihood of a superior transaction, and the
ability of the Company to terminate the Stock Purchase Agreement (upon
payment of the Termination Fee) to accept a superior transaction if one
were proposed;
(ix) The fact that the Board concluded that the transactions contemplated
by the Stock Purchase Agreement, which would substantially strengthen the
Company's financial position, allow for increased synergies that would
benefit the Company and provide an opportunity for the Company's
stockholders to receive a cash premium over recent market prices for some
of their shares, would provide greater benefits for the Company and its
stockholders than for the Company to remain independent;
(x) The operational and commercial benefits to the Company (and the
public minority holders) from being able to operate from a strengthened
financial position and from synergies expected to result from the
relationship with the Purchaser;
(xi) The fact that the Purchaser acknowledged that as majority
stockholder of the Company after the Purchaser acquires the Offer Shares
and the Issue Shares it will have fiduciary duties to the public minority
holders and that the Purchaser has agreed to elect three directors
unaffiliated with the Purchaser or the Company to the Company's Board of
Directors, tempered by the fact that if the Purchaser desires to acquire
the remainder of the outstanding equity of the Company, under current
Delaware law the Company's Board of Directors would not have any obligation
to seek offers from third parties; and
(xii) The recommendation of management.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 of the Schedule 14D-9 is hereby amended and restated in its entirety
to read as follows:
On July 18, 1995, a purported stockholder class action suit was filed in the
Court of Chancery of the State of Delaware in and for New Castle County against
the Company, the members of the Board of Directors of the Company and the
Purchaser (Horwits v. Beckner, et al., C.A. No. 14424). On July 27, 1995, the
plaintiff filed an amended complaint (as so amended, the "Complaint"). The
Complaint alleges that the Company's directors breached their fiduciary duties
and failed to exercise loyalty, good faith, due care and complete disclosure
toward the Company and the stockholders of the Company in connection with (i)
the Company's 1995 annual meeting and (ii) the subsequent proposal by the
Purchaser to acquire a controlling interest in the Company pursuant to the
transactions contemplated by the Stock Purchase Agreement.
The Complaint alleges that the Company's proxy statement for its 1995 annual
meeting failed to disclose (i) discussions regarding a possible change of
control transaction, (ii) the Company's retention of Merrill Lynch, (iii) the
halting of a proposed public equity offering in April, 1995 and (iv) the
amendment of agreements providing "change in control" benefits to certain of
the Company's executives. In addition, the Complaint alleges that, in executing
the Stock Purchase Agreement and recommending that the stockholders approve the
transactions contemplated by the Stock Purchase Agreement, the Company's
directors failed to adequately explore the availability of alternatives to
maximize stockholder
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value or otherwise conduct a process to obtain the highest value reasonably
available to stockholders in a sale of control. The Complaint alleges that the
Schedule 14D-9 fails to disclose (i) material facts relating to Merrill Lynch's
fairness opinion, (ii) the factual basis or rationale for the Company's
management and financial advisors' views as to the unlikelihood of a superior
transaction, (iii) the factual basis for the Company's board of directors'
conclusion that alternative financing of a similar magnitude was not reasonably
available and (iv) the basis for the Company's board of directors' apparent
rejection of the Purchaser's June 27, 1995 joint venture proposal in favor of a
sale of control. The Complaint alleges that the Purchaser's Tender Offer
Statement on Schedule 14D-1 dated July 21, 1995 (the "Schedule 14D-1") and the
Schedule 14D-9 also fail to disclose (i) a schedule of "change of control"
payments required to be made, stock options which vest and shares of restricted
Common Stock which vest in connection with the transaction, (ii) the structure,
terms or timing of any proposals from the Purchaser prior to the two
alternative proposals presented by the Purchaser on June 27, 1995, (iii) the
terms and structure of the joint venture proposal made by the Purchaser on June
27, 1995, (iv) the structure, terms or timing of the proposed transaction or
counter-proposal of the Other Consumer Products Entity or whether the counter-
proposal was affirmatively rejected by the Other Consumer Products Entity and
(v) the specific dates of certain developments regarding the Other Consumer
Products Entity. The Complaint further alleges that the Purchaser aided and
abetted the Company's directors' alleged breach of their fiduciary duties. The
Complaint seeks (i) a declaration that the action may be maintained as a class
action, (ii) a declaration that the transactions contemplated by the Stock
Purchase Agreement are unfair, unjust and inequitable, (iii) invalidation of
the stockholder vote, including the election of directors, at the Company's
1995 annual meeting, (iv) invalidation of the Stock Purchase Agreement, (v) an
order compelling the Company's directors to conduct a proper process to explore
the availability of alternatives to maximize stockholder value and to
disseminate completely all material information relating to the transactions
contemplated by the Stock Purchase Agreement, (vi) to enjoin further steps
necessary to accomplish or implement the transactions contemplated by the Stock
Purchase Agreement, (vii) to compensate the plaintiff and members of the class
for all losses and damages allegedly suffered and to be suffered by them and
(viii) to award plaintiff costs, including reasonable attorneys', accountants'
and experts' fees.
