EXHIBIT 10q
EMPLOYMENT AGREEMENT
----------------------
EMPLOYMENT AGREEMENT dated as of January
1, 1997, between ZENITH ELECTRONICS CORPORATION, a
Delaware corporation (the "Company"), and XXXXXXX X. XXXXXX
(the "Executive").
WHEREAS, the Executive currently serves as Senior
Vice President of the Company; and
WHEREAS, the Company and the Executive desire to
enter into this Agreement to provide for the continued employment of the
Executive by the Company upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises
and the mutual agreements contained herein, the parties hereby agree as
follows:
1. Employment. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in this
Agreement. The term of employment of the Executive by the Company
pursuant to this Agreement (the "Employment Period") shall commence on
the date hereof and shall end on December 31, 1999, unless earlier
terminated pursuant to Section 4, provided that the Employment Period
shall automatically be extended as of January 1, 2000 for one additional
year and, if so extended, shall automatically be further extended as of
each January 1 thereafter, for additional consecutive one-year periods,
unless either the Company or the Executive elects not to extend the
Agreement by written notice given to the other party at least 90 days prior
to each such period.
2. Position and Duties. The Company shall employ the
Executive during the Employment Period as its Senior Vice President,
Administration and General Counsel. The Executive shall perform
faithfully and loyally and to the best of his abilities the duties assigned to
him hereunder, shall devote his full business time, attention and effort to
the affairs of the Company and shall use his reasonable best efforts to
promote the interests of the Company. The Executive shall report to such
executive officer of the Company as shall be designated from time to time
by the Chief Executive Officer of the Company (the "CEO") or the Board
of Directors of the Company (the "Board"). Notwithstanding the
foregoing, the Executive may engage in charitable, civic or community
activities and, with the prior approval of the CEO or the Board, may serve
as a director of any business corporation, provided that such activities or
service does not interfere with his duties hereunder or violate the terms of
any of the covenants contained in Section 10 or 11.
3. Compensation.
(a) Base Compensation. As compensation for the
services to be provided by the Executive hereunder, the Company shall
pay to the Executive during the Employment Period a minimum annual
salary of Two Hundred Thirty Thousand Dollars ($230,000.00) (the
"Base Salary"), payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The
Executive's salary may be increased or decreased from time to time,
provided that the Executive's salary shall not be decreased below the Base
Salary specified by this Section 3(a). The Executive's annual salary in
effect from time to time under this Section 3(a) is hereinafter called his
"Base Compensation."
(b) Incentive Compensation. In addition to his Base
Compensation, the Executive shall be eligible to receive incentive
compensation awards for services rendered during the Employment
Period, determined in accordance with (i) the Company's annual bonus
plan or any other short-term incentive plan adopted by the Company and
(ii) the 1987 Zenith Stock Incentive Plan or any other long-term incentive
plan adopted by the Company.
(c) Supplemental Profit Sharing Benefits. During
the Employment Period, the Executive shall be entitled to participate in
the Zenith Electronics Corporation Supplemental Salaried Profit Sharing
Retirement Plan, as in effect on the date hereof, or in a comparable plan
adopted by the Company.
(d) Supplemental Long-Term Disability Benefits.
During the Employment Period, the Executive shall be eligible for
supplemental long-term disability benefits, the current terms of which are
described on Schedule I attached hereto.
(e) Supplemental Life Insurance Benefits. During
the Employment Period, the Executive shall be eligible for supplemental
life insurance benefits, the current terms of which are described on
Schedule II attached hereto.
(f) Other Benefits. In addition to the benefits
described in subsections (c), (d) and (e) above, the Executive shall be
entitled to participate in all employee benefit plans generally available to
executives who are parties to agreements with the Company which are
comparable to this Agreement, including, as of the date of this Agreement,
group medical and dental, health and accident, group life insurance, long-
term disability, short-term disability, executive insurance, pension, profit
sharing and 401(k) plans. The Executive shall be entitled to take time off
for vacation or illness in accordance with the Company's policy for senior
executives and to receive all other fringe benefits as are from time to time
made generally available to senior executives of the Company. The
Company may from time to time modify the benefits provided to the
Executive, provided that all such modifications are made on the same
basis for all executives in positions comparable to that of the Executive.
