<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
GENERAL INSTRUMENT CORPORATION
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
Common Stock 370120 10 7
(CUSIP Number)
Charles Y. Tanabe, Senior Vice President and General Counsel,
Liberty Media Corporation
8101 East Prentice Avenue, Englewood, CO 80111 (303) 721-5400
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 9, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box: [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
Common Stock CUSIP No. 370120 10 7
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
Liberty Media Corporation
(2) Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ]
(3) SEC Use Only
(4) Source of Funds
WC, OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
(6) Citizenship or Place of Organization Delaware
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of (7) Sole Voting Power 26,284,000 Shares of Common Stock*
Shares Bene-
ficially (8) Shared Voting Power 0 Shares
Owned by
Each Report- (9) Sole Dispositive Power 26,284,000 Shares of Common Stock*
ing Person
With (10) Shared Dispositive Power 0 Shares
</TABLE>
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
26,284,000 Shares of Common Stock*
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
(13) Percent of Class Represented by Amount in Row (11)*
Approximately 15.3%
(14) Type of Reporting Person
CO
* Includes 4,928,000 shares of Common Stock issuable upon exercise of currently
vested Warrants beneficially owned by the Reporting Person. Excludes 16,428,000
shares of Common Stock issuable upon exercise of currently unvested Warrants
beneficially owned by the Reporting Person. Subject to certain conditions, none
of such unvested Warrants will vest until December 31, 1999. (See Item 6
hereof)
Page 2 of 10
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Statement of
LIBERTY MEDIA CORPORATION
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
GENERAL INSTRUMENT CORPORATION
Liberty Media Corporation, a Delaware corporation (the "Reporting Person")
is filing this Statement on Schedule 13D (this "Statement") with respect to the
shares (the "Shares") of the Common Stock par value $.01 per share (the "Common
Stock") of General Instrument Corporation, a Delaware Corporation (the "Issuer")
beneficially owned by the Reporting Person.
ITEM 1. SECURITY AND ISSUER
This Statement is being filed with respect to shares of Common Stock. The
Issuer's principal executive offices are located at 101 Tournament Drive,
Horsham, Pennsylvania 19044.
ITEM 2. IDENTITY AND BACKGROUND
The reporting person is Liberty Media Corporation whose principal business
address is 8101 East Prentice Avenue, Suite 500, Englewood, Colorado 80111.
The Reporting Person succeeded to the beneficial ownership of the Shares as
a result of the merger (the "Merger") of Italy Merger Corp., a wholly owned
subsidiary of AT&T Corp. ("AT&T"), with and into Tele-Communications, Inc.
("TCI"). TCI, as the corporate parent entity of the Reporting Person, had
previously filed a Report on Schedule 13D reporting beneficial ownership of the
Shares, which at that time were attributed to the TCI Ventures Group of TCI.
In the Merger, (i) TCI became a wholly owned subsidiary of AT&T, (ii) the
businesses and assets of the Liberty Media Group and TCI Ventures Group of TCI
were combined and (iii) the holders of TCI's Liberty Media Group common stock
and TCI Ventures Group common stock received in exchange for their shares a new
class of common stock of AT&T intended to reflect the results of the combined
Liberty Media Group and TCI Ventures Group. Following the Merger, AT&T's
"Liberty Media Group" consists of the assets and businesses of TCI's Liberty
Media Group and its TCI Ventures Group prior to the
Page 3 of 10
<PAGE>
Merger, except for certain assets which were transferred to the TCI Group in
connection with the Merger, and the "AT&T Common Stock Group" consists of all of
the other assets and businesses of AT&T.
The Board of Directors and management of the Reporting Person manages the
business and affairs of the Reporting Person including, but not limited to,
making determinations regarding the disposition and voting of the Shares.
Although the the Reporting Person is a wholly owned subsidiary of AT&T, a
majority of the Reporting Person's Board of Directors consists of individuals
designated by TCI prior to the Merger. If these individuals or their designated
successors cease to constitute a majority of the Reporting Person's Board, the
Reporting Person will transfer all of its assets and businesses to a new entity.
Although this new entity would be owned substantially by AT&T, it would continue
to be managed (including with respect to the voting and disposition of the
Shares) by management of the Reporting Person prior to such transfer of assets.
As a result, the Reporting Person, acting through its Board of Directors
and management, will have the power to determine how the Shares will be voted
and, subject to the limitations of the Delaware General Corporation Law, will
have the power to dispose of the Shares, and thus is considered the beneficial
owner of the Shares for purposes of Section 13(d) of the Exchange Act.
The Liberty Media Group, principally through the Reporting Person, is
engaged in (i) the production, acquisition and distribution through all
available formats and media of branded entertainment, educational and
informational programming and software, including multimedia products, (ii)
electronic retailing, direct marketing, advertising sales related to programming
services, infomercials and transaction processing, (iii) international cable
television distribution, telephony and programming, (iv) satellite
communications and (v) investments in wireless domestic telephony and other
technology ventures.
Schedule 1 attached to this Statement contains the following information
concerning each director, executive officer and controlling person of the
Reporting Person: (i) name and residence or business address, (ii) principal
occupation or employment; and (iii) the name, principal business and address of
any corporation or other organization in which such employment is conducted.
Schedule 1 is incorporated herein by reference.
To the knowledge of the Reporting Person, each of the persons named on
Schedule 1 (the "Schedule 1 Persons") is a United States citizen, except for
David J.A. Flowers, who is a Canadian citizen. During the last five years,
neither the Reporting Person nor any of the Schedule 1 Persons (to the knowledge
of the Reporting Person) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). During the last five years,
neither the Reporting Person nor any of the Schedule 1 Persons (to the knowledge
of the Reporting Person) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and, as a result of such
proceeding, is or was subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Schedule 2 attached to this Statement contains the following information
which has been provided to the Reporting Person by AT&T concerning each
director, executive officer or controlling person of
Page 4 of 10
<PAGE>
AT&T: (i) name and residence or business address, (ii) principal occupation or
employment; and (iii) the name, principal business and address of any
corporation or other organization in which such employment is conducted.
Schedule 2 is incorporated herein by reference.
Based upon information provided to the Reporting Person by AT&T, (i) to the
knowledge of AT&T, each of the persons named on Schedule 2 (the "Schedule 2
Persons") is a United States citizen, (ii) during the last five years, neither
AT&T nor any of the Schedule 2 Persons (to the knowledge of AT&T) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and (iii) during the last five years, neither AT&T nor any of the
Schedule 2 Persons (to the knowledge of AT&T) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and,
as a result of such proceeding, is or was subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
The foregoing summary of the terms of the Merger is qualified in its
entirety by reference to the text of the Agreement and Plan of Restructuring and
Merger, dated June 23, 1998, among AT&T, Italy Merger Corp. and TCI, a copy of
which has been incorporated by reference as Exhibit 7(c), and to the text of the
AT&T/TCI Proxy Statement/Prospectus, a copy of which has been incorporated by
reference as Exhibit 7(e).
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The information set forth in Items 2 and 6 is hereby incorporated by
reference herein.
The Reporting Person currently beneficially owns a total of 26,284,000
shares of Common Stock. TCIVG-GIC, Inc., a subsidiary of the Reporting Person,
acquired 21,356,000 shares of Common Stock pursuant to the terms of that certain
Asset Purchase Agreement dated as of June 17, 1998 (the "Agreement"), among
TCIVG-GIC, Inc., NDTC Technology Inc., a subsidiary of TCI, and the Issuer. In
accordance with the Agreement, the Issuer issued 21,356,000 shares of Common
Stock to TCIVG-GIC, Inc. and Warrants to purchase shares of Common Stock,
described in the next paragraph, to National Digital Television Center, Inc., a
subsidiary of TCI ("NDTC"), in exchange for the transfer to the Issuer of
certain assets related to TCI's addressable set-top business and contracts
related thereto, issuance of a Promissory Note made by TCIVG-GIC, Inc. in the
aggregate principal amount of $50,000,000, the execution of a License Agreement
by NDTC Technology, Inc. and the Issuer, and a guaranty of certain revenues
relating to the acquired business. As a result of such exchange, on July 17,
1998, TCI became the beneficial owner of more than 5% of the Common Stock of the
Issuer. Following the Merger, the Reporting Person became the beneficial owner
of such 21,356,000 shares of Common Stock and the Warrants described below.
In connection with certain restructuring activities in advance of the
Merger, the Reporting Person purchased warrants (the "Warrants") to purchase
21,356,000 shares of Common Stock (of which, Warrants to purchase 4,928,000
shares of Common Stock are currently exercisable) from NDTC, for approximately
$176 million. All of such funds were obtained from working capital of the
Reporting Person. The terms of these Warrants are described in more detail in
Item 6, and the information contained in Item 6 is hereby incorporated by
reference herein.
Page 5 of 10
<PAGE>
The foregoing summary of the terms of the Agreement is qualified in its
entirety by reference to the text of the Agreement a copy of which is
incorporated by reference as Exhibit 7(a) to this Statement and is incorporated
herein by this reference.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Person acquired and continues to hold its securities of the
Issuer for investment purposes. The Reporting Person intends to continuously
review its investment in the Issuer, and may in the future determine to (i)
acquire additional securities of the Issuer, through open market purchases,
private agreements or otherwise, (ii) dispose of all or a portion of the
securities of the Issuer owned by it or (iii) take any other available course of
action, which could involve one or more of the types of transactions or have one
or more of the results described in the last paragraph of this Item 4.
Notwithstanding anything contained herein, the Reporting Person specifically
reserves the right to change its intention with respect to any or all of such
matters. In reaching any decision as to its course of action (as well as to the
specific elements thereof), the Reporting Person currently expects that it would
take into consideration a variety of factors, including, but not limited to, the
Issuer's business and prospects, other developments concerning the Issuer and
the cable television and entertainment programming industries generally, other
business opportunities available to the Reporting Person, other developments
with respect to the business of the Reporting Person, general economic
conditions and money and stock market conditions, including the market price of
the securities of the Issuer.
Other than as set forth in this Statement, the Reporting Person has no
present plans or proposals which relate to or would result in:
(a) The acquisition by any person of additional securities of the Issuer,
or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or of
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term
of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Issuer by any person;
Page 6 of 10
<PAGE>
(h) A class of securities of the Issuer to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or
(j) Any action similar to any of those enumerated in this Item.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The Reporting Person currently beneficially owns 26,284,000 shares of
the Common Stock. The 26,284,000 shares of Common Stock beneficially
owned by the Reporting Person represent approximately 15.3% based upon
the 167,391,015 shares of the Common Stock outstanding on October 31,
1998 as reported by the Issuer in its Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998, and assuming the
issuance of 4,928,000 shares of Common Stock to the Reporting Person
upon the exercise of currently vested Warrants. In addition, the
Reporting Person beneficially owns unvested Warrants of the Issuer
exercisable for an aggregate of 16,428,000 shares of Common Stock. The
unvested Warrants are subject to a vesting schedule as described in
Item 6 below.
To the knowledge of the Reporting Person, none of the Schedule 1
Persons have any interest in any securities of the Issuer. Based upon
information provided to the Reporting Person by AT&T, to the knowledge
of AT&T, none of the Schedule 2 Persons has any interest in any
securities of the Issuer.
(b) The Reporting Person has sole power to vote or to direct the voting of
the shares of Common Stock that the Reporting Person beneficially owns
and sole power to dispose of, or to direct the disposition of, such
shares of Common Stock.
(c) Neither the Reporting Person nor, to the knowledge of the Reporting
Person, any of the Schedule 1 Persons, has executed transactions in
the Common Stock of the Issuer during the past sixty (60) days. Based
upon information provided to the Reporting Person by AT&T, to the
knowledge of AT&T, none of the Schedule 2 Persons has executed
transactions in the Common Stock of the Issuer during the past sixty
(60) days.
(d) There is no person that has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale
of, the Common Stock beneficially owned by the Reporting Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
TCIVG-GIC, Inc., a wholly-owned subsidiary of the Reporting Person,
acquired 21,356,000 shares of Common Stock from the Issuer on July 17, 1998
pursuant to the Agreement. The Agreement also provides TCIVG-GIC, Inc. with
registration rights with respect to the shares of Common Stock
Page 7 of 10
<PAGE>
received pursuant to the Agreement. Subject to the occurrence of certain events,
the Reporting Person may not transfer its beneficial ownership of the Common
Stock for a period of three years following to closing date under the Agreement.
In addition, the Agreement sets forth certain other restrictions on the transfer
of shares of the Common Stock beneficially owned by the Reporting Person, which
provide the Issuer with rights of first refusal and rights of first offer in the
event of certain transfers of such shares of Common Stock.
NDTC and the Issuer are parties to a Warrant Issuance Agreement dated as
of December 16, 1997 (the "Warrant Agreement"). Pursuant to the terms of the
Warrant Agreement, NDTC held Warrants for 21,356,000 shares of Common Stock,
4,928,000 of which are currently exerciseable. In connection with certain
restructuring activities in advance of the Merger, the Reporting Person
purchased all of such Warrants from NDTC for approximately $176 million.
Subject to certain performance conditions involving the purchase by NDTC of
threshold numbers of digital terminals from the Issuer, the balance of the
Warrants vest as indicated in the table below. After vesting, each Warrant may
be exercised at any time from and including the vesting date through and
including the expiration date as indicated in the table below, at an exercise
price of $8.25 per share of Common Stock, subject to certain adjustments. If the
performance conditions are not met by the respective vesting dates, the
applicable Warrants terminate. AT&T has agreed to pay the Reporting Person
$8.25 in cash for each Warrant that terminates as a result of NDTC's failure to
purchase the requisite number of digital terminals from the Issuer (such cash
amount to be appropriately adjusted to relect any adjustment in the number of
shares issuable with respect to the terminated Warrant).
<TABLE>
<CAPTION>
NUMBER OF
-----------------
TYPE OF UNDERLYING
UNDERLYING SHARES EXPIRATION
VESTING DATE SECURITY UPON VESTING DATE
- ---------------- ----------- ----------------- -------------
<S> <C> <C> <C>
December 31, 1999 Common Stock 5,750,000 June 30, 2001
December 31, 2000 Common Stock 10,678,000 June 30, 2002
</TABLE>
The Warrant Agreement also grants the Reporting Person registration rights
with respect to the Common Stock issuable upon exercise of the Warrants. In
addition, the Warrant Agreement sets forth certain restrictions on the transfer
of the Warrants and certain restrictions on the shares of the underlying Common
Stock designed to satisfy the securities laws and provide the Issuer with rights
of first refusal and rights of first offer in the event of certain transfers of
the shares of the underlying Common Stock.