On or about August 2, 1995, defendants agreed to proceed to provide plaintiff
with discovery on an expedited basis which would permit plaintiff, if
necessary, to seek preliminary injunctive relief prior to the Special Meeting
from the Delaware Court of Chancery in connection with plaintiff's claims.
On August 17, 1995, plaintiff filed a motion for preliminary injunctive
relief seeking an order (i) invalidating the April 25, 1995 shareholder vote,
(ii) enjoining the Offer or any further action in connection with consummation
of the Stock Purchase Agreement, (iii) enjoining the special meeting of
stockholders of the Company to be held to consider the transactions
contemplated by the Stock Purchase Agreement (the "Special Meeting"), (iv)
invalidating the Stock Purchase Agreement, (v) enjoining the Company and the
Board of Directors to disseminate complete disclosure of all material
information, (vi) enjoining the Board of Directors to conduct a proper process
to explore the availability of alternatives to maximize Company shareholder
value.
Commencing in August 1995 and continuing into September 1995, plaintiff's
counsel conducted a review of tens-of-thousands of pages of documents from the
Company, the Purchaser and certain third parties.
Following meetings, discussions and negotiations among counsel for the
Company and the Board of Directors and counsel for the plaintiff, on October 6,
1995, the Company, the Purchaser, the members of the Board of Directors, and
the plaintiff entered a Memorandum of Understanding setting forth the terms of
an agreement in principle to settle and terminate the litigation (the "Proposed
Settlement"). Under the Proposed Settlement, the Company agreed to include
certain additional information in the proxy statement for the Special Meeting
that was not contained in the offer documents or the preliminary copies of the
proxy statement which the Company filed with the Securities and Exchange
16
<PAGE>
Commission. In exchange for the Company's agreement to include these additional
disclosures, the plaintiff agreed not to take any action to enjoin or take
other legal action to prevent the stockholder vote on or consummation of the
transactions contemplated by the Stock Purchase Agreement; to release any and
all claims against the defendants, including all state and federal claims
arising out of the events described in the Complaint; and to dismiss, with
prejudice, the Complaint to effect termination of this litigation.
The Proposed Settlement is expressly conditioned on (a) the parties'
execution of a definitive Stipulation of Settlement; (b) the plaintiff's
completion of certain discovery designed to confirm that the settlement is fair
and reasonable and in the best interests of the Company's stockholders; (c) the
court's certification of a class of the Company's stockholders during the
period from March 23, 1995 through the date of the Special Meeting who do not
exclude themselves from the class, for purposes of settlement only; (d) the
court's preliminary and final approval of the settlement; and (e) the entry of
a final judgment dismissing the litigation. The Company also has the right, in
its sole discretion, to terminate the settlement if putative class members who
collectively hold more than a specified total number of shares elect to opt out
of the class.
