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EXHIBIT 10ah
RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT, dated as of August 7, 1998 (this "Agreement"), by
and between ZENITH ELECTRONICS CORPORATION, a Delaware corporation (the
"Company"), and LG ELECTRONICS INC., a corporation organized under the laws of
the Republic of Korea ("LGE");
WHEREAS, LGE and one of its affiliates collectively own 38,155,000 shares
of common stock, par value $1 per share, of the Company (the "Old Common
Stock"), representing approximately 55% of the outstanding Old Common Stock,
and LGE owns vested and unvested options to purchase additional shares of Old
Common Stock at a price of $.01 per share (the "Options");
WHEREAS, from time to time LGE and the Company have entered into certain
contractual arrangements and LGE has provided financial support to the Company;
WHEREAS, on June 30, 1998, LGE paid $50 million to certain of the
Company's creditors to satisfy a portion of LGE's guarantee obligation in
respect of loans extended by such creditors to the Company;
WHEREAS, pursuant to the Reimbursement Agreement (as defined in Section
1), the Company is required to reimburse LGE for amounts paid by LGE under such
guarantees and to pay interest at the rate specified therein to LGE on such
amounts from the date of payment by LGE to the date of reimbursement by the
Company;
WHEREAS, on July 22, 1998, LGE paid $90,086,653.58 to certain of the
Company's creditors to satisfy the obligations of the Company under the
Leveraged Lease Documents (as defined in Section 1);
WHEREAS, pursuant to the Financial Support Agreement (as defined in
Section 1), the Company is required to reimburse LGE for amounts paid by LGE to
satisfy the Company's obligations under the Leveraged Lease Documents and to
pay interest at the rate specified therein to LGE on such amounts from the date
of payment by LGE to the date of reimbursement by the Company;
WHEREAS, a special committee of the Board of Directors of the Company
composed of independent directors (the "Special Committee") considered in
detail various proposals for the reorganization of the Company and negotiated
with LGE with respect to several proposed restructuring plans;
WHEREAS, the Special Committee made certain recommendations to the full
Board of Directors of the Company;
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WHEREAS, the Board of Directors of the Company has determined that it is
in the best interests of the Company to restructure the business and operations
of the Company (the "Operational Restructuring") as contemplated by the
Business Plan and Projections, dated June 26, 1998 (the "Operating Plan"),
prepared by the management of the Company (a copy of which is attached hereto
as Annex A);
WHEREAS, the Board of Directors of the Company has determined that it is
in the best interests of the Company to alter the capital structure of the
Company in accordance with the terms of the Outline for Proposed Restructuring
of Zenith Electronics Corporation dated May 21, 1998 (the "Proposal") a copy of
which is attached as Annex B, and such modifications to the Proposal as may be
further mutually agreed to by the Company and LGE through confirmation of a
plan of reorganization (the "Plan"), under the Bankruptcy Code (as defined
below) using acceptances of the Plan to be solicited (the "Plan Solicitation")
from the requisite holders of claims against, and interests in, the Company
pursuant to Section 1125 of the Bankruptcy Code (the "Financial
Restructurings," and together with the Operational Restructuring, the
"Restructuring");
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, upon the terms and subject to the conditions set forth
herein, the parties agree as follows:
ARTICLE I
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings (each such meaning to be equally applicable to both the
singular and plural forms of the respective terms so defined):
"Alternative Proposal" has the meaning set forth in Section 6.8.
"Bankruptcy Code" means Title 11 of the United States Code, as amended,
and the rules and orders thereunder.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company Disclosure Letter" means the Disclosure Letter, dated the
date of this Agreement, from the Company to LGE.
"Company SEC Documents" has the meaning set forth in Section 4.4.
"Confirmation Order" has the meaning set forth in Section 4.3.
"Cumulative Funding Requirement" means cash flow from operations before
restructuring changes, plus interest expense and capital expenditures, in each
case as set forth in the Operating Plan.
"Disclosure Letters" means the Company Disclosure Letter and the LG
Disclosure Letter.
"EBITDA" means, for any period, the sum of:
(i) the net income (or net loss) of the Company (determined in
accordance with GAAP) for such period, without giving effect to any GAAP
extraordinary gains or losses and without deduction for Restructuring
Charges; plus (or minus)
(ii) to the extent that any of the items referred to in any of clauses
(A) through (D) below were deducted or added in calculating such net
income:
(A) interest expense and Guarantee of Finance Fee Amortization
of the Company for such period;
(B) federal, state or local income tax expense of the Company
with respect to operations for such period;
(C) the amount of all depreciation and amortization and other
non-cash charges for such period; and
(D) non-cash gains or losses from the sale or disposal of
property (other than inventory).
"Environmental Laws" means any and all applicable federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Regulatory Authority regulating, relating to or
imposing liability or standards of conduct concerning protection of human
health or the environment, including without limitation, Hazardous Materials,
as now or may at any time during the term hereof be in effect.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity that is treated as a single employer
with the Company for purposes of Section 414 of the Code.
"ERISA Plan" means an employee benefit plan within the meaning of
Section 3(3) of ERISA or any other material benefit plan maintained for
employees of the Company or any of its ERISA Affiliates.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Financial Restructuring" has the meaning set forth in the tenth whereas
clause.
"Financial Support Agreement" means the Financial Support Agreement,
dated March 31, 1997, as amended, between the Company and LGE.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos containing materials defined or
regulated as such in or under any Environmental Law.
"HDTV Patents" shall mean all of the Company's United States patents and
patent applications relating to its digital vestigial side band technology or
relating to and used in connection with HDTV or digital television technology
of the Company.
"Implementation Program" has the meaning set forth in Section 6.7.
"Intellectual Property" means, with respect to any person, collectively,
such person's Patent Property and Trademark Property.
"Leveraged Lease Documents" means (i) the Participation Agreement, dated
as of March 26, 1997, by and among the Company, General Foods Credit
Corporation ("General Foods"), Fleet National Bank ("Fleet") as owner trustee
and the lenders party thereto, and the Lease Agreement, dated as of March 26,
1997, by and among the Company and Fleet as owner trustee, and the other
agreements and documents executed and delivered in connection therewith, and
(ii) the Participation Agreement, dated as of March 26, 1997, by and among
Zenith Texas, General Foods, Fleet as owner trustee and the lenders party
thereto, and the Lease Agreement, dated as of March 26, 1997, by and among
Zenith Texas and Fleet as owner
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trustee, and the other agreements and documents executed and delivered in
connection therewith.
"LGE Disclosure Letter" means the Disclosure Letter, dated the date of
this Agreement, from LGE to the Company.
"Lien" has the meaning set forth in Section 4.2.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, results of operations, liabilities, condition
(financial or otherwise) or prospects of the Company and its subsidiaries taken
as a whole or on the ability of the Company or its subsidiaries to consummate
the transactions contemplated by this Agreement, including the Restructuring,
or to perform their respective obligations under the definitive transaction
agreements to be entered into in connection herewith.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"New Investor" has the meaning set forth in Section 11.1(d)(iii).
"New Salaried Employee Documents" has the meaning set forth in Section
6.6.
"Note Agreement" means the Note Agreement, dated March 31, 1998, between
the Company and LGE, as amended by the First Amendment to the Note Agreement,
dated as of June 21, 1998, between the Company and LGE.
"Old Common Stock" has the meaning set forth in the first whereas
clause.
"Operating Plan" has the meaning set forth in the ninth whereas clause.
"Operational Restructuring" has the meaning set forth in the ninth
whereas clause.
"Options" has the meaning set forth in the first whereas clause.
"Patent Property" shall mean, with respect to any person:
(i) all of such person's patents (including, with respect to the
Company, the Tuner Patents and HDTV Patents), patent applications
(including, without limitation, all patents and patent applications in
preparation for filing) and patent disclosures throughout the world,
including without limitation, with respect to the Company, each
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patent and patent application referred to in Part A-1 of Section 4.14 of
the Company Disclosure Letter;
(ii) all reissues, divisions, continuations, continuations-in-part,
revisions, extensions, renewals and reexaminations of any of the items
described in clause (i) of this definition; and
(iii) all patent licenses of such person (whether as licensee or
licensor), including, with respect to the Company, each patent license
referred to in Part A-2 of Section 4.14 of the Company Disclosure Letter.
"Plan" has the meaning set forth in the tenth whereas clause.
"Plan Disclosure Documents" means the Disclosure Statement and Proxy
Statement-Prospectus (as amended or supplemented and including documents
incorporated by reference therein), to be used in connection with the Plan
Solicitation by the Company and the Rule 13e-3 Transaction Statement (as
amended or supplemented and including documents incorporated by reference
therein) filed jointly by the Company and LGE.
"Plan Solicitation" has the meaning set forth in the tenth whereas
clause.