(g) Expense Reimbursement. The Company shall
reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's
policies and procedures.
4. Termination of Employment Period. The Employment
Period shall be terminated upon the first to occur of (i) termination of the
employment of the Executive by the Company at any time without Cause
(as such term is defined in Section 8) upon written notice given to the
Executive at least 30 days prior to such termination, (ii) the election by
the Company pursuant to Section 1 not to extend this Agreement in
accordance with Section 1, (iii) the election by the Executive pursuant to
Section 1 not to extend this Agreement in accordance with Section 1, (iv)
termination of the employment of the Executive by the Company at any
time for Cause or Serious Misconduct upon written notice given to the
Executive, (v) termination of the employment of the Executive by the
Company on account of the Executive's having become unable (as
determined by the Board in good faith) to regularly perform his duties
hereunder by reason of illness or incapacity for a period of more than 180
consecutive days, (vi) termination of the employment of the Executive by
reason of retirement, (vii) the Executive's death or (viii) termination of
employment by the Executive at any time upon written notice given to the
Company at least 90 days prior to such termination. The date on which
the Employment Period terminates is hereinafter referred to as the
"Termination Date."
5. Consequences of Termination Outside of a Change in
Control Period. If a Termination Date occurs, other than within a
Change in Control Period, as defined in Section 8, the Executive shall be
entitled to receive the compensation and benefits specified by this Section
5 in lieu of any severance amounts which otherwise would be payable to
the Executive.
(a) Termination by Company Without Cause. If the
Employment Period terminates for a reason set forth in clause (i) of
Section 4:
(i) the Company shall pay to the Executive
(A) all Base Compensation otherwise payable through the
Termination Date, (B) vacation pay accrued through the
Termination Date and (C) reimbursement of expenses incurred
through the Termination Date, in each case to the extent not
theretofore paid;
(ii) the Company shall pay to the Executive
the amount of the target bonus otherwise payable for the year in
which the Termination Date occurs, prorated to the Termination
Date;
(iii) if the Termination Date occurs prior to
November 8, 1997, the Company shall pay to the Executive a
lump sum cash amount equal to three times the sum of the
Executive's Base Compensation and target bonus for the year in
which the Executive's Termination Date occurs or, if such
Termination Date occurs on or after November 8, 1997, the
Company shall pay to the Executive a lump sum cash amount
equal to the greater of (A) the sum of the Executive's Base
Compensation and target bonus for the year in which the
Termination Date occurs, multiplied by the number of whole
and/or fractional years remaining under the term of the
Employment Period (as in effect under Section 1 without regard
to the early termination thereof under Section 4) and (B) one and
one-half times the sum of the Executive's Base Compensation
and target bonus for the year in which the Termination Date
occurs;
(iv) the Company shall provide the Executive
with continued coverage, or substantially equivalent coverage,
during the period represented by the amount of the lump sum
payment under clause (iii) (i.e., three years or one and one-half
years, as the case may be) under all welfare benefit plans or
arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance, and executive insurance programs) unless the
Executive becomes covered under similar plans or arrangements
maintained by a subsequent employer; provided that if the
Company is unable to provide such continued coverage or
substantially similar coverage, the Company shall pay the
Executive a lump sum cash amount equal to the present value of
such benefits; and
(v) the Company shall provide to the
Executive outplacement services appropriate for the Executive in
accordance with industry standards (the cost of which shall not
exceed 15% of the Executive's Base Compensation).
(b) Failure of Company to Renew Agreement. If the
Employment Period terminates for a reason set forth in clause (ii) of
Section 4, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Company shall pay to the Executive the
amounts or benefits set forth in Sections 5(a)(i), (ii) and (v), plus a lump
sum cash amount equal to one and one-half times the sum of his Base
Compensation and target bonus for the year in which the Termination
Date occurs, and shall provide to the Executive the benefits described in
Section 5(a)(iv) for the period of one and one-half years commencing on
the Termination Date.
(c) Termination for Cause. If the Employment
Period terminates for a reason set forth in clause (iv) of Section 4, the
Company shall pay to the Executive the amounts set forth in Section
5(a)(i) and the Executive shall not be entitled to any severance payments,
but shall be entitled to any benefits payable under applicable plans.
(d) Disability, Retirement or Death. If the
Employment Period terminates for any reason set forth in clause (v), (vi)
or (vii) of Section 4, the Company shall pay to the Executive or his
executor, administrator or other legal representative, as the case may be,
the amounts set forth in Section 5(a)(i) and the Executive (or his executor,
administrator or other legal representative, as the case may be) shall not
be entitled to any severance payments, but shall be entitled to any benefits
payable under applicable plans.
(e) Failure of Executive to Renew Agreement; Other
Voluntary Termination by the Executive. If the Employment Period
terminates for any reason set forth in clause (iii) or (viii) of Section 4, (A)
the Company shall pay to the Executive the amounts set forth in Section
5(a)(i), (B) the Company may, in its sole discretion, but shall have no
obligation to, pay to the Executive the amount of the target bonus for the
year in which the Termination Date occurs, prorated to the Termination
Date, and (C) the Executive shall not be entitled to any severance
payments, but shall be entitled to any benefits payable under applicable
plans.
6. Consequences of Termination Within Change in
Control Period.
(a) Termination Payments and Benefits. If during a
Change in Control Period, as defined in Section 8, the Employment Period
of the Executive shall terminate other than by reason of a Nonqualifying
Termination, as defined in Section 8, then the Company shall pay or
provide to the Executive (or his executor, administrator or other legal
representative, as the case may be) within 30 days following the
Termination Date, as compensation for services rendered to the Company
and in lieu of any severance amounts which otherwise would be payable to
the Executive, the following amounts:
(i) the Company shall pay to the Executive
a lump sum cash amount equal to the sum of (A) the Executive's
Base Compensation, accrued vacation pay and reimbursable
expenses incurred through the Termination Date, in each case to
the extent not theretofore paid, (B) the Executive's annual bonus
in an amount equal to the annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Executive has been employed by the Company for less than 12
full months) bonus payable to the Executive by the Company for
the fiscal year in which the Termination Date occurs (determined
at the higher of the target or actual level of performance for such
year), multiplied by a fraction, the numerator of which is the
number of days in the fiscal year in which the termination occurs
prior to the Termination Date and the denominator of which is
365 or 366, as applicable, (C) three times the Executive's highest
annual rate of Base Compensation during the three full fiscal
years prior to the Termination Date, (D) three times the greater of
(I) the Executive's highest annual bonus payable during the three
full fiscal years prior to the Termination Date and (II) the target
bonus payable for the year in which the Termination Date occurs
and (E) all accruals under the Zenith Electronics Corporation
Supplemental Salaried Profit Sharing Retirement Plan;
(ii) for a period of three years commencing
on the Termination Date, or until such earlier date on which the
Executive becomes covered under similar plans maintained by a
subsequent employer, the Company shall continue to provide the
Executive and his dependents with coverage, or shall provide
substantially equivalent coverage, under all welfare benefit plans
or arrangements (including group medical and dental, health and
accident, long-term disability, short-term disability, group life
insurance and executive insurance programs) with the same level
of coverage, upon the same terms and otherwise to the same
extent as such plans or arrangements shall have been in effect
immediately prior to the Termination Date or, if more favorable to
the Executive, as provided generally with respect to other peer
executives of the Company. If the Company cannot provide such
continued coverage or substantially equivalent coverage, the
Company shall pay the Executive a lump sum cash amount equal
to the present value of such coverage; and
(iii) the Company shall provide outplacement
services appropriate for the Executive in accordance with industry
standards (which shall not exceed 15% of the Executive's Base
Compensation).
(b) Nonqualifying Termination Within Change in
Control Period. If during a Change in Control Period the Employment
Period shall terminate by reason of a Nonqualifying Termination, as
defined in Section 8, then the Company shall pay to the Executive (or to
his executor, administrator or other legal representative, as the case may
be) within 30 days following the Termination Date, a lump sum cash
amount equal to the sum of the Executive's Base Compensation payable
through the Termination Date, any vacation pay accrued prior to the
Termination Date and any reimbursable expenses incurred prior to the
Termination Date, in each case to the extent not theretofore paid.
7. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company or its affiliated
companies to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms ofthis
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 7) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the Company's public accounting
firm (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be
paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than 10
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs the Executive to
pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided further,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) if, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive
becomes entitled to receive, and receives, any refund with respect to such
claim, the Executive shall (subject to the Company's complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
(a) "Cause" means (i) embezzlement,
misappropriation of corporate funds or any other act of dishonesty by the
Executive, (ii) commission by the Executive of a felony involving moral
turpitude, (iii) significant activities of the Executive harmful to the
reputation of the Company, (iv) significant violation by the Executive of
any statutory or common law duty of loyalty to the Company or (v) a
material breach by the Executive of the Executive's duties and
responsibilities to the Company, including the refusal to perform or the
substantial disregard of such duties, other than as a result of incapacity
due to physical or mental illness.
(b) "Change in Control" means:
(1) the acquisition by any individual, entity
or group (a "Person"), including any "person" within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of
25% or more of either (i) then outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of then outstanding
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"),
provided such ownership interest is greater than the interest then
owned by LG Electronics, Inc. ("LGE"); excluding, however, the
following: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired directly
from the Company), (B) any acquisition by the Company or LGE,
(C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (3) of this Section 8(b); provided
further, that for purposes of clause (B), if any Person (other than
the Company, LGE or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of
25% or more of the Outstanding Company Common Stock or
25% or more of the Outstanding Company Voting Securities by
reason of an acquisition by the Company (and which ownership
interest is greater than the interest then owned by LGE), and such
Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding
Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board;
(3) approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares
of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(other than: the Company or LGE; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power
of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the
Company of a plan of complete liquidation or dissolution of the
Company.
(c) "Change in Control Period" means the period of
time beginning on the date on which a Change in Control is consummated
and ending on the earlier to occur of (i) 24 months following such Change
in Control and (ii) the Executive's death.
(d) "Good Reason" means, without the Executive's
express written consent, the occurrence of any of the following events
within a Change in Control Period:
(1) any of (i) the assignment to the
Executive of any duties inconsistent in any material respect with
the Executive's position(s), duties, responsibilities or status with
the Company immediately prior to the commencement of such
Change in Control Period, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company as in
effect immediately prior to the commencement of such Change in
Control Period or (iii) any failure to re-elect the Executive to any
position with the Company held by the Executive immediately
prior to the commencement of such Change in Control Period;
(2) a reduction by the Company in the
Executive's rate of Base Compensation as in effect immediately
prior to the commencement of such Change in Control Period or
as the same may be increased from time to time thereafter or the
failure by the Company to increase such rate of Base
Compensation each year after the commencement of such Change
in Control Period by an amount which at least equals, on a
percentage basis, the mean average percentage increase, during
the two full fiscal years of the Company immediately preceding
the commencement of such Change in Control Period, in the rates
of base salary for all officers of the Company elected by the
Board;
(3) the failure of the Company to pay the
Executive a bonus at or greater than the target level in effect in
the year in which the Change in Control Period commences, or to
continue the Executive's participation in the 1987 Zenith Stock
Incentive Plan or any comparable long-term incentive plan;
(4) any requirement of the Company that the
Executive (i) be based anywhere other than at the facility where
the Executive is located immediately prior to the commencement
of such Change in Control Period or (ii) travel on Company
business to an extent substantially more burdensome than the
travel obligations of the Executive immediately prior to the
commencement of such Change in Control Period;
(5) an election by the Company not to extend
the Employment Period in accordance with Section 1;
(6) the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan
in which the Executive is participating immediately prior to the
commencement of such Change in Control Period, unless the
Executive is permitted to participate in other plans providing the
Executive with substantially comparable benefits, or the taking of
any action by the Company which would adversely affect the
Executive's participation in or materially reduce the Executive's
benefits under any such plan, (ii) provide the Executive and the
Executive's dependents welfare benefits (including, without
limitation, group medical and dental, health and accident, long-
term disability, short-term disability, group life insurance, and
executive insurance programs) in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive
immediately prior to the commencement of such Change in
Control Period or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies, (iii)
provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive immediately prior
to the commencement of such Change in Control Period or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, (iv) provide the Executive with paid
vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated
companies as in effect for the Executive immediately prior to the
commencement of such Change in Control Period or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies, or (v) reimburse the Executive
promptly for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive immediately prior to the
commencement of such Change in Control Period, or if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies; or
(7) the failure of the Company to obtain the
assumption agreement from any successor as contemplated in
Section 18(b).
