Pursuant to Rule 12(b) 25 the following items are omitted from this
Form 10-K:
1. Financial Information regarding Foreign and Domestic
Operations and Export Sales required under Item 1
2. Information on quarterly stock prices required under Item 5
3. Item 6
4. Item 7
5. Item 8
6. Item 10
7. Item 11
8. Item 12
9. Item 13
10. Financial Information, certain exhibits and other items
required under Item 14
- ---------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 1-4115
Zenith Electronics Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Milwaukee Avenue, Glenview, Illinois 60025-2493
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (847) 391-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------ -------------------------------------------
Common Stock, $1 par value, New York Stock Exchange
and associated purchase rights Chicago Stock Exchange
Basel, Geneva and Zurich, Switzerland
Stock Exchange
6 1/4 % Convertible Subordinated New York Stock Exchange
Debentures, due 2011
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. __X__
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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_____
The aggregate market value of the registrant's Common Stock held by
non-affiliates based on the New York Stock Exchange closing price on
March 26, 1997, was $321,205,625.
As of March 26, 1997, there were 66,448,593 shares of Common Stock,
par value $1 per share outstanding.
<PAGE>
ZENITH ELECTRONICS CORPORATION
FORM 10-K
INDEX
Page
Number
--------
PART I
Item 1. BUSINESS 3
Item 2. PROPERTIES 5
Item 3. LEGAL PROCEEDINGS 6
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS 9
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 9
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 10
SIGNATURES 13
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS 15
<PAGE>
PART I
ITEM 1. BUSINESS
The company was founded in 1918 and has been a leader in consumer
electronics, first in radio and later in monochrome and color television and
other video products. The company's operations involve a dominant
industry segment, the design, development, manufacture and marketing of
video products (including color TV sets and other consumer products)
along with parts and accessories for such products. These products, along
with purchased VCRs, are sold principally to retail dealers in the United
States and to retail dealers and wholesale distributors in other foreign
countries. The company also sells directly to buying groups, private label
customers and customers in the lodging, health care and rent-to-own
industries. The company's video products also include color picture tubes
that are produced for and sold to other manufacturers and Network
Systems products, including digital and analog set-top boxes and cable
modems, interactive TV and data communication products which are sold
primarily to cable TV operators and other commercial users of these
products.
The company has sold or downsized its non-core business
activities. The company sold its monochrome video monitor business in
1993 and its power supply business in 1994. Its activities in color video
monitors sold to computer manufacturers ceased in 1995 and its activities
in high-security electronic equipment have been discontinued.
The company has incurred losses in all but one of the years since
1985. These results reflected the cumulative effect of frequent and
significant color TV price reductions during the 1980s and 1990s, and
also reflected earlier recessionary conditions in the United States. In
addition, the company has invested significant amounts in engineering and
research in recent years, which amounts have been expensed as incurred.
In November 1995, a change in control of the company occurred,
in which LG Electronics, Inc., a corporation organized under the laws of
the Republic of Korea ("LGE"), purchased shares of the company
pursuant to a combined tender offer and purchase of newly issued shares
of common stock from the company. After giving effect to the
transactions, LGE is the beneficial owner of 36,569,000 shares of
common stock of the company which represents approximately 55 percent
of the outstanding common stock.
Raw Materials
Many materials, such as copper, plastic, steel, wood, glass, aluminum and
zinc, are essential to the business. Adequate sources of supply exist for
these materials.
Patents
The company is licensed under a number of patents which are of
importance to its business, and holds numerous patents. The company
has patents and patent applications for numerous high-definition TV
("HDTV") related inventions. To the extent these inventions are
incorporated into the HDTV standard adopted by the Federal
Communications Commission, the company expects to receive royalties
from these patents. In addition, royalties have been and may be received
from these patents for non-HDTV applications as well. In addition, major
manufacturers of TV sets and VCRs agreed during 1992 to take licenses
under some of the company's U.S. tuning system patents (the licenses
expire in 2003). Based on 1996 U.S. industry unit sales levels and
technology, more than $25 million in annual royalty income is expected
through the licensing period. While in the aggregate its patents and
licenses are valuable, the business of the company is not materially
dependent on them.
Seasonal Variations in Business
Sales of the company's consumer electronics products are generally at a
higher level during the second half of the year. Sales of consumer
electronics products typically increase in the fall, as the summer vacation
season ends and people spend more time indoors with the new fall
programming on TV and during the Christmas holiday season. During each
of the last three years, approximately 60 percent of the company's
net sales were recorded in the second half of the year and
approximately 30 percent of the company's net sales were recorded in the
fourth quarter of the year.
<PAGE>
Major Customer
Sales to a single customer amounted to $187.2 (15 percent) in 1996,
$172.1 million (14 percent) in 1995 and $180.8 million (12 percent) in
1994. Sales to a second customer accounted for $140.9 million (11
percent) in 1996. No other customer accounted for 10 percent or more of
net sales.
Competitive Conditions
Competitive factors in North America include price, performance, quality,
variety of products and features offered, marketing and sales capabilities,
manufacturing costs, and service and support. The company believes it
competes well with respect to each of these factors.
The company's major product areas, including the color TV
market, are highly competitive. The company's major competitors are
significantly larger foreign-owned companies, generally with greater
worldwide TV 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.
Research and Development
During 1996 expenditures for company-sponsored engineering and
research relating to new products and services and to improvements of
existing products and services amounted to $46.7 million. Amounts
expended in 1995 and 1994 were $43.5 million and $45.4 million,
respectively.
Environmental Matters
Compliance with Federal, State and local environmental protection
provisions is not expected to have a material effect on capital
expenditures, earnings or the competitive position of the company.
Further information regarding environmental compliance is set forth under
Item 3 of this report.
Number of Employees
At the end of December 1996, the company employed approximately
15,900 people, of whom approximately 11,300 are hourly workers
covered by collective bargaining agreements. Approximately 4,400 of the
company's employees are located in the Chicago, Illinois, area, of whom
approximately 2,800 are represented by unions. Approximately 11,200 of
the company's employees are located in Mexico, of whom approximately
8,500 are represented by unions. Mexican labor contracts expire every
two years and wages are renegotiated annually or more frequently under
rapid devaluation or high inflation periods. The company believes that its
relations with its employees are good.
<PAGE>
ITEM 2. PROPERTIES
The company utilizes a total of approximately 5.3 million square feet for
manufacturing, warehousing, engineering and research, administration and
distribution, as described below.
Square Feet
Location Nature of Operation (in millions)
- ----------------------------------------------------------------------------
Domestic:
- ---------------
Chicago, Illinois Six locations - production of color 2.2
(including suburban) picture tubes, parts and service;
locations) engineering and research, marketing
and administration activities; and
assembly of electronic components
(.6 million square feet is leased
by the company)
Fort Worth, El Paso, Six locations - warehouses / offices .7
McAllen, Brownsville (.6 million square feet is leased by
and Dallas, Texas; the company)
Douglas, Arizona
Foreign:
- ---------------
Mexico Twelve manufacturing and warehouse 2.4
locations - production of plastic and
wooden cabinets for color television,
sub-assembly production of television
chassis, tuners and other components
and final assembly of color television
and Network Systems products
Taiwan One location - purchasing office -
-------
Total 5.3
=======
The company's facilities are suitable and adequate to meet current
and anticipated requirements. None of the real property owned by the
company is mortgaged
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The company is involved in various legal actions, environmental matters,
and other proceedings relating to a wide range of matters that are
incidental to the conduct of its business. The company believes, after
reviewing such matters with the company's counsel, that any liability
which may ultimately be incurred with respect to these matters is not
expected to have a material effect on either the company's consolidated
financial position or results of operations.
Litigation
Numerous lawsuits against major computer and peripheral equipment
manufacturers are pending in the U.S. District Court, Eastern District of
New York, the U.S. District Court of New Jersey and the New York State
courts, as well as other federal courts. These lawsuits seek several billion
dollars in damages from various defendants for repetitive stress injuries
claimed to have been caused by the use of word processor equipment.
The company has been named as a defendant in twenty-seven of these
cases which relate to keyboards allegedly manufactured by the company
for its former subsidiary, Zenith Data Systems Corporation. Plaintiffs in
the company's cases seek to recover $31 million actual and $321 million
punitive damages from the company. The company believes it has
meritorious defenses to the cases. Thirteen of the foregoing cases have
been dismissed, most without prejudice or subject to the appeal of the
1996 Blanco v. AT&T ruling on the applicable statute of limitations in the
New York Supreme Court Appellate Division.
In 1994, the company notified its 15 independent distributors of
its intent to change to direct-to-retail distribution on a nationwide basis
during 1995. In February 1995, one of the independent distributors filed
suit challenging the company's right to discontinue the distributorship
relationship and alleging that it had been damaged by certain of the
company's practices. The lawsuit sought injunctive relief, actual damages
of $8 million and punitive damages of $20 million. In October 1995,
summary judgment dismissing the case on all counts was entered. The
plaintiff has appealed. Another suit arising in connection with this change
in distribution was filed in April 1995 by another independent distributor.
The lawsuit seeks approximately $13 million in damages under the
Wisconsin Fair Dealership Law. In January 1996, the court denied the
company's motion for summary judgment and granted the plaintiff's
motion for summary judgment, finding the company is liable. A jury trial
on damages was held in May 1996, and the jury awarded the plaintiff
$2.37 million. The company has appealed the judgment, contesting both
the summary judgment finding of liability and the damages award.
Superfund Litigation
The company was sued in 1995 as one of several defendants who, the
plaintiffs allege, disposed of waste and, as such, may have contributed to
the contamination of an aquifer in Hidalgo County, Texas. The matter is
entitled Linn-Faysville Aquifer Preservations Association, et al. v.
Republic Waste Industries, Inc. Unspecified damages are sought and
injunctive relief was requested. At this point, the company has
insufficient information from which it can determine the extent of its
liability, if any.
The company is a defendant in a suit for contribution in the
matter of S C Holdings, Inc. v. .A.A.A. Realty Co., et al (Civil Action No.
95-947 (GEB) which was filed in the U.S. District Court, District of New
Jersey on November 30, 1995. This litigation concerns the Cinnaminson
Groundwater Contamination Site (the "Site") in the Township of
Cinnaminson, Burlington County, New Jersey. The Site is a former
landfill. The company is one of 100 parties involved in this litigation; the
company is an alleged generator of 40 drums of solvents that were
disposed of at the Site. The company is currently in settlement
negotiations and expects to resolve the matter for $140,000.
Environmental
The company has been identified by the U.S. EPA as an alleged de
minimis generator of waste disposed at two sites, both of which are
subject to U.S. EPA action under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
("CERCLA") These are the Ramp Industries Superfund Site in Denver,
Colorado and the Galaxy/Spectron, Inc. Superfund Site in Elkton,
Maryland. According to U.S. EPA volumetric information, the company
sent 0.67 cubic feet of low level radioactive materials and 0.90 cubic feet
of other waste materials to the Ramp Industries site. As there are
reportedly over 800 other PRPs at this site, the company believes it will
be eligible for a de minimis generator for $45,000 to $80,000.
<PAGE>
In addition, the company has been identified as a PRP at three
other Superfund sites: the North Penn Area 7 Superfund Site in Lansdale,
Pennsylvania, the Master Metals Superfund Site in Cleveland, Ohio and
the Midwest Solvent Recovery Superfund Site in Gary, Indiana. Neither
the extent of contamination nor the allocation of liability have been
developed for the North Penn site and, therefore, the company is unable to
estimate the extent of its liability, if any. On April 4, 1997, the company
will enter into an Administrative Order on Consent ("AOC"), along with
other PRPs, pursuant to which the PRPs will undertake certain response
activities at the Master Metals Superfund Site. The company expects to
be allocated 3.5% of an estimated $1.6 million to implement the work
outlined in the AOC. The extent of the company's liability for future
work at the Master Metals site, if any, is unknown. The Midwest Solvent
Recovery Site is moving toward completion. The company expects to pay
an additional $160,000 to cover costs incurred at that site through the end
of 1997.
Additionally, in October 1989, the U.S. Department of Justice
brought a civil action under CERCLA against certain owners, operators
and generators, seeking reimbursement of response costs incurred by U.S.
EPA in connection with the Moyer Landfill in Collegeville, Pennsylvania.
One of the defendants sued Ford Electronics and Refrigeration
Corporation ("FERCO") and others as third party defendants. FERCO,
in turn, sued the company for contribution as a third party defendant for
the company's allegedly hazardous waste materials sent to the Moyer
Landfill through FERCO. The company settled its liability with FERCO
for $300,000. In September 1996, the Department of Justice entered into
a settlement with FERCO which recognized the underlying company-
FERCO settlement. The company will be obligated to pay FERCO the
$300,000 negotiated upon entry of the Consent Decree which is expected
in the near future.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Office Held Age
- ----------------------------------------------------------------------------
Roger A. Cregg Executive Vice President, Chief Financial 41
Officer since May 1996. Chief Financial
Officer at Sweetheart Cup Company from
1990 to 1996.
Richard F. Vitkus Senior Vice President, General Counsel 57
since 1994. Secretary since 1995.
Previously Senior Vice President, General
Counsel, and Director of Corporate
Development at Vanstar Corporation
(formerly ComputerLand Corporation)
from 1991 to 1994.
Peter S. Willmott President and Chief Executive Officer 59
since November 1996. Chairman, MacFrugal's
Bargains Close-outs Inc., from 1990
to 1997; Chairman and Chief Executive
Officer, Willmott Services, Inc., from
1989 to 1997.
Dennis R. Winkleman Vice President - Human Resources since 46
March 1996. Director, Human Resources,
Case Corporation from 1990 to 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The New York Stock Exchange is the principal United States market in
which the company's common stock is traded. The number of stockholders
of record was 12,026 as of March 26, 1997. No dividends were paid to
stockholders during the two years ended December 31, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
3. Exhibits:
(3a) Restated Certificate of Incorporation of the company, as amended
(incorporated by reference to Exhibit 3(a) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992)
(3b) Certificate of Amendment to Restated Certificate of Incorporation
of the company dated May 4, 1993 (incorporated by reference to
Exhibit 4(l) of the company's Quarterly Report on Form 10-Q for the
quarter ended April 3, 1993)
(3c) By-Laws of the company, as amended (incorporated by reference
to Exhibit 3 to the company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995)
(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)
(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) Agreement, dated May 23, 1991, among Zenith Electronics
Corporation, The First National Bank of Boston and Harris Trust and
Savings Bank (incorporated by reference to Exhibit 1 of Form 8 dated
May 30, 1991)
(4g) 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)
(4h) 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)
<PAGE>
(4i) 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)
(4j) 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 (incorporated by
reference to Exhibit 4p of the company's Quarterly Report on Form
10-Q for the quarter ended June 29, 1996)
(4k) 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
(incorporated by reference to Exhibit 4q of the company's Quarterly
Report on Form 10-Q for the quarter ended June 29, 1996)
*(10a) 1987 Zenith Stock Incentive Plan (as amended) (incorporated by
reference to Exhibit A of the company's definitive Proxy Statement
dated March 13, 1992)
*(10b) Form of Amended and Restated Employment Agreement with
Gerald M. McCarthy and Albin F. Moschner (incorporated by
reference to Exhibit 2 of the company's Report on
Form 10-K for the year ended December 31, 1990)
*(10c) Form of Employee Stock Option Agreement (incorporated by
reference to Exhibit 10e of the company's Quarterly Report on
Form 10-Q for the quarter ended April 1, 1995)
*(10d) Letter Agreement, dated October 21, 1991, with Albin F.
Moschner (incorporated by reference to Exhibit 10u of the company's
Report on Form 10-K for the year ended December 31, 1991)
*(10e) Form of Indemnification Agreement with Officers and Directors
(incorporated by reference to Exhibit 8 of the company's Report on
Form 10-K for the year ended December 31, 1989)
*(10f) Form of Directors 1989 Stock Units Compensation Agreement
with T. Kimball Brooker (1000 units) (incorporated by reference to
Exhibit 9 of the company's Report on Form 10-K for the year ended
December 31, 1989)
*(10g) Form of Directors 1990 Stock Units Compensation Agreement
with T. Kimball Brooker, Andrew McNally IV and Peter S.
Willmott (1000 units each) (incorporated by reference to Exhibit 6
of the company's Report on Form 10-K for the year ended December
31, 1990)
*(10h) Form of Directors 1991 Stock Units Compensation Agreement
with T. Kimball Brooker, Andrew McNally IV and Peter S.
Willmott (1,000 units each) (incorporated by reference to Exhibit
10d of the company's Quarterly Report on Form 10-Q for the quarter
ended June 29, 1991)
*(10i) Form of Amendment, dated as of July 24, 1991, to Directors
Stock Units Compensation Agreements for 1990 and 1991
(incorporated by reference to Exhibit 10e of the company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1991)
*(10j) Directors Retirement Plan and form of Agreement (incorporated
by reference to Exhibit 10 of the company's Report on Form 10-K
for the year ended December 31, 1989)
*(10k) Form of Amendment, dated as of July 24, 1991, to Directors
Retirement Plan and form of Agreement (incorporated by reference to
Exhibit 10f of the company's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1991)
<PAGE>
*(10l) Supplemental Executive Retirement Income Plan effective as of
January 1, 1994 (incorporated by reference to Exhibit 10ab to the
company's Annual Report on Form 10-K for the year ended December
31, 1994)
*(10m) Supplemental Salaried Profit Sharing Retirement Plan effective as
of January 1, 1994 (incorporated by reference to Exhibit 10ac
to the company's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10n) Stock Purchase Agreement dated July 17, 1995, between Zenith
Electronics Corporation and LG Electronics, Inc. (incorporated by
reference to Exhibit 2 of the company's Report on Form 8-K dated
July 17, 1995)
*(10o) Resignation letter of Albin F. Moschner as president, chief
executive officer and director of the company (incorporated by
reference to Exhibit 10 of the company's Quarterly Report on Form
10-Q for the quarter ended June 29, 1996)
*(10p) Employment Agreement, dated January 1, 1997, between Roger
A. Cregg and Zenith Electronics Corporation
*(10q) Employment Agreement, dated January 1, 1997, between Richard
F. Vitkus and Zenith Electronics Corporation
*(10r) Employment Agreement, dated January 1, 1997, between Peter S.
Willmott and Zenith Electronics Corporation
*(10s) Employment Agreement, dated January 1, 1997, between Dennis
R. Winkleman and Zenith Electronics Corporation
(21) Subsidiaries of the company
* Represents a management contract, compensation plan or arrangement.
(b) Reports on Form 8-K
A report on Form 8-K dated December 18, 1996, was filed by the
company stating under Item 5 that on December 18, 1996, the company
announced that in a major restructuring designed to help accelerate the
company's return to profitability and conserve cash, it is cutting its U.S.
workforce by more than 25 percent. The employment reductions are
expected to reduce expenses by approximately $20 million in 1997, and
will require a fourth-quarter restructuring charge of approximately $25
million.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Peter S. Willmott
--------------------------
Peter S. Willmott
President and Chief Executive Officer
Date: March 31, 1997
--------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------------------------------------------------------------------------
/s/ T. Kimball Brooker Director March 31, 1997
- ---------------------- --------------
T. Kimball Brooker
/s/ Ki-song Cho Director March 31, 1997
- ---------------------- --------------
Ki-song Cho
/s/ Eugene B. Connolly Director March 31, 1997
- ---------------------- --------------
Eugene B. Connolly
/s/ Robert A. Helman Director March 31, 1997
- ---------------------- --------------
Robert A. Helman
/s/ Cha Hong Koo Director March 31, 1997
- ---------------------- --------------
Cha Hong (John) Koo
/s/ Hun Jo Lee Director March 31, 1997
- ---------------------- --------------
Hun Jo Lee
/s/ Andrew McNally IV Director March 31, 1997
- ---------------------- --------------
Andrew McNally IV
/s/ Yong Nam Director March 31, 1997
- ---------------------- --------------
Yong Nam
<PAGE>
Signatures Title Date
- ----------------------------------------------------------------------------
/s/ Peter S. Willmott Director March 31, 1997
- ---------------------- --------------
Peter S. Willmott
/s/ Roger A. Cregg Executive Vice President, and March 31, 1997
- ---------------------- Chief Financial Officer --------------
Roger A. Cregg (Principal Financial Officer)
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS
Page
Number
-------
Exhibits:
(10p) Employment Agreement, dated January 1, 1997,
between Roger A. Cregg and Zenith Electronics
Corporation 16
(10q) Employment Agreement, dated January 1, 1997,
between Richard F. Vitkus and Zenith Electronics
Corporation 31
(10r) Employment Agreement, dated January 1, 1997,
between Peter S. Willmott and Zenith Electronics
Corporation 46
(10s) Employment Agreement, dated January 1, 1997,
between Dennis R. Winkleman and Zenith Electronics
Corporation 67
(21) Subsidiaries of the company 82
EXHIBIT 10p
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1997, between ZENITH
ELECTRONICS CORPORATION, a Delaware corporation (the "Company"), and
ROGER A. CREGG (the "Executive").
