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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 13)*
Zenith Electronics Corporation
(Name of Issuer)
Common Stock, par value $1.00 per share
(Including the Associated Rights)
(Title of Class of Securities)
989349 10 5
(CUSIP Number)
Chan-Ho Lee Copy to:
Senior Vice President Steven R. Gross, Esq.
LG Electronics Inc. Debevoise & Plimpton
LG Twin Towers 875 Third Avenue
20, Yoido-dong New York, NY 10022
Youngdungpo-gu (212) 909-6000
Seoul, Korea 150-721
011-82-2-3777-3049
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 21, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(3), 240.13d-1(f) or 240.13d-1(g), check
the following box [].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 989349 10 5 Page 2 of 6 Pages
1 Names of Reporting Persons
LG Electronics Inc.
S.S. or I.R.S. Identification Nos. of Above Persons
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
N/A
- --------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant
to items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Republic of Korea
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of LG Electronics Inc. -- 38,315,000*
Shares --------------------------------------------------------------
Beneficially 8 Shared Voting Power
Owned by N/A
Each --------------------------------------------------------------
Reporting 9 Sole Dispositive Power
Person LG Electronics Inc. -- 38,315,000*
With --------------------------------------------------------------
10 Shared Dispositive Power
N/A
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
- --------
* Also includes 1,746,000 shares held by LG Electronics Inc. obtainable pursuant
to stock options exercisable within sixty (60) days of the date hereof.
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SCHEDULE 13D
CUSIP No. 989349 10 5 Page 3 of 6 Pages
LG Electronics Inc. -- 38,315,000*
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
--------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row 11
LG Electronics Inc. -- 55.3%*
- --------------------------------------------------------------------------------
14 Type of Reporting Person
CO
- --------
* Also includes 1,746,000 shares held by LG Electronics Inc. obtainable pursuant
to stock options exercisable within sixty (60) days of the date hereof.
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SCHEDULE 13D
CUSIP No. 989349 10 5 Page 4 of 6 Pages
AMENDMENT NO. 13 TO STATEMENT ON SCHEDULE 13D
This Amendment No. 13 amends and supplements the Tender Offer Statement
on Schedule 14D-1 and Schedule 13D dated July 21, 1995, as amended (the
"Schedule 13D") of LG Electronics Inc., a corporation organized under the laws
of the Republic of Korea ("LGE") filed in connection with shares of common
stock, par value $1.00 per share (the "Common Stock"), of Zenith Electronics
Corporation, a Delaware corporation (the "Company"), and the associated Common
Stock purchase rights. This Amendment is being filed on behalf of the reporting
persons identified on the cover page of this Amendment. This Amendment amends
Items 4 and 7 of the Schedule 13D.
ITEM 4. PURPOSE OF THE TRANSACTION.
LGE and the Company entered into a Restructuring Agreement, dated as of
August 7, 1998, regarding a proposed, prepackaged plan of reorganization of the
Company (the "Prepackaged Plan"). On June 21, 1999, the Company and LGE entered
an Amended and Restated Restructuring Agreement to reflect, among other things,
(i) the extension of the date by which the Prepackaged Plan must be consummated
to September 15, 1999, (ii) the terms of the Company's commitments from Citibank
N.A. with respect to debtor-in-possession and exit financing and (iii) the terms
of the Forbearance, Lock-up and Voting Agreement, dated as of March 31, 1999,
among the Company, LGE and certain holders of the Company's 6 1/4% Convertible
Subordinated Debentures due 2011. The foregoing description is qualified in its
entirety by reference to the Amended and Restated Restructuring Agreement, a
copy of which is included as Exhibit 99 hereto and is incorporated herein by
reference. In connection with such Prepackaged Plan, the Company has filed with
the Securities and Exchange Commission (the "SEC") a Disclosure Statement and
Proxy Statement-Prospectus for the solicitation of votes for the Prepackaged
Plan. In addition, the Company and LGE have filed with the SEC a Rule 13E-3
Transaction Statement relating to certain of the transactions contemplated by
the Prepackaged Plan.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 99 Amended and Restated Restructuring Agreement, dated as of
June 14, 1999, between Zenith Electronics Corporation and
LG Electronics Inc.
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SCHEDULE 13D
CUSIP No. 989349 10 5 Page 5 of 6 Pages
Signature.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 22, 1999
LG ELECTRONICS INC.
/s/ Chan-Ho Lee
--------------------------------
Name: Chan-Ho Lee
Title: Senior Vice President
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AMENDED AND RESTATED
RESTRUCTURING AGREEMENT
AMENDED AND RESTATED RESTRUCTURING AGREEMENT, dated as of June
14, 1999 (this "Agreement"), by and between ZENITH ELECTRONICS CORPORATION, a
Delaware corporation (the "Company"), and LG ELECTRONICS INC., a corporation
organized under the laws of the Republic of Korea ("LGE").
WHEREAS, LGE owns 36,569,000 shares of common stock, par value $1
per share, of the Company (the "Old Common Stock"), representing approximately
55% of the outstanding Old Common Stock, and LGE owns vested and unvested
options to purchase additional shares of Old Common Stock at a price of $.01 per
share (the "Options");
WHEREAS, from time to time LGE and the Company have entered into
certain contractual arrangements and LGE has provided financial support to the
Company;
WHEREAS, on April 20, 1999, June 30, 1998 and September 23, 1998,
LGE paid $30 million, $50 million and $22 million, respectively, to certain of
the Company's creditors to satisfy a portion of LGE's guarantee obligation in
respect of loans extended by such creditors to the Company;
WHEREAS, pursuant to the Reimbursement Agreement (as defined in
Section 1), the Company is required to reimburse LGE for amounts paid by LGE
under such guarantees and to pay interest at the rate specified therein to LGE
on such amounts from the date of payment by LGE to the date of reimbursement by
the Company;
WHEREAS, on July 22, 1998, LGE paid $90,086,653.08 to certain of
the Company's creditors to satisfy the obligations of the Company under the
Leveraged Lease Documents (as defined in Section 1);
WHEREAS, pursuant to the Financial Support Agreement (as defined
in Section 1), the Company is required to reimburse LGE for amounts paid by LGE
to satisfy the Company's obligations under the Leveraged Lease Documents and to
pay interest at the rate specified therein to LGE on such amounts from the date
of payment by LGE to the date of reimbursement by the Company;
WHEREAS, under the Leveraged Lease Documents, LGE (as beneficial
owner of the owner trusts created thereby) is the indirect owner of the
equipment subject to the Leveraged Lease Documents and may exercise one or more
of several remedies specified in the Leveraged Lease Documents with respect to
such equipment;
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WHEREAS, prior to the date hereof, LGE has directed the owner
trusts to sell certain of such equipment and has applied the net proceeds of
such sales to reduce the amount the Company is required to reimburse LGE;
WHEREAS, with respect to the remainder of such equipment LGE has
determined to (i) retain a portion of the equipment in satisfaction of a portion
of its claims under the Leveraged Lease Documents and (ii) transfer the balance
of the equipment to the Company and retain the balance of its claims under the
Leveraged Lease Documents;
WHEREAS, a special committee of the Board of Directors of the
Company composed of independent directors (the "Special Committee") considered
in detail various proposals for the reorganization of the Company and negotiated
with LGE with respect to several proposed restructuring plans;
WHEREAS, the Special Committee made certain recommendations to
the full Board of Directors of the Company;
WHEREAS, the Board of Directors of the Company determined that it
is in the best interests of the Company to restructure the business and
operations of the Company (the "Operational Restructuring") as contemplated by
the Business Plan and Projections, dated March 17, 1999 (as amended in
accordance with Section 10(e) of this Agreement, the "Operating Plan"), prepared
by the management of the Company (a copy of which is attached hereto as Annex
A);
WHEREAS, the Board of Directors of the Company determined that it
is in the best interests of the Company to alter the capital structure of the
Company in accordance with the terms of the Outline for Proposed Restructuring
of Zenith Electronics Corporation dated May 21, 1998 (the "Proposal") a copy of
which is attached as Annex B, and the modifications to the Proposal as may be
further mutually agreed to by the Company and LGE, through confirmation of a
plan of reorganization (the "Plan"), under the Bankruptcy Code (as defined
below) using acceptances of the Plan to be solicited (the "Plan Solicitation")
from the requisite holders of claims against, and interests in, the Company
pursuant to Section 1125 of the Bankruptcy Code (the "Financial Restructuring,"
and together with the Operational Restructuring, the "Restructuring");
WHEREAS, the Company and LGE entered into a Restructuring
Agreement, dated as of August 7, 1998 (the "Original Agreement"), pursuant to
which LGE agreed to participate in the Financial Restructuring on the terms and
conditions set forth therein;
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WHEREAS, the Company and LGE have entered into a Forbearance,
Lock-Up and Voting Agreement, dated as of March 31, 1999 (the "Lock-Up
Agreement"), with certain holders of the Company's 6 1/4% Convertible
Subordinated Debentures due 2011 (the "Old Subordinated Debentures") pursuant to
which such holders have agreed to vote in favor of the Plan;
WHEREAS, the Company and LGE have decided to amend and restate the
Original Agreement to reflect certain terms of the Lock-Up Agreement and other
developments relating to the Company's Restructuring;
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein set forth, upon the terms and subject to the conditions set
forth herein, the parties agree as follows:
ARTICLE I
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings (each such meaning to be equally applicable to
both the singular and plural forms of the respective terms so defined):
"Alternative Proposal" has the meaning set forth in Section 6.8.
"Bankruptcy Code" means Title 11 of the United States Code, as
amended, and the rules and orders thereunder.
