UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to____________
Commission File Number: 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 Milwaukee Avenue, Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
(847) 391-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of July 31, 1996, there were 65,820,542 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE>
ZENITH ELECTRONICS CORPORATION
FORM 10-Q
INDEX
Page
Number
--------
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations --
Three and Six months ended June 29, 1996 and July 1, 1995 3
Condensed Consolidated Balance Sheets --
June 29, 1996, December 31, 1995 and July 1, 1995 4
Condensed Consolidated Statements of Cash Flows --
Six months ended June 29, 1996 and July 1, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations 8
Liquidity and Capital Resources 9
Part II. Other Information:
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Securities Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 12
Index to Exhibits 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------
In Millions, Except Per Share Amounts
Three Months Ended Six Months Ended
---------------------- ----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net sales $ 282.1 $ 284.6 $ 519.5 $ 546.7
---------- ---------- ---------- ----------
Costs, expenses and other:
Cost of products sold 269.7 274.6 499.0 520.8
Selling, general and
administrative 37.0 26.7 71.8 55.7
Engineering and research 11.7 11.6 22.9 23.4
Other operating expense
(income), net (Note 3) (5.8) (5.9) (9.9) (10.4)
Restructuring and other
charges - 18.0 - 18.0
---------- ---------- ---------- ----------
Operating income (loss) (30.5) (40.4) (64.3) (60.8)
Gain on asset sales, net - - 0.3 -
Interest expense (3.6) (5.3) (6.9) (9.4)
Interest income 0.9 0.2 2.4 0.4
---------- ---------- ---------- ----------
Income (loss) before income taxes (33.2) (45.5) (68.5) (69.8)
Income taxes (credit) - (0.2) - (0.2)
---------- ---------- ---------- ----------
Net Income (loss) $ (33.2) $ (45.3) $ (68.5) $ (69.6)
========== ========== ========== ==========
Net income (loss) per common
share (Note 4) $ (0.51) $ (0.97) $ (1.06) $ (1.50)
========== ========== ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------
In Millions
June 29, December 31, July 1,
1996 1995 1995
-------- ------------ --------
ASSETS
- ------
Current assets:
Cash $ 22.9 $ 93.2 $ -
Receivables, net of allowance for
doubtful accounts of $3.3, $3.6
and $3.2, respectively 190.8 201.3 165.0
Inventories (Note 5) 247.2 192.2 284.8
Other 9.4 7.8 8.4
-------- ------------ --------
Total current assets 470.3 494.5 458.2
Property, plant and equipment, net 185.7 184.7 181.8
Other 7.5 11.1 15.5
-------- ------------ --------
Total assets $ 663.5 $ 690.3 $ 655.5
======== ============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term debt (Note 6) $ - $ - $ 43.9
Current portion of long-term
debt (Note 6) 16.0 9.0 6.5
Accounts payable 107.8 71.8 90.6
Income taxes payable 0.5 1.2 0.5
Accrued expenses 123.8 132.4 130.1
-------- ------------ --------
Total current liabilities 248.1 214.4 271.6
Long-term debt (Note 6) 158.1 168.8 215.5
Stockholders' equity:
Preferred stock - - -
Common stock (Note 7) 65.9 63.5 47.0
Additional paid-in capital 456.3 440.0 295.0
Retained earnings (deficit) (263.2) (194.7) (171.9)
Treasury stock (1.7) (1.7) (1.7)
-------- ------------ --------
Total stockholders' equity 257.3 307.1 168.4
-------- ------------ --------
Total liabilities and
stockholders' equity $ 663.5 $ 690.3 $ 655.5
======== ============ ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
In Millions
Increase (Decrease) in Cash
Six Months Ended
---------------------------
June 29, July 1,
1996 1995
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (68.5) $ (69.6)
Adjustments to reconcile net income (loss) to
net cash used by operations:
Depreciation 16.8 16.5
Other - (0.4)
Employee retirement plan contribution
made in stock 5.3 -
Gain on asset sales, net (0.3) -
Changes in assets and liabilities:
Current accounts (20.0) (18.3)
Other assets 0.6 (0.9)
----------- -----------
Net cash used by operating activities (66.1) (72.7)
----------- -----------
Cash flows from investing activities:
Capital additions (18.2) (30.2)
Proceeds from asset sales 4.3 -
----------- -----------
Net cash used by investing activities (13.9) (30.2)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net - 43.9
Proceeds from issuance of long-term debt - 40.0
Proceeds from issuance of common stock, net 13.4 10.1
Principal payments on long-term debt (3.7) -
----------- -----------
Net cash provided by financing activities 9.7 94.0
----------- -----------
Decrease in cash (70.3) (8.9)
Cash at beginning of period 93.2 8.9
----------- -----------
Cash at end of period $ 22.9 $ -
=========== ===========
Increase (decrease) in cash attributable to
changes in current accounts:
Receivables, net $ 10.0 $ 40.7
Income taxes, net (0.7) 0.5
Inventories (55.0) (39.6)
Other assets (1.7) 1.5
Accounts payable and accrued expenses 27.4 (21.4)
----------- -----------
Net change in current accounts $ (20.0) $ (18.3)
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 6.4 $ 8.8
Income taxes 0.6 (1.0)
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Zenith Electronics Corporation
-------------------------------
Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------
Note 1 - Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations of
the Securities and Exchange Commission. The accuracy of the amounts in the
financial statements is in some respects dependent upon facts that will exist,
and procedures that will be performed by the company, later in the year. In
the opinion of management, all adjustments necessary for a fair presentation
of the financial statements have been included and are of a normal, recurring
nature. For further information, refer to the consolidated financial
statements and notes thereto included in the company's Form 10-K for the year
ended December 31, 1995.