WHEREAS, the Executive currently serves as Executive Vice President
of the Company; and
WHEREAS, the Company and the Executive desire to enter into
this Agreement to provide for the continued employment of the
Executive by the Company upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereby agree as
follows:
1. Employment. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in this
Agreement. The term of employment of the Executive by the Company
pursuant to this Agreement (the "Employment Period") shall commence on
the date hereof and shall end on December 31, 1999, unless earlier
terminated pursuant to Section 4, provided that the Employment Period
shall automatically be extended as of January 1, 2000, for one additional
year and, if so extended, shall automatically be further extended as of
each January 1 thereafter, for additional consecutive one-year periods,
unless either the Company or the Executive elects not to extend the
Agreement by written notice given to the other party at least 90 days prior
to each such period.
2. Position and Duties. The Company shall employ the
Executive during the Employment Period as its Executive Vice President
and Chief Financial Officer. The Executive shall perform faithfully and
loyally and to the best of his abilities the duties assigned to him hereunder,
shall devote his full business time, attention and effort to the affairs of the
Company and shall use his reasonable best efforts to promote the interests
of the Company. The Executive shall report to such executive officer of
the Company as shall be designated from time to time by the Chief
Executive Officer of the Company (the "CEO") or the Board of Directors
of the Company (the "Board"). Notwithstanding the foregoing, the
Executive may engage in charitable, civic or community activities and,
with the prior approval of the CEO or the Board, may serve as a director
of any business corporation, provided that such activities or service does
not interfere with his duties hereunder or violate the terms of any of the
covenants contained in Section 10 or 11.
3. Compensation.
(a) Base Compensation. As compensation for the
services to be provided by the Executive hereunder, the Company shall
pay to the Executive during the Employment Period a minimum annual
salary of Three Hundred Thousand Dollars ($300,000.00) (the "Base
Salary"), payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The
Executive's salary may be increased or decreased from time to time,
provided that the Executive's salary shall not be decreased below the Base
Salary specified by this Section 3(a). The Executive's annual salary in
effect from time to time under this Section 3(a) is hereinafter called his
"Base Compensation."
(b) Incentive Compensation. In addition to his Base
Compensation, the Executive shall be eligible to receive incentive
compensation awards for services rendered during the Employment
Period, determined in accordance with (i) the Company's annual bonus
plan or any other short-term incentive plan adopted by the Company and
(ii) the 1987 Zenith Stock Incentive Plan or any other long-term incentive
plan adopted by the Company.
(c) Supplemental Profit Sharing Benefits. During
the Employment Period, the Executive shall be entitled to participate in
the Zenith Electronics Corporation Supplemental Salaried Profit Sharing
Retirement Plan, as in effect on the date hereof, or in a comparable plan
adopted by the Company.
(d) Supplemental Long-Term Disability Benefits.
During the Employment Period, the Executive shall be eligible for
supplemental long-term disability benefits, the current terms of which are
described on Schedule I attached hereto.
(e) Supplemental Life Insurance Benefits. During
the Employment Period, the Executive shall be eligible for supplemental
life insurance benefits, the current terms of which are described on
Schedule II attached hereto.
(f) Other Benefits. In addition to the benefits
described in subsections (c), (d) and (e) above, the Executive shall be
entitled to participate in all employee benefit plans generally available to
those executives who are parties to agreements with the Company which
are comparable to this Agreement, including, as of the date of this
Agreement, group medical and dental, health and accident, group life
insurance, long-term disability, short-term disability, executive insurance,
pension, profit sharing and 401(k) plans. The Executive shall be entitled
to take time off for vacation or illness in accordance with the Company's
policy for senior executives and to receive all other fringe benefits as are
from time to time made generally available to senior executives of the
Company. The Company may from time to time modify the benefits
provided to the Executive, provided that all such modifications are made
on the same basis for all executives in positions comparable to that of the
Executive.
(g) Expense Reimbursement. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's
policies and procedures.
4. Termination of Employment Period. The Employment
Period shall be terminated upon the first to occur of (i) termination of the
employment of the Executive by the Company at any time without Cause
(as such term is defined in Section 8) upon written notice given to the
Executive at least 30 days prior to such termination, (ii) the election by
the Company pursuant to Section 1 not to extend this Agreement in
accordance with Section 1, (iii) the election by the Executive pursuant to
Section 1 not to extend this Agreement in accordance with Section 1, (iv)
termination of the employment of the Executive by the Company at any
time for Cause or Serious Misconduct upon written notice given to the
Executive, (v) termination of the employment of the Executive by the
Company on account of the Executive's having become unable (as
determined by the Board in good faith) to regularly perform his duties
hereunder by reason of illness or incapacity for a period of more than 180
consecutive days, (vi) termination of the employment of the Executive by
reason of retirement, (vii) the Executive's death or (viii) termination of
employment by the Executive at any time upon written notice given to the
Company at least 90 days prior to such termination. The date on which
the Employment Period terminates is hereinafter referred to as the
"Termination Date."
5. Consequences of Termination Outside of a Change in
Control Period. If a Termination Date occurs, other than within a
Change in Control Period, as defined in Section 8, the Executive shall be
entitled to receive the compensation and benefits specified by this Section
5 in lieu of any severance amounts which otherwise would be payable to
the Executive.
(a) Termination by Company Without Cause. If the
Employment Period terminates for a reason set forth in clause (i) of
Section 4:
(i) the Company shall pay to the Executive
(A) all Base Compensation otherwise payable through the
Termination Date, (B) vacation pay accrued through the
Termination Date and (C) reimbursement of expenses incurred
through the Termination Date, in each case to the extent not
theretofore paid;
(ii) the Company shall pay to the Executive
the amount of the target bonus otherwise payable for the year in
which the Termination Date occurs, prorated to the Termination
Date;
(iii) the Company shall pay to the Executive
a lump sum cash amount equal to the greater of (A) the sum of
the Executive's Base Compensation and target bonus for the year
in which the Termination Date occurs, multiplied by the number
of whole and/or fractional years remaining under the term of the
Employment Period (as in effect under Section 1 without regard
to the early termination thereof under Section 4) and (B) one and
one-half times the sum of the Executive's Base Compensation and
target bonus for the year in which the Termination Date occurs;
(iv) the Company shall provide the Executive
with continued coverage, or substantially equivalent coverage,
during the period represented by the amount of the lump sum
payment under clause (iii) (i.e., one and one-half years or the
remaining term of the Employment Period, as the case may be)
under all welfare benefit plans or arrangements (including group
medical and dental, health and accident, long-term disability,
short-term disability, group life insurance, and executive
insurance programs) unless the Executive becomes covered under
similar plans or arrangements maintained by a subsequent
employer; provided that if the Company is unable to provide such
continued coverage or substantially similar coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such benefits; and
(v) the Company shall provide to the
Executive outplacement services appropriate for the Executive in
accordance with industry standards (the cost of which shall not
exceed 15% of the Executive's Base Compensation).
(b) Failure of Company to Renew Agreement. If
the Employment Period terminates for a reason set forth in clause (ii) of
Section 4, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Company shall pay to the Executive the
amounts or benefits set forth in Sections 5(a)(i), (ii) and (v), plus a lump
sum cash amount equal to one and one-half times the sum of his Base
Compensation and target bonus for the year in which the Termination
Date occurs, and shall provide to the Executive the benefits described in
Section 5(a)(iv) for the period of one and one-half years commencing on
the Termination Date.
(c) Termination for Cause. If the Employment
Period terminates for a reason set forth in clause (iv) of Section 4, the
Company shall pay to the Executive the amounts set forth in Section
5(a)(i) and the Executive shall not be entitled to any severance payments,
but shall be entitled to any benefits payable under applicable plans.
(d) Disability, Retirement or Death. If the
Employment Period terminates for any reason set forth in clause (v), (vi)
or (vii) of Section 4, the Company shall pay to the Executive or his
executor, administrator or other legal representative, as the case may be,
the amounts set forth in Section 5(a)(i) and the Executive (or his executor,
administrator or other legal representative, as the case may be) shall not
be entitled to any severance payments, but shall be entitled to any benefits
payable under applicable plans.
(e) Failure of Executive to Renew Agreement; Other
Voluntary Termination by the Executive. If the Employment Period
terminates for any reason set forth in clause (iii) or (viii) of Section 4, (A)
the Company shall pay to the Executive the amounts set forth in Section
5(a)(i), (B) the Company may, in its sole discretion, but shall have no
obligation to, pay to the Executive the amount of the target bonus for the
year in which the Termination Date occurs, prorated to the Termination
Date, and (C) the Executive shall not be entitled to any severance
payments, but shall be entitled to any benefits payable under applicable
plans.
6. Consequences of Termination Within Change in
Control Period.
(a) Termination Payments and Benefits. If during a
Change in Control Period, as defined in Section 8, the Employment Period
of the Executive shall terminate other than by reason of a Nonqualifying
Termination, as defined in Section 8, then the Company shall pay or
provide to the Executive (or his executor, administrator or other legal
representative, as the case may be) within 30 days following the
Termination Date, as compensation for services rendered to the Company
and in lieu of any severance amounts which otherwise would be payable to
the Executive, the following amounts:
(i) the Company shall pay to the Executive
a lump sum cash amount equal to the sum of (A) the Executive's
Base Compensation, accrued vacation pay and reimbursable
expenses incurred through the Termination Date, in each case to
the extent not theretofore paid, (B) the Executive's annual bonus
in an amount equal to the annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Executive has been employed by the Company for less than 12
full months) bonus payable to the Executive by the Company for
the fiscal year in which the Termination Date occurs (determined
at the higher of the target or actual level of performance for such
year), multiplied by a fraction, the numerator of which is the
number of days in the fiscal year in which the termination occurs
prior to the Termination Date and the denominator of which is
365 or 366, as applicable, (C) three times the Executive's highest
annual rate of Base Compensation during the three full fiscal
years prior to the Termination Date, (D) three times the greater of
(I) the Executive's highest annual bonus payable during the three
full fiscal years prior to the Termination Date and (II) the target
bonus payable for the year in which the Termination Date occurs
and (E) all accruals under the Zenith Electronics Corporation
Supplemental Salaried Profit Sharing Retirement Plan;
(ii) for a period of three years commencing
on the Termination Date, or until such earlier date on which the
Executive becomes covered under similar plans maintained by a
subsequent employer, the Company shall continue to provide the
Executive and his dependents with coverage, or shall provide
substantially equivalent coverage, under all welfare benefit plans
or arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance and executive insurance programs) with the same level
of coverage, upon the same terms and otherwise to the same
extent as such plans or arrangements shall have been in effect
immediately prior to the Termination Date or, if more favorable to
the Executive, as provided generally with respect to other peer
executives of the Company. If the Company cannot provide such
continued coverage or substantially equivalent coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such coverage; and
(iii) the Company shall provide outplacement
services appropriate for the Executive in accordance with industry
standards (which shall not exceed 15% of the Executive's Base
Compensation).
(b) Nonqualifying Termination Within Change in
Control Period. If during a Change in Control Period the Employment
Period shall terminate by reason of a Nonqualifying Termination, as
defined in Section 8, then the Company shall pay to the Executive (or to
his executor, administrator or other legal representative, as the case may
be) within 30 days following the Termination Date, a lump sum cash
amount equal to the sum of the Executive's Base Compensation payable
through the Termination Date, any vacation pay accrued prior to the
Termination Date and any reimbursable expenses incurred prior to the
Termination Date, in each case to the extent not theretofore paid.
7. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company or
its affiliated companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 7) (a "Payment") would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the Company's public accounting
firm (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be
paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than 10
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 7(c), the Executive
becomes entitled to receive, and receives, any refund with respect to such
claim, the Executive shall (subject to the Company's complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
(a) "Cause" means (i) embezzlement,
misappropriation of corporate funds or any other act of dishonesty by the
Executive, (ii) commission by the Executive of a felony involving moral
turpitude, (iii) significant activities of the Executive harmful to the
reputation of the Company, (iv) significant violation by the Executive of
any statutory or common law duty of loyalty to the Company or (v) a
material breach by the Executive of the Executive's duties and
responsibilities to the Company, including the refusal to perform or the
substantial disregard of such duties, other than as a result of incapacity
due to physical or mental illness.
(b) "Change in Control" means:
(1) the acquisition by any individual, entity
or group (a "Person"), including any "person" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of
25% or more of either (i) then outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of then outstanding
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"),
provided such ownership interest is greater than the interest then
owned by LG Electronics, Inc. ("LGE"); excluding, however, the
following: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly
from the Company), (B) any acquisition by the Company or LGE,
(C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (3) of this Section 8(b); provided
further, that for purposes of clause (B), if any Person (other than
the Company, LGE or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of
25% or more of the Outstanding Company Common Stock or
25% or more of the Outstanding Company Voting Securities by
reason of an acquisition by the Company (and which ownership
interest is greater than the interest then owned by LGE), and such
Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding
Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board;
(3) approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(other than: the Company or LGE; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the
Company of a plan of complete liquidation or dissolution of the
Company.
(c) "Change in Control Period" means the period of
time beginning on the date on which a Change in Control is consummated
and ending on the earlier to occur of (i) 24 months following such Change
in Control and (ii) the Executive's death.
(d) "Good Reason" means, without the Executive's
express written consent, the occurrence of any of the following events
within a Change in Control Period:
(1) any of (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the Executive's position(s), duties, responsibilities or status with
the Company immediately prior to the commencement of such
Change in Control Period, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company as in
effect immediately prior to the commencement of such Change in
Control Period or (iii) any failure to re-elect the Executive to any
position with the Company held by the Executive immediately
prior to the commencement of such Change in Control Period;
(2) a reduction by the Company in the
Executive's rate of Base Compensation as in effect immediately
prior to the commencement of such Change in Control Period or
as the same may be increased from time to time thereafter or the
failure by the Company to increase such rate of Base
Compensation each year after the commencement of such Change
in Control Period by an amount which at least equals, on a
percentage basis, the mean average percentage increase, during
the two full fiscal years of the Company immediately preceding
the commencement of such Change in Control Period, in the rates
of base salary for all officers of the Company elected by the
Board;
(3) the failure of the Company to pay the
Executive a bonus at or greater than the target level in effect in
the year in which the Change in Control Period commences, or to
continue the Executive's participation in the 1987 Zenith Stock
Incentive Plan or any comparable long-term incentive plan;
(4) any requirement of the Company that the
Executive (i) be based anywhere other than at the facility where
the Executive is located immediately prior to the commencement
of such Change in Control Period or (ii) travel on Company
business to an extent substantially more burdensome than the
travel obligations of the Executive immediately prior to the
commencement of such Change in Control Period;
(5) an election by the Company not to extend
the Employment Period in accordance with Section 1;
(6) the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan
in which the Executive is participating immediately prior to the
commencement of such Change in Control Period, unless the
Executive is permitted to participate in other plans providing the
Executive with substantially comparable benefits, or the taking of
any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such plan, (ii) provide the Executive and the
Executive's dependents welfare benefits (including, without
limitation, group medical and dental, health and accident, long-
term disability, short-term disability, group life insurance, and
executive insurance programs) in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive
immediately prior to the commencement of such Change in
Control Period or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies, (iii)
provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive immediately prior
to the commencement of such Change in Control Period or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, (iv) provide the Executive with paid
vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated
companies as in effect for the Executive immediately prior to the
commencement of such Change in Control Period or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, or (v) reimburse the Executive
promptly for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to the
commencement of such Change in Control Period, or if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies; or
(7) the failure of the Company to obtain the
assumption agreement from any successor as contemplated in
Section 18(b).
For purposes of this Agreement, any good faith
determination of Good Reason made by the Executive shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive shall not constitute Good
Reason.
(e) "Nonqualifying Termination" means a
termination of the Employment Period (i) by the Company for Serious
Misconduct, (ii) by the Executive as a result of his election pursuant to
Section 1 not to extend the Agreement in accordance with Section 1 or by
the Executive at any other time for any reason, in either case other than
for Good Reason, (iii) as a result of the Executive's death or (iv) by the
Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a result
of the Executive's incapacity due to physical or mental illness. A
termination of the Employment Period for any reason not expressly set
forth in the preceding sentence, including, without limitation, the election
by the Company not to extend the Agreement pursuant to Section 1, shall
not constitute a Nonqualifying Termination.
(f) "Serious Misconduct" means (i) embezzlement or
misappropriation of corporate funds by the Executive, (ii) commission by
the Executive of a felony involving moral turpitude or (iii) a material
breach by the Executive of the Executive's duties and responsibilities to
the Company as in effect prior to the commencement of the Change in
Control Period, including the refusal to perform or the substantial
disregard of such duties, other than as a result of incapacity due to
physical or mental illness, which is demonstrably willful and deliberate,
which is committed in bad faith or without a reasonable belief that the
breach is in the Company's best interests, and which is not remedied
within a reasonable period of time after receipt of written notice of such
breach.
9. Federal and State Withholding. The Company shall
deduct from the amounts payable to the Executive pursuant to this
Agreement the amount of all required federal and state withholding taxes
in accordance with the Executive's Form W-4 on file with the Company
and all applicable social security taxes.
10. Noncompetition; Nonsolicitation. (a) The Executive
acknowledges that in the course of his employment with the Company
pursuant to this Agreement he will become familiar, and during the course
of his employment with the Company or any of its subsidiaries prior to the
date of this Agreement he has become familiar, with trade secrets and
customer lists of, and other confidential information concerning, the
Company and its subsidiaries and that his services have been and will be
of special, unique and extraordinary value to the Company.
(b) The Executive agrees that during the
Employment Period and, if the Employment Period terminates for a reason
set forth in clause (i) or (ii) of Section 4, for a period of two years
thereafter (the "Noncompetition Period"), he shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as
a member of a partnership or as an officer, director, stockholder, investor
or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm,
corporation or enterprise in engaging or being engaged, in any business
being conducted by the Company or any of its subsidiaries as of the
termination of the Employment Period in any geographic area in which the
Company is then conducting such business.
(c) The Executive further agrees that during the
Noncompetition Period he shall not in any manner, directly or indirectly
induce or attempt to induce any employee of the Company or any of its
subsidiaries to terminate or abandon his or her employment for any
purpose whatsoever.
(d) Nothing in this Section 10 shall prohibit the
Executive from being (i) a stockholder in a mutual fund or a diversified
investment company or (ii) a passive owner of not more than two percent
of the outstanding stock of any class of a corporation any equity securities
of which are publicly traded, so long as the Executive has no active
participation in the business of such corporation.
(e) If, at any time of enforcement of this Section 10,
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any
time during the Employment Period or thereafter, make use of or disclose,
directly or indirectly, any trade secret or other confidential or secret
information of the Company or of its subsidiaries or other technical,
business, proprietary or financial information of the Company or of its
subsidiaries not available to the public generally or to the competitors of
the Company or of its subsidiaries ("Confidential Information"), except to
the extent that such Confidential Information (a) becomes a matter of
public record or is published in a newspaper, magazine or other periodical
available to the general public, other than as a result of any act or
omission of the Executive, or (b) is required to be disclosed by any law,
regulation or order of any court or regulatory commission, department or
agency. Promptly following the termination of the Employment Period,
the Executive shall surrender to the Company all records, memoranda,
notes, plans, reports, computer tapes and software and other documents
and data relating to any Confidential Information or the business of the
Company or of its subsidiaries which he may then possess or have under
his control (together with all copies thereof); provided, however, that the
Executive may retain copies of such documents as are necessary for the
preparation of his federal or state income tax returns.
12. Enforcement. The parties hereto agree that the
Company would be damaged irreparably in the event any provision of
Sections 10 or 11 of this Agreement were not performed in accordance
with their respective terms or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
13. Survival. Sections 10, 11 and 12 of this Agreement and
any rights and remedies arising out of this Agreement shall survive and
continue in full force and effect in accordance with the respective terms
hereof, notwithstanding any termination of the Employment Period.
14. Reimbursement of Expenses. If any contest or
dispute shall arise under this Agreement involving termination of the
Executive's employment with the Company or involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall reimburse the Executive, on a current basis, for
all legal fees and expenses, if any, incurred by the Executive in connection
with such contest or dispute, together with interest in an amount equal to
the prime rate from time to time in effect, as published in The Wall Street
Journal under "Money Rates," but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from
the date the Company receives the Executive's statement for such fees and
expenses through the date of payment thereof; provided, however, that in
the event the resolution of any such contest or dispute includes a finding
denying, in total, the Executive's claims in such contest or dispute, the
Executive shall be required to reimburse the Company, over a period of
12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 14.
15. Notices. All notices and other communications required
or permitted under this Agreement shall be in writing and shall be deemed
to have been duly given when personally delivered, when delivered by
courier or overnight express service or five days after having been sent by
certified or registered mail, postage prepaid, addressed (a) if to the
Executive, to the Executive's address set forth in the records of the
Company or, if to the Company, to Richard F. Vitkus, Senior Vice
President, Administration and General Counsel, Zenith Electronics
Corporation, 1000 Milwaukee Avenue, Glenview, Illinois 60025 or (b) to
such other address as either party may have furnished to the other party in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained
herein.
17. Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes and preempts any prior
understanding, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject
matter hereof other than rights to indemnification, if any, for the benefit of
the Executive. The foregoing notwithstanding, and in addition to the
compensation and benefits provided by this Employment Agreement, the
Executive will also be entitled to the Retention Bonus in accordance with
its terms as set forth in the Letter Agreement dated May 7, 1996, a copy
of which is attached hereto as Addendum A.
18. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is
not the surviving or resulting corporation or as a result of any transfer of
all or substantially all of the assets of the Company. In the event of any
such merger, consolidation or transfer of assets, the provisions of this
Agreement shall be binding upon the surviving or resulting corporation or
the person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of
this Section 18, it will cause any successor or transferee unconditionally
to assume, by written instrument delivered to the Executive (or his
executor, administrator or other legal representative, as the case may be),
all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the
Company in the same amount and on the same terms as the Executive
would be entitled hereunder if the Executive's employment were
terminated during a Change in Control Period other than by reason of a
Nonqualifying Termination. For purposes of implementing the foregoing,
the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Termination Date.
(c) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amounts would be payable
to the Executive hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in
writing by the Executive to receive such amounts or, if no person is so
appointed, to the Executive's estate.
19. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of Illinois without regard to the principle of conflict of laws.
20. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written consent
of the Company and the Executive, and no course of conduct or failure or
delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
ZENITH ELECTRONICS CORPORATION
By: /s/ Peter S. Willmott
Its: President & CEO
EXECUTIVE
/s/ Roger A. Cregg
ROGER A. CREGG
Schedule I
Supplemental Long-Term Disability Benefits
--------------------------------------------
(a) Purpose. The benefits provided by this Schedule
shall be in addition to the benefits provided by the long term disability
plan maintained by the Company for salaried employees as of the date
hereof (the "LTD Plan"), provided, however, that no benefits shall be
payable under this Schedule if the Executive does not elect to participate
in the LTD Plan.
(b) Definitions. As used in this Schedule, the
following terms shall have the following respective meanings:
(1) "Disability" means the inability of the
Executive arising during his employment
by the Company to perform the duties
pertaining to the employment position
held by the Executive with the Company
at the inception of such disability, if such
inability is due to sickness or injury. If
such disability continues for a period of
more than 180 days, it shall become a
"total long term disability" effective upon
the expiration of such 180 days. The
terms "disability" and "total long term
disability" exclude disability resulting
from intentional self-inflicted injuries or
sickness.
(2) "Maximum monthly salary" of the
Executive means the maximum amount
of monthly salary specified in the LTD
Plan on which the benefit payments
under such plan will be calculated and
based. (As of the date hereof, benefits
under the LTD Plan are 66-2/3% of
monthly salary. The maximum monthly
salary thereunder is $6,000 and the
maximum monthly benefit thereunder is
$4,000.)
(c) Benefits Payable. The amount of monthly
benefits payable by the Company to the Executive during a total long term
disability of the Executive shall be 66-2/3% of the amount, if any, by
which the actual monthly salary he was receiving immediately prior to the
commencement of his disability exceeds his maximum monthly salary as
heretofore defined, provided, however, that if such actual monthly salary
exceeds $12,500, then the amount of such benefits payable by the
Company to the Executive shall be limited to 66-2/3% of the amount by
which $12,500 exceeds his maximum monthly salary.
(d) Exclusion. No benefits shall be payable under
this Schedule if the LTD Plan has been terminated prior to the date of the
commencement of the disability.
(e) Period of Benefit Payment. Benefits shall be
payable by the Company to the Executive upon the commencement of the
total long term disability (180 days after inception of the disability) and
thereafter as long as both of the following conditions continue to be
satisfied:
(i) The long term disability continues, and
(ii) The Executive is under the care of a
physician.
Notwithstanding the foregoing, the benefits hereunder shall cease and
terminate upon the first of the following to occur:
(i) The cessation of the total long term
disability.
(ii) The death of the Executive.
(iii) The failure of the Executive to comply
with Subsection (i) of this Schedule.
(iv) The cessation of the payment of benefits
to the Executive under the LTD Plan for
any reason not specified above.
(f) Reduction or Termination of Benefits. If during
the period of total long term disability the Executive becomes employed
by any employer (including the Company) in a position other than the
employment position held by the Executive with the Company at the
inception of such disability or if it is determined that the Executive is
medically able to work in another such position, the Company shall then
or at any time or times thereafter have the right to reduce the amount of
benefits provided hereunder to any lesser amount specified by the
Company or discontinue such benefits altogether.
(g) Effect of Termination of Long Term Disability
Plan. In the event the Executive elects not to participate or elects to
terminate his participation in the LTD Plan, then this Schedule shall be of
no further force and effect, and the Company shall have no obligation to
provide the benefits described herein. In the event the Executive does
participate in and does not terminate his participation in the LTD Plan,
and the LTD Plan is terminated by the Company subsequent to the
commencement of the disability, the Executive shall nevertheless continue
to be entitled to the benefits provided hereunder and, in addition, the
Company shall be obligated to provide, and the Executive shall be entitled
to receive, long term disability benefits in the same amounts and under the
same terms and conditions as if the LTD Plan remained in full force and
effect. Nothing herein shall prohibit the Company from at any time, or
from time to time, establishing a substitute plan or plans for the LTD
Plan, in which event: (1) the Company shall be relieved of its obligation to
continue payment of benefits under the terminated LTD Plan and shall be
obligated to provide benefits under the substituted plan or plans; and (2)
"maximum monthly salary" defined in Subsection (b)(2) above shall mean
the maximum monthly salary specified in such substitute plan or plans.
(h) Determinations. All determinations as to whether
a disability or total long term disability exists at any time or has ceased to
exist, all determinations as to date of commencement or cessation of such
disability or total long term disability and all determinations as to whether
the Executive is medically able to work in another position as provided in
Subsection (f) shall be made by the Company's Corporate Medical
Director (or if at any time no person holds such a position with the
Company, then by any physician designated by the Company from time to
time), which determination shall be final and binding on the parties hereto
regardless of whether such determination is in accord with any medical or
other decision made under the LTD Plan.
(i) Medical Examinations and Data. The Company
at its own expense shall have the right and opportunity to make a medical
examination of the person of the Executive in the event of a sickness or
injury of the Executive which constitutes or might constitute a disability
or a total long term disability as herein defined and as often as the
Company may require. Such examination shall be conducted by the
Company's Corporate Medical Director or any physician designated by
the Company from time to time. The Executive agrees to submit to all
such examinations. In addition, the Company shall be entitled to examine
and obtain copies of all medical records pertaining to such sickness or
injury of any licensed physician, hospital, organization, institution or
person and the Executive agrees to furnish the Company with written
authorization to examine and obtain copies of such records as often as
required by the Company.
Schedule II
Supplemental Life Insurance Benefits
--------------------------------------
(a) Supplemental Life Insurance Benefit. The life
insurance benefits provided in this Schedule shall be in addition to any
group term life insurance program applying generally to salaried
employees. In the event the Executive's employment with the Company is
terminated for any reason, other than by death, prior to age fifty-five (55),
no benefits shall be paid pursuant to this Schedule.
(b) Benefit Amount - Preretirement. If the Executive
shall die prior to retirement, the Company shall pay to the beneficiary
designated by the Executive in writing (or, if the Executive fails to
designate a beneficiary, to the Executive's estate) a lump sum equal to one
and one-half (1-1/2) times the Executive's base salary at the date of death.
(c) Benefit Amount - Postretirement. The life
insurance benefits provided under this Schedule shall continue for a period
of ten (10) years from the date of the Executive's retirement. If the
Executive shall die within one year after the date of retirement, the
Company shall pay to the beneficiary designated by the Executive in
writing (or, if the Executive fails to designate a beneficiary, to the
Executive's estate) a lump sum equal to one and one-half (1-1/2) times the
Executive's base salary in effect on the date of the Executive's retirement.
Thereafter, on each yearly anniversary after commencement of such ten
(10) year period, the amount of such life insurance benefit shall be
decreased by ten percent (10%) of the amount of such benefit in effect at
the commencement of such ten (10) year period. If the Executive is alive
on the tenth (10th) anniversary of the commencement of such ten (10) year
period, the life insurance benefits provided under this Schedule shall cease
and expire and be of no further force and effect and the Company shall
have no further obligation hereunder.
(d) Purchase of Life Insurance Policy. The
Company may, but is not required to, purchase a life insurance policy to
fund the life insurance benefits payable to the Executive hereunder. If
such an insurance policy is purchased by the Company, such policy shall
name the Company as owner and beneficiary and, when purchased, shall
remain a general unsecured, unrestricted asset of the Company, and
neither the Executive nor any beneficiary of the Executive shall have any
rights with respect to, or claim against, such policy. Such policy, if and
when purchased by the Company, shall not be deemed to be held under
any trust for the benefit of the Executive or any beneficiary of the
Executive, nor shall such policy be deemed to be held in trust as collateral
security for fulfilling the obligations of the Company hereunder. The
benefits provided to the Executive and any beneficiary of the Executive
under this Schedule are based upon the general credit of the Company and
are otherwise unsecured. In the event the Company shall purchase a life
insurance policy as set forth in this Subsection (d), and if a medical
examination or examinations of the Executive and/or the furnishing of a
health statement signed by the Executive (which statement may include an
authorization by the Executive to any licensed physician or any
organization, institution, or person that has knowledge of the Executive or
his dependents to give such information to the insurer), is requested by the
insurer, then the Executive agrees to submit to such examination or
examinations or to provide such health statement in whatever form
required by the insurer. If the Executive refuses to submit to such
examination or examinations or to provide such health statement, then
neither the Executive nor any beneficiary of the Executive shall have any
right to the life insurance benefits provided under this Schedule and the
Company shall have no further obligation hereunder.
EXHIBIT 10q
EMPLOYMENT AGREEMENT
----------------------
EMPLOYMENT AGREEMENT dated as of January
1, 1997, between ZENITH ELECTRONICS CORPORATION, a
Delaware corporation (the "Company"), and RICHARD F. VITKUS
(the "Executive").
WHEREAS, the Executive currently serves as Senior
Vice President of the Company; and
WHEREAS, the Company and the Executive desire to
enter into this Agreement to provide for the continued employment of the
Executive by the Company upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises
and the mutual agreements contained herein, the parties hereby agree as
follows:
1. Employment. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in this
Agreement. The term of employment of the Executive by the Company
pursuant to this Agreement (the "Employment Period") shall commence on
the date hereof and shall end on December 31, 1999, unless earlier
terminated pursuant to Section 4, provided that the Employment Period
shall automatically be extended as of January 1, 2000 for one additional
year and, if so extended, shall automatically be further extended as of
each January 1 thereafter, for additional consecutive one-year periods,
unless either the Company or the Executive elects not to extend the
Agreement by written notice given to the other party at least 90 days prior
to each such period.
2. Position and Duties. The Company shall employ the
Executive during the Employment Period as its Senior Vice President,
Administration and General Counsel. The Executive shall perform
faithfully and loyally and to the best of his abilities the duties assigned to
him hereunder, shall devote his full business time, attention and effort to
the affairs of the Company and shall use his reasonable best efforts to
promote the interests of the Company. The Executive shall report to such
executive officer of the Company as shall be designated from time to time
by the Chief Executive Officer of the Company (the "CEO") or the Board
of Directors of the Company (the "Board"). Notwithstanding the
foregoing, the Executive may engage in charitable, civic or community
activities and, with the prior approval of the CEO or the Board, may serve
as a director of any business corporation, provided that such activities or
service does not interfere with his duties hereunder or violate the terms of
any of the covenants contained in Section 10 or 11.
3. Compensation.
(a) Base Compensation. As compensation for the
services to be provided by the Executive hereunder, the Company shall
pay to the Executive during the Employment Period a minimum annual
salary of Two Hundred Thirty Thousand Dollars ($230,000.00) (the
"Base Salary"), payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The
Executive's salary may be increased or decreased from time to time,
provided that the Executive's salary shall not be decreased below the Base
Salary specified by this Section 3(a). The Executive's annual salary in
effect from time to time under this Section 3(a) is hereinafter called his
"Base Compensation."
(b) Incentive Compensation. In addition to his Base
Compensation, the Executive shall be eligible to receive incentive
compensation awards for services rendered during the Employment
Period, determined in accordance with (i) the Company's annual bonus
plan or any other short-term incentive plan adopted by the Company and
(ii) the 1987 Zenith Stock Incentive Plan or any other long-term incentive
plan adopted by the Company.
(c) Supplemental Profit Sharing Benefits. During
the Employment Period, the Executive shall be entitled to participate in
the Zenith Electronics Corporation Supplemental Salaried Profit Sharing
Retirement Plan, as in effect on the date hereof, or in a comparable plan
adopted by the Company.
(d) Supplemental Long-Term Disability Benefits.
During the Employment Period, the Executive shall be eligible for
supplemental long-term disability benefits, the current terms of which are
described on Schedule I attached hereto.
(e) Supplemental Life Insurance Benefits. During
the Employment Period, the Executive shall be eligible for supplemental
life insurance benefits, the current terms of which are described on
Schedule II attached hereto.
(f) Other Benefits. In addition to the benefits
described in subsections (c), (d) and (e) above, the Executive shall be
entitled to participate in all employee benefit plans generally available to
executives who are parties to agreements with the Company which are
comparable to this Agreement, including, as of the date of this Agreement,
group medical and dental, health and accident, group life insurance, long-
term disability, short-term disability, executive insurance, pension, profit
sharing and 401(k) plans. The Executive shall be entitled to take time off
for vacation or illness in accordance with the Company's policy for senior
executives and to receive all other fringe benefits as are from time to time
made generally available to senior executives of the Company. The
Company may from time to time modify the benefits provided to the
Executive, provided that all such modifications are made on the same
basis for all executives in positions comparable to that of the Executive.
(g) Expense Reimbursement. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's
policies and procedures.
4. Termination of Employment Period. The Employment
Period shall be terminated upon the first to occur of (i) termination of the
employment of the Executive by the Company at any time without Cause
(as such term is defined in Section 8) upon written notice given to the
Executive at least 30 days prior to such termination, (ii) the election by
the Company pursuant to Section 1 not to extend this Agreement in
accordance with Section 1, (iii) the election by the Executive pursuant to
Section 1 not to extend this Agreement in accordance with Section 1, (iv)
termination of the employment of the Executive by the Company at any
time for Cause or Serious Misconduct upon written notice given to the
Executive, (v) termination of the employment of the Executive by the
Company on account of the Executive's having become unable (as
determined by the Board in good faith) to regularly perform his duties
hereunder by reason of illness or incapacity for a period of more than 180
consecutive days, (vi) termination of the employment of the Executive by
reason of retirement, (vii) the Executive's death or (viii) termination of
employment by the Executive at any time upon written notice given to the
Company at least 90 days prior to such termination. The date on which
the Employment Period terminates is hereinafter referred to as the
"Termination Date."
5. Consequences of Termination Outside of a Change in
Control Period. If a Termination Date occurs, other than within a
Change in Control Period, as defined in Section 8, the Executive shall be
entitled to receive the compensation and benefits specified by this Section
5 in lieu of any severance amounts which otherwise would be payable to
the Executive.
(a) Termination by Company Without Cause. If the
Employment Period terminates for a reason set forth in clause (i) of
Section 4:
(i) the Company shall pay to the Executive
(A) all Base Compensation otherwise payable through the
Termination Date, (B) vacation pay accrued through the
Termination Date and (C) reimbursement of expenses incurred
through the Termination Date, in each case to the extent not
theretofore paid;
(ii) the Company shall pay to the Executive
the amount of the target bonus otherwise payable for the year in
which the Termination Date occurs, prorated to the Termination
Date;
(iii) if the Termination Date occurs prior to
November 8, 1997, the Company shall pay to the Executive a
lump sum cash amount equal to three times the sum of the
Executive's Base Compensation and target bonus for the year in
which the Executive's Termination Date occurs or, if such
Termination Date occurs on or after November 8, 1997, the
Company shall pay to the Executive a lump sum cash amount
equal to the greater of (A) the sum of the Executive's Base
Compensation and target bonus for the year in which the
Termination Date occurs, multiplied by the number of whole
and/or fractional years remaining under the term of the
Employment Period (as in effect under Section 1 without regard
to the early termination thereof under Section 4) and (B) one and
one-half times the sum of the Executive's Base Compensation
and target bonus for the year in which the Termination Date
occurs;
(iv) the Company shall provide the Executive
with continued coverage, or substantially equivalent coverage,
during the period represented by the amount of the lump sum
payment under clause (iii) (i.e., three years or one and one-half
years, as the case may be) under all welfare benefit plans or
arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance, and executive insurance programs) unless the
Executive becomes covered under similar plans or arrangements
maintained by a subsequent employer; provided that if the
Company is unable to provide such continued coverage or
substantially similar coverage, the Company shall pay the
Executive a lump sum cash amount equal to the present value of
such benefits; and
(v) the Company shall provide to the
Executive outplacement services appropriate for the Executive in
accordance with industry standards (the cost of which shall not
exceed 15% of the Executive's Base Compensation).
(b) Failure of Company to Renew Agreement. If the
Employment Period terminates for a reason set forth in clause (ii) of
Section 4, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Company shall pay to the Executive the
amounts or benefits set forth in Sections 5(a)(i), (ii) and (v), plus a lump
sum cash amount equal to one and one-half times the sum of his Base
Compensation and target bonus for the year in which the Termination
Date occurs, and shall provide to the Executive the benefits described in
Section 5(a)(iv) for the period of one and one-half years commencing on
the Termination Date.
(c) Termination for Cause. If the Employment
Period terminates for a reason set forth in clause (iv) of Section 4, the
Company shall pay to the Executive the amounts set forth in Section
5(a)(i) and the Executive shall not be entitled to any severance payments,
but shall be entitled to any benefits payable under applicable plans.
(d) Disability, Retirement or Death. If the
Employment Period terminates for any reason set forth in clause (v), (vi)
or (vii) of Section 4, the Company shall pay to the Executive or his
executor, administrator or other legal representative, as the case may be,
the amounts set forth in Section 5(a)(i) and the Executive (or his executor,
administrator or other legal representative, as the case may be) shall not
be entitled to any severance payments, but shall be entitled to any benefits
payable under applicable plans.
(e) Failure of Executive to Renew Agreement; Other
Voluntary Termination by the Executive. If the Employment Period
terminates for any reason set forth in clause (iii) or (viii) of Section 4, (A)
the Company shall pay to the Executive the amounts set forth in Section
5(a)(i), (B) the Company may, in its sole discretion, but shall have no
obligation to, pay to the Executive the amount of the target bonus for the
year in which the Termination Date occurs, prorated to the Termination
Date, and (C) the Executive shall not be entitled to any severance
payments, but shall be entitled to any benefits payable under applicable
plans.
6. Consequences of Termination Within Change in
Control Period.
(a) Termination Payments and Benefits. If during a
Change in Control Period, as defined in Section 8, the Employment Period
of the Executive shall terminate other than by reason of a Nonqualifying
Termination, as defined in Section 8, then the Company shall pay or
provide to the Executive (or his executor, administrator or other legal
representative, as the case may be) within 30 days following the
Termination Date, as compensation for services rendered to the Company
and in lieu of any severance amounts which otherwise would be payable to
the Executive, the following amounts:
(i) the Company shall pay to the Executive
a lump sum cash amount equal to the sum of (A) the Executive's
Base Compensation, accrued vacation pay and reimbursable
expenses incurred through the Termination Date, in each case to
the extent not theretofore paid, (B) the Executive's annual bonus
in an amount equal to the annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Executive has been employed by the Company for less than 12
full months) bonus payable to the Executive by the Company for
the fiscal year in which the Termination Date occurs (determined
at the higher of the target or actual level of performance for such
year), multiplied by a fraction, the numerator of which is the
number of days in the fiscal year in which the termination occurs
prior to the Termination Date and the denominator of which is
365 or 366, as applicable, (C) three times the Executive's highest
annual rate of Base Compensation during the three full fiscal
years prior to the Termination Date, (D) three times the greater of
(I) the Executive's highest annual bonus payable during the three
full fiscal years prior to the Termination Date and (II) the target
bonus payable for the year in which the Termination Date occurs
and (E) all accruals under the Zenith Electronics Corporation
Supplemental Salaried Profit Sharing Retirement Plan;
(ii) for a period of three years commencing
on the Termination Date, or until such earlier date on which the
Executive becomes covered under similar plans maintained by a
subsequent employer, the Company shall continue to provide the
Executive and his dependents with coverage, or shall provide
substantially equivalent coverage, under all welfare benefit plans
or arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance and executive insurance programs) with the same level
of coverage, upon the same terms and otherwise to the same
extent as such plans or arrangements shall have been in effect
immediately prior to the Termination Date or, if more favorable to
the Executive, as provided generally with respect to other peer
executives of the Company. If the Company cannot provide such
continued coverage or substantially equivalent coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such coverage; and
(iii) the Company shall provide outplacement
services appropriate for the Executive in accordance with industry
standards (which shall not exceed 15% of the Executive's Base
Compensation).