"Bankruptcy Court" means the United States Bankruptcy Court for
the District of Delaware.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Disclosure Letter" means the Disclosure Letter, dated
August 7, 1998, from the Company to LGE as amended and modified by the
Disclosure Letter, dated as of the date hereof, from the Company to LGE.
"Company SEC Documents" has the meaning set forth in Section 4.4.
"Confirmation Order" has the meaning set forth in Section 4.3.
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"Cumulative Funding Requirement" means cash flow from operations
before Restructuring and Reorganization Charges, plus interest expense and
capital expenditures, in each case as set forth in the Operating Plan. If LGE
(in its sole discretion) grants the Company an extension of the time for payment
to LGE of any interest owed to LGE or for the use of the credits under the
Philips Letter Agreement, calculation of cash flow from operations shall be
adjusted as if payment of all such amounts was made as and when due in the
absence of such extension.
"Disclosure Letters" means the Company Disclosure Letter and the
LG Disclosure Letter.
"EBITDA" means, for any period, the sum of:
(i) the net income (or net loss) of the Company (determined in
accordance with GAAP) for such period, without giving effect to any GAAP
extraordinary gains or losses and without deduction for Restructuring
and Reorganization Charges; plus (or minus)
(ii) to the extent that any of the items referred to in any of
clauses (A) though (D) below were deducted or added in calculating such
net income:
(A) interest expense of the Company for such period;
(B) federal, state or local income tax expense of the
Company with respect to operations for such period;
(C) the amount of all depreciation and amortization and
other non-cash charges for such period; and
(D) non-cash gains or losses from the sale or disposal of
property (other than inventory).
"Environmental Laws" means any and all applicable federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any Regulatory Authority regulating, relating
to or imposing liability or standards of conduct concerning protection of human
health or the environment, including without limitation, Hazardous Materials, as
now or may at any time during the term hereof be in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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"ERISA Affiliate" means any entity that is treated as a single
employer with the Company for purposes of Section 414 of the Code.
"ERISA Plan" means an employee benefit plan within the meaning of
Section 3(3) of ERISA or any other material benefit plan maintained for
employees of the Company or any of its ERISA Affiliates.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Financial Restructuring" has the meaning set forth in the
thirteenth whereas clause.
"Financial Support Agreement" means the Financial Support
Agreement, dated March 31, 1997, as amended, between the Company and LGE.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
"Hazardous Materials" means any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances, petroleum
products (including crude oil or any fraction thereof), polychlorinated
biphenyls, urea-formaldehyde insulation, asbestos containing materials defined
or regulated as such in or under any Environmental Law.
"HDTV Patents" shall mean all of the Company's United States
patents and patent applications relating to its digital vestigial side band
technology or relating to and used in connection with HDTV or digital television
technology of the Company.
"Implementation Program" means the Company's implementation
program attached hereto as Annex C.
"Intellectual Property" means, with respect to any person,
collectively, such person's Patent Property and Trademark Property.
"Leveraged Lease Documents" means (i) the Participation
Agreement, dated as of March 26, 1997, by and among the Company, General Foods
Credit Corporation ("General Foods"), Fleet National Bank ("Fleet") as owner
trustee and the lenders party thereto, and the Lease Agreement, dated as of
March 26, 1997, by and among the Company and Fleet as owner trustee, and the
other agreements and documents executed and delivered in connection therewith,
and (ii) the Participation Agreement,
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dated as of March 26, 1997, by and among Zenith Texas, General Foods, Fleet as
owner trustee and the lenders party thereto, and the Lease Agreement, dated as
of March 26, 1997, by and among Zenith Texas and Fleet as owner trustee, and the
other agreements and documents executed and delivered in connection therewith.
"LGE Disclosure Letter" means the Disclosure Letter, dated as of
August 7, 1998, from LGE to the Company.
"Lien" has the meaning set forth in Section 4.2.
"Lock-Up Agreement" has the meaning set forth in the fifteenth
whereas clause.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, results of operations, liabilities, condition
(financial or otherwise) or prospects of the Company and its subsidiaries taken
as a whole or on the ability of the Company or its subsidiaries to consummate
the transactions contemplated by this Agreement, including the Restructuring, or
to perform their respective obligations under the definitive transaction
agreements to be entered into in connection herewith.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"New Investor" has the meaning set forth in Section 11.1(d)(iii).
"New Salaried Employee Documents" has the meaning set forth in
Section 6.6.
"Note Agreement" means the Note Agreement, dated March 31, 1998,
between the Company and LGE, as amended by the First Amendment to the Note
Agreement, dated as of June 21, 1998, between the Company and LGE, and as
amended from time to time thereafter.
"Old Common Stock" has the meaning set forth in the first whereas
clause.
"Old Subordinated Debentures" has the meaning set forth in the
fifteenth clause.
"Operating Plan" has the meaning set forth in the twelfth whereas
clause.
"Operational Restructuring" has the meaning set forth in the
twelfth whereas clause.
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"Options" has the meaning set forth in the first whereas clause.
"Original Agreement" has the meaning set forth in the fourteenth
whereas clause.
"Patent Property" shall mean, with respect to any person:
(i) all of such person's patents (including, with respect to the
Company, the Tuner Patents and HDTV Patents), patent applications
(including, without limitation, all patents and patent applications in
preparation for filing) and patent disclosures throughout the world,
including without limitation, with respect to the Company, each patent
and patent application referred to in Part A-1 of Section 4.14 of the
Company Disclosure Letter;
(ii) all reissues, divisions, continuations,
continuations-in-part, revisions, extensions, renewals and
reexaminations of any of the items described in clause (i) of this
definition; and
(iii) all patent licenses of such person (whether as licensee or
licensor), including, with respect to the Company, each patent license
referred to in Part A-2 of Section 4.14 of the Company Disclosure
Letter.
"Philips Letter Agreement" has the meaning set forth in Section
2(f).
"Plan" has the meaning set forth in the thirteenth whereas
clause.
"Plan Disclosure Documents" means the Disclosure Statement and
Proxy Statement-Prospectus (as amended or supplemented and including documents
incorporated by reference therein), to be used in connection with the Plan
Solicitation by the Company and the Rule 13e-3 Transaction Statement (as amended
or supplemented and including documents incorporated by reference therein) filed
jointly by the Company and LGE.
"Plan Solicitation" has the meaning set forth in the thirteenth
whereas clause.
"Property" shall mean any real property or personal property,
plant, building, facility, structure, underground storage tank or unit,
equipment, inventory or other asset owned, leased or operated by the Company or
any of its subsidiaries (including, without limitation, any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
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"Regulatory Authority" means any court or government,
administrative agency or commission or other governmental or regulatory
authority or agency, federal, state, local or foreign.
"Reimbursement Agreement" means the Reimbursement Agreement,
dated November 3, 1997, between the Company and LGE, together with the other
agreements and documents executed and delivered in connection therewith (as
amended, modified or supplemented from time to time), pursuant to which the
Company agreed to repay amounts paid by LGE (as guarantor of the Company's
obligations) to certain of the Company's third party creditors.
"Reportable Event" shall have the meaning set forth in Section
4043(c) of ERISA and the regulations thereunder.
"Representatives" has the meaning set forth in Section 6.6.
"Restructuring" has the meaning set forth in the thirteenth
whereas clause.
"Restructuring and Reorganization Charges" means charges incurred
by the Company to execute the Operating Plan and the Plan that are of the type
included in "Restructuring Charges" or "Reorganization Charges" in the Operating
Plan and determined on a basis consistent with the principles used to prepare
the Operating Plan.
"Reynosa Assets" means all of the right, title and interest of
Zenith Reynosa and Zenith Texas in and to (i) the land and buildings that
comprise Zenith Reynosa's production facilities # 12, #13 and #27 in Reynosa,
Mexico, (ii) all of the fixtures, equipment, personal property and other assets
located therein and identified in Section 1(a) of the Company Disclosure Letter
(as amended pursuant to Section 6.6) and (iii) all agreements relating to access
thereto.
"Reynosa Assets Claim Amount" has the meaning set forth in
Section 6.6.
"Reynosa Leveraged Lease Assets" means all of its right, title
and interest of the owner trust created under the Leveraged Lease Documents in
and to the assets subject to the Leveraged Lease Documents located at Zenith
Reynosa's production facility # 27 in Reynosa, Mexico to the extent set forth on
Section 1(b) of the Company Disclosure Letter. The Reynosa Leveraged Lease
Assets have a fair market value equal to $8,000,750.00.
"Reynosa Operating Agreement" has the meaning set forth in
Section 2(b).
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"Reynosa Purchase Agreement" has the meaning set forth in Section
2(b).
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Senior Secured PIK Notes" means the Senior Secured PIK Notes of
the Company having the terms set forth on Annex D.
"Special Committee" has the meaning set forth in the tenth
whereas clause.
"Taxes" means any net income, alternative minimum, accumulated
earnings, personal holding company, gross income, asset, gross receipts, sales,
use, goods and services, ad valorem, value added, mortgage, conveyance,
transfer, customs duties, franchise, capital stock, net worth, capital, profits,
license, withholding, payroll, employment, unemployment insurance, social
security, disability, workers' compensation, health care, excise, stamp,
property, rent, occupancy, occupational, documentary, recording, premium,
severance, environmental or windfall profit tax, duty, governmental fee or other
like assessment or charge, together with all interest or penalties thereon and
additions thereto, imposed by any taxing authority.
"Tax Return" means any return, report, declaration, form, claim
for refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Trademark" shall have the meaning ascribed to that term in the
definition of Trademark Property.
