Exhibit 10(a)(k)
REIMBURSEMENT AGREEMENT
THIS AGREEMENT is made as of November 3, 1997 (as from time to time
amended, supplemented or otherwise modified, this "Agreement") between LG
Electronics Inc. ("LGE") and Zenith Electronics Corporation ("Zenith").
WITNESSETH:
WHEREAS, Zenith from time to time may apply to LGE to guarantee up to
$160,000,000 of unsecured credit facilities for Zenith, and LGE may in its sole
discretion in each instance determine whether to issue each such guarantee; and
WHEREAS, Zenith and LGE desire to enter into this Agreement to set forth
the terms and provisions pursuant to which any such guarantees may be issued by
LGE and reimbursed by Zenith;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, LGE and Zenith agree as
follows:
1. GUARANTEES AND SECURITY DOCUMENTS.
1.1 Unless otherwise defined herein or in the Security Documents
referred to below, capitalized terms where used herein or in the Security
Documents shall have the meaning set forth in that certain Credit Agreement,
dated as of March 31, 1997, with Citicorp North America, Inc., as Agent, and
the other lenders parties thereto, as in effect on the date hereof without
giving effect hereafter to changes in said definitions not consented to in
writing by LGE for purposes of this Agreement.
1.2 Each guarantee requested by Zenith shall be substantially in the
form of Exhibit A hereto, with such modifications thereto as shall be agreed to
by LGE (individually a "Guarantee" and collectively the "Guarantees"). Zenith
shall not request issuance of any Guarantee except to lenders which extend
prior to December 31, 1997 unsecured credit facilities on terms substantially
the same as set forth in Exhibit B hereto ("Credit Facilities") to Zenith for
its working capital needs. Zenith shall not request Guarantees in an aggregate
principal amount outstanding at any one time in excess of $160,000,000.
1.3 Zenith agrees to reimburse LGE, immediately upon demand, for any
and all payments made from time to time by LGE under the Guarantees, with
interest on the amounts so paid by LGE from and including the date paid by LGE
to but not including the date LGE is reimbursed therefor, at the Reference Rate
(hereinafter defined) in effect on the date of payment plus two percent (2%) per
annum; Zenith's obligations under this Section 1.3 shall be referred to
collectively as the "Reimbursement Obligations." "Reference Rate" means at any
time, the rate of interest then most recently announced by Bank of America
National Trust and Savings Association at Chicago, Illinois as its reference
rate.
1.4 The Reimbursement Obligations shall be secured by a valid and
continuing security interest in and lien on certain assets of Zenith and its
Material Subsidiaries, including, without limitation, all equipment, real
estate, certain general intangibles and stock of domestic Subsidiaries. Such
security interests and liens shall be prior to all other security interests and
liens other than those in favor of the Agent and Permitted Liens, all pursuant
to a security agreement by Zenith, a stock pledge agreement by Zenith, a
subsidiary security agreement by Material Subsidiaries, a mortgage by Zenith and
the Material Subsidiaries and any other documents required by LGE (together with
all UCC-1 financing statements and any other document, instrument or agreement
in connection therewith, as the same may be amended or modified from time to
time hereinafter collectively called the "Security Documents"). LGE
acknowledges that LGE's liens and security interests shall be subject to a
subordination agreement with the Agent, in form and substance satisfactory to
the Agent and LGE (the "Subordination Agreement").
1.5 The payment by Zenith of the Reimbursement Obligations under this
Agreement shall be absolute, unconditional, and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, including, without limiting the generality of the foregoing, the
following circumstances:
(a) any lack of validity or enforceability of any term or provision of any
of the Guarantees, this Agreement, or any other instrument, document, or
agreement entered into in connection therewith;
(b) the existence of any claim, setoff, right of recoupment, defense or
other right of Zenith against LGE or any other person or entity, whether in
connection with this Agreement or otherwise, all of which are hereby
waived;
(c) any amendment or waiver of, any full or partial release of any
collateral under, or any consent to departure from the terms or conditions
of any of the Security Documents;
(d) any decision by LGE not to issue a Guarantee in any particular
instance;
(e) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing; or
(f) notwithstanding anything to the contrary set forth above, the payment
by Zenith of the Reimbursement Obligations shall at all times be subject to
the terms of the Subordination Agreement.
2. GUARANTEE FEE AND INTEREST CALCULATION.
2.1 Zenith agrees to pay LGE a guarantee fee, as set forth in a
letter agreement between LGE and Zenith attached hereto as Exhibit C.
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2.2 Interest shall be computed on the basis of a year consisting of
360 days and paid for actual days elapsed.
3. PAYMENTS AND OFFSET.
3.1 All payments hereunder shall be made to LGE in immediately
available funds at such place as may be designated by LGE to Zenith in writing.
3.2 In addition to, and not in limitation of, all rights of offset or
recoupment that LGE may have under applicable law, unless otherwise expressly
waived by LGE in writing, LGE shall have the right to appropriate and apply to
the payment of Zenith's obligations hereunder any and all balances, credits,
deposits, accounts or moneys of Zenith then or thereafter with or owing by LGE.
4. WARRANTIES. To induce LGE to enter into this Agreement and to execute
and deliver Guarantees, Zenith warrants that:
4.1 Zenith and all of its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the states of
their respective incorporation, and they are duly qualified and in good standing
as foreign corporations authorized to do business in each state where, because
of the nature of their respective activities or properties, such qualification
is required.
4.2 Zenith is duly authorized to execute and deliver this Agreement
and the Security Documents and is and will continue to be duly authorized to
perform its obligations under this Agreement and the Security Documents in
accordance with its respective terms.
4.3 The execution and delivery of this Agreement and the Security
Documents, and the performance by Zenith of its obligations under this Agreement
and the Security Documents, do not and will not conflict with any provision of
law or of Zenith's charter or by-laws or of any agreement binding upon Zenith,
except under Series 2000 Debentures and Series 2001 Debentures.
4.4 This Agreement and the Security Documents, when duly executed and
delivered by Zenith and its Material Subsidiaries, as the case may be, will be
legal, valid and binding obligations of Zenith and the Material Subsidiaries to
the extent such persons are parties thereto enforceable against Zenith and the
Material Subsidiaries, as the case may be, in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity.
5. CONDITIONS PRECEDENT TO ISSUANCE OF GUARANTEES. Although LGE shall
have no obligation to issue any Guarantee, but reserves the right to issue
Guarantees in its discretion in each instance, it is understood and agreed that
LGE will not issue any Guarantee unless
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at the time of such issuance:
5.1 The warranties contained in Section 4 hereof shall be true and
correct.
5.2 Zenith shall have delivered to LGE:
(a) A copy, duly certified as of the date hereof by Zenith's secretary or
assistant secretary, of (i) the resolutions of the Zenith's Board of
Directors authorizing the execution and delivery of this Agreement and
Security Documents, (ii) all documents evidencing other corporate action,
and (iii) all approvals or consents, if any, with respect to this Agreement
and the Security Documents.
(b) A certificate of Zenith's secretary or assistant secretary, dated the
date hereof, certifying the names of the Zenith's officers authorized to
sign this Agreement and the Security Documents and all other documents or
certificates to be delivered hereunder, together with the true signatures
of such officers.
(c) Duly executed Security Documents covering such collateral as is
satisfactory to LGE, together with the Subordination Agreement, all in form
and substance satisfactory to LGE and its counsel.
(d) A legal opinion from counsel to Zenith in form and substance
satisfactory to LGE.
6. GENERAL.
6.1 No amendment or waiver of any provision of this Agreement nor
consent to any departure by Zenith therefrom shall be effective unless the same
shall be in writing and signed by LGE, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
6.2 This Agreement is a continuing agreement and shall inure to the
benefit of and be binding on the parties hereto, their respective successors,
transferees and assigns; provided, that except as otherwise permitted by this
Agreement, Zenith may not assign any of its rights or delegate any of its
obligations to or under all or any part of this Agreement without the prior
written consent of LGE.
6.3 Zenith agrees to pay on demand all reasonable costs and expenses
in connection with the negotiation, preparation, execution, delivery and
enforcement of this Agreement, the Security Documents and any other documents
which may be delivered in connection with this Agreement and the Security
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for LGE with respect thereto and with respect to advising
LGE as to its rights and responsibilities under this Agreement and the Security
Documents and all costs and expenses, if any, in connection with the enforcement
of this Agreement, the Security Documents
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and such other documents which may be delivered in connection with this
Agreement and the Security Documents. In addition, Zenith shall pay any and all
stamp and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement and the
Security Documents and such other documents and agrees to save LGE harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
6.4 Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
6.5 LGE's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies LGE may have under
any other agreement, including the Guarantees and Security Documents, or by
operation of law or otherwise.
6.6 This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
6.7 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and shall be binding upon the
parties, their successors and permitted assigns.
6.8 All notices under this Agreement or the Security Documents shall
be in writing and shall be deemed to have been given five (5) days after deposit
in the mail, or one (1) day after being entrusted to a reputable commercial
overnight delivery service, or when sent out by telex or telecopy addressed to
the party to which such notice is directed at its address.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused it to be executed and delivered by their duly authorized officers, all as
of the day and year first above written.
LG ELECTRONICS INC.
By:
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Title:
----------------------
ZENITH ELECTRONICS CORPORATION
By:
-------------------------
Title:
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6
EXHIBIT A
FIRST
CHICAGO
NBD
---------------------
Limited Kun-Guarantee KUN-GUARANTEE
--------------------- Date: September 24, 1997
Creditor: The First National Bank of Chicago
Joint and Several Guarantor
-----------------------------------
Address:
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Issuing a joint and several guarantee to secure debt is a serious legal act with
potentially adverse financial consequences for the Guarantor. The Guarantor
should carefully read this Agreement and the "Notice to Guarantor" printed at
the end of this Agreement before making his/her decision.
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The Guarantor hereby guarantees for the benefit of the Creditor, jointly and
severally with the Debtor, the repayment and payment of any and all indebtedness
or liability of the Debtor which is now or may at any time hereafter be due to
the Creditor and included within the scope of the indebtedness or liability
described below. The Guarantor agrees that the terms of the relevant agreements
concerning the Guaranteed Obligations described in Item 2 below shall apply to
any and all performance of its guarantee obligations hereunder (the "Guarantee
Obligations") and agrees to be bound by the following provisions (the term
"Creditor" shall include any branch or subsidiary of the Bank).
1. Debtor Name
Address
2. Scope of the Guaranteed Obligations:
Any and all obligations, debts and liabilities of the Debtor to the
Creditor, presently existing or to be incurred hereinafter, arising
out of, connected with or related to loans against bills, discounting
of bills, loans by deed, overdrafts, payment guarantees (including
debenture payment guarantees), sales of bonds, mutual savings
transactions, lending of instruments and securities, foreign exchange
transactions and all other credit transactions, guarantee obligations,
obligations under promissory notes or checks (including obligations
under the promissory notes or checks which the Creditor acquires from
a third party), payment of interest and default interest, incidental
indebtedness including any expenses and insurance premiums payable by
the Debtor, and any and all other credit transactions [: provided that
the Guarantor shall not be liable for the Debtor's obligations
guaranteed by any of the following institutions:
[1] Financial institutions under the Bank Act and any other special
statutory banks;
[2] Credit Guarantee Fund under the Credit Guarantee Fund Act;
[3] Technology Credit Guarantee Fund under the Law Concerning
Financial Assistance for New Technology Industry;
[4] Housing Finance Credit Guarantee Fund under the Law Concerning
Assistance for Housing Security and Housing Fund for Workers; or
[5] Guarantee Insurance Corporation under the Insurance Business
Act.]
Article 1. Maximum Amount of Guarantee Obligations
The maximum amount of the Guarantee Obligations (including interest, default
interest, incidental indebtedness, and any and all other obligations which have
accrued to the date when the Guaranteed Obligations become determined) shall be
30,000,000.00 (Thirty Million) (United States Dollars). Notwithstanding such
maximum amount of Guarantee Obligations, the Guarantor shall be liable for any
interest, default interest or all other incidental indebtedness accruing or
arising after the date when the Guaranteed Obligations become determined.
Article 2. Guarantee period
The period of this Guarantee shall be a provided for in Item 2 below (Delete
Item 1).
1. Not finite but continuing, provided the Guarantor may notify the
Creditor of its intention to terminate this Agreement by written
notice after the third anniversary of this Agreement. On the 45th day
from receipt of the notice by the Creditor, the Agreement shall
terminate whereupon the Guaranteed Obligations incurred prior to such
termination (regardless whether due and payable as of such termination
date) shall be fixed as the Guaranteed Obligations and shall continue
to be so guaranteed until full payment of such Guaranteed Obligations.
2. The guarantee period shall expire on September 25, 1998. Upon the
expiration of the guarantee period, it is agreed that the Guarantor
shall guarantee the Debtor's obligations (regardless whether due and
payable as of the expiration date) owing to the Creditor which remain
outstanding as of the expiration date of the guarantee period.
Article 3. Limitation of Set-off
The validity and enforceability of this Guarantee shall not be affected by any
set-off by the Debtor of the Guaranteed Obligations against any deposits or
other credit of the Debtor maintained with the Creditor.
Article 4. Enforcement of Subrogation Rights
The Guarantor shall not exercise, prior to the Creditor, any right to which the
Guarantor has succeeded by subrogation to the Creditor as long as any obligation
is owed by the Debtor to the Creditor. Even if the Guarantor exercises such
rights contemporaneously with the Creditor, the Guarantor shall be paid only
after the Creditor is fully paid.
Article 5. Relations Between This Agreement and Other Guarantee and Security
Any guarantee or any other security offered by the Guarantor to secure the
Guaranteed Obligations shall not be affected by this Guarantee unless otherwise
agreed. If there is a maximum limit to the obligation secured by such guarantee
or offered security, the maximum limit of Guarantee Obligation under this
Agreement shall be deemed to be additional to such maximum limit of other
guarantee or security. This Article shall apply mutatis mutandis to any other
additional guarantee or security to be offered by the Guarantor, separately from
the guarantee or the security offered in connection with this Agreement.
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Article 6. Modification or Termination of Security
The Creditor may amend, terminate or release, as applicable, other guarantees or
collateral securing any of the Debtor's obligations owed to the Creditor, if the
Guarantor consents thereto or if the Creditor determines that the Guarantor's
subrogation right will not be adversely affected by substitution of the existing
security with another security with more value or the guarantor with another
guarantor with comparable financial resources or the release of the security or
the guarantee in proportion to the partial payment of the guaranteed or secured
obligation.
Article 7. Indemnification
Notwithstanding the Creditor's right against the Debtor becomes invalid or not
enforceable due to legal incapacity or lack of corporate power of the Debtor to
incur the debt lack of authority or disability of the signatory to the
transaction agreement to represent or act for the Debtor, or for any other
reasons that invalidate the Guaranteed Obligations, the Guarantor shall continue
to be obligated to perform its obligation hereunder and shall indemnify the
Creditor against any and all damages arising therefrom. All terms and conditions
hereunder shall apply mutatis mutandis to the Guarantor's liability under this
Article.
Article 8. No Counterclaim Taxation
(1) All payments to be made by or on behalf of the Guarantor to the Creditor
pursuant to this Guarantee shall be made (a) without any set-off,
counterclaim or condition whatsoever and (b) free and clear of, and without
deduction for or on account of, any present or future taxes, unless the
Guarantor is required by law or regulation to make any such payment subject
to any taxes.
(2) In the event that the Guarantor is required by any law or regulation to
make any deduction or withholding on account of any taxes from any payment
due under this Guarantee, then: (a) the Guarantor shall notify the Creditor
promptly as soon as it becomes aware of such requirement; (b) the Guarantor
shall remit promptly the amount of such taxes to the appropriate taxation
authority, and in any event prior to the date on which penalties attach
thereto; (c) such payment shall be increased by such amount as may be
necessary to ensure that the Creditor receives a net amount free and clear
of all taxes, equal to the full amount which the Creditor would have
received had such payment not been subject to such taxes; and (d) the
Guarantor shall indemnify the Creditor against any liability of any of them
in respect of such taxes.
(3) Not later than thirty days after each deduction or withholding of any such
taxes, the Guarantor shall forward to the Creditor evidence satisfactory to
the Creditor that such taxes have been remitted to the appropriate taxation
authority.
Article 9. Guarantor's Representations and Warranties.
The Guarantor represents and warrants to the Creditor as follows:
(1) The Guarantor is a duly organized corporation (Chusik Hoesa), existing
under the laws of Korea.
(2) The Guarantor has all necessary powers and authority to issue this
Guarantee and to perform and observe the obligations contained herein and
this Guarantee has been validly authorized by its Board of Directors and
this Guarantee constitutes its legal, valid and binding obligations
enforceable in accordance with its terms.
(3) Neither the giving of this Guarantee nor the observance of its terms,
including without limitation the making of payment hereunder in United
States Dollars, contravene any law, decree, ordinance, or similar enactment
binding on the Guarantor, nor does the giving of this Guarantee and the
observance of its terms contravene any existing mortgage, contract or
agreement binding on the Guarantor.
(4) All approvals, consents, licenses and other authorizations from any
legislative or executive body of government, ministry, agency, exchange,
central authority or other authority required by the Constitution or the
laws of Korea in order for the Guarantor to incur the obligations contained
in this Guarantee, to execute and deliver this Guarantee and to perform and
observe the terms and provisions hereof and to make all payments hereunder
in Dollars, have been duly obtained and are in full force and shall remain
in full force and effect without amendment or restriction during the term
hereof, unless such amendment or restriction is beyond the control of the
Guarantor.
(5) There are no proceedings pending before any court or to the Guarantor's
knowledge threatened against or affecting the Guarantor, the Debtor or any
of the Guarantor's subsidiaries and there are no proceedings pending before
any governmental agency or administrative body or to the Guarantor's
knowledge threatened against Guarantor, the Debtor or any of the
Guarantor's subsidiaries, which if adversely determined would materially
and adversely affect the Guarantor's financial condition or the Guarantor's
ability to pay under the terms and conditions of this Guarantee, and the
Guarantor's obligations hereunder rank and shall rank throughout the life
hereof at least pari passu with all the Guarantor's other unsecured
indebtedness.
(6) The Guarantor's balance sheets as at December 31, 199__ and the related
statements of income and retained earnings for the fiscal year then ended,
copies of which have been provided to the Creditor, fairly present the
Guarantor's financial condition as at the date of such balance sheet and
the results of the Guarantor's operations for the period ended on such date
all in accordance with generally accepted accounting principles of Korea
consistently applied and since the dates of each such balance sheet there
has been no material adverse change in the Guarantor's financial condition
or operations.
(7) The Guarantor has filed all income tax returns and all other material tax
returns which are required to be filed by the Guarantor and has paid all
taxes due pursuant to such returns or pursuant to any assessment received
by the Guarantor. The charges, accruals and reserves on the books of the
Guarantor in respect of taxes and other governmental charges are, in the
opinion of the Guarantor, adequate.
Article 10. Currency Indemnity
If under any applicable law or regulation, and whether pursuant to a judgment
being made or registered against the Guarantor or the liquidation of the
Guarantor or for any other reason, any payment under or in connection with this
Guarantee is made in a currency (the "payment currency") other than the currency
in which such payment is due under or in connection with this Guarantee (the
"contractual currency"), then to the extent that the amount of such payment
actually received by the Creditor, when converted into the contractual currency
at the rate of exchange, falls short of the amount due under or in connection
with this Guarantee, the Guarantor, as a separate and independent obligation,
shall indemnify and hold harmless the Creditor against the amount of such
shortfall. For the purposes of this Article, "rate of exchange" means the rate
at which the Creditor is able on or about the date of such payment to purchase
the contractual currency with the payment currency and shall take into account
any premium and other costs of exchange with respect thereto.
Article 11. _____________________
The Guarantee will be executed in the English and Korean languages. In the
event of any conflict between two languages, the English language version shall
prevail.
Article 12. Agreement on Jurisdiction and Governing Law
Any dispute arising out of or in relation to this Agreement shall be subject to
the non-exclusive jurisdiction of the Supreme Court of the State of New York,
County of New York or any Federal court of the United States of America located
in the City and State of New York, United States of America and shall be subject
to the laws of the State of New York without regard to choice of law principles.
Notice to Guarantor
The Legal Nature of Joint and Several Guarantee
. The guarantor agrees to guarantee the principal obligations incurred by the
principal obligor to the bank (the creditor) jointly and severally with the
principal obligor. Therefore, if the borrower fails to pay loans due and
payable to the bank, the bank is entitled to compel the guarantor to pay such
principal obligations prior to making demands on the borrower (e.g.,
compulsory foreclosure of the guarantor's property)
Liability for Joint and Several Guarantee
. "Guarantee for specific obligation" guarantees only obligations arising from
a credit transaction with specified purpose and amount. An extension of
maturity, roll-over of credit or replacement with another loan will discharge
the guarantee.
. "Limited kun-guarantee" guarantees within the maximum guarantee amount any
obligations which are included within the scope of specified obligations of
the borrower outstanding at present (including obligations previously
incurred and outstanding at present) or to be incurred in the future. By
granting this limited kun-guarantee, the guarantor assumes substantial
liability to guarantee the borrower's obligations. The specific guaranteed
obligations may be described as follows.
. Specific credit transaction with specified date of agreement (e.g.,
Agreement for Loans against Trade Bills dated (date))
The extension of maturity is permitted; however, roll-over or
replacement with another loan will discharge the guarantee.
. Credit transaction of a special type (e.g., loans against trade bills)
Extension of the maturity, roll-over and replacement with other credit of
the same type is permitted, but replacement with other credit of a
different type will discharge the guarantee.
. "Comprehensive kun-guarantee" guarantees, within the maximum guarantee amount
any and all obligations of the borrower outstanding at present or to be
incurred in the future without specifying the scope of such guaranteed
obligations. Therefore, by granting a comprehensive kun-guarantee, the
guarantor assumes an extensive liability.
(Note) An executive officer of a company may guarantee the company's obligations
only in the form of "guarantee for specific obligation" or "limited kun-
guarantee."
Guarantor's Signature
. If you have any questions about the scope of guaranteed obligations,
guarantee period, etc. after carefully reading the entire content of the
relevant agreement, please contact the bank's office in charge of credit. If
you determine that the agreement accurately expresses your intentions, please
enter an amount (maximum amount of guaranteed indebtedness) on the relevant
agreement (a letter of guarantee of an agreement) in your handwriting or
confirm the amount on the relevant agreement and be sure to set your hand and
affix your seal thereon.
Delivery of a Copy of Kun-Guarantee Agreement
. After executing the kun-guarantee agreement, you may request a copy thereof
from the officer in charge.
Officer:
(seal) Title:
Name: (seal)
In the space above marked with * please state briefly, in your own words that
you ____________ of corporation, a representative or an agent of the corporation
have read the above notice carefully, sign your name and affix your seal.
EXHIBIT B
FIRST The First National Bank of Chicago
CHICAGO 000 Xxxx 00xx Xxxxxx
XXX Xxx Xxxx, Xxx Xxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Jin-Woo Park Date: October 27, 1997
First Vice President
U.S. Korea Marketing Division
Xx. Xxxx-IK (Xxxxx) Xxxx
Vice President and Corporate Treasurer
Zenith Electronics Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Dear Xx. Xxxx:
The First National Bank of Chicago (the "Bank") is pleased to establish a
guaranteed line of credit in favor of Zenith Electronics Corporation, a
Delaware corporation, (the "Borrower"), in the amount of US$30,000,000
which shall continue from ( ) through ( )
(the "Maturity Date") and be operative under the following terms and
conditions.
a) The Bank's provision of the line of credit is subject to a guarantee
for repayment in U.S. Dollars of the principal and payment of interest
thereon issued and delivered by LG Electronics Inc. (the "Guarantor"),
Seoul, Korea, duly validated in accordance with all applicable Korean
FX control laws and/or regulations.
b) Loans under this line of credit will be evidenced and governed by the
Bank's standard form of master note (the "Note"), a copy of which is
attached hereto, and will bear interest, at the Borrower's option, at:
i) a rate equal to the Bank's Corporate Base Rate of interest
announced by the Bank from time to time, changing when and as the
Corporate Base Rate changes, with interest payable on the last
business day of each month, on the Maturity Date, and on demand
thereafter; or
ii) subject to availability and for a maturity to be agreed upon, at
a fixed rate equal to the sum of 0.65% per annum plus the
Eurodollar rate, where the Eurodollar rate is the rate at which
deposits in U.S. dollars in the amount and for a maturity
corresponding to that of the loan are offered by the Bank in the
offshore interbank market at approximately 10:00 a.m. (Chicago
time) two business days prior to the date on which such loan is
made, adjusted for maximum statutory reserve requirements.
Xx. Xxxx-IK (Xxxxx) Xxxx
Vice President and Corporate Treasurer
Zenith Electronics Corporation
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The aggregate amount of loans at any time outstanding shall in no event
exceed $30,000,000.
c) No interest period for or maturity of a loan hereunder shall extend beyond
the Maturity Date. Interest and fees will be computed on the basis of
actual days elapsed on a 360 day year basis.
d) The Borrower will use the proceeds of the loans hereunder for working
capital purposes. The Borrower will provide the Bank with the Note,
appropriate resolutions, incumbency certificates, and other documents that
the Bank may require from time to time.
e) The Bank shall have no obligation to make a loan hereunder (and all
outstanding loans and accrued and unpaid interest, at the option of the
Bank, may be declared immediately due and payable without notice) if, (I)
there is any failure by the Borrower to pay principal, interest, fees, or
other obligations when due under this letter, the Note, or any other
agreement or arrangement with the Bank, (ii) there exists any default under
this letter or the Note, or any violation or failure to comply with any
provision of this letter or the Note, (iii) there occurs any material
adverse change in the condition or results of operations of the Borrower
since the date of the financial statements most recently delivered to the
Bank prior to the date of this letter, (iv) any litigation is pending or
threatened against the Borrower which might have a material adverse effect
on its financial condition or results of operations, (v) there is a default
under any agreement governing indebtedness of the Borrower, (vi) any
petition is filed by or against the Borrower under the bankruptcy laws of
the United States of America or any other jurisdiction, (vii) the Borrower
becomes insolvent, howsoever evidenced, or (viii) the Guarantor cancels its
guarantee for repayment of the loan and/or interest hereon under this
letter agreement or there occurs an event or events to the Guarantor the
same as or similar to the ones described in items (I) through (vii) of this
article (e). The Bank may require a certificate of compliance with these
conditions from the Borrower's Chief Financial Officer or Treasurer as a
condition to making any loan hereunder.
Xx. Xxxx-IK (Simon) Kang
Vice President and Corporate Treasurer
Zenith Electronics Corporation
Page 3
f) The Bank may make assignments and sell participation in this line of credit,
the Note and loans made hereunder, and may disclose information pertaining
to the Borrower to perspective assignees and participants. Any assignment
will release the Bank of its funding obligation with respect to the amount
assigned and may be made upon notice to the Borrower.
g) This line of credit shall be effective as of the date of this letter when
the Borrower has signed and returned to the Bank a copy of the letter and
may be terminated by you or us at any time effective upon the giving of
written advice to the other party and in the sole discretion of the party
electing to terminate.
h) THIS LETTER AND NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS. BOTH PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN THE EVENT THIS
LETTER OR THE NOTE BECOMES THE SUBJECT OF A DISPUTE.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Jin-Woo Park
----------------------------
Jin-Woo Park
Title: First Vice Presdient
Accepted and Agreed:
Zenith Electronics Corporation
By: /s/ Xxxxx X. Xxxxx /s/ S. I. Kang
------------------ ------------------
Xxxxx X. Xxxxx S.I. Kang
Vice President and Treasurer
Title: Executive Vice President and
Chief Financial Officer
Date: October 27, 0000
XXXXXX XXXX
Xxxxxxx, Xxxxxxxx
Date: October 27, 1997
U.S.$30,000,000
FOR VALUE RECEIVED, Zenith Electronics Corp. (the "Company"), promises to pay to
the order of THE FIRST NATIONAL BANK OF CHICAGO (the "Bank"), in lawful money of
the United States at the office of the Bank at One First National Plaza,
Chicago, Illinois, or as the Bank may otherwise direct, the lesser of Thirty
Million and No/Hundreds Dollars (U.S.$30,000,000) or the aggregate outstanding
unpaid principal amount of loans advanced hereunder and pursuant to that certain
letter agreement dated 10/27/97 between the Company and the Bank (the "Letter
Agreement"), together with interest as provided below.
The Company and the Bank may agree to a fixed interest rate and a specific
maturity for a loan (a "fixed rate loan") at the time of borrowing. Interest on
each fixed rate loan shall be payable upon the maturity of such fixed rate loan
and, in the case of a fixed rate loan with an original maturity in excess of
three months, interest shall also be payable on the last day of each three-month
interval while such fixed rate loan is outstanding. A fixed rate loan not paid
at maturity shall thereafter be payable on demand and bear interest at a rate
equal to the sum of the corporate base rate of interest announced by the Bank
from time to time, plus 2% per annum, changing when and as the corporate base
rate changes.
Except as provided in the preceding paragraph, loans hereunder shall be payable
on demand and shall bear interest at a rate equal to the corporate base rate of
interest announced by the Bank from time to time, changing when and as the
corporate base rate changes. Interest on all loans bearing interest at a rate
related to the corporate base rate shall be payable on the last business day of
each month and on demand.
Any person authorized to borrow on behalf of the Company (an "authorized
person") may request a loan hereunder by telephone or telex. The Company agrees
that, in implementing this arrangement, the Bank is authorized to honor requests
which it believes, in good faith, to emanate from an authorized person acting
pursuant to this note, whether in fact that be the case or not. If the Bank
requests a written confirmation, the Company will confirm the terms of each loan
so requested by mailing a confirmation letter to the Bank signed by an
authorized person. If the Bank elects to confirm the terms of a loan to the
Company, the Company will notify the Bank in writing within 10 days after the
Company's receipt of such confirmation if it believes such confirmation to be
inaccurate, and the Company hereby waives any right to contest the accuracy of
such confirmation after such 10-day period.
The Company hereby authorizes the Bank to record loans, maturities, repayments,
interest rates and payment dates on the schedule attached to this note or
otherwise in accordance with the Bank's
1
usual practice. The obligation of the Company to repay each loan made hereunder
shall be absolute and unconditional notwithstanding any failure to enter such
amounts of such schedule or to receive written confirmation of the transaction
from the Company and, in the event of disagreement as to the terms of a
transaction, the Bank's records shall govern, absent manifest error. The Company
hereby authorizes the Bank to deposit the proceeds of loans to, and to charge
payments of principal and interest against, the Company's deposit account with
the Bank.
Each payment of principal or interest hereunder shall be made in immediately
available funds. If any payment shall become due and payable on a Saturday,
Sunday or legal holiday under the laws of Illinois, such payment shall be made
on the next succeeding business day in Illinois and any such extended time of
the payment of principal or interest shall be included in computing interest at
the rate this note bears in connection with such payment. All interest hereunder
shall be computed for the actual number of days elapsed on a 360-day basis.
If any change in any law, rule, regulation or directive (including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) imposes any condition the result of which is to increase the cost to the
Bank of making, funding or maintaining any fixed rate loan hereunder or reduces
any amount receivable by the Bank hereunder in connection with a fixed rate
loan, the Company shall pay the Bank the amount of such increased expense
incurred or the reduction in any amount received which the Bank determines is
attributable to making, funding and maintaining the fixed rate loans hereunder.
A fixed rate loan may not be prepaid prior to the agreed maturity of the loan
without the written consent of the Bank. If, for any reason, any payment of a
fixed rate loan occurs prior to maturity of that loan, the Company will
indemnify the Bank for any loss or cost resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the fixed rate loan. Loans bearing interest at a rate related
to the corporate base rate may be prepaid by the Company, without premium or
penalty.
The Company agrees that all sums payable hereunder whether in respect of
principal, interest, fees or otherwise shall be paid in accordance with the
terms of the Letter Agreement.
The Bank may elect to sell participations in or assign its rights under loans
made hereunder and the Letter Agreement. The Company hereby authorizes the Bank
to disclose information relating to the financial condition or operations of the
Company to any purchaser or prospective purchaser of an interest in any loan
made hereunder. The Company agrees that if it fails to pay any loan when due,
any purchaser of an interest in such loan shall be entitled to seek enforcement
of this note if the purchaser is permitted to do so pursuant to the terms of the
participation agreement between the Bank and such purchaser.
Nothing in this note shall constitute a commitment to make loans to the Company.
In addition to, and without limitation of, any rights of the Bank under
applicable law, if any amount payable hereunder is not paid when due, there is
any material adverse change in the Company's financial condition, there is a
default under any agreement governing indebtedness of the Company, any
2
petition is filed by or against the Company under the Federal Bankruptcy Code or
similar state law or if the Company becomes insolvent, howsoever evidenced, the
Bank may declare all unpaid principal and interest on fixed rate loans and
unpaid fees immediately due and payable and any indebtedness from the Bank to
the Company may be offset and applied toward the payment of all unpaid
principal, interest and fees payable hereunder, whether or not such amounts, or
any part thereof, shall then be due. The Company expressly waives any
presentment, demand, protest or notice in connection with this note now, or
hereafter, required by applicable law and agrees to pay all costs and expenses
of collection.
This note shall be governed by the internal law (and not the law of conflicts)
of the State of Illinois, giving effect, however, to federal laws applicable to
national banks. The Company agrees to the jurisdiction of any United States
federal or Illinois state court selling in Chicago, Illinois and hereby waives
its right to trial by jury in the event this note becomes the subject of any
dispute.
Zenith Electronics Corp.
By: /s/ Xxxxx X. Xxxxx
---------------------
Xxxxx X. Xxxxx
Title: Executive Vice President
and Chief Financial Officer
By: /s/ S. I. Kang
----------------
S. I. Kang
Vice President and Treasurer
3
SCHEDULE
to be attached and become a part of
the Master Note dated October 27, 1997
executed by Zenith Electronics Corp.
and payable to
The First National Bank of Chicago
Unpaid Initials
Amount Principal of
Date Amount of Balance Person
of of Interest Principal of Making
Transaction Loan Maturity Rate Payment Note Notation
----------- ------ -------- -------- --------- --------- --------
0
XXXXXXX X
Xxxxxxx 00, 0000
Xxxxxx Electronics Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Chief Financial Officer
Dear Xx. Xxxxx:
This letter agreement sets forth our mutual understanding regarding the
terms on which LG Electronics Inc. ("LGE") will provide credit support to Zenith
Electronics Corporation ("Zenith") in the form of such guarantees as may be
required by the lenders under proposed credit facilities for Zenith in an amount
up to $160 million in the aggregate (the "Aggregate Available Amount"). We
mutually acknowledge that LGE owns directly and indirectly a majority of the
outstanding common stock of Zenith, which stock is subject to the rules of the
New York Stock Exchange.
The parties hereto agree as follows:
1. LGE shall guarantee up to $160 million of credit facilities for Zenith
under the proposed credit facilities currently being negotiated with a proposed
group of lenders.
2. In consideration of the guarantees and subject to Paragraph 7. below,
Zenith expects to pay and LGE expects to receive a credit support fee based on
the Aggregate Available Amount. The parties intend that the credit support fee
shall be in the form of either cash or equities (which may be in the form of
stock or of options to purchase shares of Zenith's common stock). At the present
time, LGE proposes that the credit support fee be at a rate of 2% per annum of
the Aggregate Available Amount.
3. The credit support fee shall accrue as of the date of the closing of
each credit facility, and if paid in cash, shall be payable within 30 days after
the date of the next stockholders' meeting.
4. If the credit support fee is in the form of stock or stock options, such
stock or options will vest with LGE on a monthly basis, as of the first business
day of any month, at the rate of 1/12 of the total options granted for each
year's fee.
5. If the proposed credit support fee is in the form of equity, the
arrangement shall be submitted for approval to the stockholders of Zenith in
accordance with the rules of the New York Stock Exchange at the next annual
meeting, which is currently scheduled for May, 1998,
and the payment of the credit support fee in the form of equity shall be
conditioned upon the approval by the stockholders of Zenith. LGE undertakes that
it will vote in favor of the credit support fee arrangement at the stockholders'
meeting.
6. In the event that Zenith is unable to complete its arrangements with
respect to the full $160 million in proposed credit facilities prior to December
31, 1997, then the fee from January 1, 1998, forward on such facilities shall be
based on the face amount of facilities actually secured and in effect from time
to time.
7. LGE understands and acknowledges that the Board of Directors (including
its Finance Committee) and, if the fee is to be paid in equity, the shareholders
of Zenith must approve certain terms and conditions concerning the guarantee
fee; which approvals have not been obtained as of the date of this letter
agreement. LGE further acknowledges that the Board of Directors of Zenith has
retained certain independent consultants for the purpose of making
recommendations as to the appropriate compensation to be paid to LGE for its
guarantee, and that the consultants may determine that the appropriate credit
support fee is other than that proposed by LGE in this letter. LGE further
understands that Zenith will in good faith seek to obtain all necessary
approvals for appropriate and fair compensation to LGE for its financial
support.
8. On acceptance of this proposal by Zenith, LGE shall proceed with the
issuance of its guarantee of up to $160 million of the credit facilities for
Zenith under the proposed credit facilities prior to the determination of the
appropriate fee level, and in doing so relies on the good faith effort of Zenith
with respect to the fee arrangement.
Very truly yours,
LG Electronics Inc.
LG Electronics
By: /s/
--------------------------------
Its:
-------------------------------
President
Accepted and agreed to:
Zenith Electronics Corporation
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Its: Xxxxx X. Xxxxx, Exec. VP & CFO
-------------------------------
Date: November 5, 1997
----------------
