THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This Third Amendment and Waiver to Credit Agreement(this "Amendment")
effective as of the 31st day of March, 1998, among ZENITH ELECTRONICS
CORPORATION, a Delaware corporation (the "Borrower"), the financial
institutions listed on the signature pages hereof as Lenders (the "Lenders"),
CITIBANK, N.A., as issuing bank (the "Issuing Bank") and CITICORP
NORTH AMERICA, INC., as agent (the "Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Credit Agreement dated as of March 31, 1997 (as
amended, restated supplemented or otherwise modified from time to time, the
"Credit Agreement"); and
WHEREAS, pursuant to Sections 7.8,7.9 and 7.13 of the Credit Agreement, the
Borrower is required to meet certain financial tests as of the fiscal quarter
ending March 31, 1998, and the Borrower has informed the Agent, the Issuing
Bank and the Lenders that it will fail to satisfy the requirements of Sections
7.8, 7.9 and 7.13 for such fiscal quarter ending March 31, 1998(the "March
Covenant Defaults"); and
WHEREAS, pursuant to Section 6.5(c) of the Credit Agreement, the Borrower
is required to deliver to the Agent and the Lenders the annual budget for the
Borrower's and the Borrower's Subsidiaries prior to December 31st of each
year, and the Borrower failed to deliver such 1998 annual budget to the Agent
and the Lenders by December 31, 1997 (the "Budget Default"); and
WHEREAS, pursuant to Section 7.17 of the Credit Agreement, the Borrower is
required to meet all minimum funding requirements of ERISA and the Code,
and the Borrower inadvertently failed to make certain required payments to the
Zenith Hourly Profit Sharing Retirement Plan for certain employees in the State
of Missouri in October 1996 (the "ERISA Default"); and
WHEREAS, the Borrower has requested that the Agent, the Issuing Bank, and
the Lenders waive the March Covenant Defaults, the Budget Default and the
ERISA Default; and
WHEREAS, the Borrower has requested that certain terms of the Credit
Agreement be amended, and the Agent, the Issuing Bank and the Lenders have
agreed to the requested amendments on the terms and conditions set forth
herein; and
NOW THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration paid by each party to the other, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1 Amendment to Article 1. Article 1 of the Credit Agreement,
Definitions, is hereby amended by:
(a) deleting the definition of "Additional Unsecured Debt" set forth
therein in the entirety and substituting the following in its place:
Additional Unsecured Debt' shall mean the unsecured Funded Debt consisting
of revolving credit lines made available to be borrowed by the Borrower after
the Agreement Date, which are provided to the Borrower by one or more
lenders, in an aggregate principal amount not exceeding $160 million, and on
terms and conditions substantially similar to those set forth on Schedule A
attached hereto, and evidenced by documentation in form and substance,
acceptable to the Agent in its sole discretion."
(b) deleting paragraph (j) of the definition of "Permitted Liens" and
replacing such paragraph (j) with the following:
(j) Liens in favor of LGE on the Capital Stock of the Borrower's domestic
Subsidiaries and on the Intellectual Property (other than the Tuning Patents,
Tuning Patent Royalties and License Agreements), real estate and Equipment
located in the United States of the Borrower and its Material Subsidiaries
securing the LGE Debt and any guaranty of LGE of the Additional Unsecured Debt;
provided such Liens are at all times fully subordinated to the prior Liens
of the Agent (for its benefit and the benefit of the Lenders) on such assets
pursuant to a subordination agreement (the "Subordination Agreement") in
form and substance satisfactory to the Agent in its sole discretion."
(c) adding the following definition of "LGE Debt" thereto:
"'LGE Debt' shall mean the Funded Debt consisting of a credit line made
available to be advanced to the Borrower by LGE in an aggregate principal
amount not exceeding $45 million, and on terms and conditions, and evidenced
by documentation in form and substance, acceptable to the Agent in its sole
discretion."
