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EXHIBIT 10(S)
December 29, 1997
Board of Directors
Zenith Electronics Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxxx 00000
Re: Agreement for Financial Consulting Services
Gentlemen:
This letter outlines the understanding between Xxx Xxxx & Associates, a
Michigan corporation ("JA&A") and Zenith Electronics Corporation (the
"Company") of the objective, tasks, work product and fees for the engagement of
JA&A to provide financial consulting services to the Company.
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OBJECTIVE
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- Assist the Company in maximizing its value to its stakeholders and in
developing a viable, long-term business strategy.
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TASKS
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- Xxx Xxxxxxxxxx is appointed Acting Chief Financial Officer of the
Company. He will report to the Company's Chief Executive Officer.
- In his role of Acting CFO, and with assistance from JA&A, Xx. Xxxxxxxxxx
shall provide support and input to other consultants and staff retained by
the Company, and shall:
- Assist in helping the Company to realize increased liquidity with
financial benefits from such areas as:
- Sale of nonessential assets,
- Reduction in working capital committed to the business
- Discontinuing lines of business that are
identified to be exited, and
- Operating improvements to the Company's
various businesses.
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Board of Directors
December 29, 1997
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- Assist in improving the quality and relevance of information that
is reported about the Company both internally and externally.
- Assist in providing financial input to the Company's business plan.
- Assist in managing the Company's cash and in maintaining the
Company's cash forecasting and control system.
- Assist in providing liaison with the Company's lenders until such
time as a permanent CFO is hired and assumes that responsibility.
- Assist in contingency planning for a possible Chapter 11 bankruptcy
filing in the event such a filing becomes strategically necessary or
desirable.
- Assist in such other matters as may be mutually agreed upon.
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WORK PRODUCT
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Our work product will be in the form of:
- Information to be discussed with you and others, as you may direct.
- Written reports and analysis worksheets to support our suggestions as we
deem necessary or as you may request.
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STAFFING
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Xxx Xxxxxxxxxx will be the principal responsible for the overall engagement.
He will be assisted by Xx Xxxx, managing principal, who will be available to
both Xx. Xxxxxxxxxx and the Company to assure that JA&A has the appropriate
resources for this engagement. Xx. Xxxxxxxxxx will also be assisted by a staff
of consultants at various levels, all of whom have a wide range of skills and
abilities related to this type of assignment. In addition, we have
relationships with and periodically retain independent contractors with
specialized skills and abilities to assist us, and we agree that we will obtain
the prior approval of the Company for any such engagement. The size and
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Board of Directors
December 29, 1997
Page 3
composition of the JA&A staffing, and other consultants retained at the
suggestion of JA&A, shall be discussed with and subject to the prior approval
of the Company. It is understood that time is of the essence. Xx. Xxxxxxxxxx
shall provide the Company with his written proposal as to staffing assignments
and responsibilities for JA&A professionals on or prior to January 9, 1998.
JA&A and the Company agree that the initial engagement of Xx. Xxxxxxxxxx and at
least one other professional shall begin on December 29, 1997. Xx. Xxxxxxxxxx
shall be available to the Company and shall have the Company's matters as his
primary responsibility from that date. Prior to January 9, 1998, Xx.
Xxxxxxxxxx shall be expected to be available in the Company's offices not less
than four days per week. By not later than January 9, 1998, Xx. Xxxxxxxxxx
shall be available on a full-time basis at the Company's offices or on the
Company's behalf, except for such dates and times as shall be communicated to
the Company by December 31, 1997. The Company and JA&A understand and agree
that Xx. Xxxxxxxxxx may have some responsibilities relating to the winding down
of prior assignments; however, those responsibilities shall not interfere with
the general responsibilities of Xx. Xxxxxxxxxx as Acting Chief Financial
Officer, including functions critical to that assignment such as attending
Board of Directors meetings and Audit Committee meetings.
Following a review of Xx. Xxxxxxxxxx'x plan, the Company and JA&A shall
mutually agree on a further course of action and the terms of an extended
agreement.
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TIMING, FEES AND EXPENSES
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We will commence this engagement immediately upon receipt of a signed
engagement letter.
