Amended & Restated Restructuring Agreement

EXHIBIT 10AH


AMENDED AND RESTATED
RESTRUCTURING AGREEMENT


AMENDED AND RESTATED RESTRUCTURING AGREEMENT, dated as of June 14, 1999 (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 owns 36,569,000 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 April 20, 1999, June 30, 1998 and September 23, 1998, LGE paid $30 million, $50 million and $22 million, respectively, 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 $90,086,653.08 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, under the Leveraged Lease Documents, LGE (as beneficial


owner of the owner trusts created thereby) is the indirect owner of the equipment subject to the Leveraged Lease Documents and may exercise one or more of several remedies specified in the Leveraged Lease Documents with respect to such equipment;


WHEREAS, prior to the date hereof, LGE has directed the owner trusts to sell certain of such equipment and has applied the net proceeds of such sales to reduce the amount the Company is required to reimburse LGE;


WHEREAS, with respect to the remainder of such equipment LGE has determined to (i) retain a portion of the equipment in satisfaction of a portion
- of its claims under the Leveraged Lease Documents and (ii) transfer the balance
-- of the equipment to the Company and retain the balance of its claims under the Leveraged Lease Documents;


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;


WHEREAS, the Board of Directors of the Company 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 March 17, 1999 (as amended in accordance with Section 10(e) of this Agreement, 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 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 the 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 Restructuring," and together with the Operational Restructuring, the "Restructuring");


WHEREAS, the Company and LGE entered into a Restructuring Agreement, dated as of August 7, 1998 (the "Original Agreement"), pursuant to which LGE agreed to participate in the Financial Restructuring on the terms and conditions set forth therein;


WHEREAS, the Company and LGE have entered into a Forbearance, Lock-Up and Voting Agreement, dated as of March 31, 1999 (the "Lock-Up Agreement"), with certain holders of the Company's 6 1/4% Convertible Subordinated Debentures due 2011 (the "Old Subordinated Debentures") pursuant to which such holders have agreed to vote in favor of the Plan;


WHEREAS, the Company and LGE have decided to amend and restate the Original Agreement to reflect certain terms of the Lock-Up Agreement and other developments relating to the Company's 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.


"Company Disclosure Letter" means the Disclosure Letter, dated August 7, 1998, from the Company to LGE as amended and modified by the Disclosure Letter, dated as of the date hereof, 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 and Reorganization Charges, plus interest expense and capital expenditures, in each case as set forth in the Operating Plan. If LGE (in its sole discretion) grants the Company an extension of the time for payment to LGE of any interest owed to LGE or for the use of the credits under the Philips Letter Agreement, calculation of cash flow from operations shall be adjusted as if payment of all such amounts was made as and when due in the absence of such extension.


"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 and
Reorganization Charges; plus (or minus)


(ii) to the extent that any of the items referred to in any of
clauses (A) though (D) below were deducted or added in calculating such net
income:


(A) interest expense 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.


"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 thirteenth 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" means the Company's implementation program attached hereto as Annex C.


"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 trustee, and the other agreements and documents executed and delivered in connection therewith.


"LGE Disclosure Letter" means the Disclosure Letter, dated as of August 7, 1998, from LGE to the Company.


"Lien" has the meaning set forth in Section 4.2.


"Lock-Up Agreement" has the meaning set forth in the fifteenth whereas clause.


"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, and as amended from time to time thereafter.


"Old Common Stock" has the meaning set forth in the first whereas clause.


"Old Subordinated Debentures" has the meaning set forth in the fifteenth clause.


"Operating Plan" has the meaning set forth in the twelfth whereas clause.


"Operational Restructuring" has the meaning set forth in the twelfth whereas clause.


"Options" has the meaning set forth in the first whereas clause.


"Original Agreement" has the meaning set forth in the fourteenth 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 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.


"Philips Letter Agreement" has the meaning set forth in Section 2(f).


"Plan" has the meaning set forth in the thirteenth 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 thirteenth 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.


"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 thirteenth whereas clause.


"Restructuring and Reorganization Charges" means charges incurred by the Company to execute the Operating Plan and the Plan that are of the type included in "Restructuring Charges" or "Reorganization Charges" in the Operating Plan and determined on a basis consistent with the principles used to prepare the Operating Plan.


"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 Reynosa's production facilities # 12, #13 and #27 in Reynosa, Mexico, (ii) all of the fixtures, equipment, personal property and other assets located -- therein and identified in Section 1(a) of the Company Disclosure Letter (as amended pursuant to Section 6.6) and (iii) all agreements relating to access
--- thereto.


"Reynosa Assets Claim Amount" has the meaning set forth in Section 6.6.


"Reynosa Leveraged Lease Assets" means all of its right, title and interest of the owner trust created under the Leveraged Lease Documents 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 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 D.


"Special Committee" has the meaning set forth in the tenth 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.


"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 sue 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 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 of the foregoing.


"Zenith Reynosa" means Partes de Television de Reynosa, 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 guarantee fees accrued and
--- unpaid through the Closing Date payable to LGE under the Reimbursement Agreement and (iv) a portion, if any, of the secured claim pursuant to the Note Agreement
-- sufficient when aggregated with the amounts described in clauses (i), (ii) and (iii) of this Section 2(a) to equal $200 million;


(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 the Reynosa Asset Claim Amount 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 consequences that are unacceptable to either the Company or LGE, 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 "Reynosa Operating Agreement") and (iii) the amount 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 principal 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) the amount of the claim for reimbursement of the payment by LGE of the - --- obligations of the Company and Zenith Texas to certain third party creditors under the Leveraged Lease Documents remaining after release of the portion of the claim exchanged for the Reynosa Assets pursuant to Section 2(b) and the retention of the Reynosa Leveraged Lease Assets pursuant to Section 2(f), (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, and (iv) 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 the Options owned by LGE will be canceled, and LGE 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 and any such equipment sold on or before the Closing Date) and any credits outstanding under the Letter Agreement, dated November 2, 1998 (the "Philips Letter ...