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership , a New York limited partnership, ("MBO-IV") and Instrument
Partners, a New York limited partnership entered into a letter agreement, dated
August 1, 1998 (the "Letter Agreement"), with the Issuer, Liberty Ventures Group
LLC (formerly TCI Ventures Group, LLC), a Delaware limited liability company
("LVLLC"), and TCI, pursuant to which MBO-IV and Instrument Partners have agreed
that, from the date of the Letter Agreement and prior to December 31, 2005, MBO-
IV and Instrument Partners will not sell or dispose of any Common Stock of the
Issuer held by them to a third party without first offering such Common Stock
for sale to LVLLC on the same terms. This obligation does not apply to (i) a
registered public offering for cash, (ii) a distribution to their respective
partners or (iii) a sale to unaffiliated parties
Page 8 of 10
<PAGE>
of 5% or less in the aggregate of the Common Stock owned by them as of the date
of the Letter Agreement. In connection with certain restructuring activities in
advance of the Merger, LVLLC assigned its rights under the Letter Agreement to
the Reporting Person.
The foregoing description of the Warrant Agreement and the Letter Agreement
is not intended to be complete and is qualified in its entirety by the complete
texts of the Warrant Agreement and the Letter Agreement, which are each
incorporated herein by reference. A copy of the Warrant Agreement is attached as
Exhibit 7(f) hereto and a copy of the Letter Agreement is incorporated by
reference as Exhibit 7(c) hereto.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(a) Asset Purchase Agreement dated as of June 17, 1998, among TCVIG-GIC,
Inc. and NDTC Technology, Inc. both subsidiaries of TCI, and the
Issuer (incorporated by reference to Exhibit 7(a) to the Report on
Schedule 13D filed by Tele-Communications, Inc. on July 27, 1998).
(b) Promissory Note dated July 17, 1998, by TCIVG-GIC, Inc (incorporated
by reference to Exhibit 7(b) to the Report on Schedule 13D filed by
Tele-Communications, Inc. on July 27, 1998).
(c) Letter Agreement, dated August 1, 1998, among Instrument Partners,
MBO-IV, the Issuer, TCIV and TCI (incorporated by reference to Exhibit
7(c) to Amendment No. 1, filed September 9, 1998, to the Report on
Schedule 13D of TCI (originally filed on July 27, 1998)).
(d) Agreement and Plan of Restructuring and Merger, dated as of June 23,
1998, among AT&T Corp., Italy Merger Corp. and Tele-Communications,
Inc. (incorporated by reference to Appendix A to the T&T/TCI Proxy
Statement/Prospectus that forms a part of the Registration Statement
on Form S-4 of AT&T (File No. 333-70279) filed on January 8, 1999 (the
"AT&T Registration Statement")).
(e) AT&T/TCI Proxy Statement/Prospectus (incorporated by reference to the
AT&T Registration Statement).
(f) Warrant Issuance Agreement, dated as of December 16, 1997, by and
between NextLevel Systems, Inc. and National Digital Television
Center, Inc.
[Signature on following page]
Page 9 of 10
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
March 26, 1999 LIBERTY MEDIA CORPORATION
/s/ Charles Y. Tanabe
---------------------
Charles Y. Tanabe
Senior Vice President and General Counsel
<PAGE>
SCHEDULE 1
DIRECTORS AND EXECUTIVE OFFICERS
OF
LIBERTY MEDIA CORPORATION
The name and present principal occupation of each director and executive
officer of Liberty Media Corporation ("Liberty Media") are set forth below. The
business address for each person listed below is c/o Liberty Media Corporation,
8101 East Prentice Avenue, Suite 500, Englewood, Colorado 80111. All executive
officers and directors listed on this Schedule 1 are United States citizens,
except for David J.A. Flowers, who is Canadian citizen.
<TABLE>
<CAPTION>
Name Principal Occupation
- --------------------- ------------------------------------------------------------------
<S> <C>
John C. Malone Chairman of the Board and Director of Liberty Media; Director of
AT&T Corp.
Robert R. Bennett President, Chief Executive Officer and Director of Liberty Media
Gary S. Howard Executive Vice President, Chief Operating Officer and Director of
Liberty Media
Leo J. Hindery, Jr. Director of Liberty Media; President and Chief Executive Officer,
AT&T Broadband and Internet Services
Daniel E. Somers Director of Liberty Media; Senior Executive Vice President and
Chief Financial Officer of AT&T Corp.
John C. Petrillo Director of Liberty Media; Executive Vice President, Corporate
Strategy and Business Development of AT&T Corp.
Larry E. Romrell Director of Liberty Media; Consultant to Tele-Communications, Inc.
Jerome H. Kern Director of Liberty Media
Paul A. Gould Director of Liberty Media; Managing Director of Allen & Co.
David B. Koff Senior Vice President and Assistant Secretary of Liberty Media
Charles Y. Tanabe Senior Vice President, General Counsel and Assistant Secretary of
Liberty Media
Peter Zolintakis Senior Vice President of Liberty Media
Vivian J. Carr Vice President and Secretary of Liberty Media
Kathryn S. Douglass Vice President and Controller of Liberty Media
David J.A. Flowers Vice President and Treasurer of Liberty Media
David A. Jensen Vice President of Liberty Media
Gary Blaylock Vice President of Liberty Media
</TABLE>
<PAGE>
SCHEDULE 2
DIRECTORS AND EXECUTIVE OFFICERS
OF
AT&T CORP.
The name and present principal occupation of each director and executive
officer of AT&T Corp. are set forth below. The business address for each person
listed below is c/o AT&T Corp., 295 North Maple Avenue, Basking Ridge, New
Jersey 07920. All executive officers and directors listed on this Schedule 2
are United States citizens.
<TABLE>
<CAPTION>
Name Title
- ---------------------- -------------------------------------------------------------------
<S> <C>
C. Michael Armstrong Chairman of the Board, Chief Executive Officer and Director
Kenneth T. Derr Director; Chief Executive Officer of Chevron Corporation
M. Kathryn Eickhoff Director; President of Eickhoff Economics, Inc.
Walter Y. Elisha Director; Chairman and Chief Executive Officer of Springs
Industries, Inc.
George M. C. Fisher Director; Chairman and Chief Executive Officer of Eastman Kodak
Company
Donald V. Fites Director; Chairman and Chief Executive Officer of Caterpillar, Inc.
Ralph S. Larsen Director; Chairman and Chief Executive Officer of Johnson &
Johnson
John C. Malone Director; Chairman of the Board of Liberty Media Corporation
Donald F. McHenry Director; President of IRC Group
Michael I. Sovern Director; President Emeritus and Chancellor Kent Professor of Law
at Columbia University
Sanford I. Weill Director; Chairman and Co-CEO of Citigroup Inc.
Thomas H. Wyman Director; Senior Advisor of SBC Warburg, Inc.
John D. Zeglis President and Director
Harold W. Burlingame Executive Vice President, Merger & Joint Venture Integration
James Cicconi Executive Vice President-Law & Governmental Affairs and General
Counsel
Mirian Graddick Executive Vice President, Human Resources
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Daniel R. Hesse Executive Vice President and President & CEO, AT&T Wireless
Services
Leo J. Hindrey, Jr. President and Chief Executive Officer, AT&T Broadband and
Internet Services
Frank Ianna Executive Vice President and President, AT&T Network Services
Michael G. Keith Executive Vice President and President, AT&T Business Services
H. Eugene Lockhart Executive Vice President, Chief Marketing Officer
Richard J. Martin Executive Vice President, Public Relations and Employee
Communication
David C. Nagel President, AT&T Labs & Chief Technology Officer
John C. Petrillo Executive Vice President, Corporate Strategy and Business
Development
Richard Roscitt Executive Vice President and President & CEO, AT&T Solutions
D.H. Schulman Executive Vice President and President, AT&T Consumer Long
Distance and Segment Marketing
Daniel E. Somers Senior Executive Vice President and Chief Financial Officer
</TABLE>
<PAGE>
Exhibit 7(f)
--------------------------------
WARRANT ISSUANCE AGREEMENT
BETWEEN
NEXTLEVEL SYSTEMS, INC.
AND
NATIONAL DIGITAL TELEVISION CENTER, INC.
--------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
Section 1. Issuance of Warrants....................................................................1
--------------------
Section 2. Form of Warrant Certificates............................................................1
----------------------------
Section 3. Execution of Warrant Certificates.......................................................2
---------------------------------
Section 4. Registration............................................................................2
------------
Section 5. Transfer and Exchange...................................................................2
---------------------
Section 6. Amendment of the Rights Agreement.......................................................3
---------------------------------
Section 7. Transfers to Competitors................................................................3
------------------------
Section 8. Rights in the Event of a Public Offering; Closing Matters, etc..........................6
---------------------------------------------------------------
Section 9. No Impairment...........................................................................8
-------------
Section 10. Vesting of Warrants....................................................................9
-------------------
Section 11. Exercise of Warrants..................................................................11
--------------------
(a) Exercisability of Warrants........................................................11
--------------------------
(b) Method of Exercise................................................................11
------------------
Section 12. Expiration of Warrants................................................................11
----------------------
Section 13. Payment of Taxes......................................................................12
----------------
Section 14. Mutilated or Missing Warrant Certificates.............................................12
-----------------------------------------
Section 15. Reservation of Shares.................................................................12
---------------------
Section 16. Obtaining of Certain Governmental Approvals...........................................13
-------------------------------------------
Section 17. Warrant Shares Issuable Upon Exercise of a Vested Common Stock Warrant................13
----------------------------------------------------------------------
Section 17A. Warrant Shares Issuable Upon Exercise of a Vested Preferred Stock Warrant.............18
-------------------------------------------------------------------------
Section 18. Notice to Warrantholder...............................................................19
-----------------------
Section 19. Registration Rights...................................................................20
-------------------
(a) Demand Registration Rights........................................................20
--------------------------
(b) "Piggyback" Registrations.........................................................22
-------------------------
(c) GI's Obligations in Registration..................................................24
--------------------------------
(d) Payment of Registration Expenses..................................................27
--------------------------------
(e) Information from Holders..........................................................27
------------------------
(f) Indemnification...................................................................27
---------------
(g) Exchange of Certificates..........................................................30
------------------------
(h) Obligations of the Holders........................................................30
--------------------------
(i) Underwritten Registration.........................................................31
-------------------------
</TABLE>
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
(j) Exchange Act Compliance...........................................................31
-----------------------
Section 20. Restrictions on Transferability of Warrant Shares.....................................31
-------------------------------------------------
(a) Restrictive Legend; Warrantholder's Representation................................32
--------------------------------------------------
(b) Statement of Intention to Transfer; Opinion of Counsel............................33
------------------------------------------------------
(c) Termination of Restrictions.......................................................33
---------------------------
Section 21. Representations and Warranties; Certain Covenants.....................................34
-------------------------------------------------
(a) Organization and Standing.........................................................34
-------------------------
(b) Capitalization....................................................................34
--------------
(c) Authorization.....................................................................34
-------------
(d) No Conflicts......................................................................35
------------
(e) SEC Filings.......................................................................35
-----------
(f) No Brokers........................................................................35
----------
(g) Warrant Shares Equity Percentage..................................................36
--------------------------------
Section 21A. Representation and Warranty of NDTC...................................................36
-----------------------------------
Section 22. No Rights or Liabilities as Stockholder...............................................36
---------------------------------------
Section 23. Definitions...........................................................................36
-----------
Section 24. Notices...............................................................................42
-------
Section 25. Amendments............................................................................43
----------
Section 26. Successors and Assigns................................................................43
----------------------
Section 27. Termination...........................................................................43
-----------
Section 28. Governing Law.........................................................................43
-------------
Section 29. Third Party Beneficiaries.............................................................43
-------------------------
Section 30. Headings..............................................................................43
--------
Section 31. Entire Agreement......................................................................43
----------------
Section 32. Expenses..............................................................................44
--------
Section 33. Counterparts..........................................................................44
------------
</TABLE>
<PAGE>
Page
----
Schedule A. Threshold Amount and Vesting Schedule
Schedule B. Terms of Preferred Stock
Exhibit A-1 Form of - Warrant Certificate for GI Common Stock
- Election to Purchase
- Assignment
Exhibit A-2 Form of - Warrant Certificate for GI Preferred Stock
- Election to Purchase
- Assignment
Exhibit B Amendment to Rights Agreement
<PAGE>
WARRANT ISSUANCE AGREEMENT
WARRANT ISSUANCE AGREEMENT (this "Agreement"), dated as of December
---------
16, 1997, by and between NextLevel Systems, Inc., a Delaware corporation ("GI"),
--
and National Digital Television Center, Inc., a Colorado corporation ("NDTC").
----
WHEREAS, GI and NDTC have entered into a Digital Terminal Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), whereby NDTC
------------------
agreed to purchase 6,500,000 Digital Terminals from GI;
WHEREAS, it is a condition to the effectiveness of the Purchase
Agreement that GI and NDTC enter into this Agreement;
WHEREAS, GI intends, pursuant to this Agreement, to issue Warrants
entitling the Warrantholder to purchase shares of common stock, par value $.01
per share, of GI (the "GI Common Stock") and shares of a new series of
---------------
exchangeable preferred stock, par value $.01 per share, of GI (the "GI
--
Preferred Stock") having the terms set forth on Schedule B.
- ---------------
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein set forth, the parties hereto
agree as follows:
Section 1. Issuance of Warrants.
--------------------
Simultaneously with the execution hereof, GI, for good and valuable
consideration, hereby agrees to issue to the Warrantholder an aggregate of (i)
4,676,000 warrants to purchase shares of GI Common Stock ("Common Stock
------------
Warrants") and (ii) 1,668,000 warrants to purchase shares of GI Preferred Stock
("Preferred Stock Warrants"), each GI Common Stock Warrant exercisable, at the
------------------------
Common Exercise Price, for one share of GI Common Stock and each Preferred Stock
Warrant exercisable, at the Preferred Exercise Price, for one share of GI
Preferred Stock, subject to adjustment as set forth herein (the Common Stock
Warrants and the Preferred Stock Warrants being collectively referred to as the
"Warrants").
Section 2. Form of Warrant Certificates.
----------------------------
The certificates evidencing the Warrants (the "Warrant Certificates")
--------------------
to be delivered pursuant to this Agreement shall be in registered form only,
shall comply with the Delaware General Corporation Law and any other applicable
law and shall be substantially in the form set forth in Exhibit A-1 and A-2
-------------------
attached hereto.
<PAGE>
Section 3. Execution of Warrant Certificates.
---------------------------------
Warrant Certificates shall be signed on behalf of GI by its President
or any Vice President, and by its Secretary or an Assistant Secretary, under its
corporate seal. Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the President, any Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose GI may adopt and use the facsimile signature
of any person who shall have been President, any Vice President, Secretary or an
Assistant Secretary at the time such signature was so imprinted or otherwise
produced notwithstanding the fact that at the time the Warrant Certificates
shall be delivered or disposed of such person shall have ceased to hold such
office. The seal of GI may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
In case any officer of GI who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been delivered or disposed of by GI, such Warrant Certificates
nevertheless may be delivered or disposed of as though such person had not
ceased to be such officer of GI; and any Warrant Certificate may be signed on
behalf of GI by any person who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of GI to sign such Warrant
Certificate, although at the date of the execution of this Agreement any such
person was not such officer.