"Trademark Property" shall mean, with respect to any person:
(i) all of such person's trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks, logos,
trade dress other source of business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and general
intangibles of a like nature (all of the foregoing items in this clause
(i) being collectively called a "Trademark"), now existing anywhere in
the world or hereafter adopted or acquired, whether currently in use or
not, whether or not registered, all registrations and recordings thereof
and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or
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any State thereof or any foreign country, including, with respect to the
Company, those referred to in Part B-1 of Section 4.14 of the Company
Disclosure Letter;
(ii) all reissues, extensions, renewals, translations,
adaptations, derivations and combinations of any of the items described
in clause (i) of this definition;
(iii) all Trademark licenses and other agreements providing such
person with the right to use any of the types of items referred to in
clauses (i) and (ii) of this definition, including, with respect to the
Company, each Trademark license referred to in Part B-2 of Section 4.14
of the Company Disclosure Letter;
(iv) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clauses (i) and (ii) of
this definition;
(v) the right to sue third parties for past, present and future
infringements of any Trademark property described in clauses (i) or (ii)
of this definition and, to the extent applicable in clause (iii) of this
definition; and
(vi) all proceeds of, and rights associated with, the foregoing,
including any claim by such person against third parties for past,
present or future infringement or dilution of any Trademark, Trademark
registration or (to the extent applicable and if permitted by applicable
law) Trademark license, referred to on clause (iii) of this definition,
or for any injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark license, and all
rights corresponding thereto throughout the world.
"Transaction Expenses" has the meaning set forth in Section
11.3(a).
"Transaction Fee" has the meaning set forth in Section 11.3(b).
"Tuner Patents" shall mean, collectively, U.S. Patent No.
4,002,986, U.S. Patent No. 4,317,227, U.S. Patent No. 4,516,170, and U.S. Patent
No. 4,598,425, together with all applications, reissues, divisions,
continuations, continuations-in-part, revisions, extensions, renewals and
reexaminations relating thereto; and "Tuner Patent" shall mean any of the
foregoing.
"Zenith Reynosa" means Partes de Television de Reynosa, a Mexican
sociedad anonima de capital variable and a wholly-owned subsidiary of the
Company.
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"Zenith Texas" means Zenith Electronics Corporation of Texas, a
Texas corporation and a wholly-owned subsidiary of the Company.
ARTICLE II
2. The Transactions. Upon the terms and subject to the conditions
set forth herein, on the Closing Date, pursuant to the Plan,
(a) LGE will purchase from the Company, and the Company will
issue to LGE, shares of newly issued common stock, par value $.01 per share, of
the Company (the "New Common Stock"), representing 100% of the New Common Stock,
in exchange for the forgiveness by LGE of $200 million of LGE claims consisting
of (i) unsecured claims for amounts outstanding as of the Closing Date up to
$140 million arising out of the delivery of goods to the Company in the ordinary
course of business, (ii) a $50 million secured claim pursuant to the
Reimbursement Agreement, (iii) an unsecured claim for guarantee fees accrued and
unpaid through the Closing Date payable to LGE under the Reimbursement Agreement
and (iv) a portion, if any, of the secured claim pursuant to the Note Agreement
sufficient when aggregated with the amounts described in clauses (i), (ii) and
(iii) of this Section 2(a) to equal $200 million;
(b) LGE or one of its subsidiaries and Zenith Reynosa and Zenith
Texas will enter into an agreement (the "Reynosa Purchase Agreement") pursuant
to which Zenith Reynosa and Zenith Texas will sell to LGE or one of its
affiliates the Reynosa Assets in exchange for the release by LGE of claims equal
to the Reynosa Asset Claim Amount as reimbursement for the payment by LGE of the
Company's and Zenith Texas' obligations to certain third party creditors under
the Leveraged Lease Documents, provided, however, that if the transactions
contemplated by this Section 2(b) would have adverse Tax consequences that are
unacceptable to either the Company or LGE, then (i) the Company shall retain the
Reynosa Assets, (ii) the Company and LGE shall enter into an agreement with
respect to the operation by LGE of such Reynosa Assets and the Reynosa Leveraged
Lease Assets (the "Reynosa Operating Agreement") and (iii) the amount of LGE
claims that would have been exchanged for the Reynosa Assets under this Section
2(b) shall be exchanged for an equal principal amount of Senior Secured PIK
Notes;
(c) LGE will purchase from the Company, and the Company will
issue to LGE, Senior Secured PIK Notes in a principal amount equal to and in
exchange for the forgiveness by LGE of claims equal to the aggregate of (i) a
secured claim for principal amounts owed LGE pursuant to the Reimbursement
Agreement, if any, other than the $50 million exchanged for New Common Stock
under Section 2(a), (ii) the amount of the
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claim for reimbursement of the payment by LGE of the obligations of the Company
and Zenith Texas to certain third party creditors under the Leveraged Lease
Documents remaining after release of the portion of the claim exchanged for the
Reynosa Assets pursuant to Section 2(b) and the retention of the Reynosa
Leveraged Lease Assets pursuant to Section 2(f), (iii) an unsecured claim for
all servicing fees (the "Technical Service Fees") accrued and unpaid through the
Closing Date resulting from LGE's provision of certain technical and other
related services to the Company in connection with the Company's research and
development activities, and (iv) the amount of the secured claim pursuant to the
Note Agreement remaining after conversion of the portion of the claim exchanged
for New Common Stock pursuant to Section 2(a);
(d) each share of Old Common Stock owned by LGE and the Options
owned by LGE will be canceled, and LGE will have no rights or claims against the
Company in respect of such canceled Old Common Stock and Options;
(e) LGE will agree to lend or provide additional credit support
to the Company in an amount necessary to enable the Company to execute the
Operating Plan according to its terms, not to exceed $60 million, on terms
mutually acceptable to LGE and the Company;
(f) LGE will transfer to the Company all of its right, title and
interest in the equipment subject to the Leveraged Lease Documents (other than
the Reynosa Leveraged Lease Assets and any such equipment sold on or before the
Closing Date) and any credits outstanding under the Letter Agreement, dated
November 2, 1998 (the "Philips Letter Agreement"), between the Company and
Philips Electronics North America Corporation, provided, however, if the Company
and LGE do not enter into the Reynosa Purchase Agreement, then LGE will also
transfer to the Company the Reynosa Leveraged Lease Assets in exchange for
Senior Secured PIK Notes in a principal amount of $8,000,750.00; and
(g) LGE's claims other than those described under Sections 2(a),
2(b), 2(c), 2(d) and 2(f), including without limitation all accrued but unpaid
interest on amounts owed by the Company to LGE under the Reimbursement
Agreement, the Financial Support Agreement and the Note Agreement, shall be
treated as unimpaired general unsecured claims under the Plan.
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ARTICLE III
3.1 Closing. At the Closing, subject to the terms and conditions
of this Agreement, the Company and LGE shall consummate the transactions
contemplated by Section 2 hereof. The closing (the "Closing") shall take place
at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, IL 60601,
at 10:00 a.m., Chicago time, as promptly as practicable following the
satisfaction or waiver of the conditions to Closing set forth in Sections 8, 9
and 10 hereof, or at such other place and time as the parties may mutually
agree. The Company shall give LGE three business days prior written notice of
the date the Closing is scheduled to occur. The "Closing Date" shall be the date
the Closing occurs.
3.2 No Survival. The sole and exclusive recourse and remedy for a
material breach of a representation or warranty shall be the non-breaching
party's right pursuant to Section 9(a) or 10(a), as the case may be, not to
consummate the transactions contemplated hereby. At Closing all representations
and warranties shall expire, and in any case, result in no future liability for
the Company or LGE or their respective subsidiaries, officers, directors and
employees.
ARTICLE IV
4. Representations and Warranties of the Company. The Company
represents and warrants to LGE that:
4.1 Organization; Authorization; Enforceability. It is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by it of this Agreement have been duly
authorized by all requisite corporate action on its part. This Agreement has
been duly executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement by it will not: (x) conflict with or violate its organizational
documents; or (y) subject to the governmental filings and approvals referred to
in Section 4.3 and in the case of clauses (y)(i) and (y)(ii) as would not
reasonably be likely to result in or have a Material Adverse Effect, (i) breach
or violate any statute, law, rule, regulation, judgment, order or decree
applicable to it or any of its subsidiaries or by which any of their respective
properties are bound or affected, (ii) result in any breach of, or constitute a
default or give rise to any right of termination, revocation, cancellation,
acceleration or
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increased payments under (with or without the giving of notice or the lapse of
time or both), any note, mortgage, agreement, contract, indenture, permit,
lease, license, commitment, understanding or other arrangement to which it or
any of its subsidiaries is a party or by which it or any of its subsidiaries or
any of their respective properties or assets are bound or affected, or (iii)
result in the creation or imposition of any lien, mortgage, security interest,
restriction or other encumbrance (a "Lien") on it or any of its subsidiaries or
any of their respective assets or properties.
4.3 Consents. Except for (i) applicable requirements of the
Securities Act, the Exchange Act, and filings under state securities or "blue
sky" laws, (ii) approval by the Bankruptcy Court of the Plan and this Agreement
and the entry by the Bankruptcy Court of an order confirming the Plan (the
"Confirmation Order"), (iii) filing with the Secretary of State of the State of
Delaware of the Certificate of Amendment of the Certificate of Incorporation of
the Company with respect to the amendments contemplated by this Agreement, and
(iv) as set forth in Section 4.3 of the Company Disclosure Letter, no consent,
approval or authorization of, or filing with or notification to, any Regulatory
Authority or any third party is required on its part in connection with the
execution, delivery or performance of this Agreement.