"Property" shall mean any real property or personal property, plant,
building, facility, structure, underground storage tank or unit, equipment,
inventory or other asset owned, leased or operated by the Company or any of its
subsidiaries (including, without limitation, any surface water thereon or
adjacent thereto, and soil and groundwater thereunder).
"Regulatory Authority" means any court or government, administrative
agency or commission or other governmental or regulatory authority or agency,
federal, state, local or foreign.
"Reimbursement Agreement" means the Reimbursement Agreement, dated
November 3, 1997, between the Company and LGE, together with the other
agreements and documents executed and delivered in connection therewith (as
amended, modified or supplemented from time to time), pursuant to which the
Company agreed to repay amounts paid by LGE (as guarantor of the Company's
obligations) to certain of the Company's third party creditors.
"Restructuring Charges" means charges incurred by the Company to execute
the Operating Plan and the Plan that are of the type included in "Restructuring
Charges" in the Operating Plan and determined on a basis consistent with the
principles used to prepare the Operating Plan.
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"Reportable Event" shall have the meaning set forth in Section 4043(c)
of ERISA and the regulations thereunder.
"Representatives" has the meaning set forth in Section 6.6.
"Restructuring" has the meaning set forth in the tenth whereas clause.
"Reynosa Assets" means all of the right, title and interest of Zenith
Reynosa and Zenith Texas in and to (i) the land and buildings that comprise
Zenith Xxxxxxx'x production facilities # 00, #00 xxx #00 xx Xxxxxxx, Xxxxxx,
(xx) all of the fixtures, equipment, personal property and other assets located
therein and identified in Section 1(a) of the Company Disclosure Letter and
(iii) all agreements relating to access thereto.
"Reynosa Leveraged Lease Assets" means all of its right, title and
interest of Zenith Reynosa and Zenith Texas in and to the assets subject to the
Leveraged Lease Documents located at Zenith Reynosa's production facility # 27
in Reynosa, Mexico to the extent set forth on Section 1(b) of the Company
Disclosure Letter. The Reynosa Leveraged Lease Assets have a fair market value
in place equal to $8,000,750.00.
"Reynosa Operating Agreement" has the meaning set forth in Section 2(b).
"Reynosa Purchase Agreement" has the meaning set forth in Section 2(b).
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Senior Secured PIK Notes" means the Senior Secured PIK Notes of the
Company having the terms set forth on Annex C.
"Special Committee" has the meaning set forth in the seventh whereas
clause.
"Taxes" means any net income, alternative minimum, accumulated earnings,
personal holding company, gross income, asset, gross receipts, sales, use,
goods and services, ad valorem, value added, mortgage, conveyance, transfer,
customs duties, franchise, capital stock, net worth, capital, profits, license,
withholding, payroll, employment, unemployment insurance, social security,
disability, workers' compensation, health care, excise, stamp, property, rent,
occupancy, occupational, documentary, recording, premium, severance,
environmental or windfall profit tax, duty, governmental fee or other like
assessment or charge, together with all interest or penalties thereon and
additions thereto, imposed by any taxing authority.
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"Tax Return" means any return, report, declaration, form, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Trademark" shall have the meaning ascribed to that term in the
definition of Trademark Property.
"Trademark Property" shall mean, with respect to any person:
(i) all of such person's trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, trade dress
other source of business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of
a like nature (all of the foregoing items in this clause (i) being
collectively called a "Trademark"), now existing anywhere in the world
or hereafter adopted or acquired, whether currently in use or not,
whether or not registered, all registrations and recordings thereof and
all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State thereof or
any foreign country, including, with respect to the Company, those
referred to in Part B-1 of Section 4.14 of the Company Disclosure Letter;
(ii) all reissues, extensions, renewals, translations, adaptations,
derivations and combinations of any of the items described in clause (i)
of this definition;
(iii) all Trademark licenses and other agreements providing such
person with the right to use any of the types of items referred to in
clauses (i) and (ii) of this definition, including, with respect to the
Company, each Trademark license referred to in Part B-2 of Section 4.14
of the Company Disclosure Letter;
(iv) all of the goodwill of the business connected with the use of,
and symbolized by the items described in, clauses (i) and (ii) of this
definition;
(v) the right to xxx third parties for past, present and future
infringements of any Trademark property described in clauses (i) or (ii)
of this definition and, to the extent applicable in clause (iii) of this
definition; and
(vi) all proceeds of, and rights associated with, the foregoing,
including any claim by such person against third parties for past,
present or future infringement or dilution of any Trademark, Trademark
registration or (to the extent applicable and if permitted by applicable
law) Trademark license, referred to on clause (iii) of this definition,
or for any injury to the goodwill associated with the use of any such
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Trademark or for breach or enforcement of any Trademark license, and all
rights corresponding thereto throughout the world.
"Transaction Expenses" has the meaning set forth in Section 11.3(a).
"Transaction Fee" has the meaning set forth in Section 11.3(b).
"Tuner Patents" shall mean, collectively, U.S. Patent No. 4,002,986,
U.S. Patent No. 4,317,227, U.S. Patent No. 4,516,170, and U.S. Patent
No. 4,598,425, together with all applications, reissues, divisions,
continuations, continuations-in-part, revisions, extensions, renewals and
reexaminations relating thereto; and "Tuner Patent" shall mean any one of the
foregoing.
"Zenith Reynosa" means Partes de Television xx Xxxxxxx, a Mexican
sociedad anonima de capital variable and a wholly-owned subsidiary of the
Company.
"Zenith Texas" means Zenith Electronics Corporation of Texas, a Texas
corporation and a wholly-owned subsidiary of the Company.
ARTICLE II
2. The Transactions. Upon the terms and subject to the conditions set
forth herein, on the Closing Date, pursuant to the Plan,
(a) LGE will purchase from the Company, and the Company will issue to
LGE, shares of newly issued common stock, par value $.01 per share, of the
Company (the "New Common Stock"), representing 100% of the New Common Stock, in
exchange for the forgiveness by LGE of $200 million of LGE claims consisting of
(i) unsecured claims for amounts outstanding as of the Closing Date up to $140
million arising out of the delivery of goods to the Company in the ordinary
course of business, (ii) a $50 million secured claim pursuant to the
Reimbursement Agreement, (iii) an unsecured claim for all servicing fees (the
"Technical Service Fees") accrued and unpaid through the Closing Date resulting
from LGE's provision of certain technical and other related services to the
Company in connection with the Company's research and development activities,
(iv) an unsecured claim for guarantee fees accrued and unpaid through the
Closing Date payable to LGE under the Reimbursement Agreement and (v) a
portion, if any, of the secured claim pursuant to the Note Agreement sufficient
when aggregated with the amounts described in clauses (i), (ii), (iii) and (iv)
of this Section 2(a) to equal $200 million, provided, that if the aggregate
amount of the claims described in clauses (i), (ii), (iii) and (iv) of this
Section 2(a) exceeds $200 million, then a portion of the secured claim pursuant
to the Reimbursement Agreement in the amount of such excess shall be exchanged
for an equal principal amount of Senior Secured PIK Notes;
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(b) LGE or one of its subsidiaries and Zenith Reynosa and Zenith Texas
will enter into an agreement (the "Reynosa Purchase Agreement") pursuant to
which Zenith Reynosa and Zenith Texas will sell to LGE or one of its affiliates
the Reynosa Assets in exchange for the release by LGE of claims equal to
$32,364,300.00 as reimbursement for the payment by LGE of the Company's and
Zenith Texas' obligations to certain third party creditors under the Leveraged
Lease Documents, provided, however, that if the transactions contemplated by
this Section 2(b) would have adverse Tax or other consequences that are
unacceptable to either the Company or LGE or result in the payment of severance
in excess of the amount included in the Operating Plan, then (i) the Company
shall retain the Reynosa Assets, (ii) the Company and LGE shall enter into an
agreement with respect to the operation by LGE of such Reynosa Assets and the
Reynosa Leveraged Lease Assets (the "Xxxxxxx Operating Agreement") and (iii)
the $32,364,300.00 of LGE claims that would have been exchanged for the Reynosa
Assets under this Section 2(b) shall be exchanged for an equal principal amount
of Senior Secured PIK Notes;
(c) LGE will purchase from the Company, and the Company will issue to
LGE, Senior Secured PIK Notes in a principal amount equal to and in exchange
for the forgiveness by LGE of claims equal to the aggregate of (i) a secured
claim for amounts owed LGE pursuant to the Reimbursement Agreement, if any,
other than the $50 million exchanged for New Common Stock under Section 2(a),
(ii) a $49,721,603.58 claim as reimbursement for the payment by LGE of the
obligations of the Company and Zenith Texas to certain third party creditors
under the Leveraged Lease Documents, plus accrued but unpaid interest on such
amount from July 22, 1998 through the date of filing of the Prepackaged Plan
with the Bankruptcy Court, and (iii) the amount of the secured claim pursuant
to the Note Agreement remaining after conversion of the portion of the claim
exchanged for New Common Stock pursuant to Section 2(a);
(d) each share of Old Common Stock owned by LGE and its affiliate and
the Options owned by LGE will be canceled, and LGE and its affiliate will have
no rights or claims against the Company in respect of such canceled Old Common
Stock and Options;
(e) LGE will agree to lend or provide additional credit support to the
Company in an amount necessary to enable the Company to execute the Operating
Plan according to its terms, not to exceed $60 million, on terms mutually
acceptable to LGE and the Company;
(f) LGE will transfer to the Company all of its right, title and
interest in the equipment subject to the Leveraged Lease Documents other than
the Reynosa Leveraged Lease Assets, provided, however, if the Company and LGE do
not enter into the Reynosa Purchase Agreement, then LGE will also transfer to
the Company the Reynosa Leveraged Lease Assets in exchange for Senior Secured
PIK Notes in a principal amount of $8,000,750.00; and
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(g) LGE's claims (if any) other than those described under Sections
2(a), 2(b), 2(c), 2(d) and 2(f) shall be treated as unimpaired general unsecured
claims under the Plan.
ARTICLE III
3.1 Closing. At the Closing, subject to the terms and conditions of this
Agreement, the Company and LGE shall consummate the transactions contemplated
by Section 2 hereof. The closing (the "Closing") shall take place at the
offices of Xxxxxxxx & Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000, at
10:00 a.m., Chicago time, as promptly as practicable following the satisfaction
or waiver of the conditions to Closing set forth in Sections 8, 9 and 10
hereof, or at such other place and time as the parties may mutually agree. The
Company shall give LGE three business days prior written notice of the date the
Closing is scheduled to occur. The "Closing Date" shall be the date the
Closing occurs.
3.2 No Survival. The sole and exclusive recourse and remedy for a
material breach of a representation or warranty shall be the non-breaching
party's right pursuant to Section 9(a) or 10(a), as the case may be, not to
consummate the transactions contemplated hereby. At Closing all
representations and warranties shall expire, and in any case, result in no
future liability for the Company or LGE or their respective subsidiaries,
officers, directors and employees.
ARTICLE IV
4. Representations and Warranties of the Company. The Company represents
and warrants to LGE that:
4.1 Organization; Authorization; Enforceability. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance by it of this Agreement have been duly authorized by all
requisite corporate action on its part. This Agreement has been duly executed
and delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement by it will not: (x) conflict with or violate its organizational
documents; or (y) subject to the governmental filings and approvals referred to
in Section 4.3 and in the case of clauses (y)(i) and (y)(ii) as would not
reasonably be likely to result in or have a Material Adverse Effect, (i) breach
or violate any statute, law, rule, regulation, judgment, order or decree
applicable to it or any of its subsidiaries or by which any of their respective
properties are bound or affected, (ii) result in any breach of, or constitute a
default or give rise to any right of termination,
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revocation, cancellation, acceleration or increased payments under (with or
without the giving of notice or the lapse of time or both), any note, mortgage,
agreement, contract, indenture, permit, lease, license, commitment,
understanding or other arrangement to which it or any of its subsidiaries is a
party or by which it or any of its subsidiaries or any of their respective
properties or assets are bound or affected, or (iii) result in the creation or
imposition of any lien, mortgage, security interest, restriction or other
encumbrance (a "Lien") on it or any of its subsidiaries or any of their
respective assets or properties.
4.3 Consents. Except for (i) applicable requirements of the Securities
Act, the Exchange Act, and filings under state securities or "blue sky" laws,
(ii) approval by the Bankruptcy Court of the Plan and this Agreement and the
entry by the Bankruptcy Court of an order confirming the Plan (the
"Confirmation Order"), (iii) filing with the Secretary of State of the State of
Delaware of the Certificate of Amendment of the Certificate of Incorporation of
the Company with respect to the amendments contemplated by this Agreement, and
(iv) as set forth in Section 4.3 of the Company Disclosure Letter, no consent,
approval or authorization of, or filing with or notification to, any Regulatory
Authority or any third party is required on its part in connection with the
execution, delivery or performance of this Agreement.
4.4 SEC Documents. The Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
under the Securities Act and the Exchange Act since December 31, 1995 (the
"Company SEC Documents"). As of its filing date, each Company SEC Document
filed, as amended or supplemented, if applicable, (i) complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations thereunder, and (ii) did not,
at the time it was filed, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.5 Financial Statements; Absence of Undisclosed Liabilities. The
financial statements of the Company included in the Company SEC Documents
complied as to form, as of their respective dates of filing with the SEC, in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit adjustments). Except
as set forth in Section 4.5 of the Company Disclosure Letter or as reflected in
such financial statements or in the notes thereto, neither the Company nor any
of its subsidiaries has any liabilities of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due
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or to become due, that, individually or in the aggregate, have had or are
reasonably likely to have or result in a Material Adverse Effect.
4.6 Plan Disclosure Documents. The Plan Disclosure Documents will not,
at the date mailed by the Company to the creditors and equity security holders
of the Company, the date the Bankruptcy Court enters the Confirmation Order or
the Closing Date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Plan Disclosure Documents will comply as to form in
all material respects with the provisions of the Securities Act, the Exchange
Act and the Bankruptcy Code and all other rules, regulations, orders or decrees
thereunder.
4.7 Confirmation of Plan. To the knowledge of the officers of the
Company, the Company has not taken any action, or failed to take any action,
which might prevent, materially impede or delay or result in the revocation of
(i) the confirmation of the Plan (as provided in Section 1144 of the Bankruptcy
Code), (ii) a full and complete discharge (to the fullest extent possible under
Section 1141(d) of the Bankruptcy Code) of the debts of the Company intended to
be discharged under the Plan, and (iii) the vesting upon the entry of the
Confirmation Order of the property of the Company in the reorganized Company
free and clear of all claims and interests of creditors and equity security
holders except as otherwise provided in the Plan.
4.8 Compliance with Law. Except as disclosed in the Company SEC Documents
or the Plan Disclosure Documents, neither the Company nor any of its
subsidiaries is in violation of or default under (i) any statute, law,
regulation, rule, judgment, order or decree of any Regulatory Authority
applicable to the Company or any of its subsidiaries or by which any of the
Company or its subsidiaries or any of their respective assets or properties are
bound or affected or (ii) any note, mortgage, indenture, contract, agreement,
permit, lease, license, commitment, understanding or other arrangement to which
the Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or any of their respective assets or properties are
bound or affected, and neither the Company nor any of its subsidiaries has
received any notice alleging noncompliance, except with reference to all the
foregoing where the failure to be in compliance would not, individually or in
the aggregate, have or result in a Material Adverse Effect.
4.9 Environmental Matters. Except as set forth in the Company SEC
Documents and in Section 4.9 of the Company Disclosure Letter:
(a) To the best of the Company's and its subsidiaries' knowledge, after
reasonably diligent inquiry, the Property does not contain, in, on or under,
including, without limitation, the soil and groundwater thereunder, any
Hazardous Materials in violation of Environmental Laws or in amounts that could
give rise to liability under Environmental Laws.
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14
(b) The Company and each of its subsidiaries is in material compliance
with all applicable Environmental Laws, and there is no contamination or
violation of any Environmental Law which could materially interfere with the
continued operation of any of the Properties or have or result in a Material
Adverse Effect.
(c) Neither the Company nor any of the Company's subsidiaries has
received from any Regulatory Authority or other person or entity any complaint,
or notice of violation, alleged violation, investigation or advisory action or
notice of potential liability regarding matters of environmental protection or
permit compliance under applicable Environmental Laws with regard to the
Properties, nor is the Company aware that any such notice is pending or
threatened.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Property in violation of any
Environmental Laws or in a manner that could give rise to material liability
under Environmental Laws nor have any Hazardous Materials been transported or
disposed of from any of the Properties to any other location in violation of
any Environmental Laws or in a manner that could give rise to material
liability under Environmental Laws.
(e) Neither the Company nor any of its subsidiaries is a party to any
administrative actions or judicial proceedings pending under any Environmental
Law with respect to any of the Properties, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to any of the Properties.
(f) There has been no release or threat of release of Hazardous
Materials into the environment at or from any of the Properties, or arising
from or relating to the operations of the Company or any of its subsidiaries, in
violation of Environmental Laws or in amounts that could give rise to material
liability under Environmental Laws.
(g) All information, reports, and other papers and data furnished by
the Company to LGE relating to (x) the environmental conditions on, under or
about the Properties currently or formerly owned, leased, operated to used by
the Company or any of its subsidiaries or any predecessor in interest thereto
and (y) any Hazardous Materials used, managed, handled, transported, treated,
generated, stored, discharged, emitted, or otherwise released by the Company or
any of its subsidiaries or any other person or entity on, under about or from
any Properties currently or formerly owned or leased, or otherwise in
connection with the use or operation of any of the Properties of the Company or
any of its subsidiaries, or their respective businesses and operations were, at
the time the same were so furnished, (i) to the extent prepared by third
parties, to the best of the Company's knowledge, and (ii) to the extent
prepared by the Company, complete and correct in all material respects in light
of all such information, reports and other papers and data taken as a whole at
such time. No fact is
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15
currently known to the officers of the Company which had or resulted in, or
could reasonably be expected to have or result in a Material Adverse Effect.
4.10 Title to New Common Stock. Assuming the entry of the Confirmation
Order, all shares of New Common Stock issued at the Closing pursuant to this
Agreement, will have been duly authorized by all necessary corporate action on
the part of the Company, and, upon such issuance, such shares of New Common
Stock will be validly issued, fully paid and nonassessable, and the issuance of
such shares will not be subject to preemptive rights of any other stockholder
of the Company.
4.11 ERISA Matters. Except as set forth in the Company SEC Documents or
Section 4.11 of the Company Disclosure Letter,
(a) The Company and each ERISA Affiliate and each of their respective
ERISA Plans are in substantial compliance with ERISA and the Code and neither
the Company nor any of its ERISA Affiliates has incurred any accumulated
funding deficiency with respect to any such ERISA Plan within the meaning of
ERISA or the Code. The Company and each of its ERISA Affiliates have complied
with all material requirements of ERISA Sections 601 through 608 and Code
Section 4980B. Neither the Company nor, to the best of the Company's
knowledge, any of its ERISA Affiliates has made any promises of retirement or
other benefits to employees, except as set forth in the ERISA Plans. Neither
the Company nor any of its ERISA Affiliates has incurred any material liability
to the Pension Benefit Guaranty Corporation in connection with any such ERISA
Plan. The assets of each such ERISA Plan which is subject to Title IV of ERISA
are sufficient to provide the benefits under such ERISA Plan, the payment of
which the Pension Benefit Guaranty Corporation would guarantee if such ERISA
Plan were terminated, and such assets are also sufficient to provide all other
"benefit liabilities" (as defined in ERISA Section 4001(a)(16)) due under the
plan upon termination. No Reportable Event has occurred and is continuing with
respect to any such ERISA Plan. No such ERISA Plan or trust created
thereunder, or party in interest (as defined in Section 3(14) of ERISA, or any
fiduciary (as defined in Section 3(21) of ERISA), has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975
of the Code) which would subject such ERISA Plan or any other ERISA Plan of the
Company or any of its ERISA Affiliates, any trust created thereunder, or any
such party in interest or fiduciary, or any party dealing with any such ERISA
Plan or any such trust to any material penalty or tax on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code.
Neither the Company nor any of its ERISA Affiliates is a participant in or is
obligated to make any payment to a Multiemployer Plan.
(b) Neither the approval or execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement will (i)
entitle any individual to severance pay or (ii) accelerate the time of payment
or vesting of, or increase the amount of, compensation due to any individual
(other than in the form of Old Common Stock).
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16
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Letter, there is no strike, walkout or other work stoppage or lockout pending
or, to the knowledge of the Company, threatened against or affecting the
business of the Company or any of its subsidiaries.
4.12 Taxes. Except set forth in Section 4.12 of the Company Disclosure
Letter, all Tax Returns in respect of the Company and its subsidiaries required
to be filed on or before the Closing Date have (or by the Closing Date will
have) been duly and timely filed, except to the extent the failure to file any
such Tax Return would not, individually or in the aggregate, have or result in
a Material Adverse Effect. Except as set forth in Section 4.12 of the Company
Disclosure Letter, all Taxes (whether or not shown on such Tax Returns) due and
payable with respect to the Company and its subsidiaries on or before the
Closing Date have (or by the Closing Date will have) been duly and timely paid.
All Taxes required to be withheld by the Company or any of its subsidiaries on
or before the Closing Date have (or by the Closing Date will have) been duly
and timely withheld and properly paid to the applicable taxing authority.
4.13 Operating Plan. The projections contained in the Operating Plan
represent the Company's good faith estimate of the results of its operations
both before and after the Restructuring for which it believes it has a
reasonable basis. The Company believes that the assumptions which underlie the
projections continue to be reasonable in light of current circumstances.
4.14 Intellectual Property; Licenses. Except as set forth in Section 4.5
of the Company Disclosure Letter, the Company possesses adequate Intellectual
Property to continue to conduct its business as heretofore conducted by it or
as projected to be conducted in the Operating Plan, and all Intellectual
Property existing on the date hereof, together with in the case of patents and
Trademarks, the date of issuance thereof, is listed in Section 4.14 of the
Company Disclosure Letter. With respect to Intellectual Property of the
Company unless such Intellectual Property has become obsolete or is no longer
used or useful in the conduct of the business of the Company:
(a) it is valid and enforceable, is subsisting, and has not been
adjudged invalid or unenforceable, in whole or in part;
(b) the Company has made all necessary filings and recordations to
protect its interest therein, including, without limitation, recordations of
all of its interest in its Patent Property and Trademark Property in the United
States Patent and Trademark Office and, to the extent necessary for the
conduct of the Company's business, in corresponding offices throughout the
world;
(c) except as set forth in Section 4.5 of the Company Disclosure
Letter, the Company is the exclusive owner of the entire and unencumbered
right, title and interest in and
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17
to such Intellectual Property owned by it and no claim has been made that the
use of any of its owned Intellectual Property does or may violate the asserted
rights of any third party; and
(d) the Company has performed, and the Company will continue to
perform, all acts, and the Company has paid and will continue to pay, all
required fees and taxes, to maintain each and every item of such Intellectual
Property in full force and effect throughout the world, as applicable.
The Company owns directly or is entitled to use, by license or otherwise, all
patents, Trademarks, copyrights, mask works, licenses, technology, know-how,
processes and rights with respect to any of the foregoing used in, necessary
for or of importance to the conduct of the Company's business.
4.15 Year 2000. The replacement of business critical software or other
solutions necessary to address the year 2000 issue in respect of such software
is expected to be completed by December 31, 1999. The projected cost to the
Company and its subsidiaries of such replacement or other solution is properly
reflected in the Operating Plan.
ARTICLE V
5.0 Representations and Warranties of LGE. LGE represents and warrants to
the Company that:
5.1 Organization; Authorization; Enforceability. It is a corporation duly
organized and validly existing under the laws of the Republic of Korea and has
all requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
it of this Agreement have been duly authorized by all requisite corporate
action on its part. This Agreement has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms.
5.2 No Conflicts. The execution, delivery and performance of this
Agreement by it will not (i) conflict with or violate its organizational
documents or (ii) subject to the governmental filings and approvals referred to
in Section 5.3, breach or violate any statute, law, rule, regulation, judgment,
order or decree applicable to it or any of its subsidiaries or by which any of
their respective properties are bound or affected.
5.3 Consents. Except for (i) applicable requirements of the Securities
Act, the Exchange Act and filings under state securities or "blue sky" laws,
(ii) approval by the Bankruptcy Court of the Plan and this Agreement and the
entry by the Bankruptcy Court of the Confirmation Order, (iii) filing with the
Secretary of State of the State of Delaware of the Certificate of Amendment of
the Certificate of Incorporation of the Company with respect to
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18
the amendments contemplated by this Agreement, and (iv) as set forth in Section
5.3 of the LGE Disclosure Letter, no consent, approval or authorization of, or
filing with or notification to, any Regulatory Authority (including, without
limitation, any Korean Regulatory Authority) or any third party is required on
its part in connection with the execution, delivery or performance of this
Agreement.
5.4 Plan Disclosure Documents. Those portions of the Plan Disclosure
Documents made in reliance upon and in conformity with information furnished to
the Company by LGE in writing for use in connection with the preparation
thereof will not, at the date mailed by the Company to the creditors and equity
security holders of the Company, the date the Bankruptcy Court enters the
Confirmation Order or the Closing Date, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company
acknowledges that the portions of the Plan Disclosure Documents set forth in
Section 5.4 of the LGE Disclosure Letter constitute the only information
furnished in writing by LGE.
ARTICLE VI
6.0 Agreements of the Company.
6.1 Reorganization Proceedings. The Company shall, and shall cause its
subsidiaries to, use commercially reasonable efforts to consummate the
Financial Restructuring, including, without limitation:
(a) the preparation and filing of the Plan Disclosure Documents with
the SEC as soon as practicable after the date hereof and in no event later than
August 10, 1998, and the clearance of the Plan Disclosure Documents by the SEC;
(b) subject to Section 6.4, the preparation and filing of supplements
or amendments to the Plan Disclosure Documents with the SEC and the clearance of
such supplements or amendments to the Disclosure Statement by the SEC if at any
time prior to the Closing Date any fact, event or development should occur or
exist that is required under the Securities Act, the Exchange Act or the
Bankruptcy Code or the rules and regulations thereunder to be set forth in a
supplement or amendment to the Plan Disclosure Documents;
(c) the solicitation and receipt of the acceptances of the requisite
holders of claims against the Company pursuant to the Plan Solicitation;
(d) the filing with, and approval of, the Bankruptcy Court of the Plan
Disclosure Documents;
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(e) the confirmation of the Plan under the Bankruptcy Code using the
acceptances of the Plan received by the Company pursuant to the Plan
Solicitation; and
(f) the consummation of the transactions provided for in the Plan,
including, without limitation, the transactions described in Section 2 of this
Agreement.
6.2 Compliance with Bankruptcy Code. The Company shall, and shall cause
its subsidiaries, to the extent applicable, to, comply in all material respects
with the Bankruptcy Code and all other laws, rules, regulations, decrees and
orders promulgated thereunder in connection with obtaining the Confirmation
Order.
6.3 Consummation of the Plan. The Company shall, and shall cause its
subsidiaries to, use commercially reasonable efforts to obtain, and shall
obtain, and shall refrain from taking any action that would be likely to
prevent, materially impede or delay or result in the revocation of (i) the
entry by the Bankruptcy Court of the Confirmation Order; (ii) the full and
complete discharge (to the fullest extent possible under Section 1141(d) of the
Bankruptcy Code) of the debts of the Company intended to be discharged under
the Plan; and (iii) the vesting upon the entry of the Confirmation Order of the
property of the Company in the reorganized Company free and clear of all claims
and interests of creditors and equity security holders except as otherwise
provided in the Plan.
6.4 Amendments to Plan and Plan Disclosure Documents. The Company shall
not consent to any amendment or supplement to, or modification of, the Plan or
the Plan Disclosure Documents without the prior written consent of LGE.
6.5 Conduct of the Business. From the date hereof until the Closing Date,
except to the extent that LGE otherwise consents in writing or except as
contemplated or permitted by the Operating Plan or the Financial Restructuring,
(a) the Company shall, and shall cause its subsidiaries to, conduct business in
the ordinary course in substantially the same manner as presently conducted and
use commercially reasonable efforts to keep available the services of Xxxxxxx
X. Xxxxxx and his "Tier 1" and "Tier 2" reports and to preserve the
relationships with key customers, suppliers and others having business dealings
with the Company or its subsidiaries, and (b) the Company shall not, and shall
cause its subsidiaries not to:
(i) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets (other than inventory) in any such case, that would be
material to the Company;
(ii) sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any of the
assets or properties of the Company or its subsidiaries other than in the
ordinary course of business or pursuant to the
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20
Operating Plan or to existing contractual obligations set forth in Section
6.5(ii) of the Company Disclosure Letter for the sale or other disposition of
equipment;
(iii) amend its Certificate of Incorporation, By-laws or other
organizational documents, except as set forth in the Plan;
(iv) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right relating
thereto;
(v) incur any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or indebtedness;
(vi) permit, allow or suffer any of the assets or properties
of the Company or any subsidiary to be subject to any Lien other than Liens (A)
securing debt reflected on the balance sheet of the Company as of December 31,
1997 or the notes thereto or contained in the Company SEC Documents, (B)
referred to in Section 6.5 of the Company Disclosure Letter, (C) for Taxes not
yet due or payable or being contested in good faith, (D) that constitute
mechanics', carriers', workmens' or like Liens, Liens arising under original
purchase price conditional sales and other similar contracts and equipment
leases with third parties entered into in the ordinary course, (E) incurred in
the ordinary course of business consistent with past practice in connection
with workers' compensation, unemployment insurance and social security,
retirement and other legislation and in the case of Liens described in clauses
(B), (C), (D) or (E) that, individually or in the aggregate, would not
reasonably be expected to have or result in a Material Adverse Effect;
(vii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of material value;
(viii) make any change in any method of accounting or
accounting practice or policy, except as may be required by GAAP;
(ix) modify, amend, terminate or permit the lapse of any
material lease of real property (except modifications or amendments associated
with renewals of leases in the ordinary course of business consistent with
past practice of the Company);
(x) enter into any material contract or arrangement;
(xi) enter into any agreement or take any action in violation
of the terms of this Agreement or the Restructuring;
(xii) settle any material tax audit, make or change any
material tax election;
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21
(xiii) hire any new executive officers of the Company or any
of its subsidiaries;
(xiv) except as contemplated by the New Salaried Employee
Documents, (A) grant any director, executive officer or other employee of the
Company or any of its subsidiaries any increase in compensation, except, in the
case of employees who are not executive officers or directors, normal salary
increases consistent with past practice or as was required under employment
agreements or arrangements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents, (B) grant any such
director, executive officer or other employee any severance or termination pay,
except as was required under any employment, severance or termination
agreements or arrangements or plans in effect as of the date of the most
recent audited financial statements included in the Company SEC Documents,
(C) enter into any employment, severance or termination agreement with, or
adopt any plan or arrangement covering, any such director, executive officer,
or employee or (D) adopt any new benefit plan or arrangement (including,
without limitation, an employee benefit plan, a bonus plan, a severance plan
or any equity-based plan) or amend any such plan, except as required by law;
(xv) enter any new line of business; or
(xvi) agree, whether in writing or otherwise, to do any of the
foregoing.
For purposes for this Section 6.5 only, "material" means involving $5 million
or more.
6.6 Employee Matters. On or before August 21, 1998, the Company shall
complete all documents reasonably necessary to implement the newly adopted
compensation, retention and incentive plan for its salaried employees (the "New
Salaried Employee Documents") and such documents shall be satisfactory in form
and substance to LGE.
6.7 Implementation of Operating Plan. The Company shall use its best
efforts to deliver to LGE on August 7, 1998 detailed programs (the
"Implementation Program") (including in all cases, specific actions and
deadlines for such actions and material economic terms) reasonably satisfactory
to LGE for the achievement of each of the following in a manner consistent in
all material respects with the Operating Plan:
(i) the discontinuation of the manufacturing operations of the
Company and its subsidiaries;
(ii) the outsourcing of the production of the Company's products
(including the sourcing of televisions from the Xxxxxxx facility to be
transferred to an LGE affiliate ("LGE Xxxxxxx") on the Closing Date and the
sourcing by LGE Xxxxxxx from a third party of color picture tubes in quantities
and at prices necessary to permit LGE Xxxxxxx to provide such televisions); and
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(iii) the implementation of strategies to maximize the value
of vestigial side band technology.
If the Company does not deliver the final Implementation Program by August 7,
1998, it shall deliver a progress report on such date and deliver the final
Implementation Program to LGE as soon as practicable thereafter, and in any
event prior to August 31, 1998.
6.8 Access and Information. So long as this Agreement remains in effect,
the Company will (and will cause each of its subsidiaries, and each of the
accountants, counsel, consultants, officers, directors, employees, agents and
representatives (the "Representatives") of or to any of the Company and its
subsidiaries, to) give LGE and its Representatives, subject to existing
confidentiality agreements and to be used only for the purposes of this
Agreement and the transactions contemplated hereby, full access during
reasonable business hours to all of their respective properties, assets, books,
contracts, commitments, reports and records relating to the Company and its
subsidiaries, excluding such material which is attorney-client privilege or
attorney work product, and furnish to them, subject to existing confidentiality
agreements and to be used only for the purposes of this Agreement and the
transactions contemplated hereby, all such documents, records and information
with respect to the properties, assets and business of the Company and its
subsidiaries and copies of any work papers relating thereto, excluding such
material which is subject to attorney-client privilege or attorney work
product, as LGE shall from time to time reasonably request. The Company will
keep LGE generally informed as to the affairs of the Company and its
subsidiaries. In addition, the Company shall deliver to LGE, not later than
the 20th business day following the end of each fiscal month prior to the
Closing, financial statements for the Company and its consolidated subsidiaries
as of the end of such fiscal month, together with a certificate of the chief
financial officer of the Company demonstrating in reasonable detail that the
Company is in compliance with the financial covenants set forth in Section
10(f) of this Agreement. The Company will promptly notify LGE if any
information is requested from it or any negotiations or discussions are sought
to be initiated with the Company concerning any merger, consolidation, business
combination, liquidation, reorganization, sale of substantial assets, sale of
shares of capital stock, purchase of claims or similar transactions involving
the Company or any subsidiary or any division of any thereof (an "Alternative
Proposal"), and will promptly communicate to LGE the terms of any proposal or
inquiry which it may receive in respect of any Alternative Proposal.
6.9 Further Actions. The Company shall, and shall cause each of its
subsidiaries to:
(a) use commercially reasonable efforts to take or cause to be taken
all actions, and to do or cause to be done all other things, necessary, proper
or advisable in order for it to fulfill and perform its obligations in respect
of this Agreement, or otherwise to consummate and make effective the
transactions contemplated hereby;
(b) as promptly as practicable, (i) make, or cause to be made, all
filings and submissions required under any applicable law or regulation, and
give such reasonable
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23
undertakings as may be required in connection therewith, and (ii) use all
reasonable efforts to obtain or make, or cause to be obtained or made, all
permits necessary to be obtained or made by the Company or any of its
subsidiaries, in each case in connection with this Agreement, the Plan, or the
consummation of the other transactions contemplated hereby or thereby;
(c) coordinate and cooperate with LGE in exchanging such information
and supplying such reasonable assistance as may be reasonably requested by LGE
in connection with the filings and other actions contemplated by this Agreement;
(d) not issue any press release or make any other public statement
regarding the Restructuring without the prior consent of LGE or except as
otherwise required by law (provided that in such an event the Company shall
give advance notice to LGE of any such release or statement); and
(e) the Company shall promptly notify LGE in writing of any fact,
condition, event or occurrence that could reasonably be expected to result in
the failure of any of the conditions contained in Sections 8, 9 and 10 to be
satisfied, promptly upon becoming aware of the same.
6.10 Operating Plan. As soon as practicable after the end of each fiscal
month, and in no event later than the 20th business day after the end thereof,
the Company shall deliver to LGE a certificate of the Company, duly executed by
the President, the chief financial officer and the restructuring officer,
restating the representations and warranties contained in Section 4.13 of the
Agreement.
6.11 Leveraged Lease Documents. From the date hereof through the Closing,
except as otherwise consented to in writing by LGE, the Company and its
subsidiaries shall perform all of their respective obligations under and comply
with all terms and provisions of the Leveraged Lease Documents other than its
obligation to pay Basic Rent (as defined therein) thereunder.
6.12 Interest Charges. The Company will pay LGE each month in arrears (a)
all interest accruing on amounts owed but unpaid by the Company to LGE under
the Reimbursement Agreement and (b) up to $2,635,468 of interest accruing on
amounts owed but unpaid by the Company to LGE under the Financial Support
Agreement.
ARTICLE VII
7.0 Agreements of LGE.
7.1 Voting. Subject to compliance with applicable bankruptcy and
non-bankruptcy laws, LGE hereby agrees to vote all claims against and interests
in the Company that it holds in favor of the Plan to effectuate this Agreement
and the Financial Restructuring.
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7.2 Further Action. LGE shall, and shall cause each of its subsidiaries
to, use commercially reasonable efforts to take or cause to be taken all
actions, and to do or cause to be done all other things, necessary, proper or
advisable in order for it to fulfill and perform its obligations in respect of
this Agreement, or otherwise to consummate and make effective the transactions
contemplated hereby, including without limitation:
(a) as promptly as practicable, (i) make, or cause to be made, all
filings and submissions required under any applicable law or regulation
(including any Korean law or regulation), and give such reasonable
undertakings as may be required in connection therewith, and (ii) use all
reasonable efforts to obtain or make, or cause to be obtained or made, all
permits necessary to be obtained or made by LGE or any of its subsidiaries,
including such permits as are required from any Korean Regulatory Authority,
in each case in connection with this Agreement, the Plan, or the consummation
of the other transactions contemplated hereby or thereby.
(b) make all necessary and desirable appearances before the Bankruptcy
Court and participate in the bankruptcy case;
(c) make in a timely fashion all necessary and desirable applications
and notices to any applicable entities in the United States for approval of this
Agreement and the transactions contemplated hereby, including, if applicable,
notice in accordance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976;
(d) promptly notify the Company in writing of any fact, condition,
event, or occurrence that could reasonable be expected to result in the
failure of any of the conditions contained in Sections 8 and 9 to be satisfied,
promptly upon becoming aware of the same; and
(e) to obtain, and to refrain from taking any action that would be
likely to prevent, materially impede or delay or result in the revocation of
(i) the entry by the Bankruptcy Court of the Confirmation Order; (ii) the full
and complete discharge (to the fullest extent possible under Section 1141(d) of
the Bankruptcy Code) of the debts of the Company intended to be discharged under
the Plan; and (iii) the vesting upon the entry of the Confirmation Order of the
property of the Company in the reorganized Company free and clear of all claims
and interests of creditors and equity security holders in accordance with the
Plan.
7.3 Information. So long as this Agreement remains in effect, LGE shall
coordinate and cooperate with the Company or its agents in exchanging such
information and supplying such reasonable assistance as may be reasonably
requested by the Company in connection with the filings and other actions
contemplated in this Agreement. LGE shall also, as the Company may from time
to time reasonably request, timely provide the Company with any requested
information regarding LGE's performance under this Agreement, LGE's ability to
perform under this Agreement, LGE's ability to satisfy the conditions set forth
in Section 9, and other matters in any way related to this Agreement and the
transactions contemplated hereby.
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7.4 Release of Zenith Texas. LGE hereby agrees to release Zenith Texas
upon consummation of the transactions contemplated by Sections 2(b) and 2(c)
from any claims of LGE against Zenith Texas arising as a result of the
satisfaction by LGE of Zenith Texas' obligations under the Leveraged Lease
Documents.
ARTICLE VIII
8.0 Conditions to Obligations of the Parties. The Company and LGE shall
perform their obligations under this Agreement and implement the transaction
contemplated hereby in good faith and in accordance with the standards of fair
dealing. The obligations of the Company and LGE to consummate the transactions
contemplated to occur at the Closing shall be subject to the satisfaction or
waiver prior to the Closing of each of the following conditions; any of which
may be waived by the written consents of the Company and LGE to the extent
permitted by applicable law without the necessity for notice to, or approval
from, the Bankruptcy Court or any other party.
(a) Approvals. All material authorizations, permits, consents, orders or
approvals of, or registrations, declarations or filings with, or expirations of
applicable waiting periods imposed by, any Regulatory Authority (including,
without limitation, the United States and the Republic of Korea) necessary for
the consummation of the transactions contemplated hereby (collectively, the
"Requisite Approvals"), shall have been obtained or filed or shall have
occurred, and such Requisite Approvals shall not contain any condition or
restriction that is reasonably likely to have or result in a Material Adverse
Effect or impair the Company's ability to carry on its business as contemplated
by the Operating Plan.
(b) No Litigation, Injunctions, or Restraints. Consummation of the
transactions contemplated hereby or by the Plan shall not have been restrained,
enjoined or otherwise prohibited or made illegal by any applicable law, rule or
regulation, including any order, injunction, decree or judgment of any
Regulatory Authority; and no such law, rule, regulation, order, injunction,
decree or judgment that would have such an effect shall have been promulgated,
entered, issued or determined by any Regulatory Authority to be applicable to
this Agreement or the Plan. No action or proceeding shall be pending or
threatened by any Regulatory Authority or other person or entity on the Closing
Date before any Regulatory Authority to restrain, enjoin or otherwise prevent
the consummation of the transactions contemplated hereby or by the Plan or to
recover any material damages or to obtain other material relief as a result of
such transactions, or that otherwise relates to the application of such law,
rule or regulation.
(c) Confirmation of Plan and Entry of Confirmation Order. The Plan shall
have been confirmed by the Bankruptcy Court and the Confirmation Order, in form
and substance satisfactory to LGE and the Company, shall have been entered.
Any motion for rehearing or reconsideration of the Confirmation Order shall
have been denied or withdrawn.
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The time allowed for appeals of the Confirmation Order shall have expired
without any appeal having been taken or, if the Confirmation Order shall have
been appealed, a final order of the district court having jurisdiction to hear
such appeal shall have affirmed the Confirmation Order and the time allowed to
appeal from such affirmance or to seek review or rehearing thereof shall have
expired and no further hearing, appeal or petition for certiorari can be taken
or granted. The Confirmation Order shall not have been modified, amended,
dissolved, revoked or rescinded, shall be in full force and effect on the
Closing Date and, without the necessity of any further action or proceedings by
the Company, the Bankruptcy Court shall have (x) as of the date of the
Confirmation Order and as of the Closing Date, effected a full and complete
discharge and release of, and thereby extinguished, all debts of the Company
(to the fullest extent possible under Section 1141(d)(1) of the Bankruptcy
Code) except as otherwise provided in the Plan and (y) vested the property of
the Company in the reorganized Company, free and clear of all claims and
interests of creditors and equity security holders except as otherwise provided
in the Plan and the Confirmation Order. The Plan shall have been substantially
consummated (other than the occurrence of the Closing hereunder).
(d) HSR Act Notification. The notifications of the Company and LGE
pursuant to the HSR Act, if any, shall have been made and the applicable
waiting period and any extensions thereof shall have expired or been
terminated.
(e) Releases. The Plan will contain releases, satisfactory in form and
substance to LGE and the Company in their respective sole discretion, from the
Company and its creditors of any and all claims and liabilities against the
individual members of the Company's Board of Directors, the Company and LGE and
their respective associates, affiliates, subsidiaries, officers, directors,
stockholders, representatives, employees, attorneys, financial or investment
advisors, consultants, accountants or agents, and their respective successors
and assigns.
ARTICLE IX
9.0 Conditions to the Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated to occur at the Closing
shall be subject to the satisfaction or waiver prior to the Closing of each of
the following conditions, any of which may be waived in writing by the Company
by notice to LGE, without the necessity for notice to, or approval from, the
Bankruptcy Court or any other party:
(a) Representations and Warranties. The representations and warranties of
LGE set forth in this Agreement that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Agreement and as of the time
of the Closing as though made at and as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties that are qualified as to materiality
shall be true and
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correct and those that are not so qualified shall be true and correct in all
material respects, on and as of such earlier date), and the Company shall have
received a certificate signed by a duly authorized officer of LGE to such
effect.
(b) Performance of Obligations. LGE shall have performed or complied in
all material respects with all obligations and covenants required to be
performed or complied with by it under this Agreement.
ARTICLE X
10.0 Conditions to the Obligations of LGE. The obligations of LGE to
consummate the transactions contemplated to occur at the Closing shall be
subject to the satisfaction or waiver prior to the Closing of each of the
following conditions, any of which may be waived in writing by the LGE by
notice to Company, without the necessity for notice to, or approval from, the
Bankruptcy Court or any other party:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and those that are not so qualified shall be true
and correct in all material respects, as of the date of this Agreement and as
of the time of the Closing as though made at and as of such time, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, on and as of such earlier
date), and LGE shall have received a certificate of the Company signed by the
chief executive officer and chief financial officer of the Company to such
effect.
(b) Performance of Obligations. The Company shall have performed or
complied in all material respects with all obligations and covenants required
to be performed or complied with by the Company under this Agreement, and LGE
shall have received a certificate of the Company signed by the chief executive
officer and chief financial officer of the Company to such effect.
(c) Management. Xxxxxxx X. Xxxxxx and his "Tier 1" and "Tier 2" reports
shall not have resigned or indicated an intention to resign or, if any such
officer or employee shall have resigned, the Company shall have engaged a
replacement reasonably satisfactory to LGE.
(d) New Financing. The Company shall have entered into definitive
documentation with third parties for new senior financing on the terms
reasonably satisfactory to LGE in an amount of not less than $100 million and
such definitive documentation shall be reasonably satisfactory in form and
substance to LGE.
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(e) Operating Plan. (i) All material changes to the Operating Plan shall
be satisfactory to LGE.
(ii) The Company shall have implemented the programs
contemplated by the Implementation Program in a manner satisfactory to LGE.
(iii) The Company and its subsidiaries shall have entered into, as
contemplated by the timetable in the Operating Plan, binding commitments for
the sale or liquidation of those non-essential assets to be disposed of
pursuant to the Operating Plan prior to the Closing Date at prices consistent
with the assumptions set forth in the Operating Plan for the 1999 fiscal year.
(f) Operating Results. The Company's operating results shall be
consistent with the Operating Plan in the following respects:
(i) the projected Cumulative Funding Requirement from April 1, 1998
through December 31, 1998 shall not exceed $94 million;
(ii) the actual Cumulative Funding Requirement for any three-month
period commencing with the three-month period beginning April 1, 1998 shall
not have exceeded the projections in the Operating Plan by more than 20%;
(iii) the projected cumulative EBITDA (loss) from April 1, 1998
through December 31, 1998 shall not exceed $(33) million; and
(iv) the actual EBITDA (loss) for any three-month period commencing
with the three-month period beginning April 1, 1998 shall not have exceeded
the loss projected by the Operating Plan by more than 20%.
(g) Contingent Liabilities. The Company shall not have any material
contingent liabilities (including environmental liabilities) other than
liabilities disclosed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 included in the Company SEC Documents or in
Section 4.5 of the Company Disclosure Letter.
(h) Condition of Assets. On or before August 11, 1998, Xxxxxx Xxxxxxxx
LLP ("AA") shall have issued a report on certain accounts of the Company as of
the June 27, 1998 balance sheet of the Company, which report shall cover the
items described in a letter, dated June 15, 1998, from AA to Xxx X. Xxxxx and
Xxxxxx X. Xxxxxxxxxx, and which report shall be satisfactory to LGE.
(i) Restructuring Costs. Actual and projected cash Restructuring Charges
from January 1, 1998 through December 31, 1998 shall not exceed $39 million and
the sum of
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the projected cash Restructuring Charges and non-cash accruals for
environmental costs for 1998 and 1999 will not exceed $127 million.
(j) Plan Disclosure Documents. The Company shall have filed with the SEC
the Plan Disclosure Documents, which shall be reasonably satisfactory in form
and substance to LGE.
(k) Definitive Agreements. The Company and LGE shall have (i) entered
into the Xxxxxxx Purchase Agreement, which shall contain provisions identifying
the products to be provided by LGE or its affiliate from the Xxxxxxx facility
to the Company and the prices at which such products will be supplied, or the
Xxxxxxx Operating Agreement, as the case may be, and (ii) the New Salaried
Employee Documents, all of which shall be satisfactory in form and substance to
LGE.
(l) Opinion of the Company's Counsel. LGE shall have received opinions
dated the Closing Date of the general counsel of the Company, and special
counsel to the Company, in form and substance reasonably satisfactory to LGE.
(m) Corporate Proceedings. All corporate proceedings of the Company and
its subsidiaries in connection with the transactions contemplated by this
Agreement and the Financial Restructuring, and all documents and instruments
incident thereto, shall be satisfactory in form and substance to LGE and its
counsel, and LGE and its counsel shall have received all such documents and
instruments, or copies thereof, certified or requested, as may be reasonably
requested.
(n) Material Adverse Effect. No state of facts, event, change or
development shall exist or have occurred which would reasonably be expected to
have or result in a Material Adverse Effect subsequent to the date of this
Agreement.
(o) Calamities. There shall not have occurred (i) any increase or
decrease of 20% or more in the United States/Republic of Korea currency
exchange rate from the rate existing on the date hereof or a suspension of, or
limitation on, the markets therefor, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States or the
Republic of Korea, (iii) any limitation (whether or not mandatory) by any
Regulatory Authority or other event that materially adversely affects the
ability of LGE to consummate the transactions contemplated hereby, or (iv) a
commencement of a war or armed hostilities or other national or international
calamity involving the United States or the Republic of Korea.
(p) Settlement. Any settlement arrangements with respect to licensing of
technology entered into by the Company with the Sony Corporation or any of its
affiliates shall be satisfactory in form and substance to LGE.
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30
(q) Tuner Patent Royalties. LGE shall have determined in its sole
discretion that the aggregate tuner patent royalties between the Closing Date
and December 31, 2003 will not be less than 70% of the aggregate amount of such
royalties projected under the Operating Plan.
(r) Cross Defaults. No default or event of default shall have occurred
and be continuing under any of the Company's financing arrangements or any
other agreement that is material to the Company to which the Company or any of
its subsidiaries is a party or by which any of them is bound.
ARTICLE XI
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of LGE and the Company;
(b) by LGE or the Company:
(i) if the Closing shall not have occurred prior to December 15, 1998,
provided, that the right to terminate this Agreement pursuant to this clause
(i) shall not be available to any party whose failure to fulfill any obligation
under this Agreement results in the failure of the Closing to occur; or
(ii) if there shall be any statute, law, regulation or rule that makes
consummating the transactions contemplated hereby illegal or if any court or
other Regulatory Authority of competent jurisdiction shall have issued a
judgment, order, decree or ruling, or shall have taken such other action
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby and such judgment, order, decree or ruling
shall have become final and non-appealable;
(c) by LGE:
(i) if the Company shall have failed to perform in any material respect
any of its obligations hereunder or shall have breached in any respect any
representation or warranty contained herein qualified by materiality or shall
have breached in any material respect any representation or warranty not so
qualified, and the Company has failed to perform such obligation or cure any
such breach capable of being cured, within 30 days of its receipt of written
notice thereof from LGE, and such failure to perform shall not have been waived
in accordance with the terms of this Agreement;
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31
(ii) if the Board of Directors of the Company or the Special Committee
withdraws or modifies (or publicly announces its intention to do so, or
resolves to do so) in a manner adverse to LGE (as determined by LGE in its
reasonable judgment) its approval or recommendation of this Agreement or the
transactions contemplated hereby or by the Restructuring; or
(iii) if any of the conditions set forth in Sections 8 and 10 shall become
impossible to fulfill (other than as a result of any breach by LGE of the terms
of this Agreement) and shall not have been waived in accordance with the terms
of this Agreement;
(d) by the Company:
(i) if LGE shall have failed to perform in any material respect any of its
obligations hereunder or shall have breached in any respect any representation
or warranty contained herein qualified by materiality or shall have breached in
any material respect any representation or warranty not so qualified, and LGE
have failed to perform such obligation or cure any such breach capable of being
cured, within 30 days of its receipt of written notice thereof from the
Company, and such failure to perform shall not have been waived in accordance
with the terms of this Agreement;
(ii) if any of the conditions set forth in Sections 8 and 9 shall become
impossible to fulfill (other than as a result of any breach by the Company of
the terms of this Agreement) and shall not have been waived in accordance with
the terms of this Agreement; or
(iii) if there is an Alternative Proposal which the Board of Directors in
good faith determines represents a superior transaction for the Company as
compared to the Financial Restructuring and the Board of Directors determines,
after consultation with counsel, that failure to terminate this Agreement would
be inconsistent with the compliance by the Board of Directors with its
fiduciary duties imposed by law; provided, however, that the right to terminate
this Agreement pursuant to this Section 11.1(d) shall not be available (i) if
the Alternative Proposal is subject to a financing condition, unless the Board
of Directors is of the opinion, after consultation with Xxxxx X. Xxxxxxx &
Company or another nationally recognized investment banking firm, that the
Alternative Proposal is financeable, or (ii) if, prior to or concurrently with
any purported termination pursuant to this Section 11.1(d), (x) the Company or
the person or entity that made the Alternative Proposal (the "New Investor")
shall not have paid the expenses and fees contemplated by Section 11.3 and (y)
the Company and the New Investor shall not have entered into a legal, valid and
binding agreement with LGE pursuant to which such New Investor agrees to pay
LGE the Transaction Fee contemplated by Section 11.3 upon the earlier of (A)
the consummation of such Alternative Proposal and (B) the termination of such
Alternative Proposal, or (iii) if the Company has not provided LGE with five
business days' prior written notice of its intent to so terminate this
Agreement together with a summary of the material terms and conditions of such
Alternative Proposal.
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11.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or LGE as provided in Section 11, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of LGE or the Company with respect to the transactions contemplated
under this Agreement, other than the provisions of this Article XI and Article
XII and except to the extent that such termination results from the wilful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
11.3 Expenses; Transaction Fee. (a) In the event that (i) the Board of
Directors of the Company or the Special Committee shall have withdrawn or
modified in a manner adverse to LGE its approval of this Agreement or the
transactions contemplated hereby or by the Restructuring and LGE terminates the
Agreement pursuant to Section 11(c)(ii), or (ii) the Bankruptcy Court approves,
or enters an order authorizing, an offer, proposal or agreement to effect an
Alternative Proposal, or (iii) during the period ending twelve months after the
termination of this Agreement, the Company consummates, becomes a party to or
enters into an agreement relating to or publicly announces, an Alternative
Proposal, the Company shall promptly, but in no event later than three business
days after the first of such events to occur, reimburse LGE and its affiliates
for all reasonable out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to all banks, investment banking firms
and other financial institutions and their respective agents and counsel, for
structuring the transactions contemplated hereby and all reasonable fees of
counsel, accountants, experts and consultants to LGE and its affiliates, and
all printing and advertising expenses) incurred or accrued by it or on its
behalf in connection with the negotiation, preparation, execution and
performance of this Agreement and the Restructuring (the "Transaction
Expenses"), provided, however, that LGE shall not be entitled to such
Transaction Expenses if the Company terminates this Agreement due to a material
breach by LGE of its obligations under this Agreement.
(b) In the event that during the twelve months after the termination of
this Agreement the Company consummates, becomes a party to or enters into an
agreement relating to, or publicly announces, an Alternative Proposal, the
Company shall, or shall cause the New Investor to, pay LGE a transaction fee of
$8 million (the "Transaction Fee") upon the earlier of (x) the consummation of
such Alternative Proposal or (y) the termination of such Alternative Proposal.
(c) The Transaction Expenses and Transaction Fee, if any, payable pursuant
to this Section 11.3 shall not be subject to any offset, return, recoupment or
counterclaim. The Company and LGE agree that the provisions of this Section
11.3 are commercially reasonable and necessary to induce LGE to enter into and
consummate the transactions contemplated hereby.
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33
ARTICLE XII
12.1 Notices. All notices and other communications made in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given if (a) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (b) transmitted by hand delivery, (c) sent
by next-day or overnight mail or delivery, (d) transmitted by facsimile or (e)
sent by telecopy or telegram, addressed as follows:
(i) if to LGE,
LG Electronics Inc.
LG Twin Towers
00, Xxxxx-xxxx
Xxxxxxxxxxx-xx
Xxxxx, Xxxxx 150-721
Telecopy: 011-82-2-3777-5303
Telephone: 000-00-0-0000-0000
Attention: Chief Financial Officer
and to:
LG Electronics Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 000000
Telecopy: 000-000-0000
Telephone: 000-000-0000
Attention: Xxx X. Xxx
with copies to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Xxx.
- 00 -
00
(xx) if to the Company,
Zenith Electronics Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, General Counsel
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxx X.X. Xxxxxxxxxx
or, in each case, at such other address as may be specified in writing to the
other party hereto in accordance with this Section 12.1.
12.2 Governing Law. This agreement shall be governed by the internal laws
of the State of Delaware without giving effect to the conflict of laws rules
thereof.
12.3 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were
not to be performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
12.4 Miscellaneous. This Agreement (including the Annexes hereto) and
the Disclosure Letters constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof. In the event of any conflict between
this Agreement and the Commitment Letter between the Company and LGE relating
to the subject matter of Section 2(e), this Agreement shall govern. If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors and permitted
assigns. Nothing in this Agreement shall confer any rights upon any person or
entity other than the parties hereto and their respective heirs, successors and
permitted assigns. No consequential, punitive or exemplary damages shall under
any circumstances be recoverable by either party in respect of any claim
pursuant to this Agreement or in connection with the
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consummation of or any failure to consummate the transactions contemplated
hereby. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall together constitute one and the same
instrument. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement. None of the terms of this Agreement may be waived, altered or
amended except by an instrument in writing duly executed by the parties hereto.
No failure or delay in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity or otherwise. All information set forth in
any of the Annexes hereto or in any Section of the Company Disclosure Letter
shall be deemed as if also set forth in each and all of the Annexes hereto and
each and all Sections of the Company Disclosure Letter, whether actually set
forth therein or not. The Company and LGE agree that the representations and
warranties and the Operating Plan of the Company shall not be affected or
deemed waived, modified, qualified or supplemented by reason of (i) any
disclosure by the Company or any of its advisors, consultants or
representatives to LGE or any of LGE's advisors, consultants or representatives
(other than as set forth in this Agreement, the Company Disclosure Letter
hereto or in the Company SEC Documents as of the date hereof), (ii) any
investigation made by or on behalf of LGE or any of its advisors, consultants
or representatives or (iii) the fact that LGE or any of such advisors,
consultants or representatives knew or should have known that any such
representation or warranty or the Operating Plan is or might be inaccurate.
12.5 Recommendations. Notwithstanding anything else contained in this
Agreement, either the Board of Directors of the Company or the Special Committee
may at any time withdraw or modify its approval or recommendation of this
Agreement or the transactions contemplated hereby or by the Restructuring in the
event that it determines, after consultation with counsel, that failure to so
withdraw or modify its recommendation would not be consistent with compliance
with its fiduciary duties imposed by law; provided, however, that such
withdrawal or modification shall not in any manner release the Company from its
obligations under this Agreement unless LGE exercises its right to terminate
this Agreement pursuant to Section 11.1(c)(ii), in which case Article XI shall
govern.
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IN WITNESS WHEREOF, the Company and LGE have caused this Agreement to be
duly executed as of the day and year first above written.
ZENITH ELECTRONICS CORPORATION
By /s/ XXXXXXX X. XXXXXX
------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
LG ELECTRONICS INC.
By /s/ CHA HONG (XXXX) XXX
------------------------
Name: Cha Hong (Xxxx) Koo
Title: President and Chief Executive Officer
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37
Annexes
Annex A Operating Plan
Annex B The Proposal
Annex C Terms of Senior Secured PIK Notes
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38
Annex C
PRINCIPAL TERMS OF SENIOR SECURED PIK NOTES
Issuer: The Company
Maturity: Tenth anniversary of Closing Date.
Rate: LIBOR + 6.5% payable quarterly.
Interest will be payable in cash only to
the extent that the EBITDA/Cash Interest
Expense Ratio for the immediately
preceding four fiscal quarters exceeds
1.5. Otherwise interest will be payable
in kind.
Ranking: Pari passu with all existing and future
senior debt of the Company and senior to
all subordinated debt of the Company.
Collateral and Guarantees: Second lien on all assets of the Company
and its subsidiaries other than
receivables and inventory. Guaranteed
by each of the Company's subsidiaries.
Mandatory Prepayments: On sale of assets and out of excess cash.
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