For purposes of this Agreement, any good faith
determination of Good Reason made by the Executive shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive shall not constitute Good
Reason.
(e) "Nonqualifying Termination" means a
termination of the Employment Period (i) by the Company for Serious
Misconduct, (ii) by the Executive as a result of his election pursuant to
Section 1 not to extend the Agreement in accordance with Section 1 or by
the Executive at any other time for any reason, in either case other than
for Good Reason, (iii) as a result of the Executive's death or (iv) by the
Company due to the Executive's absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a result
of the Executive's incapacity due to physical or mental illness. A
termination of the Employment Period for any reason not expressly set
forth in the preceding sentence, including, without limitation, the election
by the Company not to extend the Agreement pursuant to Section 1, shall
not constitute a Nonqualifying Termination.
(f) "Serious Misconduct" means (i) embezzlement or
misappropriation of corporate funds by the Executive, (ii) commission by
the Executive of a felony involving moral turpitude or (iii) a material
breach by the Executive of the Executive's duties and responsibilities to
the Company as in effect prior to the commencement of the Change in
Control Period, including the refusal to perform or the substantial
disregard of such duties, other than as a result of incapacity due to
physical or mental illness, which is demonstrably willful and deliberate,
which is committed in bad faith or without a reasonable belief that the
breach is in the Company's best interests, and which is not remedied
within a reasonable period of time after receipt of written notice of such
breach.
9. Federal and State Withholding. The Company
shall deduct from the amounts payable to the Executive pursuant to this
Agreement the amount of all required federal and state withholding taxes
in accordance with the Executive's Form W-4 on file with the Company
and all applicable social security taxes.
10. Noncompetition; Nonsolicitation. (a) The
Executive acknowledges that in the course of his employment with the
Company pursuant to this Agreement he will become familiar, and during
the course of his employment with the Company or any of its subsidiaries
prior to the date of this Agreement he has become familiar, with trade
secrets and customer lists of, and other confidential information
concerning, the Company and its subsidiaries and that his services have
been and will be of special, unique and extraordinary value to the
Company.
(b) The Executive agrees that during the
Employment Period and, if the Employment Period terminates for a reason
set forth in clause (i) or (ii) of Section 4, for a period of two years
thereafter (the "Noncompetition Period"), he shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as
a member of a partnership or as an officer, director, stockholder, investor
or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm,
corporation or enterprise in engaging or being engaged, in any business
being conducted by the Company or any of its subsidiaries as of the
termination of the Employment Period in any geographic area in which the
Company is then conducting such business.
(c) The Executive further agrees that during the
Noncompetition Period he shall not in any manner, directly or indirectly
induce or attempt to induce any employee of the Company or any of its
subsidiaries to terminate or abandon his or her employment for any
purpose whatsoever.
(d) Nothing in this Section 10 shall prohibit the
Executive from being (i) a stockholder in a mutual fund or a diversified
investment company or (ii) a passive owner of not more than two percent
of the outstanding stock of any class of a corporation any equity securities
of which are publicly traded, so long as the Executive has no active
participation in the business of such corporation.
(e) If, at any time of enforcement of this Section 10,
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any time
during the Employment Period or thereafter, make use of or disclose,
directly or indirectly, any trade secret or other confidential or secret
information of the Company or of its subsidiaries or other technical,
business, proprietary or financial information of the Company or of its
subsidiaries not available to the public generally or to the competitors of
the Company or of its subsidiaries ("Confidential Information"), except to
the extent that such Confidential Information (a) becomes a matter of
public record or is published in a newspaper, magazine or other periodical
available to the general public, other than as a result of any act or
omission of the Executive, or (b) is required to be disclosed by any law,
regulation or order of any court or regulatory commission, department or
agency. Promptly following the termination of the Employment Period,
the Executive shall surrender to the Company all records, memoranda,
notes, plans, reports, computer tapes and software and other documents
and data relating to any Confidential Information or the business of the
Company or of its subsidiaries which he may then possess or have under
his control (together with all copies thereof); provided, however, that the
Executive may retain copies of such documents as are necessary for the
preparation of his federal or state income tax returns.
12. Enforcement. The parties hereto agree that the
Company would be damaged irreparably in the event any provision of
Sections 10 or 11 of this Agreement were not performed in accordance
with their respective terms or were otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
13. Survival. Sections 10, 11 and 12 of this Agreement and
any rights and remedies arising out of this Agreement shall survive and
continue in full force and effect in accordance with the respective terms
hereof, notwithstanding any termination of the Employment Period.
14. Reimbursement of Expenses. If any contest or dispute
shall arise under this Agreement involving termination of the Executive's
employment with the Company or involving the failure or refusal of the
Company to perform fully in accordance with the terms hereof, the
Company shall reimburse the Executive, on a current basis, for all legal
fees and expenses, if any, incurred by the Executive in connection with
such contest or dispute, together with interest in an amount equal to the
prime rate from time to time in effect, as published in The Wall Street
Journal under "Money Rates," but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from
the date the Company receives the Executive's statement for such fees and
expenses through the date of payment thereof; provided, however, that in
the event the resolution of any such contest or dispute includes a finding
denying, in total, the Executive's claims in such contest or dispute, the
Executive shall be required to reimburse the Company, over a period of
12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 14.
15. Notices. All notices and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, when delivered
by courier or overnight express service or five days after having been sent
by certified or registered mail, postage prepaid, addressed (a) if to the
Executive, to the Executive's address set forth in the records of the
Company or, if to the Company, to Xxxxxx X. Xxxxxxxxx, Vice President,
Human Resources, Zenith Electronics Corporation, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000 or (b) to such other address as either
party may have furnished to the other party in writing in accordance
herewith, except that notices of change of address shall be effective only
upon receipt.
16. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held
to be invalid, illegal or unenforceable in any respect under applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
17. Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes and preempts any prior
understanding, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject
matter hereof other than rights to indemnification, if any, for the benefit of
the Executive. Pursuant to, but not in limitation of, the foregoing
sentence, the following agreements between the Company and the
Executive shall be terminated, effective as of the date hereof, and shall
have no further force or effect: (i) the Agreement dated August 29, 1994,
(ii) the Supplemental Letter Agreement, and an Addendum thereto, both
dated August 29, 1994, and (iii) an Addendum Number Two to
Supplemental Letter Agreement dated April 4, 1995. Such termination
shall have no effect upon the vesting of options and restricted stock (if
any) pursuant to such agreements, which options and restricted stock shall
remain fully vested.
18. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any
merger or consolidation of the Company whereby the Company is or is
not the surviving or resulting corporation or as a result of any transfer of
all or substantially all of the assets of the Company. In the event of any
such merger, consolidation or transfer of assets, the provisions of this
Agreement shall be binding upon the surviving or resulting corporation or
the person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in paragraph (a) of
this Section 18, it will cause any successor or transferee unconditionally
to assume, by written instrument delivered to the Executive (or his
executor, administrator or other legal representative, as the case may be),
all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Agreement and
shall entitle the Executive to compensation and other benefits from the
Company in the same amount and on the same terms as the Executive
would be entitled hereunder if the Executive's employment were
terminated during a Change in Control Period other than by reason of a
Nonqualifying Termination. For purposes of implementing the foregoing,
the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Termination Date.
(c) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amounts would be payable
to the Executive hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in
writing by the Executive to receive such amounts or, if no person is so
appointed, to the Executive's estate.
19. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of Illinois without regard to the principle of conflict of
laws.
20. Amendment and Waiver. The provisions of this
Agreement may be amended or waived only with the prior written consent
of the Company and the Executive, and no course of conduct or failure or
delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
ZENITH ELECTRONICS CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
Its: President & CEO
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
XXXXXXX X. XXXXXX
Schedule I
Supplemental Long-Term Disability Benefits
-------------------------------------------
(a) Purpose. The benefits provided by this Schedule
shall be in addition to the benefits provided by the long term disability
plan maintained by the Company for salaried employees as of the date
hereof (the "LTD Plan"), provided, however, that no benefits shall be
payable under this Schedule if the Executive does not elect to participate
in the LTD Plan.
(b) Definitions. As used in this Schedule, the
following terms shall have the following respective meanings:
(1) "Disability" means the inability of the
Executive arising during his employment
by the Company to perform the duties
pertaining to the employment position
held by the Executive with the Company
at the inception of such disability, if such
inability is due to sickness or injury. If
such disability continues for a period of
more than 180 days, it shall become a
"total long term disability" effective upon
the expiration of such 180 days. The
terms "disability" and "total long term
disability" exclude disability resulting
from intentional self-inflicted injuries or
sickness.
(2) "Maximum monthly salary" of the
Executive means the maximum amount
of monthly salary specified in the LTD
Plan on which the benefit payments
under such plan will be calculated and
based. (As of the date hereof, benefits
under the LTD Plan are 66-2/3% of
monthly salary. The maximum monthly
salary thereunder is $6,000 and the
maximum monthly benefit thereunder is
$4,000.)
(c) Benefits Payable. The amount of monthly
benefits payable by the Company to the Executive during a total long term
disability of the Executive shall be 66-2/3% of the amount, if any, by
which the actual monthly salary he was receiving immediately prior to the
commencement of his disability exceeds his maximum monthly salary as
heretofore defined, provided, however, that if such actual monthly salary
exceeds $12,500, then the amount of such benefits payable by the
Company to the Executive shall be limited to 66-2/3% of the amount by
which $12,500 exceeds his maximum monthly salary.
(d) Exclusion. No benefits shall be payable under
this Schedule if the LTD Plan has been terminated prior to the date of the
commencement of the disability.
(e) Period of Benefit Payment. Benefits shall be
payable by the Company to the Executive upon the commencement of the
total long term disability (180 days after inception of the disability) and
thereafter as long as both of the following conditions continue to be
satisfied:
(i) The long term disability continues, and
(II) The Executive is under the care of a
physician.
Notwithstanding the foregoing, the benefits hereunder shall cease and
terminate upon the first of the following to occur:
(i) The cessation of the total long term
disability.
(ii) The death of the Executive.
(iii) The failure of the Executive to comply
with Subsection (i) of this Schedule.
(iv) The cessation of the payment of benefits
to the Executive under the LTD Plan for
any reason not specified above.
(f) Reduction or Termination of Benefits. If during
the period of total long term disability the Executive becomes employed
by any employer (including the Company) in a position other than the
employment position held by the Executive with the Company at the
inception of such disability or if it is determined that the Executive is
medically able to work in another such position, the Company shall then
or at any time or times thereafter have the right to reduce the amount of
benefits provided hereunder to any lesser amount specified by the
Company or discontinue such benefits altogether.
(g) Effect of Termination of Long Term Disability
Plan. In the event the Executive elects not to participate or elects to
terminate his participation in the LTD Plan, then this Schedule shall be of
no further force and effect, and the Company shall have no obligation to
provide the benefits described herein. In the event the Executive does
participate in and does not terminate his participation in the LTD Plan,
and the LTD Plan is terminated by the Company subsequent to the
commencement of the disability, the Executive shall nevertheless continue
to be entitled to the benefits provided hereunder and, in addition, the
Company shall be obligated to provide, and the Executive shall be entitled
to receive, long term disability benefits in the same amounts and under the
same terms and conditions as if the LTD Plan remained in full force and
effect. Nothing herein shall prohibit the Company from at any time, or
from time to time, establishing a substitute plan or plans for the LTD
Plan, in which event: (1) the Company shall be relieved of its obligation to
continue payment of benefits under the terminated LTD Plan and shall be
obligated to provide benefits under the substituted plan or plans; and (2)
"maximum monthly salary" defined in Subsection (b)(2) above shall mean
the maximum monthly salary specified in such substitute plan or plans.
(h) Determinations. All determinations as to whether
a disability or total long term disability exists at any time or has ceased to
exist, all determinations as to date of commencement or cessation of such
disability or total long term disability and all determinations as to whether
the Executive is medically able to work in another position as provided in
Subsection (f) shall be made by the Company's Corporate Medical
Director (or if at any time no person holds such a position with the
Company, then by any physician designated by the Company from time to
time), which determination shall be final and binding on the parties hereto
regardless of whether such determination is in accord with any medical or
other decision made under the LTD Plan.
(i) Medical Examinations and Data. The Company
at its own expense shall have the right and opportunity to make a medical
examination of the person of the Executive in the event of a sickness or
injury of the Executive which constitutes or might constitute a disability
or a total long term disability as herein defined and as often as the
Company may require. Such examination shall be conducted by the
Company's Corporate Medical Director or any physician designated by
the Company from time to time. The Executive agrees to submit to all
such examinations. In addition, the Company shall be entitled to examine
and obtain copies of all medical records pertaining to such sickness or
injury of any licensed physician, hospital, organization, institution or
person and the Executive agrees to furnish the Company with written
authorization to examine and obtain copies of such records as often as
required by the Company.
Schedule II
Supplemental Life Insurance Benefits
-------------------------------------
(a) Supplemental Life Insurance Benefit. The life
insurance benefits provided in this Schedule shall be in addition to any
group term life insurance program applying generally to salaried
employees. In the event the Executive's employment with the Company is
terminated for any reason, other than by death, prior to age fifty-five (55),
no benefits shall be paid pursuant to this Schedule.
(b) Benefit Amount - Preretirement. If the
Executive shall die prior to retirement, the Company shall pay to the
beneficiary designated by the Executive in writing (or, if the Executive
fails to designate a beneficiary, to the Executive's estate) a lump sum
equal to one and one-half (1-1/2) times the Executive's base salary at the
date of death.
(c) Benefit Amount - Postretirement. The life
insurance benefits provided under this Schedule shall continue for a period
of ten (10) years from the date of the Executive's retirement. If the
Executive shall die within one year after the date of retirement, the
Company shall pay to the beneficiary designated by the Executive in
writing (or, if the Executive fails to designate a beneficiary, to the
Executive's estate) a lump sum equal to one and one-half (1-1/2) times the
Executive's base salary in effect on the date of the Executive's retirement.
Thereafter, on each yearly anniversary after commencement of such ten
(10) year period, the amount of such life insurance benefit shall be
decreased by ten percent (10%) of the amount of such benefit in effect at
the commencement of such ten (10) year period. If the Executive is alive
on the tenth (10th) anniversary of the commencement of such ten (10) year
period, the life insurance benefits provided under this Schedule shall cease
and expire and be of no further force and effect and the Company shall
have no further obligation hereunder.
(d) Purchase of Life Insurance Policy. The
Company may, but is not required to, purchase a life insurance policy to
fund the life insurance benefits payable to the Executive hereunder. If
such an insurance policy is purchased by the Company, such policy shall
name the Company as owner and beneficiary and, when purchased, shall
remain a general unsecured, unrestricted asset of the Company, and
neither the Executive nor any beneficiary of the Executive shall have any
rights with respect to, or claim against, such policy. Such policy, if and
when purchased by the Company, shall not be deemed to be held under
any trust for the benefit of the Executive or any beneficiary of the
Executive, nor shall such policy be deemed to be held in trust as collateral
security for fulfilling the obligations of the Company hereunder. The
benefits provided to the Executive and any beneficiary of the Executive
under this Schedule are based upon the general credit of the Company and
are otherwise unsecured. In the event the Company shall purchase a life
insurance policy as set forth in this Subsection (d), and if a medical
examination or examinations of the Executive and/or the furnishing of a
health statement signed by the Executive (which statement may include an
authorization by the Executive to any licensed physician or any
organization, institution, or person that has knowledge of the Executive or
his dependents to give such information to the insurer), is requested by the
insurer, then the Executive agrees to submit to such examination or
examinations or to provide such health statement in whatever form
required by the insurer. If the Executive refuses to submit to such
examination or examinations or to provide such health statement, then
neither the Executive nor any beneficiary of the Executive shall have any
right to the life insurance benefits provided under this Schedule and the
Company shall have no further obligation hereunder.