Note 2 - Subsequent event
On July 24, 1996, Albin F. Moschner resigned as president, chief executive
officer and director of the company. Peter S. Willmott, 59, former president
and chief operating officer of Federal Express Corp. (now known as Fed Ex),
as well as a member of the company's board for the past six years, was named
interim president and chief executive officer. A search led by Mr. Willmott
and the board is being undertaken for Mr. Moschner's successor.
The company anticipates that the financial results for the third quarter of
1996 will reflect a severance expense related to Mr. Moschner's resignation
of approximately $5 million.
Note 3 - Other operating expense (income)
Royalty income accrued in relation to tuning system patents was $5.0 million
and $9.6 million for the three and six months ended June 29, 1996, respectively,
and $5.3 million and $9.2 million for the three and six months ended July 1,
1995, respectively. These amounts are included in Other Operating Expense
(Income).
Note 4 - Earnings per share
Primary earnings per share are based upon the weighted average number of shares
outstanding and common stock equivalents, if dilutive. Fully diluted earnings
per share, assuming conversion of the 6-1/4% convertible subordinated debentures
and the 8.5% convertible senior subordinated debentures, are not presented
because the effect of the assumed conversion is antidilutive. The weighted
average number of shares was 65.0 million and 64.3 million for the three and
six months ended June 29, 1996, respectively, and 46.9 million and 46.4 million
for the three and six months ended July 1, 1995, respectively.
Note 5 - Inventories
Inventories consisted of the following (in millions):
June 29, December 31, July 1,
1996 1995 1995
---------- ------------ ----------
Raw materials and work-in-process $ 165.3 $ 128.7 $ 185.8
Finished goods 92.3 73.9 107.8
---------- ------------ ----------
257.6 202.6 293.6
Excess of FIFO cost over LIFO cost (10.4) (10.4) (8.8)
---------- ------------ ----------
Total $ 247.2 $ 192.2 $ 284.8
========== ============ ==========
As of June 29, 1996, December 31, 1995 and July 1, 1995, $51.6 million, $27.8
million and $49.9 million, respectively, of inventories were valued using the
LIFO method.
An actual determination of inventory under the LIFO method can only be made
at the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs. Since these estimates are
subject to many factors beyond management's control, interim results are
subject to the final year-end LIFO inventory determination.
<PAGE>
Note 6 - Short-term debt and credit arrangements; Long-term debt
On May 21, 1996, the company entered into an amendment (the "First
Amendment") to its $110 million Second Amended and Restated Credit Agreement
and its $40 million First Amended and Restated Term Loan Agreement, both dated
November 6, 1995 (the "Loan Agreements"), among the company, General Electric
Capital Corporation, as agent for itself and the other lenders named therein.
The First Amendment (i) revised the maximum capital expenditure levels,
increasing the amount for 1996 from $142.0 million to $180.0 million and (ii)
revised the minimum net worth levels, reducing the amounts from $245.0 million
to $215.0 million as of June 29, 1996, and from $245.0 million to $211.0
million for every quarter thereafter.
The Loan Agreements contain restrictive financial covenants that must be
maintained as of the end of each fiscal quarter, including a liabilities to net
worth ratio and a minimum net worth amount. As of June 29, 1996, the ratio of
liabilities to net worth was required to be not greater than 4.00 to 1.0 and
was actually 1.58 to 1.0, and net worth was required to be equal to or greater
than $215.0 million and was actually $257.3 million. At the end of each fiscal
quarter through April 4, 1998, the liabilities to net worth ratio is required to
be maintained at 4.00 to 1.0, and minimum net worth is required to be $211.0
million. The Agreements restrict the amount of capital expenditures by the
company in each fiscal year. For the fiscal years 1996, 1997 and each
fiscal year thereafter, the company is permitted to make capital expenditures
(as defined in the Credit Agreement and Term Loan Agreement) of up to $180.0
million, $87.0 million and $60.0 million, respectively.
In addition, there are restrictions regarding investments, acquisitions,
guaranties, transactions with affiliates, sales of assets, mergers and
additional borrowings, along with limitations on liens. The Agreements
prohibit dividend payments on the company's common stock, restricts dividend
payments on any of its preferred stock, if issued, and prohibits the redemption
or repurchase of stock.
Note 7 - Stockholders' equity
During the first-quarter of 1996 the company issued 782,382 shares of common
stock to its profit-sharing retirement plans to fulfill the 1995 retirement
plan obligation to eligible salaried and hourly U.S. employees.
Stockholders' equity increased by $5.3 million as a result of this transaction.
During the second quarter of 1996 the company sold 1.6 million shares of
common stock to employees of the company via the exercise of previously issued
stock options. Stockholders' equity increased by $13.4 million as a result of
these sales of common stock.
Note 8 - Reclassifications
Certain prior-year amounts have been reclassified to conform with the
presentation currently used.
Note 9 - Related party
On November 8, 1995, LG Electronics, Inc. ("LGE") and its majority owned
subsidiary LG Semicon Co. LTD., purchased 18,619,000 shares of common
stock of the company pursuant to LGE's tender offer at $10.00 per share,
and purchased 16,500,000 newly issued shares of common stock from the
company at $10.00 per share. After giving effect to such transactions,
LGE beneficially owns 36,569,000 shares of common stock, which represents
approximately 56 percent of the outstanding common stock as of June 29, 1996.
The following represent the most significant transactions between the
company and LGE during the three and six months ended June 29, 1996, all of
which, in the opinion of management, were made at an arms-length basis:
Product purchases: In the ordinary course of business, the company purchases
VCRs, TV-VCR combinations and components from LGE and its affiliates.