4.4 SEC Documents. Except for the Company's Annual Report on Form
10K for the fiscal year ended December 31, 1998, which was filed by the Company
on April 1, 1999, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC under the
Securities Act and the Exchange Act since December 31, 1995 (the "Company SEC
Documents"). As of its filing date, each Company SEC Document filed, as amended
or supplemented, if applicable, (i) complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations thereunder, and (ii) did not, at the
time it was filed, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.5 Financial Statements; Absence of Undisclosed Liabilities. The
financial statements of the Company included in the Company SEC Documents
complied as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of
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<PAGE> 15
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal recurring year-end audit adjustments). Except as set forth in Section
4.5 of the Company Disclosure Letter or as reflected in such financial
statements as of and for the period ending December 31, 1997 or in the notes
thereto, neither the Company nor any of its subsidiaries has any liabilities of
any nature, whether known or unknown, absolute, accrued, contingent or otherwise
and whether due or to become due, that, individually or in the aggregate, have
had or are reasonably likely to have or result in a Material Adverse Effect.
4.6 Plan Disclosure Documents. The Plan Disclosure Documents will
not, at the date mailed by the Company to the creditors and equity security
holders of the Company, the date the Bankruptcy Court enters the Confirmation
Order or the Closing Date, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Plan Disclosure Documents will comply as to
form in all material respects with the provisions of the Securities Act, the
Exchange Act and the Bankruptcy Code and all other rules, regulations, orders or
decrees thereunder.
4.7 Confirmation of Plan. To the knowledge of the officers of the
Company, the Company has not taken any action, or failed to take any action,
which might prevent, materially impede or delay or result in the revocation of
(i) the confirmation of the Plan (as provided in Section 1144 of the Bankruptcy
Code), (ii) a full and complete discharge (to the fullest extent possible under
Section 1141(d) of the Bankruptcy Code) of the debts of the Company intended to
be discharged under the Plan, and (iii) the vesting upon the entry of the
Confirmation Order of the property of the Company in the reorganized Company
free and clear of all claims and interests of creditors and equity security
holders except as otherwise provided in the Plan.
4.8 Compliance with Law. Except as disclosed in the Company SEC
Documents or the Plan Disclosure Documents, neither the Company nor any of its
subsidiaries is in violation of or default under (i) any statute, law,
regulation, rule, judgment, order or decree of any Regulatory Authority
applicable to the Company or any of its subsidiaries or by which any of the
Company or its subsidiaries or any of their respective assets or properties are
bound or affected or (ii) any note, mortgage, indenture, contract, agreement,
permit, lease, license, commitment, understanding or other arrangement to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of their respective assets or properties are bound or
affected, and neither the Company nor any of its subsidiaries has received any
notice alleging noncompliance, except with reference to all the foregoing where
the failure to be
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in compliance would not, individually or in the aggregate, have or result in a
Material Adverse Effect.
4.9 Environmental Matters. Except as set forth in the Company SEC
Documents and in Section 4.9 of the Company Disclosure Letter:
(a) To the best of the Company's and its subsidiaries' knowledge,
after reasonably diligent inquiry, the Property does not contain, in, on or
under, including, without limitation, the soil and groundwater thereunder, any
Hazardous Materials in violation of Environmental Laws or in amounts that could
give rise to liability under Environmental Laws.
(b) The Company and each of its subsidiaries is in material
compliance with all applicable Environmental Laws, and there is no contamination
or violation of any Environmental Law which could materially interfere with the
continued operation of any of the Properties or have or result in a Material
Adverse Effect.
(c) Neither the Company nor any of the Company's subsidiaries has
received from any Regulatory Authority or other person or entity any complaint,
or notice of violation, alleged violation, investigation or advisory action or
notice of potential liability regarding matters of environmental protection or
permit compliance under applicable Environmental Laws with regard to the
Properties, nor is the Company aware that any such notice is pending or
threatened.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Property in violation of any
Environmental Laws or in a manner that could give rise to material liability
under Environmental Laws nor have any Hazardous Materials been transported or
disposed of from any of the Properties to any other location in violation of any
Environmental Laws or in a manner that could give rise to material liability
under Environmental Laws.
(e) Neither the Company nor any of its subsidiaries is a party to
any administrative actions or judicial proceedings pending under any
Environmental Law with respect to any of the Properties, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to any of the Properties.
(f) There has been no release or threat of release of Hazardous
Materials into the environment at or from any of the Properties, or arising from
or relating
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<PAGE> 17
to the operations of the Company or any of its subsidiaries, in violation of
Environmental Laws or in amounts that could give rise to material liability
under Environmental Laws.
(g) All information, reports, and other papers and data furnished
by the Company to LGE relating to (x) the environmental conditions on, under or
about the Properties currently or formerly owned, leased, operated to used by
the Company or any of its subsidiaries or any predecessor in interest thereto
and (y) any Hazardous Materials used, managed, handled, transported, treated,
generated, stored, discharged, emitted, or otherwise released by the Company or
any of its subsidiaries or any other person or entity on, under about or from
any Properties currently or formerly owned or leased, or otherwise in connection
with the use or operation of any of the Properties of the Company or any of its
subsidiaries, or their respective businesses and operations were, at the time
the same were so furnished, (i) to the extent prepared by third parties, to the
best of the Company's knowledge, and (ii) to the extent prepared by the Company,
complete and correct in all material respects in light of all such information,
reports and other papers and data taken as a whole at such time. No fact is
currently known to the officers of the Company which had or resulted in, or
could reasonably be expected to have or result in a Material Adverse Effect.
4.10 Title to New Common Stock. Assuming the entry of the
Confirmation Order, all shares of New Common Stock issued at the Closing
pursuant to this Agreement, will have been duly authorized by all necessary
corporate action on the part of the Company, and, upon such issuance, such
shares of New Common Stock will be validly issued, fully paid and nonassessable,
and the issuance of such shares will not be subject to preemptive rights of any
other stockholder of the Company.
4.11 ERISA Matters. Except as set forth in the Company SEC
Documents or Section 4.11 of the Company Disclosure Letter,
(a) The Company and each ERISA Affiliate and each of their
respective ERISA Plans are in substantial compliance with ERISA and the Code and
neither the Company nor any of its ERISA Affiliates has incurred any accumulated
funding deficiency with respect to any such ERISA Plan within the meaning of
ERISA or the Code. The Company and each of its ERISA Affiliates have complied
with all material requirements of ERISA Sections 601 through 608 and Code
Section 4980B. Neither the Company nor, to the best of the Company's knowledge,
any of its ERISA Affiliates has made any promises of retirement or other
benefits to employees, except as set forth in the ERISA Plans. Neither the
Company nor any of its ERISA Affiliates has incurred any material liability to
the Pension Benefit Guaranty Corporation in connection with any such ERISA Plan.
The assets of each such ERISA Plan which is subject to Title IV of ERISA are
sufficient to provide the benefits under such ERISA Plan, the payment of which
the
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<PAGE> 18
Pension Benefit Guaranty Corporation would guarantee if such ERISA Plan were
terminated, and such assets are also sufficient to provide all other "benefit
liabilities" (as defined in ERISA Section 4001(a)(16)) due under the plan upon
termination. No Reportable Event has occurred and is continuing with respect to
any such ERISA Plan. No such ERISA Plan or trust created thereunder, or party in
interest (as defined in Section 3(14) of ERISA, or any fiduciary (as defined in
Section 3(21) of ERISA), has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) which would
subject such ERISA Plan or any other ERISA Plan of the Company or any of its
ERISA Affiliates, any trust created thereunder, or any such party in interest or
fiduciary, or any party dealing with any such ERISA Plan or any such trust to
any material penalty or tax on "prohibited transactions" imposed by Section 502
of ERISA or Section 4975 of the Code. Neither the Company nor any of its ERISA
Affiliates is a participant in or is obligated to make any payment to a
Multiemployer Plan.
(b) Neither the approval or execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement will (i) entitle
any individual to severance pay or (ii) accelerate the time of payment or
vesting of, or increase the amount of, compensation due to any individual (other
than in the form of Old Common Stock).
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Letter, there is no strike, walkout or other work stoppage or lockout
pending or, to the knowledge of the Company, threatened against or affecting the
business of the Company or any of its subsidiaries.
4.12 Taxes. Except set forth in Section 4.12 of the Company
Disclosure Letter, all Tax Returns in respect of the Company and its
subsidiaries required to be filed on or before the Closing Date have (or by the
Closing Date will have) been duly and timely filed, except to the extent the
failure to file any such Tax Return would not, individually or in the aggregate,
have or result in a Material Adverse Effect. Except as set forth in Section 4.12
of the Company Disclosure Letter, all Taxes (whether or not shown on such Tax
Returns) due and payable with respect to the Company and its subsidiaries on or
before the Closing Date have (or by the Closing Date will have) been duly and
timely paid. All Taxes required to be withheld by the Company or any of its
subsidiaries on or before the Closing Date have (or by the Closing Date will
have) been duly and timely withheld and properly paid to the applicable taxing
authority.
4.13 Operating Plan. The projections contained in the Operating
Plan represent the Company's good faith estimate of the results of its
operations both before and after the Restructuring for which it believes it has
a reasonable basis. The Company
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believes that the assumptions which underlie the projections continue to be
reasonable in light of current circumstances.
