THIS AGREEMENT is made as of November 3, 1997 (as from time to time
amended, supplemented or otherwise modified, this "Agreement") between LG
Electronics Inc. ("LGE") and Zenith Electronics Corporation ("Zenith").
WHEREAS, Zenith from time to time may apply to LGE to guarantee up to
$160,000,000 of unsecured credit facilities for Zenith, and LGE may in its sole
discretion in each instance determine whether to issue each such guarantee; and
WHEREAS, Zenith and LGE desire to enter into this Agreement to set forth
the terms and provisions pursuant to which any such guarantees may be issued by
LGE and reimbursed by Zenith;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, LGE and Zenith agree as
1. GUARANTEES AND SECURITY DOCUMENTS.
1.1 Unless otherwise defined herein or in the Security Documents
referred to below, capitalized terms where used herein or in the Security
Documents shall have the meaning set forth in that certain Credit Agreement,
dated as of March 31, 1997, with Citicorp North America, Inc., as Agent, and
the other lenders parties thereto, as in effect on the date hereof without
giving effect hereafter to changes in said definitions not consented to in
writing by LGE for purposes of this Agreement.
1.2 Each guarantee requested by Zenith shall be substantially in the
form of Exhibit A hereto, with such modifications thereto as shall be agreed to
by LGE (individually a "Guarantee" and collectively the "Guarantees"). Zenith
shall not request issuance of any Guarantee except to lenders which extend
prior to December 31, 1997 unsecured credit facilities on terms substantially
the same as set forth in Exhibit B hereto ("Credit Facilities") to Zenith for
its working capital needs. Zenith shall not request Guarantees in an aggregate
principal amount outstanding at any one time in excess of $160,000,000.
1.3 Zenith agrees to reimburse LGE, immediately upon demand, for any
and all payments made from time to time by LGE under the Guarantees, with
interest on the amounts so paid by LGE from and including the date paid by LGE
to but not including the date LGE is reimbursed therefor, at the Reference Rate
(hereinafter defined) in effect on the date of payment plus two percent (2%) per
annum; Zenith's obligations under this Section 1.3 shall be referred to
collectively as the "Reimbursement Obligations." "Reference Rate" means at any
time, the rate of interest then most recently announced by Bank of America
National Trust and Savings Association at Chicago, Illinois as its reference
1.4 The Reimbursement Obligations shall be secured by a valid and
continuing security interest in and lien on certain assets of Zenith and its
Material Subsidiaries, including, without limitation, all equipment, real
estate, certain general intangibles and stock of domestic Subsidiaries. Such
security interests and liens shall be prior to all other security interests and
liens other than those in favor of the Agent and Permitted Liens, all pursuant
to a security agreement by Zenith, a stock pledge agreement by Zenith, a
subsidiary security agreement by Material Subsidiaries, a mortgage by Zenith and
the Material Subsidiaries and any other documents required by LGE (together with
all UCC-1 financing statements and any other document, instrument or agreement
in connection therewith, as the same may be amended or modified from time to
time hereinafter collectively called the "Security Documents"). LGE
acknowledges that LGE's liens and security interests shall be subject to a
subordination agreement with the Agent, in form and substance satisfactory to
the Agent and LGE (the "Subordination Agreement").
1.5 The payment by Zenith of the Reimbursement Obligations under this
Agreement shall be absolute, unconditional, and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, including, without limiting the generality of the foregoing, the
(a) any lack of validity or enforceability of any term or provision of any
of the Guarantees, this Agreement, or any other instrument, document, or
agreement entered into in connection therewith;
(b) the existence of any claim, setoff, right of recoupment, defense or
other right of Zenith against LGE or any other person or entity, whether in
connection with this Agreement or otherwise, all of which are hereby
(c) any amendment or waiver of, any full or partial release of any
collateral under, or any consent to departure from the terms or conditions
of any of the Security Documents;
(d) any decision by LGE not to issue a Guarantee in any particular
(e) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing; or
(f) notwithstanding anything to the contrary set forth above, the payment
by Zenith of the Reimbursement Obligations shall at all times be subject to
the terms of the Subordination Agreement.
2. GUARANTEE FEE AND INTEREST CALCULATION.
2.1 Zenith agrees to pay LGE a guarantee fee, as set forth in a
letter agreement between LGE and Zenith attached hereto as Exhibit C.
2.2 Interest shall be computed on the basis of a year consisting of
360 days and paid for actual days elapsed.
3. PAYMENTS AND OFFSET.
3.1 All payments hereunder shall be made to LGE in immediately
available funds at such place as may be designated by LGE to Zenith in writing.
3.2 In addition to, and not in limitation of, all rights of offset or
recoupment that LGE may have under applicable law, unless otherwise expressly
waived by LGE in writing, LGE shall have the right to appropriate and apply to
the payment of Zenith's obligations hereunder any and all balances, credits,
deposits, accounts or moneys of Zenith then or thereafter with or owing by LGE.
4. WARRANTIES. To induce LGE to enter into this Agreement and to execute
and deliver Guarantees, Zenith warrants that:
4.1 Zenith and all of its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the states of
their respective incorporation, and they are duly qualified and in good standing
as foreign corporations authorized to do business in each state where, because
of the nature of their respective activities or properties, such qualification
4.2 Zenith is duly authorized to execute and deliver this Agreement
and the Security Documents and is and will continue to be duly authorized to
perform its obligations under this Agreement and the Security Documents in
accordance with its respective terms.
4.3 The execution and delivery of this Agreement and the Security
Documents, and the performance by Zenith of its obligations under this Agreement
and the Security Documents, do not and will not conflict with any provision of
law or of Zenith's charter or by-laws or of any agreement binding upon Zenith,
except under Series 2000 Debentures and Series 2001 Debentures.
4.4 This Agreement and the Security Documents, when duly executed and
delivered by Zenith and its Material Subsidiaries, as the case may be, will be
legal, valid and binding obligations of Zenith and the Material Subsidiaries to
the extent such persons are parties thereto enforceable against Zenith and the
Material Subsidiaries, as the case may be, in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity.
5. CONDITIONS PRECEDENT TO ISSUANCE OF GUARANTEES. Although LGE shall
have no obligation to issue any Guarantee, but reserves the right to issue
Guarantees in its discretion in each instance, it is understood and agreed that
LGE will not issue any Guarantee unless
at the time of such issuance:
5.1 The warranties contained in Section 4 hereof shall be true and
5.2 Zenith shall have delivered to LGE:
(a) A copy, duly certified as of the date hereof by Zenith's secretary or
assistant secretary, of (i) the resolutions of the Zenith's Board of
Directors authorizing the execution and delivery of this Agreement and
Security Documents, (ii) all documents evidencing other corporate action,
and (iii) all approvals or consents, if any, with respect to this Agreement
and the Security Documents.
(b) A certificate of Zenith's secretary or assistant secretary, dated the
date hereof, certifying the names of the Zenith's officers authorized to
sign this Agreement and the Security Documents and all other documents or
certificates to be delivered hereunder, together with the true signatures
of such officers.
(c) Duly executed Security Documents covering such collateral as is
satisfactory to LGE, together with the Subordination Agreement, all in form
and substance satisfactory to LGE and its counsel.
(d) A legal opinion from counsel to Zenith in form and substance
satisfactory to LGE.
6.1 No amendment or waiver of any provision of this Agreement nor
consent to any departure by Zenith therefrom shall be effective unless the same
shall be in writing and signed by LGE, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
6.2 This Agreement is a continuing agreement and shall inure to the
benefit of and be binding on the parties hereto, their respective successors,
transferees and assigns; provided, that except as otherwise permitted by this
Agreement, Zenith may not assign any of its rights or delegate any of its
obligations to or under all or any part of this Agreement without the prior
written consent of LGE.
6.3 Zenith agrees to pay on demand all reasonable costs and expenses
in connection with the negotiation, preparation, execution, delivery and
enforcement of this Agreement, the Security Documents and any other documents
which may be delivered in connection with this Agreement and the Security
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for LGE with respect thereto and with respect to advising
LGE as to its rights and responsibilities under this Agreement and the Security
Documents and all costs and expenses, if any, in connection with the enforcement
of this Agreement, the Security Documents
and such other documents which may be delivered in connection with this
Agreement and the Security Documents. In addition, Zenith shall pay any and all
stamp and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement and the
Security Documents and such other documents and agrees to save LGE harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
6.4 Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
6.5 LGE's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies LGE may have under
any other agreement, including the Guarantees and Security Documents, or by
operation of law or otherwise.
6.6 This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
6.7 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and shall be binding upon the
parties, their successors and permitted assigns.
6.8 All notices under this Agreement or the Security Documents shall
be in writing and shall be deemed to have been given five (5) days after deposit
in the mail, or one (1) day after being entrusted to a reputable commercial
overnight delivery service, or when sent out by telex or telecopy addressed to
the party to which such notice is directed at its address.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused it to be executed and delivered by their duly authorized officers, all as
of the day and year first above written.
LG ELECTRONICS INC.
ZENITH ELECTRONICS CORPORATION