ZENITH ELECTRONICS CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of January 12, 1998 (the
"Agreement Date"), by and between Xxxxxxx X. Xxxxxx (the "Optionee"), and
Zenith Electronics Corporation, a Delaware corporation (the "Company");
WITNESSETH THAT:
WHEREAS, pursuant to the terms of Exhibit 2 of the employment
agreement between the Executive and the Company dated January 12, 1998
(the "Employment Agreement"), the Company is to grant options to purchase
300,000 shares of its Common Stock, $1.00 par value ("Stock") to the
Executive, and the rights provided by this Agreement are in settlement of that
obligation;
NOW, THEREFORE, IT IS AGREED, by and between the Company
and the Executive, as follows:
Award.
1.1. Grant of Option. The Company hereby grants to the Optionee as
of January 12, 1998 (the "Option Date"), pursuant to the provisions of the
Zenith Electronics Corporation Long-Term Equity Compensation Plan (the
"Plan"), a non-qualified option to purchase from the Company (the "Option")
300,000 shares of Stock, at the price of $5.5625 per share upon and subject to
the terms and conditions set forth below. References to employment by the
Company shall also mean employment by a subsidiary of the Company.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1.1. Option Subject to Acceptance of Agreement. The Option shall be
subject to the Optionee accepting this Agreement by executing it in the space
provided below and returning such original execution copy to the Company.
Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after January 11, 2008 (the "Expiration Date").
2.2. Exercise of Option. The Option shall be exercisable in
accordance with those provisions of the Employment Agreement that relate to
the stock option granted pursuant to Exhibit 2 of the Employment Agreement.
However, notwithstanding the exercise periods set forth in the Employment
Agreement, in the event the Company is involved in a business combination
which is intended to be treated as a pooling of interests for financial
accounting purposes (a "Pooling Transaction") pursuant to which the Optionee
receives a substitute option to purchase securities of any entity, including
an entity directly or indirectly acquiring the Company:
(i) if the acquisition of the substitute option by the Optionee may
be treated as a purchase for purposes of Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the Optionee's employment
with the Company is terminated for any reason other than Cause (as defined in
paragraph 3(c) of the Employment Agreement) during the nine-month period
beginning three months prior to the consummation of such business
combination, then the Option (or option in substitution thereof) shall be
exercisable to the extent set forth above in this Agreement until and including
the later to occur of (i) the date determined in accordance with the Employment
Agreement and (ii) the date which is seven months after the consummation of
such business combination, but in no case later than the Expiration Date; or
(ii) if the Optionee is restricted from disposing of a security (or
security underlying a security) issued in connection with the Pooling
Transaction and the purpose of such restriction is to ensure that the Pooling
Transaction is accounted for as a pooling of interests (the "Pooling
Restriction") and the Optionee's employment with the Company is terminated
for any reason other than Cause (as defined in paragraph 3(c) of the
Employment Agreement) during the nine-month period beginning three
months prior to the consummation of such business combination, then the
Option (or option in substitution thereof) shall be exercisable to the extent
set forth above in this Agreement until and including the later to occur of
(i) the date determined in accordance with the Employment Agreement and (ii)
the date which is one month after the date of expiration of the Pooling
Restriction, but in no case later than the Expiration Date.
2.3. Method of Exercise. Subject to the limitations set forth in
this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Treasurer of the Company specifying the number of whole
shares of Stock to be purchased and accompanied by payment therefor in full
(or arrangement made for such payment to the Company's satisfaction) either
(i) in cash, (ii) by delivery of previously owned whole shares of Stock (which
the Optionee has held for at least six months prior to the delivery of such
shares or which the Optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable pursuant to the Option
by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of exercise
or (iv) a combination of (i) and (ii), and (2) by executing such documents as
the Company may reasonably request. In the case of an Optionee who is subject
to Section 16 of the Exchange Act, the Company may require that the method of
making such payment be in compliance with Section 16 and the rules and
regulations thereunder. Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing
a share of Stock shall be delivered until the full purchase price therefor has
been paid.
2.4. Cancellation of Agreement. In the event that rights to purchase
all or a portion of the shares of Stock subject to the Option expire or
are exercised, canceled or forfeited, the Optionee shall, upon the Company's
request, promptly return this Agreement to the Company for full or partial
cancellation, as the case may be. Such cancellation shall be effective
regardless of whether the Optionee returns this Agreement. If the Optionee
continues to have rights to purchase shares of Stock hereunder, the Company
shall, within 10 days of the Optionee's delivery of this Agreement to the
Company, either (i) xxxx this Agreement to indicate the extent to which the
Option has expired or been exercised, canceled or forfeited or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be substantially similar to this Agreement in form
and substance.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than by will or the laws of descent and
distribution. Except to the extent permitted by the foregoing sentence, during
the Optionee's lifetime the Option is exercisable only by the Optionee or the
Optionee's Legal Representative. Except to the extent permitted by the
foregoing, the Option may not be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of
law or otherwise) or be subject to execution, attachment or similar process.
Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the Option, the Option and all rights hereunder shall
immediately become null and void.
3.2. Investment Representation. The Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the
Option will be purchased for investment and not with a view to the distribution
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), unless such purchase has been registered under the
Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities law; and (c) if requested by the
Company, the Optionee shall submit a written statement, in form satisfactory
to the Company, to the effect that such representation (x) is true and
correct as of the date of purchase of any shares hereunder or (y) is true and
correct as of the date of any sale of any such shares, as applicable. As
a further condition precedent to any exercise of the Option, the
Optionee shall comply with all regulations and requirements of any
regulatory authority having control of or supervision over the issuance or
delivery of the shares and, in connection therewith, shall execute any
documents which the Board or the Committee shall in its sole discretion deem
necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase of the shares,
such amount as the Company may be required, under all applicable federal,
state, local or other laws or regulations, to withhold and pay over as income
or other withholding taxes (the "Required Tax Payments") with respect to such
exercise of the Option. If the Optionee shall fail to advance the Required Tax
Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable
by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (i) a cash
payment to the Company, (ii) delivery to the Company of previously owned
whole shares of Stock (which the Optionee has held for at least six months
prior to the delivery of such shares or which the Optionee purchased on the
open market and in each case for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date the obligation to withhold or pay taxes first arises in connection
with the Option (the "Tax Date"), equal to the Required Tax Payments, (iii)
authorizing the Company to withhold whole shares of Stock which would
otherwise be delivered upon exercise of the Option having an aggregate Fair
Market Value determined as of the Tax Date equal to the Required Tax
Payments, (iv) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (v) any
combination of (i), (ii) and (iii); provided, however, that in the case of an
Optionee who is subject to Section 16 of the Exchange Act, the Company may
require that the method of satisfying any such obligation be in compliance with
Section 16 and the rules and regulations thereunder. Shares of Stock to be
delivered may not have a Fair Market Value in excess of the minimum amount
of the Required Tax Payments. Any fraction of a share of Stock which would
be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax
Payments have been satisfied in full.
3.4. Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the exercise date over (B)
the exercise price of the Option. The decision of the Committee regarding
any such adjustment shall be final, binding and conclusive.
3.5. Change in Control. To the extent provided in the
Employment Agreement, the Option shall become exercisable upon the date, if
any, of a Change in Control (as defined in the Employment Agreement).
3.6. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the
purchase or delivery of shares hereunder, the Option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained, free of any conditions not
acceptable to the Company. The Company agrees to use reasonable efforts to
effect or obtain any such listing, registration, qualification, consent or
approval.
3.7. Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or
more certificates representing the number of shares purchased against full
payment therefor. The Company shall pay all original issue or transfer taxes
and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.8. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.9. Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the Optionee any right to continued employment by the
Company or any subsidiary or affiliate of the Company.
3.10. Decisions of Board or Committee. The Board of Directors or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination
or other action made or taken by the Board of Directors or the Committee
regarding the Plan or this Agreement shall be final, binding and conclusive.
3.11. Company to Reserve Shares. The Company shall at all times prior to
the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
3.12. Agreement Subject to the Plan. This Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option is
hereby designated as not constituting an "incentive stock option" within
meaning of section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"); this Agreement shall be interpreted and treated consistently with such
designation.
4.2 Meaning of Certain Terms. (a) As used herein, employment
by the Company shall include employment by a corporation which is a
"subsidiary corporation" of the Company, as such term is defined in section 424
of the Code. References in this Agreement to sections of the Code shall be
deemed to refer to any successor section of the Code or any successor internal
revenue law.
(b) As used herein, the term "Legal Representative" shall include
an executor, administrator, legal representative, guardian or similar person.
(c) As used herein, the term "Fair Market Value" shall mean the
closing transaction price of a share of Common Stock as reported in The Wall
Street Journal as New York Stock Exchange Composite Transactions for the date
as of which such value is being determined or, if there shall be no reported
transaction on such date, on the next preceding date for which a transaction
was reported; provided that if Fair Market Value for any date cannot be
determined as above provided, Fair Market Value shall be determined by the
Committee by whatever means or method as the Committee, in the good faith
exercise of its discretion, shall at such time deem appropriate.
4.3. Successors. This Agreement shall be binding upon and inure
to the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to Zenith
Electronics Corporation, 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000-
2493, Attention: Human Resources, and if to the Optionee, to the Optionee's
last known address set forth in the records of the Company, or such other
address as shall be provided to the Company in writing by the Optionee. All
notices, requests or other communications provided for in this Agreement shall
be made in writing either (a) by personal delivery to the party entitled
thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the
United States mails to the last known address of the party entitled thereto
or (d) by express courier service. The notice, request or other communication
shall be deemed to be received upon personal delivery, upon confirmation
of receipt of facsimile transmission or upon receipt by the party entitled
thereto if by United States mail or express courier service; provided, however,
that if a notice, request or other communication sent to the Company is not
received during regular business hours, it shall be deemed to be received
on the next succeeding business day of the Company.
4.5 Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the
extent not governed by the laws of the United States, shall be governed by the
laws of the State of Illinois and construed in accordance therewith without
giving effect to principles of conflicts of laws.
4.6 Counterparts. This Agreement may be executed in two
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
ZENITH ELECTRONICS CORPORATION
By:
_________________________________
Accepted this 19th day of
_______________, 1998.
_________________________
Xxxxxxx X. Xxxxxx
