Exhibit 9
MEMORANDUM OF UNDERSTANDING
---------------------------
This Memorandum of Understanding is entered by and among Xxxxxx X.
Xxxxxxx, SEP XXX ("Plaintiff"), Xxxxx X. Xxxxxxx, X. Xxxxxxx Xxxxxxx, Xxxxx X.
Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X. XxXxxxxx, Xxxxxx XxXxxxx XX,
Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxx (collectively, the
"Directors"), Zenith Electronics Corporation ("Zenith"), and LG Electronics Inc.
("LG") as of this 6th day of October 1995.
WHEREAS, on or about July 18, 1995, Plaintiff, a stockholder of
Zenith, commenced an action in the Court of Chancery of the State of Delaware,
New Castle County, against Zenith, the Directors, and LG (collectively the
"Defendants"), which action is titled Xxxxxx X. Xxxxxxx, SEP XXX x. Xxxxx X.
Xxxxxxx, et al.; Civil Action No. 14424 (the "Action");
WHEREAS, on or about July 24, 1995, LG disseminated its Schedule 14D-1
Tender Offer Statement Pursuant to Section 14(D)(1) of the Securities Exchange
Act of 1934 (the "Schedule 14D-1"), and Offer to Purchase for Cash Up to
18,619,000 Shares of Common Stock (including associated rights) of Zenith
Electronics Corporation at $10.00 Net Per Share by LG Electronics Inc. (the
"Offer to Purchase"), and Zenith disseminated its Schedule 14D-9
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934 (the "Schedule 14D-9"), in connection with the
Transaction (defined below);
WHEREAS, on or about July 27, 1995, Plaintiff filed an Amended Class
Action Complaint (the "Complaint");
WHEREAS, plaintiff filed the Action on its own behalf and as a
putative class action on behalf of all stockholders of Zenith (except Defendants
and their affiliates) who have been or will be adversely affected by the conduct
of Defendants as alleged in the Complaint (the "Class");
WHEREAS, the Complaint alleged various violations of fiduciary duties
on the part of the Directors in connection with their approval of the terms of a
Stock Purchase Agreement between Zenith and LG dated as of July 17, 1995 and the
transaction contemplated thereby (the "Transaction") and that Zenith and LG
failed to make adequate disclosures in connection with the Transaction,
including the Schedule 14D-1 and the Schedule 14D-9 (the "Tender Offer
Materials");
WHEREAS, the Complaint also alleged that Zenith failed to make
adequate disclosures in connection with Zenith's April 1995 annual stockholders'
meeting, including the proxy statement disseminated to Zenith stockholders in
connection therewith (the "March Proxy Materials");
WHEREAS, counsel for plaintiff served document production requests
upon the Defendants and their financial
-2-
advisors, and have reviewed tens of thousands of pages of materials provided by
the Defendants and their advisors pursuant to those requests;
WHEREAS, plaintiff's counsel also have been provided certain
preliminary copies, which were filed with the Securities and Exchange
Commission, of proxy materials (the "Draft Proxy Materials") the final version
of which Zenith intends to distribute to shareholders in seeking approval of the
Transaction at a special meeting to be commenced for that purpose (the "Special
Meeting");
WHEREAS, as a result of the Action and pursuant to settlement
negotiations among counsel for the parties, Zenith has agreed to make certain
additional disclosures, which were not included in the Tender Offer Materials,
to Zenith stockholders in connection with the Transaction by supplementing the
information contained in the Draft Proxy Materials, without admitting the
materiality of said additional disclosures or any deficiency in the March Proxy
Materials, the Tender Offer Materials, or the Draft Proxy Materials;
WHEREAS, Plaintiff and its counsel believe, based on a review of
documents and other investigation into this matter, that the settlement
contemplated by this Memorandum of Understanding is fair to and in the best
interests of the Class and that substantial additional information on the
subjects of
-3-
plaintiff's claims, which information was not disclosed in the Tender Offer
Materials but will be disclosed in the final proxy statement disseminated to
Zenith shareholders (including shareholders who have tendered shares) in
connection with the Special Meeting, including, among other things, the
additional information included pursuant to settlement negotiations, provides a
substantial benefit to the Class;
WHEREAS, but for the negotiated additional disclosures and the
disclosure of certain other information which plaintiff contended was not
included in the Tender Offer Materials, plaintiff would have alleged that the
proxy statement disseminated to Zenith shareholders in connection with the
Special Meeting was deficient in the same respects as the Tender Offer
Materials;
NOW THEREFORE, as a result of the foregoing and further negotiations
among counsel to the parties, the parties to the Action have agreed in principle
to a settlement of the Action on the terms and subject to the conditions set
forth below:
1. The parties to the Action will use their best efforts and will
attempt in good faith to agree upon and execute, within 30 days of the date of
this Memorandum of Understanding, an appropriate Stipulation of Settlement and
such other documentation as may be required in order to obtain approval by the
Court of the settlement of the Action, under Rules 23(a),
-4-
23(b)(3) and 23(e) of the Court of Chancery, upon the terms set forth in this
Memorandum of Understanding. Pending the negotiation and execution of the
Stipulation of Settlement, plaintiff and its counsel will not seek a preliminary
injunction or any other equitable relief relating to the Transaction, and all
proceedings in the Action will be stayed except as provided herein. The
Stipulation of Settlement will describe plaintiff's claims and the procedural
history of the Action and will expressly provide:
(a) for the certification of the Action, for settlement purposes only,
as a class action pursuant to Chancery Court Rule 23(a) and (b)(3) on
behalf of all holders of Zenith common stock (except Defendants and their
affiliates) who held shares on any date between and including March 23,
1995 and the date of the Special Meeting, including the legal
representatives, heirs, transferees, successors in interest, or assigns of
all such foregoing holders (the "Class"), and that class members will be
given the opportunity to opt out of the proposed Class;
(b) for the complete discharge, settlement and release of, and an
injunction barring, all claims, rights, causes of action, suits, matters
and issues, whether known or unknown, that have been, could have been, or
in the future might be asserted in the Action or in any other court or
proceeding (including but not limited to any claims arising under
-5-
federal or state law relating to alleged fraud, misrepresentation or
inadequate disclosure, breach of any duty, negligence, or otherwise) by or
on behalf of Plaintiff or any members of the Class, whether individual,
class, derivative, representative, legal, equitable or any type or in any
other capacity against Defendants or any of their associates, affiliates,
subsidiaries, present or former officers, directors, employees, attorneys,
financial advisers or other advisers or agents, heirs, executors, personal
representatives, estates, administrators, and successors and assigns which
have arisen, arise now or hereafter arise out of or relate in any way to
the Transaction, the Stock Purchase Agreement, the Tender Offer Materials
and any supplements or amendments thereto, the Offer to Purchase and any
supplements or amendments thereto, the proxy materials to be sent to Zenith
stockholders announcing the Special Meeting and seeking approval of the
transaction to be voted on at the Special Meeting, the March Proxy
Materials, the April 1995 annual meeting of shareholders, or any of the
documents, transactions, or events described in any complaint filed in the
Action (collectively, the "Settled Claims");
(c) that Defendants in this Action have denied, and continue to deny,
that any of them have committed or have threatened to commit any violations
of law or breaches of duty to the Plaintiff or the members of the putative
Class;
-6-
(d) that Defendants in the Action are entering into this Memorandum of
Understanding, and will be entering into the Stipulation of Settlement,
solely because the proposed settlement would eliminate the burden and
expense of further litigation and would facilitate the consummation of the
Transaction, which Defendants believe is in the best interests of Zenith
and all of its stockholders;
(e) that subject to the order of the Court and pending final
determination of whether the settlement provided for in the Stipulation of
Settlement should be approved, Plaintiff and all members of the Class, or
any of them, are barred and enjoined from commencing or prosecuting any
action asserting any claims, either directly, representatively,
derivatively or in any other capacity, against any Defendant herein which
have been or could have been asserted, or which arise out of or relate in
any way to the Transaction, the Stock Purchase Agreement, the Tender Offer
Materials and any supplements or amendments thereto, the Offer to Purchase
and any supplements or amendments thereto, the proxy materials to be sent
to Zenith stockholders announcing the Special Meeting and seeking approval
of the transaction to be voted on at the Special Meeting, the March Proxy
Materials, the April 1995 annual meeting of stockholders, or any of the
documents, transactions, or events described in any complaint filed or to
be filed in the Action; and
-7-
(f) that the Stipulation of Settlement shall be deemed rescinded and
void and of no further force or effect, without prejudice to any party,
unless: (i) plaintiff completes certain additional discovery, the scope of
which shall be agreed on by the parties, sufficient to enable plaintiff's
counsel to confirm that the settlement is fair and reasonable and in the
best interests of the Class; (ii) the Class is certified, for settlement
purposes only, in accordance with the terms of this Memorandum of
Understanding unless the parties otherwise agree to a modification of the
Class; and (iii) the Court enters an Order and Final Judgment approving the
settlement on the terms set forth in the Stipulation of Settlement,
releasing the Settled Claims, and dismissing the Action with prejudice and
without costs or expenses (except as provided in paragraph 6 herein). The
Company also has the right, in its sole discretion, to terminate the
settlement if putative class members who collectively hold more than a
specified total number of shares (to be set forth in a separate Opt Out
Letter Agreement between Zenith and plaintiff) elect to opt out of the
Class.
2. The parties to the Action will present the Stipulation of
Settlement to the Court for preliminary approval as soon as practicable after
its execution. Provided the settlement is preliminarily approved and the
putative class is certified for settlement purposes only in accordance with the
-8-
terms of the Stipulation of Settlement, and following appropriate notice to the
members of the Class, the parties will use their best efforts to obtain prompt
final approval and implementation as necessary by the Court of the settlement
and all its terms, including the dismissal of the Action with prejudice.
3. Upon completion of the confirmatory discovery contemplated
herein, the execution of the Stipulation of Settlement, and the Court's
preliminary approval of the settlement, the members of the proposed class shall
be provided notice of the proposed settlement and its terms. Said notice shall
be drafted in a form and delivered to stockholders in a manner mutually
agreeable to the parties and approved by the Court, and the expense of printing
and mailing notice shall be borne by Zenith.
4. The parties agree that the confirmatory discovery contemplated
herein may include depositions of Defendants and their investment advisors, all
of which shall be subject to the Stipulation and Order Governing the Protection
and Exchange of Confidential Material previously entered in this Action, which
shall commence as soon as practicable after execution of this Memorandum of
Understanding and shall be completed within 21 days after this Memorandum of
Understanding is signed by all parties or within such other time as the parties
may mutually agree.
-9-
5. If the settlement is not consummated in accordance with Paragraph
1, this Memorandum of Understanding shall be null and void and of no force and
effect, and shall not be deemed, used, or offered to prejudice in any way the
positions of the parties with respect to the Action or otherwise.
6. In connection with the settlement contemplated by this Memorandum
of Understanding, Plaintiff's counsel will apply to the Court for an aggregate
award of attorneys' fees and expenses in an amount not to exceed $300,000
(collectively, the "Fees and Expenses"). Defendants agree that they will not
oppose such application. Subject to the terms and conditions of this Memorandum
of Understanding and the terms and conditions of the Stipulation of Settlement
contemplated by Paragraphs 1 through 12 hereof, Zenith will pay Plaintiff's
counsel such Fees and Expenses (not to exceed $300,000) as may be awarded by the
Court.
7. The settlement of this Action and any award of attorneys' fees
and expenses by the Court is not conditioned on consummation of the Transaction.
8. This Memorandum of Understanding and the settlement contemplated
by it shall be governed by, and construed in accordance with, the laws of the
State of Delaware.
-10-
9. This Memorandum of Understanding may be modified or amended only
by a writing signed by all the signatories hereto.
10. Plaintiff and its counsel represent and warrant that none of the
Plaintiff's alleged claims or causes of action against Defendants have been
assigned, encumbered or in any manner transferred in whole or in part.
11. This Memorandum of Understanding shall be binding upon and inure
to the benefit of the parties and their respective agents, executors, heirs,
successors and assigns.
12. This Memorandum of Understanding may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Each of the attorneys
executing this Memorandum of Understanding on behalf of one or more parties
warrants and represents that he or she has been duly authorized and empowered to
execute this Memorandum of Understanding on behalf of said party or parties.
-11-
Of Counsel:
/s/ Xxxxxx X. Xxxxxxxx
WOLF HALDENSTEIN XXXXX ___________________________
XXXXXXX & HERZ, LLP Xxxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxxxx Xxxxxx X. Xxxxxx, Xx.
9th Floor CHIMICLES, XXXXXXXX & XXXXXXXX
Xxx Xxxx, Xxx Xxxx 00000 One Xxxxxx Square
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for XXXXXX X. XXXXXXX, SEP XXX
Of Counsel:
/s/ R. Xxxxxxxx Xxxxxxx
SIDLEY & AUSTIN __________________________
One First National Plaza R. Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxx X. Xxxxxx, Xx.
XXXXXXXX, XXXXXX & FINGER
One Xxxxxx Square
P. O. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for XXXXX X. XXXXXXX, X. XXXXXXX
XXXXXXX, XXXXX X. XXXXX, XXXXX X. XXXXXX,
XXXXXXX XXXXXXXX, XXXXXX X. XxXXXXXX, XXXXXX
XxXXXXX XX, XXXXX X. XXXXXXXX, XXXXX X.
XXXXXXXX, XXXXX X. XXXXXXXX, AND ZENITH
ELECTRONICS CORPORATION
Of Counsel:
/s/ Xxxxxxx X. Xxxxxxx
XXXXX, XXXXX & XXXXX ___________________________
000 Xxxxx XxXxxxx Xxxxxx Xxxxxxx X. Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000 MORRIS, NICHOLS, ARSHT & TUNNEL
(000) 000-0000 0000 Xxxxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for LG ELECTRONICS INC.
-12-