HOURLY FEES -
This engagement will be staffed with professionals at various levels as the
tasks require. For purposes of bi-weekly xxxxxxxx, our fees will be based on
the hours charged at our hourly rates which are:
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Board of Directors
December 29, 1997
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Principals $430 - 495
Senior Associates $300 - 375
Associates $225 - 285
Accountants and Consultants $180 - 220
EXPENSES -
In addition to the fees set forth above, the Company shall pay directly or
reimburse JA&A upon receipt of periodic xxxxxxxx, for all reasonable
out-of-pocket expenses incurred in connection with this assignment such as
travel, lodging, postage, telephone and facsimile charges. JA&A shall use its
best efforts to obtain prior written approval of the Company for expenses
anticipated to exceed $30,000 for any month; however, the Company understands
that circumstances may not always permit this.
RETAINER -
The Company shall be billed for fees and expenses specific to the first two
weeks of the engagement. After January 9, 1998, the Company and JA&A shall
mutually agree on the amount of any retainer required for future work under
this agreement. We will submit bi-weekly invoices for services rendered and
expenses incurred as described above, and we will offset such invoices against
the retainer. Payment will be due upon receipt of the invoices to replenish
the retainer to the agreed upon amount. Any unearned portion of the retainer
will be returned to you at the termination of the engagement.
CONTINGENT SUCCESS FEE -
A contingent success fee will be considered based upon JA&A's demonstrated
contribution to value creation during the course of our engagement. This does
not represent a binding commitment but rather only is a commitment to, in good
faith, consider such a fee based upon our demonstrated contribution.
Additionally, if the Company is persuaded of the merits of having JA&A
facilitate a Turnaround Team process, it is agreed that an appropriate
amendment to this agreement will be negotiated whereby JA&A will receive a
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December 29, 1997
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contingent bonus based upon demonstrated financial benefits attained. However,
whether to conduct such a team-based process, the objectives of such a process
and appropriate contingent compensation for that effort are matters that will
be subject to the Company's approval and this letter does not commit the
Company or its new CEO to undertake such a team-based process.
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RELATIONSHIP OF THE PARTIES
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The parties intend that an independent contractor relationship will be created
by this agreement. JA&A is not to be considered an employee or agent of the
Company and the employees of JA&A are not entitled to any of the benefits that
the Company provides for the Company's employees.
The Company and JA&A each agree not to solicit or recruit any employees or
agents of the other for a period of two years subsequent to the completion
and/or termination of this agreement.
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Board of Directors
December 29, 1997
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CONFIDENTIALITY
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JA&A agrees to keep confidential all information obtained from the Company.
JA&A agrees that neither it nor its directors, officers, principals, employees,
agents or attorneys will disclose to any other person or entity, or use for any
purpose other than specified herein, any information pertaining to the Company
or any affiliate thereof which is either non-public, confidential or
proprietary in nature ("Information") which it obtains or is given access to
during the performance of the services provided hereunder. JA&A may make
reasonable disclosures of Information to third parties in connection with their
performance of their obligations and assignments hereunder and JA&A agrees that
it shall obtain a confidentiality agreement from unrelated third parties (which
shall not include the Company's vendors, customers or lenders) prior to the
disclosure of such Information. In addition, JA&A may disclose its involvement
with the Company, provided that JA&A shall not publicly announce its retention
by the Company unless the Company has previously made such public disclosure.
Information includes data, plans, reports, schedules, drawings, accounts,
records, calculations, specifications, flow sheets, computer programs, source
or object codes, results, models, or any work product relating to the business
of the Company, its subsidiaries, distributors, affiliates, vendors, customers,
employees, contractors and consultants.
The Company acknowledges that all advice (written or oral) given by JA&A to the
Company in connection with JA&A's engagement is intended solely for the benefit
and use of the Company (limited to its Board of Directors and its management)
in considering the transactions to which it relates. The Company agrees that
no such advice shall be used for any other purpose or reproduced, disseminated,
quoted or referred to at any time in any manner or for any purpose other than
accomplishing the tasks and programs referred to herein or in discussions with
the Company's lenders or debt holders, without JA&A's prior approval (which
shall not be unreasonably withheld) except as required by law. This agreement
will survive the termination of the engagement.
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Board of Directors
December 29, 1997
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FRAMEWORK OF THE ENGAGEMENT
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The Company acknowledges that it is hiring JA&A purely to assist and advise the
Company in business planning and restructuring. JA&A's engagement shall not
constitute an audit, review or compilation, or any other type of financial
statement reporting engagement that is subject to the rules of the AICPA or
other such state and national professional bodies.
We acknowledge that JA&A and Xx. Xxxxxxxxxx are being retained to provide
services and perform functions normally performed by the chief financial
officer of companies in similar circumstances. Such responsibilities include,
but are not limited to, cash management, oversight of the preparation and audit
of required financial reports, management of the financial staff within the
Company and interface with the Company's lenders and creditors. We understand
that the Company has retained other consultants to handle investment banking
functions and that Xx. Xxxxxxxxxx and JA&A professionals shall serve in support
capacities to those consultants.
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INDEMNIFICATION
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In engagements of this nature, it is our practice to receive indemnification.
Accordingly, in consideration of our agreement to act on your behalf in
connection with this engagement, you agree to indemnify, hold harmless, and
defend us (including our principals, employees and agents) from and against all
claims, liabilities, losses, damages and reasonable expenses as they are
incurred, including reasonable legal fees and disbursements of counsel, and the
costs of our professional time (our professional time will be reimbursed at our
rates in effect when such future time is required), relating to or arising out
of the engagement, including any legal proceeding in which we may be required
or agree to participate but in which we are not a party. We, our principals,
employees and agents may, but are not required to, engage a single firm of
separate counsel of our choice in connection with any of the matters to which
this indemnification agreement relates. This indemnification agreement does
not apply to actions taken or omitted to be taken by us in bad faith.
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Board of Directors
December 29, 1997
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INDEMNIFICATION OF OFFICERS
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In addition to the foregoing indemnification, Xxx Xxxxxxxxxx, along with other
JA&A personnel who serve as acting officers of the Company, shall be
individually indemnified in a manner comparable to that provided under the
Company's directors' and officers' liability insurance as is applicable to
officers of the Company.
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TERMINATION AND SURVIVAL
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The agreement may be terminated at any time by written notice by one party to
the other; provided, however, that notwithstanding such termination JA&A will
be entitled to any fees and expenses due under the provisions of the agreement.
Such payment obligation shall inure to the benefit of any successor or
assignee of JA&A.
The obligations of the parties under the Indemnification, Indemnification of
Officers and Confidentiality sections of this agreement shall survive the
termination of the agreement as well as the other sections of this agreement
which expressly provide that they shall survive termination of this agreement.
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GOVERNING LAW
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This letter agreement is governed by and construed in accordance with the laws
of the State of Michigan with respect to contracts made and to be performed
entirely therein and without regard to choice of law or principles thereof.
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CONFLICTS
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We know of no fact or situation which would represent a conflict of interest
for us with regard to the Company.
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Board of Directors
December 29, 1997
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SEVERABILITY
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If any portion of the letter agreement shall be determined to be invalid or
unenforceable, we each agree that the remainder shall be valid and enforceable
to the maximum extent possible.
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ENTIRE AGREEMENT
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All of the above contains the entire understanding of the parties relating to
the services to be rendered by JA&A and may not be amended or modified in any
respect except in writing signed by the parties. JA&A will not be responsible
for performing any services not specifically described in this letter or in a
subsequent writing signed by the parties.
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NOTICES
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All notices required or permitted to be delivered under this letter agreement
shall be sent, if to us, to the address set forth at the head of this letter,
to the attention of Xx. Xxxxxx X. Xxxxxxxxxxxx, and if to you, to the address
for you set forth above, to the attention of your General Counsel, or to such
other name or address as may be given in writing to the other party. All
notices under the agreement shall be sufficient if delivered by facsimile or
overnight mail. Any notice shall be deemed to be given only upon actual
receipt.
If the Company becomes involved in any proceeding under the Bankruptcy Code, it
agrees to petition the Court to affirm this agreement as part of its first day
motions.
If these terms meet with your approval, please sign and return the enclosed
copy of this proposal.
We look forward to working with you.
Sincerely yours,
XXX XXXX & ASSOCIATES
Xxxxxx X. Xxxxxxxxxx
Principal
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Board of Directors
December 29, 1997
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Acknowledged and Agreed to:
ZENITH ELECTRONICS CORPORATION
By:
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Its:
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Dated:
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