2 Amendment to Section 2.6. Section 2.6(c) of the Credit Agreement,
Other Mandatory Repayments, is hereby amended by deleting subparagraph (i)
in the entirety and substituting the following in its place:
"(i) In the event that after the Agreement Date, the Borrower shall issue
any Capital Stock (other than in connection with the exercise of employee or
LGE stock options), shall sell any of its assets (other than sales of Inventory
in the ordinary course of its business or pursuant to the Receivables
Securitization) or shall incur any Funded Debt (other than the Obligations, the
LGE Debt and the Additional Unsecured Debt), one hundred percent (100%) of
the Net Cash Proceeds received by the Borrower from such issuance, sale or
incurrence shall be paid on the date of receipt of the proceeds thereof by the
Borrower to the Lenders as a mandatory payment of the Revolving Loans and
the Term Loan, on a pro-rata basis. The payment of the Term Loan due
hereunder shall be applied to reduce the Term Loan quarterly principal
installments set forth in Section 2.6(b) in the inverse order of maturity. The
Revolving Loan Commitment shall be permanently reduced by the amount of
the payment of the Revolving Loans due hereunder, whether or not such
payment is made. Nothing in this Section shall authorize the Borrower to issue
any Capital Stock, sell any assets or incur any Funded Debt except as expressly
permitted by this Agreement."
3 Amendment to Section 6.6. Section 6.6 of the Credit Agreement,
Notice of Litigation and Other Matters, is hereby amended by deleting
paragraph (c) thereof in its entirety and substituting the following in its
place:
"(c) Within (i) one (1) Business Day of the demand by any lender of any
Additional Unsecured Debt or by LGE in connection with the LGE Debt for the
repayment of all or any portion of the principal thereof, the Borrower shall
notify the Agent and the Lenders of the occurrence thereof, and (ii) three (3)
Business Days' of the occurrence of any default (whether or not the Borrower
has received notice thereof from any other Person) on Indebtedness of the
Borrower or any Subsidiary of the Borrower which singly, or in the aggregate
exceed $1,000,000, the Borrower shall notify the Agent and the Lenders of the
occurrence thereof;"
4 Amendment to Section 7.1. Section 7.1 of the Credit Agreement,
Indebtedness, is hereby amended by deleting paragraph (g) thereof in the
entirety and substituting the following in its place:
"(g) (i) the LGE Debt and the Additional Unsecured Debt, and (ii) other
unsecured Indebtedness incurred by the Borrower not to exceed $2,000,000 in
the aggregate outstanding from time to time."
5 Amendment to Section 7.16. Section 7.16 of the Credit Agreement,
Amendment and Waiver, is hereby deleted in its entirety and the following
substituted in its place:
"Section 7.16 Amendment and Waiver tc \l2 ""Section 7.16
Amendment and Waiver . The Borrower shall not, without the prior
written consent of the Majority Lenders, enter into any amendment of, or agree
to or accept any waiver which would adversely affect the rights of the Agent,
the Lenders and the Issuing Banks under this Agreement or any other Loan
Document, of (a) its certificate of incorporation and by-laws, (b) the
Subordinated Debentures, (c) the Securitization Documents, or (d) any
document evidencing Additional Unsecured Debt or LGE Debt."
6. Amendment to Section 8.1. Section 8.1 of
the Credit Agreement, Events of Default, is hereby amended by deleting
paragraphs (r) and (s) thereof in their entirety and replacing such paragraphs,
respectively, with the following:
"(r)(i) Any lender of any Additional Unsecured Debt shall accelerate such
Additional Unsecured Debt or otherwise demand the repayment of all or part of
the outstanding principal balance thereof (whether from the Borrower, LGE or
any other obligor thereon) and such Additional Unsecured Debt is not
refinanced or otherwise replaced with Funded Debt having substantially similar
terms, and evidenced by documentation in form and substance acceptable to the
Agent, within three (3) Business Days, or (ii) LGE shall accelerate or
otherwise demand repayment of all or part of the outstanding principal
balance of the LGE Debt, or (iii) LGE shall demand reimbursement of all or
part of any payment made by LGE pursuant to its guaranty of the Additional
Unsecured Debt;
(s) (i) The Borrower shall not have the ability to borrow Additional Unsecured
Debt in an aggregate principal amount of at least $160,000,000 by June 30,
1998, or (ii) the Borrower shall not have the ability to borrow the LGE
Debt in an aggregate principal amount of up to $45,000,000 by April 30, 1998,
or (iii) the Borrower shall not have used a portion of the proceeds of the
Additional Unsecured Debt(x) to redeem and satisfy in full the Series 2000
Debentures by December 31, 1997, and (y) to redeem or repurchase and satisfy
in full the Series 2001 Debentures by January 31, 1998;"
7. Amendment to Exhibits. Exhibit C to the
Credit Agreement, Borrowing Base Certificate, is hereby replaced in the
entirety with Exhibit C attached hereto.