The company purchased $22.4 million and $27.0 million of these items
during the three and six months ended June 29, 1996, respectively. Sales of
products purchased from LGE and its affiliates contributed $27.6 million and
$43.4 million to sales for the three and six months ended June 29, 1996,
respectively.
Product and other sales: The company sells CRT tubes and yokes and other
manufactured subassemblies to LGE and its affiliates at prices that equate to
amounts charged by the company to its major customers. Sales by the company to
LGE and its affiliates were $5.5 million and $9.3 million during the three and
six months ended June 29, 1996, respectively.
As of June 29, 1996, receivables included $3.0 million from LGE and its
affiliates and accounts payable included $25.1 million to LGE and its
affiliates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The company reported a second-quarter 1996 net loss of $33.2 million, or 51
cents per share, compared with a net loss of $45.3 million, or 97 cents per
share, in the 1995 quarter. Second-quarter 1995 results included $18.0
million, or 39 cents per share, of restructuring and other charges.
Total second-quarter sales were $282.1 million in 1996 and $284.6 million in
1995.
The 1996 quarterly loss reflected continuing soft color television industry
conditions, lower prices and higher co-op advertising expenses (resulting from
distribution changes), as well as $5 million of one-time items, primarily
consulting fees. Major cost reductions from re-engineering programs, reduced
material costs and improved efficiencies helped offset some of the negative
factors in the quarter.
In consumer electronics, the company's sales increased in the quarter,
although selling prices declined by $14 million compared with the 1995 quarter.
Domestic industry direct-view color TV sales to dealers, which were weaker in
the quarter than in 1995, rebounded in June to a record pace. Industry sales
to dealers of giant-screen projection television sets were up again in the
quarter. The company's domestic color TV market share increased during the
quarter in both key categories.
The company's color TV unit sales in international markets were higher
compared with the 1995 quarter, as were sales of commercial TV products for the
lodging, educational and health care markets. Sales of color picture tubes to
other manufacturers declined in the quarter.
Sales of Network Systems products -- primarily set-top boxes sold mostly to
the cable television industry -- declined in the quarter as industry demand for
analog set-top boxes softened. However, the company and industry sales of
cable modems, while still relatively small, rose in the quarter.
Selling, general and administrative expenses were $37.0 million in the second
quarter of 1996, compared with $26.7 million in the previous year. The 39
percent increase was due mainly to the increased co-op advertising expenses
(due to changes in distribution) and the one-time charges relating to outside
consulting fees.
Results for the second quarter include $5.0 million of accrued royalty
revenues from tuning system licenses. These revenues were $5.3 million in the
second quarter of 1995.
For the first six months of 1996 the company reported a net loss of $68.5
million, or $1.06 per share, compared with a net loss of $69.6 million (which
included $18.0 million of restructuring and other charges), or $1.50 per share
for the first six months of 1995. First-half sales were $519.5 million in 1996
compared with $546.7 million in 1995. Domestic industry color television
selling prices in the first half of 1996 were substantially lower than a year
ago and the industry pricing environment is not expected to improve during the
rest of the year. The company selectively reduced color TV prices in February
1996 in response to competitors' pricing actions in order to maintain market
share. Although the company continues to seek more than $75 million in
additional cost reduction opportunities for 1996, the decline in color TV
pricing and inflationary cost pressures are expected to have a negative
impact on the company's financial results for 1996.
During the second-quarter of 1996 the company announced a series of product
initiatives based on its cable modem and set-top box technologies that
contemplate (i) the licensing of certain technology from DiviCom Inc., for use
in development of digital set-top terminals offering advanced 8-bit graphics
and CD-quality audio capability for wired and wireless video networks;
(ii) the offering of a cable modem system in cooperation with U.S. Robotics,
Inc. that would allow cable operators with one-way cable systems to provide
their subscribers with Internet access without needing to upgrade their
systems to two-way cable technology; and (iii) the use of an integrated
end-to-end solution for two-way cable operators to provide ultra-high speed
data delivery, based on Zenith cable modems, Microsoft Corporation's Windows
NT Public Networks server software and Cisco Systems internetworking
technology. In addition, the company announced an agreement to collaborate
with a privately held software company, Diba Inc., on interactive television
technology that will allow TV viewers to access the Internet on their
television screens. The first Zenith "NetVision" Web-browsing TVs are
planned for fall 1996 shipment.
The company has not yet recognized any revenues from these recently announced
product initiatives and does not anticipate significant revenues from these
initiatives in 1996. Whether the company will achieve significant revenues
or profits from these product initiatives in the near term or ever will depend
largely on market acceptance of the products and the existence of competitive
products. The company expects from time to time in the future to announce
other product initiatives. The ultimate contribution of any such initiatives
to the financial performance of the company will similarly depend on such
factors.
<PAGE>
Liquidity and Capital Resources
Cash decreased $70.3 million during the six months ended June 29, 1996. The
decrease consisted of $66.1 million of cash used by operating activities and
$13.9 million of cash used to purchase fixed assets, net of proceeds from
asset sales, offset by $9.7 million of cash provided from financing activities
which consisted of $13.4 million of proceeds from the issuance of common
stock less $3.7 million of cash used to pay maturities of the Term Loan
Agreement.
During the six months ended June 29, 1996, the $66.1 million of cash used by
operating activities principally funded a $51.7 million net loss as adjusted
for depreciation and a $20.0 million change in current accounts. The change in
current accounts was composed primarily of a $55.0 million increase in
inventories (mainly to support higher projected shipment schedules in the
second half of the year) partially offset by a $27.4 million increase in
accounts payable and accrued expenses and a $10.0 million decrease in
receivables. In addition, the company reduced cash used by operating
activities by issuing common stock to the profit-sharing retirement plans
to fulfill the 1995 obligation to salaried employees and some hourly
employees. This issuance increased stockholders' equity by $5.3 million.