(b) Nonqualifying Termination Within Change in
Control Period. If during a Change in Control Period the Employment
Period shall terminate by reason of a Nonqualifying Termination, as
defined in Section 8, then the Company shall pay to the Executive (or to
his executor, administrator or other legal representative, as the case may
be) within 30 days following the Termination Date, a lump sum cash
amount equal to the sum of the Executive's Base Compensation payable
through the Termination Date, any vacation pay accrued prior to the
Termination Date and any reimbursable expenses incurred prior to the
Termination Date, in each case to the extent not theretofore paid.
7. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company or its affiliated
companies to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms ofthis
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 7) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the Company's public accounting
firm (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be
paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than 10
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) if, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive
becomes entitled to receive, and receives, any refund with respect to such
claim, the Executive shall (subject to the Company's complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
(a) "Cause" means (i) embezzlement,
misappropriation of corporate funds or any other act of dishonesty by the
Executive, (ii) commission by the Executive of a felony involving moral
turpitude, (iii) significant activities of the Executive harmful to the
reputation of the Company, (iv) significant violation by the Executive of
any statutory or common law duty of loyalty to the Company or (v) a
material breach by the Executive of the Executive's duties and
responsibilities to the Company, including the refusal to perform or the
substantial disregard of such duties, other than as a result of incapacity
due to physical or mental illness.
(b) "Change in Control" means:
(1) the acquisition by any individual, entity
or group (a "Person"), including any "person" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of
25% or more of either (i) then outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of then outstanding
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"),
provided such ownership interest is greater than the interest then
owned by LG Electronics, Inc. ("LGE"); excluding, however, the
following: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly
from the Company), (B) any acquisition by the Company or LGE,
(C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (3) of this Section 8(b); provided
further, that for purposes of clause (B), if any Person (other than
the Company, LGE or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of
25% or more of the Outstanding Company Common Stock or
25% or more of the Outstanding Company Voting Securities by
reason of an acquisition by the Company (and which ownership
interest is greater than the interest then owned by LGE), and such
Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding
Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board;
(3) approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(other than: the Company or LGE; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the
Company of a plan of complete liquidation or dissolution of the
Company.
(c) "Change in Control Period" means the period of
time beginning on the date on which a Change in Control is consummated
and ending on the earlier to occur of (i) 24 months following such Change
in Control and (ii) the Executive's death.
(d) "Good Reason" means, without the Executive's
express written consent, the occurrence of any of the following events
within a Change in Control Period:
(1) any of (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the Executive's position(s), duties, responsibilities or status with
the Company immediately prior to the commencement of such
Change in Control Period, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company as in
effect immediately prior to the commencement of such Change in
Control Period or (iii) any failure to re-elect the Executive to any
position with the Company held by the Executive immediately
prior to the commencement of such Change in Control Period;
(2) a reduction by the Company in the
Executive's rate of Base Compensation as in effect immediately
prior to the commencement of such Change in Control Period or
as the same may be increased from time to time thereafter or the
failure by the Company to increase such rate of Base
Compensation each year after the commencement of such Change
in Control Period by an amount which at least equals, on a
percentage basis, the mean average percentage increase, during
the two full fiscal years of the Company immediately preceding
the commencement of such Change in Control Period, in the rates
of base salary for all officers of the Company elected by the
Board;
(3) the failure of the Company to pay the
Executive a bonus at or greater than the target level in effect in
the year in which the Change in Control Period commences, or to
continue the Executive's participation in the 1987 Zenith Stock
Incentive Plan or any comparable long-term incentive plan;
(4) any requirement of the Company that the
Executive (i) be based anywhere other than at the facility where
the Executive is located immediately prior to the commencement
of such Change in Control Period or (ii) travel on Company
business to an extent substantially more burdensome than the
travel obligations of the Executive immediately prior to the
commencement of such Change in Control Period;
(5) an election by the Company not to extend
the Employment Period in accordance with Section 1;
(6) the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan
in which the Executive is participating immediately prior to the
commencement of such Change in Control Period, unless the
Executive is permitted to participate in other plans providing the
Executive with substantially comparable benefits, or the taking of
any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such plan, (ii) provide the Executive and the
Executive's dependents welfare benefits (including, without
limitation, group medical and dental, health and accident, long-
term disability, short-term disability, group life insurance, and
executive insurance programs) in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive
immediately prior to the commencement of such Change in
Control Period or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies, (iii)
provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive immediately prior
to the commencement of such Change in Control Period or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, (iv) provide the Executive with paid
vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated
companies as in effect for the Executive immediately prior to the
commencement of such Change in Control Period or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, or (v) reimburse the Executive
promptly for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to the
commencement of such Change in Control Period, or if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies; or
(7) the failure of the Company to obtain the
assumption agreement from any successor as contemplated in
Section 18(b).
For purposes of this Agreement, any good faith
determination of Good Reason made by the Executive shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive shall not constitute Good
Reason.
(e) "Nonqualifying Termination" means a
termination of the Employment Period (i) by the Company for Serious
Misconduct, (ii) by the Executive as a result of his election pursuant to
Section 1 not to extend the Agreement in accordance with Section 1 or by
the Executive at any other time for any reason, in either case other than
for Good Reason, (iii) as a result of the Executive's death or (iv) by the
Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a result
of the Executive's incapacity due to physical or mental illness. A
termination of the Employment Period for any reason not expressly set
forth in the preceding sentence, including, without limitation, the election
by the Company not to extend the Agreement pursuant to Section 1, shall
not constitute a Nonqualifying Termination.
(f) "Serious Misconduct" means (i) embezzlement or
misappropriation of corporate funds by the Executive, (ii) commission by
the Executive of a felony involving moral turpitude or (iii) a material
breach by the Executive of the Executive's duties and responsibilities to
the Company as in effect prior to the commencement of the Change in
Control Period, including the refusal to perform or the substantial
disregard of such duties, other than as a result of incapacity due to
physical or mental illness, which is demonstrably willful and deliberate,
which is committed in bad faith or without a reasonable belief that the
breach is in the Company's best interests, and which is not remedied
within a reasonable period of time after receipt of written notice of such
breach.
9. Federal and State Withholding. The Company
shall deduct from the amounts payable to the Executive pursuant to this
Agreement the amount of all required federal and state withholding taxes
in accordance with the Executive's Form W-4 on file with the Company
and all applicable social security taxes.
10. Noncompetition; Nonsolicitation. (a) The
Executive acknowledges that in the course of his employment with the
Company pursuant to this Agreement he will become familiar, and during
the course of his employment with the Company or any of its subsidiaries
prior to the date of this Agreement he has become familiar, with trade
secrets and customer lists of, and other confidential information
concerning, the Company and its subsidiaries and that his services have
been and will be of special, unique and extraordinary value to the
Company.
(b) The Executive agrees that during the
Employment Period and, if the Employment Period terminates for a reason
set forth in clause (i) or (ii) of Section 4, for a period of two years
thereafter (the "Noncompetition Period"), he shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as
a member of a partnership or as an officer, director, stockholder, investor
or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm,
corporation or enterprise in engaging or being engaged, in any business
being conducted by the Company or any of its subsidiaries as of the
termination of the Employment Period in any geographic area in which the
Company is then conducting such business.
(c) The Executive further agrees that during the
Noncompetition Period he shall not in any manner, directly or indirectly
induce or attempt to induce any employee of the Company or any of its
subsidiaries to terminate or abandon his or her employment for any
purpose whatsoever.
(d) Nothing in this Section 10 shall prohibit the
Executive from being (i) a stockholder in a mutual fund or a diversified
investment company or (ii) a passive owner of not more than two percent
of the outstanding stock of any class of a corporation any equity securities
of which are publicly traded, so long as the Executive has no active
participation in the business of such corporation.
(e) If, at any time of enforcement of this Section 10,
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any time
during the Employment Period or thereafter, make use of or disclose,
directly or indirectly, any trade secret or other confidential or secret
information of the Company or of its subsidiaries or other technical,
business, proprietary or financial information of the Company or of its
subsidiaries not available to the public generally or to the competitors of
the Company or of its subsidiaries ("Confidential Information"), except to
the extent that such Confidential Information (a) becomes a matter of
public record or is published in a newspaper, magazine or other periodical
available to the general public, other than as a result of any act or
omission of the Executive, or (b) is required to be disclosed by any law,
regulation or order of any court or regulatory commission, department or
agency. Promptly following the termination of the Employment Period,
the Executive shall surrender to the Company all records, memoranda,
notes, plans, reports, computer tapes and software and other documents
and data relating to any Confidential Information or the business of the
Company or of its subsidiaries which he may then possess or have under
his control (together with all copies thereof); provided, however, that the
Executive may retain copies of such documents as are necessary for the
preparation of his federal or state income tax returns.
12. Enforcement. The parties hereto agree that the
Company would be damaged irreparably in the event any provision of
Sections 10 or 11 of this Agreement were not performed in accordance
with their respective terms or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
13. Survival. Sections 10, 11 and 12 of this Agreement and
any rights and remedies arising out of this Agreement shall survive and
continue in full force and effect in accordance with the respective terms
hereof, notwithstanding any termination of the Employment Period.
14. Reimbursement of Expenses. If any contest or dispute
shall arise under this Agreement involving termination of the Executive's
employment with the Company or involving the failure or refusal of the
Company to perform fully in accordance with the terms hereof, the
Company shall reimburse the Executive, on a current basis, for all legal
fees and expenses, if any, incurred by the Executive in connection with
such contest or dispute, together with interest in an amount equal to the
prime rate from time to time in effect, as published in The Wall Street
Journal under "Money Rates," but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from
the date the Company receives the Executive's statement for such fees and
expenses through the date of payment thereof; provided, however, that in
the event the resolution of any such contest or dispute includes a finding
denying, in total, the Executive's claims in such contest or dispute, the
Executive shall be required to reimburse the Company, over a period of
12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 14.
15. Notices. All notices and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, when delivered
by courier or overnight express service or five days after having been sent
by certified or registered mail, postage prepaid, addressed (a) if to the
Executive, to the Executive's address set forth in the records of the
Company or, if to the Company, to Dennis R. Winkleman, Vice President,
Human Resources, Zenith Electronics Corporation, 1000 Milwaukee
Avenue, Glenview, Illinois 60025 or (b) to such other address as either
party may have furnished to the other party in writing in accordance
herewith, except that notices of change of address shall be effective only
upon receipt.
16. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held
to be invalid, illegal or unenforceable in any respect under applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
17. Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes and preempts any prior
understanding, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject
matter hereof other than rights to indemnification, if any, for the benefit of
the Executive. Pursuant to, but not in limitation of, the foregoing
sentence, the following agreements between the Company and the
Executive shall be terminated, effective as of the date hereof, and shall
have no further force or effect: (i) the Agreement dated August 29, 1994,
(ii) the Supplemental Letter Agreement, and an Addendum thereto, both
dated August 29, 1994, and (iii) an Addendum Number Two to
Supplemental Letter Agreement dated April 4, 1995. Such termination
shall have no effect upon the vesting of options and restricted stock (if
any) pursuant to such agreements, which options and restricted stock shall
remain fully vested.
18. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is
not the surviving or resulting corporation or as a result of any transfer of
all or substantially all of the assets of the Company. In the event of any
such merger, consolidation or transfer of assets, the provisions of this
Agreement shall be binding upon the surviving or resulting corporation or
the person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of
this Section 18, it will cause any successor or transferee unconditionally
to assume, by written instrument delivered to the Executive (or his
executor, administrator or other legal representative, as the case may be),
all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the
Company in the same amount and on the same terms as the Executive
would be entitled hereunder if the Executive's employment were
terminated during a Change in Control Period other than by reason of a
Nonqualifying Termination. For purposes of implementing the foregoing,
the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Termination Date.
(c) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amounts would be payable
to the Executive hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in
writing by the Executive to receive such amounts or, if no person is so
appointed, to the Executive's estate.
19. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of Illinois without regard to the principle of conflict of
laws.
20. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written consent
of the Company and the Executive, and no course of conduct or failure or
delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
ZENITH ELECTRONICS CORPORATION
By: /s/ Peter S. Willmott
Its: President & CEO
EXECUTIVE
/s/ Richard F. Vitkus
RICHARD F. VITKUS
Schedule I
Supplemental Long-Term Disability Benefits
-------------------------------------------
(a) Purpose. The benefits provided by this Schedule
shall be in addition to the benefits provided by the long term disability
plan maintained by the Company for salaried employees as of the date
hereof (the "LTD Plan"), provided, however, that no benefits shall be
payable under this Schedule if the Executive does not elect to participate
in the LTD Plan.
(b) Definitions. As used in this Schedule, the
following terms shall have the following respective meanings:
(1) "Disability" means the inability of the
Executive arising during his employment
by the Company to perform the duties
pertaining to the employment position
held by the Executive with the Company
at the inception of such disability, if such
inability is due to sickness or injury. If
such disability continues for a period of
more than 180 days, it shall become a
"total long term disability" effective upon
the expiration of such 180 days. The
terms "disability" and "total long term
disability" exclude disability resulting
from intentional self-inflicted injuries or
sickness.
(2) "Maximum monthly salary" of the
Executive means the maximum amount
of monthly salary specified in the LTD
Plan on which the benefit payments
under such plan will be calculated and
based. (As of the date hereof, benefits
under the LTD Plan are 66-2/3% of
monthly salary. The maximum monthly
salary thereunder is $6,000 and the
maximum monthly benefit thereunder is
$4,000.)
(c) Benefits Payable. The amount of monthly
benefits payable by the Company to the Executive during a total long term
disability of the Executive shall be 66-2/3% of the amount, if any, by
which the actual monthly salary he was receiving immediately prior to the
commencement of his disability exceeds his maximum monthly salary as
heretofore defined, provided, however, that if such actual monthly salary
exceeds $12,500, then the amount of such benefits payable by the
Company to the Executive shall be limited to 66-2/3% of the amount by
which $12,500 exceeds his maximum monthly salary.
(d) Exclusion. No benefits shall be payable under
this Schedule if the LTD Plan has been terminated prior to the date of the
commencement of the disability.
(e) Period of Benefit Payment. Benefits shall be
payable by the Company to the Executive upon the commencement of the
total long term disability (180 days after inception of the disability) and
thereafter as long as both of the following conditions continue to be
satisfied:
(i) The long term disability continues, and
(II) The Executive is under the care of a
physician.
Notwithstanding the foregoing, the benefits hereunder shall cease and
terminate upon the first of the following to occur:
(i) The cessation of the total long term
disability.
(ii) The death of the Executive.
(iii) The failure of the Executive to comply
with Subsection (i) of this Schedule.
(iv) The cessation of the payment of benefits
to the Executive under the LTD Plan for
any reason not specified above.
(f) Reduction or Termination of Benefits. If during
the period of total long term disability the Executive becomes employed
by any employer (including the Company) in a position other than the
employment position held by the Executive with the Company at the
inception of such disability or if it is determined that the Executive is
medically able to work in another such position, the Company shall then
or at any time or times thereafter have the right to reduce the amount of
benefits provided hereunder to any lesser amount specified by the
Company or discontinue such benefits altogether.
(g) Effect of Termination of Long Term Disability
Plan. In the event the Executive elects not to participate or elects to
terminate his participation in the LTD Plan, then this Schedule shall be of
no further force and effect, and the Company shall have no obligation to
provide the benefits described herein. In the event the Executive does
participate in and does not terminate his participation in the LTD Plan,
and the LTD Plan is terminated by the Company subsequent to the
commencement of the disability, the Executive shall nevertheless continue
to be entitled to the benefits provided hereunder and, in addition, the
Company shall be obligated to provide, and the Executive shall be entitled
to receive, long term disability benefits in the same amounts and under the
same terms and conditions as if the LTD Plan remained in full force and
effect. Nothing herein shall prohibit the Company from at any time, or
from time to time, establishing a substitute plan or plans for the LTD
Plan, in which event: (1) the Company shall be relieved of its obligation to
continue payment of benefits under the terminated LTD Plan and shall be
obligated to provide benefits under the substituted plan or plans; and (2)
"maximum monthly salary" defined in Subsection (b)(2) above shall mean
the maximum monthly salary specified in such substitute plan or plans.
(h) Determinations. All determinations as to whether
a disability or total long term disability exists at any time or has ceased to
exist, all determinations as to date of commencement or cessation of such
disability or total long term disability and all determinations as to whether
the Executive is medically able to work in another position as provided in
Subsection (f) shall be made by the Company's Corporate Medical
Director (or if at any time no person holds such a position with the
Company, then by any physician designated by the Company from time to
time), which determination shall be final and binding on the parties hereto
regardless of whether such determination is in accord with any medical or
other decision made under the LTD Plan.
(i) Medical Examinations and Data. The Company
at its own expense shall have the right and opportunity to make a medical
examination of the person of the Executive in the event of a sickness or
injury of the Executive which constitutes or might constitute a disability
or a total long term disability as herein defined and as often as the
Company may require. Such examination shall be conducted by the
Company's Corporate Medical Director or any physician designated by
the Company from time to time. The Executive agrees to submit to all
such examinations. In addition, the Company shall be entitled to examine
and obtain copies of all medical records pertaining to such sickness or
injury of any licensed physician, hospital, organization, institution or
person and the Executive agrees to furnish the Company with written
authorization to examine and obtain copies of such records as often as
required by the Company.
Schedule II
Supplemental Life Insurance Benefits
-------------------------------------
(a) Supplemental Life Insurance Benefit. The life
insurance benefits provided in this Schedule shall be in addition to any
group term life insurance program applying generally to salaried
employees. In the event the Executive's employment with the Company is
terminated for any reason, other than by death, prior to age fifty-five (55),
no benefits shall be paid pursuant to this Schedule.
(b) Benefit Amount - Preretirement. If the
Executive shall die prior to retirement, the Company shall pay to the
beneficiary designated by the Executive in writing (or, if the Executive
fails to designate a beneficiary, to the Executive's estate) a lump sum
equal to one and one-half (1-1/2) times the Executive's base salary at the
date of death.
(c) Benefit Amount - Postretirement. The life
insurance benefits provided under this Schedule shall continue for a period
of ten (10) years from the date of the Executive's retirement. If the
Executive shall die within one year after the date of retirement, the
Company shall pay to the beneficiary designated by the Executive in
writing (or, if the Executive fails to designate a beneficiary, to the
Executive's estate) a lump sum equal to one and one-half (1-1/2) times the
Executive's base salary in effect on the date of the Executive's retirement.
Thereafter, on each yearly anniversary after commencement of such ten
(10) year period, the amount of such life insurance benefit shall be
decreased by ten percent (10%) of the amount of such benefit in effect at
the commencement of such ten (10) year period. If the Executive is alive
on the tenth (10th) anniversary of the commencement of such ten (10) year
period, the life insurance benefits provided under this Schedule shall cease
and expire and be of no further force and effect and the Company shall
have no further obligation hereunder.
(d) Purchase of Life Insurance Policy. The
Company may, but is not required to, purchase a life insurance policy to
fund the life insurance benefits payable to the Executive hereunder. If
such an insurance policy is purchased by the Company, such policy shall
name the Company as owner and beneficiary and, when purchased, shall
remain a general unsecured, unrestricted asset of the Company, and
neither the Executive nor any beneficiary of the Executive shall have any
rights with respect to, or claim against, such policy. Such policy, if and
when purchased by the Company, shall not be deemed to be held under
any trust for the benefit of the Executive or any beneficiary of the
Executive, nor shall such policy be deemed to be held in trust as collateral
security for fulfilling the obligations of the Company hereunder. The
benefits provided to the Executive and any beneficiary of the Executive
under this Schedule are based upon the general credit of the Company and
are otherwise unsecured. In the event the Company shall purchase a life
insurance policy as set forth in this Subsection (d), and if a medical
examination or examinations of the Executive and/or the furnishing of a
health statement signed by the Executive (which statement may include an
authorization by the Executive to any licensed physician or any
organization, institution, or person that has knowledge of the Executive or
his dependents to give such information to the insurer), is requested by the
insurer, then the Executive agrees to submit to such examination or
examinations or to provide such health statement in whatever form
required by the insurer. If the Executive refuses to submit to such
examination or examinations or to provide such health statement, then
neither the Executive nor any beneficiary of the Executive shall have any
right to the life insurance benefits provided under this Schedule and the
Company shall have no further obligation hereunder.
EXHIBIT 10r
EMPLOYMENT AGREEMENT
----------------------
THIS AGREEMENT, made and entered into as of January 1,
1997 by and between Peter S. Willmott (the "Executive") and Zenith
Electronics Corporation (the "Company");
WITNESSETH THAT:
WHEREAS, the parties desire to enter into this Agreement
pertaining to the employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth below, it is hereby covenanted and agreed by the
Executive and the Company as follows:
1. Performance of Services. The Executive's employment with
the Company shall be subject to the following:
(a) Subject to the terms of this Agreement, the Company hereby
agrees to employ the Executive as its President and Chief
Executive Officer during the Agreement Term (as defined below),
and the Executive hereby agrees to remain in the employ of the
Company during the Agreement Term. During the Agreement
Term, while he is employed by the Company, the Executive shall
be a member of the Board of Directors of the Company (the
"Board").
(b) During the Agreement Term, while the Executive is employed by
the Company, the Executive shall devote his full time, energies
and talents to serving as its President and Chief Executive
Officer.
(c) The Executive agrees that he shall perform his duties faithfully
and efficiently subject to the directions of the Board. The
Executive's duties may include providing services for both the
Company and the Subsidiaries (as defined below), as determined
by the Board; provided, that the Executive shall not, without his
consent, be assigned tasks that would be inconsistent with those
of President and Chief Executive Officer. The Executive will
have such authority, power, responsibilities and duties as are
inherent to his positions and necessary to carry out his
responsibilities and the duties required of him hereunder.
(d) Notwithstanding the foregoing provisions of this paragraph 1,
during the Agreement Term, the Executive may devote reasonable
time to activities other than those required under this Agreement,
including the supervision of his personal investments, and
activities involving professional, charitable, educational, religious
and similar types of organizations, speaking engagements,
membership on the boards of directors of other organizations, and
similar type activities, to the extent that such other activities do
not, in the judgement of the Board, materially inhibit or prohibit
the performance of the Executive's duties under this Agreement,
or conflict in any material way with the business of the Company
or any Subsidiary.
(e) Subject to the provisions of this Agreement, the Executive shall
not be required to perform services under this Agreement during
any period that he is Disabled. The Executive shall be considered
"Disabled" during any period in which he has a physical or mental
disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.
In the event of a dispute as to whether the Executive is Disabled,
the Company may refer the same to a mutually acceptable
licensed practicing physician, and the Executive agrees to submit
to such tests and examinations as such physician shall deem
appropriate.
(f) The "Agreement Term" shall be the period beginning on January
1, 1997 (the "Effective Date") and ending on December 29, 1998.
(g) For purposes of this Agreement, the term "Subsidiary" shall mean
any corporation, partnership, joint venture or other entity during
any period in which at least a fifty percent interest in such entity
is owned, directly or indirectly, by the Company (or a successor
to the Company).
2. Compensation. Subject to the terms of this Agreement, during
the Agreement Term, while the Executive is employed by the Company,
the Company shall compensate him for his services as follows:
(a) The Executive shall receive, in substantially equal monthly or
more frequent installments, in accordance with the Company's
regular payroll practices, an annual base salary of $750,000 (the
"Salary").
(b) For Company performance based on the performance period
beginning on the Effective Date and ending December 31, 1997
(the "1997 Performance Period") and for the performance period
beginning on the January 1, 1998 and ending December 31, 1998
(the "1998 Performance Period"), the Executive shall participate
in a bonus program. The bonus program shall provide, for each
performance period, a maximum bonus amount of 120% of the
Executive's annual Salary, and a minimum bonus amount for each
performance period of not less than 60% of the Executive's
annual Salary, with the minimum payable only if the target goals
for the performance period are achieved. The performance goals
for each performance period shall be established by the
Organization and Compensation Committee of the Board after
consultation with the Executive. The performance goals for the
1997 Performance Period shall be established not later than
March 31, 1997. The value for each bonus award will be
distributed in cash. For the 1997 Performance Period, the bonus
shall be distributed not later than February 28, 1998, and for the
1998 Performance Period, the bonus shall be distributed not later
than February 28, 1999. Notwithstanding the foregoing
provisions of this paragraph (b), for the 1997 Performance
Period, the Executive shall be entitled to a bonus of not less than
$450,000.
(c) As provided in Exhibit 1, which is attached to and forms a part of
this Agreement, the Executive shall be entitled to receive a cash
payment based on the value of 150,000 shares of common stock
of the Company ("Company Stock").
(d) As provided in Exhibit 2, which is attached to and forms a part of
this Agreement, the Executive shall be entitled to receive the
award of options to purchase 150,000 shares of Company Stock.
(e) The Executive shall be provided with the welfare benefits and
other fringe benefits to the same extent and on the same terms as
those benefits are provided by the Company from time to time to
the Company's other senior management employees, except that
the Salary, and the bonus, stock-based awards, and other
incentive compensation benefits for the Executive shall be
determined under the provisions of this agreement rather than the
policies applicable to other employees.
(f) If the Executive's Date of Termination is December 29, 1998, and
he is precluded from receiving an allocation under the Zenith
Salaried Profit Sharing Retirement Plan and/or the Zenith
Electronics Corporation Supplemental Salaried Profit Sharing
Retirement Plan for the year ending December 31, 1998 by reason
of his not being employed by the Company on that date, the
Company shall make a cash payment to the Executive equal to the
amount which would have been allocated to his accounts under
those plans, based on his actual compensation from the Company
for 1998, but determined as though he had been employed through
December 31, 1998. Such payment shall be made not later than
January 20, 1999.
(g) The Executive shall be provided, at the Company's expense,
transportation between his home and the office, and the Executive
is authorized to incur reasonable expenses for entertainment,
traveling, meals, lodging and similar items in promoting the
Company's business. The Company will reimburse the Executive
for all reasonable expenses so incurred, and for reasonable legal
fees incurred in connection with the negotiation of this Agreement.
(h) The Executive shall be entitled to coverage under the
indemnification agreement dated April 24, 1990 between the
Executive and the Company (the "Indemnification Agreement"),
and coverage under such agreement shall continue during the
period in which the Executive is employed, and for five years
after the Date of Termination, or such period longer than five
years as is consistent with the Company policy applicable to other
senior executives of the Company.
3. Termination. The Executive's employment with the Company
during the Agreement Term may be terminated by the Company or the
Executive without any breach of this Agreement only under the
circumstances described in paragraphs 3(a) through 3(f):
(a) Death. The Executive's employment hereunder will terminate
upon his death.
(b) Disability. The Company may terminate the Executive's
employment during any period in which he is Permanently
Disabled. The Executive shall be considered "Permanently
Disabled" during any period in which (i) he has a physical or
mental disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement;
and (ii) such disability is determined by the Board to be of a long-
term nature. In the event of a dispute as to whether the Executive
is Permanently Disabled, the Company may refer the same to a
mutually acceptable licensed practicing physician, and the
Executive agrees to submit to such tests and examination as such
physician shall deem appropriate.
(c) Cause. The Company may terminate the Executive's employment
hereunder at any time for Cause. For purposes of this Agreement,
the term "Cause" shall mean:
(i) the willful and continued failure by the Executive to
substantially perform his duties with the Company (other than any
such failure resulting from the Executive's being Disabled) within
a reasonable period of time after a written demand for substantial
performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his
duties;
(ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company,
monetarily or otherwise; or
(iii) the engaging by the Executive in egregious misconduct
involving serious moral turpitude to the extent that, in the
reasonable judgment of the Company's Board, the Executive's
credibility and reputation no longer conform to the standard of the
Company's executives.
For purposes of this Agreement, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was not
contrary to the best interest of the Company.
(d) Constructive Discharge. If (i) the Company commits a material
breach of the Agreement; (ii) the Executive provides written
notice to the Company of the occurrence of such material breach,
which specifically identifies the manner in which the Executive
believes that the breach has occurred; (iii) the Company fails to
correct such breach within a reasonable time (not to exceed 10
business days) after such notice is given; and (iv) the Executive
resigns within the 60-calendar-day period following the
Executive's discovery of such breach, then, for purposes of this
paragraph 3(d), the Executive shall be considered to have been
dismissed by the Company for reasons other than Cause. For
purposes of this paragraph (d), a "material breach" of the
Agreement shall include (without limitation), in the absence of the
Executive's express written consent, the occurrence of either of
the following circumstances:
(i) The assignment to the Executive of any duties materially
inconsistent with the Executive's position as President and Chief
Executive Officer, or the removal from the Executive of the
authority for any material responsibilities normally attendant to
the office of the President and Chief Executive Officer.
(ii) The failure of the Executive to be elected as a member of the
Board.
(e) Termination by Executive. The Executive may terminate his
employment hereunder at any time for any reason by giving the
Company prior written Notice of Termination (as defined in
paragraph 3(g)), which Notice of Termination shall be effective
not less than 30 calendar days after it is given to the Company,
provided that nothing in this Agreement shall require the
Executive to specify a reason for any such termination. However,
to the extent that the procedures specified in paragraph 3(d) are
required, the procedures of this paragraph 3(e) may not be used in
lieu of the procedures required under paragraph 3(d).
(f) Termination by Company. The Company may terminate the
Executive's employment hereunder at any time for any reason, by
giving the Executive prior written Notice of Termination, which
Notice of Termination shall be effective immediately, or such
later time as is specified in such notice. The Company shall not
be required to specify a reason for the termination under this
paragraph 3(f), provided that termination of the Executive's
employment by the Company shall be deemed to have occurred
under this paragraph 3(f) only if it is not for reasons described in
paragraph 3(b), 3(c), 3(d) or 3(e).
(g) Notice of Termination. Any termination of the Executive's
employment by the Company or the Executive (other than a
termination pursuant to paragraph 3(a)) must be communicated
by a written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" means a
dated notice which indicates the specific termination provision in
this Agreement relied on and which sets forth in reasonable detail
the facts and circumstances, if any, claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
(h) Date of Termination. "Date of Termination" means the last day
the Executive is employed by the Company, provided that the
Executive's employment is terminated in accordance with the
foregoing provisions of this paragraph 3.
4. Rights Upon Termination. The Executive's right to payment
and benefits under this Agreement for periods after his Date of
Termination shall be determined in accordance with the following
provisions of this paragraph 4:
(a) General. If the Executive's Date of Termination occurs during the
Agreement Term for any reason, the Company shall pay to the
Executive:
(i) The Executive's Salary for the period ending on the Date of
Termination.
(ii) Payment for unused vacation days, as determined in
accordance with Company policy as in effect from time to time,
which amounts shall be paid in accordance with the Company's
regular payroll practices.
(iii) Payment of any unpaid bonus amount for the 1997
Performance Period in accordance with actual performance for
the period (subject to the minimum for the period set forth above),
but only if the Date of Termination has occurred on or after
December 31, 1997. Amounts paid under this paragraph (iii)
shall be paid to the Executive at the time such bonus amounts
would otherwise have been paid to the Executive if he had
remained in the employ of the Company through the end of the
Agreement Term.
(iv) Any other payments or benefits due to be provided to the
Executive pursuant to any employee compensation or benefit
plans or arrangements (as the terms of those compensation or
benefit plans or arrangements may be modified by paragraph 2 of
this Agreement), to the extent such payments and benefits are
earned as of the Date of Termination. Except as may otherwise
be expressly provided to the contrary in this Agreement, nothing
in this Agreement shall be construed as requiring the Executive to
be treated as employed by the Company for purposes of any
employee benefit plan or arrangement following the date of the
Executive's Date of Termination.
(b) Resignation and Termination for Cause. If the Executive's Date
of Termination occurs during the Agreement Term under
circumstances described in paragraph 3(c) (relating to the
Executive's termination for Cause) or paragraph 3(e) (relating to
the Executive's resignation), then, in addition to the amounts
payable in accordance with paragraph 4(a):
(i) All unexercised stock options granted to the Executive prior to
the Date of Termination and which are exercisable immediately
prior to the Date of Termination shall continue to be exercisable
by the Executive for a period of 90 days after the Date of
Termination.
(ii) The Executive shall receive a cash payment from the
Company equal to the Fair Market Value of the vested Share
Units credited to his Stock Account as of the Date of
Termination.
(c) Death. If the Executive's Date of Termination occurs during the
Agreement Term because of the Executive's death, then, in
addition to the amounts payable in accordance with paragraph
4(a):
(i) The Executive's estate shall receive from the Company, for the
period continuing through the end of the Agreement Term, the
Salary amount described in paragraph 2(a), as in effect on his
Date of Termination, in monthly or more frequent installments in
accordance with the Company's regular payroll practices.
(ii) The Executive's estate shall receive from the Company a
payment (or payments) in lieu of bonus (or bonuses). If the Date
of Termination occurs during the 1997 Performance Period, the
Executive's estate shall be entitled to a payment based on actual
performance for that performance period (provided that such
amount shall be not less than $450,000), and the Executive's
estate shall be entitled to a payment for the 1998 Performance
Period in an amount determined by the Board, provided that such
amount shall be not less than $450,000. If the Date of
Termination occurs during the 1998 Performance Period, the
Executive's estate shall be entitled to a payment based on actual
performance for that performance period. Amounts payable
under this paragraph (ii) shall be paid at the time such bonus
amounts would otherwise have been paid to the Executive if he
had remained in the employ of the Company through the end of
the Agreement Term.
(iii) All unexercised stock options granted to the Executive prior
to the Executive's death (regardless of whether they are
exercisable prior to the Date of Termination) shall be exercisable
by the Executive's estate, heirs and assigns for a period expiring
on the third anniversary of the Date of Termination.
(iv) The Executive's estate shall receive a cash payment from the
Company equal to the Fair Market Value of the Share Units
credited to his Stock Account as of the Date of Termination
(regardless of whether such Share Units are vested prior to the
Date of Termination).
By writing filed with the Company in accordance with the
procedures established by it, the Executive may designate one or
more beneficiaries to receive the benefits which would otherwise
be provided to the Executive's estate under this paragraph (c).
(d) Disability. If the Executive's Date of Termination occurs during
the Agreement Term under circumstances described in paragraph
3(b) (relating to the Executive's being Disabled), then, in addition
to the amounts payable in accordance with paragraph 4(a):
(i) The Executive shall receive from the Company for the period
continuing through the end of the Agreement Term (regardless of
whether the Executive continues to be Disabled through the end of
the Agreement Term), the Salary amount described in paragraph
2(a), as in effect on his Date of Termination, in monthly or more
frequent installments in accordance with the Company's regular
payroll practices.
(ii) The Executive shall receive from the Company a payment (or
payments) in lieu of the bonus (or bonuses). If the Date of
Termination occurs during the 1997 Performance Period, the
Executive shall be entitled to a payment based on actual
performance for that performance period (provided that such
amount shall be not less than $450,000), and the Executive shall
be entitled to a payment for the 1998 Performance Period in an
amount determined by the Board, provided that such amount shall
be not less than $450,000. If the Date of Termination occurs
during the 1998 Performance Period, the Executive shall be
entitled to a payment based on actual performance for that
performance period. Amounts payable under this paragraph (ii)
shall be paid at the time such bonus amounts would otherwise
have been paid to the Executive if he had remained in the employ
of the Company through the end of the Agreement Term.
(iii) All unexercised stock options granted to the Executive prior
to the Date of Termination (regardless of whether they are
exercisable prior to the Date of Termination) shall be exercisable
by the Executive for a period expiring on the third anniversary of
the Date of Termination.
(iv) The Executive shall receive a cash payment from the
Company equal to the Fair Market Value of the Share Units
credited to his Stock Account as of the Date of Termination
(regardless of whether such Share Units are vested prior to the
Date of Termination).
(v) If the Executive continues to be Disabled through the end of
the Agreement Term, then, for the period after the end of the
Agreement Term, the Executive shall be entitled to receive
disability income replacement coverage to the extent provided
under the disability policy applicable to other senior management
employees of the Company. During any period while the
Executive is Disabled, and is otherwise entitled to receive Salary
(or Salary replacement) payments under this Agreement, any
Salary payments otherwise due to the Executive shall be reduced
by the amount of any benefits paid for the same period of time
under such disability income replacement coverage.
(e) Discharge without Cause. If the Executive's Date of Termination
occurs during the Agreement Term under circumstances described
in paragraph 3(d) (relating to constructive discharge) or
paragraph 3(f) (relating to termination by the Company without
Cause), then, in addition to the amounts payable in accordance
with paragraph 4(a):
(i) The Executive shall receive from the Company, for the period
continuing through the end of the Agreement Term, the Salary
amount described in paragraph 2(a), as in effect on his Date of
Termination, in monthly or more frequent installments in
accordance with the Company's regular payroll practices.
(ii) The Executive shall receive from the Company a payment (or
payments) in lieu of the bonus (or bonuses), which payment shall
be based on actual performance for the performance period (but
shall not be less than the rate of $450,000 for each of the
performance periods). However, if the Executive is entitled to
payment for the 1997 Performance Period in accordance with
paragraph 4(a)(iii) because the Date of Termination occurs on or
after December 31, 1997, no payment shall be made for the 1997
Performance Period under this paragraph (ii). Amounts payable
under this paragraph (ii) shall be paid at the time the bonus
amounts would otherwise have been paid to the Executive if he
had remained in the employ of the Company through the end of
the Agreement Term.
(iii) All unexercised stock options granted to the Executive prior
to the Date of Termination (regardless of whether they are
exercisable prior to the Date of Termination) shall be exercisable
by the Executive for a period expiring on the third anniversary of
the Date of Termination.
(iv) The Executive shall receive a cash payment from the
Company equal to the Fair Market Value of the Share Units
credited to his Stock Account as of the Date of Termination
(regardless of whether such Share Units are vested prior to the
Date of Termination).
(f) Other Severance Benefits. Except as may be otherwise
specifically provided by an amendment of this paragraph (f)
adopted in accordance with paragraph 10, payments under this
paragraph 4 shall be in lieu of any benefits that may be otherwise
payable to or on behalf of the Executive pursuant to the terms of
any severance pay arrangement of the Company or any
Subsidiary or any other, similar arrangement of the Company or
any Subsidiary providing benefits upon involuntary termination of
employment.
5. Duties on Termination. Subject to the terms and conditions of
this Agreement, during the period beginning on the date of delivery of a
Notice of Termination, and ending on the Date of Termination, the
Executive shall continue to perform his duties as set forth in this
Agreement, and shall also perform such services for the Company as are
necessary and appropriate for a smooth transition to the Executive's
successor. Notwithstanding the foregoing provisions of this paragraph 5,
the Company may suspend the Executive from performing his duties
under this Agreement following the delivery of a Notice of Termination
providing for the Executive's resignation, or delivery by the Company of a
Notice of Termination providing for the Executive's termination of
employment for any reason; provided, however, that during the period of
suspension (which shall end on the Date of Termination), the Executive
shall continue to be treated as employed by the Company for other
purposes, and his rights to compensation or benefits shall not be reduced
by reason of the suspension.
6. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this
Agreement by seeking other employment or otherwise. The Company
shall not be entitled to set off against the amounts payable to the
Executive under this Agreement any amounts owed to the Company by the
Executive, any amounts earned by the Executive in other employment
after termination of his employment with the Company, or any amounts
which might have been earned by the Executive in other employment had
he sought such other employment.
7. Noncompetition and Confidentiality. Except as otherwise
provided in this Agreement, the Executive shall be subject to such
restrictions on competition, interference with the business of the
Company and its Subsidiaries, and on the use, disclosure and retention of
trade secrets and confidential information as are applicable to other senior
management employees of the Company.
8. Assistance with Claims. The Executive agrees that, for the
period beginning the Effective Date, and continuing for a reasonable
period after the Executive's termination of employment with the Company,
the Executive will assist the Company in defense of any claims that may
be made against the Company, and will assist the Company in the
prosecution of any claims that may be made by the Company, to the
extent that such claims may relate to services performed by the Executive
for the Company. The Executive agrees to promptly inform the Company
if he becomes aware of any lawsuits involving such claims that may be
filed against the Company. The Company agrees to reimburse the
Executive for all of the Executive's reasonable out-of-pocket expenses
associated with such assistance, including travel expenses. For periods
after the Executive's employment with the Company terminates, the
Company agrees to provide reasonable compensation to the Executive for
such assistance. The Executive also agrees to promptly inform the
Company if he is asked to assist in any investigation of the Company (or
its actions) that may relate to services performed by the Executive for the
Company, regardless of whether a lawsuit has then been filed against the
Company with respect to such investigation.
9. Nonalienation. The interests of the Executive under this
Agreement are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Executive or the Executive's beneficiary.
10. Amendment. This Agreement may be amended or cancelled
only by mutual agreement of the parties in writing without the consent of
any other person. So long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.
11. Applicable Law. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Illinois, without
regard to the conflict of law provisions of any state. All disputes shall be
litigated in Chicago, Illinois.
12. Severability. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of
any other provision of this Agreement, and this Agreement will be
construed as if such invalid or unenforceable provision were omitted (but
only to the extent that such provision cannot be appropriately reformed or
modified).
13. Waiver of Breach. No waiver by any party hereto of a
breach of any provision of this Agreement by any other party, or of
compliance with any condition or provision of this Agreement to be
performed by such other party, will operate or be construed as a waiver of
any subsequent breach by such other party or any similar or dissimilar
provisions and conditions at the same or any prior or subsequent time.
The failure of any party hereto to take any action by reason of such
breach will not deprive such party of the right to take action at any time
while such breach continues.
14. Successors. This Agreement shall be binding upon, and inure
to the benefit of, the Company and its successors and assigns and upon
any person acquiring, whether by merger, consolidation, purchase of
assets or otherwise, all or substantially all of the Company's assets and
business.
15. Notices. Notices and all other communications provided for
in this Agreement shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, postage
prepaid, or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below (or such other addresses as shall be specified
by the parties by like notice). Such notices, demands, claims and other
communications shall be deemed given:
(a) in the case of delivery by overnight service with guaranteed next
day delivery, the next day or the day designated for delivery;
(b) in the case of certified or registered U.S. mail, five days after
deposit in the U.S. mail; or
(c) in the case of facsimile, the date upon which the transmitting
party received confirmation of receipt by facsimile, telephone or
otherwise;
provided, however, that in no event shall any such communications be
deemed to be given later than the date they are actually received.
Communications that are to be delivered by the U.S. mail or by overnight
service are to be delivered to the addresses set forth below:
to the Company:
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, IL 60025
or to the Executive:
Peter S. Willmott
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, IL 60025
All notices to the Company shall be directed to the attention of Chairman
of the Board of Directors of the Company, with a copy to the General
Counsel of the Company. Each party, by written notice furnished to the
other party, may modify the applicable delivery address, except that notice
of change of address shall be effective only upon receipt.
16. Costs of Enforcement. The following provisions of this
paragraph 16 shall apply if it becomes necessary or desirable for the
Executive to retain legal counsel or incur other costs and expenses in
connection with either enforcing any and all of his rights under this
Agreement or defending against any allegations of breach of this
Agreement by the Company:
(a) The Executive shall be entitled to recover from the Company
reasonable attorneys' fees, costs and expenses incurred by him in
connection with such enforcement or defense.
(b) Payments required under this paragraph 16 shall be made by the
Company to the Executive (or directly to the Executive's attorney)
at the time the attorneys' fees, costs, and expenses are incurred by
the Executive.
(c) The Executive shall be entitled to select his legal counsel;
provided, however, that such right of selection shall not affect the
requirement that any costs and expenses reimbursable under this
paragraph 16 be reasonable.
(d) The Executive's rights to payments under this paragraph 16 shall
not be affected by the final outcome of any dispute with the
Company; provided, however, that to the extent that the court
shall determine that under the circumstances recovery by the
Executive of all or a part of any such fees and costs and expenses
would be unjust, the Executive shall not be entitled to such
recovery; and to the extent that such amount have been recovered
by the Executive previously, the Executive shall repay such
amounts to the Company.
17. Survival of Agreement. Except as otherwise expressly
provided in this Agreement, the rights and obligations of the parties to this
Agreement shall survive the termination of the Executive's employment
with the Company.
18. Entire Agreement. Except as otherwise provided herein, this
Agreement (including the Exhibits attached hereto) constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior and contemporaneous agreements, if any, between the
parties relating to the subject matter hereof.
IN WITNESS THEREOF, the Executive has hereunto set his
hand, and the Company has caused these presents to be executed in its
name and on its behalf, and its corporate seal to be hereunto affixed, all as
of the day and year first above written.
/s/ Peter S. Willmott
PETER S. WILLMOTT
Zenith Electronics Corporation
By /s/ Richard F. Vitkus
Richard F. Vitkus
Senior Vice President
ATTEST:
/s/ Wayne M. Koprowski
Wayne M. Koprowski
Assistant Secretary
(SEAL)
EXHIBIT 1
SHARE UNIT AWARDS
------------------
Under paragraph 2(c) of the employment agreement (the
"Agreement") between Zenith Electronics Corporation (the "Company")
and Peter S. Willmott (the "Executive"), the Executive is entitled to
receive a cash payment based on 150,000 shares of common stock of the
Company ("Company Stock"). Except as otherwise expressly provided in
the Agreement, this Exhibit 1 sets forth the terms and conditions of such
award.
(a) A "Stock Account" shall be established by the Company in the
name of the Executive, which will reflect an unfunded obligation
of the Company to pay cash to the Executive, as determined in
accordance with this Exhibit 1.
(b) As of the Effective Date, 150,000 Share Units shall be allocated
to the Executive's Stock Account.
(c) As of the record date for the payment of any dividend with respect
to Company Stock which record date occurs on or after the
Effective Date and on or before the Date of Termination, the
Executive's Stock Account will be credited with additional Share
Units equal to (i) the amount of the dividends or other distribution
that would have been paid with respect to the number of shares of
Company Stock equal to the number of Share Units credited to
the Stock Account as of the dividend record date; divided by (ii)
the Fair Market Value of a share of Company Stock on the day
such dividend is payable.
(d) Except as otherwise provided in the Agreement, the Executive's
right to Share Units allocated to his Stock Account shall become
vested in accordance with the following:
(i) The Executive shall be vested in 25% of the Share Units as of
December 31, 1997, if the Executive is then employed by the
Company.
(ii) The Executive shall be vested in 25% of the Share Units as of
December 29, 1998, if the Executive is then employed by the
Company.
(iii) The Executive shall be vested in 25% of the Share Units in
proportion to the achievement of performance goals for the 1997
Performance Period and 25% of the Share Units in proportion to
the achievement of the performance goals for the 1998
Performance Period.
(e) If the Executive remains in the employ of the Company through
the end of the Agreement Term (i.e., through December 29,
1998), or is otherwise entitled to such cash payments under the
Agreement, he shall receive a cash payment from the Company
equal to the Fair Market Value of the vested Share Units credited
to his Stock Account as of his Date of Termination.
(f) The cash to be paid to the Executive with respect to Share Units
credited to his Stock Account following his Date of Termination
shall be distributed within 20 days after such Date of
Termination, provided that no such payment shall be made prior
to the Executive's Date of Termination.
(g) In the event of recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation, rights
offering, separation, reorganization or liquidation, or other change
in the corporate structure or shares of the Company, the Share
Units and the right to shares of Company Stock shall be adjusted
to the same extent such adjustment would be made with respect to
shares awarded under the 1987 Zenith Stock Incentive Plan (the
"Stock Incentive Plan").
(h) The Company shall use a procedure to grant the Share Units
under this Exhibit 1 so that, to the extent that the grant is a
"purchase" for purposes of Section 16(b) of the Securities
Exchange Act of 1934, the grant will be exempt from Section
16(b) by reason of SEC Rule 16b-3 (or other SEC rules).
(i) For purposes of this Agreement:
(i) The "Fair Market Value" of a Share Unit as of any date shall
be the Fair Market Value of a share of Company Stock on that
date.
(ii) The "Fair Market Value" of a share of Company Stock as of
any date shall be determined on the same manner as is used to
determine such fair market value in establishing the minimum
option exercise price for a stock option under the Stock Incentive
Plan.
(iii) For purposes of determining the amount of cash to be
distributed to the Executive with respect to Share Units credited
to his Stock Account as of his Date of Termination, the "Fair
Market Value" of a Share Unit shall be determined as of the Date
of Termination.
EXHIBIT 2
STOCK OPTION AWARDS
---------------------
Under paragraph 2(d) of the employment agreement (the
"Agreement") between Zenith Electronics Corporation (the "Company")
and Peter S. Willmott (the "Executive"), the Executive is entitled to
receive the award of options to purchase 150,000 shares of common stock
of the Company ("Company Stock"). Except as otherwise expressly
provided in the Agreement, this Exhibit 2 sets forth the terms and
conditions of such options.
(a) As of the Effective Date, the Executive shall be granted an option
to purchase 100,000 shares of Company stock. As of January 1,
1998 if the Executive is then employed by the Company, the
Executive shall be granted an option to purchase an additional
50,000 shares of Company stock. The option exercise price per
share of Company Stock under each option shall equal the fair
market value of a share of Company Stock on the date the option
is granted.
(b) The option granted as of the Effective Date shall first become
exercisable with respect to 50% of the shares covered thereby as
of January 1, 1998, if the Executive is then employed by the
Company. The option granted as of the Effective Date shall first
become exercisable with respect to the remaining 50% of the
shares covered thereby as of December 29, 1998, if the Executive
is then employed by the Company. The option granted as of
January 1, 1998 shall first become exercisable with respect to
100% of the shares covered thereby as of December 29, 1998, if
the Executive is then employed by the Company.
(c) If the Executive continues to be employed by the Company
through the last day of the Agreement Term, all unexercised stock
options then held by the Executive shall be exercisable by the
Executive (or his executor or assigns) through the third
anniversary of the last day of the Agreement Term.
(d) If the Executive dies after the Date of Termination, but before the
expiration of the period during which options are exercisable by
the Executive under the Agreement (including this Exhibit 2),
such options shall continue to be exercisable until such expiration
of the period by the Executive's estate (or his executor or assigns
or, if applicable, the beneficiary designated by the Executive).
(e) The options granted under this Exhibit 2 shall not be incentive
stock options.
(f) The options granted under this Exhibit 2 will provide that after
the option has been granted, and prior to its exercise, the options
may be transferred by the Executive, for no consideration, to or
for the benefit of the Executive's Immediate Family (including,
without limitation, to a trust for the benefit of the Executive's
Immediate Family or to a partnership for members of a
Executive's Immediate Family), subject to such limits as the
Committee may establish, and the transferee shall remain subject
to all the terms and conditions applicable to the options prior to
such transfer. The Executive's "Immediate Family" shall mean
the Executive's spouse, children, stepchildren, adoptive
relationships, sisters, brothers and grandchildren (and, for this
purpose, shall also include the Executive).
(g) The Company shall use a procedure to grant the options under
this Exhibit 2 so that, to the extent that the grant is a "purchase"
for purposes of Section 16(b) of the Securities Exchange Act of
1934, the grant will be exempt from Section 16(b) by reason of
SEC Rule 16b-3 (or other SEC rules).
(h) The options awarded under this Exhibit 2 shall be granted under
and subject to the terms and conditions of the 1987 Zenith Stock
Incentive Plan.
ZENITH ELECTRONICS CORPORATION
EMPLOYEE SHARE UNIT AGREEMENT
THIS AGREEMENT, entered into as of January 1, 1997 (the
"Agreement Date"), by and between Peter S. Willmott (the "Executive"),
and Zenith Electronics Corporation, a Delaware corporation (the
"Company");
WITNESSETH THAT:
WHEREAS, pursuant to the terms of Exhibit 1 of the
employment agreement between the Executive and the Company dated
January 1, 1997 (the "Employment Agreement"), the Company is to
establish a stock account in the name of the Executive, which will reflect
an unfunded obligation of the Company to pay cash to the Executive,
based on the value of units representing shares of Company stock
allocated to the Stock Account, and the rights provided by this Agreement
are in settlement of that obligation;
NOW, THEREFORE, IT IS AGREED, by and between the
Company and the Executive, as follows:
1. Establishment of Stock Account. As of the Effective Date, the
Company shall establish a Stock Account, which shall be used to record
the number of Share Units allocated for the benefit of the Executive.
2. Adjustments to Stock Account. The Stock Account shall be
adjusted in accordance with the following:
(a) As of the Effective Date, 150,000 Share Units shall be allocated
to the Stock Account for the benefit of the Executive, which
150,000 Share Units shall be the opening account balance of the
Stock Account.
(b) As of the record date for the payment of any dividend with respect
to common stock of the Company ("Stock"), which record date
occurs on or after the Effective Date, and on or before the Date of
Termination, the Stock Account will be credited with additional
Share Units equal to (i) the amount of the dividends or other
distributions that would have been paid with respect to the
number of shares of Stock equal to the number of Share Units
credited to the Stock Account as of the dividend record date;
divided by (ii) the Fair Market Value of a share of Stock on the
day such dividend is payable. For purposes of this Agreement,
the term "Date of Termination" shall be defined as set forth in the
Employment Agreement.
(c) Immediately after distribution of the Value of the vested portion
of the Stock Account in accordance with paragraph 6, the number
of Share Units allocated to the Stock Account shall be reduced to
zero, and the Stock Account shall be cancelled.
3. Adjustment to Share Units. In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar
change in capitalization or event with respect to Stock, or any distribution
to holders of Stock which would not otherwise result in a corresponding
adjustment to the number of Share Units allocated to the Stock Account in
accordance with paragraph 2, the Share Units allocated to the Stock
Account shall be adjusted by the committee (the "Committee") which
administers the 1987 Zenith Stock Incentive Plan (the "Plan") to the same
extent such adjustment would be made with respect to shares awarded
under the Plan.
4. Statement of Stock Account. As soon as practicable after the
end of calendar year 1997 and calendar year 1998, the Company shall
provide the Executive with a statement of the transactions in his Stock
Account during that year and the number of Share Units allocated to his
Stock Account as of the end of the year.
5. Vesting. The Executive shall be vested in the Share Units
allocated to the Stock Account as of his Date of Termination in
accordance with the following:
(a) The Executive shall be vested 25% of the Share Units allocated to
the Stock Account as of his Date of Termination, if the
Executive's Date of Termination has not occurred before
December 31, 1997.
(b) The Executive shall be vested in an additional 25% of the Share
Units allocated to the Stock Account as of his Date of
Termination, if the Executive's Date of Termination has not
occurred before December 29, 1998.
(c) The Executive shall be vested in 25% of the Share Units allocated
to the Stock Account as of his Date of Termination, in proportion
to the achievement of performance goals for the 1997
Performance Period, and shall be vested in the remaining 25% of
the Share Units allocated to the Stock Account as of his Date of
Termination, in proportion to the achievement of the performance
goals for the 1998 Performance Period, as those Performance
Periods and performance goals are established in accordance with
the Employment Agreement.
(d) Notwithstanding the foregoing provisions of this paragraph 5, the
Executive shall become vested in 100% of the Share Units
allocated to his Stock Account as of his Date of Termination
(which vesting shall be deemed to occur prior to the determination
and distribution of the Value of his Stock Account in accordance
with paragraph 6), if the Executive's Date of Termination occurs
prior to December 29, 1998 under circumstances described in
paragraph 3(b) of the Employment Agreement (relating to the
Executive's being Disabled), under circumstances described in
paragraph 3(d) of the Employment Agreement (relating to
constructive discharge), or under circumstances described in
paragraph 3(f) of the Employment Agreement (relating to
termination by the Company without Cause), or the Date of
Termination occurs prior to December 29, 1998 by reason of his
death.
6. Distribution. On, or within 20 days after, the Executive's Date
of Termination, but in no event prior to the Date of Termination, the
Executive shall receive a cash payment from the Company equal to the
Value of the vested portion of the Stock Account, determined as of the
Date of Termination, and based on the vesting provisions set forth in
paragraph 5. The "Value" of the Stock Account as of the Date of
Termination shall equal the product of: (a) number of Share Units
(including fractional Share Units) allocated to the Stock Account as of
that date; multiplied by (b) the Fair Market Value of a share of Stock.
The Value of the vested portion of the Stock Account shall be equal to the
Value of the Stock Account, but proportionately reduced to reflect the
portion of the Share Units allocated to the Stock Account that is not
vested on the Date of Termination. As used in this Agreement, the "Fair
Market Value" of a share of Stock shall mean the closing transaction price
of a share of Stock as reported in The Wall Street Journal as New York
Stock Exchange Composite Transactions for the date as of which such
value is being determined or, if there shall be no reported transaction on
such date, on the next preceding date for which a transaction was
reported; provided that if the Fair Market Value for any date cannot be
determined as above provided, Fair Market Value shall be determined by
the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem appropriate.
7. Withholding. All amounts payable under this Agreement shall
be subject to withholding of all applicable taxes, and the Executive shall
also be responsible for payment of any withholding taxes which become
due with respect to such payment prior to the date such payment occurs.
8. Heirs. Any amounts payable to the Executive under this
Agreement that are not paid at the time of the Executive's death shall be
paid at the time and in the form determined in accordance with the
provisions of this Agreement, to the beneficiary designated by the
Executive in writing filed with the Committee in such form and at such
time as the Committee shall require. If a deceased Executive fails to
designate a beneficiary, or if the designated beneficiary of the deceased
Executive dies before the Executive or before complete payment of the
amounts distributable under this Agreement, the Committee shall direct
that benefits to be paid under this Agreement be paid to the legal
representative or representatives of the estate of the last to die of the
Executive and his beneficiary.
9. Transferability. The interests of the Executive under this
Agreement may not be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or
otherwise) or be subject to execution, attachment or similar process, other
than by will or the laws of descent and distribution.
10. Limitation of Implied Rights. Neither the Executive nor any
other person shall, by reason of the establishment of the Stock Account, or
by reason of the allocation of Share Units to that account, acquire any
right in or title to any assets, funds or property of the Company
whatsoever prior to the date of distribution with respect to the Stock
Account. The Executive shall have only a contractual right to the cash
distributable under this Agreement, unsecured by any assets of the
Company. Nothing contained in this Agreement shall constitute a
guarantee by the Company that the assets of the Company shall be
sufficient to provide any benefits specified under this Agreement.
11. Share Units Confer No Rights as Stockholder. The
Executive shall not be considered a stockholder of the Company by reason
of the allocation of Share Units to the Stock Account, and shall not be
entitled to any privileges of Stock ownership with respect to Share Units.
12. Counterparts. This Agreement may be executed in two
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
13. Successors. This Agreement shall be binding upon and inure
to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Executive, acquire any
rights hereunder in accordance with this Agreement.
14. Governing Law. This Agreement and all determinations
made and actions taken pursuant hereto, to the extent not governed by the
laws of the United States, shall be governed by the laws of the State of
Illinois and construed in accordance therewith without giving effect to
principles of conflicts of laws.
15. Amendment. This Agreement may be amended by written
Agreement of the Executive and the Company, without the consent of any
other person.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the Agreement Date.
ZENITH ELECTRONICS CORPORATION
By /s/ Richard F. Vitkus
Richard F. Vitkus
Senior Vice President
/s/ Peter S. Willmott
PETER S. WILLMOTT
Attest:
/s/ Wayne M. Koprowski
Wayne M. Koprowski
Assistant Secretary
ZENITH ELECTRONICS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of January 1, 1997 (the
"Agreement Date"), by and between Peter S. Willmott (the "Executive"),
and Zenith Electronics Corporation, a Delaware corporation (the
"Company");
WITNESSETH THAT:
WHEREAS, the Company maintains the 1987 Zenith Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of
this Agreement; and
WHEREAS, pursuant to the terms of paragraph (a) of Exhibit 2
of the employment agreement between the Executive and the Company
dated January 1, 1997 (the "Employment Agreement"), the Executive is
entitled to receive an option to purchase 100,000 shares of common stock
of the Company, par value $1.00 ("Stock"), and the option award
reflected by this Agreement, which is made under the Plan, is in settlement
of that obligation (which award is in addition to the grant of an option to
purchase 50,000 shares of Stock, to be made to the Executive as of
January 1, 1998, subject to the terms of the Employment Agreement);
NOW, THEREFORE, IT IS AGREED, by and between the
Company and the Executive, as follows:
1. Award and Purchase Price. Subject to the terms of this
Agreement and the Plan, the Executive is hereby granted an option to
purchase a total of 100,000 shares of Stock (the "Option"). The price of
each share of Stock subject to the Option shall be $10.875. The Option is
not intended to constitute an "incentive stock option" as that term is used
in Code section 422.
2. Exercise Date. The Option shall become exercisable with
respect to 50,000 shares of Stock as of January 1, 1998, if the Executive's
Date of Termination has not occurred before that date; and the Option
shall become exercisable with respect to the remaining 50,000 shares of
Stock as of December 29, 1998, if the Executive's Date of Termination
has not occurred before that date. The Option shall become fully
exercisable on the Executive's Date of Termination (regardless of the
extent to which is was exercisable immediately prior to the Date of
Termination), if the Executive's Date of Termination occurs prior to
December 29, 1998 under circumstances described in paragraph 3(b) of
the Employment Agreement (relating to the Executive's being Disabled),
under circumstances described in paragraph 3(d) of the Employment
Agreement (relating to constructive discharge), or under circumstances
described in paragraph 3(f) of the Employment Agreement (relating to
termination by the Company without Cause), or the Executive's Date of
Termination occurs prior to December 29, 1998 by reason of his death.
For purposes of this Agreement, the term "Date of Termination" shall be
defined as set forth in the Employment Agreement.
3. Expiration Date. The Option shall expire on, and shall not be
exercisable after, the "Expiration Date" determined in accordance with the
following:
(a) If the Executive's Date of Termination occurs on or after
December 29, 1998, the Expiration Date shall be December 29,
2000.