8 Waiver.
The Agent, the Issuing Bank and the Lenders hereby:
(a) waive the March Covenant Defaults and their rights and remedies under the
Credit Agreement arising as a result of the March Covenant Defaults; provided,
however, as of the effective date of this Waiver and at all times thereafter,
the obligation of the Lenders to make any Advance under the Revolving Loan
Commitment (excluding Advances the proceeds of which are to reimburse the
Swing Bank for Swing Loans or an Issuing Bank for amounts drawn under a
Letter of Credit) and the obligation of any Issuing Bank to issue any Letter of
Credit under the Letter of Credit Commitment shall each be subject to the
delivery to the Agent of a Borrowing Base Certificate which demonstrates to
the satisfaction of the Agent that, after giving effect to the making of such
Advance or the issuance of such Letter of Credit, the Borrower will have
Availability of not less than $10,000,000;
(b) waive the Budget Default and their rights and remedies under the Credit
Agreement arising as a result of the Budget Default, provided, that the
Borrower comply with the provisions of Section 6.5(c) of the Credit Agreement
for the 1998 annual budget by March 31, 1998;
(c) waive the ERISA Default and their rights and remedies under the Credit
Agreement arising as a result of the ERISA Default, provided, that the amount
required to be paid by the Borrower as a result of the ERISA Default shall not
exceed the aggregate amount of $60,000, and that such payment be made by the
Borrower to the Zenith Hourly Profit Sharing Retirement Plan by March 31,
1998; and
(d) waive for all periods prior to June 30, 1998, any Event of Default which
arises solely as a result of the representation and warranty of the Borrower
pursuant to Section 4.1(t) of the Credit Agreement being incorrect or
misleading when made or deemed to have been made by the Borrower
thereunder;
provided, however, the above-referenced waivers shall not waive any other
requirement or hinder, restrict or otherwise modify the rights and remedies of
the Agent, the Issuing Bank and the Lenders following the occurrence of any
other Default or Event of Default under the Credit Agreement.
9 Amendment to Securitization Documents. The Agent, the Issuing
Bank and the Lenders hereby consent, pursuant to Section 7.16 of the Credit
Agreement, to the execution and delivery by the Borrower of an amendment to
the Securitization Documents which, among other things, limits the Series
1997-1 Invested Amount (as defined in the Securitization Documents) to
$50,000,000, and is otherwise acceptable to the Agent.
10 Acceptance of Accountants' Opinion. The Agent, the Issuing Bank
and the Lenders hereby agree that the opinion of the Borrower's accountants
accompanying the Borrower's annual financial statements which shall be
delivered pursuant to Section 6.2 of the Credit Agreement may be subject to the
qualification set forth on Exhibit A attached hereto.
11. No Other Amendment or Waiver.
Except for the amendments and waivers (including the Availability
requirement set forth in Section 8(a) above) expressly set forth above, the
text of the Credit Agreement and all other Loan Documents shall remain
unchanged and in full force and effect. The Borrower acknowledges and
expressly agrees that the Lenders reserve the right to, and do in fact, require
strict compliance with all terms and provisions of the Credit Agreement and the
other Loan Documents.