During the six months ended June 29, 1996, investing activities used $13.9
million of cash which consisted of capital additions of $18.2 million offset
by $4.3 million of proceeds from asset sales. For the same period of 1995,
capital additions were $30.2 million.
As of June 29, 1996, the company had $22.9 million of cash and had interest-
bearing obligations that consisted of $158.1 million of long-term debt, the
current portion ($10.2 million) of the Term Loan Agreement, the current
portion ($5.8 million) of the Debentures due 2011 and $25.0 million of
extended-term payables with LG Electronics, Inc. The company's long-term
debt is composed of $109.3 million of 6-1/4% Convertible Subordinated
Debentures due 2011 that require annual sinking fund payments of $5.8
million beginning in 1997, $24.3 million aggregate principal amount of 8.5%
Senior Subordinated Convertible Debentures due 2000 and 2001, and the
long-term portion of the Term Loan Agreement ($24.5 million). The Term Loan
Agreement requires scheduled quarterly principal payments over the life
of the loan with a balloon payment of $17 million due on the termination date
of the loan, June 30, 1998.
The company's Credit Agreement and Term Loan Agreement contain identical
financial covenants that must be maintained as of the end of each fiscal
quarter, including a liabilities to net worth ratio and a minimum net worth
amount. In addition, the Credit Agreement and the Term Loan Agreement
restrict the amount of capital expenditures by the company in each fiscal
year. (See Note 6 to the Condensed Consolidated Financial Statements for
further discussion on the financial covenants.)
Capital additions for the full year 1996 are expected to be about $135 million
as the company is planning significant capital investment projects primarily in
the color picture tube area, which include new automated production processes
and the addition of new production lines for computer display tubes along with
a new facility for production of color picture tubes for large-screen
direct-view color TV sets. To support its planned significant capital
investment projects during 1996 and 1997, the company is exploring options
for additional financing. There can be no assurance that the company will
be able to find the additional financing required to support these projects.
There can be no assurances that the company will not experience liquidity
problems in the future because of adverse market conditions or other
unfavorable events. However, the company believes that its Credit Agreement,
together with extended-term payables expected to be available from LG
Electronics, Inc. and the company's efforts to obtain other financing
sources, will be adequate to meet its seasonal working capital, capital
expenditure and other requirements during 1996.
As indicated in Note 2 to the Condensed Consolidated Financial Statements,
the company anticipates that the financial results for the third quarter of
1996 will reflect a severance expense related to Albin F. Moschner's
resignation as president, chief executive officer and director of the company
on July 24, 1996, of approximately $5 million.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the three months ended June 29, 1996, no reportable events or material
developments occurred regarding the legal proceedings of the company that would
need to be reported.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on April 24, 1996.
(c) At the meeting, the following matters were voted on by security holders:
1. Ten Directors were elected and received the following votes:
Broker
For Withheld Non-Votes
------------ ------------ ------------
T. Kimball Brooker 57,850,609 573,831 0
Ki-song Cho 57,841,640 582,800 0
Eugene B. Connolly 57,866,522 557,918 0
Robert A. Helman 57,762,933 661,507 0
Cha Hong (John) Koo 57,843,208 581,232 0
Hun Jo Lee 57,839,118 585,322 0
Andrew McNally IV 57,850,968 573,472 0
Albin F. Moschner 57,813,967 610,473 0
Yong Nam 57,843,358 581,082 0
Peter S. Willmott 57,860,555 563,885 0
2. Arthur Andersen LLP was approved as independent public accountants to
examine the consolidated financial statements of the company for the year
1996 and to perform other accounting services with 57,928,240 shares
voted for, 293,715 shares voted against and 202,485 shares abstaining.
There were no broker non-votes.
3. A stockholder proposal requesting the Board of Directors to take the steps
necessary to provide for cumulative voting in the election of directors was
defeated with 3,225,145 shares voted for, 45,127,315 shares voted against,
416,200 shares abstaining and 9,655,780 broker non-votes.
4. A stockholder proposal requesting the Board of Directors to provide a
comprehensive report describing the company's maquiladora operations as
well as a forecast of operations under the North American Free Trade
Agreement was defeated with 2,198,434 shares voted for, 45,620,701 shares
voted against, 949,525 shares abstaining and 9,655,780 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(4a) Indenture dated as of April 1, 1986 between Zenith Electronics
Corporation and The First National Bank of Boston as Trustee with
respect to the 6-1/4% Convertible Subordinated Debentures due 2011
(incorporated by reference to Exhibit 1 of the company's Quarterly Report
on Form 10-Q for the quarter ended March 30, 1991)
(4b) Debenture Purchase Agreement dated as of November 19, 1993 with the
institutional investors named therein (incorporated by reference to Exhibit
4(a) of the company's Current Report on Form 8-K dated November 19, 1993)
(4c) Amendment No. 1 dated November 24, 1993 to the Debenture Purchase
Agreement dated as of November 19, 1993 with the institutional investor
named therein (incorporated by reference to Exhibit 4(a) of the company's
Current Report on Form 8-K dated November 24, 1993)
<PAGE>
(4d) Amendment No. 2 dated as of January 11, 1994 to the Debenture
Purchase Agreement dated as of November 19, 1993 (incorporated by reference
to Exhibit 4(c) of the company's Current Report on Form 8-K dated January 11,
1994)
(4e) Debenture Purchase Agreement dated as of January 11, 1994 with the
institutional investor named therein (incorporated by reference to Exhibit
4(a) of the company's Current Report on Form 8-K dated January 11, 1994)
(4f) Stockholder Rights Agreement, dated as of October 3, 1986 (incorporated
by reference to Exhibit 4c of the company's Quarterly Report on Form
10-Q for the quarter ended September 28, 1991)
(4g) Amendment, dated April 26, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(d) of the company's Quarterly Report
on Form 10-Q for the quarter ended April 3, 1993)
(4h) Amended and Restated Summary of Rights to Purchase Common Stock
(incorporated by reference to Exhibit 4(e) of the company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4i) Amendment, dated July 7, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(f) of the company's Quarterly Report
on Form 10-Q for the quarter ended July 3, 1993)
(4j) Agreement, dated May 23, 1991, among Zenith Electronics Corporation,
The First National Bank of Boston and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8 dated May 30, 1991)
(4k) Amendment, dated May 24, 1991, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 2 of Form 8 dated May 30, 1991)
(4l) Agreement, dated as of February 1, 1993, among Zenith Electronics
Corporation, The Bank of New York and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8 dated March 25, 1993)
(4m) Amendment, dated July 17, 1995, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4 of the company's Current Report on
Form 8-K dated July 17, 1995)
(4n) Second Amended and Restated Credit Agreement, dated as of November
6, 1995, with General Electric Capital Corporation, as agent and lender, and
the other lenders named (incorporated by reference to Exhibit 4g of the
company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995)
(4o) First Amended and Restated Term Loan Agreement, dated as of
November 6, 1995, with General Electric Capital Corporation, as agent
and lender, and the other lenders named (incorporated by reference to Exhibit
4i of the company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995)
(4p) First Amendment to Second Amended and Restated Credit Agreement and
First Amended and Restated Term Loan Agreement, dated as of May 21, 1996,
with General Electric Capital Corporation, as agent and lender, and the other
lenders named
(4q) Second Amendment to Second Amended and Restated Credit Agreement
and First Amended and Restated Term Loan Agreement, dated as of June 26,
1996, with General Electric Capital Corporation, as agent and lender, and
the other lenders named
(10) Resignation letter of Albin F. Moschner as president, chief executive
officer and director of the company
(27) Financial Data Schedule for the six months ended June 29, 1996
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 29, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
(Registrant)
Date: August 13, 1996
By: /s/ Roger A. Cregg
--------------------
Roger A. Cregg
Executive Vice President -
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibits:
(4p) First Amendment to Second Amended and Restated Credit Agreement and
First Amended and Restated Term Loan Agreement, dated as of May 21, 1996,
with General Electric Capital Corporation, as agent and lender, and the other
lenders named
(4q) Second Amendment to Second Amended and Restated Credit Agreement
and First Amended and Restated Term Loan Agreement, dated as of June 26,
1996, with General Electric Capital Corporation, as agent and lender, and
the other lenders named
(10) Resignation letter of Albin F. Moschner as president, chief executive
officer and director of the company
(27) Financial Data Schedule for the six months ended June 29, 1996
EXHIBIT 4p
----------
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AND
FIRST AMENDED AND RESTATED TERM LOAN AGREEMENT
-------------------------------------------------
This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND
FIRST AMENDED AND RESTATED TERM LOAN AGREEMENT (this "Amendment"), dated as
of May 21, 1996, is by and between ZENITH ELECTRONICS CORPORATION, a Delaware
corporation, as Borrower, GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as Agent and as Lender, THE BANK OF NEW YORK COMMERCIAL
CORPORATION, a New York corporation, as Lender, and CONGRESS FINANCIAL
CORPORATION, a California corporation, as Lender.
RECITALS
----------
A. Borrower, Agent and Lenders are parties to (i) that certain Second
Amended and Restated Credit Agreement dated as of November 6, 1995 (as
amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement") and (ii) that certain First Amended and Restated
Term Loan Agreement dated as of November 6, 1995 (as amended, restated,
supplemented or otherwise modified from time to time, the "Term Loan
Agreement" and, collectively with the Credit Agreement, the "Loan Agreements");
B. Borrower wishes, and Agent and Lenders are willing, to amend certain
provisions of the Loan Agreements, all on the terms and conditions set forth
in this Amendment; and
C. As it relates to each Loan Agreement, each capitalized term used in this
Amendment and not otherwise defined in this Amendment shall have the meaning
ascribed thereto in Schedule A to the respective Loan Agreement; this Amendment
shall constitute a Loan Document; these Recitals shall be construed as part
of this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Amendment of the Loan Agreements. Each Loan Agreement is hereby
amended as follows:
(a) The aggregate maximum Capital Expenditure levels contained in clause
(a) of Schedule 6.11 of each Loan Agreement are replaced in their entirety
as follows:
Aggregate Maximum
Period Capital Expenditures
-------- ----------------------
Fiscal Year 1995 $ 80,000,000
Fiscal Year 1996 $180,000,000
Fiscal year 1997 $ 87,000,000
Fiscal Year 1998 $ 60,000,000
and each Fiscal
Year thereafter
(b) The minimum Net Worth levels contained in clause (b) of Schedule 6.11
of each Loan Agreement are replaced in their entirety as follows:
Period Minimum Net Worth
-------- -------------------
July 1, 1995 $143,000,000
September 30, 1995 $154,000,000
December 31, 1995 $251,000,000
March 30, 1996 $245,000,000
June 29, 1996 $215,000,000
September 28, 1996 $211,000,000
and each Fiscal
Quarter thereafter
2. Conditions to Effectiveness. This Amendment shall not become effective,
and neither the Agent nor any Lender shall have any obligation hereunder,
until the following conditions shall have been satisfied in full, in Agent's
sole discretion:
(a) Agent, on behalf of itself and Lenders, shall have received original
counterparts of this Amendment, duly executed by each party hereto;
(b) Agent, on behalf of itself and Lenders, shall have received such other
agreements, certificates, documents or other instruments as Agent may request;
and
(c) on and as of the date hereof, the representations and warranties of
Borrower made pursuant to Section 3 hereof shall be true, accurate and
complete in all respects.
3. Representations and Warranties of Borrower. In order to induce Agent
and Lenders to enter into this Amendment, Borrower hereby makes the following
representations and warranties, each of which shall survive the execution
and delivery of this Amendment:
(a) as of the date hereof, no Default or Event of Default is continuing
and, after giving effect to this Amendment and the transactions contemplated
hereby, no Default or Event of Default shall have occurred and be continuing;
(b) as of the date hereof and after giving effect to this Amendment
and the transactions contemplated hereby, the representations and
warranties of Borrower and each Domestic Subsidiary contained in the Loan
Documents are true, accurate and complete in all respects on and as of
the date hereof to the same extent as though made on and as of the date
hereof, except to the extent that any such representation or warranty
expressly relates to an earlier date; and
(c) the execution, delivery and performance by Borrower and each
Guarantor Subsidiary of this Amendment and each of the agreements,
certificates, documents and other instruments described herein or
contemplated hereby to which such Person is a party are within its corporate
powers and have been duly authorized by all necessary corporate action on
the part of such Person (including, without limitation, resolutions of any
executive committee, the board of directors and, as applicable, the
stockholders, of such Person), and this Amendment and such agreements,
certificates, documents and instruments are the legal, valid and
binding obligation of such Person enforceable against such Person in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting the rights
of creditors generally or by application of general principles of equity.
4. Reference to and Effect on the Loan Agreements.
4.1. Except as specifically amended above, each Loan Agreement shall
remain in full force and effect and each Loan Agreement, as amended by this
Amendment, is hereby ratified and confirmed in all respects.
4.2. The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Agent or Lenders
under either Loan Agreement or any of the other Loan Documents thereunder, or
constitute a waiver of any provision of either Loan Agreement or any of
the other Loan Documents thereunder. Upon the effectiveness of this
Amendment each reference to the Credit Agreement and the Term Loan Agreement
contained in any Loan Document shall, in each case, mean and be a respective
reference to the Credit Agreement, as amended hereby, or the Term Loan
Agreement, as amended hereby.
5. Miscellaneous.
5.1 Fees and Expenses. Borrower agrees to pay on demand all fees, costs
and expenses incurred by or otherwise due to Agent, on behalf of itself
and Lenders, in connection with the preparation, execution and delivery of
this Amendment, together with all fees, costs and expenses incurred by or
otherwise due to Agent, on behalf of itself and Lenders, prior to the date
hereof which are payable by Borrower pursuant to the Loan Agreements.
5.2 Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
5.3 Severability. Wherever possible, each provision of this Amendment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Amendment.
5.4 Counterparts. This Amendment may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
[signature page follows]
IN WITNESS WHEREOF, each party hereto has caused this First Amendment to
be duly executed and delivered by its proper and duly authorized officer as
of the date first written above.
ZENITH ELECTRONICS CORPORATION,
as Borrower
By:/s/ Willard C. McNitt
_____________________________
Vice President and Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and as Lender
By:/s/ Robert Battle
_____________________________
Duly Authorized Signatory
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Lender
By:
_____________________________
Title:
________________________
CONGRESS FINANCIAL CORPORATION,
as Lender
By:/s/ Kenneth Donahue
___________________________
Title: Assistant Vice President
________________________
ACKNOWLEDGMENT AND CONSENT
--------------------------
AS OF THE DATE FIRST WRITTEN ABOVE, EACH OF THE UNDERSIGNED GUARANTOR
SUBSIDIARIES HEREBY ACKNOWLEDGES AND CONSENTS TO BE BOUND BY THE FOREGOING
FIRST AMENDMENT AND CONFIRMS AND AGREES THAT, AFTER GIVING EFFECT TO
SUCH FIRST AMENDMENT, ALL OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY ARE
AND SHALL CONTINUE TO BE IN FULL FORCE AND AFFECT AND ARE HEREBY CONFIRMED
AND RATIFIED IN ALL RESPECTS.
ZENITH DISTRIBUTING CORPORATION OF
ILLINOIS
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
MIDSTATES
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION OF
NEW ENGLAND
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION OF
NEW YORK
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
SOUTHEAST
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
WEST
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH/INTEQ, INC.
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH ELECTRONICS CORPORATION OF
ARIZONA
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH ELECTRONICS CORPORATION OF
TEXAS
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH MICROCIRCUITS CORPORATION
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH VIDEO TECH CORPORATION
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH VIDEO TECH CORPORATION -
FLORIDA
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENTRANS, INC.
By: /s/ Willard C. McNitt
_____________________________
Treasurer
EXHIBIT 4q
-----------
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AND
FIRST AMENDED AND RESTATED TERM LOAN AGREEMENT
----------------------------------------------
This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND
FIRST AMENDED AND RESTATED TERM LOAN AGREEMENT (this "Amendment"), dated as of
June __, 1996, is by and between ZENITH ELECTRONICS CORPORATION, a Delaware
corporation, as Borrower, GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as Agent and as Lender, THE BANK OF NEW YORK COMMERCIAL
CORPORATION, a New York corporation, as Lender, and CONGRESS FINANCIAL
CORPORATION, a California corporation, as Lender.
RECITALS
----------
A. Borrower, Agent and Lenders are parties to (i) that certain Second
Amended and Restated Credit Agreement dated as of November 6, 1995 (as
amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement") and (ii) that certain First Amended and Restated
Term Loan Agreement dated as of November 6, 1995 (as amended, restated,
supplemented or otherwise modified from time to time, the "Term Loan
Agreement" and, collectively with the Credit Agreement, the "Loan Agreements");
B. Borrower wishes, and Agent and Lenders are willing, to amend certain
provisions of the Loan Agreements, all on the terms and conditions set forth
in this Amendment; and
C. As it relates to each Loan Agreement, each capitalized term used in this
Amendment and not otherwise defined in this Amendment shall have the meaning
ascribed thereto in Schedule A to the respective Loan Agreement; this
Amendment shall constitute a Loan Document; these Recitals shall be
construed as part of this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Amendment of the Loan Agreements. Each Loan Agreement is hereby
amended as follows:
(a) The following subsection is inserted as the final subsection of
Section 6.2 of each Loan Agreement:
" (I) Borrower's purchase on or prior to July 31, 1996 of shares of the
Series B Preferred Stock of Diba, Inc., a Delaware corporation, for (A) a per
share price not in excess of $3 and (B) an aggregate amount, together with
all related fees, costs and expenses, not in excess of $5,000,000 (the "Diba
Investment"), provided that (i) neither Borrower nor any Subsidiary shall be
obligated to contribute any cash (other than the actual Diba Investment on
the date thereof) or cash equivalents or other assets to or otherwise in
respect of the Diba investment and (ii) neither Borrower nor any Subsidiary
shall guarantee or be liable in any manner for any debts or liabilities of
or otherwise in respect of the Diba Investment."
(b) The following paragraph is inserted as the final text of Schedule
6.11 of each Loan Agreement:
" Notwithstanding anything in this Agreement or any of the other Loan
Documents to the contrary, with respect to each calculation of Net Worth
made pursuant to this Schedule 6.11 on or after the effectiveness of
Borrower's election to change its Inventory accounting method from a last-in,
first- out basis to a first-in, first-out basis, there shall be excluded
from such calculation an amount equal to $10,400,000 (or, if greater, such
other amount resulting from, and as of the date of, the effectiveness of
such election)."
2. Conditions to Effectiveness of Section 1(a). Section 1(a) of this
Amendment shall not become effective, and neither the Agent nor any Lender
shall have any obligation hereunder, until the following conditions shall
have been satisfied in full, in Agent's sole discretion:
(a) Agent, on behalf of itself and Lenders, shall have received original
counterparts of this Amendment, duly executed by each party hereto;
(b) Agent, on behalf of itself and Lenders, shall have received copies of
all agreements, certificates, documents or other instruments executed or
delivered pursuant to the Diba Investment, each certified by Borrower's
Secretary as a true, accurate and complete copy thereof;
(c) Agent, on behalf of itself and Lenders, shall have received such other
agreements, certificates, documents or other instruments as Agent may request;
and
(d) on and as of the effective date hereof, the representations and
warranties of Borrower made pursuant to Section 4 hereof shall be true,
accurate and complete in all respects.
3. Conditions to Effectiveness of Section 1(b). Section 1(b) of this
Amendment shall not become effective until the effectiveness of Borrower's
election to change its Inventory accounting method from a last-in, first-out
basis to a first-in, first-out basis.
4. Representations and Warranties of Borrower. In order to induce Agent
and Lenders to enter into this Amendment, Borrower hereby makes the following
representations and warranties, each of which shall survive the execution and
delivery of this Amendment:
(a) as of the date hereof, no Default or Event of Default is continuing
and, after giving effect to this Amendment and the transactions contemplated
hereby, no Default or Event of Default shall have occurred and be continuing;
(b) as of the date hereof and after giving effect to this Amendment and the
transactions contemplated hereby, the representations and warranties of
Borrower and each Domestic Subsidiary contained in the Loan Documents are
true, accurate and complete in all respects on and as of the date hereof to
the same extent as though made on and as of the date hereof, except to the
extent that any such representation or warranty expressly relates to an
earlier date; and
(c) the execution, delivery and performance by Borrower and each Guarantor
Subsidiary of this Amendment and each of the agreements, certificates,
documents and other instruments described herein or contemplated hereby to
which such Person is a party are within its corporate powers and have been
duly authorized by all necessary corporate action on the part of such Person
(including, without limitation, resolutions of any executive committee, the
board of directors and, as applicable, the stockholders, of such Person),
and this Amendment and such agreements, certificates, documents and
instruments are the legal, valid and binding obligation of such Person
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the rights of creditors generally or by application
of general principles of equity.
5. Reference to and Effect on the Loan Agreements.
5.1. Except as specifically amended above, each Loan Agreement shall
remain in full force and effect and each Loan Agreement, as amended by this
Amendment, is hereby ratified and confirmed in all respects.
5.2. The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or Lenders under
either Loan Agreement or any of the other Loan Documents thereunder, or
constitute a waiver of any provision of either Loan Agreement or any of
the other Loan Documents thereunder. Upon the effectiveness of this Amendment
each reference to the Credit Agreement and the Term Loan Agreement contained
in any Loan Document shall, in each case, mean and be a respective reference
to the Credit Agreement, as amended hereby, or the Term Loan Agreement,
as amended hereby.
6. Miscellaneous.
6.1 Fees and Expenses. Borrower agrees to pay on demand all fees, costs
and expenses incurred by or otherwise due to Agent, on behalf of itself
and Lenders, in connection with the preparation, execution and delivery of
this Amendment, together with all fees, costs and expenses incurred by or
otherwise due to Agent, on behalf of itself and Lenders, prior to the
date hereof which are payable by Borrower pursuant to the Loan Agreements.
6.2 Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
6.3 Severability. Wherever possible, each provision of this Amendment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited
by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this Amendment.
6.4 Counterparts. This Amendment may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one
agreement.
[signature page follows]
IN WITNESS WHEREOF, each party hereto has caused this Amendment to be duly
executed and delivered by its proper and duly
authorized officer as of the date first
written above.
ZENITH ELECTRONICS CORPORATION,
as Borrower
By: /s/ Willard C. McNitt
__________________________
Vice President and Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and as Lender
By: /s/ Robert Battle
_____________________________
Duly Authorized Signatory
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Lender
By: /s/ Stephen Mangiante
_____________________________
Vice President
CONGRESS FINANCIAL CORPORATION,
as Lender
By: /s/ Kenneth Donahue
_____________________________
Assistant Vice President
ACKNOWLEDGMENT AND CONSENT
----------------------------
AS OF THE DATE FIRST WRITTEN ABOVE, EACH OF THE UNDERSIGNED GUARANTOR
SUBSIDIARIES HEREBY ACKNOWLEDGES AND CONSENTS TO BE BOUND BY THE FOREGOING
AMENDMENT AND CONFIRMS AND AGREES THAT, AFTER GIVING EFFECT TO SUCH AMENDMENT,
ALL OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY ARE AND SHALL CONTINUE TO BE
IN FULL FORCE AND AFFECT AND ARE HEREBY CONFIRMED AND RATIFIED IN ALL RESPECTS.
ZENITH DISTRIBUTING CORPORATION OF
ILLINOIS
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
MIDSTATES
By: /s/ Willard C. McNitt
____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION OF
NEW ENGLAND
By: /s/ Willard C. McNitt
____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION OF
NEW YORK
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
SOUTHEAST
By: /s/ Willard C. McNitt
____________________________
Treasurer
ZENITH DISTRIBUTING CORPORATION -
WEST
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH/INTEQ, INC.
By: /s/ Willard C. McNitt
___________________________
Treasurer
ZENITH ELECTRONICS CORPORATION OF
ARIZONA
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH ELECTRONICS CORPORATION OF
TEXAS
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH MICROCIRCUITS CORPORATION
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH VIDEO TECH CORPORATION
By: /s/ Willard C. McNitt
_____________________________
Treasurer
ZENITH VIDEO TECH CORPORATION -
FLORIDA
By: /s/ Willard C. McNitt
____________________________
Treasurer
ZENTRANS, INC.
By: /s/ Willard C. McNitt
_____________________________
Treasurer
EXHIBIT 10
------------
July 24, 1996
Mr. Albin F. Moschner
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Dear Al:
The purpose of this letter is to confirm our understanding that, effective
immediately, you will resign from employment with the Company and its
affiliates and from the positions that you hold on the Company's Board
of Directors. The Company has agreed that, solely for purposes of your
Supplemental Letter Agreement with the Company dated October 21, 1991,
as amended from time to time, and without admitting that such is the fact,
your resignation will be treated as a termination of employment for
"Good Reason". Accordingly, to the extent applicable, you will be
entitled to the following payments and benefits:
(1) Payment of your accrued but unpaid salary and vacation pay, based on
your salary rate as in effect immediately prior to your termination.
(2) Benefits to which you are entitled under the specific terms of any of
the Company's employee benefit plans.
(3) A lump sum payment equal to 36 months of your monthly compensation
(which monthly compensation shall be calculated as the highest aggregate
amount of compensation paid to you as regular salary with respect to any
calendar month during the three year period immediately preceding your
termination, plus 1/12 of the annual incentive payment, if any, to which
you were entitled for 1995).
(4) A payment equal to the excess, if any, of (a) the highest price
actually paid for the Company's stock pursuant to the change in control
of the Company over (b) the trading price of the Company's stock today,
multiplied by the number of shares of the Company's stock that you owned
on the date of the change in control (excluding any shares that you may
have sold pursuant to the change in control).
<PAGE>
Mr. Albin F. Moschner
July 24, 1996
Page 2
(5) Payment of any incentive compensation to which you are entitled for any
past fiscal year that has not yet been paid or awarded (including deferred
amounts).
(6) For a period of two years following your termination, the Company will
maintain in full force and effect at its expense all employee benefit
plans and programs in which you were entitled to (or did) participate
immediately prior to your termination. In the event the terms of such
plans or programs prohibit your participation because you are not actively
employed by the Company, the Company will arrange to provide you with
benefits which are substantially similar to those to which you were
entitled under such plans and programs.
(7) For a period of two years following your termination, the Company will
pay on your behalf the premiums on the insurance policy relating to
you issued under the Company's executive insurance program. You
will be responsible for any personal income taxes incurred by you as a
result of the Company's payment of such premiums.
(8) In the event that it is determined that any of the above payments,
together with previous accelerations of stock options, restricted stock
and long-term incentive awards in connection with the change in control,
would subject you to an excise tax under section 4999 of the Internal
Revenue Code (relating to taxes on golden parachute payments), or if
you incur any interest or penalties with respect to such an excise tax,
you will be entitled to a "gross-up" payment, calculated in accordance
with and subject to the provisions of Addendum Number Two of your
Supplemental Letter Agreement.
In addition, the Company has agreed to forgive any repayment obligation
you have with respect to the $345,000 that the Company paid to you to assist
you in paying the taxes you incurred upon the vesting of your restricted
stock in connection with the change in control.
Very truly yours,
/s/ Hun Jo Lee
------------------
H.J. Lee
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 194
<ALLOWANCES> 3
<INVENTORY> 247
<CURRENT-ASSETS> 470
<PP&E> 735
<DEPRECIATION> 549
<TOTAL-ASSETS> 664
<CURRENT-LIABILITIES> 248
<BONDS> 0
<COMMON> 66
0
0
<OTHER-SE> 191
<TOTAL-LIABILITY-AND-EQUITY> 664
<SALES> 520
<TOTAL-REVENUES> 520
<CGS> 499
<TOTAL-COSTS> 499
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (69)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