Section 4. Registration.
------------
Warrant Certificates issued as provided in this Agreement shall be
numbered by GI and shall be registered by GI in a register maintained by its
Secretary at its principal executive offices in the name of the Warrantholder.
Section 5. Transfer and Exchange.
---------------------
(a) An assignment, conveyance or other transfer of the Warrants shall
be made on the books of GI maintained for such purpose at the principal office
of GI referred to in Section 24 upon surrender of the Warrants together with a
----------
properly completed assignment duly executed by the Warrantholder or a subsequent
transferee. Upon any such registration of transfer, new Warrants shall be
issued to the transferee and the surrendered Warrants shall be canceled.
Notwithstanding the foregoing, the Warrants and the rights under this Agreement
may not be assigned, conveyed or transferred unless (i) such assignment,
conveyance or transfer complies with all applicable securities laws and the
provisions of this Agreement, including Section 5(b), and (ii) the transferee
------------
agrees in writing to be bound by the terms of this Agreement, including the
restrictions set forth in Sections 5(b), 7 and 8.
----------------------
2
<PAGE>
(b) The Warrants may not be sold, assigned, monetized or otherwise
transferred prior to their respective Warrant Expiration Dates, except that the
Warrantholder may transfer the Warrants to an Affiliate of the Warrantholder
that agrees in writing to be bound by the terms of this Agreement.
(c) Warrant Certificates may be exchanged at the option of the
Warrantholder, when surrendered to GI at its office referred to in Section 24
----------
for another Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number and type of Warrants. Warrant
Certificates surrendered for exchange, transfer or exercise shall be canceled by
GI.
(d) At any time prior to the exercise of a Preferred Stock Warrant, at
GI's option, GI may elect to cause such Warrant to become exercisable for 10
times the Common Warrant Shares issuable or deliverable upon exercise of a
Common Stock Warrant (initially for 10 shares of GI Common Stock) for each share
of GI Preferred Stock issuable upon exercise of such Preferred Stock Warrant
prior to such changes.
Section 6. Amendment of the Rights Agreement.
---------------------------------
It is understood and agreed that GI has amended the Rights Agreement
in the manner attached hereto as Exhibit B.
---------
Section 7. Transfers to Competitors.
------------------------
(a) Notwithstanding any other provisions of this Agreement the
Warrantholder shall not knowingly sell, transfer, pledge, hypothecate, assign or
otherwise dispose of any Warrant Shares to a Competitor at any time prior to
December 31, 2002 without first complying with the provisions of this Section 7.
---------
If prior to December 31, 2002, the Warrantholder shall receive a bona fide offer
in writing from a Competitor (a "Competitor Offer") to acquire all or part of
----------------
the Warrant Shares (the "First Offer Shares"), which offer the Warrantholder
------------------
proposes to accept, the Warrantholder shall deliver to GI a notice (a "Notice of
---------
Sale") containing a copy of the Competitor Offer, and setting forth the identity
- ----
of the Competitor and an offer to sell the First Offer Shares to GI on the
following terms: (i) if the Competitor Offer contemplates a purchase of the
First Offer Shares by the Competitor for consideration consisting solely of
cash, then the Warrantholder's offer shall be to sell the First Offer Shares for
cash in an amount equal to the purchase price specified in, and otherwise on the
terms and conditions contained in, the Competitor Offer, and (ii) if the
Competitor Offer contemplates an acquisition of the First Offer Shares by the
Competitor for consideration any portion of which is not cash, then the
Warrantholder's offer shall be to sell the First Offer Shares for cash in an
amount equal to the sum of the cash consideration and the fair market value of
the noncash consideration (as determined pursuant to paragraph (c) below)
specified in, and otherwise on the terms and conditions contained in, the
Competitor Offer; provided, however that if the Competitor Offer is a public
--------- -------
tender or exchange offer (other than a tender or exchange
3
<PAGE>
offer made by a Person that is not an Affiliate of the Warrantholder to acquire
50% or more of the outstanding shares of GI Common Stock as to which this
Section 7 shall not apply), made by a person that is not an Affiliate of the
- ---------
Warrantholder, to acquire shares of GI Common Stock, the per share price to be
paid for the First Offer Shares shall be equal to the highest per share price
actually paid for shares of GI Common Stock in such public tender or exchange
offer. The Notice of Sale shall specify the price at which the First Offer
Shares are offered, as provided in the preceding sentence. If GI desires to
accept the offer set forth in a Notice of Sale, GI shall, within 30 days of
receipt of such Notice of Sale, notify the Warrantholder in writing of its
intention to acquire the First Offer Shares. The closing of such purchase and
sale shall be subject to the additional provisions of paragraphs (d) and (e) of
Section 8.
- ---------
(b) If (i) GI does not timely accept the offer set forth in a Notice
of Sale, or (ii) the purchase of the First Offer Shares is not consummated
within the period set forth in Section 8(d)(iii) for any reason other than a
-----------------
breach by the Warrantholder of any of its covenants, representations or
warranties that are a condition to consummation of such purchase, then GI shall
be deemed to have rejected such offer as of the last date for accepting such
offer or closing such purchase, as applicable, and the Warrantholder shall have
the right, at any time during the thirty day period beginning on the date that
the offer set forth in a Notice of Sale is deemed rejected or the day following
the last day of the period set forth in Section 8(d)(iii), as applicable, to
-----------------
enter into a binding agreement to sell all of the First Offer Shares to the
Competitor on terms and conditions no less favorable in the aggregate to the
Warrantholder than those set forth in the Competitor Offer, and thereafter
(within the period specified below in this paragraph (b)) to sell all of the
First Offer Shares to the Competitor pursuant to such agreement. If the
Warrantholder does not enter into such an agreement during such thirty-day
period, or does not close the sale thereunder within sixty days after execution
of such an agreement (subject to extension for a maximum of one hundred eighty
additional days to the extent required to obtain all required governmental and
third party approvals), the procedure set forth above with respect to the Notice
of Sale shall be repeated with respect to any subsequent proposed sale,
assignment or other disposition of the Warrant Shares to a Competitor. Any
First Offer Shares transferred to a Person other than GI in compliance with the
provisions of this Section 7 shall not thereafter be subject to the provisions
---------
of this Agreement.
(c) Before submitting a Notice of Sale pursuant to paragraph (a) in
response to a Competitor Offer that contemplates (i) a sale of the First Offer
Shares in conjunction with other assets, or (ii) an acquisition of the First
Offer Shares by the Competitor for consideration any portion of which is not
cash, the Warrantholder and GI shall cause (A) if the Competitor Offer
contemplates a sale of the First Offer Shares in conjunction with other assets,
the total consideration specified in the Offer to be allocated between the First
Offer Shares and such other assets, (B) if the Competitor Offer contemplates an
acquisition of the First Offer Shares by the Competitor for consideration
4
<PAGE>
any portion of which is not cash, the fair market value of the noncash
consideration to be determined, in each case pursuant to this paragraph (c):
(i) The Warrantholder shall deliver to GI a notice stating that
the Warrantholder intends to deliver a Notice of Sale to which this
paragraph (c) applies and identifying an appraiser (the "First
-----
Appraiser") who has been retained by the Warrantholder to allocate the
---------
total consideration specified in the Competitor Offer or to conduct an
appraisal of the noncash consideration pursuant to this paragraph (c).
Within ten business days after its receipt of the Warrantholder's
notice pursuant to the preceding sentence, GI shall send a notice to
the Warrantholder identifying a second appraiser (the "Second
------
Appraiser") who shall be retained by GI to make such allocation or
---------
conduct such appraisal, as applicable, pursuant to this paragraph (c).
(ii) The First Appraiser and the Second Appraiser shall submit
their independent determinations of the amount of consideration
allocable to the First Offer Shares or the fair market value of the
noncash consideration as applicable, within thirty days after the date
on which the Second Appraiser is retained. If the respective
determinations of the First Appraiser and the Second Appraiser vary by
less than ten percent of the higher determination, the amount of
consideration allocable to the First Offer Shares or the fair market
value of the noncash consideration, as applicable, for purposes of
paragraph (a), shall be the average of the two determinations.
(iii) If the respective determinations of the First Appraiser
and the Second Appraiser vary by ten percent or more of the higher
determination, the two Appraisers shall promptly designate a third
appraiser (the "Third Appraiser"), who shall be retained by the
---------------
Warrantholder and GI to make an allocation or conduct an appraisal
pursuant to this paragraph (c). The First Appraiser and the Second
Appraiser shall be instructed not to, and the Warrantholder and GI
shall not provide any information to the Third Appraiser as to the
determinations of the First Appraiser and the Second Appraiser or
otherwise influence the Third Appraiser's determination in any way.
The Third Appraiser shall submit its determination of the amount of
consideration allocable to the First Offer Shares or the fair market
value of the noncash consideration, as applicable, within thirty days
after the date on which the Third Appraiser is retained. If a Third
Appraiser is retained, the amount of consideration allocable to the
First Offer Shares or the fair market value of the noncash
consideration, as applicable, for purposes of paragraph (a), shall
equal the average of the two closest of
5
<PAGE>
the three determinations, except that, if the difference between the
highest and middle determinations is no more than 105% and no less
than 95% of the difference between the middle and lowest
determinations, then the amount of consideration allocable to the
First Offer Shares or the fair market value of the noncash
consideration, as applicable, for purposes of paragraph (a), shall
equal the middle determination.
(iv) Any appraiser retained pursuant to this paragraph (c) shall
be nationally recognized as being qualified and experienced in the
appraisal of assets comparable to the First Offer Shares and, if
applicable, any other assets proposed to be sold pursuant to the
Competitor Offer and shall not be an Affiliate of any party to this
Agreement. All fees and expenses of the First Appraiser shall be
borne by the Warrantholder, of the Second Appraiser shall be borne by
GI and of the Third Appraiser shall be borne equally by the
Warrantholder and GI.
(v) In determining the fair market value of the noncash
consideration, each appraiser retained pursuant to this paragraph (c)
shall: (A) assume that the fair market value of the applicable asset
is the price at which the asset would change hands between a willing
buyer and a willing seller, neither being under any compulsion to buy
or sell and each having reasonable knowledge of all relevant facts;
(B) assume that the applicable asset would be sold for cash; and (C)
use valuation techniques then prevailing in the relevant industry.
Section 8. Rights in the Event of a Public Offering; Closing Matters, etc..
---------------------------------------------------------------
(a) In the event that the Warrantholder desires to sell any Warrant
Shares in a registered public offering for cash (the "Offering"), the
--------
Warrantholder shall first offer such shares for sale to GI in accordance with
the following provisions.
(b) If the Warrantholder intends to cause GI to register Warrant
Shares pursuant to the terms of this Agreement, the Warrantholder shall deliver
a notice to GI (in addition to any notice required pursuant to Section 19 of
this Agreement) specifying (A) the number of the Warrant Shares the
Warrantholder desires to sell in the Offering (the "Offered Shares") and (B) the
--------------
proposed timing of the Offering, and offering to sell the Offered Shares to GI
at the price determined below (an "Offering Notice"). If GI desires to purchase
---------------
the Offered Shares, it shall so notify the Warrantholder in writing within 10
days from the receipt of such Offering Notice (a "Reply Notice"). If, by its
------------
Reply Notice, GI accepts the offer of the Warrantholder, such Reply Notice shall
constitute an agreement binding on GI and the Warrantholder to sell and purchase
for
6
<PAGE>
cash all, but not less than all, the Offered Shares at the Fair Market Value
for such shares as of the date of the Reply Notice.
(c) If GI does not accept the offer of the Warrantholder pursuant to
the foregoing provisions of this Section 8 or the purchase of the Offered Shares
---------
is not consummated within the period set forth in Section 8(d)(iii) for any
-----------------
reason other than a breach by the Warrantholder of any of its covenants,
representations or warranties that is a condition to consummation of such
purchase, then GI shall be deemed to have rejected such offer as of the last
date for accepting such offer or closing such purchase, as applicable, and the
Warrantholder shall have the right to proceed with a registered public offering
of the Offered Shares, subject to the further provisions of this Agreement;
provided, however, that any Offered Shares that have not been sold in a
- -------- -------
registered public offering prior to the first anniversary of the date that the
offer set forth in the Offering Notice is deemed rejected for any reason other
than the failure of GI to comply with its covenants in Section 19 may not
----------
thereafter be sold in a registered public offering without complying with the
provisions of this Agreement. Any Offered Shares transferred to a Person other
than GI in compliance with the provisions of this Section 8 shall not thereafter
---------
be subject to the provisions of this Agreement.
(d) Any purchase by GI of Warrant Shares pursuant to Section 7 or
---------
Section 8 shall be subject to the following additional terms and conditions:
- ---------
(i) The Warrantholder shall represent and warrant that GI will
receive good and valid title to the Warrant Shares, free and clear of
all liens, of any nature whatsoever except for governmental and third
party approvals required for transfers of shares of GI Common Stock
generally.
(ii) The closing of the purchase and sale shall be subject to the
satisfaction of the following conditions:
(A) all governmental and third party approvals required with
respect to the transactions to be consummated at such closing
shall have been obtained, to the extent the failure to obtain
such approvals would prevent GI or the Warrantholder from
performing any of its material obligations under the transaction
documents or would result in any material adverse change in, or
material adverse effect on, GI;
(B) there shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction restricting,
preventing or prohibiting the consummation of the transactions to
be consummated at such closing; and
7
<PAGE>
(C) the representation and warranty of the Warrantholder
contemplated by clause (i) of this paragraph (d) shall be true
and correct at the closing of such sale with the same force and
effect as if then made.
(iii) Unless otherwise agreed by the applicable parties, the
closing of any purchase and sale of Warrant Shares shall take place at
the principal executive offices of GI at 10:00 a.m. local time on a
business day selected by GI, provided that such closing shall occur as
promptly as practicable, and in any event within sixty days after the
acceptance of the applicable offer, subject to extension for a maximum
of thirty additional days to the extent required to obtain all
required governmental and third party approvals.
(iv) Unless otherwise agreed by the applicable parties, the
purchase price shall be payable by wire transfer of same day funds or
by certified or cashier's check drawn to the order of the
Warrantholder, as specified by the Warrantholder.
(e) The Warrantholder and GI shall each use commercially reasonable
efforts to cooperate with the other in connection with the Warrantholder's
efforts to transfer any interest in the Warrant Shares in accordance with the
provisions of Sections 7 and 8, including making qualified personnel available
----------------
for attending hearings and meetings respecting any approvals and authorizations
required for such transfer and, at the request of the Warrantholder, making all
filings with, and giving all notices to third parties and governmental
authorities that may be necessary or reasonably required to be made or given by
the Warrantholder and GI in order to effect the contemplated transfers. Subject
to the other provisions of this Agreement, neither the Warrantholder nor GI
shall take any action to delay, impair or impede the receipt of any required
consents, approvals or authorizations. "Commercially reasonable efforts" as
used in this Section 8 shall not require any party to undertake extraordinary or
---------
unreasonable measures to obtain any consents, approvals or other authorizations.
Section 9. No Impairment.
-------------
The rights granted to the Warrantholder hereunder do not in any way
conflict with and are not inconsistent with the rights granted to a registered
holder of GI Common Stock under any other agreements, except such rights that
have been waived. GI will not, by amendment of its Amended and Restated
Certificate of Incorporation or By-laws, or through reorganization,
consolidation, merger, dissolution, issuance or sale of securities, sale of
assets or any other voluntary action, willfully avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking
8
<PAGE>
of all such action as may be necessary or appropriate in order to protect the
rights of the Warrantholder under this Agreement and the Warrants against
wrongful impairment. Without limiting the generality of the foregoing, GI: (i)
will take all such action as may be necessary or appropriate in order that GI
may validly and legally issue fully paid and nonassessable Warrant Shares upon
the exercise of the Warrants; and (ii) will not on or after the date hereof
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the Warrantholder under this Agreement or which
otherwise conflicts with the provisions hereof.
Section 10. Vesting of Warrants.
-------------------
(a) The exercisability of the Warrants and the Warrantholder's rights
under this Agreement shall vest in accordance with the vesting schedule set
forth in Schedule A and paragraph (c) below. Upon attainment of each applicable
----------
Threshold, GI shall promptly notify the Warrantholder in writing that the number
of Warrants related to such Threshold will become exercisable in accordance with
Schedule A, but the failure to give any such notice shall not affect the
exercisability of the applicable Warrants. The first Warrants to become
exercisable shall be the Common Stock Warrants; the Preferred Stock Warrants
shall become exercisable only after all outstanding Common Stock Warrants have
either become exercisable or failed to vest in accordance with Schedule A
----------
hereof.
(b) GI hereby covenants and agrees to proceed as promptly as
practicable to call and hold a meeting of its stockholders (the "Stockholders
------------
Meeting"), in compliance with all applicable laws and to the extent required by
- -------
applicable law or stock exchange regulations, for the purpose of approving the
issuance of the maximum amount of GI Common Stock that may be issued in the
Transaction, including, without limitation, upon consummation of the
transactions contemplated by the Memorandum of Agreement, upon exercise of the
Common Stock Warrants and, assuming only for purposes of such stockholder vote
that GI has exercised in full its right to cause the Preferred Stock Warrants to
become exercisable for GI Common Stock, upon exercise of the Preferred Stock
Warrants as so changed.
(c) If, as of June 30, 1998, GI has not exercised its right, as to all
and not less than all of the Preferred Stock Warrants, to cause the Preferred
Stock Warrants to become exercisable for GI Common Stock as provided in Section
5(d) of this Agreement, then (i) after July 1, 1998 each Warrant shall
automatically vest and become exercisable on the last day of the applicable
calendar year for such Warrant set forth in the first column on Schedule A
without regard to whether the threshold number of Digital Terminals has been
purchased for such year (but the purchase commitment shall continue unaffected)
and (ii) if at any time and from time to time on or after July 1, 1998,
Warrantholder desires to sell any Preferred Warrant Shares to a Person that is
not an Affiliate of the Warrantholder in a bona fide arm's length transaction
and the fair market
9
<PAGE>
value of the consideration to be received therefor per Preferred Warrant Share
would be less than 10 times the then fair market value of a Common Warrant Share
(the amount of such difference being the "Per Share Differential"), then
Warrantholder shall provide prior written notice (the "Proposal Notice") to GI,
and GI shall (subject to the provisions set forth below) pay to the
Warrantholder within 45 days after receipt of a further written notice from the
Warrantholder that the Preferred Warrant Shares have been sold, an amount in
cash (in immediately available funds) equal to the product of the Per Share
Differential times the number of Preferred Warrant Shares so sold. The fair
market value of the consideration received in a sale of Warrant Shares shall be
the amount of cash, if any, so received and the fair market value of any noncash
consideration determined in the manner provided in Section 7(c), with the
Warrantholder identifying the First Appraiser in its Proposal Notice and GI
identifying the Second Appraiser within 5 days after receipt of such notice. GI
at its option may, in lieu of making payment pursuant to clause (ii) of this
Section 10(c), elect, by written notice (the "Response Notice") to the
Warrantholder within 5 days after receiving the Proposal Notice, to purchase the
Preferred Warrant Shares which Warrantholder proposes to sell pursuant to clause
(ii) of this Section 10(c), for a price equal to 10 times the then fair market
value of a Common Warrant Share multiplied by the number of Preferred Warrant
Shares to be sold to such Person; such payment by GI shall be made in cash (in
immediately available funds) within 45 days after the date of the Response
Notice. The fair market value of a Common Warrant Share that is a share of GI
Common Stock shall, for the purpose of this Section 10(c), be deemed to be the
Closing Price of a share of GI Common Stock on the Trading Day before the date
of the sale of the Preferred Warrant Shares to a Person or GI, as applicable;
provided, however, that for purposes of determining whether the Warrantholder
- -------- -------
shall provide GI with a Proposal Notice, the fair market value of a Common
Warrant Share that is a share of GI Common Stock shall be deemed to be the
Closing Price of a share of GI Common Stock on the Trading Day before the date
the Proposal Notice is sent by the Warrantholder. Any Preferred Stock Warrants
remaining outstanding after July 1, 1998 may, at GI's election at any time,
become exercisable for GI Common Stock in accordance with the terms of this
Agreement. In the event that GI has filed a preliminary proxy statement for the
Stockholders Meeting prior to February 15, 1998, but GI has been unable to
obtain all necessary clearances from the Securities and Exchange Commission so
as to be able to hold the Stockholders Meeting prior to June 30, 1998, then the
July 1, 1998 date in this paragraph (c) shall be extended, up to a maximum of 3
additional months, for such time as may be necessary to obtain such approvals.
(d) NDTC agrees to vote, at the Stockholders Meeting, all shares of GI
Common Stock then owned by it in favor of approving the issuance of the maximum
amount of GI Common Stock issuable in the Transaction.
10
<PAGE>
Section 11. Exercise of Warrants.
--------------------
(a) Exercisability of Warrants. Subject to the terms and conditions
--------------------------
set forth herein, vested Warrants shall be exercisable for cash, in whole or in
part until the applicable Warrant Expiration Date in accordance with Schedule A.
----------
(b) Method of Exercise. In order to exercise any vested Warrant,
------------------
the Warrantholder shall deliver to GI at its office referred to in Section 24:
----------
(i) a written notice of such Warrantholder's election to exercise the vested
Warrants, which notice shall specify the number of such Warrantholder's vested
Warrants being exercised, (ii) a certified check or official bank check in
immediately available funds payable to the order of GI or a wire transfer in
immediately available funds to a bank account designated by GI, in an amount
equal to the Exercise Price multiplied by the number of Warrants being
exercised, and (iii) the Warrant Certificate evidencing the vested Warrants
being exercised. Such notice may be in the form of the Election to Purchase
appearing at the end of the Warrant Certificates attached as Exhibit A-1 and
-----------
Exhibit A-2 hereto. Upon receipt of the items referred to in clauses (i),
- -----------
(ii) and (iii) above, GI shall, as promptly as practicable, and in any event
within two Business Days thereafter, execute or cause to be executed, and
delivered to or upon the written order of the Warrantholder, and in the name of
the Warrantholder, a certificate or certificates representing the number of
Warrant Shares issuable upon exercise (as determined pursuant to this Section 11
----------
and Section 17 or Section 17A, as applicable), of the vested Warrants,
---------- -----------
and any and all of which certificates shall bear the restrictive legend set
forth in Section 20(a), except as provided in Section 20(c). The stock
------------- -------------
certificate or certificates so delivered shall be registered in the name of the
Warrantholder. If the vested Warrants evidenced by a Warrant Certificate shall
have been exercised and/or surrendered in part, GI shall, at the time of
delivery of the Warrant Shares, deliver to the holder thereof or on the order of
the holder thereof a new Warrant Certificate evidencing vested Warrants in an
amount equal to the number of vested Warrants evidenced by the delivered Warrant
Certificates that were not exercised or surrendered which new Warrant
Certificate shall in all other respects be identical with the Warrant
Certificate being exercised or surrendered (including with respect to the number
of unvested Warrants evidenced thereby).
GI shall keep copies of this Agreement and any notices received
hereunder available for inspection during normal business hours at its office
referred to in Section 24.
----------
Section 12. Expiration of Warrants.
----------------------
All Warrants that are not surrendered to GI for exercise in accordance
herewith by 5:00 p.m., New York City time at GI's office referred to in Section
-------
24, on the Warrant Expiration Date set forth in Schedule A for the applicable
- -- ----------
Warrants shall expire
11
<PAGE>
as of such time and all rights of the Warrantholder in respect of such Warrants
shall terminate and cease.
Section 13. Payment of Taxes.
----------------
GI shall pay any and all issue, documentary stamp or other taxes
(other than applicable income taxes) that may be payable in respect of any
issuance or delivery of Warrant Shares. GI shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of Warrant Shares in a name other than that of the
Warrantholder, and no such issuance or delivery shall be made unless and until
the Person to which issuance and delivery is to be made has paid to GI the
amount of any such tax, or has established, to the satisfaction of GI, that such
tax has been paid.
Section 14. Mutilated or Missing Warrant Certificates.
-----------------------------------------
In case any Warrant Certificates shall be mutilated, lost, stolen or
destroyed, GI shall issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but in the case of a lost, stolen or destroyed Warrant Certificate, a
new Warrant Certificate shall be issued by GI only upon its receipt of
reasonably satisfactory evidence of such loss, theft or destruction and, if
requested, an indemnity or bond reasonably satisfactory to GI.
Section 15. Reservation of Shares.
---------------------
The Warrant Shares, when issued upon exercise of the Warrants, shall
be duly authorized, validly issued, fully paid, nonassessable, and free from all
taxes (other than income taxes with respect to dividends or distributions
thereon and taxes arising from the disposition thereof), liens, charges,
security interests, restrictions and other encumbrances (except restrictions set
forth in this Agreement or otherwise imposed under applicable securities laws).
GI will at all times during the period that the Warrants may be exercised
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued GI Common Stock and GI Preferred Stock, or its
authorized and issued GI Common Stock and GI Preferred Stock held in treasury,
for the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of the Warrants, the full number of Warrant Shares deliverable
upon the exercise of the Warrants. Before taking any action which would cause
an adjustment pursuant to Section 17 reducing the Common Exercise Price below
----------
the then par value (if any) of the Common Warrant Shares issuable upon exercise
of the Common Stock Warrants, GI will take any corporate action that may, in the
opinion of its counsel (which may be counsel employed by GI), be necessary in
order that GI may validly and legally issue fully paid and nonassessable Common
Warrant Shares at the Exercise Price as so adjusted.
12
<PAGE>
Section 16. Obtaining of Certain Governmental Approvals.
-------------------------------------------
(a) GI from time to time will use reasonable efforts to obtain and
keep effective any and all permits, consents and approvals of governmental
agencies and authorities and to make securities law filings under federal and
state laws, or with any securities exchange or association on which the GI
Common Stock is listed, that may be required in connection with the issuance and
delivery of the Warrant Certificates, the exercise of Warrants and the issuance
and delivery of Warrant Shares.
(b) Without limiting the generality of the foregoing, in the event
that GI or the Warrantholder reasonably believes that exercise of the Warrants
and issuance of Warrant Shares acquirable upon such exercise requires prior
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of l976 and the
rules and regulations thereunder (the "HSR Act and Rules"), then any such
-----------------
exercise shall be contingent upon such prior compliance and, subject to
effecting such compliance, be effective as of the Exercise Date. To effect such
compliance, GI and the Warrantholder will, promptly following receipt by GI of
the Warrantholder's notice of exercise or other written request, use their
respective commercially reasonable efforts to make all filings necessary to
cause the expiration or termination of any applicable waiting period under the
HSR Act and Rules. Each of GI and the Warrantholder shall bear and pay its
respective costs or expenses that it incurs in complying with this Section
-------
16(b), except that each of GI and the Warrantholder electing to exercise the
- -----
Warrants shall pay one half of any fee payable to the Federal Trade Commission
or the Department of Justice (or any other governmental body then having
jurisdiction with respect to the HSR Act and Rules) in connection with the
filing of any reports under the HSR Act and Rules.
Section 17. Warrant Shares Issuable Upon Exercise of a Vested Common Stock
--------------------------------------------------------------
Warrant.
-------
(a) After the vesting of a Common Stock Warrant and prior to the
Warrant Expiration Date for such Common Stock Warrant, one (1) share of GI
Common Stock is purchasable at the Common Exercise Price upon the exercise of
one (1) Common Stock Warrant, subject to adjustment as discussed below:
(b) In case, subsequent to the date of this Agreement, GI shall: (i)
pay a dividend on the GI Common Stock in shares of GI Common Stock, (ii)
subdivide the outstanding shares of GI Common Stock into a greater number of
shares, (iii) combine the outstanding shares of GI Common Stock into a smaller
number of shares, (iv) pay a dividend on the GI Common Stock in shares of its
capital stock (other than GI Common Stock), or (v) issue any shares of its
capital stock by reclassification of the shares of GI Common Stock (other than
any reclassification by way of merger or binding share exchange that is subject
to paragraph (i)), the Common Exercise Price, and the number and kind of Common
Warrant Shares receivable upon exercise, in effect at the time of the
13
<PAGE>
record date for such dividend or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that the
holder of the Common Stock Warrants exercised after such time shall be entitled
to receive the aggregate number and kind of Common Warrant Shares which, if the
Common Stock Warrants had been exercised immediately prior to such time, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur. Subject
to paragraph (g), for a dividend or distribution, the adjustment shall become
effective immediately after the record date for the dividend or distribution,
and for a subdivision, combination or reclassification, the adjustment shall
become effective immediately after the effective date of the subdivision,
combination or reclassification.
(c) In case GI shall issue rights or warrants to all holders of GI
Common Stock entitling them (for a period expiring within 45 days after the
record date for the determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase shares of GI Common Stock (or
Convertible Securities) at a price per share (or having a conversion price per
share, after adding thereto an allocable portion of the exercise price of the
right or warrant to purchase such Convertible Securities, computed on the basis
of the maximum number of shares of GI Common Stock issuable upon conversion of
such Convertible Securities) less than the Current Market Price per share on the
Determination Date, the Common Exercise Price shall be adjusted by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, of which the numerator shall be the number of shares of GI Common
Stock outstanding on such record date plus the number of shares which the
aggregate offering price of the total number of shares of GI Common Stock so
offered (or the aggregate initial conversion price of the Convertible Securities
so offered, after adding thereto the aggregate exercise price of the rights or
warrants to purchase such Convertible Securities) to holders of GI Common Stock
(and to holders of Convertible Securities referred to in the following paragraph
if the distribution to which this paragraph (c) applies is also being made to
such holders) would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of GI Common Stock outstanding on such
record date plus the number of additional shares of GI Common Stock so offered
for subscription or purchase (or into which the Convertible Securities so
offered are initially convertible). The adjustment contemplated by this
paragraph (c) shall be made successively whenever any such rights or warrants
are issued and shall become effective immediately after the close of business on
such record date; however, to the extent that shares of GI Common Stock (or
Convertible Securities) have not been issued when such rights or warrants expire
(or, in the case of rights or warrants to purchase Convertible Securities which
have been exercised, if all of the shares of GI Common Stock issuable upon
conversion of such Convertible Securities have not been issued prior to the
expiration of the conversion right thereof), the Common Exercise Price shall be
readjusted (but only with respect to
14
<PAGE>
Warrants exercised after such expiration) to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares (or
Convertible Securities) actually issued upon the exercise of such rights or
warrants (or the conversion of such Convertible Securities).
For purposes of this paragraph (c) the number of shares of GI Common
Stock outstanding on any record date shall be deemed to include the maximum
number of shares of GI Common Stock the issuance of which would be necessary to
effect the full exercise, exchange or conversion of all Convertible Securities
outstanding on such record date which are then exercisable, exchangeable or
convertible at a price (before giving effect to any adjustment to such price for
the distribution to which this paragraph (c) is being applied) equal to or less
than the Current Market Price per share of GI Common Stock on the applicable
Determination Date, if all of such Convertible Securities were deemed to have
been exercised, exchanged or converted immediately prior to the opening of
business on such record date. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined by the Board of Directors of GI.
Shares of Common Stock owned by or held for the account of GI or any majority
owned subsidiary shall not be deemed outstanding for the purpose of any
computation under this paragraph (c).
(d) In case GI shall distribute to all holders of GI Common Stock
evidences of its indebtedness or assets or subscription rights or warrants
(excluding (x) dividends or distributions referred to in paragraph (b) and
distributions of rights or warrants referred to in paragraph (c) and (y) cash
dividends or other cash distributions, unless such cash dividends or cash
distributions are Extraordinary Cash Dividends), the Common Exercise Price shall
be adjusted by multiplying the Common Exercise Price in effect immediately prior
to the record date for the determination of stockholders entitled to receive
such distribution by a fraction, of which the numerator shall be the number of
shares of GI Common Stock outstanding on such record date multiplied by the
Current Market Price on the Determination Date, less the fair market value (as
determined by the Board of Directors of GI) on such record date of the evidences
of indebtedness, assets, subscription rights or warrants to be distributed to
the holders of GI Common Stock (and to the holders of Convertible Securities
referred to below if the distribution to which this paragraph (d) applies is
also being made to such holders), and of which the denominator shall be the
number of shares of GI Common Stock outstanding on such record date multiplied
by such Current Market Price. For purposes of this paragraph (d), the number of
shares of GI Common Stock outstanding on any record date shall be deemed to
include the maximum number of shares of GI Common Stock the issuance of which
would be necessary to effect the full exercise, exchange or conversion of all
Convertible Securities outstanding on such record date which are then
exercisable, exchangeable or convertible at a price (before giving effect to any
adjustment to such price for the distribution to which this paragraph (d) is
being applied) equal to or less than the Current Market Price
15
<PAGE>
per share of GI Common Stock on the applicable Determination Date, if all of
such Convertible Securities were deemed to have been exercised, exchanged or
converted immediately prior to the opening of business on such record date.
For purposes of this paragraph (d), the term "Extraordinary Cash
------------------
Dividend" shall mean any cash dividend with respect to the GI Common Stock the
- --------
amount of which, together with the aggregate amount of cash dividends on the GI
Common Stock to be aggregated with such cash dividend in accordance with the
following provisions of this paragraph, equals or exceeds the threshold
percentage set forth below in the following sentence. If, upon the date prior
to the Ex-Dividend Date with respect to a cash dividend on GI Common Stock, the
aggregate of the amount of such cash dividend together with the amounts of all
cash dividends on the GI Common Stock with Ex-Dividend Dates occurring in the
365 consecutive day period ending on the date prior to the Ex-Dividend Date with
respect to the cash dividend to which this provision is being applied (other
than any such other cash dividends with Ex-Dividend Dates occurring in such
period for which a prior adjustment to the Exercise Price was previously made
under this paragraph (d)) equals or exceeds on a per share basis 50% of the
average of the Closing Prices during the period beginning on the date after the
first such Ex-Dividend Date in such period and ending on the date prior to the
Ex-Dividend Date with respect to the cash dividend to which this provision is
being applied (except that if no other cash dividend has had an Ex-Dividend Date
occurring in such period, the period for calculating the average of the Closing
Prices shall be the period commencing 365 days prior to the date immediately
prior to the Ex-Dividend Date with respect to the cash dividend to which this
provision is being applied), such cash dividend together with each other cash
dividend with an Ex-Dividend Date occurring in such 365-day period that is
aggregated with such cash dividend in accordance with this paragraph shall be
deemed to be an Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph
(d) shall be made successively whenever any distribution to which this paragraph
(d) applies is made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
Shares of GI Common Stock owned by or held for the account of GI or any majority
owned subsidiary shall not be deemed outstanding for the purposes of any such
adjustment.
(e) In the event that this Section 17 requires adjustments to the
----------
Common Exercise Price and number of Common Warrant Shares purchasable under more
than one of clause (iv) of the first sentence of paragraph (b), paragraph (c) or
paragraph (d), and the record dates for the distribution giving rise to such
adjustments shall occur on the same date, then such adjustments shall be made by
applying, first, the provisions of paragraph (b), second the provisions of
paragraph (d) and, third, the provisions of paragraph (c).
16
<PAGE>
(f) No adjustment in the Common Exercise Price shall be required if
the amount of such adjustment shall be less than 14 cents per Common Warrant
Share; provided, however, that any adjustments which by reason of this
-------- -------
subsection (f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
-------
17 shall be made to the nearest cent or to the nearest one-hundredth of a Common
- --
Warrant Share, as the case may be.
(g) In any case in which this Section 17 shall require that an
----------
adjustment in the Common Exercise Price be made effective as of the record date
for a specified event, GI may elect to defer until the occurrence of such event
(x) issuing to the holder of any Common Stock Warrant exercised after such
record date the Common Warrant Shares, if any, issuable upon such exercise over
and above the Common Warrant Shares, if any, issuable upon such exercise on the
basis of the Common Exercise Price in effect prior to such adjustment and (y)
paying to such holder cash or its check in lieu of any fractional interest to
which such holder would be entitled pursuant to paragraph (k); provided,
--------
however, that GI shall deliver to such holder a due bill or other appropriate
- -------
instrument evidencing such holder's right to receive such additional Common
Warrant Shares and such cash upon the occurrence of the event requiring such
adjustment.
(h) Upon each adjustment of the Common Exercise Price as a result of
the calculations made in subsections (b), (c), (d) or (j) of this Section 17,
----------
each Warrant outstanding prior to the making of the adjustment in the Common
Exercise Price shall thereafter evidence the right to purchase, at the adjusted
Common Exercise Price, that number of Common Warrant Shares (calculated to the
nearest hundredth) obtained by (A) multiplying the number of Common Warrant
Shares purchasable upon exercise of a Common Stock Warrant prior to adjustment
of the number of Common Warrant Shares by the Common Exercise Price in effect
prior to adjustment of the Common Exercise Price and (B) dividing the product so
obtained by the Common Exercise Price in effect after such adjustment of the
Common Exercise Price.
(i) If GI consolidates with or merges into, or transfers (other than
by mortgage or pledge) its properties and assets substantially as an entirety
to, another Person or GI is a party to a merger or binding share exchange which
reclassifies or changes its outstanding GI Common Stock, GI (or its successor in
such transaction) or the transferee of such properties and assets shall make
appropriate provision so that the Common Stock Warrants shall thereafter be
exercisable, upon the terms and conditions specified in this Agreement, for the
kind and amount of securities, cash or other assets receivable upon such
transaction by a holder of the number of Common Warrant Shares purchasable upon
exercise of the Common Stock Warrants immediately before the effective date of
such transaction (assuming, to the extent applicable, that such holder failed to
exercise any rights of election with respect thereto, and received per Common
Warrant Share the kind and amount of securities, cash or other assets received
per share of GI Common Stock by a plurality of the nonelecting shares of GI
Common Stock);
17
<PAGE>
and in any such case, if necessary, the provisions set forth in this Section 17
----------
with respect to the rights and interests thereafter of the holder of the Common
Stock Warrants shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any such other securities or assets thereafter
deliverable on the exercise of the Common Stock Warrants. Equivalent
requirements to the foregoing shall also be applicable for the protection of the
rights of the holders of Preferred Stock Warrants based on the Common Warrant
Shares that would be issuable upon exchange of the GI Preferred Stock for which
such Preferred Stock Warrants are exercisable assuming for this purpose that GI
had exercised in full its right to require such exchange. The subdivision or
combination of the GI Common Stock at any time outstanding into a greater or
lesser number of shares of GI Common Stock shall not be deemed to be a
reclassification of the GI Common Stock for the purposes of this subsection. GI
shall not effect any such consolidation, merger, transfer or binding share
exchange unless prior to or simultaneously with the consummation thereof the
successor (if other than GI) resulting from such consolidation or merger or the
Person purchasing such assets or other appropriate Person shall assume, by
written instrument, the obligation to deliver to the holder of the Warrants such
securities, cash or other assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase and the other obligations
under this Agreement.
(j) The Company may make such reductions in the Common Exercise Price,
in addition to those required by subsections (b), (c) and (d) of this Section
-------
17, as it shall in its sole discretion determine to be advisable.
(k) If the number of Common Warrant Shares purchasable upon the
exercise of the Common Stock Warrants is adjusted pursuant to paragraph (h), the
Company shall nonetheless not be required to issue fractions of Common Warrant
Shares upon exercise of the Common Stock Warrants or to distribute share
certificates which evidence fractional Common Stock Warrant Shares. In lieu of
fractional Common Warrant Shares, there shall be paid to the Warrantholder at
the time the Common Stock Warrant is exercised as herein provided an amount in
cash equal to the same fraction of the current market value of a Common Warrant
Share. For purposes of this paragraph (k), the current market value of a Common
Warrant Share shall be the Closing Price of a Common Warrant Share for the
Trading Day immediately prior to the date of such exercise.
Section 17A. Warrant Shares Issuable Upon Exercise of a Vested Preferred Stock
-----------------------------------------------------------------
Warrant.
-------
(a) After the vesting of a Preferred Stock Warrant and prior to the
Warrant Expiration Date for such Preferred Stock Warrant, one (1) share of GI
Preferred Stock is purchasable at the Preferred Exercise Price upon the exercise
of one (1) Preferred Stock Warrant, subject to adjustment as discussed below.
18
<PAGE>
(b) For so long as any Preferred Stock Warrants are outstanding, (i)
GI shall not amend, modify or withdraw the Certificate of Rights, Designations
and Preferences for the GI Preferred Stock, (ii) issue any shares of GI
Preferred Stock other than pursuant to the Preferred Stock Warrants issued to
Warrantholder and other cable television multiple systems operators; or (iii)
split, combine or reclassify the shares of GI Preferred Stock, in each case
without the prior written approval of Warrantholder, which may be unreasonably
withheld, except as may be required by law or stock exchange regulations. If,
and to the extent that, the Common Exercise Price or the number or kind of
Common Warrant Shares with respect to the Common Stock Warrants are adjusted
pursuant to Section 17, the Preferred Stock Exercise Price and the number and
kind of Common Warrant Shares for which a Preferred Warrant Share issuable upon
exercise of a Preferred Stock Warrant may be exchanged at the option of GI,
shall automatically be adjusted correspondingly in accordance with the terms of
the Preferred Stock Warrants.
Section 18. Notice to Warrantholder.
-----------------------
(a) Upon any adjustment of the Exercise Price or number of Warrant
Shares pursuant to Section 17 or Section 17A, GI within 20 days thereafter shall
---------- -----------
cause to be given to the Warrantholder written notice of such adjustment setting
forth the Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and setting forth the number of Warrant Shares (or portion thereof)
purchasable upon exercise of the Warrants after such adjustment in the Exercise
Price or number of Warrant Shares. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
provisions of Section 18(b).
-------------
(b) In case:
(i) GI shall authorize the issuance to all holders of GI Common
Stock of right or warrants to subscribe for or purchase shares of GI Common
Stock or of any other subscription rights or warrants; or
(ii) GI shall authorize the distribution to all holders of GI
Common Stock of evidences of its indebtedness or assets (other than dividends
payable in GI Common Stock); or
(iii) of any consolidation, merger or binding share exchange to
which GI is a party and for which approval of any shareholders of GI is
required, or of the conveyance or transfer of the properties and assets of GI
as, or substantially as, an entirety, or of any reclassification or change of
outstanding Warrant Shares issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of GI; or
(v) GI proposes to take any action (other than actions of the
character described in Section 17(b), except as required under (iii) above)
------------
which would
19
<PAGE>
require an adjustment of the Exercise Price or number of Warrant Shares pursuant
to Section 17 or Section 17A.
---------- -----------
then GI shall cause to be given to the Warrantholder at least 20 days (or 10
days in any case specified in clauses (i) or (ii) above) prior to the applicable
record or effective date hereinafter specified, a written notice stating (x) the
date as of which the holders of record of GI Common Stock to be entitled to
receive any such rights, warrants or distribution are to be determined, or (y)
the date on which any such consolidation, merger, binding share exchange,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of record
of GI Common Stock shall be entitled to exchange their shares of GI Common Stock
for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, binding share exchange, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 18(b) or any defect therein shall not affect the
-------------
legality or validity of any distribution, right, warrant, consolidation, merger,
binding share exchange, conveyance, transfer, dissolution, liquidation or
winding up, or the vote upon any such action.
Section 19. Registration Rights.
-------------------
(a) Demand Registration Rights.
--------------------------
(i) At any time and from time to time after the date hereof, the
Warrantholder and any transferee of Registrable Securities who becomes a
party to this Agreement (the "Transferees"; and together with the
-----------
Warrantholder, the "Holders") shall have the right to request GI to effect
-------
the registration under the Securities Act of all or part of their
Registrable Securities. Holders shall exercise such right by giving of a
notice stating (A) the number of Registrable Securities to be included in
such registration statement and (B) Holder's intended method of
distribution (which may include an underwritten offering). Upon receipt by
GI of any such request, GI shall promptly give notice of such proposed
registration to all Holders who hold Registrable Securities and thereupon
shall, as expeditiously as possible, use reasonable efforts to effect the
registration under the Securities Act of:
(A) all Registrable Securities that GI has been requested to
register pursuant to clause (i) of this Section 19(a); and
-------------
(B) all other Registrable Securities that Holders have, within 20
days after GI has given such notice, requested GI to register;
all to the extent requisite to permit the sale or other disposition by the
Holders of the Registrable Securities so to be registered.
20
<PAGE>
(ii) If the managing underwriter, selected pursuant to Section
-------
19(i)(A); of the public offering to be effected pursuant to a registration
--------
statement filed pursuant to clause (i) of this Section 19(a) of any
-------------
Registrable Securities shall advise GI in writing (with a copy to each
holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such
registration (including securities of GI that are not Registrable
Securities) exceeds the number that can be sold in such offering without
having an adverse effect on such offering, GI will include in such
registration to the extent of the number that GI is so advised can be sold
in such offering:
(A) first, Registrable Securities requested to be included in
-----
such registration by Holders pro rata based on the number of shares to
be included; and
(B) second, other securities of GI proposed to be included
------
pursuant to Section 19(a)(viii) in such registration, in accordance
-------------------
with the priorities, if any, then existing among GI and the holders of
such other securities.
(iii) The Holders requesting inclusion in a registration statement
under this Section 19(a) may withdraw from any requested registration
-------------
pursuant to this Section 19(a) by giving written notice to GI prior to the
-------------
date an underwriting agreement is executed or such registration statement
becomes effective; provided, however, that for a period of three months
-------- -------
after such withdrawal, such Holders may not request any registration
pursuant to this Section 19(a), unless (A) such Holders pay GI for its out-
-------------
of-pocket expenses relating to such registration, (B) the registration
statement had not been filed within 90 days of the initial request for
registration pursuant to Section 19(a)(i) or had not become effective
within 120 days of such request or (C) GI otherwise failed to comply with
its obligations under this Section 19 with respect to such registration.
(iv) GI shall not be required to effect more than a total of three
effective registrations under this Section 19(a). Notwithstanding the
-------------
foregoing, if the Holders withdraw from an offering after the registration
statement for the shares to be offered thereby has become effective due to
the occurrence of any of the events set forth in Sections 19(c)(vi), (vii)
-------------------------
or (viii), then such registration shall not be counted as an effective
---------
registration for purposes of this Section 19(a)(iv).
-----------------
(v) GI shall not be required to effect a registration pursuant to this
Section 19(a) unless the offering includes Registrable Securities having a
-------------
Fair Market Value of at least $10 million in the aggregate.
(vii) GI shall not be required to effect any registration within six
(6) months of the effective date of any other registration under this
Section 19(a).
-------------
21
<PAGE>
(viii) If the managing underwriter in an underwritten offering has
not limited the number of Registrable Securities to be underwritten, then
GI may include securities for its own account or for the account of others
in such registration statement and underwriting if the managing underwriter
so agrees and if the number of Registrable Securities held by Holders which
would otherwise have been included in such registration statement and
underwriting will not thereby be limited. The inclusion of such shares
shall be on the same terms as the registration of Registrable Securities
held by the Holders. In the event that the managing underwriter excludes
some of the securities to be registered, the securities to be sold for the
account of the Company and any other holders shall be excluded in their
entirety prior to the exclusion of any Registrable Securities of the
Holders.
(b) "Piggyback" Registrations. If GI at any time proposes to
-------------------------
register any of its securities under the Securities Act (other than pursuant to
Section 19(a)) on a registration statement on Form S-1, S-2 or S-3 or on any
- -------------
other form upon which may be registered securities similar to the Registrable
Securities for sale to the general public except Form S-4 and Form S-8, GI will
at each such time give prompt notice to the Holders of its intention to do so
setting forth the date on which GI proposes to file such registration statement,
which date shall be no earlier than 30 days from the date of such notice, and
advising the Holders of their right to have Registrable Securities included
therein. Upon the written request of the Holders given to GI not less than 5
days prior to the proposed filing date of such registration statement set forth
in such notice, GI will use reasonable best efforts to cause each of the
Registrable Securities that GI has been requested to register by the Holders to
be registered under the Securities Act. If the securities to be so registered
for sale include securities to be sold for the account of GI and to be
distributed by or through a firm of underwriters of recognized standing under
underwriting terms appropriate for such transaction, then the Registrable
Securities shall also be included in such underwriting, provided that if, in the
--------
reasonable written opinion of the managing underwriter or underwriters, the
total amount of such securities to be so registered, when added to such
Registrable Securities, will exceed the maximum amount of GI's securities that
can be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially and adversely affecting the entire
offering, GI will include in such registration to the extent of the number which
GI is so advised can be sold in such offering securities determined as follows:
(i) if such registration as initially proposed by GI was solely a
primary registration of its securities:
(A) first, the securities proposed by GI to be sold for its own
-----
account,
22
<PAGE>
(B) second, any Registrable Securities requested to be included
------
in such registration pro rata among the Holders of such Registrable
Securities and the holders of such other shares of GI Common Stock on
the basis of the number of Registrable Securities and other shares of
GI Common Stock requested to be included by each such holder, and
(C) third, any other securities of GI proposed to be included in
-----
such registration statement in accordance with the provisions, if any,
then existing among the holders of such securities, and
(ii) if such registration as initially proposed by GI was in whole or
in part requested by holders of securities of GI, other than Holders of
Registrable Securities, pursuant to demand registration rights,
(A) first, such securities held by the holders initiating such
-----
registration, pro rata among the holders thereof, on the basis agreed
upon by such holders and GI,
(B) second, Registrable Securities requested to be included in
------
such registration pro rata among the Holders of such Registrable
Securities and the holders of such other shares of GI Common Stock on
the basis of the number of Registrable Securities and other shares of
GI Common Stock requested to be included by each such holder, and
(C) third, any securities of GI proposed to be included in such
-----
registration statement in accordance with the priorities, if any, then
existing among the holders of such securities.
To the extent that the managing underwriter in an underwritten
offering pursuant to this Section 19(b) determines that the public sale or other
distribution of any Registrable Securities, shares of GI Common Stock or other
securities of GI other than those included in such underwritten offering should
be delayed following the effective date of such registration statement, the
Holders agree to enter, together with and on the same terms as GI and any other
holders of securities included in such registration statement, into an agreement
not to sell any other Registrable Securities, shares of GI Common Stock or other
securities of GI during such period following the effective date of such
registration statement as the managing underwriter reasonably determines is
necessary in connection with such underwritten offering, which period shall in
no event exceed 180 days following the effective date of such registration
statement.
The Holders requesting inclusion in a registration statement under
this Section 19(b) may withdraw from any requested registration pursuant to this
-------------
Section 19(b) by giving written notice to GI prior to the date an underwriting
- -------------
agreement is executed or such registration statement becomes effective.
23
<PAGE>
(c) GI's Obligations in Registration. If and whenever GI is obligated
--------------------------------
by the provisions of this Section 19 to use reasonable best efforts to effect
----------
the registration of any Registrable Securities under the Securities Act, GI
will:
(i) prepare and file with the Commission, as expeditiously as possible
within 90 days after the initial request from holders to register such
Registrable Securities, a registration statement with respect to such
Registrable Securities and use reasonable best efforts to cause such
registration statement to become effective within 180 days after such
initial request and to remain effective; provided, however, that GI shall
-------- -------
not be required to keep such registration statement effective, or to
prepare and file any amendments or supplements thereto, later than the
earlier of (x) such time as all Registrable Securities have been sold and
(y) 5:00 P.M., New York City time, on the last business day of the sixth
month following the date on which such registration statement becomes
effective under the Securities Act or such longer period during which the
Commission requires that such registration statement be kept effective with
respect to any of the Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement whenever the Holders for whom such Registrable
Securities are registered or are to be registered shall desire to dispose
of the same, subject, however, to the proviso contained in the immediately
preceding clause (i);
(iii) furnish each Holder for whom such Registrable Securities are
registered or are to be registered such numbers of copies of each
registration statement and printed prospectus, including a preliminary
prospectus and any amendments or supplements thereto, in conformity with
the requirements of the Securities Act, and such other documents and
information as such Holder may reasonably request in order to facilitate
the disposition of such Registrable Securities;
(iv) use reasonable best efforts to register or qualify the
Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each Holder
shall reasonably request, and do any and all other acts and things that may
be necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of such Registrable Securities except
that GI shall not for any purpose be required to (A) qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this clause (iv) be obligated to be so
24
<PAGE>
qualified, (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction unless GI is
already subject to general service of process in such jurisdiction;
(v) furnish to the Holders for whom such Registrable Securities are
registered or are to be registered at the time of the disposition of such
Registrable Securities by such Holders a signed copy of an opinion of
counsel for GI reasonably acceptable to such holders as to such matters as
such holders may reasonably request and substantially to the effect that, a
registration statement covering such Registrable Securities has been filed
with the Commission under the Securities Act and has been made effective by
order of the Commission; said registration statement and the prospectus
contained therein comply as to form in all material respects with the
requirements of the Securities Act and, based upon such investigation and
inquiry as said counsel deems necessary or appropriate, nothing has come to
said counsel's attention that would cause it to believe that either said
registration statement or said prospectus contains an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of said
prospectus, in the light of the circumstances under which they were made)
not misleading; said counsel knows of no legal or governmental proceedings
required to be described in said prospectus that are not described as
required, or of any contract or documents of a character required to be
described in said registration statement or said prospectus or to be filed
as an exhibit to said registration statement or to be incorporated by
reference therein that is not described and filed as required; no stop
order has been issued by the Commission suspending the effectiveness of
such registration statement and that, to the best of such counsel's
knowledge, no proceedings for the issuance of such a stop order are
threatened or contemplated; and the applicable provisions of the securities
or blue sky laws of each state in which GI shall be required, pursuant to
clause (iv) of this Section 19(c), to register or qualify such Registrable
-------------
Securities, have been complied with, assuming the accuracy and completeness
of the information furnished to such counsel with respect to each filing
relating to such laws; it being understood that said counsel may rely, as
to all factual matters and financial data treated therein, on certificates
of GI (copies of which shall be delivered to such Holders), and as to all
questions of the laws of each state in which GI shall be so required to
register or qualify such Registrable Securities, on the opinion of counsel
from such state reasonably acceptable to such Holders, copies of which
shall be delivered to such Holders;
(vi) immediately notify each Holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material
25
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(vii) advise each Holder of Registrable Securities covered by such
registration statement, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the
initiation or threatening of any proceeding for that purpose; and use its
reasonable best efforts to comply with all applicable rules and regulations
of the Commission, and make generally available to the seller of
Registrable Securities covered by such Registration Statement, earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than forty-five (45) days after the end of any twelve (12)
month period (or ninety (90) days, if such period is a fiscal year) (a)
commencing at the end of any fiscal quarter in which Securities are sold to
underwriters in an underwritten offering, or (b) if not sold to
underwriters in such an offering, beginning with the first day of the month
of GI's first fiscal quarter commencing after the effective date of a
registration statement;
(viii) permit any holder holding Registrable Securities covered by
such registration statement or prospectus to withdraw their Registrable
Securities from such registration statement or prospectus if such Holder
has informed GI that it reasonably believes that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five (5) business days prior to
the filing thereof;
(ix) enter into such customary agreements (including an underwriting
agreement in customary form, if applicable) and take all such other actions
as holders of a majority of the Registrable Securities being sold or the
underwriters retained by such Holders, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities,
including customary opinions and indemnification and lock-up agreements;
(x) if requested by the managing underwriters or a Holder of
Registrable Securities being sold in connection with an underwritten
offering, promptly incorporate in a prospectus supplement or post-effective
amendment such
26
<PAGE>
information as the managing underwriters and the holders of a majority of
the Registrable Securities being sold agree should be included therein
relating to the plan of distribution with respect to such Registrable
Securities including, without limitation, information with respect to the
securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(xi) list such Registrable Securities on any securities exchange on
which the GI Common Stock is then listed, if such Registrable Securities
are not already so listed and if such listing is then permitted under the
rules of such exchange, and provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later
than the effective date of such registration statement; and
(xii) obtain a CUSIP number for all Registrable Securities (unless
already obtained) not later than the effective date of such registration
statement.
The period of time that GI is obligated to keep any registration
statement effective, or to prepare and file any amendments or supplements
thereto, pursuant to Section 19(c)(i) shall be extended by the number of
----------------
days that any such Holder is unable to sell Registrable Securities due to
the matters discussed in Sections 19(c)(vi) and (vii) above.
----------------------------
(d) Payment of Registration Expenses. GI shall pay all Registration
--------------------------------
Expenses in connection with each registration pursuant to this Section 19.
----------
(e) Information from Holders. Notices and requests delivered by
------------------------
the Warrantholder to GI pursuant to this Section 19 shall contain the
----------
information required by Section 19(a)(i).
----------------
(f) Indemnification.
---------------
(i) Indemnification by GI. In the event of any registration under the
---------------------
Securities Act of any Registrable Securities pursuant to this Section 19,
----------
GI hereby agrees to indemnify and hold harmless the Holders, their
respective agents, directors and officers, each other person, if any, who
controls (within the meaning of the Securities Act) the Holders and each
other person (including underwriters) who participates in the offering of
such Registrable Securities, against any losses, claims, damages or
liabilities, to the extent that such losses, claims, damages or liabilities
(or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in any
27
<PAGE>
registration statement, on the effective date thereof, under which
such Registrable Securities were registered under the Securities Act, in
any preliminary prospectus or final prospectus contained therein or in any
amendment or supplement to any preliminary prospectus or final prospectus
(if used during the period GI is required to keep such registration
statement current in any such case), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation by GI of the Securities Act or state
securities or blue sky laws and relating to action or inaction required of
GI in connection with the registration or qualification of securities under
such laws and will reimburse such Holders, such agents, directors and
officers and each such controlling person or participating person
(including underwriters) for any legal or any other expenses reasonably
incurred by such Holders, such agents, directors and officers or such
controlling person or participating person (including underwriters) in
connection with investigating or defending any such loss, claim, damage,
liability or proceeding, provided, that GI will not be liable in any such
--------
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished to GI by an
instrument duly executed by such Holder or such controlling or
participating person (including underwriters), as the case may be,
specifically for use in the preparation of such registration statement; and
provided, further, that, with respect to any untrue statement or omission
-------- -------
or alleged untrue statement or omission made in any preliminary prospectus,
GI will not be liable to any holder to the extent that any loss, claim,
damage, liability or expense results from the fact that a current copy of
the final prospectus was not sent or given to the Person asserting any such
loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such
Person if it is determined that it was the responsibility of such Holder to
provide such Person with a current copy of the final prospectus and such
current copy of the final prospectus was provided to such Holders and would
have cured the defect giving rise to such loss, claim, damage, liability or
expense.
(ii) Indemnification by the Holders. The Holders, each individually
------------------------------
and not jointly, agree to indemnify and hold harmless GI, its respective
agents, directors and officers, each other person, if any, who controls
(within the meaning of the Securities Act) GI and each other person
(including underwriters) who participates in the offering of such
Registrable Securities, against all losses, claims, damages and liabilities
to which GI, may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based upon any untrue statement of any material fact contained in any such
28
<PAGE>
registration statement, on the effective date thereof, under which such
Registrable Securities were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein or in any
amendment or supplement to any preliminary prospectus or final prospectus
(if used during the period GI is required to keep such registration
statement current in any such case), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, but only if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such statement or omission
made in such registration statement, said preliminary or final prospectus
or said amendment or supplement in reliance upon and in conformity with
written information furnished to GI by an instrument duly executed by the
Holders or such underwriter, as the case may be, and specifically stated to
be for use in the preparation of such registration statement.
(iii) Notices of Claims, Etc. Each party entitled to be indemnified
----------------------
pursuant to Section 19(f)(i) or (ii) above, promptly but not later than 30
------------------------
days after its receipt of notice of the commencement of any action against
it in respect of which indemnity may be sought from any indemnifying party
pursuant to this Section 19(f), shall notify such indemnifying party in
-------------
writing of the commencement thereof. In case any such action shall be
brought against any indemnified party and it shall notify such indemnifying
party of the commencement thereof, such indemnifying party will be entitled
to participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
such indemnified party may participate in such defense, which participation
by the indemnified party shall be at its expense unless (i) the employment
of counsel by such indemnified party has been authorized by the
indemnifying party, (ii) the indemnified party shall have been advised by
its counsel in writing that there is a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense
of such action (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified
party) or (iii) the indemnifying party shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the
fees and expenses of the indemnified party's counsel shall be at the
expense of the indemnifying party. The failure of any such indemnified
party to give notice as provided herein shall not relieve such indemnifying
party of its obligations under this Section 19(f) unless such failure to
-------------
give notice shall materially adversely affect such indemnifying party in
the defense of any such claim or any such litigation. With respect to any
claim or litigation the defense of which is being conducted by such
indemnifying party, no indemnified party shall, except with the consent of
such indemnifying party, consent to entry of any judgment or enter into any
settlement of any claim as to which indemnity may
29
<PAGE>
be sought. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(iv) Contribution. To the extent that the undertaking to indemnify,
------------
pay and hold harmless set forth in paragraphs (i) and (ii) of this Section
-------
19(f) may be unenforceable because it is violative of any law or public
-----
policy, each party that would have been required to provide the indemnity
shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all
indemnified liabilities incurred by each party entitled to indemnification
under this Section 19(f); provided that in no event shall a Holder of
-------------
Registrable Securities be required to contribute an amount greater than the
dollar amount of net proceeds received by such holder upon the sale of such
Registrable Securities.
(g) Exchange of Certificates. As soon as possible after the
------------------------
effectiveness of any registration statement under the Securities Act pursuant to
this Section 19, GI will deliver to the Holders of any Warrant Shares so
----------
registered, upon demand of the Holders and their delivery to GI of a certificate
or certificates representing such Warrant Shares bearing the legend set forth in
Section 20(a), a new certificate or certificates representing such Warrant
- -------------
Shares but not bearing such legend.
(h) Obligations of the Holders. The Holders agree:
--------------------------
(i) that upon receipt of any notice from GI of the happening of any
event of the kind described in Section 19(c)(vi), the Holders will
-----------------
forthwith discontinue its disposition of Registrable Securities pursuant to
the registration statement relating to such Registrable Securities until
its receipt of the copies of the supplemented or amended prospectus
contemplated by Section 19(c)(vi) and, if so directed by GI, will use it
-----------------
reasonable best efforts to deliver to GI (at GI's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice, and
(ii) that they will immediately notify GI at any time when a
prospectus relating to the registration of such Registrable Securities is
required to be delivered under the Securities Act, of the happening of any
event as a result of which information previously furnished by such Holder
to GI in writing specifically for inclusion in such prospectus contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make
30
<PAGE>
the statements therein not misleading in the light of the circumstances
under which they were made.
(i) Underwritten Registration. (A) If any of the Registrable
-------------------------
Securities covered by a registration pursuant to Section 19(a) are to be sold in
-------------
an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in Fair Market Value of such Registrable Securities
included in such offering. No Person may participate in any such underwritten
registration hereunder unless such Person (a) agrees to sell its Registrable
Securities, GI Common Stock or other securities of GI on the basis provided in
an underwriting agreement provided by the Holders of a majority in Fair Market
Value of the Registrable Securities to be sold in such underwritten offering and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
(B) If any of the Registrable Securities covered by a registration
pursuant to Section 19(b) are to be sold in an underwritten offering, the
-------------
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the holders of a majority in Fair
Market Value of securities being registered. No Holder may participate in any
such underwritten registration hereunder unless such Holder (a) agrees to sell
its Registrable Securities on the basis provided in an underwriting agreement
approved by, GI or the holders of a majority in Fair Market Value of the
securities being registered and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(j) Exchange Act Compliance. The Company shall comply with all of
-----------------------
the reporting requirements of the Exchange Act and shall comply with all other
public information reporting requirements of the Commission which are conditions
to the availability of Rule 144 for the sale of Registrable Securities. GI shall
cooperate with each Holder in supplying such information as may be necessary for
such Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of Rule
144.
Section 20. Restrictions on Transferability of Warrant Shares.
-------------------------------------------------
Notwithstanding any provisions contained in this Agreement to the
contrary, the Warrants and the related Warrant Shares shall not be transferable
except upon the conditions specified in Section 5, 7, 8, if and to the extent
---------------
applicable, and in this Section 20, which conditions are intended, among other
----------
things, to ensure compliance with the provisions of the Securities Act in
respect of the transfer of the Warrant Shares. The Warrantholder agrees that it
will not (i) transfer any Warrant Shares prior to delivery to GI of the opinion
of counsel (who may be an employee of the Warrantholder) (which
31
<PAGE>
opinion shall be reasonably satisfactory to GI) referred to in, and to the
effect described in, clause (i) of Section 20(b), or until registration of such
-------------
Warrant Shares under the Securities Act has become effective, or (ii) transfer
any Warrant Shares without compliance with Sections 5, 7 and 8. The
-------------------
Warrantholder agrees that such opinion of counsel must be reasonably
satisfactory to GI.
(a) Restrictive Legend; Warrantholder's Representation. Unless and
--------------------------------------------------
until otherwise permitted by this Section 20, Warrant Certificates and each
----------
certificate representing Warrant Shares, and any certificate issued at any time
upon transfer of, or in exchange for or replacement of, any certificate bearing
the legend set forth below shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE REQUIREMENTS OF OR AN EXEMPTION UNDER SUCH ACT. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF THAT WARRANT AGREEMENT DATED AS OF DECEMBER 16, 1997, BY
AND BETWEEN THE WARRANTHOLDER AND NEXTLEVEL SYSTEMS, INC. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF
NEXTLEVEL SYSTEMS, INC."
The Warrantholder represents and warrants, and in entering into this
Agreement with GI, understands and acknowledges, that it is acquiring the
Warrants and Warrant Shares for its own account for investment purposes and not
with a view to, or for sale in connection with, any distribution (as such term
is used under Section 2(11) of the Securities Act) thereof. Without limiting
the foregoing, the Warrantholder acknowledges and agrees that the Warrants have
not and will not be registered under the Securities Act or any applicable state
securities laws and it agrees that it will reoffer or resell the Warrant Shares
purchased by it under this Agreement (i) only (A) to GI, (B) pursuant to any
transaction under and meeting the requirements of Rule 144A, as amended from
time to time, promulgated under the Securities Act, (C) pursuant to an exemption
from registration under the Securities Act in accordance with Rule 144, as
amended from time to time, promulgated under the Securities Act, or (D) in
accordance with any other available exemption from the requirements of Section 5
of the Securities Act and (ii) in accordance with any applicable federal and
state securities laws. The Warrantholder further agrees to hold GI harmless
from any claim, demand or liability for broker's or finder's placement fees or
commissions payable by the Warrantholder alleged to have been incurred by the
Warrantholder in connection with this transaction. The Warrantholder and each
holder of Warrant Shares by its acceptance of such security
32
<PAGE>
further understands that such security may bear a legend as contemplated by this
Section 20.
- ----------
(b) Statement of Intention to Transfer; Opinion of Counsel. The
------------------------------------------------------
Warrantholder, by its acceptance of this Agreement, agrees that prior to any
transfer of any Warrant Shares, the Warrantholder will deliver to GI a notice of
such proposed transfer and a signed copy of the opinion of the Warrantholder's
counsel (who may be an employee of Warrantholder) reasonably satisfactory to GI
as to the necessity or non-necessity for registration under the Securities Act
in connection with such transfer.
(i) If, in the opinion of the Warrantholder's counsel (which opinion
shall be reasonably satisfactory to GI) , the proposed transfer of any
Warrant Shares may be effected without registration under the Securities
Act of such Warrant Shares, then the Warrantholder shall be entitled to
transfer such Warrant Shares in accordance with the intended method of
disposition specified in the notice delivered by the Warrantholder to GI.
(ii) Notwithstanding the foregoing provisions of this Section 20(b),
-------------
no opinion of any counsel need be furnished (x) in the event of any
proposed transfer of any Warrant to an institutional investor who is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act and which transfer is otherwise exempt from the registration
requirements of the Securities Act or (y) in the event of any proposed
transfer of Warrant Shares in connection with a registration under the
Securities Act.
(c) Termination of Restrictions. Notwithstanding the foregoing
---------------------------
provisions of this Section 20, the restrictions imposed by this Section 20 upon
---------- ----------
the transferability of the Warrant Certificates and the Warrant Shares shall
cease and terminate as to any particular Warrant Certificate or shares of
capital stock when, (i) such Warrant Certificate or Warrant Shares shall have
been effectively registered under the Securities Act and sold by the
Warrantholder in accordance with such registration or (ii) in the opinion of
counsel for the holder of such Warrant Certificate or Warrant Shares, if such
opinion is satisfactory in form and substance to GI, such restrictions are no
longer required in order to ensure compliance with the Securities Act. If and
whenever the restrictions imposed by this Section 20 shall terminate as to a
----------
Warrant Certificate (or to any shares of capital stock) as hereinabove provided,
the Warrantholder may and GI shall, as promptly as practicable upon the request
of the Warrantholder and at GI's expense, cause to be stamped or otherwise
imprinted upon such Warrant Certificate or such shares of capital stock a legend
in substantially the following form:
"The restrictions on transferability of this [these] [Warrant
Certificate/securities] terminated on _______________, 199__[20___],
and are of no further force or effect."
33
<PAGE>
All Warrant Certificates issued upon transfer, division or combination
of, or in substitution for, any Warrant Certificate or Warrant Certificates
entitled to bear such legend shall have a similar legend endorsed thereon.
Whenever the restrictions imposed by this Section 20 shall terminate as to any
----------
Warrant Certificate or as to any shares of capital stock, as hereinabove
provided, the Warrantholder shall be entitled to receive from GI without
expense, a new Warrant Certificate or new shares of capital stock not bearing
the restrictive legend set forth in Subsection (a) of this Section 20.
----------
Section 21. Representations and Warranties; Certain Covenants.
-------------------------------------------------
GI represents and warrants to the Warrantholder that:
(a) Organization and Standing. GI (x) is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the failure to be so qualified or licensed and in
good standing (individually or in the aggregate) would have a material adverse
effect on GI, and (y) has all requisite corporate power and authority necessary
to enable it to carry on its business as now conducted, to enter into this
Agreement, to issue the Warrants and to carry out the transactions contemplated
hereby and thereby.
(b) Capitalization. The authorized capital stock of GI consists
--------------
of as of the date hereof 400,000,000 shares of GI Common Stock, and 20,000,000
shares of preferred stock, par value $.01 per share, issuable in series
("Preferred Stock"). The rights, privileges and preferences of the GI Common
---------------
Stock and Preferred Stock are as stated in the Company's Amended and Restated
Certificate of Incorporation. As of the date hereof, there are issued and
outstanding 147,999,599 shares of GI Common Stock, no shares of Preferred Stock
and no other shares of capital stock. All such issued and outstanding GI Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable state and
federal securities laws. As of the date hereof, there are no outstanding
options, warrants or other rights to purchase or otherwise acquire equity
securities of GI, securities convertible into or exchangeable for equity
securities of GI, options, warrants or other rights to purchase or otherwise
acquire any such convertible or exchangeable securities, or agreements to issue
or grant any of the foregoing, other than pursuant to employee benefit plans of
the Company, the Rights Agreement or pursuant to agreements entered into in
connection or simultaneously with this Transaction (including agreements with
affiliates of Warrantholder and agreements with certain cable television
multiple system operators).
(c) Authorization. All corporate action on the part of GI and its
-------------
officers, directors and shareholders necessary for the authorization, execution
and delivery of, and the performance of all obligations of GI under, this
Agreement and, upon issuance in
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accordance with the terms of this Agreement, the Warrants, and for the
authorization, issuance and delivery of the Warrants and of the Warrant Shares
issuable upon exercise of the Warrants has been taken. This Agreement has been
duly executed and delivered by GI, and this Agreement constitutes, and the
Warrants when issued and delivered in accordance with the terms of this
Agreement shall constitute, the legal, valid and binding obligations of GI,
enforceable against GI in accordance with their respective terms, subject to:
(x) judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief and other equitable
remedies; and (y) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights.
(d) No Conflicts. The execution and delivery by GI of this
------------
Agreement and the Warrants and the performance by GI of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby do not and will not conflict with, result in any violation of
or default (with or without notice or lapse of time or both) under, give rise to
a right of termination, cancellation or acceleration or any material obligation
or to the loss of any material benefit under or result in or require the
creation, imposition or extension of any lien, security interest, restriction or
other encumbrance upon any of GI's properties or assets (other than those
imposed under this Agreement or the Warrants) under (i) any oral or written
contract, indenture, mortgage, lease, deed, commitment, agreement, arrangement
or legally binding understanding or instrument, (ii) any provision of its
constitutive or governing documents or (iii) any law, statute, ordinance, rule,
regulation, judgment, order, decree or arbitral award, except for any such
conflicts, violations, defaults, rights, obligations or losses that,
individually or in the aggregate, would not have a material adverse effect on GI
or its ability to consummate the transactions contemplated under this Agreement
or the Warrants.
(e) SEC Filings. GI has filed all required reports, schedules, forms,
-----------
statements and other documents with the Securities and Exchange Commission
("SEC") since July 25, 1997 (as such documents have been amended prior to the
---
date hereof, the "GI SEC Documents"). As of their respective dates, the GI SEC
----------------
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such GI SEC
Documents. None of the GI SEC Documents contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by a later GI SEC Document.
(f) No Brokers. GI agrees to hold the Warrantholder harmless from any
----------
claim, demand or liability for broker's or finder's placement fees or
commissions payable by GI alleged to have been incurred by GI in connection with
this transaction.
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<PAGE>
(g) Warrant Shares Equity Percentage. As of the date hereof, the
--------------------------------
Warrant Shares represent at least 10% of the fully diluted equity securities of
GI on an as issued basis, assuming exercise, conversion or exchange of all
outstanding Rights (other than rights issuable under the Rights Agreement) and
all Rights issuable in connection with the Transaction.
Section 21A. Representation and Warranty of NDTC.
-----------------------------------
NDTC represents and warrants to GI that it is financially capable of
performing all of its obligations under this Agreement and the Purchase
Agreement.
Section 22. No Rights or Liabilities as Stockholder.
---------------------------------------
The Warrant Certificates shall not be construed as conferring upon the
Warrantholder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders or the election of
directors of GI or any other matter, or any rights whatsoever as a stockholder
of GI, including, without limitation, the right to receive any dividends or
other distributions paid by GI in respect of the GI Common Stock. No provision
hereof, in the absence of affirmative action by the Warrantholder to purchase
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the Warrantholder, shall give rise to any liability of such holder for the
Exercise Price or as a stockholder of GI, whether such liability is asserted by
GI or by creditors of GI.
Section 23. Definitions.
-----------
The terms defined in this Section 23, whenever used in this Agreement,
----------
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified and, unless the context otherwise requires, words in the
singular or in the plural shall each include the singular and the plural and the
use of any gender shall include all genders.
"Affiliate" shall mean, with respect to a specified Person, another
---------
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the Person
specified.
"Agreement" shall mean this Warrant Issuance Agreement as it may be
---------
from time to time amended, supplemented or restated.
"Board of Directors" shall mean the Board of Directors of GI.
------------------
"Business Combination" means any merger, consolidation, sale of assets
--------------------
or other business combination by GI with one or more Persons in which cash or
non-cash consideration is distributed to holders of any shares of GI Common
Stock.
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<PAGE>
"Business Day" shall mean any day other than Saturday, Sunday or a day
------------
on which banking institutions in New York City are authorized or obligated by
law to close.
"Closing Date" shall have the meaning assigned to such term in the
------------
Purchase Agreement.
"Closing Price" of a share of GI Common Stock on any Trading Day means
-------------
the last reported sales price, regular way, for such Trading Day as reported on
the New York Stock Exchange.
"Common Exercise Price" shall mean $14.25 per Common Warrant Share, as
---------------------
the same may be adjusted pursuant to this Agreement.
"Common Stock Warrants" shall have the meaning assigned to such term
---------------------
in Section 1.
---------
"Common Warrant Shares" shall mean shares of GI Common Stock and/or
---------------------
such other securities, property and cash that the Warrantholder shall be
entitled to receive upon exercise of the Common Stock Warrants pursuant to the
provisions of Section 17, including, without limitation, subsection (b) thereof.
----------
"Commission" shall mean the Securities and Exchange Commission and any
----------
other similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Competitor" shall mean a competitor of GI that is engaged in the
----------
business of selling the same types of products to the same types of customers as
GI, which competitors are set forth in the most recent written list of
competitors delivered by GI to Warrantholder (as supplemented from time to time
after the date hereof).
"Competitor Offer" shall have the meaning assigned to such term in
----------------
Section 7(a).
- ------------
"Convertible Securities" shall mean convertible into or exercisable or
----------------------
exchangeable for GI Common Stock at the option of the holder thereof, or which
otherwise entitle the holder thereof to subscribe for, purchase or otherwise
acquire GI Common Stock.
"Current Market Price", on the Determination Date for any issuance of
--------------------
rights or warrants or any distribution in respect of which the Current Market
Price is being calculated, shall mean the average of the daily Closing Prices of
the GI Common Stock for the shortest of:
(i) the period of 30 consecutive Trading Days commencing 45
Trading Days before such Determination Date;
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<PAGE>
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance of rights or warrants or the distribution in
respect of which the Current Market Price is being calculated and ending on the
last full Trading Day before such Determination Date; and
(iii) the period, if any, commencing on the date next
succeeding the Ex-Dividend Date with respect to the next preceding issuance of
rights or warrants or distribution for which an adjustment is required by the
provisions of clause (iv) of the first sentence of Section 17(b), Section 17(c)
------------- -------------
or Section 17(d), and ending on the last full Trading Day before such
-------------
Determination Date.
If the record date for an issuance of rights or warrants or a
distribution for which an adjustment is required by the provisions of clause
(iv) of the first sentence of Section 17(b), Section 17(c) or Section 17(d) (the
------------- ------------- -------------
"preceding adjustment event") precedes the record date for the issuance or
distribution in respect of which the Current Market Price is being calculated
and the Ex-Dividend Date for such preceding adjustment event is on or after the
Determination Date for the issuance or distribution in respect of which the
Current Market Price is being calculated, then the Current Market Price shall be
adjusted by deducting therefrom the fair market value (on the record date for
the issuance or distribution in respect of which the Current Market Price is
being calculated), as determined in good faith by the Board of Directors, of the
capital stock, rights, warrants, assets or evidences of indebtedness issued or
distributed in respect of each share of GI Common Stock in such preceding
adjustment event. Further, in the event that the Ex-Dividend Date (or in the
case of a subdivision, combination or reclassification, the effective date with
respect thereto) with respect to a dividend, subdivision, combination or
reclassification to which clause (i), (ii), (iii) or (v) of the first sentence
of Section 17(b) applies occurs during the period applicable for calculating the
-------------
Current Market Price, then the Current Market Price shall be calculated for such
period in a manner determined in good faith by the Board of Directors to reflect
the impact of such dividend, subdivision, combination or reclassification on the
Closing Prices of the GI Common Stock during such period.
"Determination Date" for any issuance of rights or warrants or any
------------------
distribution to which Section 17(c) or Section 17(d) applies shall mean the
------------- -------------
earlier of (i) the record date for the determination of stockholders entitled to
receive the rights or warrants or the distribution to which such Section applies
and (ii) the Ex-Dividend Date for such right, warrants or distribution.
"Ex-Dividend Date" shall mean the date on which "ex-dividend" trading
----------------
commences for a dividend, an issuance of rights or warrants or a distribution to
which any of Section 17(b), Section 17(c) or Section 17(d) applies in the over-
------------- ------------- -------------
the-counter market or on the principal exchange on which the GI Common Stock is
then quoted or listed.
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<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Exercise Price" shall mean the Common Exercise Price or Preferred
--------------
Exercise Price as applicable.
"Fair Market Value" shall mean (i), as to any Registrable Securities
-----------------
which are shares of GI Common Stock, (x) the number of such shares proposed to
be sold times (y) the average daily Closing Prices of the GI Common Stock for
the period of 30 consecutive Trading Days commencing 45 Trading Days prior to
the date of the initial request for registration, (ii), as to any Registrable
Securities which are shares of GI Preferred Stock, an amount calculated in
accordance with (i) for the number of shares of GI Common Stock for which such
GI Preferred Stock may be exchanged at GI's option and (iii), as to any other
Registrable Securities, the fair market value of such securities, as determined
in good faith by the Board of Directors of GI.
"First Appraiser" shall have the meaning assigned to such term in
---------------
Section 7(c)(i).
- ---------------
"First Offer Shares" shall have the meaning assigned to such term in
------------------
Section 7(a).
"GI" means NextLevel Systems, Inc., a Delaware corporation.
--
"GI Common Stock" shall have the meaning set forth in the recitals to
---------------
this Agreement.
"GI Preferred Stock" shall have the meaning set forth in the recitals
------------------
to this Agreement.
"Holders" shall have the meaning assigned to such term in Section
------- -------
19(a)(i).
- --------
"HSR Act and Rules" shall have the meaning assigned to such term in
-----------------
Section 16(b).
- -------------
"Memorandum of Agreement" shall mean the Memorandum of Agreement,
-----------------------
dated December 16, 1997, between NDTC and NextLevel Systems, Inc.
"Notice of Sale" shall have the meaning assigned to such term in
--------------
Section 7(a).
- ------------
"Notification Event" shall have the meaning assigned to such term in
------------------
Section 18.
- ----------
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<PAGE>
"Offering" shall have the meaning associated with such term in Section
-------- -------
8(a).
- ----
"Offering Notice" shall have the meaning assigned to such term in
---------------
Section 8(a).
"Parties" shall mean GI and the Warrantholder.
-------
"Person" means any natural person, corporation, business trust, joint
------
venture, association, company, partnership, limited liability company or other
entity or any government, or any agency or political subdivision thereof.
"Preferred Exercise Price", as of any relevant time, means, for one
------------------------
share of GI Preferred Stock, the dollar amount that is equal to 10 times the
Common Exercise Price in effect at such time; provided, however, that if there
-------- -------
are no Common Stock Warrants outstanding at the time of determination, the
Preferred Exercise Price shall be determined by reference to the Common Stock
Warrants as if they were still outstanding and all adjustments pursuant to this
Agreement continued to be made.
"Preferred Stock Warrant" shall have the meaning assigned to such term
-----------------------
in Section 1.
---------
"Preferred Warrant Shares" shall mean shares of GI Preferred Stock
------------------------
and/or such other securities, property and cash that the Warrantholder shall be
entitled to receive upon exercise of the Preferred Stock Warrants pursuant to
the provisions of Section 17A.
-----------
"Purchase Agreement" shall have the meaning assigned to such term in
------------------
the recitals to this Agreement.
"Registrable Securities" shall mean any Warrant Shares issued upon the
----------------------
exercise of a Warrant issued pursuant to this Agreement. As to any particular
Registrable Securities once issued, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (ii) such securities shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act,
(iii) such securities shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by GI and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act, or (iv) such
securities shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance with Section 19, including, without limitation, (i)
----------
all Commission and stock exchange or National Association of Securities Dealers,
Inc.
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<PAGE>
registration, filing fees and listing expenses, (ii) all fees and expenses
of complying with securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters in connection with blue sky
qualification of any Warrant Shares), (iii) all printing, messenger and delivery
expenses, (iv) the fees and disbursements of counsel for GI and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, (v) the fees and disbursements of counsel retained in connection
with such registration by Holders of the Warrant Shares being registered, and
(vi) any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, including the fees and expenses of any special experts
retained in connection with the requested registration.
"Reply Notice" shall mean a notice from GI, stating whether GI accepts
------------
or rejects the offer made by the offering Warrantholder in the Offering Notice.
"Right of First Offer Provisions" shall have the meaning assigned to
-------------------------------
such term in Section 7.
---------
"Rights Agreement" shall mean the Rights Agreement, dated as of June
----------------
12, 1997, as amended, between GI and ChaseMellon Shareholder Services, L.L.C.
"Second Appraiser" shall have the meaning assigned to such term in
----------------
Section 7(a).
- ------------
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Stockholders Meeting" shall have the meaning assigned to such term in
--------------------
Section 10(b).
- -------------
"Third Appraiser" shall have the meaning assigned to such term in
---------------
Section 7(c)(iii).
- -----------------
"Threshold" shall mean the threshold number of Digital Terminals as
---------
set forth in Schedule A.
----------
"Trading Day" means a day on which the New York Stock Exchange is open
-----------
for the transaction of business (unless such trading shall have been suspended
for the entire day).
"Transaction" shall mean all of the transactions contemplated by the
-----------
following: (i) this Agreement, (ii) the Memorandum of Agreement, and (iii) the
warrant agreements entered into between GI and certain cable television multiple
system operators on terms substantially similar to this Agreement, and (iv) all
instruments and documents forming part of the foregoing.
41
<PAGE>
Transferees" shall have the meaning assigned to such term in Section
----------- -------
19(a)(i).
- --------
"Warrant Certificates" shall have the meaning assigned to such term in
--------------------
Section 2.
- ---------
"Warrant Expiration Date" shall mean the expiration dates as set forth
-----------------------
in Schedule A.
----------
"Warrantholder" means National Digital Television Center, Inc., a
-------------
Colorado corporation and any transferee of Warrantholder that is the record
owner of the Warrants or the Warrant Shares, as applicable, and is bound by this
Agreement.
"Warrants" shall have the meaning assigned to such term in Section 1.
--------
"Warrant Shares" shall mean the Common Warrant Shares on the Preferred
--------------
Warrant Shares, as applicable.
Section 24. Notices.
-------
All notices, consents, requests, waivers or other communications
required or permitted under this Agreement (each a "Notice") shall be in writing
------
and shall be sufficiently given (a) if hand delivered, (b) if sent by nationally
recognized overnight courier, or (c) if sent by registered or certified mail,
postage prepaid, return receipt requested, addressed, if to the Warrantholder at
the address shown on the Warrant register kept by GI, with a copy to Baker &
Botts, L.L.P., 599 Lexington Avenue, New York, New York 10022, Attention:
Elizabeth Markowski, and if to GI to:
NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue, Suite 1300
Chicago, Illinois 60631
Attn: General Counsel
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn: Lois Herzeca
42
<PAGE>
or such other address as shall be furnished by any of the Parties in a Notice.
Any Notice shall be deemed given upon receipt.
Section 25. Amendments.
----------
This Agreement may be amended, supplemented or waived only by a
subsequent writing signed by each of the Parties.
Section 26. Successors and Assigns.
----------------------
All terms and conditions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and permitted
assigns of the Parties.
Section 27. Termination.
-----------
This Agreement shall terminate on December 31, 2005 (other than
Sections 10, 13, 16, 19, and 20 and Sections 24 through 33, inclusive, and all
- ------------------------------- ----------------------
related definitions, which shall survive such termination). Notwithstanding the
foregoing, this Agreement (other than Sections 7, 8, 10, 13, 16, 19, and 20 and
-------------------------------------
Sections 24 through 33, inclusive, and all related definitions, which shall
- ----------------------
survive such termination) will terminate when all Warrants have been exercised.
Section 28. Governing Law.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
Section 29. Third Party Beneficiaries.
-------------------------
Each Party intends that this Agreement shall not benefit or create any
right or cause of action in or on behalf of any Person other than the Parties
and transferees.
Section 30. Headings.
--------
The headings in this Agreement are for convenience only and shall not
affect the construction or interpretation of this Agreement.
Section 31. Entire Agreement.
----------------
This Agreement, together with the Exhibits and Schedules (which are
incorporated herein by this reference), constitutes the entire agreement and
understanding between the Parties with respect to the subject matter hereof and
shall supersede any prior agreements and understandings between the Parties with
respect to such subject matter.
43
<PAGE>
Section 32. Expenses.
--------
Regardless whether the transactions contemplated by this Agreement are
consummated, each of the Parties shall pay its own expenses and costs incurred
or to be incurred in negotiating, closing and carrying out this Agreement and in
consummating the transactions contemplated herein, except as otherwise expressly
provided for herein.
Section 33. Counterparts.
------------
This Agreement may be executed with counterpart signature pages or in
one or more counterparts, all of which shall be one and the same Agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to all the Parties.
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
NEXTLEVEL SYSTEMS, INC.
By:_____________________________________
Name:
Title:
NATIONAL DIGITAL TELEVISION CENTER, INC.
By:_____________________________________
Name:
Title:
45