The Company, the members of the Board of Directors, and the Purchaser denied,
and continue to deny, that they committed any violations of law or breaches of
duty as alleged in the Complaint, but entered the Memorandum of Understanding
and contemplate entering into the Stipulation of Settlement solely because the
Proposed Settlement would eliminate the burden and expense of further
litigation and would facilitate the consummation of the transactions
contemplated by the Stock Purchase Agreement. In agreeing to disclose
additional information, the Company does not admit the materiality of that
information or that the materials previously filed with the Securities and
Exchange Commission were in any way deficient. In connection with the Proposed
Settlement, it is anticipated that counsel for the plaintiff will apply to the
court for an aggregate award of attorneys' fees and expenses in an amount not
to exceed $300,000. As a condition of settlement, the Company has agreed to pay
plaintiff's counsel the amount awarded by the court. Before the Proposed
Settlement is finally approved by the court, notice of the proposed terms and
conditions of the settlement will be mailed to all members of any class
certified by the court, who will be afforded an opportunity to opt out of and
object to the settlement.
Copies of the Complaint and the Memorandum of Understanding are filed as
exhibits hereto.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO.
-----------
Exhibit 9 Memorandum of Understanding dated as of October 6, 1995.
Exhibit 10 Press Release issued by Zenith Electronics Corporation on
October 19, 1995.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Zenith Electronics Corporation
/s/ Albin F. Moschner
By: _________________________________
Name: Albin F. Moschner
Title:President and Chief
Executive Officer
Dated: October 19, 1995
18
<PAGE>
Exhibit 9
MEMORANDUM OF UNDERSTANDING
---------------------------
This Memorandum of Understanding is entered by and among Gwynne L.
Horwits, SEP IRA ("Plaintiff"), Harry G. Beckner, T. Kimball Brooker, David H.
Cohen, Ilene S. Gordon, Charles Marshall, Gerald M. McCarthy, Andrew McNally IV,
Albin F. Moschner, Peter S. Willmott, Jerry K. Pearlman (collectively, the
"Directors"), Zenith Electronics Corporation ("Zenith"), and LG Electronics Inc.
("LG") as of this 6th day of October 1995.
WHEREAS, on or about July 18, 1995, Plaintiff, a stockholder of
Zenith, commenced an action in the Court of Chancery of the State of Delaware,
New Castle County, against Zenith, the Directors, and LG (collectively the
"Defendants"), which action is titled Gwynne L. Horwits, SEP IRA v. Harry G.
Beckner, et al.; Civil Action No. 14424 (the "Action");
WHEREAS, on or about July 24, 1995, LG disseminated its Schedule 14D-1
Tender Offer Statement Pursuant to Section 14(D)(1) of the Securities Exchange
Act of 1934 (the "Schedule 14D-1"), and Offer to Purchase for Cash Up to
18,619,000 Shares of Common Stock (including associated rights) of Zenith
Electronics Corporation at $10.00 Net Per Share by LG Electronics Inc. (the
"Offer to Purchase"), and Zenith disseminated its Schedule 14D-9
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934 (the "Schedule 14D-9"), in connection with the
Transaction (defined below);
<PAGE>
WHEREAS, on or about July 27, 1995, Plaintiff filed an Amended Class
Action Complaint (the "Complaint");
WHEREAS, plaintiff filed the Action on its own behalf and as a
putative class action on behalf of all stockholders of Zenith (except Defendants
and their affiliates) who have been or will be adversely affected by the conduct
of Defendants as alleged in the Complaint (the "Class");
WHEREAS, the Complaint alleged various violations of fiduciary duties
on the part of the Directors in connection with their approval of the terms of a
Stock Purchase Agreement between Zenith and LG dated as of July 17, 1995 and the
transaction contemplated thereby (the "Transaction") and that Zenith and LG
failed to make adequate disclosures in connection with the Transaction,
including the Schedule 14D-1 and the Schedule 14D-9 (the "Tender Offer
Materials");
WHEREAS, the Complaint also alleged that Zenith failed to make
adequate disclosures in connection with Zenith's April 1995 annual stockholders'
meeting, including the proxy statement disseminated to Zenith stockholders in
connection therewith (the "March Proxy Materials");
WHEREAS, counsel for plaintiff served document production requests
upon the Defendants and their financial
-2-
<PAGE>
advisors, and have reviewed tens of thousands of pages of materials provided by
the Defendants and their advisors pursuant to those requests;
WHEREAS, plaintiff's counsel also have been provided certain
preliminary copies, which were filed with the Securities and Exchange
Commission, of proxy materials (the "Draft Proxy Materials") the final version