4.14 Intellectual Property; Licenses. Except as set forth in
Section 4.5 of the Company Disclosure Letter, the Company possesses adequate
Intellectual Property to continue to conduct its business as heretofore
conducted by it or as projected to be conducted in the Operating Plan, and all
Intellectual Property existing on the date hereof, together with in the case of
patents and Trademarks, the date of issuance thereof, is listed in Section 4.14
of the Company Disclosure Letter. With respect to Intellectual Property of the
Company unless such Intellectual Property has become obsolete or is no longer
used or useful in the conduct of the business of the Company:
(a) it is valid and enforceable, is subsisting, and has not been
adjudged invalid or unenforceable, in whole or in part;
(b) the Company has made all necessary filings and recordations
to protect its interest therein, including, without limitation, recordations of
all of its interest in its Patent Property and Trademark Property in the United
States Patent and Trademark Office and, to the extent necessary for the conduct
of the Company's business, in corresponding offices throughout the world;
(c) except as set forth in Section 4.5 of the Company Disclosure
Letter, the Company is the exclusive owner of the entire and unencumbered right,
title and interest in and to such Intellectual Property owned by it and no claim
has been made that the use of any of its owned Intellectual Property does or may
violate the asserted rights of any third party; and
(d) the Company has performed, and the Company will continue to
perform, all acts, and the Company has paid and will continue to pay, all
required fees and taxes, to maintain each and every item of such Intellectual
Property in full force and effect throughout the world, as applicable.
The Company owns directly or is entitled to use, by license or otherwise, all
patents, Trademarks, copyrights, mask works, licenses, technology, know-how,
processes and rights with respect to any of the foregoing used in, necessary for
or of importance to the conduct of the Company's business.
4.15 Year 2000. The replacement of business critical software or
other solutions necessary to address the year 2000 issue in respect of such
software is expected to be completed by July 31, 1999. The projected cost to the
Company and its subsidiaries of such replacement or other solution is properly
reflected in the Operating Plan.
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ARTICLE V
5. Representations and Warranties of LGE. LGE represents and
warrants to the Company that:
5.1 Organization; Authorization; Enforceability. It is a
corporation duly organized and validly existing under the laws of the Republic
of Korea and has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance by it of this Agreement have been duly authorized by all requisite
corporate action on its part. This Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
5.2 No Conflicts. The execution, delivery and performance of this
Agreement by it will not (i) conflict with or violate its organizational
documents or (ii) subject to the governmental filings and approvals referred to
in Section 5.3, breach or violate any statute, law, rule, regulation, judgment,
order or decree applicable to it or any of its subsidiaries or by which any of
their respective properties are bound or affected.
5.3 Consents. Except for (i) applicable requirements of the
Securities Act, the Exchange Act and filings under state securities or "blue
sky" laws, (ii) approval by the Bankruptcy Court of the Plan and this Agreement
and the entry by the Bankruptcy Court of the Confirmation Order, (iii) filing
with the Secretary of State of the State of Delaware of the Certificate of
Amendment of the Certificate of Incorporation of the Company with respect to the
amendments contemplated by this Agreement, and (iv) as set forth in Section 5.3
of the LGE Disclosure Letter, no consent, approval or authorization of, or
filing with or notification to, any Regulatory Authority (including, without
limitation, any Korean Regulatory Authority) or any third party is required on
its part in connection with the execution, delivery or performance of this
Agreement.
5.4 Plan Disclosure Documents. Those portions of the Plan
Disclosure Documents made in reliance upon and in conformity with information
furnished to the Company by LGE in writing for use in connection with the
preparation thereof will not, at the date mailed by the Company to the creditors
and equity security holders of the Company, the date the Bankruptcy Court enters
the Confirmation Order or the Closing Date, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company
acknowledges that the portions of the Plan Disclosure Documents set forth in
Section 5.4 of the LGE Disclosure Letter constitute the only information
furnished in writing by LGE.
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ARTICLE VI
6. Agreements of the Company.
6.1 Reorganization Proceedings. The Company shall, and shall
cause its subsidiaries to, use commercially reasonable efforts to consummate the
Financial Restructuring, including, without limitation:
(a) the preparation and filing of the Plan Disclosure Documents
with the SEC as soon as practicable after the date hereof and the clearance of
the Plan Disclosure Documents by the SEC;
(b) subject to Section 6.4, the preparation and filing of
supplements or amendments to the Plan Disclosure Documents with the SEC and the
clearance of such supplements or amendments to the Disclosure Statement by the
SEC if at any time prior to the Closing Date any fact, event or development
should occur or exist that is required under the Securities Act, the Exchange
Act or the Bankruptcy Code or the rules and regulations thereunder to be set
forth in a supplement or amendment to the Plan Disclosure Documents;
(c) the solicitation and receipt of the acceptances of the
requisite holders of claims against the Company pursuant to the Plan
Solicitation;
(d) the filing with, and approval of, the Bankruptcy Court of the
Plan Disclosure Documents;
(e) the confirmation of the Plan under the Bankruptcy Code using
the acceptances of the Plan received by the Company pursuant to the Plan
Solicitation; and
(f) the consummation of the transactions provided for in the
Plan, including, without limitation, the transactions described in Section 2 of
this Agreement.
6.2 Compliance with Bankruptcy Code. The Company shall, and shall
cause its subsidiaries, to the extent applicable, to, comply in all material
respects with the Bankruptcy Code and all other laws, rules, regulations,
decrees and orders promulgated thereunder in connection with obtaining the
Confirmation Order.
6.3 Consummation of the Plan. The Company shall, and shall cause
its subsidiaries to, use commercially reasonable efforts to obtain, and shall
obtain, and shall refrain from taking any action that would be likely to
prevent, materially impede or delay
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or result in the revocation of (i) the entry by the Bankruptcy Court of the
Confirmation Order; (ii) the full and complete discharge (to the fullest extent
possible under Section 1141(d) of the Bankruptcy Code) of the debts of the
Company intended to be discharged under the Plan; and (iii) the vesting upon the
entry of the Confirmation Order of the property of the Company in the
reorganized Company free and clear of all claims and interests of creditors and
equity security holders except as otherwise provided in the Plan.
6.4 Amendments to Plan and Plan Disclosure Documents. The Company
shall not consent to any amendment or supplement to, or modification of, the
Plan or the Plan Disclosure Documents without the prior written consent of LGE,
which consent may be evidenced by the execution of the Plan or the Plan
Disclosure Documents by the LGE-designated members of the Board of Directors of
the Company.
6.5 Conduct of the Business. From the date hereof until the
Closing Date, except to the extent that LGE otherwise consents in writing or
except as contemplated or permitted by the Operating Plan or the Financial
Restructuring, (a) the Company shall, and shall cause its subsidiaries to,
conduct business in the ordinary course in substantially the same manner as
presently conducted and use commercially reasonable efforts to keep available
the services of Jeffrey P. Gannon and his "Tier 1" and "Tier 2" reports and to
preserve the relationships with key customers, suppliers and others having
business dealings with the Company or its subsidiaries, and (b) the Company
shall not, and shall cause its subsidiaries not to:
(i) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets (other than inventory) in any such case,
that would be material to the Company;
(ii) sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of
the assets or properties of the Company or its subsidiaries other than
in the ordinary course of business or pursuant to the Operating Plan or
to existing contractual obligations set forth in Section 6.5(ii) of the
Company Disclosure Letter for the sale or other disposition of
equipment;
(iii) amend its Certificate of Incorporation, By-laws or other
organizational documents, except as set forth in the Plan;
(iv) redeem or otherwise acquire any shares of its capital stock
or issue any capital stock or any option, warrant or right relating
thereto;
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(v) incur any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness;
(vi) permit, allow or suffer any of the assets or properties of
the Company or any subsidiary to be subject to any Lien other than Liens
(A) securing debt reflected on the balance sheet of the Company as of
December 31, 1997 or the notes thereto or contained in the Company SEC
Documents, (B) referred to in Section 6.5 of the Company Disclosure
Letter, (C) for Taxes not yet due or payable or being contested in good
faith, (D) that constitute mechanics', carriers', workmens' or like
Liens, Liens arising under original purchase price conditional sales and
other similar contracts and equipment leases with third parties entered
into in the ordinary course, (E) incurred in the ordinary course of
business consistent with past practice in connection with workers'
compensation, unemployment insurance and social security, retirement and
other legislation and in the case of Liens described in clauses (B),
(C), (D) or (E) that, individually or in the aggregate, would not
reasonably be expected to have or result in a Material Adverse Effect;
(vii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of material value;
(viii) make any change in any method of accounting or accounting
practice or policy, except as may be required by GAAP;
(ix) modify, amend, terminate or permit the lapse of any material
lease of real property (except modifications or amendments associated
with renewals of leases in the ordinary course of business consistent
with past practice of the Company);
(x) enter into any material contract or arrangement;
(xi) enter into any agreement or take any action in violation of
the terms of this Agreement or the Restructuring;
(xii) settle any material tax audit, make or change any material
tax election;
(xiii) hire any new executive officers of the Company or any of
its subsidiaries;
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(xiv) except as contemplated by the New Salaried Employee
Documents, (A) grant any director, executive officer or other employee
of the Company or any of its subsidiaries any increase in compensation,
except, in the case of employees who are not executive officers or
directors, normal salary increases consistent with past practice or as
was required under employment agreements or arrangements in effect as of
the date of the most recent audited financial statements included in the
Company SEC Documents, (B) grant any such director, executive officer or
other employee any severance or termination pay, except as was required
under any employment, severance or termination agreements or
arrangements or plans in effect as of the date of the most recent
audited financial statements included in the Company SEC Documents, (C)
enter into any employment, severance or termination agreement with, or
adopt any plan or arrangement covering, any such director, executive
officer, or employee or (D) adopt any new benefit plan or arrangement
(including, without limitation, an Employee Benefit Plan, a bonus plan,
a severance plan or any equity-based plan) or amend any such plan,
except as required by law;
(xv) enter any new line of business; or
(xvi) agree, whether in writing or otherwise, to do any of the
foregoing.
For purposes for this Section 6.5 only, "material" means involving $5 million or
more.
6.6 Reynosa Asset Claim Amount. The Company and LGE estimated the
value of the Reynosa Assets to be $32,364,300.00 as of August 7, 1998. At least
five days prior to the Closing, the Company and LGE shall agree in writing on
the value of the Reynosa Assets as of the Closing Date (the "Reynosa Asset Claim
Amount"). The Reynosa Asset Claim Amount shall equal $32,364,300.00 plus (i) the
aggregate amount of capital expenditures made in respect of the Reynosa Assets
by the Company since August 7, 1998 and approved by LGE; minus (ii) the sum of
(x) the amount of depreciation (determined in accordance with GAAP) in respect
of the Reynosa Assets since August 7, 1998 and (y) the amount of any liabilities
assumed by LGE in connection with the transactions contemplated by the Reynosa
Purchase Agreement; plus or minus, as the case may be, (iii) the value of any
equipment, personal property or other assets added or subtracted from the list
set forth on Schedule 1(a) hereto pursuant to the mutual written agreement of
the Company and LGE.
6.7 [Intentionally omitted.]
6.8 Access and Information. So long as this Agreement remains in
effect, the Company will (and will cause each of its subsidiaries, and each of
the
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accountants, counsel, consultants, officers, directors, employees, agents and
representatives (the "Representatives") of or to any of the Company and its
subsidiaries, to) give LGE and its Representatives, subject to existing
confidentiality agreements and to be used only for the purposes of this
Agreement and the transactions contemplated hereby, full access during
reasonable business hours to all of their respective properties, assets, books,
contracts, commitments, reports, records, accountants and accountant's work
papers relating to the Company and its subsidiaries, excluding such material
which is attorney-client privilege or attorney work product, and furnish to
them, subject to existing confidentiality agreements and to be used only for the
purposes of this Agreement and the transactions contemplated hereby, all such
documents, records and information with respect to the properties, assets and
business of the Company and its subsidiaries and copies of any work papers
relating thereto, excluding such material which is subject to attorney-client
privilege or attorney work product, as LGE shall from time to time reasonably
request. The Company will keep LGE generally informed as to the affairs of the
Company and its subsidiaries. In addition, the Company shall deliver to LGE, not
later than the 20th business day following the end of each fiscal month prior to
the Closing, financial statements for the Company and its consolidated
subsidiaries as of the end of such fiscal month, together with a certificate of
the chief financial officer of the Company demonstrating in reasonable detail
that the Company is in compliance with the financial covenants set forth in
Section 10(f) of this Agreement. The Company will promptly notify LGE if any
information is requested from it or any negotiations or discussions are sought
to be initiated with the Company concerning any merger, consolidation, business
combination, liquidation, reorganization, sale of substantial assets, sale of
shares of capital stock, purchase of claims or similar transactions involving
the Company or any subsidiary or any division of any thereof (an "Alternative
Proposal"), and will promptly communicate to LGE the terms of any proposal or
inquiry which it may receive in respect of any Alternative Proposal.
6.9 Further Actions. The Company shall, and shall cause each of
its subsidiaries to:
(a) use commercially reasonable efforts to take or cause to be
taken all actions, and to do or cause to be done all other things, necessary,
proper or advisable in order for it to fulfill and perform its obligations in
respect of this Agreement, or otherwise to consummate and make effective the
transactions contemplated hereby;
(b) as promptly as practicable, (i) make, or cause to be made,
all filings and submissions required under any applicable law or regulation, and
give such reasonable undertakings as may be required in connection therewith,
and (ii) use all reasonable efforts to obtain or make, or cause to be obtained
or made, all permits necessary to be obtained or made by the Company or any of
its subsidiaries, in each case in connection with this
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Agreement, the Plan, or the consummation of the other transactions contemplated
hereby or thereby;
(c) coordinate and cooperate with LGE in exchanging such
information and supplying such reasonable assistance as may be reasonably
requested by LGE in connection with the filings and other actions contemplated
by this Agreement;
(d) not issue any press release or make any other public
statement regarding the Restructuring without the prior consent of LGE or except
as otherwise required by law (provided that in such an event the Company shall
give advance notice to LGE of any such release or statement); and
(e) the Company shall promptly notify LGE in writing of any fact,
condition, event or occurrence that could reasonably be expected to result in
the failure of any of the conditions contained in Sections 8, 9 and 10 to be
satisfied, promptly upon becoming aware of the same.
6.10 Operating Plan. As soon as practicable after the end of each
fiscal month, and in no event later than the 20th business day after the end
thereof, the Company shall deliver to LGE a certificate of the Company, duly
executed by the President, the chief financial officer and the restructuring
officer, restating the representations and warranties contained in Section 4.13
of the Agreement.
6.11 Leveraged Lease Documents. From the date hereof through the
Closing Date, except as otherwise consented to in writing by LGE, the Company
and its subsidiaries shall perform all of their respective obligations under and
comply with all terms and provisions of the Leveraged Lease Documents other than
its obligation to pay Basic Rent (as defined therein) thereunder.
6.12 Interest Charges. On May 31, 1999, and thereafter at the end
of each month, the Company will pay LGE all accrued but unpaid interest under
the Reimbursement Agreement and the Financial Support Agreement.
ARTICLE VII
7. Agreements of LGE.
7.1 Voting. Subject to compliance with applicable bankruptcy and
non-bankruptcy laws, LGE hereby agrees to vote all claims against and interests
in the
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Company that it holds in favor of the Plan to effectuate this Agreement and the
Financial Restructuring.
7.2 Further Action. LGE shall, and shall cause each of its
subsidiaries to, use commercially reasonable efforts to take or cause to be
taken all actions, and to do or cause to be done all other things, necessary,
proper or advisable in order for it to fulfill and perform its obligations in
respect of this Agreement, or otherwise to consummate and make effective the
transactions contemplated hereby, including without limitation:
(a) as promptly as practicable, (i) make, or cause to be made,
all filings and submissions required under any applicable law or regulation
(including any Korean law or regulation), and give such reasonable undertakings
as may be required in connection therewith, and (ii) use all reasonable efforts
to obtain or make, or cause to be obtained or made, all permits necessary to be
obtained or made by LGE or any of its subsidiaries, including such permits as
are required from any Korean Regulatory Authority, in each case in connection
with this Agreement, the Plan, or the consummation of the other transactions
contemplated hereby or thereby.
(b) make all necessary and desirable appearances before the
Bankruptcy Court and participate in the bankruptcy case;
(c) make in a timely fashion all necessary and desirable
applications and notices to any applicable entities in the United States for
approval of this Agreement and the transactions contemplated hereby, including,
if applicable, notice in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976;
(d) promptly notify the Company in writing of any fact,
condition, event, or occurrence that could reasonable be expected to result in
the failure of any of the conditions contained in Sections 8 and 9 to be
satisfied, promptly upon becoming aware of the same; and
(e) to obtain, and to refrain from taking any action that would
be likely to prevent, materially impede or delay or result in the revocation of
(i) the entry by the Bankruptcy Court of the Confirmation Order; (ii) the full
and complete discharge (to the fullest extent possible under Section 1141(d) of
the Bankruptcy Code) of the debts of the Company intended to be discharged under
the Plan; and (iii) the vesting upon the entry of the Confirmation Order of the
property of the Company in the reorganized Company free and clear of all claims
and interests of creditors and equity security holders in accordance with the
Plan.
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7.3 Information. So long as this Agreement remains in effect, LGE
shall coordinate and cooperate with the Company or its agents in exchanging such
information and supplying such reasonable assistance as may be reasonably
requested by the Company in connection with the filings and other actions
contemplated in this Agreement. LGE shall also, as the Company may from time to
time reasonably request, timely provide the Company with any requested
information regarding LGE's performance under this Agreement, LGE's ability to
perform under this Agreement, LGE's ability to satisfy the conditions set forth
in Section 9, and other matters in any way related to this Agreement and the
transactions contemplated hereby.
7.4 Release of Zenith Texas. LGE hereby agrees to release Zenith
Texas upon consummation of the transactions contemplated by Sections 2(b) and
2(c) from any claims of LGE against Zenith Texas arising as a result of the
satisfaction by LGE of Zenith Texas' obligations under the Leveraged Lease
Documents.
ARTICLE VIII
8. Conditions to Obligations of the Parties. The Company and LGE
shall perform their obligations under this Agreement and implement the
transaction contemplated hereby in good faith and in accordance with the
standards of fair dealing. The obligations of the Company and LGE to consummate
the transactions contemplated to occur at the Closing shall be subject to the
satisfaction or waiver prior to the Closing of each of the following conditions;
any of which may be waived by the written consents of the Company and LGE to the
extent permitted by applicable law without the necessity for notice to, or
approval from, the Bankruptcy Court or any other party.
(a) Approvals. All material authorizations, permits, consents,
orders or approvals of, or registrations, declarations or filings with, or
expirations of applicable waiting periods imposed by, any Regulatory Authority
(including, without limitation, the United States and the Republic of Korea)
necessary for the consummation of the transactions contemplated hereby
(collectively, the "Requisite Approvals"), shall have been obtained or filed or
shall have occurred, and such Requisite Approvals shall remain valid and
effective and shall not contain any condition or restriction that is reasonably
likely to have or result in a Material Adverse Effect or impair the Company's
ability to carry on its business as contemplated by the Operating Plan.
(b) No Litigation, Injunctions, or Restraints. Consummation of
the transactions contemplated hereby or by the Plan shall not have been
restrained, enjoined or otherwise prohibited or made illegal by any applicable
law, rule or regulation, including any order, injunction, decree or judgment of
any Regulatory Authority; and no such law,
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<PAGE> 29
rule, regulation, order, injunction, decree or judgment that would have such an
effect shall have been promulgated, entered, issued or determined by any
Regulatory Authority to be applicable to this Agreement or the Plan. No action
or proceeding shall be pending or threatened by any Regulatory Authority or
other person or entity on the Closing Date before any Regulatory Authority to
restrain, enjoin or otherwise prevent the con summation of the transactions
contemplated hereby or by the Plan or to recover any material damages or to
obtain other material relief as a result of such transactions, or that otherwise
relates to the application of such law, rule or regulation.
(c) Confirmation of Plan and Entry of Confirmation Order. The
Plan shall have been confirmed by the Bankruptcy Court and the Confirmation
Order, in form and substance satisfactory to LGE and the Company, shall have
been entered. Any motion for rehearing or reconsideration of the Confirmation
Order shall have been denied or withdrawn. The time allowed for appeals of the
Confirmation Order shall have expired without any appeal having been taken or,
if the Confirmation Order shall have been appealed, a final order of the
district court having jurisdiction to hear such appeal shall have affirmed the
Confirmation Order and the time allowed to appeal from such affirmance or to
seek review or rehearing thereof shall have expired and no further hearing,
appeal or petition for certiorari can be taken or granted. The Confirmation
Order shall not have been modified, amended, dissolved, revoked or rescinded,
shall be in full force and effect on the Closing Date and, without the necessity
of any further action or proceedings by the Company, the Bankruptcy Court shall
have (x) as of the date of the Confirmation Order and as of the Closing Date,
effected a full and complete discharge and release of, and thereby extinguished,
all debts of the Company (to the fullest extent possible under Section
1141(d)(1) of the Bankruptcy Code) except as otherwise provided in the Plan and
(y) vested the property of the Company in the reorganized Company, free and
clear of all claims and interests of creditors and equity security holders
except as otherwise provided in the Plan and the Confirmation Order. The Plan
shall have been substantially consummated (other than the occurrence of the
Closing hereunder).
(d) HSR Act Notification. The notifications of the Company and
LGE pursuant to the HSR Act, if any, shall have been made and the applicable
waiting period and any extensions thereof shall have expired or been terminated.
(e) Releases. The Plan will contain releases, satisfactory in
form and substance to LGE and the Company in their respective sole discretion,
from the Company and its creditors of any and all claims and liabilities against
the individual members of the Company's Board of Directors, the Company and LGE
and their respective associates, affiliates, subsidiaries, officers, directors,
stockholders, representatives, employees, attorneys, financial or investment
advisors, consultants, accountants or agents, and their
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respective successors and assigns. LGE hereby acknowledges its agreement
relating to such releases contained in the Lock-Up Agreement.
ARTICLE IX
9. Conditions to the Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated to occur at the
Closing shall be subject to the satisfaction or waiver prior to the Closing of
each of the following conditions, any of which may be waived in writing by the
Company by notice to LGE, without the necessity for notice to, or approval from,
the Bankruptcy Court or any other party:
(a) Representations and Warranties. The representations and
warranties of LGE set forth in this Agreement that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, as of the date of this Agreement
and as of the time of the Closing as though made at and as of such time, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are qualified as to
materiality shall be true and correct and those that are not so qualified shall
be true and correct in all material respects, on and as of such earlier date),
and the Company shall have received a certificate signed by a duly authorized
officer of LGE to such effect.
(b) Performance of Obligations. LGE shall have performed or
complied in all material respects with all obligations and covenants required to
be performed or complied with by it under this Agreement.
ARTICLE X
10. Conditions to the Obligations of LGE. The obligations of LGE
to consummate the transactions contemplated to occur at the Closing shall be
subject to the satisfaction or waiver prior to the Closing of each of the
following conditions, any of which may be waived in writing by the LGE by notice
to Company, without the necessity for notice to, or approval from, the
Bankruptcy Court or any other party:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, as of the date of this Agreement
and as of the time of the Closing as though made at and as of such time, except
to the extent such representations and
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warranties expressly relate to an earlier date (in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, on and as of such earlier date), and LGE shall have
received a certificate of the Company signed by the chief executive officer and
chief financial officer of the Company to such effect.
(b) Performance of Obligations. The Company shall have performed
or complied in all material respects with all obligations and covenants required
to be performed or complied with by the Company under this Agreement, and LGE
shall have received a certificate of the Company signed by the chief executive
officer and chief financial officer of the Company to such effect.
(c) Management. Jeffrey P. Gannon and his "Tier 1" and "Tier 2"
reports shall not have resigned or indicated an intention to resign or, if any
such officer or employee shall have resigned, the Company shall have engaged a
replacement reasonably satisfactory to LGE.
(d) New Financing. The Company shall have entered into definitive
documentation with third parties for new senior financing on the terms
reasonably satisfactory to LGE in an amount of not less than $150 million and
such definitive documentation shall be reasonably satisfactory in form and
substance to LGE.
(e) Operating Plan. (i) All material changes to the Operating
Plan shall be satisfactory to LGE.
(ii) The Company shall have implemented the programs contemplated
by the Implementation Program in a manner satisfactory to LGE.
(iii) The Company and its subsidiaries shall have entered into,
as contemplated by the timetable in the Operating Plan, binding
commitments for the sale or liquidation of those non-essential assets to
be disposed of pursuant to the Operating Plan prior to the Closing Date
at prices consistent with the assumptions set forth in the Operating
Plan for the 1999 fiscal year.
(f) Operating Results. The Company's operating results shall be
consistent with the Operating Plan in the following respects:
(i) the projected Cumulative Funding Requirement from January 1,
1999 through August 31, 1999 shall not exceed $104 million;
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(ii) the actual Cumulative Funding Requirement for any
three-month period commencing with the three-month period beginning
January 1, 1999 shall not have exceeded the projections in the Operating
Plan by more than 20%;
(iii) the projected cumulative EBITDA (loss) from January 1, 1999
through August 31, 1999 shall not exceed $(21) million; and
(iv) the actual EBITDA (loss) for any three-month period
commencing with the three-month period beginning January 1, 1999 shall
not have exceeded the loss projected by the Operating Plan by more than
$3.75 million.
(g) Contingent Liabilities. The Company shall not have any
material contingent liabilities (including environmental liabilities) other than
liabilities disclosed in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 included in the Company SEC Documents or in Section
4.5 of the Company Disclosure Letter.
(h) [Intentionally omitted.]
(i) Restructuring Costs. Actual and projected cash Restructuring
and Reorganization Charges from January 1, 1999 through August 31, 1999 shall
not exceed $64 million and the sum of the projected cash Restructuring and
Reorganization Charges after January 1, 1999 (including, without limitation,
outstanding accruals for environmental costs) will not exceed $82 million.
(j) Plan Disclosure Documents. The Company shall have filed with
the SEC the Plan Disclosure Documents, which shall be reasonably satisfactory in
form and substance to LGE.
(k) Definitive Agreements. The Company and LGE (or one of its
subsidiaries in the case of the agreements identified in clause (i)) shall have
(i) entered into the Reynosa Purchase Agreement or the Reynosa Operating
Agreement, as the case may be, and (ii) the New Salaried Employee Documents, all
of which shall be satisfactory in form and substance to LGE.
(l) Opinion of the Company's Counsel. LGE shall have received
opinions dated the Closing Date of the general counsel of the Company, and
special counsel to the Company, in form and substance reasonably satisfactory to
LGE.
(m) Corporate Proceedings. All corporate proceedings of the
Company and its subsidiaries in connection with the transactions contemplated by
this Agreement
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and the Financial Restructuring, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to LGE and its counsel, and
LGE and its counsel shall have received all such documents and instruments, or
copies thereof, certified or requested, as may be reasonably requested.
(n) Material Adverse Effect. No state of facts, event, change or
development shall exist or have occurred which would reasonably be expected to
have or result in a Material Adverse Effect subsequent to the date of this
Agreement.
(o) Calamities. There shall not have occurred since the date
hereof (i) any increase or decrease of 20% or more in the United States/Republic
of Korea currency exchange rate from the rate existing on the date hereof or a
suspension of, or limitation on, the markets therefor, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or the Republic of Korea, (iii) any limitation (whether or not
mandatory) by any Regulatory Authority or other event that materially adversely
affects the ability of LGE to consummate the transactions contemplated hereby,
or (iv) a commencement of a war or armed hostilities or other national or
international calamity involving the United States or the Republic of Korea.
(p) Settlement. Any settlement arrangements with respect to
licensing of technology entered into by the Company with the Sony Corporation or
any of its affiliates shall be satisfactory in form and substance to LGE.
(q) Tuner Patent Royalties. LGE shall have determined in its sole
discretion that the aggregate tuner patent royalties between the Closing Date
and December 31, 2003 will not be less than 70% of the aggregate amount of such
royalties projected under the Operating Plan.
(r) Cross Defaults. Other than (i) that certain default
pertaining to the Old Subordinated Debentures with respect to the Company's
failure to make an interest and sinking fund payment on April 1, 1999 and (ii)
that certain cross default of the loan from Credit Agricole Indosuez related
thereto, no default or event of default shall have occurred and be continuing
under any of the Company's financing arrangements or any other agreement that is
material to the Company to which the Company or any of its subsidiaries is a
party or by which any of them is bound.
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ARTICLE XI
11.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of LGE and the Company;
(b) by LGE or the Company:
(i) if the Closing shall not have occurred prior to
September 15, 1999, provided, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to
any party whose failure to fulfill any obligation under this
Agreement results in the failure of the Closing to occur; or
(ii) if there shall be any statute, law, regulation or
rule that makes consummating the transactions contemplated hereby
illegal or if any court or other Regulatory Authority of
competent jurisdiction shall have issued a judgment, order,
decree or ruling, or shall have taken such other action
restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated hereby and such judgment, order,
decree or ruling shall have become final and non-appealable;
(c) by LGE:
(i) if the Company shall have failed to perform in any
material respect any of its obligations hereunder or shall have
breached in any respect any representation or warranty contained
herein qualified by materiality or shall have breached in any
material respect any representation or warranty not so qualified,
and the Company has failed to perform such obligation or cure any
such breach capable of being cured, within 30 days of its receipt
of written notice thereof from LGE, and such failure to perform
shall not have been waived in accordance with the terms of this
Agreement;
(ii) if the Board of Directors of the Company or the
Special Committee withdraws or modifies (or publicly announces
its intention to do so, or resolves to do so) in a manner adverse
to LGE (as determined by LGE in its reasonable judgment) its
approval or recommendation of this Agreement or the transactions
contemplated hereby or by the Restructuring; or
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(iii) if any of the conditions set forth in Sections 8 and
10 shall become impossible to fulfill (other than as a result of
any breach by LGE of the terms of this Agreement) and shall not
have been waived in accordance with the terms of this Agreement;
(d) by the Company:
(i) if LGE shall have failed to perform in any material
respect any of its obligations hereunder or shall have breached
in any respect any representation or warranty contained herein
qualified by materiality or shall have breached in any material
respect any representation or warranty not so qualified, and LGE
have failed to perform such obligation or cure any such breach
capable of being cured, within 30 days of its receipt of written
notice thereof from the Company, and such failure to perform
shall not have been waived in accordance with the terms of this
Agreement;
(ii) if any of the conditions set forth in Sections 8 and
9 shall become impossible to fulfill (other than as a result of
any breach by the Company of the terms of this Agreement) and
shall not have been waived in accordance with the terms of this
Agreement; or
(iii) if there is an Alternative Proposal which the Board
of Directors in good faith determines represents a superior
transaction for the Company as compared to the Financial
Restructuring and the Board of Directors determines, after
consultation with counsel, that failure to terminate this
Agreement would be inconsistent with the compliance by the Board
of Directors with its fiduciary duties imposed by law; provided,
however, that the right to terminate this Agreement pursuant to
this Section 11.1(d) shall not be available (i) if the
Alternative Proposal is subject to a financing condition, unless
the Board of Directors is of the opinion, after consultation with
Peter J. Solomon & Company or another nationally recognized
investment banking firm, that the Alternative Proposal is
financeable, or (ii) if, prior to or concurrently with any
purported termination pursuant to this Section 11.1(d), (x) the
Company or the person or entity that made the Alternative
Proposal (the "New Investor") shall not have paid the expenses
and fees contemplated by Section 11.3 and (y) the Company and the
New Investor shall not have entered into a legal, valid and
binding agreement with LGE pursuant to which such New Investor
agrees to pay LGE the Transaction Fee contemplated by Section
11.3 upon the earlier of (A) the consummation of such Alternative
Proposal and (B) the termination of such Alternative Proposal, or
(iii) if the
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Company has not provided LGE with five business days' prior
written notice of its intent to so terminate this Agreement
together with a summary of the material terms and conditions of
such Alternative Proposal.
11.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or LGE as provided in Section 11, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of LGE or the Company with respect to the transactions
contemplated under this Agreement, other than the provisions of this Article XI
and Article XII and except to the extent that such termination results from the
wilful and material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
11.3 Expenses; Transaction Fee. (a) In the event that (i) the
Board of Directors of the Company or the Special Committee shall have withdrawn
or modified in a manner adverse to LGE its approval of this Agreement or the
transactions contemplated hereby or by the Restructuring and LGE terminates the
Agreement pursuant to Section 11(c)(ii), or (ii) the Bankruptcy Court approves,
or enters an order authorizing, an offer, proposal or agreement to effect an
Alternative Proposal, or (iii) during the period ending twelve months after the
termination of this Agreement, the Company consummates, becomes a party to or
enters into an agreement relating to or publicly announces, an Alternative
Proposal, the Company shall promptly, but in no event later than three business
days after the first of such events to occur, reimburse LGE and its affiliates
for all reasonable out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to all banks, investment banking firms and
other financial institutions and their respective agents and counsel, for
structuring the transactions contemplated hereby and all reasonable fees of
counsel, accountants, experts and consultants to LGE and its affiliates, and all
printing and advertising expenses) incurred or accrued by it or on its behalf in
connection with the negotiation, preparation, execution and performance of this
Agreement and the Restructuring (the "Transaction Expenses"), provided, however,
that LGE shall not be entitled to such Transaction Expenses if the Company
terminates this Agreement due to a material breach by LGE of its obligations
under this Agreement.
(b) In the event that during the twelve months after the
termination of this Agreement the Company consummates, becomes a party to or
enters into an agreement relating to, or publicly announces, an Alternative
Proposal, the Company shall, or shall cause the New Investor to, pay LGE a
transaction fee of $8 million (the "Transaction Fee") upon the earlier of (x)
the consummation of such Alternative Proposal or (y) the termination of such
Alternative Proposal.
(c) The Transaction Expenses and Transaction Fee, if any, payable
pursuant to this Section 11.3 shall not be subject to any offset, return,
recoupment or
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counterclaim. The Company and LGE agree that the provisions of this Section 11.3
are commercially reasonable and necessary to induce LGE to enter into and
consummate the transactions contemplated hereby.
ARTICLE XII
12.1 Notices. All notices and other communications made in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given if (a) mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, (b) transmitted by hand delivery,
(c) sent by next-day or overnight mail or delivery, (d) transmitted by facsimile
or (e) sent by telecopy or telegram, addressed as follows:
(i) if to LGE,
LG Electronics Inc.
LG Twin Towers
20, Yoido-dong
Youngdungpo-gu
Seoul, Korea 150-721
Telecopy: 011-82-2-3777-5303
Telephone: 011-82-2-3777-3049
Attention: Chief Financial Officer
and to:
LG Electronics Inc.
6133 North River Road
Rosemont, IL 600118
Telecopy: 847-692-3576
Telephone: 847-692-4630
Attention: Nam K. Woo
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with copies to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6586
Attention: Steven R. Gross, Esq.
(ii) if to the Company,
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, IL 60025-2493
Telecopy: (847) 391-8584
Telephone: (847) 391-8064
Attention: Richard F. Vitkus, General Counsel
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telecopy: (312) 861-2200
Telephone: (312) 861-2200
Attention: James H.M. Sprayregen
or, in each case, at such other address as may be specified in writing to the
other party hereto in accordance with this Section 12.1.
12.2 Governing Law. This agreement shall be governed by the
internal laws of the State of Delaware without giving effect to the conflict of
laws rules thereof.
12.3 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
12.4 Miscellaneous. This Agreement (including the Annexes hereto)
and the Disclosure Letters constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject
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matter hereof. In the event of any conflict between this Agreement and the
Commitment Letter between the Company and LGE relating to the subject matter of
Section 2(e), this Agreement shall govern. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns. Nothing in this Agreement
shall confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns. No consequential,
punitive or exemplary damages shall under any circumstances be recoverable by
either party in respect of any claim pursuant to this Agreement or in connection
with the consummation of or any failure to consummate the transactions
contemplated hereby. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall together constitute
one and the same instrument. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement. None of the terms of this Agreement may be waived, altered or
amended except by an instrument in writing duly executed by the parties hereto.
No failure or delay in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity or otherwise. All information set forth in
any of the Annexes hereto or in any Section of the Company Disclosure Letter
shall be deemed as if also set forth in each and all of the Annexes hereto and
each and all Sections of the Company Disclosure Letter, whether actually set
forth therein or not. The Company and LGE agree that the representations and
warranties and the Operating Plan of the Company shall not be affected or deemed
waived, modified, qualified or supplemented by reason of (i) any disclosure by
the Company or any of its advisors, consultants or representatives to LGE or any
of LGE's advisors, consultants or representatives (other than as set forth in
this Agreement, the Company Disclosure Letter hereto or in the Company SEC
Documents as of the date hereof), (ii) any investigation made by or on behalf of
LGE or any of its advisors, consultants or representatives or (iii) the fact
that LGE or any of such advisors, consultants or representatives knew or should
have known that any such representation or warranty or the Operating Plan is or
might be inaccurate.
12.5 Recommendations. Notwithstanding anything else contained in
this Agreement, either the Board of Directors of the Company or the Special
Committee may at any time withdraw or modify its approval or recommendation of
this Agreement or the transactions contemplated hereby or by the Restructuring
in the event that it determines, after consultation with counsel, that failure
to so withdraw or modify its recommendation
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would not be consistent with compliance with its fiduciary duties imposed by
law; provided, however, that such withdrawal or modification shall not in any
manner release the Company from its obligations under this Agreement unless LGE
exercises its right to terminate this Agreement pursuant to Section 11.1(c)(ii),
in which case Article XI shall govern.
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IN WITNESS WHEREOF, the Company and LGE have caused this
Agreement to be duly executed as of the day and year first above written.
ZENITH ELECTRONICS CORPORATION
By /s/ Jeffrey P. Gannon
------------------------------------------------
Name: Jeffrey P. Gannon
Title: President and Chief Executive Officer
LG ELECTRONICS INC.
By /s/ Cha Hong (John) Koo
------------------------------------------------
Name: Cha Hong (John) Koo
Title: Vice Chairman and Chief Executive Officer
41