(b) If the Executive's Date of Termination occurs prior to December
29, 1998 under circumstances described in paragraph 3(b) of the
Employment Agreement (relating to the Executive's being
Disabled), under circumstances described in paragraph 3(d) of the
Employment Agreement (relating to constructive discharge), or
under circumstances described in paragraph 3(f) of the
Employment Agreement (relating to termination by the Company
without Cause), or if the Executive's Date of Termination occurs
prior to December 29, 1998 by reason of his death, the Expiration
Date shall be the three-year anniversary of his Date of
Termination.
(c) If the Executive's Date of Termination occurs prior to December
29, 1998 under circumstances described in paragraph 3(c) of the
Employment Agreement (relating to the Executive's termination
for Cause) or paragraph 3(e) of the Employment Agreement
(relating to the Executive's resignation), the Expiration Date shall
be the 90-day anniversary of the Date of Termination.
In no event, however, shall the Expiration Date be later than the ten-year
anniversary of the Agreement Date. No portion of the Option shall be
exercisable after the Executive's Date of Termination except to the extent
that it is exercisable on the Executive's Date of Termination; provided,
however, that, subject to the limitations in paragraphs (a), (b) and (c),
next above, the Option shall remain exercisable after the Executive's Date
of Termination to the extent that it becomes exercisable on the Executive's
Date of Termination in accordance with the provisions of paragraph 2 of
this Agreement.
4. Method of Exercise. Any portion of the Option that is
exercisable may be exercised in whole or in part in accordance with the
following:
(a) The Option may be exercised by filing a written notice with the
Treasurer of the Company, provided that the notice is filed on or
before the date the Option expires. The exercise notice shall
specify the number of whole shares of Stock to be purchased, and
shall accompanied by payment therefor in full (or arrangement
made for such payment to the Company's satisfaction) either (i) in
cash, (ii) by delivery of previously owned whole shares of Stock
(which the Executive has held for at least six months prior to the
delivery of such shares or which the Executive purchased on the
open market, and in each case for which the Executive has good
title, free and clear of all liens and encumbrances) having a Fair
Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by
reason of such exercise, (iii) in cash by a broker-dealer acceptable
to the Company to whom the Executive has submitted an
irrevocable notice of exercise or (iv) a combination of (i) and (ii).
The Executive shall execute such documents in connection with
the Option exercise as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (ii), (iii) and (iv) and, to the extent that
the Executive is subject to Section 16 of the Exchange Act, the
Company may require that the method of making such payment
be in compliance with Section 16 and the rules and regulations
thereunder. Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the Executive. No
certificate representing a share of Stock shall be delivered until
the full purchase price therefor has been paid.
(b) Upon the exercise of the Option, in whole or in part, the Company
shall deliver or cause to be delivered one or more certificates representing
the number of shares purchased against full payment therefor. The
Company shall pay all original issue or transfer taxes and all fees and
expenses incident to such delivery, except as otherwise provided in
paragraph 5.
(c) As used in this Agreement, the "Fair Market Value" of a share of
Stock shall mean the closing transaction price of a share of Stock
as reported in The Wall Street Journal as New York Stock
Exchange Composite Transactions for the date as of which such
value is being determined or, if there shall be no reported
transaction on such date, on the next preceding date for which a
transaction was reported; provided that if the Fair Market Value
for any date cannot be determined as above provided, Fair Market
Value shall be determined by the Committee by whatever means
or method as the Committee, in the good faith exercise of its
discretion, shall at such time deem appropriate.
5. Withholding.
(a) As a condition precedent to the delivery of Stock upon
exercise of the Option, the Executive shall, upon request by the Company,
pay to the Company in addition to the purchase price of the shares, such
amount as the Company may be required, under all applicable federal,
state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with
respect to such exercise of the Option. If the Executive shall fail to
advance the Required Tax Payments after request by the Company, the
Company may, in its discretion, deduct any Required Tax Payments from
any amount then or thereafter payable by the Company to the Executive.
(b) The Executive may elect to satisfy his obligation to advance
the Required Tax Payments (which, for purposes of this paragraph (b),
shall include such increased amount as the Company may be required to
withhold by reason of an election by the Executive) by any of the
following means: (i) a cash payment to the Company, (ii) delivery to the
Company of previously owned whole shares of Stock (which the
Executive has held for at least six months prior to the delivery of such
shares or which the Executive purchased on the open market and in each
case for which the Executive has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date the
obligation to withhold or pay taxes first arises in connection with the
Option (the "Tax Date"), equal to the Required Tax Payments, (iii)
authorizing the Company to withhold whole shares of Stock which would
otherwise be delivered upon exercise of the Option having an aggregate
Fair Market Value determined as of the Tax Date equal to the Required
Tax Payments, (iv) a cash payment by a broker-dealer acceptable to the
Company to whom the Executive has submitted an irrevocable notice of
exercise or (v) any combination of (i), (ii) and (iii); provided, however,
that the Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (ii)-(v) and, to the extent that the Executive is
subject to Section 16 of the Exchange Act, the Company may require that
the method of satisfying any such obligation be in compliance with
Section 16 and the rules and regulations thereunder. Any fraction of a
share of Stock which would be required to satisfy any such obligation
shall be disregarded and the remaining amount due shall be paid in cash
by the Executive.
6. Heirs. Subject to the terms of the Plan, any benefits to be
provided to the Executive under this Agreement that have not been
provided at the time of the Executive's death shall be provided at the time
and in the form determined in accordance with the provisions of this
Agreement, to the beneficiary designated by the Executive in writing filed
with the Committee in such form and at such time as the Committee shall
require. If a deceased Executive fails to designate a beneficiary, or if the
designated beneficiary of the deceased Executive dies before the Executive
or before complete provision of the benefits under this Agreement, the
Committee shall direct that benefits to be provided under this Agreement
be provided to the legal representative or representatives of the estate of
the last to die of the Executive and his beneficiary.
7. Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event with respect to Stock, or any distribution to holders
of Stock other than a regular cash dividend, the number and class of
securities subject to the Option and the purchase price per security shall
be appropriately adjusted by the Committee without an increase in the
aggregate purchase price. If any adjustment would result in a fractional
security being subject to the Option, the Company shall pay the
Executive, in connection with the first exercise of the Option occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the exercise date over (B)
the exercise price of the Option. The decision of the Committee regarding
any such adjustment shall be final, binding and conclusive.
8. Transferability.
(a) Except to the extent otherwise provided in paragraph (b) next
below, the Option may not be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise), or be subject to execution,
attachment or similar process, other than by will or the laws of
descent and distribution. During the Executive's lifetime, the
Option shall be exercisable only by the Executive.
(b) Notwithstanding the foregoing provisions of this paragraph 8, the
Option may be transferred by the Executive for no consideration
to or for the benefit of the Executive's Immediate Family
(including, without limitation, to a trust for the benefit of an
Executive's Immediate Family or to a partnership for members of
an Executive's Immediate Family), subject to such limits and
exceptions as the Committee may establish, and the transferee
shall remain subject to all the terms and conditions applicable to
the Option prior to such transfer. The foregoing right to transfer
the Option shall also apply to the right to consent to amendments
to the Option agreement. The Executive's "Immediate Family"
shall mean the Executive's spouse, children, stepchildren, adoptive
relationships, sisters, brothers and grandchildren (and, for this
purpose, shall also include the Executive).
9. Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.
10. Notices. All notices, request or other communications
provided for in this Agreement shall be made, if to the Company, to
Zenith Electronics Corporation, 1000 Milwaukee Avenue, Glenview,
Illinois 60025-2493, Attention: Treasurer, and if the Executive, to the
Executive's last known address set forth in the records of the Company, or
such other address as shall be provided to the Company in writing by the
Executive. All notices, requests or other communications provided for in
this Agreement shall be made in writing either (a) by personal delivery to
the party entitled thereto, (b) by facsimile with confirmation of receipt, (c)
by mailing in the United States mails to the last known address of the
party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transaction or
upon receipt by the party entitled thereto if by United States mail or
express courier service; provided, however, that if a notice, request or
other communication sent to the Company is not received during regular
business hours, it shall be deemed to be received on the next succeeding
business day of the Company.
11. Option Confers No Rights as Stockholder. The Executive
shall not be entitled to any privileges of ownership with respect to shares
of Stock subject to the Option unless and until purchased and delivered
upon the exercise of the Option, in whole or in part, and the Executive
becomes a stockholder of record with respect to such delivered shares; and
the Executive shall not be considered a stockholder of the Company with
respect to any such shares not so purchased and delivered.
12. Agreement Subject to the Plan. This Agreement is subject to
the provisions of the Plan and shall be interpreted in accordance therewith.
The Executive hereby acknowledges receipt of a copy of the Plan.
13. Counterparts. This Agreement may be executed in two
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
14. Successors. This Agreement shall be binding upon and inure
to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Executive, acquire any
rights hereunder in accordance with this Agreement or the Plan.
15. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the
extent not governed by the laws of the United States, shall be governed by
the laws of the State of Illinois and construed in accordance therewith
without giving effect to principles of conflicts of laws.
16. Amendment. This Agreement may be amended by written
Agreement of the Executive and the Company, without the consent of any
other person.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the Agreement Date.
ZENITH ELECTRONICS CORPORATION
By /s/ Richard F. Vitkus
Richard F. Vitkus
/s/ Peter S. Willmott
PETER S. WILLMOTT
Attest:
/s/ Wayne M. Koprowski
Wayne M. Koprowski
Assistant Secretary
EXHIBIT 10s
EMPLOYMENT AGREEMENT
----------------------
EMPLOYMENT AGREEMENT dated as of January
1, 1997, between ZENITH ELECTRONICS CORPORATION, a
Delaware corporation (the "Company"), and DENNIS R.
WINKLEMAN (the "Executive").
WHEREAS, the Executive currently serves as Vice
President of the Company; and
WHEREAS, the Company and the Executive desire to
enter into this Agreement to provide for the continued employment of the
Executive by the Company upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises
and the mutual agreements contained herein, the parties hereby agree as
follows:
1. Employment. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in this
Agreement. The term of employment of the Executive by the Company
pursuant to this Agreement (the "Employment Period") shall commence on
the date hereof and shall end on December 31, 1999, unless earlier
terminated pursuant to Section 4, provided that the Employment Period
shall automatically be extended as of January 1, 2000, for one additional
year and, if so extended, shall automatically be further extended as of
each January 1 thereafter, for additional consecutive one-year periods,
unless either the Company or the Executive elects not to extend the
Agreement by written notice given to the other party at least 90 days prior
to each such period.
2. Position and Duties. The Company shall employ the
Executive during the Employment Period as its Vice President, Human
Resources. The Executive shall perform faithfully and loyally and to the
best of his abilities the duties assigned to him hereunder, shall devote his
full business time, attention and effort to the affairs of the Company and
shall use his reasonable best efforts to promote the interests of the
Company. The Executive shall report to such executive officer of the
Company as shall be designated from time to time by the Chief Executive
Officer of the Company (the "CEO") or the Board of Directors of the
Company (the "Board"). Notwithstanding the foregoing, the Executive
may engage in charitable, civic or community activities and, with the prior
approval of the CEO or the Board, may serve as a director of any
business corporation, provided that such activities or service does not
interfere with his duties hereunder or violate the terms of any of the
covenants contained in Section 10 or 11.
3. Compensation.
(a) Base Compensation. As compensation for the
services to be provided by the Executive hereunder, the Company shall
pay to the Executive during the Employment Period a minimum annual
salary of One Hundred Fifty Thousand Dollars ($150,000.00) (the
"Base Salary"), payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The
Executive's salary may be increased or decreased from time to time,
provided that the Executive's salary shall not be decreased below the Base
Salary specified by this Section 3(a). The Executive's annual salary in
effect from time to time under this Section 3(a) is hereinafter called his
"Base Compensation."
(b) Incentive Compensation. In addition to his Base
Compensation, the Executive shall be eligible to receive incentive
compensation awards for services rendered during the Employment
Period, determined in accordance with (i) the Company's annual bonus
plan or any other short-term incentive plan adopted by the Company and
(ii) the 1987 Zenith Stock Incentive Plan or any other long-term incentive
plan adopted by the Company.
(c) Supplemental Profit Sharing Benefits. During
the Employment Period, the Executive shall be entitled to participate in
the Zenith Electronics Corporation Supplemental Salaried Profit Sharing
Retirement Plan, as in effect on the date hereof, or in a comparable plan
adopted by the Company.
(d) Supplemental Long-Term Disability Benefits.
During the Employment Period, the Executive shall be eligible for
supplemental long-term disability benefits, the current terms of which are
described on Schedule I attached hereto.
(e) Supplemental Life Insurance Benefits. During
the Employment Period, the Executive shall be eligible for supplemental
life insurance benefits, the current terms of which are described on
Schedule II attached hereto.
(f) Other Benefits. In addition to the benefits
described in subsections (c), (d) and (e) above, the Executive shall be
entitled to participate in all employee benefit plans generally available to
those executives who are parties to agreements with the Company which
are comparable to this Agreement, including, as of the date of this
Agreement, group medical and dental, health and accident, group life
insurance, long-term disability, short-term disability, executive insurance,
pension, profit sharing and 401(k) plans. The Executive shall be entitled
to take time off for vacation or illness in accordance with the Company's
policy for senior executives and to receive all other fringe benefits as are
from time to time made generally available to senior executives of the
Company. The Company may from time to time modify the benefits
provided to the Executive, provided that all such modifications are made
on the same basis for all executives in positions comparable to that of the
Executive.
(g) Expense Reimbursement. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's
policies and procedures.
4. Termination of Employment Period. The Employment
Period shall be terminated upon the first to occur of (i) termination of the
employment of the Executive by the Company at any time without Cause
(as such term is defined in Section 8) upon written notice given to the
Executive at least 30 days prior to such termination, (ii) the election by
the Company pursuant to Section 1 not to extend this Agreement in
accordance with Section 1, (iii) the election by the Executive pursuant to
Section 1 not to extend this Agreement in accordance with Section 1, (iv)
termination of the employment of the Executive by the Company at any
time for Cause or Serious Misconduct upon written notice given to the
Executive, (v) termination of the employment of the Executive by the
Company on account of the Executive's having become unable (as
determined by the Board in good faith) to regularly perform his duties
hereunder by reason of illness or incapacity for a period of more than 180
consecutive days, (vi) termination of the employment of the Executive by
reason of retirement, (vii) the Executive's death or (viii) termination of
employment by the Executive at any time upon written notice given to the
Company at least 90 days prior to such termination. The date on which
the Employment Period terminates is hereinafter referred to as the
"Termination Date."
5. Consequences of Termination Outside of a Change in
Control Period. If a Termination Date occurs, other than within a
Change in Control Period, as defined in Section 8, the Executive shall be
entitled to receive the compensation and benefits specified by this Section
5 in lieu of any severance amounts which otherwise would be payable to
the Executive.
(a) Termination by Company Without Cause. If the
Employment Period terminates for a reason set forth in clause (i) of
Section 4:
(i) the Company shall pay to the Executive
(A) all Base Compensation otherwise payable through the
Termination Date, (B) vacation pay accrued through the
Termination Date and (C) reimbursement of expenses incurred
through the Termination Date, in each case to the extent not
theretofore paid;
(ii) the Company shall pay to the Executive
the amount of the target bonus otherwise payable for the year in
which the Termination Date occurs, prorated to the Termination
Date;
(iii) the Company shall pay to the Executive
a lump sum cash amount equal to the greater of (A) the sum of
the Executive's Base Compensation and target bonus for the year
in which the Termination Date occurs, multiplied by the number
of whole and/or fractional years remaining under the term of the
Employment Period (as in effect under Section 1 without regard
to the early termination thereof under Section 4) and (B) one and
one-half times the sum of the Executive's Base Compensation and
target bonus for the year in which the Termination Date occurs;
(iv) the Company shall provide the Executive
with continued coverage, or substantially equivalent coverage,
during the period represented by the amount of the lump sum
payment under clause (iii) (i.e., one and one-half years or the
remaining term of the Employment Period, as the case may be)
under all welfare benefit plans or arrangements (including group
medical and dental, health and accident, long-term disability,
short-term disability, group life insurance, and executive
insurance programs) unless the Executive becomes covered under
similar plans or arrangements maintained by a subsequent
employer; provided that if the Company is unable to provide such
continued coverage or substantially similar coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such benefits; and
(v) the Company shall provide to the
Executive outplacement services appropriate for the Executive in
accordance with industry standards (the cost of which shall not
exceed 15% of the Executive's Base Compensation).
(b) Failure of Company to Renew Agreement. If
the Employment Period terminates for a reason set forth in clause (ii) of
Section 4, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Company shall pay to the Executive the
amounts or benefits set forth in Sections 5(a)(i), (ii) and (v), plus a lump
sum cash amount equal to one and one-half times the sum of his Base
Compensation and target bonus for the year in which the Termination
Date occurs, and shall provide to the Executive the benefits described in
Section 5(a)(iv) for the period of one and one-half years commencing on
the Termination Date.
(c) Termination for Cause. If the Employment
Period terminates for a reason set forth in clause (iv) of Section 4, the
Company shall pay to the Executive the amounts set forth in Section
5(a)(i) and the Executive shall not be entitled to any severance payments,
but shall be entitled to any benefits payable under applicable plans.
(d) Disability, Retirement or Death. If the
Employment Period terminates for any reason set forth in clause (v), (vi)
or (vii) of Section 4, the Company shall pay to the Executive or his
executor, administrator or other legal representative, as the case may be,
the amounts set forth in Section 5(a)(i) and the Executive (or his executor,
administrator or other legal representative, as the case may be) shall not
be entitled to any severance payments, but shall be entitled to any benefits
payable under applicable plans.
(e) Failure of Executive to Renew Agreement; Other
Voluntary Termination by the Executive. If the Employment Period
terminates for any reason set forth in clause (iii) or (viii) of Section 4, (A)
the Company shall pay to the Executive the amounts set forth in Section
5(a)(i), (B) the Company may, in its sole discretion, but shall have no
obligation to, pay to the Executive the amount of the target bonus for the
year in which the Termination Date occurs, prorated to the Termination
Date, and (C) the Executive shall not be entitled to any severance
payments, but shall be entitled to any benefits payable under applicable
plans.
6. Consequences of Termination Within Change in
Control Period.
(a) Termination Payments and Benefits. If during a
Change in Control Period, as defined in Section 8, the Employment Period
of the Executive shall terminate other than by reason of a Nonqualifying
Termination, as defined in Section 8, then the Company shall pay or
provide to the Executive (or his executor, administrator or other legal
representative, as the case may be) within 30 days following the
Termination Date, as compensation for services rendered to the Company
and in lieu of any severance amounts which otherwise would be payable to
the Executive, the following amounts:
(i) the Company shall pay to the Executive
a lump sum cash amount equal to the sum of (A) the Executive's
Base Compensation, accrued vacation pay and reimbursable
expenses incurred through the Termination Date, in each case to
the extent not theretofore paid, (B) the Executive's annual bonus
in an amount equal to the annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Executive has been employed by the Company for less than 12
full months) bonus payable to the Executive by the Company for
the fiscal year in which the Termination Date occurs (determined
at the higher of the target or actual level of performance for such
year), multiplied by a fraction, the numerator of which is the
number of days in the fiscal year in which the termination occurs
prior to the Termination Date and the denominator of which is
365 or 366, as applicable, (C) three times the Executive's highest
annual rate of Base Compensation during the three full fiscal
years prior to the Termination Date, (D) three times the greater of
(I) the Executive's highest annual bonus payable during the three
full fiscal years prior to the Termination Date and (II) the target
bonus payable for the year in which the Termination Date occurs
and (E) all accruals under the Zenith Electronics Corporation
Supplemental Salaried Profit Sharing Retirement Plan;
(ii) for a period of three years commencing
on the Termination Date, or until such earlier date on which the
Executive becomes covered under similar plans maintained by a
subsequent employer, the Company shall continue to provide the
Executive and his dependents with coverage, or shall provide
substantially equivalent coverage, under all welfare benefit plans
or arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance and executive insurance programs) with the same level
of coverage, upon the same terms and otherwise to the same
extent as such plans or arrangements shall have been in effect
immediately prior to the Termination Date or, if more favorable to
the Executive, as provided generally with respect to other peer
executives of the Company. If the Company cannot provide such
continued coverage or substantially equivalent coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such coverage; and
(iii) the Company shall provide outplacement
services appropriate for the Executive in accordance with industry
standards (which shall not exceed 15% of the Executive's Base
Compensation).
(b) Nonqualifying Termination Within Change in
Control Period. If during a Change in Control Period the Employment
Period shall terminate by reason of a Nonqualifying Termination, as
defined in Section 8, then the Company shall pay to the Executive (or to
his executor, administrator or other legal representative, as the case may
be) within 30 days following the Termination Date, a lump sum cash
amount equal to the sum of the Executive's Base Compensation payable
through the Termination Date, any vacation pay accrued prior to the
Termination Date and any reimbursable expenses incurred prior to the
Termination Date, in each case to the extent not theretofore paid.
7. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company or
its affiliated companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 7) (a "Payment") would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the Company's public accounting
firm (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be
paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than 10
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 7(c), the Executive
becomes entitled to receive, and receives, any refund with respect to such
claim, the Executive shall (subject to the Company's complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
(a) "Cause" means (i) embezzlement,
misappropriation of corporate funds or any other act of dishonesty by the
Executive, (ii) commission by the Executive of a felony involving moral
turpitude, (iii) significant activities of the Executive harmful to the
reputation of the Company, (iv) significant violation by the Executive of
any statutory or common law duty of loyalty to the Company or (v) a
material breach by the Executive of the Executive's duties and
responsibilities to the Company, including the refusal to perform or the
substantial disregard of such duties, other than as a result of incapacity
due to physical or mental illness.
(b) "Change in Control" means:
(1) the acquisition by any individual, entity
or group (a "Person"), including any "person" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of
25% or more of either (i) then outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of then outstanding
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"),
provided such ownership interest is greater than the interest then
owned by LG Electronics, Inc. ("LGE"); excluding, however, the
following: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly
from the Company), (B) any acquisition by the Company or LGE,
(C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (3) of this Section 8(b); provided
further, that for purposes of clause (B), if any Person (other than
the Company, LGE or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of
25% or more of the Outstanding Company Common Stock or
25% or more of the Outstanding Company Voting Securities by
reason of an acquisition by the Company (and which ownership
interest is greater than the interest then owned by LGE), and such
Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding
Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board;
(3) approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(other than: the Company or LGE; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the
Company of a plan of complete liquidation or dissolution of the
Company.
(c) "Change in Control Period" means the period of
time beginning on the date on which a Change in Control is consummated
and ending on the earlier to occur of (i) 24 months following such Change
in Control and (ii) the Executive's death.
(d) "Good Reason" means, without the Executive's
express written consent, the occurrence of any of the following events
within a Change in Control Period:
(1) any of (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the Executive's position(s), duties, responsibilities or status with
the Company immediately prior to the commencement of such
Change in Control Period, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company as in
effect immediately prior to the commencement of such Change in
Control Period or (iii) any failure to re-elect the Executive to any
position with the Company held by the Executive immediately
prior to the commencement of such Change in Control Period;
(2) a reduction by the Company in the
Executive's rate of Base Compensation as in effect immediately
prior to the commencement of such Change in Control Period or
as the same may be increased from time to time thereafter or the
failure by the Company to increase such rate of Base
Compensation each year after the commencement of such Change
in Control Period by an amount which at least equals, on a
percentage basis, the mean average percentage increase, during
the two full fiscal years of the Company immediately preceding
the commencement of such Change in Control Period, in the rates
of base salary for all officers of the Company elected by the
Board;
(3) the failure of the Company to pay the
Executive a bonus at or greater than the target level in effect in
the year in which the Change in Control Period commences, or to
continue the Executive's participation in the 1987 Zenith Stock
Incentive Plan or any comparable long-term incentive plan;
(4) any requirement of the Company that the
Executive (i) be based anywhere other than at the facility where
the Executive is located immediately prior to the commencement
of such Change in Control Period or (ii) travel on Company
business to an extent substantially more burdensome than the
travel obligations of the Executive immediately prior to the
commencement of such Change in Control Period;
(5) an election by the Company not to extend
the Employment Period in accordance with Section 1;
(6) the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan
in which the Executive is participating immediately prior to the
commencement of such Change in Control Period, unless the
Executive is permitted to participate in other plans providing the
Executive with substantially comparable benefits, or the taking of
any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such plan, (ii) provide the Executive and the
Executive's dependents welfare benefits (including, without
limitation, group medical and dental, health and accident, long-
term disability, short-term disability, group life insurance, and
executive insurance programs) in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive
immediately prior to the commencement of such Change in
Control Period or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies, (iii)
provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive immediately prior
to the commencement of such Change in Control Period or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, (iv) provide the Executive with paid
vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated
companies as in effect for the Executive immediately prior to the
commencement of such Change in Control Period or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, or (v) reimburse the Executive
promptly for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to the
commencement of such Change in Control Period, or if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies; or
(7) the failure of the Company to obtain the
assumption agreement from any successor as contemplated in
Section 18(b).
For purposes of this Agreement, any good faith
determination of Good Reason made by the Executive shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive shall not constitute Good
Reason.
(e) "Nonqualifying Termination" means a
termination of the Employment Period (i) by the Company for Serious
Misconduct, (ii) by the Executive as a result of his election pursuant to
Section 1 not to extend the Agreement in accordance with Section 1 or by
the Executive at any other time for any reason, in either case other than
for Good Reason, (iii) as a result of the Executive's death or (iv) by the
Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a result
of the Executive's incapacity due to physical or mental illness. A
termination of the Employment Period for any reason not expressly set
forth in the preceding sentence, including, without limitation, the election
by the Company not to extend the Agreement pursuant to Section 1, shall
not constitute a Nonqualifying Termination.
(f) "Serious Misconduct" means (i) embezzlement or
misappropriation of corporate funds by the Executive, (ii) commission by
the Executive of a felony involving moral turpitude or (iii) a material
breach by the Executive of the Executive's duties and responsibilities to
the Company as in effect prior to the commencement of the Change in
Control Period, including the refusal to perform or the substantial
disregard of such duties, other than as a result of incapacity due to
physical or mental illness, which is demonstrably willful and deliberate,
which is committed in bad faith or without a reasonable belief that the
breach is in the Company's best interests, and which is not remedied
within a reasonable period of time after receipt of written notice of such
breach.
9. Federal and State Withholding. The Company shall
deduct from the amounts payable to the Executive pursuant to this
Agreement the amount of all required federal and state withholding taxes
in accordance with the Executive's Form W-4 on file with the Company
and all applicable social security taxes.
10. Noncompetition; Nonsolicitation. (a) The Executive
acknowledges that in the course of his employment with the Company
pursuant to this Agreement he will become familiar, and during the course
of his employment with the Company or any of its subsidiaries prior to the
date of this Agreement he has become familiar, with trade secrets and
customer lists of, and other confidential information concerning, the
Company and its subsidiaries and that his services have been and will be
of special, unique and extraordinary value to the Company.
(b) The Executive agrees that during the
Employment Period and, if the Employment Period terminates for a reason
set forth in clause (i) or (ii) of Section 4, for a period of two years
thereafter (the "Noncompetition Period"), he shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as
a member of a partnership or as an officer, director, stockholder, investor
or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm,
corporation or enterprise in engaging or being engaged, in any business
being conducted by the Company or any of its subsidiaries as of the
termination of the Employment Period in any geographic area in which the
Company is then conducting such business.
(c) The Executive further agrees that during the
Noncompetition Period he shall not in any manner, directly or indirectly
induce or attempt to induce any employee of the Company or any of its
subsidiaries to terminate or abandon his or her employment for any
purpose whatsoever.
(d) Nothing in this Section 10 shall prohibit the
Executive from being (i) a stockholder in a mutual fund or a diversified
investment company or (ii) a passive owner of not more than two percent
of the outstanding stock of any class of a corporation any equity securities
of which are publicly traded, so long as the Executive has no active
participation in the business of such corporation.
(e) If, at any time of enforcement of this Section 10,
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any
time during the Employment Period or thereafter, make use of or disclose,
directly or indirectly, any trade secret or other confidential or secret
information of the Company or of its subsidiaries or other technical,
business, proprietary or financial information of the Company or of its
subsidiaries not available to the public generally or to the competitors of
the Company or of its subsidiaries ("Confidential Information"), except to
the extent that such Confidential Information (a) becomes a matter of
public record or is published in a newspaper, magazine or other periodical
available to the general public, other than as a result of any act or
omission of the Executive, or (b) is required to be disclosed by any law,
regulation or order of any court or regulatory commission, department or
agency. Promptly following the termination of the Employment Period,
the Executive shall surrender to the Company all records, memoranda,
notes, plans, reports, computer tapes and software and other documents
and data relating to any Confidential Information or the business of the
Company or of its subsidiaries which he may then possess or have under
his control (together with all copies thereof); provided, however, that the
Executive may retain copies of such documents as are necessary for the
preparation of his federal or state income tax returns.
12. Enforcement. The parties hereto agree that the
Company would be damaged irreparably in the event any provision of
Sections 10 or 11 of this Agreement were not performed in accordance
with their respective terms or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
13. Survival. Sections 10, 11 and 12 of this Agreement and
any rights and remedies arising out of this Agreement shall survive and
continue in full force and effect in accordance with the respective terms
hereof, notwithstanding any termination of the Employment Period.
14. Reimbursement of Expenses. If any contest or
dispute shall arise under this Agreement involving termination of the
Executive's employment with the Company or involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall reimburse the Executive, on a current basis, for
all legal fees and expenses, if any, incurred by the Executive in connection
with such contest or dispute, together with interest in an amount equal to
the prime rate from time to time in effect, as published in The Wall Street
Journal under "Money Rates," but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from
the date the Company receives the Executive's statement for such fees and
expenses through the date of payment thereof; provided, however, that in
the event the resolution of any such contest or dispute includes a finding
denying, in total, the Executive's claims in such contest or dispute, the
Executive shall be required to reimburse the Company, over a period of
12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 14.
15. Notices. All notices and other communications required
or permitted under this Agreement shall be in writing and shall be deemed
to have been duly given when personally delivered, when delivered by
courier or overnight express service or five days after having been sent by
certified or registered mail, postage prepaid, addressed (a) if to the
Executive, to the Executive's address set forth in the records of the
Company or, if to the Company, to Richard F. Vitkus, Senior Vice
President, Administration and General Counsel, Zenith Electronics
Corporation, 1000 Milwaukee Avenue, Glenview, Illinois 60025 or (b) to
such other address as either party may have furnished to the other party in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained
herein.
17. Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes and preempts any prior
understanding, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject
matter hereof other than rights to indemnification, if any, for the benefit of
the Executive.
18. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is
not the surviving or resulting corporation or as a result of any transfer of
all or substantially all of the assets of the Company. In the event of any
such merger, consolidation or transfer of assets, the provisions of this
Agreement shall be binding upon the surviving or resulting corporation or
the person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of
this Section 18, it will cause any successor or transferee unconditionally
to assume, by written instrument delivered to the Executive (or his
executor, administrator or other legal representative, as the case may be),
all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the
Company in the same amount and on the same terms as the Executive
would be entitled hereunder if the Executive's employment were
terminated during a Change in Control Period other than by reason of a
Nonqualifying Termination. For purposes of implementing the foregoing,
the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Termination Date.
(c) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amounts would be payable
to the Executive hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in
writing by the Executive to receive such amounts or, if no person is so
appointed, to the Executive's estate.
19. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of Illinois without regard to the principle of conflict of laws.
20. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written consent
of the Company and the Executive, and no course of conduct or failure or
delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
ZENITH ELECTRONICS CORPORATION
By: /s/ Peter S. Willmott
Its: President & CEO
EXECUTIVE
/s/ Dennis R. Winkleman
DENNIS R. WINKLEMAN
Schedule I
Supplemental Long-Term Disability Benefits
------------------------------------------
(a) Purpose. The benefits provided by this Schedule
shall be in addition to the benefits provided by the long term disability
plan maintained by the Company for salaried employees as of the date
hereof (the "LTD Plan"), provided, however, that no benefits shall be
payable under this Schedule if the Executive does not elect to participate
in the LTD Plan.
(b) Definitions. As used in this Schedule, the
following terms shall have the following respective meanings:
(1) "Disability" means the inability of the
Executive arising during his employment
by the Company to perform the duties
pertaining to the employment position
held by the Executive with the Company
at the inception of such disability, if such
inability is due to sickness or injury. If
such disability continues for a period of
more than 180 days, it shall become a
"total long term disability" effective upon
the expiration of such 180 days. The
terms "disability" and "total long term
disability" exclude disability resulting
from intentional self-inflicted injuries or
sickness.
(2) "Maximum monthly salary" of the
Executive means the maximum amount
of monthly salary specified in the LTD
Plan on which the benefit payments
under such plan will be calculated and
based. (As of the date hereof, benefits
under the LTD Plan are 66-2/3% of
monthly salary. The maximum monthly
salary thereunder is $6,000 and the
maximum monthly benefit thereunder is
$4,000.)
(c) Benefits Payable. The amount of monthly
benefits payable by the Company to the Executive during a total long term
disability of the Executive shall be 66-2/3% of the amount, if any, by
which the actual monthly salary he was receiving immediately prior to the
commencement of his disability exceeds his maximum monthly salary as
heretofore defined, provided, however, that if such actual monthly salary
exceeds $12,500, then the amount of such benefits payable by the
Company to the Executive shall be limited to 66-2/3% of the amount by
which $12,500 exceeds his maximum monthly salary.
(d) Exclusion. No benefits shall be payable under
this Schedule if the LTD Plan has been terminated prior to the date of the
commencement of the disability.
(e) Period of Benefit Payment. Benefits shall be
payable by the Company to the Executive upon the commencement of the
total long term disability (180 days after inception of the disability) and
thereafter as long as both of the following conditions continue to be
satisfied:
(i) The long term disability continues, and
(ii) The Executive is under the care of a
physician.
Notwithstanding the foregoing, the benefits hereunder shall cease and
terminate upon the first of the following to occur:
(i) The cessation of the total long term
disability.
(ii) The death of the Executive.
(iii) The failure of the Executive to comply
with Subsection (i) of this Schedule.
(iv) The cessation of the payment of benefits
to the Executive under the LTD Plan for
any reason not specified above.
(f) Reduction or Termination of Benefits. If during
the period of total long term disability the Executive becomes employed
by any employer (including the Company) in a position other than the
employment position held by the Executive with the Company at the
inception of such disability or if it is determined that the Executive is
medically able to work in another such position, the Company shall then
or at any time or times thereafter have the right to reduce the amount of
benefits provided hereunder to any lesser amount specified by the
Company or discontinue such benefits altogether.
(g) Effect of Termination of Long Term Disability
Plan. In the event the Executive elects not to participate or elects to
terminate his participation in the LTD Plan, then this Schedule shall be of
no further force and effect, and the Company shall have no obligation to
provide the benefits described herein. In the event the Executive does
participate in and does not terminate his participation in the LTD Plan,
and the LTD Plan is terminated by the Company subsequent to the
commencement of the disability, the Executive shall nevertheless continue
to be entitled to the benefits provided hereunder and, in addition, the
Company shall be obligated to provide, and the Executive shall be entitled
to receive, long term disability benefits in the same amounts and under the
same terms and conditions as if the LTD Plan remained in full force and
effect. Nothing herein shall prohibit the Company from at any time, or
from time to time, establishing a substitute plan or plans for the LTD
Plan, in which event: (1) the Company shall be relieved of its obligation to
continue payment of benefits under the terminated LTD Plan and shall be
obligated to provide benefits under the substituted plan or plans; and (2)
"maximum monthly salary" defined in Subsection (b)(2) above shall mean
the maximum monthly salary specified in such substitute plan or plans.
(h) Determinations. All determinations as to whether
a disability or total long term disability exists at any time or has ceased to
exist, all determinations as to date of commencement or cessation of such
disability or total long term disability and all determinations as to whether
the Executive is medically able to work in another position as provided in
Subsection (f) shall be made by the Company's Corporate Medical
Director (or if at any time no person holds such a position with the
Company, then by any physician designated by the Company from time to
time), which determination shall be final and binding on the parties hereto
regardless of whether such determination is in accord with any medical or
other decision made under the LTD Plan.
(i) Medical Examinations and Data. The Company
at its own expense shall have the right and opportunity to make a medical
examination of the person of the Executive in the event of a sickness or
injury of the Executive which constitutes or might constitute a disability
or a total long term disability as herein defined and as often as the
Company may require. Such examination shall be conducted by the
Company's Corporate Medical Director or any physician designated by
the Company from time to time. The Executive agrees to submit to all
such examinations. In addition, the Company shall be entitled to examine
and obtain copies of all medical records pertaining to such sickness or
injury of any licensed physician, hospital, organization, institution or
person and the Executive agrees to furnish the Company with written
authorization to examine and obtain copies of such records as often as
required by the Company.
Schedule II
Supplemental Life Insurance Benefits
--------------------------------------
(a) Supplemental Life Insurance Benefit. The life
insurance benefits provided in this Schedule shall be in addition to any
group term life insurance program applying generally to salaried
employees. In the event the Executive's employment with the Company is
terminated for any reason, other than by death, prior to age fifty-five (55),
no benefits shall be paid pursuant to this Schedule.
(b) Benefit Amount - Preretirement. If the Executive
shall die prior to retirement, the Company shall pay to the beneficiary
designated by the Executive in writing (or, if the Executive fails to
designate a beneficiary, to the Executive's estate) a lump sum equal to one
and one-half (1-1/2) times the Executive's base salary at the date of death.
(c) Benefit Amount - Postretirement. The life
insurance benefits provided under this Schedule shall continue for a period
of ten (10) years from the date of the Executive's retirement. If the
Executive shall die within one year after the date of retirement, the
Company shall pay to the beneficiary designated by the Executive in
writing (or, if the Executive fails to designate a beneficiary, to the
Executive's estate) a lump sum equal to one and one-half (1-1/2) times the
Executive's base salary in effect on the date of the Executive's retirement.
Thereafter, on each yearly anniversary after commencement of such ten
(10) year period, the amount of such life insurance benefit shall be
decreased by ten percent (10%) of the amount of such benefit in effect at
the commencement of such ten (10) year period. If the Executive is alive
on the tenth (10th) anniversary of the commencement of such ten (10) year
period, the life insurance benefits provided under this Schedule shall cease
and expire and be of no further force and effect and the Company shall
have no further obligation hereunder.
(d) Purchase of Life Insurance Policy. The
Company may, but is not required to, purchase a life insurance policy to
fund the life insurance benefits payable to the Executive hereunder. If
such an insurance policy is purchased by the Company, such policy shall
name the Company as owner and beneficiary and, when purchased, shall
remain a general unsecured, unrestricted asset of the Company, and
neither the Executive nor any beneficiary of the Executive shall have any
rights with respect to, or claim against, such policy. Such policy, if and
when purchased by the Company, shall not be deemed to be held under
any trust for the benefit of the Executive or any beneficiary of the
Executive, nor shall such policy be deemed to be held in trust as collateral
security for fulfilling the obligations of the Company hereunder. The
benefits provided to the Executive and any beneficiary of the Executive
under this Schedule are based upon the general credit of the Company and
are otherwise unsecured. In the event the Company shall purchase a life
insurance policy as set forth in this Subsection (d), and if a medical
examination or examinations of the Executive and/or the furnishing of a
health statement signed by the Executive (which statement may include an
authorization by the Executive to any licensed physician or any
organization, institution, or person that has knowledge of the Executive or
his dependents to give such information to the insurer), is requested by the
insurer, then the Executive agrees to submit to such examination or
examinations or to provide such health statement in whatever form
required by the insurer. If the Executive refuses to submit to such
examination or examinations or to provide such health statement, then
neither the Executive nor any beneficiary of the Executive shall have any
right to the life insurance benefits provided under this Schedule and the
Company shall have no further obligation hereunder.
EXHIBIT 21
ZENITH ELECTRONICS CORPORATION SUBSIDIARIES
State or Other
Jurisdiction of Incorporation
- -----------------------------------------------------------------------------
Cableproductos de Chihuahua, S.A. de C.V. Mexico
Electro Partes de Matamoros, S.A. de C.V. Mexico
Interocean Advertising Corporation New York
Interocean Advertising Corporation of California California
Interocean Advertising Corporation of Illinois Illinois
Productos Magneticos de Chihuahua, S.A. de C.V. Mexico
Partes de Television de Reynosa, S.A. de C.V. Mexico
Radio Componentes de Mexico, S.A. de C.V. Mexico
Telson, S.A. de C.V. Mexico
Zenco de Chihuahua, S.A. de C.V. Mexico
Zenith Distributing Corporation of Illinois Illinois
Zenith Distributing Corporation of New York New York
Zenith Distributing Corporation-West California
Zenith Distributing Corporation of Arizona Arizona
Zenith Electronics Corporation of Pennsylvania Pennsylvania
Zenith Electronics Corporation of Texas Texas
Zenith Electronics (Europe) Limited England
Zenith Electronics (Ireland) Limited Ireland
Zenith/Inteq, Inc. Delaware
Zenith Microcircuits Corporation Delaware
Zenith Radio Canada Ltd/Zenith Radio Canada Ltee Canada
Zenith Taiwan Corporation Taiwan
Zenith Video Tech Corporation Delaware
Zenith Video Tech Corporation-Florida Delaware
Zentrans, Inc. Delaware
Zenith Finance Corporation Delaware
* All subsidiaries are wholly-owned by Zenith Electronics Corporation
except for Radio Componentes de Mexico, S.A. de C.V. which is a
wholly-owned subsidiary of Cableproductos de Chihuahua S.A. de C.V.