of which Zenith intends to distribute to shareholders in seeking approval of the
Transaction at a special meeting to be commenced for that purpose (the "Special
Meeting");
WHEREAS, as a result of the Action and pursuant to settlement
negotiations among counsel for the parties, Zenith has agreed to make certain
additional disclosures, which were not included in the Tender Offer Materials,
to Zenith stockholders in connection with the Transaction by supplementing the
information contained in the Draft Proxy Materials, without admitting the
materiality of said additional disclosures or any deficiency in the March Proxy
Materials, the Tender Offer Materials, or the Draft Proxy Materials;
WHEREAS, Plaintiff and its counsel believe, based on a review of
documents and other investigation into this matter, that the settlement
contemplated by this Memorandum of Understanding is fair to and in the best
interests of the Class and that substantial additional information on the
subjects of
-3-
<PAGE>
plaintiff's claims, which information was not disclosed in the Tender Offer
Materials but will be disclosed in the final proxy statement disseminated to
Zenith shareholders (including shareholders who have tendered shares) in
connection with the Special Meeting, including, among other things, the
additional information included pursuant to settlement negotiations, provides a
substantial benefit to the Class;
WHEREAS, but for the negotiated additional disclosures and the
disclosure of certain other information which plaintiff contended was not
included in the Tender Offer Materials, plaintiff would have alleged that the
proxy statement disseminated to Zenith shareholders in connection with the
Special Meeting was deficient in the same respects as the Tender Offer
Materials;
NOW THEREFORE, as a result of the foregoing and further negotiations
among counsel to the parties, the parties to the Action have agreed in principle
to a settlement of the Action on the terms and subject to the conditions set
forth below:
1. The parties to the Action will use their best efforts and will
attempt in good faith to agree upon and execute, within 30 days of the date of
this Memorandum of Understanding, an appropriate Stipulation of Settlement and
such other documentation as may be required in order to obtain approval by the
Court of the settlement of the Action, under Rules 23(a),
-4-
<PAGE>
23(b)(3) and 23(e) of the Court of Chancery, upon the terms set forth in this
Memorandum of Understanding. Pending the negotiation and execution of the
Stipulation of Settlement, plaintiff and its counsel will not seek a preliminary
injunction or any other equitable relief relating to the Transaction, and all
proceedings in the Action will be stayed except as provided herein. The
Stipulation of Settlement will describe plaintiff's claims and the procedural
history of the Action and will expressly provide:
(a) for the certification of the Action, for settlement purposes only,
as a class action pursuant to Chancery Court Rule 23(a) and (b)(3) on
behalf of all holders of Zenith common stock (except Defendants and their
affiliates) who held shares on any date between and including March 23,
1995 and the date of the Special Meeting, including the legal
representatives, heirs, transferees, successors in interest, or assigns of
all such foregoing holders (the "Class"), and that class members will be
given the opportunity to opt out of the proposed Class;
(b) for the complete discharge, settlement and release of, and an
injunction barring, all claims, rights, causes of action, suits, matters
and issues, whether known or unknown, that have been, could have been, or
in the future might be asserted in the Action or in any other court or
proceeding (including but not limited to any claims arising under
-5-
<PAGE>
federal or state law relating to alleged fraud, misrepresentation or
inadequate disclosure, breach of any duty, negligence, or otherwise) by or
on behalf of Plaintiff or any members of the Class, whether individual,
class, derivative, representative, legal, equitable or any type or in any
other capacity against Defendants or any of their associates, affiliates,
subsidiaries, present or former officers, directors, employees, attorneys,
financial advisers or other advisers or agents, heirs, executors, personal
representatives, estates, administrators, and successors and assigns which
have arisen, arise now or hereafter arise out of or relate in any way to
the Transaction, the Stock Purchase Agreement, the Tender Offer Materials
and any supplements or amendments thereto, the Offer to Purchase and any
supplements or amendments thereto, the proxy materials to be sent to Zenith
stockholders announcing the Special Meeting and seeking approval of the
transaction to be voted on at the Special Meeting, the March Proxy
Materials, the April 1995 annual meeting of shareholders, or any of the
documents, transactions, or events described in any complaint filed in the
Action (collectively, the "Settled Claims");
(c) that Defendants in this Action have denied, and continue to deny,
that any of them have committed or have threatened to commit any violations
of law or breaches of duty to the Plaintiff or the members of the putative
Class;
-6-
<PAGE>
(d) that Defendants in the Action are entering into this Memorandum of
Understanding, and will be entering into the Stipulation of Settlement,
solely because the proposed settlement would eliminate the burden and
expense of further litigation and would facilitate the consummation of the
Transaction, which Defendants believe is in the best interests of Zenith
and all of its stockholders;
(e) that subject to the order of the Court and pending final
determination of whether the settlement provided for in the Stipulation of
Settlement should be approved, Plaintiff and all members of the Class, or
any of them, are barred and enjoined from commencing or prosecuting any
action asserting any claims, either directly, representatively,
derivatively or in any other capacity, against any Defendant herein which
have been or could have been asserted, or which arise out of or relate in
any way to the Transaction, the Stock Purchase Agreement, the Tender Offer
Materials and any supplements or amendments thereto, the Offer to Purchase
and any supplements or amendments thereto, the proxy materials to be sent
to Zenith stockholders announcing the Special Meeting and seeking approval
of the transaction to be voted on at the Special Meeting, the March Proxy
Materials, the April 1995 annual meeting of stockholders, or any of the
documents, transactions, or events described in any complaint filed or to
be filed in the Action; and
-7-
<PAGE>
(f) that the Stipulation of Settlement shall be deemed rescinded and
void and of no further force or effect, without prejudice to any party,
unless: (i) plaintiff completes certain additional discovery, the scope of
which shall be agreed on by the parties, sufficient to enable plaintiff's
counsel to confirm that the settlement is fair and reasonable and in the
best interests of the Class; (ii) the Class is certified, for settlement
purposes only, in accordance with the terms of this Memorandum of
Understanding unless the parties otherwise agree to a modification of the
Class; and (iii) the Court enters an Order and Final Judgment approving the
settlement on the terms set forth in the Stipulation of Settlement,
releasing the Settled Claims, and dismissing the Action with prejudice and
without costs or expenses (except as provided in paragraph 6 herein). The
Company also has the right, in its sole discretion, to terminate the
settlement if putative class members who collectively hold more than a
specified total number of shares (to be set forth in a separate Opt Out
Letter Agreement between Zenith and plaintiff) elect to opt out of the
Class.
2. The parties to the Action will present the Stipulation of
Settlement to the Court for preliminary approval as soon as practicable after
its execution. Provided the settlement is preliminarily approved and the
putative class is certified for settlement purposes only in accordance with the
-8-
<PAGE>
terms of the Stipulation of Settlement, and following appropriate notice to the
members of the Class, the parties will use their best efforts to obtain prompt
final approval and implementation as necessary by the Court of the settlement
and all its terms, including the dismissal of the Action with prejudice.
3. Upon completion of the confirmatory discovery contemplated
herein, the execution of the Stipulation of Settlement, and the Court's
preliminary approval of the settlement, the members of the proposed class shall
be provided notice of the proposed settlement and its terms. Said notice shall
be drafted in a form and delivered to stockholders in a manner mutually
agreeable to the parties and approved by the Court, and the expense of printing
and mailing notice shall be borne by Zenith.
4. The parties agree that the confirmatory discovery contemplated
herein may include depositions of Defendants and their investment advisors, all
of which shall be subject to the Stipulation and Order Governing the Protection
and Exchange of Confidential Material previously entered in this Action, which
shall commence as soon as practicable after execution of this Memorandum of
Understanding and shall be completed within 21 days after this Memorandum of
Understanding is signed by all parties or within such other time as the parties
may mutually agree.
-9-
<PAGE>
5. If the settlement is not consummated in accordance with Paragraph
1, this Memorandum of Understanding shall be null and void and of no force and
effect, and shall not be deemed, used, or offered to prejudice in any way the
positions of the parties with respect to the Action or otherwise.
6. In connection with the settlement contemplated by this Memorandum
of Understanding, Plaintiff's counsel will apply to the Court for an aggregate
award of attorneys' fees and expenses in an amount not to exceed $300,000
(collectively, the "Fees and Expenses"). Defendants agree that they will not
oppose such application. Subject to the terms and conditions of this Memorandum
of Understanding and the terms and conditions of the Stipulation of Settlement
contemplated by Paragraphs 1 through 12 hereof, Zenith will pay Plaintiff's
counsel such Fees and Expenses (not to exceed $300,000) as may be awarded by the
Court.
7. The settlement of this Action and any award of attorneys' fees
and expenses by the Court is not conditioned on consummation of the Transaction.
8. This Memorandum of Understanding and the settlement contemplated
by it shall be governed by, and construed in accordance with, the laws of the
State of Delaware.
-10-
<PAGE>
9. This Memorandum of Understanding may be modified or amended only
by a writing signed by all the signatories hereto.
10. Plaintiff and its counsel represent and warrant that none of the
Plaintiff's alleged claims or causes of action against Defendants have been
assigned, encumbered or in any manner transferred in whole or in part.
11. This Memorandum of Understanding shall be binding upon and inure
to the benefit of the parties and their respective agents, executors, heirs,
successors and assigns.
12. This Memorandum of Understanding may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Each of the attorneys
executing this Memorandum of Understanding on behalf of one or more parties
warrants and represents that he or she has been duly authorized and empowered to
execute this Memorandum of Understanding on behalf of said party or parties.
-11-
<PAGE>
Of Counsel:
/s/ Pamela S. Tikellis
WOLF HALDENSTEIN ADLER ___________________________
FREEMAN & HERZ, LLP Pamela S. Tikellis
270 Madison Avenue Robert J. Kriner, Jr.
9th Floor CHIMICLES, JACOBSEN & TIKELLIS
New York, New York 10016 One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
(302) 656-2500
Attorneys for GWYNNE L. HORWITS, SEP IRA
Of Counsel:
/s/ R. Franklin Balotti
SIDLEY & AUSTIN __________________________
One First National Plaza R. Franklin Balotti
Chicago, Illinois 60603 Robert J. Stearn, Jr.
RICHARDS, LAYTON & FINGER
One Rodney Square
P. O. Box 551
Wilmington, Delaware 19801
(302) 658-6541
Attorneys for HARRY G. BECKNER, T. KIMBALL
BROOKER, DAVID H. COHEN, ILENE S. GORDON,
CHARLES MARSHALL, GERALD M. McCARTHY, ANDREW
McNALLY IV, ALBIN F. MOSCHNER, PETER S.
WILLMOTT, JERRY K. PEARLMAN, AND ZENITH
ELECTRONICS CORPORATION
Of Counsel:
/s/ Kenneth J. Nachbar
MAYER, BROWN & PLATT ___________________________
190 South LaSalle Street Kenneth J. Nachbar
Chicago, Illinois 60603 MORRIS, NICHOLS, ARSHT & TUNNEL
(312) 782-0600 1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
(302) 658-9200
Attorneys for LG ELECTRONICS INC.
-12-
<PAGE>
Exhibit 10
FOR IMMEDIATE RELEASE
---------------------
ZENITH ANNOUNCES THIRD-QUARTER PROFIT
-------------------------------------
Major Cost Reductions Help Offset Sales Decline,
Contribute to Improvements from First Half
GLENVIEW, Ill., Oct. 19, 1995 -- Zenith Electronics Corporation today reported
a third-quarter 1995 profit of $1.8 million or 4 cents per share, compared with
a profit of $9.4 million, or 21 cents per share, in the third quarter of 1994.
Results for both periods included one-time, non-recurring items: a $7.5 million
tax refund and a $0.8 million gain on asset sales in the 1995 quarter, compared
with a $5.5 million gain on property sales in the 1994 quarter.
The third-quarter profit represents a substantial improvement from Zenith's
net loss of $69.6 million in the seasonally-weaker first half of the year,
the company said.
Major cost reductions from re-engineering programs and reduced cycle times,
including new initiatives launched in the third quarter, helped offset the
effect of lower sales, lower prices and higher material costs compared with the
third quarter of 1994. The devaluation of the Mexican peso also had a positive
impact on costs again in the third quarter of this year.
Third-quarter sales were $332 million in 1995 and $419 million in 1994.
Despite this 20 percent decline in overall dollar sales, the domestic market
share of Zenith-brand direct-view color TV was relatively constant with the
third quarter last year. The sales decline reflected a variety of factors
including lower selling prices, very soft direct-view color television domestic
industry conditions, reduced VCR revenues and significantly lower color TV unit
sales in Mexico.
(MORE)
<PAGE>
-2-
Sales of Network Systems products -- set-top boxes and data modems sold
primarily to the cable TV industry -- were essentially unchanged from the third
quarter of 1994. In the third quarter, Zenith announced a multi-million-dollar
agreement with "Mega TV" to provide as many as 200,000 wireless cable decoders
for Malaysia's new pay TV operation over the next six months.
Total sales in the first nine months of 1995 were $879 million, compared
with $1,015 million in the first nine months of 1994. Zenith reported a net loss
of $67.8 million, or $1.46 per share in the first nine months of 1995, compared
with a nine-month 1994 loss of $10.9 million, or 21 cents per share. Nine-month
1995 results include the $7.5 million tax refund and the $0.8 million gain on
asset sales in the third quarter and $18.0 million in special charges for
severance and other non-recurring items in the second quarter. The 1994
nine-month period included asset sales of $6.9 million.
The third quarter was marked by major progress in high-definition
television (HDTV) and related digital TV technologies developed by Zenith and
other members of the "Digital HDTV Grand Alliance." The final rounds of
laboratory and field tests of the Grand Alliance system have been successfully
completed, representing some of the last steps in the eight-year technical
evaluation process conducted by the Federal Communications Commission (FCC)
Advisory Committee on Advanced Television Service (ACATS). Next month, the
ACATS is expected to recommend that the FCC adopt the Grand Alliance system
(including Zenith-developed digital transmission technology) as the new U.S.
digital television broadcast standard.
(MORE)
<PAGE>
-3-
Also next month, the transaction under which LG Electronics Inc. (formerly
Goldstar Co. Ltd.) will acquire 57.7 percent of the outstanding shares of Zenith
common stock through a tender offer and a direct investment in Zenith is
scheduled to be completed. The $351 million transaction, announced in July, is
subject to Zenith shareholder approval, as well as the successful completion of
the tender offer. Zenith has scheduled its special shareholders' meeting to vote
on the transaction for Nov. 7. All required government approvals have been
obtained.
-30-
MEDIA CONTACT: John Taylor (708) 391-8181
INVESTOR CONTACT: Bill McNitt (708) 391-7713
<PAGE>
<TABLE>
<CAPTION>
ZENITH ELECTRONICS CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net sales $332.5 $419.4 $879.2 $1,015.5
------ ------ ------ --------
Costs, expenses and other:
Cost of products sold 303.1 382.3 828.2 928.7
Selling, general and administrative 28.9 28.6 80.2 78.4
Engineering and research 10.7 11.2 34.2 34.0
Other operating expenses (income), net (9.2) (10.8) (19.6) (18.9)
Restructuring and other charges -- -- 18.0 --
------ ------ ------ --------
Operating income (loss) (1.0) 8.1 (61.8) (6.7)
Gain on asset sales, net .8 5.5 .8 6.9
Interest expense (5.7) (4.7) (15.1) (11.8)
Interest income .2 .2 .6 .4
------ ------ ------ --------
Income (loss) before income taxes (5.7) 9.1 (75.5) (11.2)
Income taxes (credit) (7.5) (.3) (7.7) (.3)
------ ------ ------ --------
Net income (loss) $ 1.8 $ 9.4 $(67.8) $ (10.9)
====== ====== ====== ========
Net income (loss) per common share $ .04 $ .21 $(1.46) $ (.27)
====== ====== ====== ========
Weighted average shares outstanding 46.9 44.0 46.5 41.0
</TABLE>