12. Representations and Warranties. The
Borrower hereby represents and warrants in favor of the Agent, the Issuing
Bank, and each Lender, as follows:
(a) the Borrower has the corporate power and authority (i) to enter into
this Amendment, and (ii) to do all acts and things as are required or
contemplated hereunder to be done, observed and performed by it;
(b) this Amendment has been duly authorized, validly executed and delivered
by one or more authorized signatories of the Borrower, and constitutes
the legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms;
(c) the execution and delivery of this Amendment and performance by the
Borrower under the Credit Agreement, as amended hereby, do not and will not
require the consent or approval of any regulatory authority or governmental
authority or agency having jurisdiction over the Borrower which has not
already been obtained, nor contravene or conflict with the charter documents of
the Borrower, or the provisions of any statute, judgment, order, indenture,
instrument, agreement or undertaking, to which the Borrower is a party or by
which any of its properties are or may become bound; and
(d) as of the date hereof, and after giving effect to this Amendment (i) no
Default or Event of Default exists under the Credit Agreement or is caused by
this Amendment, and (ii) each representation and warranty set forth in Article
4 of the Credit Agreement is true and correct, except (x) to the extent
previously fulfilled in accordance with the terms of the Credit Agreement, as
amended hereby, (y) to the extent specifically relating to the Agreement Date,
and (z) for the representation and warranty set forth in Section 4.1(t) of the
Credit Agreement.
13. Amendment Fees. In consideration for the
prompt review, approval and execution of this Amendment by the Lenders, and
other good and valuable consideration, the Borrower hereby agrees to pay: (a)
to each Lender approving this Amendment and whose executed signature page
to this Amendment is received by the Agent by 5:00 p.m.(eastern standard
time) on Friday, March 27, 1998, an amendment fee in the amount of one-fifth
of one percent (0.20%) of such Lender's pro-rata share of the Commitments,
and (b) to each Lender approving this Amendment and whose executed
signature page to this Amendment is received by the Agent by 5:00
p.m.(eastern standard time) on Tuesday, March 31, 1998, an amendment fee in
the amount of one-tenth of one percent (0.10%) of such Lender's pro-rata share
of the Commitments. Such amendment fees shall be fully earned and due and
payable upon the effectiveness of this Amendment and shall be non-refundable
when paid.
14. Loan Document. This Amendment shall be
deemed to be a Loan Document for all purposes.
15. Expenses. The Borrower agrees to pay all
reasonable expenses of the Agent incurred in connection with this Amendment,
including, without limitation, all fees and expenses of counsel to the Agent.
16. Counterparts. This Amendment may be
executed in multiple counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute one and the same
agreement. Delivery of an executed counterpart of this Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.
17. Governing Law. This Amendment shall be
deemed to be made pursuant to the laws of the State of New York with respect
to agreements made and to be performed wholly in the State of New York, and
shall be construed, interpreted, performed and enforced in accordance
therewith.
18. Definitions. All capitalized terms not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
19. Effectiveness. This Amendment shall be effective
as of the date first set forth above upon the Agent's receipt of (a) a
counterpart hereof duly executed by the Borrower and the Majority Lenders,
and (b) such other documents executed by the Borrower as the Agent may
reasonably require.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused
it to be executed by their duly authorized officers, effective as of the day
and year first written above.
BORROWER: ZENITH ELECTRONICS CORPORATION
By:
Name:
Its:
AGENT: CITICORP NORTH AMERICA, INC.
By:
Name:
Its:
ISSUING BANK: CITIBANK, N.A.
By:
Name:
Its:
LENDERS: CITICORP USA, INC.
By:
Name:
Its:
CONGRESS FINANCIAL CORPORATION
By:
Name:
Its:
BANK BOSTON, N.A., f/k/a The First National Bank of Boston
By:
Name:
Its:
XXXXXX FINANCIAL, INC.
By:
Name:
Its:
BNY FINANCIAL CORPORATION
By:
Name:
Its:
SANWA BUSINESS CREDIT CORPORATION
By:
Name:
Its:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
Name:
Its:
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By:
Name:
Its:
