FINANCIAL SUPPORT AGREEMENT
THIS FINANCIAL SUPPORT AGREEMENT (this "Agreement")
is entered into as of March 31, 1997 between LG ELECTRONICS INC.,
a Korean corporation ("LGE"), and ZENITH ELECTRONICS
CORPORATION, a Delaware corporation ("Zenith").
W I T N E S S E T H:
WHEREAS, LGE, with its associated company, LG Semicon Co.,
Ltd., currently owns a majority of the issued and outstanding capital stock
of Zenith; and
WHEREAS, Zenith has requested certain financial support from
LGE and LGE has agreed to provide such support in consideration of the
issuance of the stock options to LGE as herein provided;
NOW, THEREFORE, in consideration of the foregoing premises
and the representations, warranties and covenants set forth in this
Agreement, LGE and Zenith hereby agree as follows:
1. Parent Undertaking - Securitization Transactions. LGE
shall, at the request of Zenith, provide a performance undertaking (the
"Performance Undertaking") to the trustee (the "Trustee") of a trust to be
formed for the purpose of establishing securitization program of trade
receivables (the "Receivables") of Zenith and certain of its subsidiaries
(collectively, the "Originators") in an aggregate principal amount not to
exceed U.S. $200 million at any one time outstanding, pursuant to which
LGE shall unconditionally and irrevocably undertake for the benefit of the
Trustee to perform when due all of the respective covenants, agreements
and other obligations (other than any payment obligations) of each of the
Originators, Zenith, as servicer, Zenith Finance Corporation, a wholly-
owned subsidiary of Zenith, as purchaser of Receivables from the
Originators, under each agreement relating to such securitization program
to which each such entity is a party; provided that the obligation of LGE to
provide the Performance Undertaking shall not extend beyond March 31,
2,000; provided further that the terms of the Performance Undertaking
shall not differ materially from the form of the Parent Undertaking
Agreement (the "Parent Undertaking Agreement") attached hereto as
Exhibit 1 without LGE's prior written approval, which approval may be
given or withheld by LGE, in its sole and absolute discretion.
2. LGE Guaranties - Lease Transactions. LGE shall, at the
request of Zenith, execute and deliver guaranties (collectively, the
"Guaranties") for the benefit of Zenith and Zenith Electronics Corporation
of Texas, a wholly-owned subsidiary of Zenith (collectively, the "Lessees")
in connection with (i) a lease (the "U.S. Lease") by Zenith for the term of
twelve and half years relating to certain U.S.-sited equipment having an
aggregate fair market value of U.S. $66,025,216, and (ii) a lease (the
"Mexican Lease"; together with the U.S. Lease, collectively, the "Leases")
for the term of twelve and half years relating to certain Mexico-sited
equipment having an aggregate fair market value of U.S. $20,567,000,
pursuant to which LGE shall irrevocably and unconditionally guarantee the
payment obligations of the Lessees under the Leases and any other related
agreements to which each Lessee is a party; provided that the terms of the
Guaranties shall not differ materially from the form of the Guaranties
attached hereto as Exhibit 2 without LGE's prior approval, which approval
may be given or withheld by LGE, in its sole and absolute discretion.
3. Vendor Credit Line. LGE shall provide, or cause to
provide, Zenith with a vendor credit line (the "Vendor Credit Line") in an
aggregate amount not substantially in excess of US $100,000,000
outstanding at any time for an initial period of 3 years in connection with
the sales of products by LGE or its subsidiaries or associated companies to
Zenith; provided, however, that LGE, in its sole and absolute discretion,
may (i) increase the amount of the Vendor Credit Line, (ii) terminate the
term of the Vendor Credit Line at any time or (iii) extend the term of the
Vendor Credit Line.
4. Stock Options.
4.1 Issuance of Stock Options. In consideration of LGE's
agreement to provide the Performance Undertaking Agreement, the
Guaranties and the Vendor Credit Line, Zenith hereby agrees to grant to
LGE irrevocable stock options (the "Stock Options") to purchase shares
(the "Shares") of the common stock of Zenith at a purchase price of one
cent ($.01) per Share (the "Purchase Price") up to 3,965,000 Shares, being
the number obtained by dividing (X) the sum of (i) $6,000,000 (the
Securitization Transactions undertaking fees, as computed below), plus (ii)
$30,650,000 (the Lease Transactions guarantee fees as computed below),
plus (iii) $3,000,000 (the Vendor Credit Line fees, as computed below) by
(Y) $10, being an amount rounded, if necessary, to the nearest dollar of the
average closing price per Share on the New York Stock Exchange for the
month of March, 1997.
For purposes of this Agreement, (i) the Securitization Transactions
undertaking fees shall be the product of (a) 1% of $200,000,000 times (b)
3 (years); (ii) the Lease Transactions guarantee fees shall be the product of
(a) approximately 2.83% of $86,600,000 times (b) 12.5 (years); and (iii)
the Vendor Credit Line fees shall be the product of (a) 1% of
$100,000,000 times (b) 3 (years). LGE acknowledges that the aggregate
amount of the fees to be paid by Zenith to LGE shall be subject to a
fairness opinion of Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated.
Zenith agrees to renegotiate the amount of fees with respect to the Vendor
Credit Line in the event that LGE substantially increases the amount of the
Vendor Credit Line, in its sole and absolute discretion.
4.2 Shares to be Issued under the Stock Options. Zenith
warrants and covenants that the Shares to be issued upon the exercise of
the Stock Options shall be duly authorized, fully paid, non-assessable and
validly issued when issued and shall have all of the same rights and
entitlement as the shares of the common stock as described in Section 4.3
of the Stock Purchase Agreement dated as of July 17, 1995 between LGE
and Zenith.
4.3 Exercise and Transfer of Stock Options.
(a) The Stock Options granted in this
Agreement shall vest and may be exercised in whole
or in part, as set forth in Schedule A attached to this
Agreement. The Stock Options shall terminate on
March 31, 2012.
(b) In the event LGE or any permitted
assignee wishes to exercise the Stock Options in
whole or in part, LGE or such assignee shall send a
written notice (an "Exercise Notice") to Zenith
specifying the total number of Shares LGE or such
assignee wishes to purchase, the denominations of
the certificate or certificates evidencing such Shares
which LGE or such assignee wishes to receive, a
date which shall be a business day which is at least
five business days after delivery of such notice, and
the place for the closing of such purchase (a
"Closing"), which place will be in Chicago, Illinois.
LGE may, in its discretion upon its exercise of the
Stock Options, have any Shares issued in the name
of any of subsidiaries or associated companies.
(c) Upon receipt of an Exercise Notice,
Zenith shall be obligated to deliver to LGE or LGE's
permitted assignee a certificate or certificates
evidencing the number of Shares specified therein, in
accordance with the terms of this Agreement, on the
date specified in such Exercise Notice.
(d) LGE may assign the Stock Options in
whole or in part to any of LGE's subsidiaries or
associated companies.
(e) In the event Zenith shall be
prohibited from delivering any of the Shares to LGE
upon any exercise of the Stock Option, as a result of
any law, rule, regulation, judgment, order or decree
of any government, governmental body or court
having jurisdiction over Zenith, Zenith and LGE
shall negotiate in good faith and agree on an
alternative consideration to be provided to LGE in
an amount and on the terms at least as favorable to
LGE as the Stock Options granted or to be granted
hereunder.
4.4 Closing. At each Closing, Zenith will deliver to LGE a
certificate or certificates evidencing the number of Shares specified in the
applicable Exercise Notice (in the denominations specified therein) against
payment of the Purchase Price therefor by LGE to Zenith. All payments
made by LGE to Zenith pursuant to this Section 4.4 shall be made, at the
option of LGE, either (a) by wire transfer of immediately available United
States funds in amount of the aggregate Purchase Price for the Shares
being purchased, or (b) by delivery to Zenith of a certified or bank check or
checks payable in the United States to or on the order of Zenith in an
amount equal to the aggregate Purchase Price.
4.5 Adjustments of Shares.
(a) In the event of any change in the
capitalization of Zenith or in the number of
outstanding shares of Zenith by reason of a stock
dividend, split-up, recapitalization, reclassification,
combination, exchange of shares or similar
transaction, or any other change in the corporate or
capital structure of Zenith (including, without
limitation, the declaration or payment of an
extraordinary dividend in cash, securities or other
property), the type and number of shares or
securities to be issued by Zenith upon exercise of the
Stock Option shall be adjusted appropriately, and
proper provision shall be made in the agreements
governing such transaction, so that LGE shall
receive upon exercise of the Stock Option the
number and class of shares or other securities or
property that LGE would have received if the Stock
Option had been exercised immediately prior to such
event, or the record date therefor, as applicable, and
elected to the fullest extend it would have been
permitted to elect, to receive such securities, cash or
other property.
(b) In the event that Zenith shall enter
into an agreement (i) to consolidate with or merge
into any person, and Zenith shall not be the
continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person to
merge into Zenith and Zenith shall be the continuing
or surviving corporation but, in connection with
such merger, the then outstanding shares of Zenith
shall be changed into or exchanged for stock or
other securities of Zenith or any other person or into
cash or any other property, or the outstanding shares
of Zenith shall after such merger represent less than
50% of the outstanding shares and share equivalents
of the surviving corporation or (iii) to sell or
otherwise transfer all or substantially all of its assets
to any person in a single transaction or series of
related transactions and, in connection with such
sale or transfer the outstanding shares of Zenith shall
be changed into or exchanged for stock or other
securities of Zenith or any other person or into cash
or any other property, then in any such case, proper
provision shall be made in the agreements governing
such transaction so that LGE shall receive upon
exercise of the Stock Option the number and class of
shares or other securities or property that LGE
would have received if the Stock Option had been
exercised immediately prior to such transaction, or
the record date therefor, as applicable, and elected
to the fullest extent it would have been permitted to
elect, to receive such securities, cash or other
property.
4.6 Registration Rights.
(a) Demand Registration. Commencing
on May 1, 1997, LGE shall have the right to require
Zenith to register all or any portion of the Shares
received by LGE as a result of exercises by then of
the Stock Options pursuant to Section 4.3 above for
disposition on a delayed or continuous basis
pursuant to Rule 415 of the U.S. Securities Act of
1933, as amended (the "Securities Act"). Upon
receipt of such request, Zenith shall effect the
registration under the Securities Act of all such
Shares within 120 days of receipt of such request for
disposition in accordance with the intended method
of disposition stated in such request. Zenith shall
take such actions as are reasonably required in order
to expedite or facilitate the registration of the
Shares, including, without limitation, (i) preparing
and filing with the U.S. Securities and Exchange
Commission (the "Commission") a registration
statement, or any amendments and supplements
thereto, with respect to such Shares and causing
such registration statement to become and remain
effective for the period of the distribution
contemplated thereby, (ii) qualifying the Shares
covered by such registration statement under such
other securities or blue sky laws of such jurisdiction
within the United States as shall be reasonably
appropriate for the distribution of such Shares, (iii)
entering into customary agreements (including if the
method of distribution is by means of an
underwriting, an underwriting agreement in
customary form), (iv) providing to LGE so many
copies of the final prospectus with respect to the
registration statement as LGE may reasonably
request, and (v) otherwise complying with all
applicable rules and regulations of the Commission.
(b) Incidental Registration. If at any
time Zenith determines that it shall file a registration
statement under the Securities Act on any form that
would also permit the registration of the Shares and
such filing is to be on its behalf and/or on behalf of
selling holders, Zenith shall each such time promptly
give LGE written notice of such determination
setting forth the date on which Zenith proposes to
file such registration statement, which date shall be
no earlier than sixty (60) days from the date of such
notice, and advising Zenith of its right to have the
Shares received by LGE as a result of exercises by
then of the Stock Option pursuant to Section 5.1
above included in such registration. Upon the
written request of LGE received by Zenith no later
than thirty (30) days after the date of Zenith's
notice, Zenith shall effect the registration under the
Securities Act of all such Shares within 120 days of
receipt of such request except, however, to the
extent that the managing underwriter, if any, of the
offering with respect to which such registration
statement shall have been filed shall determine in
good faith that the inclusion of such Shares would
interfere with the successful marketing of such
offering, in which case such Shares, or a portion
thereof determined by such managing underwriter,
shall be excluded from such registration.
(c) Expenses of Registration. All
expenses incurred in connection with each
registration pursuant to Paragraph (a) or (b) of this
Section 4.6, including without limitation all
registration, filing and qualification fees, word
processing, duplicating, printers' and accounting
fees, fees of the National Association of Securities
Dealers, Inc. or listing fees, messenger and delivery
expenses, all fees and expenses of complying with
state securities or blue sky law, fees and
disbursements of counsel for Zenith, and the fees
and expenses of counsel for LGE, shall be paid by
Zenith.
(d) Indemnification. In the event any
Share is included in a registration statement
pursuant to this Section 4.6, Zenith shall indemnify
LGE, its directors and officers, each person who
participates in the offering and each person who
controls LGE within the meaning of Section 15 of
the Securities Act against losses, claims, damages,
expenses, or liabilities to which they may become
subject under the Securities Act or otherwise, arising
out of or based on any untrue or alleged untrue
statement of any material fact contained in such
registration statement on the effective date thereof
or in the final prospectus with respect thereto filed
with the Commission pursuant to Rule 424(b) or
arising out of or based on the omission or alleged
omission to state in the registration statement, the
final prospectus, or any preliminary prospectus, a
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 except insofar as such losses, claims,
damages, expenses or liabilities are caused by
information provided in writing by LGE to Zenith
expressly for inclusion in such registration
statement, final prospectus, or preliminary
prospectus.
(e) Transfer of Registration Rights. The
registration rights of LGE under this Section 4.6
with respect to any Share may be transferred to (i)
any transferee of such Share who acquires at least
twenty percent (20%) of LGE's Shares received by
LGE as a result of exercises by them of the Stock
Option pursuant to Section 4.3 or (ii) any of its
subsidiaries or associated companies.
5. Representations. Each of the parties represents on its own
behalf to the other party that:
(a) Such party has obtained all
authorization, consents, approvals, orders or licenses
required of it under applicable laws, rules or
regulations (including, in the case of LGE, those of
the Republic of Korea) for the execution, delivery
and performance of its obligations under this
Agreement (including, in the case of Zenith, the
approval of the Audit Committee has been obtained
and notice to shareholders will be given promptly);
(b) The execution, delivery and
performance of this Agreement by such party does
not (a) violate or conflict with (i) its articles of
incorporation or by-laws or any comparable
organizational documents, (ii) any applicable laws,
rules or regulations or (iii) any order, writ,
judgment, award, injunction or decree binding on or
affecting it or its properties and (B) conflict with,
result in any breach of any of the terms and
provisions of, or constitute (with or without notice
or lapse of time or both) a default under, any
indenture, contract, agreement, mortgage, deed of
trust or other instrument to which it is a party or by
which it or its properties are bound;
(c) This Agreement has been duly
authorized by all necessary corporate action on the
part of such party and is a legal, valid and binding
obligation of such party, enforceable against such
party in accordance with its terms.
6. Reimbursement and Interest. Zenith shall reimburse the
payments made by LGE to the relevant beneficiaries pursuant hereto. In
addition, Zenith shall pay to LGE monthly or semi-annually in arrears,
interest on the payments made by LGE to the relevant beneficiaries
pursuant hereto, accrued on the date of payment until payment of such
interest in full, at a rate equal to the call-loan rate charged to LGE on the
date of payment by a Korean bank selected by LGE and with which LGE
transacts banking business.
7. Subrogation. Zenith agrees that subject to the terms of the
Parent Undertaking Agreement and the Guaranties, LGE, by virtue of any
payment or performance to the relevant beneficiaries pursuant hereto, shall
be subrogated to such beneficiaries' claim against Zenith or any person
relating thereto.
8. Indemnity. Zenith hereby undertakes to indemnify and hold
harmless LGE from and against all liabilities, costs, losses, damages and
expenses which LGE may incur or sustain by reason of or arising in any
way in connection with the performance or payment by LGE to the
relevant beneficiaries pursuant hereto.
9. Covenants of Zenith
9.1 Reporting Requirements and Other Documents. Zenith
shall furnish to LGE a copy of each document or instrument to be delivered
to each of the parties to, and in connection with, the transactions described
in Section 1 above (herein called, the "Securitization Transactions") and
the transactions described in Section 2 above (herein called, the "Lease
Transactions") by Zenith and its subsidiaries. Zenith shall furnish or cause
to be furnished to LGE such financial and operating data and other
information with respect to the business and properties of Zenith and any
of its subsidiaries as LGE may reasonably request from time to time.
9.2 Notice of Material Adverse Effect. Zenith shall give prompt
notice to LGE of (i) any material breach of, or the occurrence or
nonoccurrence of any event which with notice or lapse of time or both
would be a material breach of, any representation or warranty or covenant
or agreement contained in this Agreement, (ii) the occurrence or
nonoccurrence of any event which with notice or lapse of time or both
would be an event of default under, or otherwise a material breach of any
representation or warranty or covenant or agreement contained in, any of
the agreements into which Zenith shall have entered in connection with the
Securitization Transactions or the Lease Transactions or (iii) the
occurrence of any event which could have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or business
prospects of Zenith and its subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
9.3 Consents of LGE. Zenith acknowledges that LGE shall
have no obligation to consent to any amendment, modification, supplement
or change of any term or condition of any of the agreements into which
Zenith shall have entered in connection with the Securitization Transactions
or the Lease Transactions. LGE may consent to such amendment,
modification, supplement or change, in its sole and absolute discretion.
Zenith agrees to consult with LGE prior to its dealings with any of the
parties to the Securitization Transactions and the Lease Transactions.
Unless LGE shall otherwise consent in writing, Zenith shall not amend,
modify, supplement or change in any manner, any term or condition of any
of the agreements into which Zenith shall have entered in connection with
the Securitization Transactions and the Lease Transactions.
9.4 Taxes.
(a) Zenith shall make its best efforts to
(i) minimize its tax liabilities that may accrue under
the United States tax laws and regulations, including
the interest stripping provision thereunder, in
connection with the Performance Undertaking
Agreement, the Guaranties or the Vendor Credit
Line and (ii) minimize tax liabilities to which LGE
may be subject with respect to the Shares received
upon exercise by it of the Stock Option.
(b) Upon the reasonable request of LGE,
Zenith shall cause each beneficiary under the
Performance Undertaking Agreement or the
Guaranties which shall have been organized under
the laws of a jurisdiction outside the United States
to provide LGE with Internal Revenue Service form
1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue
Service, certifying that such beneficiary is exempt
from or is entitled to a reduced rate of United States
withholding tax on payments under the relevant
agreements or documents.
9.5 Default. In the event that Zenith shall fail to perform or
observe any agreement set forth in this Agreement, LGE shall terminate the
Vendor Credit Line, and LGE may take any other actions, as it deems
necessary.
10. Miscellaneous
10.1 Governing Law. This Agreement shall he governed by,
construed under and enforced in accordance with, the laws of the State of
Illinois.
10.2 Consent to Jurisdiction. LGE and Zenith hereby irrevocably
and unconditionally submit to the nonexclusive jurisdiction of any court of
the State of Illinois or the Federal courts of the United States of America
sitting in Illinois, and any appellate court from any thereof, in any legal
action or proceeding arising out of or in connection with this Agreement or
the transactions contemplated hereby and LGE and Zenith hereby agree
that any summons, pleading, judgment, memorandum of law, or other
paper relevant to any action or proceeding shall be sufficiently served if
delivered to the recipient thereof by certified or registered mail (with return
receipt) at its address set forth in Section 10.4. Nothing in the proceeding
sentence shall affect the right of any party to proceed in any jurisdiction for
the enforcement or execution of any judgment, decree or order made by a
court specified in said sentence.
10.3 Expenses. Except as provided in Article 4, each of the
parties shall pay its own expenses incurred in connection with the
negotiation and preparation of this Agreement and the effectuation of the
transactions contemplated hereby including, without limitation, all fees and
disbursements of its respective legal counsel, advisors, and accountants.
10.4 Notices. In case of any event or circumstance giving rise to
an obligation of LGE or Zenith to provide notice hereunder, such notice
shall be delivered within the time specifically set forth herein or, if no such
time is specified, then as promptly as practicable after becoming aware of
such event or circumstance. Any notice required or permitted to be given
under this Agreement shall be written, and may be given by personal
delivery, by cable, telecopy or telegram (with a confirmation copy mailed
as follows), by Federal Express, United Parcel Service, or other reputable
commercial delivery service, or by registered or certified mail, first-class
postage prepaid, return receipt requested. Notice shall be deemed given
upon actual receipt. Mailed notices shall be addressed as follows, but each
party may change address by written notice in accordance with this
paragraph.
To Zenith: Zenith Electronics Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
To LGE: LG Electronics Inc.
00 Xxxxx-xxxx
Xxxxxxxxxxx-xx
Xxxxx, Xxxxx 150-721
Attention: Director of Finance
10.5 Severability. The exercise of the rights and the performance
of the obligations of the parties hereunder are subject to applicable laws,
regulations, rules and decisions of the courts and other government,
governmental agencies and authorities having jurisdiction over such rights
and obligations. The unenforceability or invalidity of any provision of the
Agreement shall not affect any other provision hereof and in the event of a
judicial, administrative or arbitral finding of such unenforceability or
invalidity, the Agreement shall remain in force in all other respects.
10.6 Waiver. No term or provision hereof shall be deemed
waived and no breach hereof excused unless such waiver or consent shall
be in writing and signed by the party claimed to have waived or consented.
No waiver hereunder shall apply or be construed to apply beyond its
expressly stated terms. No failure is exercise and no delay in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver
thereof. No failure to insist upon strict performance of any term or
provision of this Agreement or to exercise any right hereunder, shall be
construed as a waiver or as a relinquishment of such term, provision or
right.
10.7 Assignment and Parties in Interest. This Agreement and the
rights hereunder may not be assigned by LGE or Zenith without the prior
written consent of the other party, which may be given or withheld in the
other party's discretion, except that LGE may (i) exercise any or all rights
and/of fulfill any or all obligations under this Agreement in conjunction
with or through one or more associated companies of LGE; and/or (ii)
assign this Agreement to an associated company of LGE. This Agreement
shall be binding upon and inure solely to the benefit of LGE and Zenith and
their respective successors and permitted assigns and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
10.8 Amendment. This Agreement may be amended only by a
written instrument executed and delivered by a duly authorized officer of
LGE and a duly authorized officer of Zenith.
10.9 Cumulation of Remedies. All remedies available to any
party for breach or non-performance of this Agreement are cumulative and
not exclusive of any rights, remedies, powers or privileges provided by law,
and may be exercised concurrently or separately, and the exercise of and
any remedy shall not be deemed an election of such remedy to the
exclusion of other remedies.
10.10 Headings; References. Headings used in this Agreement are
inserted as a matter of convenience and for reference, do not constitute a
part of this Agreement for any other purpose, and shall not affect the
interpretation or enforcement hereof or thereof.
10.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereby have executed and
delivered this Agreement as of the date first above written.
LG ELECTRONICS INC.
By:
_________________________ Name:
Title:
ZENITH ELECTRONICS
CORPORATION
By:
_________________________
Name:
Title:
