<PAGE>
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
<TABLE>
<C> <S>
--X-- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ------------ to ------------
Commission file number 001-12929
</TABLE>
COMMSCOPE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-4135495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1375 LENOIR RHYNE BOULEVARD, HICKORY, NORTH CAROLINA 28601
(Address of principal executive offices)
(Zip Code)
(704) 324-2200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes / / No /X/ (*)
(*) Registrant became subject to the filing requirements on June 13, 1997.
------------------------
As of July 31, 1997 there were 49,104,825 shares of Common Stock
outstanding.
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<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ---------- -----------
Net Sales....................................................... $ 159,291 $ 142,014 $ 307,165 $ 272,927
---------- ---------- ---------- -----------
Operating Costs and Expenses:
Cost of sales................................................. 119,920 105,374 228,554 201,879
Selling, general and administrative........................... 13,369 10,888 24,680 20,436
Research and development........................................ 1,558 1,283 2,828 2,629
Amortization of excess of cost over fair value of net assets
acquired.................................................... 1,306 1,253 2,612 2,517
---------- ---------- ---------- -----------
Total operating costs and expenses........................ 136,153 118,798 258,674 227,461
---------- ---------- ---------- -----------
Operating Income................................................ 23,138 23,216 48,491 45,466
Other income, net............................................... 275 241 485 615
Interest expense, net........................................... (2,533) (2,593) (5,266) (4,976)
---------- ---------- ---------- -----------
Income Before Income Taxes...................................... 20,880 20,864 43,710 41,105
Provision for income taxes...................................... (7,930) (7,922) (16,605) (15,613)
---------- ---------- ---------- -----------
Net Income...................................................... $ 12,950 $ 12,942 $ 27,105 $ 25,492
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Accounts receivable, less allowance for doubtful accounts of $3,976 and $3,761,
respectively........................................................................ $ 110,298 $ 101,817
Inventories........................................................................... 52,618 41,136
Prepaid expenses and other current assets............................................. 1,909 1,287
Deferred income taxes................................................................. 13,405 13,742
----------- ------------
Total current assets............................................................ 178,230 157,982
Property, plant and equipment, net.................................................... 130,196 117,022
Intangibles, less accumulated amortization of $25,191 and $23,809, respectively....... 23,574 24,956
Excess of cost over fair value of net assets acquired, less accumulated amortization
of $35,652 and $33,040 respectively................................................. 172,956 175,568
Investments and other assets.......................................................... 4,705 4,357
----------- ------------
Total Assets.................................................................... $ 509,661 $ 479,885
----------- ------------
----------- ------------
Liabilities and Stockholder's Equity
Current Liabilities:
Accounts payable...................................................................... $ 24,690 $ 18,953
Income taxes payable.................................................................. 2,511 2,148
Other accrued liabilities............................................................. 28,735 29,661
----------- ------------
Total current liabilities....................................................... 55,936 50,762
Long-term debt........................................................................ 10,800 10,800
Deferred income taxes................................................................. 15,484 15,198
Other non-current liabilities......................................................... 10,253 9,565
----------- ------------
Total liabilities............................................................... 92,473 86,325
Commitments and contingencies
Stockholder's Equity:
Common Stock, $.01 par value; 2,000,000 shares authorized; 240,000 shares issued...... 2 2
Additional paid-in capital............................................................ 193,591 197,068
Retained earnings..................................................................... 223,595 196,490
----------- ------------
Total stockholder's equity............................................................ 417,188 393,560
Total Liabilities and Stockholder's Equity............................................ $ 509,661 $ 479,885
----------- ------------
----------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1997 1996
--------- ----------
OPERATING ACTIVITIES:
Net income.................................................................................. $ 27,105 $ 25,492
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................. 10,229 9,021
Changes in assets and liabilities:
Accounts receivable..................................................................... (8,481) (12,451)
Inventories............................................................................. (11,482) (1,043)
Prepaid expenses and other current assets............................................... (622) (336)
Deferred income taxes................................................................... 623 (2,870)
Accounts payable, income taxes payable and other accrued liabilities.................... 5,174 6,911
Other non-current liabilities........................................................... 688 978
Other..................................................................................... (395) (460)
--------- ----------
Net cash provided by operating activities................................................... 22,839 25,242
--------- ----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment................................................ (19,362) (9,089)
Acquisition of Teledyne Thermatics assets, net............................................ -- (17,849)
Other..................................................................................... -- 65
--------- ----------
Net cash used in investing activities....................................................... (19,362) (26,873)
--------- ----------
FINANCING ACTIVITIES:
Transfers from (to) sole stockholder...................................................... (3,477) 1,631
--------- ----------
Net cash provided by (used in) financing activities......................................... (3,477) 1,631
--------- ----------
Change in cash and cash equivalents......................................................... -- --
--------- ----------
Cash and cash equivalents, beginning of period.............................................. -- --
--------- ----------
Cash and cash equivalents, end of period.................................................... $ -- $ --
--------- ----------
--------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
-----------------
<S> <C>
(UNAUDITED)
Common Stock................................................................................... $ 2
--------
Additional Paid-In Capital Balance, January 1, 1997............................................ 197,068
Transfers to sole stockholder.................................................................. (3,477)
--------
Balance, June 30, 1997......................................................................... 193,591
--------
Retained Earnings
Balance, January 1, 1997....................................................................... 196,490
Net income..................................................................................... 27,105
--------
Balance, June 30, 1997......................................................................... 223,595
--------
Total Stockholder's Equity..................................................................... $ 417,188
--------
--------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND
CommScope, Inc. ("CommScope" or the "Company") was incorporated in Delaware
in January 1997 and, through its wholly owned subsidiary CommScope, Inc. of
North Carolina, formerly a wholly-owned subsidiary of General Instrument
Corporation ("General Instrument"), operates in the cable manufacturing
business. The Company designs, manufactures and markets coaxial, fiber optic and
high performance electronic cables primarily used in communications, local area
network, aerospace and industrial applications. CommScope is the largest
manufacturer and supplier of coaxial cable for cable television applications in
the United States and is a leading supplier of coaxial cable for satellite
television applications. CommScope is also a major supplier of coaxial cable to
international cable television markets.
General Instrument (i) transferred all the assets and liabilities relating
to the manufacture and sale of broadband communications products used in the
cable television, satellite, and telecommunications industries to its
wholly-owned subsidiary NextLevel Systems, Inc. ("NextLevel Systems") and all
the assets and liabilities relating to the manufacture and sale of coaxial,
fiber optic and other electronic cable used in the cable television, satellite
and other industries to CommScope, Inc. (then a wholly-owned subsidiary of
General Instrument) and (ii) distributed all of the outstanding shares of
capital stock of each of NextLevel Systems and CommScope to its stockholders on
a pro rata basis as a dividend in a transaction that was consummated on July 28,
1997. Approximately 147.3 million shares of NextLevel Systems Common Stock,
based on an exchange ratio of one for one, were distributed to General
Instrument's stockholders of record on July 25, 1997 (the "NextLevel
Distribution"). On the Distribution Date, approximately 49.1 million shares of
CommScope Common Stock, based on an exchange ratio of one for three, were
distributed to NextLevel Systems' stockholders of record on that date (the
"CommScope Distribution" and together with the NextLevel Distribution,
collectively the "Distribution"). On the Distribution Date, NextLevel Systems
and CommScope began operating as independent entities with publicly traded
common stock. General Instrument retained no ownership interest in either
NextLevel Systems or CommScope. Additionally, following the NextLevel
Distribution, General Instrument was renamed General Semiconductor, Inc.
("General Semiconductor") and effected a one for four reverse stock split.
For the purpose of governing certain of the ongoing relationships among
NextLevel Systems, CommScope and General Semiconductor after the Distribution
and to provide mechanisms for an orderly transition, NextLevel Systems,
CommScope and General Semiconductor have entered into various agreements which
the companies believe are fair to each of the parties and are comparable to
those which would have been reached in arm's length negotiations with
unaffiliated parties.
BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements reflect
the results of operations, financial position, and cash flows of CommScope that
were transferred from General Instrument to the Company in connection with the
Distribution. The condensed consolidated balance sheet as of June 30, 1997, the
condensed consolidated statements of income for the three months and the six
months ended June 30, 1997 and 1996, and the condensed consolidated statements
of cash flows for the six months ended June 30, 1997 and 1996 are unaudited and
reflect all adjustments of a normal recurring nature which are, in the opinion
of management, necessary for a fair presentation of the interim period financial
statements. There were no adjustments of a non-recurring nature recorded during
the three and six months ended
6
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. BACKGROUND AND BASIS OF PRESENTATION (CONTINUED)
June 30, 1997 and 1996. The results of operations for the interim period are not
necessarily indicative of the results of operations to be expected for the full
year.
The unaudited interim condensed consolidated financial statements of
CommScope have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.
The condensed consolidated financial statements include an allocation of
certain assets, liabilities and general corporate expenses from General
Instrument, and accordingly reflect the results of operations and changes in
cash flows of the Company as if it were a separate entity prior to the
Distribution. In the opinion of management, general corporate administrative
expenses have been allocated to CommScope on a reasonable and consistent basis
using management's estimate of services provided to CommScope by General
Instrument. However, such allocations are not necessarily indicative of the
level of expenses which might have been incurred had CommScope been operating as
a separate, stand-alone entity during the periods presented.
Prior to the Distribution Date, CommScope participated in General
Instrument's cash management program, and the accompanying financial statements
include an allocation of net interest expense from General Instrument. Net
interest expense has been allocated based upon CommScope's net assets as a
percentage of the total net assets of General Instrument. The allocations were
made consistently in each period, and management believes the allocations are
reasonable. However, these interest costs would not necessarily be indicative of
what the actual costs would have been had CommScope operated as a separate,
stand-alone entity during the periods presented.
Subsequent to the Distribution, CommScope will be responsible for the cash
management functions using its own resources or purchased services and will be
responsible for the costs associated with operating a public company.
CommScope's financial results include the costs incurred by General
Instrument related to the postretirement benefit plan for employees and retirees
of CommScope. Also, the provision for income taxes for the six months ended June
30, 1997 and 1996 is based on CommScope's expected annual effective tax rate,
calculated assuming CommScope had filed separate tax returns under its
previously existing structure as a wholly-owned subsidiary of General
Instrument.
The financial information included herein does not necessarily reflect the
consolidated results of operations, financial position, and cash flows of
CommScope in the future or on a historical basis had CommScope been a separate
stand-alone entity for the periods presented. These interim condensed
consolidated financial statements should be read in conjunction with the
Company's December 31, 1996 audited consolidated financial statements and notes
thereto included in the Company's Prospectus dated June 13, 1997.
No historical earnings per share data is presented as the CommScope earnings
were part of General Instrument's results for all periods presented and until
the Distribution Date.
7
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
2. SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventories consist of:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials............................................... $ 20,524 $ 23,206
Work in process............................................. 10,374 4,978
Finished goods 21,720 12,952
------------- -------
$ 52,618 $ 41,136
------------- -------
------------- -------
</TABLE>
3. PRO FORMA FINANCIAL INFORMATION AND SUBSEQUENT CAPITAL STRUCTURE
The accompanying unaudited pro forma consolidated statements of income
present the consolidated results of CommScope and were prepared to give effect
to the Distribution as if it had occurred on January 1, 1996. The unaudited pro
forma statements of income set forth below do not purport to represent what
CommScope's operations actually would have been or to project CommScope's
operating results for any future period.
The unaudited pro forma information has been prepared utilizing the
historical consolidated statements of income of CommScope which were adjusted to
reflect a net debt level of $275 million at the beginning of each period
presented at an assumed weighted average borrowing rate of 6.35% plus the
amortization of debt issuance costs associated with the new borrowings (see
discussion following the pro forma statements of income). Pro forma earnings per
share was calculated by dividing the pro forma net income for each period
presented by the pro forma common and common equivalent shares outstanding for
each period, and assumes that the total of 49.2 million common and common
equivalent shares outstanding at the Distribution Date were outstanding since
January 1, 1996.
Giving effect to the Distribution as of January 1, 1996, pro forma results
for the Company would have been as follows:
<TABLE>
<CAPTION>
PRO FORMA (A) PRO FORMA (A)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ----------- ----------- -----------
Net Income.......................................................... $ 11,664 $ 11,697 $ 24,661 $ 22,873
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Primary earnings per share.......................................... $ 0.24 $ 0.24 $ 0.50 $ 0.46
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
- ------------------------
(A) Assumes a net debt level of $275 million and interest expense of $4.6
million and $9.2 million for the three and six months ended June 30, 1997
and 1996, respectively.
Giving effect to the Distribution as of June 30, 1997, the Company's pro
forma net debt was $275 million and total stockholders' equity was approximately
$140 million.
On July 23, 1997, prior to the Distribution, the Company entered into a $350
million credit agreement with a group of banks (the "Credit Agreement"). On the
Distribution Date, the Company borrowed $266
8
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
3. PRO FORMA FINANCIAL INFORMATION AND SUBSEQUENT CAPITAL STRUCTURE (CONTINUED)
million under the Credit Agreement which was utilized to make a dividend payment
to General Instrument in accordance with the terms of the Distribution and to
fund fees and expenses in connection with the Credit Agreement. The Company
intends to utilize the Credit Agreement in the future for, among other things,
general working capital needs, financing strategic acquisitions, and other
general corporate purposes.
The Credit Agreement provides a total of $350 million in available revolving
credit commitments through loans available at various interest rates and
interest maturity periods (collectively, the "Revolving Credit Loans") and
through the issuance of standby or commercial letters of credit ("Letters of
Credit") of up to $50 million. All amounts borrowed under the Credit Agreement
are due on December 31, 2002.
At the Company's option, advances under the Revolving Credit Loans are
available by choosing from one of the following types of loans, which are
primarily differentiated by the interest rates available: (i) an ABR Loan (as
defined in the Credit Agreement), with interest based on the highest of the
prime rate of The Chase Manhattan Bank, the Base CD Rate (as defined in the
Credit Agreement) plus 1%, or the Federal Funds Effective Rate (as defined in
the Credit Agreement) plus 0.5%; (ii) a Eurodollar Loan (as defined in the
Credit Agreement), with interest based on the Eurodollar Rate (LIBOR) plus a
margin which will vary based on the Company's performance with respect to
certain calculated financial ratios as defined in the Credit Agreement; (iii) an
Absolute Rate Bid Loan (as defined in the Credit Agreement), with interest
determined through competitive bid procedures among qualified lenders under the
Credit Agreement; and (iv) a Swing Line Loan (as defined in the Credit
Agreement) for up to an aggregate amount of $30 million, with interest based on
a money market rate, the ABR Loan rate or a combination thereof.
Interest on the Revolving Credit Loans generally is payable quarterly in
arrears or, for a Eurodollar Loan, at the end of an interest period date which
is specified at the time funds are advanced to the Company, not to exceed three
months. A facility fee based on the total commitment under the Credit Agreement
and a fee for outstanding letters of credit is payable quarterly.
The Credit Agreement contains certain financial and operating covenants,
including restrictions on incurring indebtedness and liens, entering into
transactions to acquire or merge with any entity, making certain other
fundamental changes, selling assets, paying dividends, and maintaining certain
minimum levels of consolidated net worth, leverage ratio, and interest coverage
ratios.
4. SUBSEQUENT EVENTS
In July 1997, Vision Cables Pty. Ltd. ("Vision Cables"), an Australian
company in which CommScope owns a 49% minority interest, announced to its
workforce that it plans to suspend manufacturing operations at its facility near
Melbourne, Australia in August of this year. The joint venture company was
established in 1995 with Pacific Dunlop Ltd. of Australia ("Pacific Dunlop"),
the 51% owner. Vision Cables has been supplying the Australian cable television
market with both CommScope manufactured coaxial cables imported from the United
States and coaxial cables produced by Vision Cables in Australia.
CommScope and Pacific Dunlop are together evaluating options for future
manufacturing operations at the Melbourne facility. If the manufacturing
operations are permanently discontinued, CommScope may
9
<PAGE>
COMMSCOPE, INC.
(FORMERLY COMMSCOPE, INC. OF NORTH CAROLINA)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
4. SUBSEQUENT EVENTS (CONTINUED)
need to record its minority interest share of the one-time charges related to
the closing of $1 million to $3 million after tax ($0.02 to $0.06 per share) as
early as the third quarter of 1997.
The Company's share of the net income or loss of the joint venture is
included in the consolidated statements of income using the equity method of
accounting. Since 1995, CommScope has recorded net income of approximately $1
million, after tax, from its minority interest investment in the joint venture
and sold approximately $50 million of CommScope exported products to the
Australian market through the Vision Cables distribution arrangement.
In August 1997, the Company announced that it had reached a non-binding
understanding with Alcatel Cable France ("Alcatel") that would establish a
European base of operations for CommScope.
The tentative agreement centers around a transfer by Alcatel to CommScope of
its CATV coaxial cable business in Seneffe, Belgium. Alcatel would also purchase
its future requirements of CATV coaxial cable from CommScope for a period of
time to be determined. As a part of the arrangement, Alcatel would receive
substantially all of the assets from CommScope's high-temperature aerospace and
industrial cable business in Elm City, North Carolina.
The agreement is subject to certain contingencies including board approval
by both companies, regulatory approval and due diligence, and is expected to be
completed later this year.
Sales from Alcatel's Seneffe coaxial cable business were approximately $20
million for the first half of 1997. Sales from CommScope's aerospace and
industrial cable business totaled approximately $8 million for the first half of
1997.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL POSITION
The following discussion and analysis is provided to increase the
understanding of, and should be read in conjunction with, the unaudited
condensed consolidated financial statements and accompanying notes included in
this document as well as the audited consolidated financial statements, related
notes thereto and management's discussion and analysis of results of operations
and financial position for the year ended December 31, 1996 included in the
Company's Prospectus dated June 13, 1997. Unless otherwise specified,
capitalized terms used herein are used as defined in the audited consolidated
financial statements of CommScope for the year ended December 31, 1996.
HIGHLIGHTS
CommScope reported net income of $13 million for the quarter ended June 30,
1997, unchanged from the second quarter of 1996. For the six months ended June
30, 1997, net income increased 6% to $27 million, compared to $25 million for
the same period in 1996. No historical earnings per share data is presented as
the CommScope earnings were part of General Instrument's results for all periods
presented.
CommScope reported pro forma net income of $12 million ($0.24 per pro forma
share) for the quarter ended June 30, 1997, unchanged from the second quarter of
1996. For the six months ended June 30, 1997 pro forma net income was $25
million ($0.50 per pro forma share), compared to $23 million ($0.46 per pro
forma share) for the same period in 1996, an increase of 8%. Pro forma net
income and earnings per share reflect the impact of CommScope's new capital
structure immediately following the Distribution (see Liquidity and Capital
Resources below), assuming that all common stock issued and long term debt
borrowings as of the Distribution Date were outstanding since January 1, 1996.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE AND
SIX MONTH PERIODS ENDED JUNE 30, 1997 WITH THE THREE AND
SIX MONTH PERIODS ENDED JUNE 30, 1996
NET SALES
Net sales for the second quarter and six months ended June 30, 1997
increased $17 million (12%) to $159 million and $34 million (13%) to $307
million, respectively, over the comparable prior year periods. This increase in
net sales reflects higher sales in cable television and other video distribution
markets and strong growth in the local area network ("LAN") product line.
Net sales to cable television and other video distribution markets for the
second quarter and six months ended June 30, 1997 increased $11 million (9%) to
$135 million and $17 million (7%) to $256 million, respectively, over the
comparable prior year periods, primarily due to higher sales volume of both
semi-flexible coaxial cables used in the trunk and feeder distribution portion
of cable television systems and flexible coaxial (drop) cable primarily used for
connecting the feeder cable to the cable television subscriber's residence.
These sales have been driven by increased deployment of hybrid fiber coaxial
("HFC") networks for new cable television systems in international markets and
continued domestic growth, offset in part by a slow down in such spending by a
major cable television operator in the United States.
Net sales for LAN and other data applications for the second quarter and six
months ended June 30, 1997 increased $3 million (19%) to $17 million and $8
million (27%) to $37 million, respectively, over the comparable prior year
periods, reflecting higher sales volume for premise wiring of LANs. Partially
offsetting the volume increases for cable television and LAN products were
decreases in the average selling prices of these products.
Sales of other cable products for the second quarter and six months ended
June 30, 1997 were $7 million and $14 million, respectively, compared to $3
million and $5 million, respectively, for the second quarter and six months
ended June 30, 1996. This increase is primarily due to sales of high-temperature
11
<PAGE>
aerospace and industrial cable products from the Company's Elm City, North
Carolina facility, which was acquired along with certain other assets of the
Thermatics Division of Teledyne Industries, Inc. in May 1996. Sales of
high-temperature aerospace and industrial cable products for the three and six
months ended June 30, 1997 were $4 million and $8 million, respectively,
compared with sales for the month of June 1996, subsequent to the acquisition of
the Elm City facility, of $1 million.
International sales for the second quarter and six months ended June 30,
1997 increased $9 million (20%) to $57 million and $19 million (21%) to $111
million, respectively, over the comparable prior year periods. International
sales for the six months ended June 30 represented 36% of the Company's net
sales in 1997 compared to 33% in 1996.
GROSS PROFIT (NET SALES LESS COST OF SALES)
Gross profit for the second quarter and six months ended June 30, 1997 was
$39 million and $79 million, respectively, compared to $37 million and $71
million for the comparable prior year periods, an increase of 7% and 11%,
respectively. The higher gross profit reflects the increased sales volume noted
above and lower overhead costs including reduced warranty related provisions due
to lowered expectations of claims, partially offset by the lower average selling
prices described above and increases in raw material costs. As a percentage of
sales, gross margin declined from 26% in the second quarter of 1996 to 25% for
the second quarter of 1997. For both the six months ended June 30, 1997 and 1996
gross margin as a percentage of sales was 26%. Due to the competitive pricing
environment and higher raw material costs, the Company expects gross margins
percentages to range from 23% to 25% for the remainder of fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE
SG&A expense for the second quarter and six months ended June 30, 1997
increased $2 million (23%) to $13 million and $4 million (21%) to $25 million,
respectively, over the comparable prior year periods. As a percentage of sales,
SG&A expense for the second quarters ended June 30, 1997 and 1996 was 8%, and
for the six month periods ended June 30, 1997 and 1996 was 8% and 7%,
respectively. The increase in SG&A expense was principally attributable to
increased sales and marketing expenditures to support product expansion and
increased growth opportunities in international cable and network markets.
RESEARCH AND DEVELOPMENT
Research and development expense as a percentage of sales was unchanged for
the second quarter and six months ended June 30, 1997 compared with the
corresponding periods in 1996. The Company has ongoing programs to develop new
products and market opportunities for its products and core capabilities and new
manufacturing technologies to achieve cost reductions.
INTEREST EXPENSE-NET
Net interest expense represents an allocation of interest expense from
General Instrument and was allocated based upon the Company's net assets as a
percentage of the total net assets of General Instrument. Net interest expense
allocated to the Company was $3 million and $5 million for the quarter and six
months ended June 30, 1997, respectively, unchanged from the corresponding
periods of 1996.
Pro forma net interest expense reflects the historical interest expense of
the Company adjusted to reflect a net debt level of $275 million at the
beginning of each period presented at an assumed weighted average borrowing rate
of 6.35% for each period plus the amortization of debt issuance costs associated
with the new borrowings (see Liquidity and Capital Resources below). These pro
forma net interest costs are not necessarily indicative of what the actual
interest costs would have been had CommScope operated as a separate, stand-alone
entity.
12
<PAGE>
INCOME TAXES
The provision for income taxes has been determined as if the Company had
filed separate tax returns under its previously existing structure as a wholly
owned subsidiary of General Instrument for the periods presented. Accordingly,
future tax rates could vary from the historical effective tax rates depending on
the Company's future tax elections.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations was $23 million for the six months ended June
30, 1997 compared to $25 million for the comparable prior year period, a
decrease of $2 million or 10%. This decrease is primarily attributable to
increases in net working capital due to sales growth partially offset by the
increase in net income in 1997 over the comparable six month period in 1996.
Working capital was $122 million at June 30, 1997 compared to $107 million
at December 31, 1996, an increase of $15 million, or 14%. The increase in
working capital is due to an increase in sales volume with a corresponding
increase in accounts receivable as well as increased inventory to support
business growth and the introduction of new products, partially offset by the
related increases in accounts payable. Based on current levels of orders and
backlog, management of the Company believes that working capital levels are
appropriate to support future operations.
During the six months ended June 30, 1997, the Company invested $19 million
in equipment and facilities compared to $9 million for the comparable period in
1996. This level of capital spending was attributable to capacity expansion
across the business units of the Company to meet increased current and
anticipated future demands. During the six months ended June 30, 1996, the
Company utilized $18 million to acquire certain assets of the Thermatics
Division of Teledyne Industries, Inc.
Management of the Company assesses its liquidity in terms of its overall
ability to obtain cash to support its ongoing business levels and to fund its
growth objectives. Prior to the Distribution Date, the Company participated in
the General Instrument cash management program. To the extent the Company
generated positive cash, such amounts were remitted to General Instrument. To
the extent the Company experienced temporary cash needs for working capital
purposes or capital expenditures, such funds historically were provided by
General Instrument. The net effect of these transactions is included in
additional paid-in capital as transfers from / to sole stockholder. Effective as
of the Distribution Date, the Company has independently established a cash
management program to support future business levels and growth objectives.
The Company's principal sources of liquidity both on a short-term and
long-term basis have been cash flows provided by operations and funds provided
by General Instrument. Net cash transfers to General Instrument were $3 million
for the six months ended June 30, 1997 compared to net cash transfers from
General Instrument to the Company of $2 million for the six months ended June
30, 1996. Management believes that, based upon its analysis of the Company's
consolidated financial position and the expected results of its operations in
the future, the Company will have sufficient cash flows from future operations
and the financial flexibility to attract both short- and long-term capital on
acceptable terms as may be needed to fund operations, capital expenditures and
its other growth objectives. There can be no assurance, however, that future
industry-specific developments or general economic trends will not adversely
affect the Company's operations or its ability to meet its cash requirements.
On July 23, 1997, prior to the Distribution, the Company entered into a $350
million credit agreement with a group of banks (the "Credit Agreement"). On the
Distribution Date, the Company borrowed $266 million under the Credit Agreement
which was utilized to make a dividend payment to General Instrument in
accordance with the terms of the Distribution and to fund fees and expenses in
connection with the Credit Agreement. The Company intends to utilize the Credit
Agreement in the future for, among other
13
<PAGE>
things, general working capital needs, financing strategic acquisitions, and
other general corporate purposes.
The Credit Agreement provides a total of $350 million in available revolving
credit commitments through loans available at various interest rates and
interest maturity periods (collectively, the "Revolving Credit Loans") and
through the issuance of standby or commercial letters of credit ("Letters of
Credit") of up to $50 million. All amounts borrowed under the Credit Agreement
are due on December 31, 2002.
At the Company's option, advances under the Revolving Credit Loans are
available by choosing from one of the following types of loans, which are
primarily differentiated by the interest rates available: (i) an ABR Loan (as
defined in the Credit Agreement), with interest based on the highest of the
prime rate of The Chase Manhattan Bank, the Base CD Rate (as defined in the
Credit Agreement) plus 1%, or the Federal Funds Effective Rate (as defined in
the Credit Agreement) plus 0.5%; (ii) a Eurodollar Loan (as defined in the
Credit Agreement), with interest based on the Eurodollar Rate (LIBOR) plus a
margin which will vary based on the Company's performance with respect to
certain calculated financial ratios as defined in the Credit Agreement; (iii) an
Absolute Rate Bid Loan (as defined in the Credit Agreement), with interest
determined through competitive bid procedures among qualified lenders under the
Credit Agreement; and (iv) a Swing Line Loan (as defined in the Credit
Agreement) for up to an aggregate amount of $30 million, with interest based on
a money market rate, the ABR Loan rate or a combination thereof.
Interest on the Revolving Credit Loans generally is payable quarterly in
arrears or, for a Eurodollar Loan, at the end of an interest period date which
is specified at the time funds are advanced to the Company, not to exceed three
months. A facility fee based on the total commitment under the Credit Agreement
and a fee for outstanding letters of credit is payable quarterly.
The Credit Agreement contains certain financial and operating covenants,
including restrictions on incurring indebtedness and liens, entering into
transactions to acquire or merge with any entity, making certain other
fundamental changes, selling assets, paying dividends, and maintaining certain
minimum levels of consolidated net worth, leverage ratio, and interest coverage
ratios.
Giving effect to the Distribution as of June 30, 1997, the Company's pro
forma net debt was $275 million and total stockholders' equity was approximately
$140 million.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On June 10, 1997, the sole stockholder of the Company approved the
following by written consent:
1. CommScope, Inc. 1997 Long-Term Incentive Plan
2. Amendment to the Certificate of Incorporation to increase the
authorized capital of the Company.
(b) On July 25, 1997, the sole stockholder of the Company approved the
following by written consent:
1. CommScope, Inc. 1997 Long-Term Incentive Plan, as amended
2. Amended and Restated Certificate of Incorporation to provide for a
classified board of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of CommScope, Inc.
3.2 Amended and Restated By-Laws of CommScope, Inc.
10.1 Employee Benefits Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc.,
CommScope, Inc. and General Semiconductor, Inc.
10.2 Debt and Cash Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc.,
CommScope, Inc. and General Semiconductor, Inc.
10.3 Insurance Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and
General Semiconductor, Inc.
10.4 Tax Sharing Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and
General Semiconductor, Inc.
10.5 Trademark License Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope,
Inc. and General Semiconductor, Inc.
10.6 Transition Services Agreement, dated as of July 25, 1997, between NextLevel Systems, Inc. and
CommScope, Inc.
10.7 Credit Agreement, dated as of July 23, 1997, among CommScope, Inc. of North Carolina, Certain Banks,
The Chase Manhattan Bank, as Administrative Agent and The Chase Manhattan Bank, Bank of America
National Trust and Savings Association, BankBoston, N.A., Bank of Tokyo-Mitsubishi Trust Company,
CIBC, Inc., Credit Lyonnais Atlanta Agency, First Union National Bank, The Fuji Bank, Limited,
Atlanta Agency, NationsBank, N.A., Toronto Dominion (New York), Inc. and Wachovia Bank, N.A. as
Co-Agents.
27 Financial Data Schedule
99 Forward-Looking Information
</TABLE>
(b) Reports on Form 8-K filed during the three months ended June 30, 1997
are as follows:
None
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
COMMSCOPE, INC.
August 14, 1997 /s/ JEARLD L. LEONHARDT
Date ------------------------------------------------
Jearld L. Leonhardt
Executive Vice President, Finance and
Administration, and Treasurer
Signing both in his capacity as Executive Vice
President on behalf of the Registrant and as
Chief Financial Officer of the Registrant
</TABLE>
16
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COMMSCOPE, INC.
(Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware)
The undersigned, Frank J. Logan, certifies that he is an Executive
Vice President of CommScope, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), and does hereby further
certify as follows:
(1) The name of the Corporation is CommScope, Inc.
(2) The Corporation's original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on January 28, 1997.
A Certificate of Amendment was filed with the Secretary of State of the State of
Delaware on June 11, 1997.
(3) This Amended and Restated Certificate of Incorporation, which
amends and restates the certificate of incorporation of the Corporation, was
duly adopted by unanimous stockholder written consent in accordance with
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware (the "GCL").
(4) Pursuant to Section 103(d) of the GCL, this Amended and Restated
Certificate of Incorporation shall become effective at 5:00 p.m. on July 25,
1997 (the "Effective Date").
(5) The text of the Amended and Restated Certificate of
Incorporation of the Corporation is amended and restated to read in its entirety
as follows:
FIRST: The name of the Corporation is CommScope, Inc.
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<PAGE>
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the GCL.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 320,000,000 shares
divided into two classes of which 20,000,000 shares of par value $.01 per share
shall be designated Preferred Stock and 300,000,000 shares of par value $.01 per
share shall be designated Common Stock.
A. Common Stock
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of Common Stock.
2. Voting Rights. Except as otherwise required by law, at every
annual or special meeting of stockholders of the Corporation, every holder of
Common Stock shall be entitled to one vote, in person or by proxy, for each
share of Common Stock standing in such holder's name on the books of the
Corporation.
3. Liquidation, Dissolution, or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation, after payment or provision for payment of the debts and
other liabilities of
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<PAGE>
the Corporation and of the preferential amounts, if any, to which the holders of
Preferred Stock shall be entitled, the holders of all outstanding shares of
Common Stock shall be entitled to share ratably in the remaining net assets of
the Corporation.
B. Preferred Stock
1. Issuance. The Board of Directors of the Corporation is
authorized, subject to limitations prescribed by law, to provide for the
issuance of shares of Preferred Stock of the Corporation from time to time in
one or more series, each of which series shall have such distinctive designation
or title as shall be fixed by the Board of Directors prior to the issuance of
any shares thereof. Each such series of Preferred Stock shall have such voting
powers, full or limited, or no voting powers, and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to the issuance of any
shares thereof pursuant to the authority hereby expressly vested in it, all in
accordance with the laws of the State of Delaware.
2. Amendment. Except as may otherwise be required by law or
this Amended and Restated Certificate of Incorporation, the terms of any series
of Preferred Stock may be amended without the consent of the holders of any
other series of Preferred Stock or of any class of Common Stock of the
Corporation.
FIFTH: The business and affairs of the Corporation shall be managed
by and under the direction of the Board of Directors. The Board of Directors may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute or this Amended and Restated Certificate
of Incorporation directed or required to be exercised or done by the
stockholders.
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<PAGE>
A. Number of Directors. Except as otherwise fixed by or pursuant to
the provisions of this Amended and Restated Certificate of Incorporation
relating to the rights of the holders of Preferred Stock to elect directors
under specified circumstances, the number of directors shall be fixed from time
to time exclusively by the Board of Directors pursuant to a resolution adopted
by a majority of the then authorized number of directors of the Corporation, but
in no event shall the number of directors be fewer than three. No director need
be a stockholder.
B. Classes and Terms of Directors. The directors shall be divided
into three classes (I, II and III), as nearly equal in number as possible, and
no class shall include less than one director. The initial term of office for
members of Class I shall expire at the annual meeting of stockholders in 1998;
the initial term of office for members of Class II shall expire at the annual
meeting of stockholders in 1999; and the initial term of office for members of
Class III shall expire at the annual meeting of stockholders in 2000. At each
annual meeting of stockholders beginning in 1998, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, and shall continue to hold office until their respective successors
are elected and qualified. In the event of any increase in the number of
directors fixed by the Board of Directors, the additional directors shall be so
classified that all classes of directors have as nearly equal numbers of
directors as may be possible. In the event of any decrease in the number of
directors, all classes of directors shall be decreased equally as nearly as may
be possible, but in no case will a decrease in the number of directors shorten
the term of any incumbent director.
C. Newly Created Directorships and Vacancies. Subject to the rights
of the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors or any
vacancies in the Board of
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<PAGE>
Directors resulting from death, resignation, retirement, disqualification,
removal from office or any other cause shall be filled only by a majority of the
directors then in office, even if less than a quorum is then in office, or by
the sole remaining director, and shall not be filled by stockholders. Directors
elected to fill a newly created directorship or other vacancies shall hold
office for the remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such director's
successor has been elected and has qualified.
D. Removal of Directors. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, the directors or any director may be
removed from office at any time, but only for cause, at a meeting called for
that purpose, and only by the affirmative vote of the holders of at least a
majority of the voting power of all issued and outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
E. Rights of Holders of Preferred Stock. Notwithstanding the
foregoing provisions of this Article FIFTH, whenever the holders of any one or
more series of Preferred Stock issued by the Corporation shall have the right,
voting separately by series, to elect directors at an annual or special meeting
of stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the rights and preferences
of such Preferred Stock as set forth in this Amended and Restated Certificate of
Incorporation or in the resolution or resolutions of the Board of Directors
relating to the issuance of such Preferred Stock, and such directors so elected
shall not be divided into classes pursuant to this Article FIFTH unless
expressly provided by such rights and preferences.
F. Written Ballot Not Required. Elections of directors need not be
by written ballot unless the By-laws of the Corporation shall otherwise provide.
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<PAGE>
SIXTH: To the fullest extent permitted under the law of the State of
Delaware, including the GCL, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for damages for any
breach of fiduciary duty as a director. No amendment to or repeal of this
Article SIXTH shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal. In the
event that the GCL is hereafter amended to permit further elimination or
limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be so eliminated or limited to the fullest
extent permitted by the GCL as so amended without further action by either the
Board of Directors or the stockholders of the Corporation.
SEVENTH: Each person who was or is made a party or is threatened to
be made a party to or is involved (including, without limitation, as a witness)
in any threatened, pending or completed action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that such person (the "Indemnitee") is or
was a director or officer of the Corporation or is or was serving at the request
of the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such Proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as such a director or officer, shall be indemnified and
held harmless by the Corporation to the full extent permitted by law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), or by other applicable law as then in effect, against all
- 6 -
<PAGE>
expense, liability, losses and claims (including attorneys' fees, judgments,
fines, excise taxes under the Employee Retirement Income Security Act of 1974,
as amended from time to time, penalties and amounts to be paid in settlement)
actually incurred or suffered by such Indemnitee in connection with such
Proceeding.
EIGHTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, repeal,
alter, amend, or rescind the By-laws of the Corporation. In addition, the
By-laws of the Corporation may be adopted, repealed, altered, amended or
rescinded by the affirmative vote of the holders of at least a majority of the
voting power of all the issued and outstanding shares of capital stock of the
Corporation entitled to vote thereon.
NINTH: The Corporation reserves the right to repeal, alter, amend or
rescind any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
- 7 -
<PAGE>
IN WITNESS WHEREOF, CommScope, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Frank J. Logan, its
Executive Vice President, on this 21st day of July, 1997.
COMMSCOPE, INC.
By: /s/ Frank J. Logan
----------------------------------
Name: Frank J. Logan
Title: Executive Vice President
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS OF
COMMSCOPE, INC.
(hereinafter called the "Corporation")
(As of July 25, 1997)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
Section 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at any such
time and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver thereof. At such annual meetings, the stockholders shall elect
by a plurality vote the directors standing for election and transact such other
business as may properly be brought before the meeting in accordance with these
Amended and Restated By-Laws.
Section 3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by statute may be called by
the Board of Directors, the Chairman of the Board of Directors, if one shall
have been elected, or the President and shall be called by the Secretary upon
the request in writing of a stockholder
<PAGE>
or stockholders holding of record at least a majority of the voting power of the
issued and outstanding shares of capital stock of the Corporation entitled to
vote at such meeting.
Section 4. Notice of Meetings. Except as otherwise expressly
required by statute, written notice of each annual and special meeting of
stockholders stating the date, place and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given to each stockholder of record entitled to vote thereat not less
than ten nor more than sixty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice. Notice shall be given personally or by mail and,
if by mail, shall be sent in a postage prepaid envelope, addressed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid. Notice of any
meeting shall not be required to be given to any person who attends such
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
Section 5. Organization. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, or, in such person's
absence or if one shall not have been elected, the President, shall act as
chairman of the meeting. The Secretary or, in such person's absence or inability
to act, the person whom the chairman of the meeting shall appoint secretary of
the meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 6. Conduct of Business. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seems to him or her in order. The date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting.
Section 7. Quorum, Adjournments. The holders of a majority of the
voting power of the issued and outstanding shares of capital stock of the
Corporation entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at all meetings of
stockholders, except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented by
proxy at any meeting of stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have
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<PAGE>
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented by
proxy. At such adjourned meeting at which a quorum shall be present or
represented by proxy, any business may be transacted which might have been
transacted at the meeting as originally called. If the adjournment is for more
than thirty days, or, if after adjournment a new record date is set, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation and these Amended and Restated By-Laws, each
stockholder of the Corporation shall be entitled at each meeting of stockholders
to one vote for each share of capital stock of the Corporation standing in such
stockholder's name on the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7
of Article V of these Amended and Restated By-Laws as the record
date for the determination of the stockholders who shall be entitled
to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which
notice thereof shall be given, or, if notice is waived, at the close
of business on the date next preceding the day on which the meeting
is held.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for such stockholder by a proxy
signed by such stockholder or such stockholder's attorney-in-fact, but no proxy
shall be voted after three years from its date, unless the proxy provides for a
longer period. Any such proxy shall be delivered to the secretary of the meeting
at or prior to the time designated in the order of business for so delivering
such proxies. When a quorum is present at any meeting, the affirmative vote of
the holders of a majority of the voting power of the issued and outstanding
stock of the Corporation entitled to vote thereon, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of the
Certificate of Incorporation or of these Amended and Restated By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by such stockholder's proxy, if there be such
proxy.
Section 9. List of Stockholders Entitled to Vote. At least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the
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<PAGE>
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder
shall be prepared. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city, town, or village where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 10. Inspectors. The Board of Directors shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting shall, or if inspectors shall
not have been appointed, the chairman of the meeting may appoint one or more
inspectors. Each inspector, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. The inspectors shall determine the number of shares
of capital stock of the Corporation outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided by statute or in the Certificate of Incorporation, any action
required to be taken or which may be taken at any annual or special meeting of
the stockholders of the Corporation may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of any such corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 12. Advance Notice Provisions for Election of Directors.
Only persons who are nominated in accordance with the following procedures shall
be eligible
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for election as directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 12 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 12.
In addition to any other applicable requirements, for a nomination
to be made by a stockholder such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than 60 days nor more
than 90 days prior to the date of the annual meeting; provided, however, that in
the event that less than 70 days' notice or prior public disclosure of the date
of the annual meeting is given or made to stockholders, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the 10th day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the 10th day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the
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persons named in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to be named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 12. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 13. Advance Notice Provisions for Business to be Transacted
at Annual Meeting. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section 13 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 13.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the date of the
annual meeting; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the annual meeting is given or
made to stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record
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address of such stockholder, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
such stockholder, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 13, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 13 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Place of Meetings. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
Section 2. Annual Meeting. The annual meeting of the Board of
Directors may be held at such time or place (within or without the State of
Delaware) as shall be specified in a notice thereof given as hereinafter
provided in Section 5 of this Article III.
Section 3. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise be
held on that day shall be held at the same hour on the next succeeding business
day.
Section 4. Special Meeting. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one shall have been
elected, or by two or more directors of the Corporation or by the President.
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Section 5. Notice of Meetings. Notice of regular meetings of the
Board of Directors need not be given except as otherwise required by law or
these Amended and Restated By-Laws. Notice of each special meeting of the Board
of Directors for which notice shall be required, shall be given by the Secretary
as hereinafter provided in this Section 5, in which notice shall be stated the
time and place of the meeting. Except as otherwise required by these Amended and
Restated By-Laws, such notice need not state the purposes of such meeting.
Notice of any special meeting, and of any regular or annual meeting for which
notice is required, shall be given to each director at least (a) four hours
before the meeting if by telephone or by being personally delivered or sent by
telex, telecopy, or similar means or (b) two days before the meeting if
delivered by mail to the director's residence or usual place of business. Such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage prepaid, or when transmitted if sent by telex,
telecopy, or similar means. Neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified in
the notice or waiver of notice of such meeting. Any director may waive notice of
any meeting by a writing signed by the director entitled to the notice and filed
with the minutes or corporate records. The attendance at or participation of the
director at a meeting shall constitute waiver of notice of such meeting, unless
the director at the beginning of the meeting or promptly upon such director's
arrival objects to holding the meeting or transacting business at the meeting.
Section 6. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or, in the absence of
the Chairman of the Board or if one shall not have been elected, the President
(or, in the President's absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat. The
Secretary or, in such person's absence, any person appointed by the chairman
shall act as secretary of the meeting and keep the minutes thereof.
Section 7. Quorum and Manner of Acting. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, and, except as otherwise expressly
required by statute or the Certificate of Incorporation or these Amended and
Restated By-Laws, the affirmative vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum at any meeting of the Board of Directors,
a majority of the directors present thereat may adjourn such meeting to another
time and place. Notice of the time and place of any such adjourned meeting shall
be given to all of the directors unless such time and place were announced at
the meeting at which the adjournment was taken, in which case such notice need
only be given to the directors who were not present thereat. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have
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been transacted at the meeting as originally called. The directors shall act
only as a Board and the individual directors shall have no power as such.
Section 8. Action by Consent. Unless restricted by the Certificate
of Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
Section 9. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
Section 10. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence of disqualification of any member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
such members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Each such committee, to the extent provided in the resolution
creating it, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which require it; provided, however, that no such committee shall have
the power or authority in reference to the following matters: (a) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the General Corporation Law of Delaware to be submitted to
stockholders for approval or (b) adopting, amending or repealing any by-law of
the Corporation. Each such committee shall serve at the pleasure of the Board of
Directors and have such name as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors.
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Section 11. Fees and Compensation. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 12. Resignations. Any director of the Corporation may resign
at any time by giving written notice of such director's resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 13. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's or
persons' votes are counted for such purposes if (a) the material facts as to
such person's or persons' relationship or interest and as to the contract or
transaction are disclosed or are known to the directors or committee who then in
good faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum, (b) the material facts as to such person's or persons'
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, one or more Vice
Presidents (including Senior, Executive or other classifications of Vice
Presidents) and a Secretary. The Board of Directors, in its discretion, may also
choose as an officer of the Corporation a Chairman of the Board and a Vice
Chairman of the Board and may choose other
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officers (including a Treasurer, one or more Assistant Secretaries and one or
more Assistant Treasurers) as may be necessary or desirable. Such officers as
the Board of Directors may choose shall perform such duties and have such powers
as from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any officer of the Corporation the power to
choose such other officers and to proscribe their respective duties and powers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these Amended and
Restated By-Laws. The officers of the Corporation need not be stockholders of
the Corporation nor, except in the case of the Chairman of the Board and Vice
Chairman of the Board of Directors, need such officers be directors of the
Corporation.
Section 2. Term. All officers of the Corporation shall hold office
until their successors are chosen and qualified, or until their earlier
resignation or removal. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
Section 3. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of such officer's resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon receipt. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to make it effective.
Section 4. Removal. Any officer may be removed at any time by the
Board of Directors with or without cause.
Section 5. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that such officer is also a
director of the Corporation.
Section 6. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. The Chairman of the Board shall advise and
counsel with the President, and in the President's absence with other executives
of the Corporation, and shall perform such other duties as may from time to time
be assigned to the Chairman of the Board by the Board of Directors.
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ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
Section 1. Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or a Vice Chairman of the Board
or the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restriction of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Facsimile Signatures. Any or all of the signatures on a
certificate may be a facsimile, engraved or printed. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person was such officer, transfer
agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or the owner's legal representative, to
give the Corporation a bond in such sum as it may direct sufficient to indemnify
it against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
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Section 4. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 5. Transfer Agents and Registrars. The Board of Directors
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
Section 6. Regulations. The Board of Directors may make such
additional rules and regulations, not inconsistent with these Amended and
Restated By-Laws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation.
Section 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 8. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares of stock on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. General. Each person who was or is made a party or is
threatened to be made a party to or is involved (including, without limitation,
as a witness) in any threatened, pending or completed action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal, administrative or
investigative ("Proceeding") brought by reason of the fact that such person (the
"Indemnitee") is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, whether the basis of
such Proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving as such a director or officer,
shall be indemnified and held harmless by the Corporation to the full extent
authorized by the General Corporation Law of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expenses,
liabilities, losses and claims (including attorneys' fees, judgments, fines,
excise taxes under the Employee Retirement Income Security Act of 1974, as
amended from time to time, penalties and amounts to be paid in settlement)
actually incurred or suffered by such Indemnitee in connection with such
Proceeding (collectively, "Losses").
Section 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to or is
involved (including, without limitation, as a witness) in any Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person (also an "Indemnitee") is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, against Losses actually incurred or suffered by the
Indemnitee in connection with the defense or settlement of such action or suit
if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
provided that no indemnification shall be made in respect of any claim, issue or
matter as to which Delaware law expressly prohibits such indemnification by
reason of an adjudication of liability of the Indemnitee unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the
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circumstances of the case, the Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Indemnification in Certain Cases. Notwithstanding any
other provision of this Article VI, to the extent that an Indemnitee has been
wholly successful on the merits or otherwise in any Proceeding referred to in
Sections 1 or 2 of this Article VI on any claim, issue or matter therein, the
Indemnitee shall be indemnified against Losses actually incurred or suffered by
the Indemnitee in connection therewith. If the Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Corporation shall indemnify the Indemnitee, against Losses actually incurred
or suffered by the Indemnitee in connection with each successfully resolved
claim, issue or matter. In any review or Proceeding to determine such extent of
indemnification, the Corporation shall bear the burden of proving any lack of
success and which amounts sought in indemnity are allocable to claims, issues or
matters which were not successfully resolved. For purposes of this Section 3 and
without limitation, the termination of any such claim, issue or matter by
dismissal with or without prejudice shall be deemed to be a successful
resolution as to such claim, issue or matter.
Section 4. Procedure. (a) Any indemnification under Sections 1 and 2
of this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the Indemnitee is proper (except that the right of the
Indemnitee to receive payments pursuant to Section 5 of this Article VI shall
not be subject to this Section 4) in the circumstances because the Indemnitee
has met the applicable standard of conduct. Such determination shall be made
promptly, but in no event later than 60 days after receipt by the Corporation of
the Indemnitee's written request for indemnification. The Secretary of the
Corporation shall, promptly upon receipt of the Indemnitee's request for
indemnification, advise the Board of Directors that the Indemnitee has made such
request for indemnification.
(b) The entitlement of the Indemnitee to indemnification shall be
determined in the specific case (1) by the Board of Directors by a majority vote
of the directors who are not parties to such Proceeding, even though less than a
quorum (the "Disinterested Directors"), or (2) if there are no Disinterested
Directors, or if such Disinterested Directors so direct, by independent legal
counsel, or (3) by the stockholders.
(c) In the event the determination of entitlement is to be made by
independent legal counsel, such independent legal counsel shall be selected by
the Board of Directors and approved by the Indemnitee. Upon failure of the Board
of Directors to so select such independent legal counsel or upon failure of the
Indemnitee to so approve, such independent legal counsel shall be selected by
the American Arbitration Association
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in New York, New York or such other person as such Association shall designate
to make such selection.
(d) If the Board of Directors or independent legal counsel shall
have determined that the Indemnitee is not entitled to indemnification to the
full extent of the Indemnitee's request, the Indemnitee shall have the right to
seek entitlement to indemnification in accordance with the procedures set forth
in Section 6 of this Article VI.
(e) If the person or persons empowered pursuant to Section 4(b) of
this Article VI to make a determination with respect to entitlement to
indemnification shall have failed to make the requested determination within 60
days after receipt by the Corporation of such request, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and the Indemnitee shall be absolutely entitled to such indemnification,
absent (i) misrepresentation by the Indemnitee of a material fact in the request
for indemnification or (ii) a final judicial determination that all or any part
of such indemnification is expressly prohibited by law.
(f) The termination of any proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, adversely affect the rights of the Indemnitee to indemnification
hereunder except as may be specifically provided herein, or create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or create a presumption that (with respect to any criminal
action or proceeding) the Indemnitee had reasonable cause to believe that the
Indemnitee's conduct was unlawful.
(g) For purposes of any determination of good faith hereunder, the
Indemnitee shall be deemed to have acted in good faith if the Indemnitee's
action is based on the records or books of account of the Corporation or an
affiliate, including financial statements, or on information supplied to the
Indemnitee by the officers of the Corporation or an affiliate in the course of
their duties, or on the advice of legal counsel for the Corporation or an
affiliate or on information or records given or reports made to the Corporation
or an affiliate by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care to the Corporation or an
affiliate. The Corporation shall have the burden of establishing the absence of
good faith. The provisions of this Section 4(g) of this Article VI shall not be
deemed to be exclusive or to limit in any way the other circumstances in which
the Indemnitee may be deemed to have met the applicable standard of conduct set
forth in these Amended and Restated By-Laws.
(h) The knowledge and/or actions, or failure to act, of any other
director, officer, agent or employee of the Corporation or an affiliate shall
not be imputed to the
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Indemnitee for purposes of determining the right to indemnification under these
Amended and Restated By-Laws.
Section 5. Advances for Expenses and Costs. All expenses (including
attorneys' fees) incurred by or on behalf of the Indemnitee (or reasonably
expected by the Indemnitee to be incurred by the Indemnitee within three months)
in connection with any Proceeding shall be paid by the Corporation in advance of
the final disposition of such Proceeding within twenty days after the receipt by
the Corporation of a statement or statements from the Indemnitee requesting from
time to time such advance or advances whether or not a determination to
indemnify has been made under Section 4 of this Article VI. The Indemnitee's
entitlement to such advancement of expenses shall include those incurred in
connection with any Proceeding by the Indemnitee seeking an adjudication or
award in arbitration pursuant to these Amended and Restated By-Laws. The
financial ability of an Indemnitee to repay an advance shall not be a
prerequisite to the making of such advance. Such statement or statements shall
reasonably evidence such expenses incurred (or reasonably expected to be
incurred) by the Indemnitee in connection therewith and shall include or be
accompanied by a written undertaking by or on behalf of the Indemnitee to repay
such amount if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified therefor pursuant to the terms of this Article VI.
Section 6. Remedies in Cases of Determination Not to Indemnify or to
Advance Expenses. (a) In the event that (i) a determination is made that the
Indemnitee is not entitled to indemnification hereunder, (ii) advances are not
made pursuant to Section 5 of this Article VI or (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to Section 4 of this Article VI, the Indemnitee shall be entitled to seek a
final adjudication either through an arbitration proceeding or in an appropriate
court of the State of Delaware or any other court of competent jurisdiction of
the Indemnitee's entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance with
the procedures set forth in Section 4 of this Article VI, in whole or in part,
that the Indemnitee is not entitled to indemnification, any judicial proceeding
or arbitration referred to in paragraph (a) of this Section 6 shall be de novo
and the Indemnitee shall not be prejudiced by reason of any such prior
determination that the Indemnitee is not entitled to indemnification, and the
Corporation shall bear the burdens of proof specified in Sections 3 and 4 of
this Article VI in such proceeding.
(c) If a determination is made or deemed to have been made pursuant
to the terms of Sections 4 or 6 of this Article VI that the Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial
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proceeding or arbitration in the absence of (i) a misrepresentation of a
material fact by the Indemnitee or (ii) a final judicial determination that all
or any part of such indemnification is expressly prohibited by law.
(d) To the extent deemed appropriate by the court, interest shall be
paid by the Corporation to the Indemnitee at a reasonable interest rate for
amounts which the Corporation indemnifies or is obliged to indemnify the
Indemnitee for the period commencing with the date on which the Indemnitee
requested indemnification (or reimbursement or advancement of expenses) and
ending with the date on which such payment is made to the Indemnitee by the
Corporation.
Section 7. Rights Non-Exclusive. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other Sections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
Section 8. Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan, against any liability asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of this Article VI.
Section 9. Definition of Corporation. For purposes of this Article
VI, references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, shall stand in the same position under this Article VI with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
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Section 10. Other Definitions. For purposes of this Article VI,
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VI.
Section 11. Survival of Rights. The indemnification and advancement
of expenses provided by, or granted pursuant to this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. No
amendment, alteration, rescission or replacement of these Amended and Restated
By-Laws or any provision hereof shall be effective as to an Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
position with the Corporation or any other entity which the Indemnitee is or was
serving at the request of the Corporation prior to such amendment, alteration,
rescission or replacement.
Section 12. Indemnification of Employees and Agents of the
Corporation. The Corporation may, by action of the Board of Directors from time
to time, grant rights to indemnification and advancement of expenses to
employees and agents of the Corporation with the same scope and effect as the
provisions of this Article VI with respect to the indemnification of directors
and officers of the Corporation.
Section 13. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each person entitled to
indemnification under the first paragraph of this Article VI as to all losses
actually and reasonably incurred or suffered by such person and for which
indemnification is available to such person pursuant to this Article VI to the
full extent permitted by any applicable portion of this Article VI that shall
not have been invalidated and to the full extent permitted by applicable law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation
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may be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserve in the manner in which it was created.
Section 3. Seal. The seal of the Corporation shall be in such form
as shall be approved by the Board of Directors.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
Section 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
Section 6. Execution of Contracts, Deeds, Etc. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
Section 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which the Corporation may be entitled to cast as a
shareholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of the Board or the President
may instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may, or
may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation and under its seal or
otherwise,
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such written proxies, consents, waivers or other instruments as may be necessary
or proper in the circumstances.
ARTICLE VIII
AMENDMENTS
These Amended and Restated By-Laws may be repealed, altered, amended
or rescinded in whole or in part, or new By-Laws may be adopted by either the
affirmative vote of the holders of at least a majority of the voting power of
all of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereon or by the Board of Directors.
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EXHIBIT 10.1
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
THIS BENEFITS AGREEMENT is made and entered into as of this 25th day of
July, 1997 by and among General Semiconductor, Inc. a Delaware corporation
("GS"), NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"),
and CommScope, Inc., a Delaware corporation ("CommScope").
WHEREAS, pursuant to the terms of that certain Distribution Agreement by
and among General Instrument Corporation, NextLevel Systems and CommScope and
dated as of June 12, 1997 (the "Distribution Agreement"), the parties have
entered into this Agreement regarding certain employment, compensation and
benefit matters occasioned by the Distributions.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each other member of its Group over
which it has direct or indirect legal or effective control, hereby agrees as
follows:
SECTION 1. Definitions. The following terms, when capitalized herein, shall have
the meanings set forth below in this Section 1. All other capitalized terms
which are used but are not otherwise defined herein shall have the meanings
ascribed to them in the Distribution Agreement.
"Active Employees" means, with respect to each Group, all employees
regularly engaged in the performance of services to, for or on behalf of
any member of such Group as of the close of business on the NextLevel
Systems Distribution Date.
"Former Employees" means, with respect to each Group, all former
employees of GI and/or its Subsidiaries (including, but not limited to,
such employees who, as of the close of business on the NextLevel Systems
Distribution Date, are on leave of absence, long-term disability or layoff
with recall rights and the dependents of those persons) who, if they were
regularly engaged in the performance of services to, for or on behalf of
GI or any of its Subsidiaries at the close of business on the NextLevel
Systems Distribution Date, would be an Active Employee of such Group,
determined on a basis consistent with the determination of the Active
Employees of such Group and shall, with respect to GS, include former
employees of previously disposed of businesses, discontinued operations
and the corporate office of GI.
"GS Salaried Welfare Plans" means, collectively, the General
Instrument Corporation Group Welfare Benefits Plan and the General
Instrument Corporation Cafeteria Plan.
SECTION 2. General Employment Matters.
2.01. General Obligations. Except as specifically provided herein, from
and after the NextLevel Systems Distribution Date, each of GS, NextLevel Systems
and CommScope shall and shall, as applicable, cause each of the other members of
its respective Group over which it has direct or indirect legal or effective
control to, (a) continue the employment of all of the Active Employees of its
respective Group, subject, however to the terms of Section 2.03 below and (b)
except as otherwise specifically provided herein, pay, perform and discharge any
and all labor, employment, compensation and benefit liabilities, whether arising
prior to, on or after the NextLevel Systems Distribution Date, with respect to
all such Active Employees and all Former Employees of its respective Group.
Except as specifically provided herein, each of GS, NextLevel Systems and
CommScope shall be solely responsible for the Former Employees of its respective
Group.
2.02. Initial Compensation of Active Employees. The initial compensation
(base salary or wage level) of each Active Employee of each Group shall be the
same as the compensation (base salary or wage level) of such Active Employee
immediately prior to the NextLevel Systems Distribution Date.
2.03. No Additional Employment Rights Created. Nothing in this Agreement
shall give any Active Employee of any Group any right to continued employment by
any member of that Group or any other Group beyond the NextLevel
<PAGE>
Systems Distribution Date, which is in addition to or supplemental to any
such right he or she may have arising under contract or otherwise.
SECTION 3. United States Salaried Pension and Savings Plan Benefits.
3.01. Defined Benefit Plans.
(a) Effective as of June 30, 1997, Next Level Communications (a
member of the NextLevel Group) ceased to be a sponsor of the General
Instrument Corporation Pension Plan for Salaried and Hourly Paid Non-Union
Employees (the "Pension Plan"), and GS and the members of the GS Group
became the only sponsors of the Pension Plan. Effective as of July 1,
1997, NextLevel Systems established a defined benefit plan (the "NextLevel
Systems Pension Plan") for the benefit of the Active Employees and Former
Employees of the NextLevel Group who were, immediately prior to such
effective date, participants in the Pension Plan. Upon the transfer of
assets contemplated in Section 3.01(c), all liabilities for benefits
accrued under the Pension Plan through June 30, 1997 in respect of the
Active Employees and Former Employees of the NextLevel Group shall be
transferred from the Pension Plan to the NextLevel Systems Pension Plan.
The Pension Plan shall retain all other liabilities of the Pension Plan.
(b) Promptly after the NextLevel Systems Distribution Date, GS shall
cause the actuary of the Pension Plan (the "Plan Actuary") to allocate the
assets of the Pension Plan as of June 30, 1997 between the Pension Plan
and the NextLevel Systems Pension Plan. Such allocation shall reflect the
division of liabilities set forth in Section 3.01(a) and shall be effected
in accordance with Section 414(l) of the Code and the regulations
thereunder, using for such purpose those actuarial assumptions prescribed
by the Pension Benefit Guaranty Corporation for calculating unfunded
benefit liabilities in connection with single employer plans terminating
on June 30, 1997 (the "Assumptions"). If the fair market value of the
assets of the Pension Plan as of June 30, 1997, exceeds the present value
of accrued benefit liabilities calculated on a plan termination basis
using the Assumptions, such excess shall be allocated between the Pension
Plan and the NextLevel Systems Pension Plan in proportion to the present
value of the accrued benefit liabilities allocated to each such plan. The
assets allocable to the NextLevel Systems Pension Plan pursuant to this
Section 3.01(b) as of June 30, 1997 is hereinafter referred to as the
"Distribution Date Asset Value."
(c) As promptly as practical after the determination of the
Distribution Date Asset Value pursuant to Section 3.01(b), GS shall cause
the trustee of the Pension Plan to transfer to the trustee of the
NextLevel Systems Pension Plan the Distribution Date Asset Value (i)
increased by a proportionate share of the earnings (or decreased by a
proportionate share of losses) of the Pension Plan from June 30, 1997
until the date of transfer (the "Interim Period") and (ii) decreased by
benefit payments to the Active Employees and Former Employees of the
NextLevel Group during the Interim Period (the "Transferred Amount"). The
Transferred Amount shall be transferred in cash or other property as may
be agreed between the trustees of the respective plans.
(d) During the Interim Period, the Pension Plan shall make all
benefit payments that become due in respect of the Active Employees and
Former Employees of the NextLevel Group to the extent such benefits were
accrued under the Pension Plan through June 30, 1997.
(e) All calculations required under this Section 3.01 shall
initially be made by the Plan Actuary. The Plan Actuary shall provide to
the actuary for the NextLevel Pension Plan (the "NextLevel Actuary"), for
review, all calculations made pursuant to this Section 3.01, together with
all supporting documentation, work papers, census data and other
information reasonably requested by the NextLevel Actuary. If the Plan
Actuary and the NextLevel Actuary cannot agree on the determination of the
Transferred Amount, a third actuary, mutually agreeable to GS and
NextLevel Systems, shall be appointed, whose determination of the
Transferred Amount shall be binding on all parties; provided, however,
that the amount determined by the third actuary may not be lower than the
lowest amount nor higher than the highest amount determined by the Plan
Actuary and the NextLevel Actuary.
3.02. CommScope, Inc. Employees Profit Sharing and Savings Plan. CommScope
shall, immediately following the NextLevel Systems Distribution Date, continue
to sponsor the CommScope, Inc. Employees Profit Sharing and Savings Plan (the
"CommScope DC Plan").
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3.03. General Instrument (Puerto Rico), Inc. Savings Plan. NextLevel
Systems shall, immediately following the NextLevel Systems Distribution Date,
cause its subsidiary, General Instrument (Puerto Rico), Inc. ("GI Puerto Rico"),
to continue to sponsor the General Instrument (Puerto Rico), Inc. Savings Plan
(the "Puerto Rico Plan").
3.04. General Instrument Corporation Savings Plan. The active
participation in the General Instrument Corporation Savings Plan (the "GI
Savings Plan") by persons other than the Active Employees of the GS Group ceased
to be effective as of June 30, 1997. In addition, as of June 30, 1997, all
members of the NextLevel Group ceased to be sponsors of the GI Savings Plan and
the members of the GS Group became the only sponsors of the GI Savings Plan.
3.05. Establishment of NextLevel Systems Defined Contribution Plan.
(a) NextLevel Systems Plan. NextLevel Systems has established or
made available, effective as of July 1, 1997, a defined contribution plan
for the benefit of the Active Employees of the NextLevel Systems Group
(the "NextLevel Systems DC Plan").
(b) Transfer of Account Balances to NextLevel Systems DC Plans. As
promptly as practical after the NextLevel Systems Distribution Date, GS
shall cause the trustee of the GI Savings Plan to transfer to the trustee
of the NextLevel Systems DC Plan, the account balances of each Active
Employee of the NextLevel Systems Group and each Former Employee of the
NextLevel Systems Group with respect to whom the GI Savings Plan maintains
an account as of the close of business on the NextLevel Systems
Distribution Date. Such transfers shall be equal to the value of the
transferred account balances as of the close of business on the day
preceding the date of transfer and shall be in cash, except that the
NextLevel Systems DC Plan will accept the following: (i) GS Common Stock
for the GS Common Stock fund portion of such account balances (together
with any and all of the shares of the common stock of NextLevel Systems
and CommScope distributed in connection with the Distributions); and (ii)
amounts credited to the GI Savings Plan which are held in mutual funds
which are also investment media in the NextLevel Systems DC Plan.
3.06. Transfer of Employer Stock. Each of the sponsors of the GI Savings
Plan, the CommScope DC Plan, the NextLevel Systems DC Plan and the Puerto Rico
Plan shall cause their respective plans (i) to permit the participants therein
to sell from the GS Common Stock Fund portion of the plan the shares of Common
Stock of the two entities that do not sponsor the plan immediately after the
NextLevel Systems Distribution Date, or in the case of the Puerto Rico Plan, are
not the parent corporation of such plan's sponsor, immediately after the
NextLevel Systems Distribution Date and (ii) not to permit the future investment
in the shares of Common Stock of any entity that does not sponsor the plan, or
in the case of the Puerto Rico Plan, is not the parent corporation of such
plan's sponsor (except for investments in the stock of such entity indirectly
through mutual funds or other collective investment vehicles with respect to
which participants have no control over the individual investments thereof).
SECTION 4. Pension Matters Outside the United States. With respect to the
business and operations of each Group in jurisdictions outside the United
States, each of the parties hereto shall (and, as applicable, shall cause each
other member of its Group over which it has direct or indirect legal or
effective control to) assume or retain, as the case may be, any and all pension
liabilities and attendant plans and their assets related to its Active Employees
and Former Employees.
SECTION 5. Executive Compensation.
5.01. GI Supplemental Executive Retirement Plan. None of the Active
Employees of the NextLevel Group have accrued any benefits under the GI
Supplemental Executive Retirement Plan (the "SERP") from and after June 30,
1997. As of the NextLevel Systems Distribution Date, NextLevel Systems shall
assume all liabilities under the SERP in respect of the Active Employees and
Former Employees of the NextLevel Group.
5.02. GI Voluntary Deferred Compensation Plan. The participation of the
Active Employees and Former Employees of the NextLevel Systems Group and the
CommScope Group in the GI Voluntary Deferred Compensation Plan (the "Deferred
Compensation Plan") shall cease as of the NextLevel Systems Distribution Date.
As of the NextLevel Systems Distribution Date, NextLevel Systems and CommScope
shall assume the liability for the accounts of their respective Active Employees
and Former Employees in the Deferred Compensation Plan. GS shall continue to
sponsor the Deferred Compensation Plan and shall retain all other liabilities
under the Deferred Compensation Plan including the liability for the accounts of
its Active Employees and Former Employees in the Deferred Compensation Plan. The
total of each account of each
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Active Employee or Former Employee of the NextLevel Systems Group and the
CommScope Group in the Deferred Compensation Plan as of the NextLevel Systems
Distribution Date shall become the opening balance of such Active Employee's or
Former Employee's account in a nonqualified deferred compensation plan
established, as of the NextLevel Systems Distribution Date, by NextLevel Systems
(the "NextLevel Systems Deferred Compensation Plan") or CommScope (the
"CommScope Deferred Compensation Plan"), as the case may be. As promptly as
practical after the NextLevel Systems Distribution Date, assets having a fair
market value as of the date of transfer equal to the transferred account
balances as of such date shall be transferred to a successor trust established
by NextLevel Systems in connection with the NextLevel Systems Deferred
Compensation Plan or to a successor trust established by CommScope in connection
with the CommScope Deferred Compensation Plan, as the case may be. Such
transferred assets shall be in cash or such other property as may be agreed
between GS and NextLevel Systems and between GS and CommScope.
5.03. Options. NextLevel Systems and CommScope have established,
respectively, the NextLevel Systems 1997 Long-Term Incentive Plan (the
"NextLevel Systems Incentive Plan") and the CommScope 1997 Long-Term Incentive
Plan (the "CommScope Incentive Plan"). Effective as of the NextLevel Systems
Distribution Date, all outstanding options in respect of GI Common Stock held
immediately prior to the NextLevel Systems Distribution (the "Current Options"):
(i)(A) by Active Employees and Former Employees (except as otherwise provided
herein) of either the NextLevel Group or the CommScope Group and (B) current
directors of GI immediately prior to the NextLevel Systems Distribution will be
replaced with substitute options in respect of NextLevel Systems Common Stock or
CommScope Common Stock, as the case may be (the "Substitute Options"), issued
under either the NextLevel Systems Incentive Plan or the CommScope Incentive
Plan; and (ii) by one Former Employee (Daniel F. Akerson) and certain retired
directors (Daniel F. Akerson, Morton H. Meyerson, Felix G. Rohatyn, Paul G.
Stern and Robert S. Strauss) shall be adjusted so that, after the NextLevel
Systems Distribution, in addition to options held in respect of GS Common Stock
("GS Options"), such persons will also hold replacement options in respect of
NextLevel Systems Common Stock and CommScope Common Stock ("Spin-off Options").
The number of shares with respect to which the Spin-off Options shall be granted
shall be the number of shares of NextLevel Systems Common Stock and CommScope
Common Stock that the holder of the Current Options would have received in the
NextLevel Systems Distribution if he were a holder on the NextLevel Systems
Distribution Date of that number of shares of GI Common Stock covered by the
Current Option. Substitute Options, GS Options and Spin-off Options shall be
designed to preserve the economic value of the related Current Options, and the
vesting and expiration dates and other terms of the related awards will remain
in effect under the Substitute Options, GS Options and Spin-off Options, as
applicable. Effective as of the NextLevel Systems Distribution Date, all
outstanding options in respect of GS Common Stock held by Active Employees of
the GS Group as of the NextLevel Systems Distribution Date will be adjusted as
necessary to reflect the NextLevel Systems Distribution. The number of shares
covered by the Substitute Options, GS Options, and Spin-off Options, and the
exercise price thereof, shall be determined by a committee consisting of the
chief executive officers of GS, NextLevel Systems and CommScope.
5.04. Stock Appreciation Rights. Prior to the NextLevel Systems
Distribution Date, certain persons held stock appreciation right ("SAR")
agreements ("SAR Agreements") with respect to GI Common Stock. Effective as of
the NextLevel Systems Distribution Date, all outstanding SAR Agreements shall be
adjusted so that, after the NextLevel Systems Distribution, in addition to a SAR
held in respect of GS Common Stock ("GS SAR"), such persons will also hold a SAR
in respect of NextLevel Systems Common Stock and CommScope Common Stock
("Spin-off SARs "). The number of reference shares with respect to which each
Spin-Off SAR shall be granted shall be the number of shares of NextLevel Systems
Common Stock and CommScope Common Stock that the holder of the SAR would have
received in the NextLevel Systems Distribution if he were a holder on the
NextLevel Systems Distribution Date of that number of shares of GI Common Stock
covered by the SAR. A Spin-off SAR shall be designed to preserve the economic
value of the related SAR, and the other terms of the related SAR will remain in
effect under the Spin-off SAR, as applicable. The number of reference shares
covered by each Spin-off SAR shall be determined by a committee consisting of
the chief executive officers of GS, NextLevel Systems and CommScope.
5.05. Employment and Other Agreements. CommScope shall retain or assume,
as the case may be, any and all contractual obligations to Mr. Drendel with
respect to his employment agreement. GS shall have no further obligation to Mr.
Drendel with respect to his employment agreement.
SECTION 6. Welfare Benefits.
6.01. GS Salaried Welfare Plans. Effective on the NextLevel Systems
Distribution Date, GS shall serve as the sole sponsor of the GI Salaried Welfare
Plans from and after the NextLevel Systems Distribution Date.
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6.02. Allocation and Discharge of Welfare Plan Liabilities. NextLevel
Systems shall retain or assume, as the case may be, and discharge all welfare
plan liabilities with respect to Active Employees and Former Employees of the
NextLevel Systems Group and their dependents. CommScope shall retain or assume,
as the case may be, and discharge all welfare plan liabilities with respect to
Active Employees and Former Employees of the CommScope Group and their
dependents. GS shall retain and discharge all other welfare plan liabilities
which remain after allocation of liabilities to CommScope and NextLevel Systems
under the two immediately preceding sentences, including, without limitation,
all such liabilities relating to the Active Employees and Former Employees of
the GS Group and their dependents.
SECTION 7. General.
7.01. Post-Distribution Administration of Plans. The parties hereto agree
to administer all plans consistently herewith, and to the extent necessary to
amend their respective employee benefit plans accordingly.
7.02. Cost and Expenses. Each party shall bear all costs and expenses,
including but not limited to legal and actuarial fees, incurred in the design,
drafting and implementation of any and all plans and compensation structures
which it establishes or creates and the amendment of its existing plans or
compensation structures.
SECTION 8. Miscellaneous.
8.01. Complete Agreement; Construction. This Agreement and the
Distribution Agreement shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement or the Distribution
Agreement to the contrary, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the provisions of the
Distribution Agreement or any other Ancillary Agreement, this Agreement shall
control.
8.02. Other Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by any of the other Ancillary Agreements.
8.03. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
8.04. Survival of Agreements. Except as otherwise expressly provided
herein, all covenants and agreements of the parties contained in this Agreement
shall survive the NextLevel Systems Distribution Date.
8.05. Notices. All notices and other communications to a party hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to such party (and
will be deemed given on the date on which the notice is received by such party)
at the address for such party set forth below (or at such other address for the
party as the party shall, from time to time, specify by like notice to the other
parties):
If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to NextLevel Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
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8.06. Waivers. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
8.07. Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties hereto.
8.08. Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
8.09. Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and permitted assigns.
8.10. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and the members of their respective Groups and
Affiliates, after giving effect to the Distributions, and should not be deemed
to confer upon third parties any remedy, claim, liability, right of
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
8.11. Attorney Fees. A party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, reasonable legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in addition to any
other relief to which such other party may be entitled hereunder or otherwise.
8.12. Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
8.13. 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. WITHOUT LIMITING THE
PROVISIONS OF SECTIONS 8.14 AND 8.15 HEREOF, EACH OF THE PARTIES IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF (A) THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND (B) IN THE CIRCUMSTANCE SET FORTH IN
THE NEXT SENTENCE, THE SUPREME COURT OF THE STATE OF NEW YORK, FOR THE PURPOSES
OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR OF ANY
ANCILLARY AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF
THE PARTIES AGREES TO COMMENCE ANY ACTION, SUIT OR PROCEEDING RELATING HERETO
ONLY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
OR, IF SUCH SUIT, ACTION OR OTHER PROCEEDING MAY NOT BE BROUGHT IN SUCH COURT
FOR JURISDICTIONAL REASONS, IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW
YORK COUNTY, AND IN NO OTHER FORUM. EACH OF THE PARTIES FURTHER AGREES THAT
SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO
SUCH PARTY'S RESPECTIVE ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY ACTION, SUIT OR PROCEEDING IN THE FORUM PROVIDED FOR HEREIN WITH
RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS
SECTION. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT
OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN (I) THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR (II) IN THE
CIRCUMSTANCES SET FORTH IN THE SECOND SENTENCE HEREOF, THE SUPREME COURT OF THE
STATE OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
8.14. Mediation. In the event of a controversy, dispute or claim arising
out of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any
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way related to this Agreement or any transaction contemplated hereby or thereby,
including, without limitation, any claim based on contract, tort, statute or
constitution (collectively, "Agreement Disputes"), the general counsels (or
other chief legal officers) of the relevant parties shall negotiate in good
faith for a reasonable period of time to settle such Agreement Dispute.
8.15. Arbitration. If after the reasonable period of time provided for in
Section 8.14, the relevant general counsels (or other chief legal officers) are
unable to settle an Agreement Dispute, such Agreement Dispute shall be settled
by arbitration administered by the American Arbitration Association in
accordance with its applicable Rules for Commercial Arbitration and judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any such arbitration shall be commenced and all the
proceedings thereof conducted in New York City. If any such arbitration requires
the consent of a non-party to this Agreement to submit to arbitration, the party
initiating the arbitration shall use reasonable efforts to procure such consent.
If such consent cannot be procured, the initiating party shall nevertheless be
bound to proceed against all other parties herein solely by arbitration pursuant
to this Section 8.15, and shall (unless otherwise agreed by all parties herein
who may be affected by such Agreement Dispute) be bound by Section 8.13 with
respect to claims arising out of any Agreement Disputes against a non-party to
this Agreement which is amenable to, or consents to, jurisdiction in the forum
set forth in Section 8.13.
8.16. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
8.17. Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantee the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
NextLevel Systems Distribution Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
-----------------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
-----------------------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
-----------------------------
Name: Frank B. Wyatt, II
Title: Secretary
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EXHIBIT 10.2
DEBT AND CASH ALLOCATION AGREEMENT
DEBT AND CASH ALLOCATION AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), among General Semiconductor, Inc., a Delaware corporation ("GS"),
NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), and
CommScope, Inc., a Delaware corporation ("CommScope").
WHEREAS, pursuant to the terms of the Distribution Agreement, dated as of
June 12, 1997 (the "Distribution Agreement"), among General Instrument
Corporation, a Delaware corporation ("GI"), NextLevel Systems and CommScope, the
parties have entered into this Agreement regarding the allocation of certain
indebtedness and cash of GI and its consolidated subsidiaries as of the close of
business on the NextLevel Systems Distribution Date (the "Distribution Time").
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each of the other members of its
Group, hereby agrees as follows:
SECTION 1. Certain Definitions. Unless otherwise defined herein or unless
the context otherwise requires, the following terms will have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined).
"Accounts Payable" shall have the meaning ascribed to such term under
GAAP.
"Accounts Receivable" shall have the meaning ascribed to such term under
GAAP.
"Actual CommScope Debt Amount" shall mean the aggregate amount (expressed
as a positive number), as of the Distribution Time, of the following, without
duplication:
(i) the then outstanding amount of the CommScope Credit
Facility plus accrued and accreted interest and fees and expenses in
respect thereof (as reflected on the CommScope Adjusted Closing Balance
Sheet); plus
(ii) the then outstanding principal amount of Consolidated
Debt of CommScope and the CommScope Subsidiaries other than that which is
described in clause (i) above (for this purpose undrawn letters of credit
and guarantees shall not be treated as outstanding), plus accrued and
accreted interest and fees and expenses in respect thereof as reflected on
the CommScope Adjusted Closing Balance Sheet, including without
limitation, outstanding indebtedness
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incurred in connection with the issuance of industrial revenue bonds by
the Alabama State Industrial Development Authority.
"Actual GS Debt Amount" shall mean the aggregate amount (expressed as a
positive number), as of the Distribution Time, of the following, without
duplication:
(i) the then outstanding amount of the GS Credit Facility plus
accrued and accreted interest and fees and expenses in respect thereof (as
reflected on the GS Adjusted Closing Balance Sheet) ; plus
(ii) the then outstanding principal amount of Consolidated
Debt of GS and the GS Subsidiaries other than that which is described in
clause (i) above (for this purpose undrawn letters of credit and
guarantees shall not be treated as outstanding), plus accrued and accreted
interest and fees and expenses in respect thereof as reflected on the GS
Adjusted Closing Balance Sheet, including without limitation, debt
incurred with respect to the General Instrument Taiwan, Ltd. ("GI Taiwan")
mortgage facility (the "Taiwan Facility").
"Agreement" shall have the meaning specified in the first paragraph
hereof.
"Auditors" shall have the meaning specified in Section 5(a).
"BKP Litigation" means the action entitled BKP Partners, L.P. v. General
Instrument Corp., as more fully described in the Proxy Statement.
"Cash and Cash Equivalents" shall have the meaning ascribed to such term
under GAAP; provided, however, that in all events checks issued by GS and the GS
Subsidiaries which remain unpaid as of the Distribution Time shall be deducted
from Cash and Cash Equivalents, and checks received by GS and the GS
Subsidiaries which remain uncollected prior to the Distribution Time (other than
checks that have been dishonored) shall be included in Cash and Cash
Equivalents.
"CommScope" shall have the meaning specified in the first paragraph
hereof.
"CommScope Adjusted Closing Balance Sheet" shall have the meaning
specified in Section 5(b).
"CommScope Base Amount" shall mean the amount designated as such on
Schedule I.
"CommScope Closing Balance Sheet" shall have the meaning specified in
Section 5(a).
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"CommScope Credit Facility" shall have the meaning specified in Section
3(c).
"CommScope Credit Facility Debt" shall have the meaning specified in
Section 3(c).
"CommScope Determination Date" shall have the meaning specified in Section
5(b).
"CommScope Dispute" shall have the meaning specified in Section 5(b).
"CommScope Distribution Date" shall have the meaning specified in the
Distribution Agreement.
"CommScope Dividend Amount" shall mean an amount equal to the CommScope
Base Amount (i) less the outstanding indebtedness with respect to the industrial
revenue bonds relating to CommScope issued by the Alabama State Industrial
Development Authority, as of the CommScope Distribution Date , (ii) plus the
amount of Cash and Cash Equivalents held by CommScope or the CommScope
Subsidiaries as of the CommScope Distribution Date.
"CommScope Group" means CommScope, the CommScope Subsidiaries and the
corporations, partnerships, joint ventures, investments and other entities that
represent equity investments of CommScope or any of the CommScope Subsidiaries
following the consummation of the Corporate Restructuring Transactions and the
NextLevel Systems Distribution.
"Consolidated Debt" shall mean (without duplication) with respect to any
Person, every obligation of such Person and its consolidated Subsidiaries (i)
for money borrowed, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) for reimbursement with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person or its
consolidated Subsidiaries, (iv) for the deferred purchase price of property or
services if, and to the extent that, such obligation would appear as a liability
upon a balance sheet of such Person or its consolidated Subsidiaries prepared in
accordance with GAAP (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), and (v) to guarantee or
otherwise be liable for, any obligation of the type referred to in clauses (i)
through (iv) of another Person.
"Corporate Restructuring Transactions" shall have the meaning specified in
the Distribution Agreement.
"Disputing Party" shall have the meaning ascribed to such term in Section
5(b).
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"Distribution Agreement" shall have the meaning specified in the recitals
to this Agreement.
"Distributions" shall have the meaning specified in the Distribution
Agreement.
"Distribution Time" shall have the meaning specified in the recitals to
this Agreement.
"DSC Litigation" means the action entitled DSC Communications Corporation
and DSC Technologies Corporation v. Next Level Communications, Thomas R. Eames
and Peter W. Keeler, Case No. 4:95cv96, as more fully described in the Proxy
Statement.
"GAAP" means United States generally accepted accounting principles and
practices, as in effect on the date of this Agreement, as promulgated by the
Financial Accounting Standards Board and its predecessors.
"GI" shall have the meaning specified in the recitals to this Agreement.
"GI Common Stock" means the shares of common stock, par value $.01 per
share of GI.
"GI Credit Agreement" shall mean the Third Amended and Restated Credit
Agreement dated as of August 12, 1996, among General Instrument Corporation of
Delaware, The Chase Manhattan Bank as administrative agent, and certain lenders
named therein.
"GI Delaware" means General Instrument Corporation of Delaware, a Delaware
corporation and a wholly owned subsidiary of GI.
"GI Taiwan" means General Instrument Taiwan, Ltd., a Taiwanese corporation
and an indirect wholly owned subsidiary of GI.
"Group" means (i) with respect to GS, the GS Group, (ii) with respect to
NextLevel Systems, the NextLevel Systems Group, and (iii) with respect to
CommScope, the CommScope Group.
"GS" shall have the meaning specified in the first paragraph hereof.
"GS Adjusted Closing Balance Sheet" shall have the meaning specified in
Section 5(b).
"GS Base Amount" shall mean the amount designated as such on Schedule I.
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"GS Closing Balance Sheet" shall have the meaning specified in Section
5(a).
"GS Credit Facility" shall have the meaning specified in Section 3(a).
"GS Credit Facility Debt" shall have the meaning specified in Section
3(a).
"GS Dispute" shall have the meaning specified in Section 5(b).
"GS Determination Date" shall have the meaning specified in Section 5(b).
"GS Group" means GS, the GS Subsidiaries and the corporations,
partnerships, joint ventures, investments and other entities that represent
equity investments of GS or any of the GS Subsidiaries following consummation of
the Corporate Restructuring Transactions and the Distributions.
"Independent Auditors" shall have the meaning specified in Section 5(b).
"NextLevel Systems" shall have the meaning specified in the first
paragraph hereof.
"NextLevel Systems Credit Facility" shall have the meaning specified in
Section 3(b).
"NextLevel Systems Distribution" shall have the meaning specified in the
Distribution Agreement.
"NextLevel Systems Distribution Date" shall have the meaning specified in
the Distribution Agreement.
"NextLevel Systems Group" means NextLevel Systems, the NextLevel Systems
Subsidiaries and the corporations, partnerships, joint ventures, investments and
other entities that represent equity investments of any of NextLevel Systems or
any of the NextLevel Systems Subsidiaries following the consummation of the
Corporate Restructuring Transactions and the Distributions.
"Notice" shall have the meaning specified in Section 7(j).
"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.
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"Proxy Statement" means the Proxy Statement, dated June 13, 1997, sent to
the holders of GI Common Stock in connection with the Distributions, including
any amendment or supplement thereto.
"Securities Litigation" means the class action entitled In Re General
Instrument Corporation Securities Litigation, as more fully described in the
Proxy Statement.
"Subsidiary" means, with respect to any Person:
(i) any corporation of which at least a majority in interest
of the outstanding voting stock (having by the terms thereof voting power under
ordinary circumstances to elect a majority of the directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of a contingency) is at the time, directly or indirectly, owned or
controlled by such Person or by such Person and one or more of its Subsidiaries;
or
(ii) any non-corporate entity in which such Person or such
Person and one or more Subsidiaries of such Person either (A) directly or
indirectly, at the date of determination thereof, has at least majority
ownership interest, or (B) at the date of determination is a general partner or
an entity performing similar functions (e.g., manager of a Limited Liability
Company or a trustee of a trust).
SECTION 2. Allocation of Debt. Prior to or contemporaneously with the
consummation of the NextLevel Systems Distribution, each of the parties hereto
will take such action and make such transfers so that, to the extent possible,
as of the Distribution Time (a) the Actual GS Debt Amount (less the amount of
any Cash and Cash Equivalents held by GS or the GS Subsidiaries) shall equal the
GS Base Amount, and (b) the Actual CommScope Debt Amount (less the amount of any
Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) shall
equal the CommScope Base Amount.
SECTION 3. Credit Facilities. (a) GS shall, at its expense, obtain and
have in place on or prior to the Distribution Time a credit facility (the "GS
Credit Facility") for GS and the GS Subsidiaries in an aggregate principal
amount at least equal to (i) the GS Base Amount, less the outstanding
indebtedness with respect to the Taiwan Facility as of the Distribution Time,
but plus the amount of Cash and Cash Equivalents held by GS or the GS
Subsidiaries as of the Distribution Time (such portion of the GS Credit Facility
to be used to repay amounts under the GI Credit Agreement and for any other
purposes required in accordance with Section 2 hereof) and (ii) such additional
amounts as shall be sufficient (together with other funds available to GS) for
other general corporate purposes. The aggregate amount of debt (including
accrued and accreted interest and fees
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and expenses) outstanding as of the Distribution Time under this facility is
hereinafter called the "GS Credit Facility Debt".
(b) NextLevel Systems shall, at its expense, obtain and have in
place on or prior to the Distribution Time, a credit facility (the "NextLevel
Systems Credit Facility") for NextLevel Systems and the NextLevel Systems
Subsidiaries in an aggregate amount at least sufficient (together with other
funds available to NextLevel Systems): (i) to repay the portion of the
outstanding indebtedness under the GI Credit Agreement, if any, to be assumed
and repaid by NextLevel Systems so as to allocate debt among the parties hereto
in accordance with Section 2 hereof; (ii) to satisfy any reasonably anticipated
liabilities in connection with the Securities Litigation, the BKP Litigation,
the DSC Litigation and all other pending legal proceedings; and (iii) for other
general corporate purposes.
(c) CommScope shall, at its expense, obtain and have in place on or
prior to the Distribution Time, a credit facility (the "CommScope Credit
Facility") for CommScope and the CommScope Subsidiaries in an aggregate
principal amount at least sufficient (together with other funds available to
CommScope): (i) to pay the CommScope Dividend Amount to GI Delaware on or prior
to the Distribution Time and (ii) for other general corporate purposes. The
aggregate amount of debt (including accrued and accreted interest and fees and
expenses) outstanding as of the Distribution Time under this facility is
hereinafter called the "CommScope Credit Facility Debt".
SECTION 4. Conduct of Business. Each of NextLevel Systems, CommScope and
GS represents and warrants that the Accounts Payable and Accounts Receivable of
its respective business have been incurred and paid during 1997(to date),
consistent with past practice in all material respects.
SECTION 5. Post-Distribution Audit.
(a) Preparation of Closing Balance Sheets. As soon as practicable
after the Distribution Time, but in any event within 60 days following the
Distribution Time, NextLevel Systems shall cause Deloitte & Touche LLP (or
another comparable independent accounting firm selected by NextLevel Systems)
(the "Auditors") to:
(i) conduct an audit of GS and the GS Subsidiaries to
determine the aggregate amount, as of the Distribution Time, of each of
(a) the GS Credit Facility Debt, (b) the Consolidated Debt (other than the
GS Credit Facility Debt) of GS and the GS Subsidiaries, and (c) the Cash
and Cash Equivalents held by GS and the GS Subsidiaries, and to prepare
and deliver to each of NextLevel Systems, GS and CommScope a consolidated
balance sheet for GS and the GS Subsidiaries
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as of the Distribution Time reflecting the amount of each of the foregoing
(the "GS Closing Balance Sheet");
(ii) conduct an audit of CommScope and the CommScope
Subsidiaries to determine the aggregate amount, as of the Distribution
Time, of each of (a) the CommScope Credit Facility Debt, (b) the
Consolidated Debt (other than the CommScope Credit Facility Debt) of
CommScope and the CommScope Subsidiaries, and (c) the Cash and Cash
Equivalents held by CommScope and the CommScope Subsidiaries, and to
prepare and deliver to each of NextLevel Systems, GS and CommScope a
consolidated balance sheet for CommScope and the CommScope Subsidiaries as
of the Distribution Time reflecting the aggregate amount of each of the
foregoing (the "CommScope Closing Balance Sheet"); and
(iii) conduct procedures (to be agreed upon) to determine the
accuracy of the representations and warranties contained in Section 4
hereof.
The GS Closing Balance Sheet and the CommScope Closing Balance Sheet
shall each be prepared on the basis of an audit conducted by the Auditors in
accordance with GAAP consistently applied and without giving effect to any
change in accounting principles required on account of the consummation of the
Distributions, except that, to the extent that any definition contained herein
contemplates inclusion or exclusion of an item that would not be included or
excluded under GAAP, the Auditors shall compute such item in accordance with
such definition. During the course of the preparation of the GS Closing Balance
Sheet and the CommScope Closing Balance Sheet by the Auditors, and during any
period in which there is a dispute regarding either the GS Closing Balance Sheet
or the CommScope Closing Balance Sheet, each of GS and CommScope, as the case
may be, shall cooperate with the Auditors and each other and shall have access
to all work papers of the Auditors and all pertinent accounting and other
records of GS and the GS Subsidiaries and CommScope and the CommScope
Subsidiaries, as applicable. NextLevel Systems shall pay the fees and expenses
of the Auditors.
(b) Disputes Regarding Closing Balance Sheet. Unless (i) in the case
of the GS Closing Balance Sheet, GS delivers written notice to NextLevel Systems
on or prior to the 30th day after its receipt of the GS Closing Balance Sheet
that it disputes any of the amounts set forth on the GS Closing Balance Sheet (a
"GS Dispute"), or (ii) in the case of the CommScope Closing Balance Sheet,
CommScope delivers written notice to NextLevel Systems on or prior to the 30th
day after its receipt of the CommScope Closing Balance Sheet that it disputes
any of the amounts set forth on the CommScope Closing Balance Sheet (a
"CommScope Dispute") then, as applicable, GS and/or CommScope shall be deemed to
have accepted and agreed to the GS Closing Balance Sheet or the CommScope
Closing Balance Sheet, as applicable, in the form in which it
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was delivered to it by the Auditors. If such a notice of a GS Dispute is given
by GS or a notice of a CommScope Dispute is given by CommScope (in either case
such party being hereinafter referred to as the "Disputing Party") within such
30-day period, then NextLevel Systems and the Disputing Party shall, within 15
days after the giving of any such notice, attempt to resolve such GS Dispute or
CommScope Dispute, as the case may be, and agree in writing upon the final
content of the GS Closing Balance Sheet or CommScope Closing Balance Sheet, as
the case may be.
If the Disputing Party and NextLevel Systems are unable to resolve
any GS Dispute or CommScope Dispute, as the case may be, within such 15-day
period, then a mutually acceptable independent accounting firm (the "Independent
Auditors") shall be employed as arbitrator hereunder to settle such GS Dispute
and/or CommScope Dispute, as the case may be, as soon as practicable. The
Independent Auditors shall have access to all documents and facilities necessary
to perform its function as arbitrator. The determination of the Independent
Auditors with respect to any GS Dispute and/or CommScope Dispute, as the case
may be, shall be final and binding on the applicable parties hereto. NextLevel
Systems and the Disputing Party shall each pay one-half of the fees and expenses
of the Independent Auditors for such services. NextLevel Systems and the
Disputing Party each agree to execute, if requested by the Independent Auditors,
a reasonable engagement letter. The term "GS Adjusted Closing Balance Sheet", as
used herein, shall mean the definitive GS Closing Balance Sheet agreed to by GS
and NextLevel Systems or, as the case may be, the definitive GS Closing Balance
Sheet resulting from the determinations made by the Independent Auditors in
accordance with this Section 5(b) (in addition to the matters theretofore agreed
to by GS and NextLevel Systems). The term "CommScope Adjusted Closing Balance
Sheet", as used herein, shall mean the definitive CommScope Closing Balance
Sheet agreed to by CommScope and NextLevel Systems or, as the case may be, the
definitive CommScope Closing Balance Sheet resulting from the determinations
made by the Independent Auditors in accordance with this Section 5(b) (in
addition to the matters theretofore agreed to by CommScope and NextLevel
Systems). The date on which the GS Adjusted Closing Balance Sheet is determined
and provided to each of NextLevel Systems and GS pursuant to this Section 5(b)
is hereinafter referred to as the "GS Determination Date". The date on which the
CommScope Adjusted Closing Balance Sheet is determined and provided to each of
NextLevel Systems and CommScope pursuant to this Section 5(b) is hereinafter
referred to as the "CommScope Determination Date".
SECTION 6. Post Distribution Adjustments and Cash Payments.
(a) If the Actual GS Debt Amount (less the amount of any Cash and
Cash Equivalents held by GS or the GS Subsidiaries) exceeds the GS Base Amount,
NextLevel Systems shall pay to GS the amount of such excess in cash within 10
days
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after the GS Determination Date. If, on the other hand, the Actual GS Debt
Amount (less the amount of any Cash and Cash Equivalents held by GS or the GS
Subsidiaries) is less than the GS Base Amount, GS shall pay to NextLevel Systems
the amount of such deficiency in cash within 10 days after the GS Determination
Date.
(b) If the Actual CommScope Debt Amount (less the amount of any Cash
and Cash Equivalents held by CommScope or the CommScope Subsidiaries) exceeds
the CommScope Base Amount, NextLevel Systems shall pay to CommScope the amount
of such excess in cash within 10 days after the CommScope Determination Date.
If, on the other hand, the Actual CommScope Debt Amount (less the amount of any
Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) is
less than the CommScope Base Amount, CommScope shall pay to NextLevel Systems
the amount of such deficiency in cash within 10 days after the CommScope
Determination Date.
(c) After the Distribution Time, (i) GS shall promptly pay over to
NextLevel Systems or CommScope, respectively, any payments received by GS in
respect of accounts receivable transferred to NextLevel Systems or CommScope, as
the case may be, pursuant to the Distribution Agreement, (ii) each of NextLevel
Systems, CommScope and GS shall be solely responsible for collecting, and taking
action regarding, accounts payable transferred or allocated to such company
pursuant to the Distribution Agreement, and (iii) each of NextLevel Systems and
CommScope shall have the right to endorse the name of General Instrument
Corporation or General Semiconductor, Inc. on any check or other evidence of
indebtedness received by such company in respect of accounts receivable
transferred to it pursuant to the Distribution Agreement.
SECTION 7. Miscellaneous Provisions.
(a) Termination. This Agreement may not be terminated except by an
agreement in writing signed by all of the parties hereto.
(b) Further Actions. If at any time after the Distribution Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of GS, NextLevel Systems and CommScope shall, on the written
request of any of them, take (or cause the appropriate member of its Group over
which it has direct or indirect legal or effective control to take) all such
reasonably necessary or desirable action.
(c) Cooperation. The parties hereto agree to use their reasonable
best efforts to cooperate with respect to the various matters contemplated by
this Agreement.
(d) Successors and Assigns. Except as otherwise expressly provided
herein, no party hereto may assign or delegate, whether by operation of law or
otherwise,
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any of such party's rights or obligations under or in connection with this
Agreement without the written consent of each other party hereto. No assignment
will, however, release the assignor of any of its obligations under this
Agreement or waive or release any right or remedy the other parties may have
against such assignor hereunder. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will be binding upon and enforceable against the
respective successors and assigns of such party and will be enforceable by and
will inure to the benefit of the respective successors and permitted assigns of
such party.
(e) Modification; Waiver; Severability. This Agreement may be
amended, supplemented or waived only by a subsequent writing signed by all of
the parties hereto. The failure of any party hereto to require strict
performance by any other party of any provision of this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby, so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to any
party.
(f) 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 hereto.
(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
(h) 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 or
sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c)
if sent by registered or certified mail, postage prepaid, return receipt
requested, and in each case addressed as follows:
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If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to NextLevel Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
or such other address as shall be furnished by any of the Parties in a Notice.
Any Notice shall be deemed given upon receipt.
(i) Survival. Except as otherwise expressly provided herein, all
representations, warranties, covenants and agreements of the parties contained
in this Agreement shall survive the Distribution Time.
(j) No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and the members of their respective Groups, and
shall not be deemed to confer upon third parties any remedy, claim, liability,
right of reimbursement, claim or action or other right in excess of those
existing without reference to this Agreement.
(k) Governing Law and Consent to Jurisdiction. THIS AGREEMENT AND
THE ANCILLARY AGREEMENTS 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
-------------------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
-------------------------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
-------------------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.3
INSURANCE AGREEMENT
This Insurance Agreement (the "Agreement") is made and entered into as of
this 25th day of July, 1997, by and among General Semiconductor, Inc., a
Delaware corporation ("GS"), NextLevel Systems, Inc., a Delaware corporation
("NextLevel Systems"), and CommScope, Inc., a Delaware corporation
("CommScope").
WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"),
NextLevel Systems, and CommScope have entered into that certain Distribution
Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), pursuant to
which (i) GI and its Subsidiaries shall cause to be consummated the Corporate
Restructuring Transactions in order to restructure, divide, and separate their
existing businesses and assets so that (a) the NextLevel Systems Assets and
NextLevel Systems Business shall be owned, controlled, and operated, directly
and indirectly, by NextLevel Systems, (b) the CommScope Assets and CommScope
Business shall be owned, controlled, and operated, directly and indirectly, by
CommScope, and (c) the GS Assets and GS Business shall be owned, controlled, and
operated, directly and indirectly, by GI, which will be renamed General
Semiconductor, Inc., a Delaware corporation, immediately following the NextLevel
Systems Distribution (as defined herein), (ii) GI shall distribute (the
"NextLevel Systems Distribution") to the holders of GI's outstanding shares of
common stock the outstanding shares of common stock of NextLevel Systems
("NextLevel Systems Common Stock"), and (iii) NextLevel Systems shall distribute
(the "CommScope Distribution") to the holders of NextLevel Systems Common Stock
(which holders also will be the stockholders of GI) the outstanding shares of
common stock of CommScope (such two distributions being collectively referred to
as the "Distributions"), upon the terms and subject to the conditions set forth
in the Distribution Agreement;
WHEREAS, GI, its Subsidiaries, and their respective predecessors have
historically maintained various Policies for the benefit or protection of one or
more of the NextLevel Systems Covered Persons, the CommScope Covered Persons,
and the GS Covered Persons;
WHEREAS, in connection with the transactions contemplated by the
Distribution Agreement, GI, NextLevel Systems, and CommScope have determined
that it is necessary and desirable to provide for the respective continuing
rights and obligations in respect of said Policies from and after the NextLevel
Systems Distribution Date; and
WHEREAS, pursuant to the Distribution Agreement the parties hereto have
agreed to enter into this Agreement,
NOW THEREFORE, in consideration of the mutual agreements, provisions, and
covenants contained in this Agreement and the Distribution Agreement, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. Unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined).
"Agreement" shall mean this Insurance Agreement, dated as of July 25,
1997, by and among GS, NextLevel Systems, and CommScope, including any
amendments hereto and each Schedule attached hereto.
"Cable Manufacturing Business" shall mean, when unqualified, the CommScope
Assets, CommScope Liabilities, and/or CommScope Business.
<PAGE>
"Claims Administration" shall mean, with respect to any Policy, the
processing of claims made under such Policy, including, without limitation, the
reporting of losses or claims to insurance carriers and the management, defense,
and settlement of claims.
"Claims Deposit" shall mean the amount of funds, as of the NextLevel
Systems Distribution Date, maintained by GS on deposit for the benefit of the
insurance carriers under the Retrospective-Rated Policies.
"Claims-Made" shall mean, with respect to any Policy, coverage provided by
such Policy for claims made during a period specified therein.
"Claims-Made Policies" shall mean those current and past Policies which
are Claims-Made in nature, including but not limited to those Policies
identified on Schedule A hereto, which show GI or any of its predecessors (or
such entity and its subsidiaries and/or affiliates) as the named insured, but
excluding (i) any directors' and officers' liability insurance policies which
are or were maintained by or on behalf of GI, (ii) the Exclusive Policies, and
(iii) the Retrospective-Rated Policies.
"Common Policies" shall mean the Claims-Made Policies, Occurrence-Based
Policies, and Retrospective-Rated Policies.
"CommScope Assets" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Business" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Covered Person" shall mean each member of the CommScope Group
and any other Person, in each case to the extent any Policy addressed herein
purports to provide insurance coverage in respect of any claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages, or expenses
incurred by such Person arising out of, in connection with, or otherwise related
to the Cable Manufacturing Business.
"CommScope Distribution" shall have the meaning set forth in the recitals.
"CommScope Exclusive Policies" shall mean all current and past Policies
identified on Schedule D hereto, which show CommScope, any other member of the
CommScope Group, or any of their respective predecessors (or such entity and its
subsidiaries and/or affiliates) as the named insured and do not purport to
relate to the Communications Business or the Power Semiconductor Business or to
cover any NextLevel Systems Covered Person or GS Covered Person, excluding (i)
any directors' and officers' liability policies which are or were maintained by
or on behalf of CommScope, and (ii) any Retrospective-Rated Policy.
"CommScope Group" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Liabilities" shall have the meaning set forth in the
Distribution Agreement.
"Communications Business" shall mean, when unqualified, the NextLevel
Systems Assets, NextLevel Systems Liabilities, and/or NextLevel Systems
Business.
"Corporate Restructuring Transactions" shall have the meaning set forth in
the Distribution Agreement.
"Covered Persons" shall mean (i) with respect to GS, the GS Covered
Persons, (ii) with respect to NextLevel Systems, the NextLevel Systems Covered
Persons, and (iii) with respect to CommScope, the CommScope Covered Persons.
"Current Claims-Made Policies" shall mean the Claims-Made Policies in
effect as of the NextLevel Systems Distribution Date, which Policies are set
forth on Schedule A hereto.
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"Current Occurrence-Based Policies" shall mean the Occurrence-Based
Policies in effect as of the NextLevel Systems Distribution Date, which Policies
are set forth on Schedule B hereto.
"Distribution Agreement" shall mean that certain Distribution Agreement,
dated as of June 12, 1997, by and among GI, NextLevel Systems, and CommScope,
including any amendments, exhibits, and schedules thereto.
"Distributions" shall have the meaning set forth in the recitals.
"Distribution Time" shall mean the time at which the NextLevel Systems
Distribution shall become effective.
"Exclusive Policies" shall mean the NextLevel Systems Exclusive Policies
and the CommScope Exclusive Policies.
"Group" shall have the meaning set forth in the Distribution Agreement.
"GS Assets" shall have the meaning set forth in the Distribution
Agreement.
"GS Business" shall have the meaning set forth in the Distribution
Agreement.
"GS Covered Person" shall mean each member of the GS Group and any other
Person, in each case to the extent any Policy addressed herein purports to
provide insurance coverage in respect of any claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages, or expenses
incurred by such Person arising out of, in connection with, or otherwise related
to the Power Semiconductor Business or the discontinued GI operations.
"GS Group" shall have the meaning set forth in the Distribution Agreement.
"GS Liabilities" shall have the meaning set forth in the Distribution
Agreement.
"Insurance Administration" shall mean, with respect to any Policy, the
accounting for premiums, defense costs, indemnity payments, deductibles, and
retentions, as appropriate, under the terms and conditions of such Policy, and
the distribution of Insurance Proceeds.
"Insurance Proceeds" shall mean those monies, net of any applicable
premium adjustment, deductible, retention, or similar cost paid or held by or
for the benefit of an insured party which are either (i) received by an insured
from an insurance carrier, or (ii) paid by an insurance carrier on behalf of an
insured.
"Letters of Credit" shall have the meaning set forth in Section 7.1
hereof.
"NextLevel Systems Assets" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Business" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Common Stock" shall have the meaning set forth in the
recitals. "NextLevel Systems Covered Person" shall mean each member of the
NextLevel Systems Group and any other Person, in each case to the extent any
Policy addressed herein purports to provide insurance coverage in respect of any
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
damages, or expenses incurred by such Person arising out of, in connection, with
or otherwise related to the Communications Business.
"NextLevel Systems Distribution" shall have the meaning set forth in the
recitals.
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"NextLevel Systems Distribution Date" shall have the meaning set forth in
the Distribution Agreement.
"NextLevel Systems Exclusive Policies" shall mean all current and past
Policies, including but not limited to the current Policies set forth on
Schedule E hereto, which show NextLevel Systems, any other member of the
NextLevel Systems Group, or any of their respective predecessors (or such entity
and its subsidiaries and/or affiliates) as the named insured and do not purport
to relate to the Cable Manufacturing Business or the Power Semiconductor
Business or to cover any CommScope Covered Person or GS Covered Person,
excluding (i) any directors' and officers' liability policies which are or were
maintained by or on behalf of NextLevel Systems, and (ii) any
Retrospective-Rated Policy.
"NextLevel Systems Group" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Liabilities" shall have the meaning set forth in the
Distribution Agreement.
"Occurrence-Based" shall mean, with respect to any Policy, coverage
provided by such Policy for acts, omissions, damages, or injuries which occur or
are alleged to have occurred during a period specified in such Policy.
"Occurrence-Based Policies" shall mean those current and past Policies
which are Occurrence-Based in nature, including but not limited to those
policies identified on Schedule B hereto, which show GI or any of its
predecessors (or such entity and its subsidiaries and/or affiliates) as the
named insured, but excluding (i) any directors' and officers' liability policies
which are or were maintained by or on behalf of GI, (ii) the Exclusive Policies,
and (iii) the Retrospective-Rated Policies.
"Person" shall have the meaning set forth in the Distribution Agreement.
"Policies" means insurance policies and insurance contracts of any kind
(other than life and benefits policies or contracts), including, without
limitation, primary, excess, and umbrella policies, commercial general liability
policies, fiduciary liability, automobile, aircraft, property and casualty,
workers' compensation, and employee dishonesty insurance policies, bonds, and
self-insurance and captive insurance company arrangements, together with the
rights, benefits, and privileges thereunder.
"Power Semiconductor Business" shall mean, when unqualified, the GS
Assets, GS Liabilities, and/or GS Business.
"Retrospective-Rated Policies" shall mean the Policies identified on
Schedule C hereto, together with all other current and past primary workers'
compensation, automobile liability, and general liability (including products
liability) Policies showing GI, any member of the NextLevel Systems Group, the
CommScope Group, or the GS Group, or any of their respective predecessors (or
such entity and its subsidiaries and/or affiliates) as the insured party and
which are cost plus, fronting, high deductible, or retrospective premium
programs.
"Subsidiary" shall have the meaning set forth in the Distribution
Agreement.
"Termination Time" shall mean with respect to coverage under any Policy
for any Covered Person, the time as of which coverage under said Policy is to be
cancelled with respect to that Covered Person pursuant to the terms hereof.
1.2 References. References herein to a "Schedule" are, unless otherwise
specified, to one of the Schedules attached to this Agreement, and references to
an "Article" or a "Section" are, unless otherwise specified, to one of the
Articles or Sections, respectively, of this Agreement.
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ARTICLE II
CANCELLATION OF POLICIES
2.1 Current Occurrence-Based Policies. On or prior to the NextLevel
Systems Distribution Date, GI shall take or cause to be taken all necessary or
appropriate action to cause the Current Occurrence-Based Policies identified on
Schedule B hereto to be cancelled as of, and to afford no future coverage to the
insureds thereunder except as otherwise contemplated by this Agreement from and
after, the Distribution Time, with respect to any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person.
2.2 Current Claims-Made Policies. On or prior to the NextLevel Systems
Distribution Date, GI shall take or cause to be taken all necessary or
appropriate action to cause the Current Claims-Made Policies identified on
Schedule A hereto to be cancelled as of, and to afford no future coverage to the
insureds thereunder except as otherwise contemplated by this Agreement from and
after, the Distribution Time, with respect to any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person.
ARTICLE III
COVERAGE
3.1 Maintenance of Coverage Through Distribution Time. From the date
hereof up to the Distribution Time, the parties hereto agree to maintain (and to
cause each member of their respective Groups over which they have legal or
effective direct or indirect control to maintain) in full force and effect the
Occurrence-Based Policies, Claims-Made Policies, and Retrospective-Rated
Policies for the benefit of any NextLevel Systems Covered Person, CommScope
Covered Person, and GS Covered Person to which such Policies by their terms
relate.
3.2 Coverage Under Occurrence-Based Policies.
(a) Termination of Coverage Under Occurrence-Based Policies. The parties
hereto agree to take or cause to be taken all necessary or appropriate action so
that, notwithstanding anything to the contrary contained in any Occurrence-Based
Policy, coverage under the Occurrence-Based Policies shall be terminated so that
none of the Occurrence-Based Policies shall afford any future coverage to any
NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person
for occurrences which take place or are alleged to have taken place on or after
the Distribution Time, with respect to any NextLevel Systems Covered Person,
CommScope Covered Person, or GS Covered Person.
(b) Access to Policies Following Termination Time. Notwithstanding the
provisions of Section 3.2(a) hereof, from and after their respective Termination
Time under any Occurrence-Based Policy each NextLevel Systems Covered Person,
CommScope Covered Person, and GS Covered Person shall have the right to coverage
and to make or pursue a claim for coverage under such Occurrence-Based Policy
with respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, and damages incurred or claimed to have been incurred
prior to such Termination Time, as well as all expenses that relate to such
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
and damages, whether incurred prior to or after such Termination Time, by such
Covered Person in or in connection with the operation of, or otherwise related
to, (i) the Communications Business, with respect to any NextLevel Systems
Covered Person, (ii) the Cable Manufacturing Business, with respect to any
CommScope Covered Person, or (iii) the Power Semiconductor Business, with
respect to any GS Covered Person, in each case subject to the terms, conditions,
and limitations of such Occurrence-Based Policy, provided, however, that nothing
in this Section 3.2(b) shall be deemed to constitute or reflect an assignment of
any such Occurrence-Based Policy.
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(c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered
Person, or GS Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under an Occurrence-Based Policy may claim for such insurance
as and to the extent that such insurance is available up to the full extent of
the applicable limits of liability under such Occurrence-Based Policy.
Notwithstanding the foregoing, each of NextLevel Systems, CommScope, and GS
shall, to the extent any of its respective Covered Persons shall have exhausted
all or any portion of the limits of liability, if any, under any
Occurrence-Based Policy, use its best efforts to obtain and maintain in full
force and effect a Policy in replacement of the limits of liability exhausted
under such Occurrence-Based Policy for all claims which would be covered thereby
absent such exhaustion (including any pending or known claims), and be
responsible for and pay all costs and expenses in connection therewith, which
Policy shall provide at least the same coverage, and contain terms and
provisions which are no less favorable to the insured parties, as existed under
the Occurrence-Based Policy in respect of which such replacement is obtained,
provided, however, that no party hereto shall be required to expend more than an
amount equal to 350% of the original premium paid with respect to the portion of
the limits of liability under such Occurrence-Based Policy (determined on a pro
rata basis) exhausted by such party's respective Covered Persons to obtain a
replacement Policy as contemplated hereby, it being understood that each party
hereto shall nonetheless be required to obtain the maximum amount of replacement
coverage available for such 350% premium amount in accordance with the terms and
provisions of this sentence. If at any time a party (an "Impairing Party")
hereto becomes aware (such party being deemed to be aware whenever any of the
directors or executive officers of such party or any other member of its
respective Group become aware) of a claim or potential claim against any of such
Impairing Party's respective Covered Persons, which claim is reasonably likely
to exhaust (but has not yet exhausted) all or any portion of the aggregate
limits of liability, if any, under any Occurrence-Based Policy (a "Potential
Impairment"), such Impairing Party shall promptly provide notice of such
Potential Impairment to the other parties hereto. If such Potential Impairment
actually occurs, the Impairing Party shall have five business days thereafter to
obtain a Policy in replacement of such limits of liability (in accordance with
the terms and provisions of the second preceding sentence).
3.3 Coverage Under Claims-Made Policies.
(a) Termination of Coverage Under Claims-Made Policies. The parties hereto
agree to take or cause to be taken all necessary or appropriate action so that,
notwithstanding anything to the contrary contained in any Claims-Made Policy,
coverage under the Claims-Made Policies shall be terminated so that no
Claims-Made Policy shall afford any future coverage to any NextLevel Systems
Covered Person, CommScope Covered Person, or GS Covered Person for claims which
have not been reported or made as provided by the terms of such Claims-Made
Policy prior to the Distribution Time, with respect to any NextLevel System
Covered Person, CommScope Covered Person, or GS Covered Person.
(b) Access to Policies Following Termination Time. Notwithstanding the
provisions of Section 3.3(a) hereof, from and after their respective Termination
Time under any Claims-Made Policy each NextLevel Systems Covered Person,
CommScope Covered Person, and GS Covered Person shall have the right to coverage
and to make or pursue a claim for coverage under such Claims-Made Policy with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, damages, and expenses which are reported in accordance
with the terms of such Claims-Made Policy prior to such Termination Time and
which are incurred or claimed to be incurred by such Covered Person in or in
connection with the operation of, or otherwise related to, (i) the
Communications Business, with respect to any NextLevel Systems Covered Person,
(ii) the Cable Manufacturing Business, with respect to any CommScope Covered
Person, or (iii) the Power Semiconductor Business, with respect to any GS
Covered Person, in each case subject to the terms, conditions, and limitations
of such Claims-Made Policy, provided, however, that nothing in this Section
3.3(b) shall be deemed to constitute or reflect an assignment of any such
Claims-Made Policy.
(c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered
Person, or GS Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under a Claims-Made Policy may claim for such insurance as
and to the extent that such insurance is available up to the full extent of the
applicable limits of
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liability under such Claims-Made Policy. Notwithstanding the foregoing, each of
NextLevel Systems, CommScope, and GS shall, to the extent any of its respective
Covered Persons shall have exhausted all or any portion of the limits of
liability, if any, under any Claims-Made Policy, use its best efforts to obtain
and maintain in full force and effect at its own cost a Policy in replacement of
the limits of liability exhausted under such Claims-Made Policy for all claims
which would be covered thereby absent such exhaustion (including any pending or
known claims), and be responsible for and pay all costs and expenses in
connection therewith, which Policy shall provide at least the same coverage, and
contain terms and provisions which are no less favorable to the insured parties,
as existed under the Claims-Made Policy in respect of which such replacement is
obtained, provided, however, that no party hereto shall be required to expend
more than an amount equal to 350% of the original premium paid with respect to
the portion of the limits of liability under such Claims-Made Policy (determined
on a pro rata basis) exhausted by such party's respective Covered Persons to
obtain a replacement Policy as contemplated hereby, it being understood that
each party hereto shall nonetheless be required to obtain the maximum amount of
replacement coverage available for such 350% premium amount in accordance with
the terms and provisions of this sentence. If at any time an Impairing Party
becomes aware (such party being deemed to be aware whenever any of the directors
or executive officers of such party or any other member of its respective Group
become aware) of a claim or potential claim against any of such Impairing
Party's respective Covered Persons which claim is reasonably likely to exhaust
(but has not yet exhausted) all or any portion of the aggregate limits of
liability, if any, under any Claims-Made Policy, such Impairing Party shall
promptly provide notice of such Potential Impairment to the other parties
hereto. If such Potential Impairment actually occurs, the Impairing Party shall
have five business days thereafter to obtain a Policy in replacement of such
limits of liability (in accordance with the terms and provisions of the second
preceding sentence).
3.4 Coverage Under Retrospective-Rated Policies.
(a) Termination of Coverage at Distribution Time. On or prior to the
NextLevel Systems Distribution Date, the parties hereto agree to take or cause
to be taken all necessary or appropriate action so that, except as otherwise
contemplated by the terms of this Agreement and notwithstanding anything to the
contrary contained in any Retrospective-Rated Policy, coverage under the
Retrospective-Rated Policies shall be terminated so that none of the
Retrospective-Rated Policies shall afford any future coverage to any NextLevel
Systems Covered Person, CommScope Covered Person, or GS Covered Person for
occurrences which take place or are alleged to have taken place on or after the
Distribution Time, with respect to any NextLevel Systems Covered Person,
CommScope Covered Person, or GS Covered Person.
(b) Access to Policies and Policy Limits. Notwithstanding the provisions
of Section 3.4(a) hereof, from and after their respective Termination Time under
any Retrospective-Rated Policy each NextLevel Systems Covered Person, CommScope
Covered Person, and GS Covered Person shall have the right to coverage and to
make or pursue a claim for coverage under such Retrospective-Rated Policy with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, and damages incurred or claimed to have been incurred
prior to such Termination Time, as well as all expenses that relate to such
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
and damages, whether incurred prior to or after such Termination Time, by such
Covered Person in or in connection with the operation of, or otherwise related
to, (i) the Communications Business, with respect to any NextLevel Systems
Covered Person, (ii) the Cable Manufacturing Business, with respect to any
CommScope Covered Person, or (iii) the Power Semiconductor Business, with
respect to any GS Covered Person, in each case subject to the terms, conditions,
and limitations of such Retrospective-Rated Policy, provided, however, that
nothing in this Section 3.4(b) shall be deemed to constitute or reflect an
assignment of any such Retrospective-Rated Policy. Any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person may claim insurance
coverage under a Retrospective-Rated Policy as and to the extent that such
insurance is available up to the full extent of the applicable limits of
liability under such Retrospective-Rated Policy.
3.5 Coverage Under Exclusive Policies. From and after the Distribution
Time, coverage under any Exclusive Policy may (at the option of the party or
parties shown as the named insured thereunder, and subject to the rights of the
insurers thereunder) continue with respect to any claims, suits, actions,
proceedings, injuries, losses, liabilities,
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occurrences, damages, or expenses incurred or claimed to have been incurred
prior to, on, or after the Distribution Time, subject to the terms, conditions,
and limitations of such Exclusive Policy, provided, however, that (i) no member
of the NextLevel Systems Group or GS Group shall have any liability or
obligation with respect to any of the CommScope Exclusive Policies, and (ii) no
member of the CommScope Group or GS Group shall have any liability or obligation
with respect to any of the NextLevel Systems Exclusive Policies.
3.6 Assistance in Obtaining Additional Coverage. Each of the parties
hereto agrees to use its reasonable best efforts to assist the other parties in
the transition to obtain separate insurance coverage for the NextLevel Systems
Group, CommScope Group, and GS Group from and after the NextLevel Systems
Distribution Date, which assistance shall include, but shall not be limited to,
the identification of potential insurance carriers.
3.7 Discovery Periods. Except as specified in this Section 3.7 and except
as the parties hereto may otherwise agree, the parties hereto acknowledge and
agree that when this Agreement calls for the termination of insurance coverage
under a Claims-Made Policy, such insurance coverage shall be terminated as of
the time specified and that no discovery period of coverage in respect of such
Policy shall be provided thereunder, notwithstanding anything to the contrary
contained herein or in any such Policy. Notwithstanding the foregoing, GS shall
use its reasonable best efforts to cause the relevant insurers under the
Claims-Made Policies providing directors' and officers' liability insurance to
offer to GS the maximum discovery period of coverage available under said
Claims-Made Policies, and/or to purchase run-off coverage for the liabilities
insured under said Claims-Made Policies with an aggregate limitation of
liability separate from the limitation of liability under said Claims-Made
Policies. All premiums, costs, and other charges with respect to any discovery
period of coverage provided under any Claims-Made Policy or any run-off coverage
for the liabilities insured under any Claims-Made Policy shall be the sole
responsibility of (i) NextLevel Systems, with respect to coverage for NextLevel
Systems Covered Persons, (ii) CommScope, with respect to coverage for CommScope
Covered Persons, and (iii) GS, with respect to coverage for GS Covered Persons.
Each party hereto shall not (and shall not permit any of its respective Covered
Persons over which it has legal or effective direct or indirect control to) take
any action contrary to the provisions of this Section 3.7.
3.8 Further Assurances. Each of NextLevel Systems, CommScope, and GS
agrees to take (and to cause each of its respective Covered Persons over which
it has direct or indirect legal or effective control to take) all such actions
as are necessary or appropriate, including the provision of notice to all
relevant insurance carriers, to effectuate the purposes of this Article III.
ARTICLE IV
PREMIUMS, DEDUCTIBLES, AND RELATED MATTERS
4.1 Occurrence-Based and Claims-Made Policies.
(a) Premiums in Respect of Occurrence-Based and Claims-Made Policies. From
and after the Distribution Time, all premiums, costs, and other charges with
respect to any Occurrence-Based Policy or Claims-Made Policy shall be paid by
GS, provided, however, that (i) NextLevel Systems shall promptly reimburse GS in
full for any such premiums, costs, or other charges in respect of the cover
afforded under any such Occurrence-Based Policy or Claims-Made Policy to any
NextLevel Systems Covered Person, and (ii) CommScope shall promptly reimburse GS
in full for any such premiums, costs, or other charges in respect of the cover
afforded under any such Occurrence-Based Policy or Claims-Made Policy to any
CommScope Covered Person, in each case determined in accordance with GI's
historical practices with respect to the allocation of such premiums, costs, and
charges prior to the date hereof. All amounts refunded from and after the
Distribution Time by insurance carriers in respect of premiums previously paid
under any Occurrence-Based Policy or Claims-Made Policy shall be the sole
property of NextLevel Systems, provided, however, that NextLevel Systems shall
promptly pay to CommScope or GS, as applicable, upon receipt thereof from an
insurance carrier, the CommScope Group's or the GS Group's respective share of
any such amounts refunded (such respective share to be determined in accordance
with GI's historical practices with respect
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to the allocation of insurance premiums among its Subsidiaries and divisions
prior to the date hereof). Each of CommScope and GS shall (and shall cause each
member of its respective Group over which it has direct or indirect legal or
effective control to) promptly pay to NextLevel Systems any such refunded
amounts actually received by it to which NextLevel Systems is entitled pursuant
hereto.
(b) Deductibles, Retentions, and Self-Insured Amounts. From and after the
Distribution Time, all deductibles, retentions, and self-insured amounts with
respect to coverage or a claim for coverage under any Occurrence-Based Policy or
Claims-Made Policy shall be the sole responsibility of (i) NextLevel Systems,
with respect to any coverage or claim for coverage in respect of any NextLevel
Systems Covered Person, (ii) CommScope, with respect to any coverage or claim
for coverage in respect of any CommScope Covered Person, and (iii) GS, with
respect to any coverage or claim for coverage in respect of any GS Covered
Person.
4.2 Retrospective-Rated Policies.
(a) Premiums, Costs, and Other Charges. From and after the Distribution
Time, all premiums, costs, and other charges with respect to any
Retrospective-Rated Policy, including claim payments and associated expenses
under cost plus or fronting policies or retrospective-rated premium programs,
shall be the sole responsibility of and be paid by GS, provided, however, that
(i) NextLevel Systems shall promptly reimburse GS for all such premiums, costs,
and other charges paid by GS (including amounts paid by GS as reimbursement in
respect of amounts drawn under Letters of Credit maintained by GS pursuant to
Section 7.1 hereof but excluding LC Maintenance Fees defined in Section 7.1
hereof) in respect of coverage provided for any NextLevel Systems Covered Person
to the extent such premiums, costs, and other charges exceed the amount of the
Claims Deposit, and (ii) CommScope shall promptly reimburse GS for all such
premiums, costs, and other charges paid by GS (including amounts paid by GS as
reimbursement in respect of amounts drawn under Letters of Credit maintained by
GS pursuant to Section 7.1 hereof but excluding LC Maintenance Fees defined in
Section 7.1 hereof) in respect of coverage provided for any CommScope Covered
Person to the extent such premiums, costs, and other charges exceed the amount
of the Claims Deposit. All amounts refunded from and after the Distribution Time
by insurance carriers pursuant to the terms of any Retrospective-Rated Policy
incepting before April 1, 1991 shall be shared equally by GS and NextLevel
Systems, and all amounts refunded from and after the Distribution Time by
insurance carriers pursuant to the terms of any Retrospective-Rated Policy
incepting on or after April 1, 1991 shall be shared equally by GS, NextLevel
Systems, and CommScope.
(b) Deductibles, Retentions, and Self-Insured Amounts. From and after the
Distribution Time, all deductibles, retentions, and self-insured amounts with
respect to coverage or a claim for coverage under any Retrospective-Rated Policy
shall be the sole responsibility of (i) NextLevel Systems, with respect to any
coverage or claim for coverage in respect of any NextLevel Systems Covered
Person, (ii) CommScope, with respect to any coverage or claim for coverage in
respect of any CommScope Covered Person, and (iii) GS, with respect to any
coverage or claim for coverage in respect of any GS Covered Person.
(c) Conversion to Guaranteed-Cost. From and after the Distribution Time,
(i) GS shall be authorized to negotiate with the insurance carrier of any
Retrospective-Rated Policy to convert such Policy to provide coverage in respect
of GS Covered Persons on a guaranteed-cost basis; (ii) NextLevel Systems shall
be authorized to negotiate with the insurance carrier of any Retrospective-Rated
Policy to convert such Policy to provide coverage in respect of NextLevel
Systems Covered Persons on a guaranteed-cost basis, and (iii) CommScope shall be
authorized to negotiate with the insurance carrier of any Retrospective-Rated
Policy to covert such Policy to provide coverage in respect of CommScope Covered
Persons on a guaranteed-cost basis, provided, however, that (i) GS shall not be
authorized to negotiate the conversion of any Retrospective-Rated Policy in
respect of NextLevel Systems Covered Persons or CommScope Covered Persons, (ii)
NextLevel Systems shall not be authorized to negotiate the conversion of any
Retrospective-Rated Policy in respect of GS Covered Persons or CommScope Covered
Persons, and (iii) CommScope shall not be authorized to negotiate the conversion
of any Retrospective-Rated Policy in respect of GS Covered Persons or NextLevel
Systems Covered Persons.
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4.3 Exclusive Policies. From and after the Distribution Time, all
deductibles, retentions, self-insured amounts, premiums, and other costs with
respect to any Exclusive Policy or claim for coverage thereunder shall be the
sole responsibility of, and all refunded premiums with respect to any Exclusive
Policy shall be the sole property of, (i) NextLevel Systems, with respect to any
NextLevel Systems Exclusive Policy, and (ii) CommScope, with respect to any
CommScope Exclusive Policy.
4.4 Excess Costs and Settlements. Each Covered Person shall be responsible
for any excess costs and expenses relating to its respective claims permitted
hereunder (or those of any member of its respective Group) under the Common
Policies, including defense costs to the extent such defense costs are not
covered under such Common Policies, and shall be responsible for obtaining or
reviewing the appropriateness of releases upon settlement of such claims.
4.5 Effect on Other Agreements. Notwithstanding anything to the contrary
contained herein, nothing in this Article IV shall be construed to alter or in
any way limit any rights to indemnity provided in the Distribution Agreement or
in any other Ancillary Agreement (as such term is defined in the Distribution
Agreement).
ARTICLE V
ADMINISTRATION
5.1 Occurrence-Based and Claims-Made Policies.
(a) Administration. From and after the NextLevel Systems Distribution
Date, Claims Administration and Insurance Administration with respect to the
Occurrence-Based Policies and Claims-Made Policies shall be the responsibility
of (i) NextLevel Systems, with respect to any coverage or claim for coverage of
any NextLevel Systems Covered Person, (ii) CommScope, with respect to any
coverage or claim for coverage of any CommScope Covered Person, and (iii) GS,
with respect to any coverage or claim for coverage of any GS Covered Person.
Each of NextLevel Systems and CommScope shall (and shall cause each of its
respective Covered Persons over which it has direct or indirect legal or
effective control to) provide prompt notice to GS of all actions taken by it
with respect to the Claims Administration and Insurance Administration for the
Occurrence-Based Policies and Claims-Made Policies as contemplated by this
Section 5.1. Each party hereto shall (and shall cause each other member of its
Group over which it has direct or indirect legal or effective control to) take
all necessary or appropriate action, if any, to delegate Claims Administration
and Insurance Administration with respect to the Occurrence-Based Policies and
Claims-Made Policies to any other party who is to assume such responsibilities
pursuant hereto, but, to the extent any party hereto (a "Precluded Party") is
not permitted by the terms of any such policy to engage in Claims Administration
or Insurance Administration with respect to coverage or claims for its
respective Covered Persons, the party permitted to engage in Claims
Administration or Insurance Administration shall do so with respect to coverage
or claims for the Precluded Party's Covered Persons only upon the express
authorization and direction of such Precluded Party. Each party hereto shall be
responsible for its own disbursements and out-of-pocket expenses and the direct
and indirect costs of its employees or agents relating to Claims Administration
and Insurance Administration contemplated by this Section 5.1. Notwithstanding
anything to the contrary contained herein, GS shall have the right to undertake
at its own cost and expense Claims Administration and/or Insurance
Administration with respect to any coverage or claim for coverage of any
NextLevel Systems Covered Person or CommScope Covered Person.
(b) Effect of Administrative Responsibilities. Each of NextLevel Systems,
CommScope, and GS acknowledges and agrees that each other party's
responsibilities under this Section 5.1 for Claims Administration and Insurance
Administration shall not relieve any party submitting an insured claim under any
Occurrence-Based Policy or Claims-Made Policy of (a) the primary responsibility
for reporting such insured claim accurately, completely, and in a timely manner,
or (b) any other right or responsibility which such party may have pursuant to
the terms of any Occurrence-Based Policy or Claims-Made Policy.
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5.2 Retrospective-Rated Policies. From and after the Distribution Time, GS
shall be solely responsible for Claims Administration and Insurance
Administration with respect to the Retrospective-Rated Policies including,
without limitation, the administration of all billings associated with the
Retrospective-Rated Policies by the insurance carriers thereunder.
Notwithstanding the foregoing, each of NextLevel Systems and CommScope shall
retain the right to, at its option, direct the management, defense, reporting,
and settlement of claims involving its respective Covered Persons under the
Retrospective-Rated Policies. GS shall not settle any claim against any
NextLevel Systems Covered Person or CommScope Covered Person under any
Retrospective-Rated Policy without the consent of NextLevel Systems or
CommScope, respectively.
ARTICLE VI
PROCEEDS
6.1 Occurrence-Based and Claims-Made Policies. From and after the
NextLevel Systems Distribution Date, Insurance Proceeds received with respect to
claims, costs, and expenses under the Occurrence-Based Policies and Claims-Made
Policies shall be paid to the Covered Person to which such Insurance Proceeds
are due pursuant to the terms of such Policies.
6.2 Retrospective-Rated Policies. From and after the NextLevel Systems
Distribution Date, Insurance Proceeds received with respect to claims, costs,
and expenses under the Retrospective-Rated Policies shall be paid, as
appropriate, to the Covered Person to which such Insurance Proceeds are due
pursuant to the terms of such Policies.
6.3 Return of Proceeds. Each of NextLevel Systems, CommScope, and GS shall
(and shall cause each of its respective Covered Persons over which it has direct
or indirect legal or effective control to) promptly pay to each other party any
Insurance Proceeds actually received by it to which any of such other party's
Covered Persons are entitled pursuant hereto, which other party shall then
distribute such Insurance Proceeds to the Covered Person to which they are due
pursuant hereto.
ARTICLE VII
LETTERS OF CREDIT AND SURETY BONDS
7.1 Maintenance. (a) Letters of Credit. From and after the NextLevel
Systems Distribution Date, to secure obligations under the Retrospective-Rated
Policies relating to periods preceding the Distribution Time, GS shall, for such
time as may be required by law or the terms of any Retrospective-Rated Policy,
maintain in full force and effect the letters of credit identified on Schedule
7.1-A hereto or, as necessary or appropriate, substitute therefor and maintain
in full force and effect letters of credit acceptable to the insurance carriers
and/or surety under the Retrospective-Rated Policies issued by comparably rated
lenders containing substantially identical terms and conditions (collectively,
the "Letters of Credit"). GS shall be solely responsible for the actual and
reasonable administrative fees and expenses (the "LC Maintenance Fees") in
respect of the issuance and maintenance of the Letters of Credit and shall not
obtain reimbursement for any portion thereof from either NextLevel Systems or
CommScope.
(b) Surety Bonds. The parties hereto acknowledge that GI is obligated to
indemnify the sureties under certain performance bonds and other surety
instruments that secure obligations of the NextLevel Systems Business, NextLevel
Systems Group, CommScope Business, CommScope Group, GS Business, and/or GS Group
including, but not limited to, the surety instruments identified on Schedule
7.1-B hereto (the "GI-Provided Bonds"). From and after the Distribution Time, GS
shall maintain such GI-Provided Bonds in place for such time as may be required
by law. To the extent possible on commercially reasonable terms, each of
NextLevel Systems and CommScope shall use reasonable commercial efforts to
obtain a replacement for each GI-Provided Bond that
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secures obligations of the NextLevel Systems Business or NextLevel Systems
Group (in the case of NextLevel Systems) or the CommScope Business or CommScope
Group (in the case of CommScope) and to thereafter arrange for the release of GS
from the GI-Provided Bond which has been so replaced. If the surety under any
GI-Provided Bond is required to and does in fact perform according to the terms
of said GI-Provided Bond and GS is required to and does in fact indemnify such
surety in respect thereof, (i) NextLevel Systems shall reimburse GS for all
amounts actually paid by GS to such surety to the extent such amounts constitute
NextLevel Systems Liabilities, and (ii) CommScope shall reimburse GS for all
amounts actually paid by GS to such surety to the extent such amounts constitute
CommScope Liabilities.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement may not be terminated except upon the
written agreement of each of the parties hereto.
8.2 Further Assurances. If at any time after the NextLevel Systems
Distribution Date any further action is necessary or desirable to carry out the
purposes of this Agreement, each of NextLevel Systems, CommScope, and GS shall,
on the written request of any of them, take (or cause the appropriate member of
its Group over which it has direct or indirect legal or effective control to
take) all such reasonably necessary or desirable action. If subsequent to the
NextLevel Systems Distribution Date any Policy showing any member of the
NextLevel Systems Group, CommScope Group, or GS Group, or any of their
respective predecessors, as named insured is discovered which was in effect for
periods prior to the Distribution Time and has not been addressed by the
provisions of this Agreement, the parties hereto agree to negotiate in good
faith an arrangement with respect to such Policy which shall give, to the
fullest extent possible, effect to the purposes of this Agreement and the
transactions contemplated by the Distribution Agreement.
8.3 Cooperation. The parties hereto agree to use their reasonable best
efforts to cooperate with respect to the various insurance matters contemplated
by this Agreement. Each party hereto shall not (and shall not permit any of its
respective Covered Persons over which it has legal or effective direct or
indirect control to) take any action or permit any inaction that could
reasonably be expected to jeopardize or otherwise interfere with the rights of
any other party (or any of such other party's respective Covered Persons)
hereunder or the ability of any other party (or any of such other party's
respective Covered Persons) to collect any proceeds which might be available
under any of the Policies addressed herein in accordance with the terms of this
Agreement.
8.4 No Representations and Warranties. The parties hereto understand and
agree that no representation or warranty as to the existence, applicability, or
extent of insurance coverage for the Communications Business, the Cable
Manufacturing Business, or the Power Semiconductor Business under any Policy is
herein being made.
8.5 Limitation on Liability. Except as may be otherwise expressly provided
for herein, no party hereto shall be liable hereunder to another party or any of
such other party's Covered Persons for claims not reimbursed by insurers for any
reason not within the control of such party including, without limitation,
coinsurance provisions, deductibles, quota share deductibles, exhaustion of
aggregates, self-insured retentions, bankruptcy or insolvency of an insurance
carrier, Policy limitations or restrictions, any coverage disputes, any failure
to timely claim, or any defect in such claim or its processing.
8.6 Successors and Assigns. Except as otherwise expressly provided herein,
no party hereto may assign or delegate, whether by operation of law or
otherwise, any of such party's rights or obligations under or in connection with
this Agreement without the written consent of each other party hereto. No
assignment will, however, release the assignor of any of its obligations under
this Agreement or waive or release any right or remedy the other parties may
have against such assignor hereunder. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will be binding upon and
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enforceable against the respective successors and assigns of such party and will
be enforceable by and will inure to the benefit of the respective successors and
permitted assigns of such party.
8.7 Modification; Waiver; Severability. This Agreement may not be amended
or modified except in a writing executed by each of the parties hereto. The
failure by any party to exercise or a delay in exercising any right provided for
herein shall not be deemed a waiver of any right hereunder. Whenever possible,
each provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law, such provision will
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same Agreement.
8.9 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.10 Notices. All notices, demands, or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or five
business days after mailing by certified or registered mail, return receipt
requested and postage prepaid, to the recipient at such recipient's address as
indicated below:
NextLevel Systems: 8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attention: General Counsel
CommScope: 1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attention: General Counsel
GS: 10 Melville Park Road
Melville, New York 11747-3113
Attention: General Counsel
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
8.11 Survival. Each of the agreements of the parties herein shall survive
the NextLevel Systems Distribution Date.
8.12 No Third Party Beneficiaries. This Agreement is made solely for the
benefit of the parties hereto and their respective Covered Persons and shall not
give rise to any rights of any kind to any other third parties.
8.13 Other. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION,
VALIDITY, AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO BE
SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS
OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF
DELAWARE. This Agreement, together with the Distribution Agreement and other
Ancillary Agreements (as such term is defined in the Distribution Agreement),
constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.
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8.14 Sole Agent. In all matters relating to this Agreement, including the
resolution of any disputes relating to this Agreement between any members of
different Groups, (i) NextLevel Systems shall be the sole agent for the members
of the NextLevel Systems Group, (ii) CommScope shall be the sole agent for the
members of the CommScope Group, and (iii) GS shall be the sole agent for members
of the GS Group. No member of any Group shall have any authority to represent
itself in any such matter or to terminate such agency without the prior written
consent of each party hereto.
8.15 No Double Recovery. No provision of this Agreement shall be construed
to provide recovery to any Person for any costs, expenses, or other amounts for
which such Person has been fully compensated under any other provision of this
Agreement, any other agreement, or otherwise.
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IN WITNESS WHEREOF, the parties have made and entered into this Insurance
Agreement as of the date first set forth above.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.4
TAX SHARING AGREEMENT
among
GENERAL SEMICONDUCTOR, INC.
COMMSCOPE, INC.
and
NEXTLEVEL SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Definition of Terms 2
SECTION 2. Allocation of Tax Liabilities 7
SECTION 3. Proration of Taxes for Straddle Periods 11
SECTION 4. Preparation and Filing of Tax Returns 12
SECTION 5. Tax Payments and Intercompany Billings 17
SECTION 6. Tax Benefits 21
SECTION 7. Assistance and Cooperation 22
SECTION 8. Tax Records 23
SECTION 9. Tax Contests 24
SECTION 10. Effective Date; Termination of Prior Intercompany Tax 25
Allocation Agreements
SECTION 11. No Inconsistent Actions 25
SECTION 12. Survival of Obligations 27
SECTION 13. Employee Matters 27
SECTION 14. Treatment of Payments; Tax Gross Up 27
SECTION 15. Disagreements 29
SECTION 16. Late Payments 29
SECTION 17. Expenses 29
SECTION 18. General Provisions 30
(i)
<PAGE>
TAX SHARING AGREEMENT
This Agreement is entered into as of July 25, 1997 by and among General
Semiconductor, Inc., a Delaware corporation ("GS"), CommScope, Inc., a Delaware
corporation ("CommScope"), and NextLevel Systems, Inc. a Delaware corporation
("Systems"). Capitalized terms used in this Agreement are defined in Section 1
below. Unless otherwise indicated, all "Section" references in this Agreement
are to sections of this Agreement.
RECITALS
WHEREAS, as of the opening of business on the date hereof, General
Instrument Corporation ("GI") was the common parent of an affiliated group of
corporations, including CommScope and Systems, which has elected to file
consolidated Federal income tax returns; and
WHEREAS, the Companies have entered into a Distribution Agreement, dated
as of June 12, 1997, setting forth the corporate transactions pursuant to which
GI will distribute all of the outstanding shares of common stock of Systems to
GI shareholders, and Systems will distribute all of the outstanding shares of
CommScope to Systems shareholders, in transactions intended to qualify as
tax-free distributions under Section 355 of the Code; and
WHEREAS, as a result of the Systems Distribution, CommScope and Systems,
and their respective subsidiaries, will cease to be members of the affiliated
group of which GI is the common parent, effective as of the Distribution Date;
and
WHEREAS, as a result of the CommScope Distribution, CommScope and its
subsidiaries will cease to be members of the affiliated group of which Systems
is the common parent, effective as of the CommScope Distribution Date; and
WHEREAS, as of the Distribution Date, GI will be renamed General
Semiconductor, Inc.; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the
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transactions contemplated by the Distribution Agreement, and to provide for and
agree upon other matters relating to Taxes;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the Companies hereby agree as follows:
SECTION 1. Definition of Terms. For purposes of this Agreement
(including the recitals hereof), the following terms have the following
meanings:
"Accounting Cutoff Date" means, with respect to each of GS, CommScope and
Systems, any date as of the end of which there is a closing of the financial
accounting records for such entity.
"Accounting Firm" shall have the meaning provided in Section 15.
"Adjustment Request" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, or (b) any claim for refund or credit of
Taxes previously paid.
"Affiliate" means any entity that directly or indirectly is "controlled"
by the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Distributions.
"Agreement" shall mean this Tax Sharing Agreement.
"Allocated Federal Tax Liability" shall have the meaning provided in
Section 5.01(b)(i).
"Carryback" means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item which may or must be carried from one Tax
Period to another Tax Period under the Code or other applicable Tax Law.
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"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
"CommScope" means CommScope, Inc., a Delaware corporation, and any
successor.
"CommScope Distribution" means the CommScope Distribution, as that term is
defined in the Distribution Agreement.
"CommScope Distribution Date" means the CommScope Distribution Date, as
that term is defined in the Distribution Agreement.
"CommScope Group" means Commscope and its Affiliates as determined
immediately after the Distributions.
"Companies" means GS, CommScope, and Systems, collectively, and "Company"
means any one of GS, CommScope or Systems.
"Consolidated or Combined Income Tax" means any Income Tax computed by
reference to the assets and activities of members of more than one Group.
"Consolidated or Combined State Income Tax" means any State Income Tax
computed by reference to the assets and activities of members of more than one
Group.
"Consolidated Tax Liability" means, with respect to any GI Federal
Consolidated Return, the "tax liability of the group" as that term is used in
Treasury Regulation Section 1.1552-1(a)(1) (including applicable interest,
additions to the tax, additional amounts, and penalties as provided in the
Code), provided that such tax liability shall be treated as including any
alternative minimum tax liability under Code Section 55.
"Cumulative Federal Tax Payment" shall have the meaning provided in
Section 5.01(b)(ii).
"Distribution Agreement" means the agreement, as amended from time to
time, setting forth the corporate transactions required to effect the
distribution to GI shareholders of Systems common shares, and the distribution
to Systems shareholders of CommScope common shares, and to which this Tax
Sharing Agreement is attached as an exhibit.
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"Distribution Date" means the NextLevel Systems Distribution Date, as that
term is defined in the Distribution Agreement.
"Distributions" means the NextLevel Systems Distribution and the CommScope
Distribution, as such terms are defined in the Distribution Agreement.
"Federal Income Tax" means any Tax imposed by Subtitle A or F of the Code.
"Foreign Income Tax" means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulation Section 1.901-2.
"GI Delaware" means General Instrument Corporation of Delaware, a
Delaware corporation.
"GI Federal Consolidated Return" means any United States federal Tax
Return for the affiliated group (as that term is defined in Code Section 1504)
that includes GI or GS as the common parent and includes any member of the
CommScope Group or the Systems Group.
"GS" means General Semiconductor, Inc., a Delaware corporation, and any
successor.
"GS Group" means GS and its Affiliates, excluding any entity that is a
member of the Systems Group or the CommScope Group.
"Group" means the GS Group, the CommScope Group, and the Systems Group, as
the context requires.
"Income Tax" means any Federal Income Tax, State Income Tax, or Foreign
Income Tax.
"Payment Date" means (i) with respect to any GI Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Code Section 6655, the due date (determined without regard to extensions)
for filing the return determined under Code Section 6072, and the date the
return is filed, and (ii) with respect to any Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
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"Pre-Distribution Consolidated Tax Liability" means Consolidated Tax
Liability with respect to all Tax Periods ending on or prior to the Distribution
Date and in the case of the Tax Period which includes the Distribution Date, the
Consolidated Tax Liability computed as if the Distribution Date were the last
day of the Tax Period.
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period beginning the day after the Distribution Date.
"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.
"Prime Rate" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded daily on the basis of a
year of 365 or 366 (as applicable) days and actual days elapsed.
"Prior Intercompany Tax Allocation Agreements" means any written or oral
agreement or any other arrangements relating to allocation of Taxes existing
between or among the GS Group, the CommScope Group, and the Systems Group as of
the Distribution Date (other than this Agreement and other than any such
agreement or arrangement between or among persons who are members of a single
Group).
"Responsible Company" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
"Restructuring Tax" means the Taxes described in Sections 2.06(a)(ii) or
2.06(a)(iii) (relating to Tax resulting from any income or gain recognized as a
result of the Transactions).
"Ruling Request" means the letter filed by GI with the Internal Revenue
Service requesting a ruling from the Internal Revenue Service regarding certain
tax consequences of the Transactions (including all attachments, exhibits, and
other materials submitted with such ruling request letter) and any amendment or
supplement to such ruling request letter.
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"Separate Company Tax" means any Tax computed by reference to the assets
and activities of a member or members of a single Group.
"Straddle Period" means any Tax Period that begins on or before and ends
after the Distribution Date.
"State Income Tax" means any Tax imposed by any State of the United States
or by any political subdivision of any such State which is imposed on or
measured by net income, including state and local franchise or similar Taxes
measured by net income.
"Systems" means NextLevel Systems, Inc., a Delaware corporation, and
any successor.
"Systems Delaware" means NextLevel Systems of Delaware, Inc., a
Delaware corporation.
"Systems Group" means Systems and its Affiliates as determined
immediately after the Distributions.
"Systems Distribution" means the NextLevel Systems Distribution, as that
term is defined in the Distribution Agreement.
"Tainting Act" shall have the meaning provided in Section 11.
"Tax" or "Taxes" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
and any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing.
"Tax Authority" means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
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"Tax Benefit" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated tax payments), net
of any associated or corresponding item of income, gain or other increase in
otherwise required Tax payments.
"Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including any
administrative or judicial review of any claim for refund).
"Tax Item" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, and credit.
"Tax Law" means the law of any governmental entity or political
subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for which the Tax
is reported as provided under the Code or other applicable Tax Law.
"Tax Records" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax Authority.
"Tax Return" means any report of Taxes due, any claims for refund of Taxes
paid, any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.
"Transactions" means the transactions contemplated by the Distribution
Agreement (including the Corporate Restructuring Steps and Distributions, as
defined in such agreement).
"Transferred Communications Businesses" shall have the meaning provided
in Section 2.05.
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"Treasury Regulations" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
SECTION 2. Allocation of Tax Liabilities. The provisions of this Section 2
are intended to determine each Company's liability for Taxes with respect to
Pre-Distribution Periods, Straddle Periods, and Post-Distribution Periods. Once
the liability has been determined under this Section 2, Section 5 determines the
time when payment of the liability is to be made, and whether the payment is to
be made to the Tax Authority directly or to another Company.
2.01 General Rule
(a) Systems Liability. Systems shall indemnify and hold harmless the
GS Group and the CommScope Group from and against any liability for Taxes
which Systems is liable for under this Section 2.
(b) GS Liability. GS shall be liable for, and shall indemnify and
hold harmless the Systems Group and the CommScope Group from and against
any liability for Taxes which are allocated to GS under this Section 2.
(c) CommScope Liability. CommScope shall be liable for, and shall
indemnify and hold harmless the Systems Group and the GS Group from and
against any liability for, Taxes which are allocated to CommScope under
this Section 2.
2.02 Allocation of United States Federal Income Tax. Except as
otherwise provided in this Agreement:
(a) Allocation of Tax Relating to GI Federal Consolidated Returns.
With respect to any GI Federal Consolidated Return: (i) Systems shall be
liable for all Pre-Distribution Consolidated Tax Liability and (ii) GS
shall be liable for any Consolidated Tax Liability for the Tax Period
which includes the Distribution Date in excess of Systems' liability under
clause (i).
(b) Allocation of GI Federal Consolidated Return Tax Adjustments.
With respect to any GI Federal Consolidated Return: (i) Systems shall be
liable for any adjustments to the
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reported Pre-Distribution Consolidated Tax Liability and (ii) GS shall be
liable for any adjustments to the Consolidated Tax Liability for the Tax
Period which includes the Distribution Date in excess of Systems'
liability under clause (i).
2.03 Allocation of State Income Taxes. Except as otherwise provided in
this Agreement, State Income Taxes shall be allocated as follows:
(a) Separate Company Taxes. In the case of any State Income Tax
which is a Separate Company Tax that is apportioned under this Agreement
to a Pre-Distribution Period, Systems shall be liable (i) to GS for such
Tax imposed on any members of the GS Group, and (ii) to CommScope for such
Tax imposed on any members of the CommScope Group.
(b) Consolidated or Combined State Income Taxes.
(i) Allocation of Tax Reported on Tax Returns Filed After the
Distribution Date. Systems shall be liable for any Consolidated or
Combined State Income Tax that is apportioned under this Agreement
to a Pre-Distribution Period.
(ii) Allocation of Combined or Consolidated State Income Tax
Adjustments. Systems shall be liable for any adjustment to the
amount of Consolidated or Combined State Income Tax reported on any
Tax Return (or as previously adjusted) that is apportioned under
this Agreement to a Pre-Distribution Period.
2.04 Allocation of State Income Tax Effects of Federal Audit Adjustments.
Systems shall be liable for any State Income Taxes resulting from the
adjustments to GI Federal Consolidated Returns, to the extent that such State
Income Taxes are apportioned to a Pre-Distribution Period. In accordance with
Section 6, any Tax Benefit realized by the CommScope Group or by the GS Group as
a result of Systems' payment of such State Income Taxes shall be for the account
of Systems and shall be paid to Systems under Section 6. For example, if Systems
pays a State Income Tax liability of $100x related to adjustments to the Tax
Return of a member of the CommScope Group, and if such payment is available as a
deduction on the CommScope Group's Tax Return for Federal Income Tax, CommScope
shall pay to Systems the Federal Income Tax
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benefit attributable to the deduction (i.e., $35x assuming a 35% maximum
marginal tax rate under Code Section 11, and assuming the payment is treated as
a nondeductible dividend, capital contribution, or combination thereof under the
Code in accordance with Section 14 of this Agreement).
2.05 Allocation of Foreign Income Taxes and Other Taxes. Except as
provided in Section 2.06, all Taxes (including without limitation any Foreign
Income Taxes and any Taxes with respect to Post-Distribution Periods) other than
those specifically allocated pursuant to Sections 2.02 through 2.04 shall be
allocated based on the legal entity on which the legal incidence of the Tax is
imposed; provided, however, any such Taxes specifically related to the
businesses transferred by GI Delaware to Systems in the Transactions (the
"Transferred Communications Businesses") shall be allocated to Systems. Subject
to the proviso in the preceding sentence, as between the parties to this
Agreement, GS shall be liable for all Taxes imposed on any member of the GS
Group, Systems shall be liable for all Taxes imposed on any member of the
Systems Group and CommScope shall be liable for all Taxes imposed on any member
of the CommScope Group. The Companies believe that there is no Tax not
specifically allocated pursuant to Sections 2.02 through 2.04 relating to
Pre-Distribution Periods which is legally imposed on more than one legal entity
or is not solely allocable to the Transferred Communications Businesses (e.g.,
joint and several liability); however, if there is any such Tax, it shall be
allocated in accordance with past practices as reasonably determined by the
affected Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies.
2.06 Transaction and Other Taxes
(a) Systems Liability. Except as otherwise provided in this Section
2.06, Systems shall be liable for, and shall indemnify and hold harmless
the GS Group and the CommScope Group from and against any liability for,
all Taxes resulting from the Transactions, including:
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(i) Any sales and use, gross receipts, or other transfer
Taxes imposed on the transfers occurring pursuant to the
Transactions;
(ii) any Tax resulting from any income or gain recognized
under Treasury Regulation Sections 1.1502-13 or 1.1502-19 (or any
corresponding provisions of other applicable Tax Laws) as a result
of the Transactions; and
(iii) any Tax resulting from any income or gain recognized as
a result of any of the transactions contemplated by the Distribution
Agreement failing to qualify for tax-free treatment under Code
Sections 332, 351, 355, 361, or other provisions of the Code (as
contemplated in the Ruling Request) or other applicable Tax Laws.
(b) Indemnity for Inconsistent Acts. GS shall be liable for, and
shall indemnify and hold harmless the Systems Group and the CommScope
Group from and against any liability for, any Restructuring Tax (described
in subparagraphs (ii) and (iii) above) to the extent arising from any
breach of GS's representations or covenants under Section 11 or any
Tainting Act by GS or its Affiliates. CommScope shall be liable for, and
shall indemnify and hold harmless the Systems Group and the GS Group from
and against any liability for, any Restructuring Tax to the extent arising
from any breach of CommScope's representations or covenants under Section
11 or any Tainting Act by CommScope or its Affiliates.
(c) Indemnity for Representations. Systems shall be liable for, and
shall indemnify and hold harmless the GS Group and the CommScope Group
from and against any liability for, any Restructuring Tax to the extent
arising from the inaccuracy of any factual statements or representations
in connection with the Ruling Request, but only to the extent such
inaccuracy arises from facts in existence prior to the Distribution Date,
and excluding any inaccuracy with respect to any statements or
representations relating to CommScope or its Affiliates or any plan or
intention on the part of CommScope or its Affiliates as to actions to be
taken at or subsequent to the Distribution Date. CommScope shall be liable
for, and shall indemnify and hold harmless the Systems Group and the GS
Group from and against any liability for, any
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Restructuring Tax to the extent arising from the inaccuracy of any factual
statements or representations relating to the CommScope or its Affiliates
in connection with the Ruling Request.
2.07 Application to Interim Period Between Distributions. The parties
intend that Systems and CommScope will file consolidated and combined Income Tax
Returns for the period beginning on the day after the Systems Distribution and
ending on the date of the CommScope Distribution. In connection with such
period, Systems and CommScope intend that the principles of this Agreement (with
Systems having the role of both Systems and, as applicable, GS) shall apply
thereto mutatis mutandis, except as the parties hereto may otherwise agree.
SECTION 3. Proration of Taxes for Straddle Periods
3.01 General Method of Proration. In the case of any Straddle Period, Tax
Items shall be apportioned between Pre-Distribution Periods and
Post-Distribution Periods in accordance with the principles of Treasury
Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the
Companies. No election shall be made under Treasury Regulation Section
1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items). If the
Distribution Date is not an Accounting Cutoff Date, the provisions of Treasury
Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the
items (other than extraordinary items) for the month which includes the
Distribution Date.
3.02 Transaction Treated as Extraordinary Item. In determining the
apportionment of Tax Items between Pre-Distribution Periods and
Post-Distribution Periods, any Tax Items relating to the Transactions shall be
treated as an extraordinary item described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and
any Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be
allocated to Pre-Distribution Periods.
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SECTION 4. Preparation and Filing of Tax Returns
4.01 General. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. The
Companies shall provide, and shall cause their Affiliates to provide, assistance
and cooperate with one another in accordance with Section 7 with respect to the
preparation and filing of Tax Returns, including providing information required
to be provided in Section 7.
4.02 Pre-Distribution Period and Straddle Period Tax Returns. All Tax
Returns required to be filed for Pre-Distribution Periods or Straddle
Periods, if not filed by the Distribution Date, shall be:
(1) prepared and filed by Systems, in the case of any Tax Returns
relating to a Consolidated or Combined Income Tax;1 and
(2) prepared and filed, or caused to be prepared and filed, by the
Group to which such Tax Return relates in all other cases.
Each of GS and CommScope shall, for each Tax Period or portion thereof for
which a member of the GS Group or the CommScope Group, respectively, is included
in a Tax Return described in clause (1) of the preceding sentence, provide
Systems with (i) a true and correct tax return for its Group together with an
accompanying computation of Tax liability of its Group, (ii) separate tax
returns for each member of its Group together with accompanying computations of
the separate tax return Tax liabilities of each member of its Group, and (iii) a
reconciliation of book income to federal taxable income for each member of its
Group. GS and CommScope each hereby agrees to use its best efforts to provide
Systems with such returns and computations no later than the first day of the
sixth month following the end of the period to which such returns and
computations relate, but in any event shall provide such returns and
computations to Systems
- --------
1 Systems may prepare these Tax Returns under the Transition Services
Agreement.
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<PAGE>
no later than the fifteenth day of the sixth month following the end of the
period to which such returns and computations relate. Each of GS and CommScope,
in preparing the above mentioned tax returns for its Group, shall not consider
or give effect to any (i) net operating loss carryover or carryover, (ii)
capital loss carryover or carryback, (iii) excess charitable deduction
carryover, (iv) excess tax carryover or carryback, or (v) other similar
carryback or carryback item.
4.03 Post-Distribution Period Tax Returns. Except as otherwise
provided in Section 4.02 with respect to Straddle Period Tax Returns:
(1) All Tax Returns related to the CommScope Group for
Post-Distribution Periods shall be prepared and filed (or caused to be
prepared and filed) by CommScope,
(2) All Tax Returns related to the Systems Group for
Post-Distribution Periods shall be prepared and filed (or caused to be
prepared and filed) by Systems.
(3) All Tax Returns related to the GS Group for Post-Distribution
Periods shall be prepared and filed (or caused to be prepared and filed)
by GS.
4.04 Manner of Filing.
(a) All Tax Returns filed or caused to be filed by GS, CommScope or
Systems after the Distribution Date shall be prepared on a basis that is
consistent with any IRS ruling obtained by GI in connection with the
restructuring of GI contemplated by the Distribution Agreement (in the absence
of a controlling change in law or circumstances), and shall be filed on a timely
basis by the party responsible for such filing under this Agreement.
(b) All Tax Returns filed or caused to be filed by GS, or CommScope or
Systems after the Distribution Date shall be prepared (in the absence of a
controlling change in law or circumstances) consistent with past practices,
elections, accounting methods, conventions, and principles of taxation used for
the most recent taxable periods for which Tax Returns involving similar items
have been filed prior to the Distribution Date.
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4.05 Right to Review Tax Returns
(a) General. The Responsible Company with respect to any Tax Return
shall make such Tax Return and related workpapers available for review by
the other Companies, if requested, to the extent (i) such Tax Return
relates to Taxes for which the requesting party may be liable, (ii) such
Tax Return relates to Taxes for which the requesting party may be liable
in whole or in part for any additional Taxes owing as a result of
adjustments to the amount of Taxes reported on such Tax Return, (iii) such
Tax Return relates to Taxes for which the requesting party may have a
claim for Tax Benefits under this Agreement, or (iv) the requesting party
reasonably determines that it must inspect such Tax Return to confirm
compliance with the terms of this Agreement. The Responsible Company shall
use its reasonable best efforts to make such Tax Return available for
review as required under this paragraph sufficiently in advance of the due
date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have
such Tax Returns modified before filing, taking into account the person
responsible for payment of the tax (if any) reported on such Tax Return
and the materiality of the amount of Tax liability with respect to such
Tax Return. The Companies shall attempt in good faith to resolve any
issues arising out of the review of such Tax Returns.
(b) Execution of Returns Prepared by Other Party. In the case of any
Tax Return which is required to be prepared and filed by one Company under
this Agreement and which is required by law to be signed by another
Company (or by its authorized representative), the Company which is
legally required to sign such Tax Return shall not be required to sign
such Tax Return under this Agreement if there is no reasonable basis for
the tax treatment of any material items reported on the Tax Return. Any
such Tax Return shall be supplied by the Company responsible for its
preparation and filing to the Company responsible for its signing at least
five days prior to the due date of such Tax Return (including applicable
extensions) and such signing Company shall deliver an executed copy of
such Tax Return to the filing
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Company at least two days prior to the due date of such Tax Return
(including applicable extensions).
4.06 Claims for Refund, Carrybacks, and Self-Audit Adjustments
("Adjustment Requests")
(a) Consent Required for Adjustment Requests Related to Consolidated
or Combined Income Taxes. Except as provided in paragraph (b) below, each
of the Companies hereby agrees that, unless each of the other Companies
consents in writing, which consent shall not be unreasonably withheld, (i)
no Adjustment Request with respect to any Consolidated or Combined Income
Tax for a Pre-Distribution Period shall be filed, and (ii) any available
elections to waive the right to claim in any Pre-Distribution Period with
respect to any Consolidated or Combined Income Tax any Carryback arising
in a Post-Distribution Period shall be made, and no affirmative election
shall be made to claim any such Carryback. Any Adjustment Request which
the Companies consent to make under this Section 4.06 shall be prepared
and filed by the Responsible Company under Sections 4.02 and 4.03 for the
Tax Return to be adjusted. The Company requesting the Adjustment Request
shall provide to the Responsible Company all information required for the
preparation and filing of such Adjustment Request in such form and detail
as reasonably requested by the Responsible Company.
(b) Exception for Adjustment Requests Related to Audit Adjustments.
Each of the Companies shall be entitled, without the consent of any other
Company, to require GS to file an Adjustment
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Request to take into account any net operating loss, net capital loss,
deduction, credit, or other adjustment attributable to such Company or any
member of its Group corresponding to any adjustment resulting from any
audit by the Internal Revenue Service or other Tax Authority with respect
to Consolidated or Combined Income Taxes for any Pre-Distribution Period.
For example, if the Internal Revenue Service requires a Company to
capitalize an item deducted for the taxable year 1993, such Company shall
be entitled, without the consent of any other Company, to require GS to
file an Adjustment Request for the taxable year 1994 (and later years) to
take into account any depreciation or amortization deductions in such
years directly related to the item capitalized in 1993. In addition,
Systems shall be entitled to require GS or CommScope, as appropriate, to
file an Adjustment Request of the same sort with respect to Separate
Company Taxes for any Pre-Distribution Periods.
(c) Other Adjustment Requests Permitted. Nothing in this Section
4.06 shall prevent any Company or its Affiliates from filing any
Adjustment Request with respect to Income Taxes which are not Consolidated
or Combined Income Taxes or with respect to any Taxes other than Income
Taxes; provided, however, that without the written consent of Systems
(which consent shall not be unreasonably withheld) neither GS nor
CommScope shall file an amended Tax Return with respect to Taxes for which
Systems is liable under this Agreement. Any refund or credit obtained as a
result of any such Adjustment Request (or otherwise) shall be for the
account of the person liable for the Tax under this Agreement.
(d) Payment of Refunds. Any refunds or other Tax Benefits received
by any Company (or any of its Affiliates) as a result of any Adjustment
Request which are for the account of another Company (or member of such
other Company's Group) shall be paid by the Company receiving (or whose
Affiliate received) such refund or Tax Benefit to such other Company in
accordance with Section 6.
SECTION 5. Tax Payments and Intercompany Billings
5.01 Payment of Taxes With Respect to GI Federal Consolidated Returns
Filed After the Distribution Date. In the case of any GI Federal Consolidated
Return the due date for which (including extensions) is after the
Distribution Date,
(a) Computation and Payment of Tax Due. At least ten business days
prior to any Payment Date, GS shall compute the amount of Tax required to
be paid to the Internal Revenue Service (taking into account the
requirements of Section 4.04 relating to consistent accounting practices)
with respect to such Tax Return on such Payment Date and shall notify
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Systems in writing of the amount of Tax required to be paid on such
Payment Date. GS will pay such amount to the Internal Revenue Service on
or before such Payment Date.
(b) Computation and Payment of Systems Liability With Respect to
Tax Due. Within 30 days following any Payment Date, Systems will pay to
GS the excess (if any) of
(i) the Pre-Distribution Consolidated Tax Liability determined
as of such Payment Date with respect to the applicable Tax Period
allocable to Systems in a manner consistent with the provisions of
Section 2.02(a) (the "Allocated Federal Tax Liability"), over
(ii) the cumulative net payments with respect to such Tax
Return prior to such Payment Date made before the Distribution Date,
plus all such payments by the members of the Systems Group made from
the Distribution Date to the Payment Date (the "Cumulative Federal
Tax Payment").
If the Systems Cumulative Federal Tax Payment is greater than the Systems
Allocated Federal Tax Liability as of any Payment Date, then GS shall pay
such excess to Systems within 30 days of GS's receipt of the corresponding
Tax Benefit (i.e., through either a reduction in GS's otherwise required
Tax payment, or a refund of prior Tax payments).
(c) Interest on Intergroup Tax Allocation Payments. In the case of
any payments to GS required under paragraph (b) of this subsection 5.01,
Systems shall also pay to GS an amount of interest computed at the Prime
Rate on the amount of the payment required based on the number of days
from the applicable Payment Date to the date of payment. In the case of
any payments by GS required under paragraph (b) of this subsection 5.01,
GS shall also pay to the payee an amount of interest computed at the Prime
Rate on the amount of the payment required based on the number of days
from the date of receipt of the Tax Benefit to the date of payment of such
amount to the payee.
(d) Representation Regarding Cumulative 1997 Federal Income Tax
Payments. Systems represents and warrants to GS that, as of the the
date hereof, $16,500,000 of cumulative net
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payments have been made by GI, and credited by the Internal Revenue
Service, with respect to the 1997 GI Federal Consolidated Return.
5.02 Payment of Federal Income Tax Related to Adjustments
(a) Adjustments Resulting in Underpayments. GS shall pay to the
Internal Revenue Service when due any additional Federal Income Tax
required to be paid as a result of any adjustment to the Pre-Distribution
Consolidated Tax Liability with respect to any GI Federal Consolidated
Return. Systems shall pay to GS such amount within 30 days from the later
of (i) the date the additional Tax was paid by GS or (ii) the date of
receipt by Systems of a written notice and demand from GS for payment of
the amount due, accompanied by evidence of payment and a statement
detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Any payments required under this Section
5.02(a) shall include interest computed at the Prime Rate based on the
number of days from the date the additional Tax was paid by GS to the date
of the payment under this Section 5.02(a).
(b) Adjustments Resulting in Overpayments. Within 30 days of receipt
by GS of any Tax Benefit resulting from any adjustment to the
Pre-Distribution Consolidated Tax Liability with respect to any GI Federal
Consolidated Return, GS shall pay to Systems its share of any such Tax
Benefit, as determined by Systems. Any payments required under this
Section 5.02(b) shall include interest computed at the Prime Rate based on
the number of days from the date the Tax Benefit was received by GS to the
date of payment to Systems Company under this Section 5.02(b).
5.03 Payment of State Income Tax Relating to Pre-Distribution
Periods With Respect to Returns Filed After the Distribution Date
(a) Computation and Payment of Tax Due. At least three business days
prior to any Payment Date for any Tax Return with respect to any State
Income Tax relating to a Pre-Distribution Period, the Responsible Company
shall compute the amount of Tax required to be paid to the applicable Tax
Authority (taking into account the requirements of Section 4.04
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relating to consistent accounting practices) with respect to such Tax
Return on such Payment Date and--
(i) If such Tax Return is with respect to a Consolidated or
Combined State Income Tax, GS shall notify Systems in writing of the
amount of Tax required to be paid on such Payment Date. GS will pay
such amount to such Tax Authority on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate Company
Tax, the Responsible Company shall, if it is not the Company liable
for the Tax reported on such Tax Return, notify the Company liable
for such Tax in writing of the amount of Tax required to be paid on
such Payment Date. The Company liable for such Tax will pay such
amount to such Tax Authority on or before such Payment Date.
(b) Computation and Payment of Systems Liability With Respect to Tax
Due. Within 120 days following the due date (including extensions) for
filing any Tax Return for any Consolidated or Combined State Income Tax
(excluding any Tax Return with respect to payment of estimated Taxes or
Taxes due with a request for extension of time to file) relating to a
Pre-Distribution Period, Systems shall pay to GS the tax liability
allocable to Systems as determined by Systems under the provisions of
Section 2.03(b)(i), plus interest computed at the Prime Rate on the amount
of the payment based on the number of days from the due date (including
extensions) to the date of payment by Systems to GS
5.04 Payment of State Income Taxes Related to Adjustments
(a) Adjustments Resulting in Underpayments. GS shall pay to the
applicable Tax Authority when due any additional State Income Tax required
to be paid as a result of any adjustment to the Tax liability with respect
to any Tax Return for any Consolidated or Combined State Income Tax for
any Pre-Distribution Period. Systems shall pay to GS its respective share
of any such additional Tax payment determined by Systems in accordance
with Section 2.03(b)(ii) within 120 days from the later of (i) the date
the additional Tax was
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paid by GS or (ii) the date of receipt by Systems of a written notice and
demand from GS for payment of the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in
reasonable detail the particulars relating thereto. Systems shall also pay
to GS interest on its respective share of such Tax computed at the Prime
Rate based on the number of days from the date the additional Tax was paid
by GS to the date of its payment to GS under this Section 5.04(a).
(b) Adjustments Resulting in Overpayments. Within 120 days of
receipt by GS of any Tax Benefit resulting from any adjustment to the Tax
liability with respect to any Tax Return for any Consolidated or Combined
State Income Tax for any Pre-Distribution Period, GS shall pay to Systems
its share of any such Tax Benefit determined by Systems. Any payments
required under this Section 5.04(b) computed at the Prime Rate based on
the number of days from the date the Tax Benefit was received by GS to the
date of payment to Systems under this Section 5.04(b).
5.05 Payment of Separate Company Taxes. Each Company shall pay, or
shall cause to be paid, to the applicable Tax Authority when due all Separate
Company Taxes owed by such Company or a member of such Company's Group.
5.06 Indemnification Payments. If any Company (the "payor") is
required to pay to a Tax Authority a Tax that another Company (the "responsible
party") is required to pay to such Taxing Authority under this Agreement, the
responsible party shall reimburse the payor within 30 days of delivery by the
payor to the responsible party of an invoice for the amount due, accompanied by
evidence of payment and a statement detailing the Taxes paid and describing in
reasonable detail the particulars relating thereto. The reimbursement shall
include interest on the Tax payment computed at the Prime Rate based on the
number of days from the date of the payment to the Tax Authority to the date of
reimbursement under this Section 5.06.
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Section 6. Tax Benefits
If a Tax Benefit accrues to a member of one Group as the result of
an adjustment to any Tax Return with respect to any Taxes for which a member of
another Group is liable hereunder, the Company to which such Tax Benefit accrues
shall make a payment to the Company that is liable for such Taxes hereunder
within 30 days following accrual of the Tax Benefit. Such payment shall be in an
amount equal to the present value of such Tax Benefit (including any Tax Benefit
realized as a result of the payment), plus interest on such amount computed at
the Prime Rate based on the number of days from the date of accrual of the Tax
Benefit to the date of payment of such amount under this Section; provided,
however, that no payment under this Section 6 by the Company to which such Tax
Benefit accrues shall exceed the present value of the detriment to the Company
liable for such Taxes, which deteriment results from the adjustment giving rise
to such Tax Benefit.
Section 7. Assistance and Cooperation
7.01 General. After the Distribution Date, each of the Companies
shall cooperate (and cause their respective Affiliates to cooperate) with each
other and with each other's agents, including accounting firms and legal
counsel, in connection with Tax matters relating to the Companies and their
Affiliates including (i) preparation and filing of Tax Returns, (ii) determining
the liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Companies
and their Affiliates available to such other Companies as provided in Section 8.
Each of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or
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for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes. Any information or
documents provided under this Section 7 shall be kept confidential by the
Company receiving the information or documents, except as may otherwise be
necessary in connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
7.02 Income Tax Return Information. Each Company will provide to
each other Company information and documents relating to their respective Groups
required by the other Companies to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with GI's past practices. Any additional information or documents the
Responsible Company requires to prepare such Tax Returns will be provided in
accordance with past practices, if any, or as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns timely.
Section 8. Tax Records
8.01 Retention of Tax Records. Except as provided in Section 8.02,
each Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of their respective Groups for Pre-Distribution Tax
Periods, and Systems shall preserve and keep all other Tax Records relating to
Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the
contents thereof may become material in the administration of any matter under
the Code or other applicable Tax Law, but in any event until the later of (i)
the expiration of any applicable statutes of limitation, and (ii) seven years
after the Distribution Date. If, prior to the expiration of the applicable
statute of limitation and such seven-year period, a Company reasonably
determines that any Tax Records which it is required to preserve and keep under
this Section 8 are no longer material in the administration of any matter under
the Code or other applicable Tax Law, such Company may dispose of such records
upon 90 days prior notice to the other Companies. Such notice shall include a
list of the records to be disposed of describing in reasonable detail each file,
book, or other record accumulation being disposed. The notified
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Companies shall have the opportunity, at their cost and expense, to copy or
remove, within such 90-day period, all or any part of such Tax Records.
8.02 State Income Tax Returns. Tax Returns with respect to State
Income Taxes and workpapers prepared in connection with preparing such Tax
Returns shall be preserved and kept, in accordance with the guidelines of
Section 8.01, by the Company responsible for preparing and filing the applicable
Tax Return.
8.03 Access to Tax Records. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
Section 9. Tax Contests
9.01 Notice. Each of the parties shall provide prompt notice to the
other parties of any pending or threatened Tax audit, assessment or proceeding
or other Tax Contest of which it becomes aware related to Taxes for Tax Periods
for which it is indemnified by one or more other parties hereunder. Such notice
shall contain factual information (to the extent known) describing any asserted
Tax liability in reasonable detail and shall be accompanied by copies of any
notice and other documents received from any Tax Authority in respect of any
such matters. If an indemnified party has knowledge of an asserted Tax liability
with respect to a matter for which it is to be indemnified hereunder and such
party fails to give the indemnifying party prompt notice of such asserted Tax
liability, then (i) if the indemnifying party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(ii) if the indemnifying party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying
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party is otherwise required to pay the indemnified party pursuant to this
Agreement shall be reduced by the amount of such detriment.
9.02 Control of Tax Contests. Each Company shall have full
responsibility and discretion in handling, settling or contesting any Tax
Contest involving a Tax for which it is liable pursuant to Section 2 of this
Agreement; provided, however, Systems may participate in any Tax Contest with
respect to Restructuring Taxes regardless of whether it has liability or
indemnification obligations with respect to such Taxes under this Agreement.
Section 10. Effective Date; Termination of Prior Intercompany Tax
Allocation Agreements. This Agreement shall be effective on the Distribution
Date. Immediately prior to the close of business on the Distribution Date (i)
all Prior Intercompany Tax Allocation Agreements (the "Prior Agreements") shall
be terminated, and (ii) amounts due under such Prior Agreements as of the
Distribution Date shall be settled as of the Distribution Date (including
capitalization or distribution of amounts due or receivable under such
agreements). Upon such termination and settlement, no further payments by or to
the GS Group, by or to the CommScope Group, or by or to the Systems Group, with
respect to such Prior Agreements shall be made, and all other rights and
obligations resulting from such Prior Agreements between the Companies and their
Affiliates shall cease at such time. Any payments pursuant to such Prior
Agreements shall be ignored for purposes of computing amounts due under this
Agreement.
Section 11. No Inconsistent Actions.
(a) Each of the Companies covenants and agrees that it will not take
any action, and it will cause its Affiliates to refrain from taking any
action, which may be inconsistent with the Tax treatment of the
Transactions as contemplated in the Ruling Request (any such action is
referred to in this Section 11 as a "Tainting Act"), unless (i) the
Company or Affiliate thereof proposing such Tainting Act (the "Requesting
Party") either (A) obtains a ruling with respect to the Tainting Act from
the Internal Revenue Service or other applicable Tax Authority that is
reasonably satisfactory to each other Company (the "Requested Parties")
(except that the
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Requesting Party shall not submit any such ruling request if a Requested
Party determines in good faith that filing such request might have a
materially adverse effect upon such Requested Party), or (B) obtains an
unqualified opinion of independent nationally recognized tax counsel
acceptable to each Requested Party, on a basis of assumed facts and
representations consistent with the facts at the time of such action, that
such Tainting Act will not affect the Tax treatment of the Transactions as
contemplated in the Ruling Request, or (ii) each Requested Party consents
in writing to such Tainting Act, which consent shall be granted or
withheld in the sole and absolute discretion of each such Requested Party.
Without limiting the foregoing:
(i) Specified Actions. During the two year period following
the Distribution Date, unless clause (i) or (ii) of the preceding
paragraph is satisfied with respect to the applicable action, no
Company or its Affiliate will (A) liquidate or merge with or into
any other corporation (other than a merger which results in the
outstanding stock of such Company or its Affiliates immediately
before the merger continuing to represent at least eighty (80)
percent of the outstanding voting stock and non-voting stock of the
merged corporations after the transaction); (B) issue more than 20%,
by vote or value, of its capital stock in one or more transactions;
(C) redeem, purchase or otherwise reacquire more than five (5)
percent, by vote or value, of its capital stock in one or more
transactions (other than in connection with future employee benefit
plans or pursuant to a future market purchase program involving five
(5) percent or less of its publicly traded stock); (D) sell,
exchange, distribute or otherwise dispose of, other than in the
ordinary course of business, more than 25% of the assets
constituting the trades or businesses relied upon in the Ruling
Request to sastisfy Section 355(b) of the Code; or (E) discontinue
or cause to be discontinued the active conduct of the trades or
businesses relied upon in the Ruling Request to satisfy Section
355(b) of the Code.
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(ii) No Inconsistent Plan or Intent. Each of the Companies
represents and warrants that neither it nor any of its Affiliates
has any plan or intent to take any action which is inconsistent with
any factual statements or representations in the Ruling Request.
Regardless of any change in circumstances, each of the Companies
covenants and agrees that it will not take, and it will cause its
Affiliates to refrain from taking, any such inconsistent action on
or before the last day of the calendar year ending after the second
anniversary of the Distribution Date other than as permitted in this
Section 11.
(iii) Amended or Supplemental Rulings. Each of the Companies
covenants and agrees that it will not file, and it will cause its
Affiliates to refrain from filing, any amendment or supplement to
the Ruling Request subsequent to the Distribution Date without the
consent of the other Companies, which consent shall not be
unreasonably withheld.
(b) Notwithstanding anything to the contrary in this Agreement, each
Company shall be solely liable for, and shall indemnify and hold harmless
each other Company from any Restructuring Tax resulting from a Tainting
Act by such first Company or its Affiliates, regardless of whether clause
(i) or (ii) of Section 11(a) was satisfied with respect to such Tainting
Act.
Section 12. Survival of Obligations. The representations,
warranties, covenants and agreements set forth in this Agreement shall be
unconditional and absolute and shall remain in effect without limitation as to
time.
Section 13. Employee Matters. Each of the Companies agrees to
utilize, or cause its Affiliates to utilize, the alternative procedure set forth
in Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to wage reporting.
Section 14. Treatment of Payments; Tax Gross Up
14.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the
absence of any change in tax treatment under the Code or other applicable Tax
Law,
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(a) any Tax indemnity payments made by a Company under Section 5
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring
immediately before the Systems Distribution on the Distribution Date, but
only to the extent the payment does not relate to a Tax allocated to the
payor in accordance with Treasury Regulation Section 1.1502-33(d) (or
under corresponding principles of other applicable Tax Laws), and
(b) any Tax Benefit payments made by a Company under Section 6,
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring
immediately before the Systems Distribution on the Distribution Date, but
only to the extent the payment does not relate to a Tax allocated to the
payor in accordance with Treasury Regulation Section 1.1502-33(d) (or
under corresponding principles of other applicable Tax Laws).
14.02 Tax Gross Up. If notwithstanding the manner in which Tax
indemnity payments and Tax Benefit payments were reported, there is an
adjustment to the Tax liability of a Company as a result of its receipt of a
payment pursuant to this Agreement, such payment shall be appropriately adjusted
so that the amount of such payment, reduced by the amount of all Income Taxes
payable with respect to the receipt thereof (but taking into account all
correlative Tax Benefits resulting from the payment of such Income Taxes), shall
equal the amount of the payment which the Company receiving such payment would
otherwise be entitled to receive pursuant to this Agreement.
14.03 Interest Under This Agreement. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest
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payment shall be treated as interest expense to the indemnitor (deductible to
the extent provided by law) and as interest income by the indemnitee (includible
in income to the extent provided by law). The amount of the payment shall not be
adjusted under Section 14.02 to take into account any associated Tax Benefit to
the indemnitor or increase in Tax to the indemnitee.
Section 15. Disagreements. If after good faith negotiations the
parties cannot agree on the application of this Agreement to any matter, then
the matter will be referred to a nationally recognized accounting firm
acceptable to each of the parties (the "Accounting Firm"). The Accounting Firm
shall furnish written notice to the parties of its resolution of any such
disagreement as soon as practical, but in any event no later than 45 days after
its acceptance of the matter for resolution. Any such resolution by the
Accounting Firm will be conclusive and binding on all parties to this Agreement.
In accordance with Section 17, each party shall pay its own fees and expenses
(including the fees and expenses of its representatives) incurred in connection
with the referral of the matter to the Accounting Firm. All fees and expenses of
the Accounting Firm in connection with such referral shall be shared equally by
the parties affected by the matter.
Section 16. Late Payments. Any amount owed by one party to another
party under this Agreement which is not paid when due shall bear interest at the
Prime Rate plus two percent, compounded semiannually, from the due date of the
payment to the date paid. To the extent interest required to be paid under this
Section 16 duplicates interest required to be paid under any other provision of
this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
Section 17. Expenses. Except as provided in Section 15, each party
and its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.
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Section 18. General Provisions
18.01 Addresses and Notices. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered in party or
when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
address as follows:
If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.
18.02 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
18.03 Waiver. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
18.04 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
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18.05 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.
18.06 Integration. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter of this Agreement and
supersedes all prior agreements and understandings pertaining thereto. In the
event of any inconsistency between this Agreement and the Distribution Agreement
or any other agreements relating to the transactions contemplated by the
Distribution Agreement, the provisions of this Agreement shall control.
18.07 Construction. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning and shall not be
strictly construed for or against any party.
18.08 No Double Recovery; Subrogation. No provision of this
Agreement shall be construed to provide an indemnity or other recovery for any
costs, damages, or other amounts for which the damaged party has been fully
compensated under any other provision of this Agreement or under any other
agreement or action at law or equity. Unless expressly required in this
Agreement, a party shall not be required to exhaust all remedies available under
other agreements or at law or equity before recovering under the remedies
provided in this Agreement. Subject to any limitations provided in this
Agreement (for example, the limitation on filing claims for refund in Section
4.06), the indemnifying party shall be subrogated to all rights of the
indemnified party for recovery from any third party.
18.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
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18.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.5
TRADEMARK LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), between and among NextLevel Systems, Inc., a Delaware corporation
("NextLevel Systems"), CommScope, Inc., a Delaware corporation ("CommScope"),
and General Semiconductor, Inc., a Delaware corporation ("GS").
RECITALS
WHEREAS, General Instrument Corporation, a Delaware corporation
("GI"), is being separated and divided into three separate and independent
public companies and, in order to effectuate the separation, (a) GI intends to
distribute (the "Next Level Systems Distribution"), as a dividend to the holders
of shares of common stock, par value $.01 per share, of GI, shares of common
stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems
Common Stock") and (b) NextLevel Systems intends to distribute, following the
NextLevel Systems Distribution, as a dividend to the holders of NextLevel
Systems Common Stock, shares of common stock, par value $.01 per share of
CommScope (the "CommScope Distribution"; and, together with the NextLevel
Systems Distribution, the "Distributions");
WHEREAS, the Distributions will be effected pursuant to a
Distribution Agreement, dated as of June 12, 1997 (the "Distribution
Agreement"), among NextLevel Systems, CommScope and GI;
WHEREAS, the NextLevel Systems Distribution is becoming effective as
of the date hereof (the "NextLevel Systems Distribution Date");
WHEREAS, NextLevel Systems, as a result of the NextLevel Systems
Distribution, is the owner of all right, title and interest in and to the GI
Trademarks (as hereinafter defined);
WHEREAS, NextLevel Systems desires to license to both CommScope and
GS the use of the GI Trademarks for limited purposes for a transitional period
of time after the NextLevel Systems Distribution Date to avoid operating
inefficiencies and unnecessary expense, and CommScope and GS desire to take such
license for said purposes; and
WHEREAS, the parties hereto have determined that this Agreement is
appropriate in order to effectuate the purposes of the Distribution Agreement as
described therein.
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NOW, THEREFORE, in consideration of the mutual agreements,
undertakings and covenants herein and therein, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01 General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Agreement" shall have the meaning specified in the first paragraph
hereof.
"Ancillary Agreements" shall have the meaning as set forth in the
Distribution Agreement.
"CommScope Distribution" shall have the meaning specified in the
recitals to this Agreement.
"Distributions" shall have the meaning specified in the recitals to
this Agreement.
"Distribution Agreement" shall have the meaning specified in the
recitals to this Agreement.
"GI Trademarks" shall mean GENERAL INSTRUMENT, the logo "GI", and
all other trademarks, service marks, and trade names containing "General
Instrument" or variations thereof, along with their respective applications and
registrations wherever used or registered and the goodwill associated therewith.
"NextLevel Systems Common Stock" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution Date" shall have the meaning
specified in the recitals to this Agreement.
"Notice" shall have the meaning specified in Section 4.03 hereof.
"Subsidiary", with respect to any party, shall mean any corporation,
partnership, joint venture or other entity of which such party, directly or
indirectly, owns an interest sufficient to elect a majority of the board of
directors (or persons performing
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similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency).
"Transition Period" shall have the meaning specified in Section
2.01(a) hereof.
ARTICLE II. GI TRADEMARKS LICENSE
Section 2.01 Subject to the terms and conditions of this Agreement,
NextLevel Systems hereby grants to each of CommScope and GS a limited,
non-assignable, worldwide, non-exclusive, royalty-free license, without right to
grant sublicenses (except to Subsidiaries of each of CommScope or GS, as the
case may be), to use the GI Trademarks and the goodwill appurtenant thereto, as
follows:
(a) For a period of up to 12 months (the "Transition Period")
following the NextLevel Systems Distribution Date, each of CommScope and GS and
their respective Subsidiaries shall be entitled to use and/or sell its existing
parts and products which have imprinted thereon the GI Trademarks to the extent
that such parts and products were existing inventory (or had been sold by GI)
prior to the NextLevel Systems Distribution Date. From and after the NextLevel
Systems Distribution Date, CommScope, GS and their respective Subsidiaries shall
not print or manufacture any new parts or products bearing the GI Trademarks.
Each of CommScope, GS and their respective Subsidiaries shall cease using and/or
selling any parts and products bearing the GI Trademarks as soon as practicable
but in no event later than the end of the Transition Period.
(b) For the Transition Period, each of CommScope and GS and their
respective Subsidiaries shall be entitled to use the GI Trademarks on existing
signs, stationery, displays or other identification or advertising material to
the extent that such signs, stationery, displays or other identification or
advertising material were existing prior to the NextLevel Systems Distribution
Date. From and after the NextLevel Systems Distribution Date, CommScope, GS and
their respective Subsidiaries shall not prepare, print or install any new signs,
stationery, displays or other identification or advertising material bearing the
GI Trademarks. Each of CommScope, GS and their respective Subsidiaries shall
remove any and all references to the GI Trademarks from any and all signs,
stationery, displays or other identification or advertising material as soon as
practicable but in no event later than the end of the Transition Period.
Section 2.02 Each of CommScope and GS, when using the GI Trademarks
under this Agreement, undertakes to comply substantially with all laws
pertaining to
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the GI Trademarks. This provision includes compliance with marking requirements.
Each of CommScope and GS represents and warrants that all goods and services to
be sold under the GI Trademarks and the marketing, sales, and distribution of
them shall meet or exceed all federal, state, and local laws, ordinances,
standards, regulations, and guidelines pertaining to such products or
activities, including, but not limited to, those pertaining to product safety,
quality, labeling and propriety. Each of CommScope and GS agrees that it will
not package, market, sell, or distribute any goods or services or cause or
permit any goods or services to be packaged, marketed, sold, or distributed in
violation of any such federal, state, or local law, ordinance, standard,
regulation, or guideline.
Section 2.03 The GI Trademarks license granted herein is for the
sole purpose of assisting each of CommScope and GS to effectuate the purposes of
the Distribution Agreement as described therein and is not assignable or
transferable in any manner whatsoever.
Section 2.04 Any and all goodwill arising from CommScope's or GS's
use of the GI Trademarks shall inure solely to the benefit of NextLevel Systems,
and neither CommScope nor GS shall assert any claims to the GI Trademarks or
such goodwill. Neither CommScope nor GS shall, at any time, do or suffer to be
done any act or thing which in any way adversely affects any rights in and to
the GI Trademarks or any goodwill associated therewith or which reduces the
value of the GI Trademarks or detracts from their reputation.
Section 2.05 (a) The GI Trademarks license granted herein to
CommScope may be terminated by NextLevel Systems at any time, at NextLevel
Systems' option, in the event of a material breach of any term of this Article
II by CommScope, upon written Notice to CommScope.
(b) The GI Trademarks license granted herein to GS may be terminated
by NextLevel Systems at any time, at NextLevel Systems' option, in the event of
a material breach of any term of this Article II by GS, upon written Notice to
GS.
Section 2.06 Upon termination under Section 2.05 of the GI
Trademarks license granted herein, or expiration of the time periods set forth
in Section 2.01, (a) CommScope and GS's rights, as applicable, with respect to
use of the GI Trademarks in any way shall be as if this Agreement had not been
entered into and (b) CommScope and GS, as applicable, shall cease using the GI
Trademarks immediately in all ways. In addition, CommScope and GS, as
applicable, will destroy all documents and materials bearing the GI Trademarks
and will certify to NextLevel Systems that it has done so. CommScope and GS will
not at any time adopt or use without NextLevel Systems' prior
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written consent, any word or mark which is likely to be similar to or confusing
with the GI Trademarks.
Section 2.07 Each of CommScope and GS hereby acknowledge NextLevel
Systems' exclusive right, title and interest in and to the GI Trademarks and
agree that it will not at any time do or cause to be done any act or thing
contesting or in any way impairing any part or all of such right, title and
interest. CommScope and GS agree that they shall not in any manner represent
that they have any ownership in the GI Trademarks or registrations thereof and
hereby acknowledge that use of the GI Trademarks will inure to the benefit of
NextLevel Systems.
ARTICLE III. UNDERTAKINGS
Section 3.01 To the extent that the grants of the GI Trademarks
licenses under Article II herein would violate or be prohibited by any agreement
with a third party, and such GI Trademarks are actually used by the grantee
party, then the granting party undertakes to use reasonable efforts to obtain
the necessary consent(s) from such third party so as to be permitted to make
such grants. However, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications, possibly
contemplated by this Agreement will satisfy the provisions of any and all
applicable agreements or the requirements of any or all applicable laws or
judgments.
ARTICLE IV. MISCELLANEOUS
Section 4.01 Entire Agreement. This Agreement, together with the
Distribution Agreement and the Ancillary Agreements (as defined in the
Distribution Agreement) constitute the entire agreement and understanding
between and among the parties with respect to the subject matter hereof and
shall supersede any prior agreements and understandings among the parties with
respect to such subject matter.
Section 4.02 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.
Section 4.03 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 or sent by telecopy, (b) if sent
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<PAGE>
by nationally recognized overnight courier, or (c) if sent by registered or
certified mail, postage prepaid, return receipt requested, and in each case
addressed as follows:
If to NextLevel Systems, to: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, to: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
If to GS, to: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
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 4.04 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish the first party's right to demand strict performance thereafter of
that or any other provision hereof.
Section 4.05 Amendments. This Agreement may be amended, supplemented
or waived only by a subsequent writing signed by each of the parties.
Section 4.06 Assignment. This Agreement may not be assigned by any
party without the consent of the other parties.
Section 4.07 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 4.08 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any
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<PAGE>
entity that becomes a Subsidiary of such party on and after the NextLevel
Systems Distribution Date.
Section 4.09 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 hereto.
Section 4.10 Specific Performance. Each of the parties hereto
acknowledges that there is no adequate remedy at law for failure by such parties
to comply with the provisions of this Agreement and that such failure would
cause immediate harm that would not be adequately compensable in damages, and
therefore agree that their agreements contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Agreement.
Section 4.11 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 4.12 Interpretation. The parties intend that the
Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986,
as amended, so that no gain or loss shall be recognized for Federal income tax
purposes as a result of the transaction, and all provisions of this Agreement
shall be so interpreted.
Section 4.13 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby, so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to any
party.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.6
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), between NextLevel Systems, Inc., a Delaware corporation ("Service
Provider" or "NextLevel Systems") and CommScope, Inc., a Delaware corporation
("Recipient" or "CommScope").
WHEREAS, General Instrument Corporation, a Delaware corporation
("GI"), is being separated and divided into three separate and independent
public companies and, in order to effectuate the separation, (a) GI intends to
distribute (the "Next Level Systems Distribution"), as a dividend to the holders
of shares of common stock, par value $.01 per share, of GI, shares of common
stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems
Common Stock") and (b) NextLevel Systems intends to distribute, following the
NextLevel Systems Distribution, as a dividend to the holders of NextLevel
Systems Common Stock, shares of common stock, par value $.01 per share of
CommScope (the "CommScope Distribution"; and, together with the NextLevel
Systems Distribution, the "Distributions");
WHEREAS, the Distributions will be effected pursuant to a
Distribution Agreement, dated as of June 12, 1997 (the "Distribution
Agreement"), among NextLevel Systems, CommScope and GI;
WHEREAS, the NextLevel Systems Distribution is becoming effective as
of the date hereof (the "NextLevel Systems Distribution Date"); and
WHEREAS, in order to facilitate the orderly continuation of
Recipient's business for a transitional period after the NextLevel Systems
Distribution Date, Service Provider has agreed to provide to Recipient, and
Recipient has agreed to purchase from Service Provider, the Transition Services
described in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
respective covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the following
terms shall have the following respective meanings (capitalized terms used but
not defined herein shall have the respective meanings ascribed thereto in the
Distribution Agreement):
"Agreement" shall have the meaning specified in the first paragraph
hereof.
<PAGE>
"CommScope Distribution" shall have the meaning specified in the
recitals to this Agreement.
"Distributions" shall have the meaning specified in the recitals
to this Agreement.
"Distribution Agreement" shall have the meaning specified in the
recitals to this Agreement.
"GI" shall have the meaning specified in the recitals to this
Agreement.
"NextLevel Systems Common Stock" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution Date" shall have the meaning
specified in the recitals to this Agreement.
"Notice" shall have the meaning specified in Section 4.08 hereof.
"Other Services" shall have the meaning specified in Section 2.04.
"Recipient" shall have the meaning set forth in the first
paragraph hereof.
"Service Provider" shall have the meaning set forth in the first
paragraph hereof.
"Transition Period" shall mean, for each Transition Service, the
transition period (commencing on the NextLevel Systems Distribution Date) set
forth opposite such Transition Service on Schedule I hereto.
"Transition Services" shall mean the administrative services set
forth on Schedule I hereto.
ARTICLE II
TRANSITION SERVICES
Section 2.01. Transition Period. Service Provider shall make
available to Recipient each of the Transition Services for the applicable
Transition Period on the terms and subject to the conditions set forth herein.
The Transition Period for each Transition Service may be extended for such
additional periods as may be mutually agreed by the parties hereto. The Service
Provider shall only be obligated to provide
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Transition Services during normal business hours and in a manner that will not
interfere with the Service Provider's business operations.
Section 2.02. Fees. Recipient shall pay to Service Provider the fees
set forth on Schedule I hereto in respect of each of the Transition Services,
plus reasonable out-of-pocket expenses incurred by the Service Provider in
providing the Transition Services (including, but not limited to travel,
overnight lodging, telephone, postage, reproduction costs, computer time,
supplies and parts). Any payments required to be made hereunder shall be due and
payable within 30 days of the date of invoice. Recipient shall pay any
value-added tax and any tariff, duty, export or import fee, sales tax, use tax,
service tax or other tax or charge subsequently imposed by any government or
government agency on Recipient or Service Provider with respect to the
Transition Services or the execution or performance of this Agreement.
Section 2.03. Performance of Transition Services. Service Provider
agrees to perform the Transition Services to be provided hereunder in a
professional and competent manner, using at least the same standard of care that
it uses in performing such services in its own affairs. Recipient understands
that the Transition Services provided hereunder are transitional in nature and
are furnished by Service Provider solely for the purpose of facilitating the
Distributions. Recipient understands that Service Provider is not in the
business of providing Transition Services to third parties and has no long term
interest in continuing this Agreement. Recipient agrees to make a transition to
its own internal organization or other third party suppliers for the Transition
Services as promptly as practicable.
Section 2.04. Other Services. From time to time, Recipient may find
it desirable to request, in addition to the Transition Services, additional
services to be made available to Recipient by Service Provider ("Other
Services"). It is understood and agreed, however, that Service Provider is under
no obligation to provide Other Services, nor has Service Provider made any
promises, representations, or commitments to provide Recipient with any such
Other Services. Upon Recipient's written request for such Other Services, the
parties shall commence negotiations in good faith in order to arrange for the
delivery thereof and compensation therefor. Any such Other Services shall only
be deemed to be Transition Services upon execution of an amendment to Schedule I
signed by each party hereto.
Section 2.05. Personnel. Service Provider shall select, employ, pay,
supervise, and direct all Service Provider personnel providing Transition
Services hereunder. Service Provider shall be solely responsible for the payment
of all direct and indirect compensation (including fringe benefits) for Service
Provider personnel assigned to perform services under this Agreement, and shall
be responsible for worker's compensation insurance, employment taxes, and other
employer liabilities relating to such
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<PAGE>
personnel. Service Provider shall be solely responsible for assigning personnel
to perform the Transition Services, which personnel shall be instructed by
Service Provider to perform the Transition Services in a timely, efficient and
workmanlike manner.
ARTICLE III
NO WARRANTIES; LIMITATION ON LIABILITY; INDEMNIFICATION
Section 3.01. No Warranties. Service Provider makes no warranties,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose with respect to the
Transition Services to be provided hereunder.
Section 3.02. Limitation on Liability. In no event shall Service
Provider be liable for any incidental or consequential damages (including
without limitation lost profits) to Recipient arising from the provision of the
Transition Services by Service Provider hereunder, other than for Service
Provider's gross negligence or willful misconduct.
Section 3.03. Indemnification. Recipient agrees to indemnify, defend
and hold harmless Service Provider, its directors, officers, employees, agents
and representatives from any and all claims, actions, demands, judgments,
losses, costs, expenses, damages and liabilities (including but not limited to
attorneys fees and other expenses of litigation) arising out of or connected
with the Transition Services supplied under this Agreement or in any way related
to this Agreement, regardless of the legal theory asserted (other than such as
result directly from Service Provider's gross negligence or willful misconduct).
Recipient further agrees to reimburse Service Provider and indemnify, defend and
hold harmless Service Provider, its directors, officers, employees, agents, and
representatives from any and all claims, actions, demands, judgments, losses,
costs, expenses, damages, and liabilities (including but not limited to
attorneys fees and expenses of litigation), arising from or related to any
Recipient act or omission connected with the provision of any Transition Service
by Service Provider in the performance of this Agreement or caused by any
Recipient product or information provided to Service Provider in connection with
the Transition Services. This indemnity shall apply to claims, actions and
demands for which Service Provider may be, or may be claimed to be, partially or
solely liable. The parties agree that the indemnities set forth in this Section
3.03 shall not apply to claims between the parties arising out of or connected
to this Agreement. Service Provider shall promptly notify Recipient in writing
of any claim, action, or demand for which Service Provider intends to claim
indemnification hereunder (however, failure to give such notice shall not
relieve Recipient from its obligations hereunder). Service Provider agrees that
Recipient will control the defense of all claims, actions, or demands which are
indemnified against hereunder at Recipient's expense, unless Service Provider
notifies Recipient that it will assume responsibility
- 4 -
<PAGE>
therefor (in which event Recipient shall bear all expenses thereof, including
fees and expenses of one counsel and any local counsel). Service Provider will
cooperate fully with Recipient and its legal representatives in the
investigation and defense of any claim, action, or demand covered by this
indemnification. Service Provider will permit Recipient to settle any claim,
action or demand and agrees that Recipient will control such settlement,
provided, however that such settlement does not adversely affect Service
Provider's rights under this Agreement or impose any obligations on Service
Provider in addition to those stated in this Agreement. Recipient, in the
defense of any claims, actions or demands, will not consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term the giving by the claimant or plaintiff to Service Provider of a release
from all liability with respect to the claim, action, or demand. No such claim,
action, or demand will be settled by Service Provider without the prior written
consent of Recipient.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Cooperation. The parties hereto shall cooperate with
each other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other during the Transition Period to
facilitate the orderly transition of the separation of the businesses of
NextLevel Systems, CommScope and GS and to minimize any disruption to the
respective businesses that might result from the transactions contemplated by
the Distribution Agreement and hereby.
Section 4.02. Relationship of the Parties. The parties hereto agree
that, from after the NextLevel Systems Distribution Date, nothing herein shall
constitute, be construed to be, or create a partnership, joint venture or
similar relationship between them, and that any actions performed by or on
behalf of another party hereunder shall be as an agent for such other party.
Section 4.03. Amendments. This Agreement may be amended,
supplemented or waived only by a subsequent writing signed by all of the
parties hereto.
Section 4.04. 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 hereto.
Section 4.05. Termination. This Agreement shall be automatically
terminated without action by either party if the Distribution Agreement is
terminated and the NextLevel Systems Distribution is abandoned. In the event of
such termination, neither party shall have any liability of any kind to the
other party. This Agreement, or
- 5 -
<PAGE>
any Transition Service provided hereunder, may be terminated by either party
upon written notice to the other party if the other party fails to perform or
otherwise breaches an obligation under this Agreement; provided, however, that
such party failing to perform or otherwise breaching shall have thirty days from
the date notice of intention to terminate is received to cure the failure to
perform or breach of an obligation. Notwithstanding the foregoing, neither party
shall be responsible for any delay in the performance of any obligation
hereunder due to labor disturbances, accidents, fires, floods, wars, riots,
rebellions, blockages, acts of governments, governmental requirements and
regulations, restrictions imposed by law or any other similar conditions, beyond
the reasonable control and without the fault or negligence of such party, and
the time for performance by such party shall be extended by the period of such
delay.
Section 4.06. Confidentiality. From and after the NextLevel Systems
Distribution Date, each of Service Provider and Recipient shall hold, and cause
their affiliates, directors, officers, employees, agents, consultants, advisors
and representatives to hold, in strict confidence, and shall not make use of,
divulge or otherwise disclose any Information (as defined in the Distribution
Agreement) concerning the other party's business obtained by it prior to the
NextLevel Systems Distribution Date, including any trade secret or other similar
proprietary data, or furnished to it by such other party pursuant to the
Distribution Agreement, any ancillary agreements to the Distribution Agreement
or this Agreement, except disclosure to such of its directors, officers,
employees, agents, consultants, advisors, affiliates and representatives, who
shall have a bona fide "need to know" and (in the case of agents, consultants,
advisors and representatives) who shall execute an agreement agreeing to be
bound by the provisions of this Section 4.06, and each party shall be
responsible for a breach by any of such persons or representatives; provided,
however, that the Service Provider or Recipient, or any of their respective
affiliates, may disclose such Information to the extent that: (a) disclosure is
compelled by an order of a court of competent jurisdiction or is required by law
to be disclosed to a governmental authority and the applicable party uses
reasonable efforts to notify the other party prior to (and, to the extent
practicable, at least ten days prior to) any disclosure of Information pursuant
to the foregoing clause (a), except to the extent that the giving of such notice
would be unlawful or violate any order, ruling or directive of any governmental
authority; or (b) such party can show that such Information was (i) available to
such person on a nonconfidential basis (other than from the other party or its
affiliates or representatives) prior to the disclosure by the other party, (ii)
in the public domain through no fault of such person, or (iii) lawfully acquired
by such person from another source after the time it was furnished to such
person by the other party, and not acquired from such source subject to any
confidentiality obligation on the part of such source, or on the part of the
acquiror.
Section 4.07. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
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<PAGE>
THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREUNDER.
Section 4.08. 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 or sent by telecopy, (b) if sent by nationally recognized overnight
courier, or (c) if sent by registered or certified mail, postage prepaid, return
receipt requested, and in each case addressed as follows:
If to Service Provider, to: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to Recipient, to: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
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 4.09. 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 hereto.
Section 4.10. Interpretation. The parties intend that the
Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986,
as amended, so that no gain or loss shall be recognized for Federal income tax
purposes as a result of the transaction, and all provisions of this Agreement
shall be so interpreted.
Section 4.11. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby, so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to any
party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
Exhibit 10.7
===============================================================
CREDIT AGREEMENT
among
COMMSCOPE, INC. OF NORTH CAROLINA,
CERTAIN BANKS,
THE CHASE MANHATTAN BANK,
as Administrative Agent,
and
THE CHASE MANHATTAN BANK,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
BANKBOSTON, N.A.,
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
CIBC INC.,
CREDIT LYONNAIS ATLANTA AGENCY,
FIRST UNION NATIONAL BANK,
THE FUJI BANK, LIMITED, ATLANTA AGENCY,
NATIONSBANK, N.A.,
TORONTO DOMINION (NEW YORK), INC.
and
WACHOVIA BANK, N.A.,
as Co-Agents
Dated as of July 23, 1997
===============================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS................................................... 2
1.1 Defined Terms................................................. 2
1.2 Other Definitional Provisions................................. 20
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS............................................ 20
2.1 Revolving Credit Commitments.................................. 20
2.2 Proceeds of Revolving Credit Loans............................ 21
2.3 Issuance of Letters of Credit................................. 21
2.4 Participating Interests....................................... 22
2.5 Procedure for Opening Letters of Credit....................... 22
2.6 Payments in Respect of Letters of Credit...................... 22
2.7 The Bid Loans................................................. 23
2.8 Procedure for Bid Loan Borrowing.............................. 24
2.9 Bid Loan Payments............................................. 27
2.10 Swing Line Commitment......................................... 27
2.11 Participations................................................ 29
SECTION 3. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT................................... 29
3.1 Procedure for Borrowing....................................... 29
3.2 Conversion Options............................................ 30
3.3 Changes of Commitment Amounts................................. 30
3.4 Optional Prepayments.......................................... 31
3.5 Mandatory Prepayments......................................... 31
3.6 Interest Rates and Payment Dates.............................. 32
3.7 Computation of Interest and Fees.............................. 33
3.8 Facility Fees................................................. 33
3.9 Certain Fees.................................................. 33
3.10 Letter of Credit Fees......................................... 33
3.11 Letter of Credit Reserves..................................... 34
3.12 Further Assurances............................................ 35
3.13 Obligations Absolute.......................................... 35
3.14 Assignments................................................... 36
3.15 Participations................................................ 36
3.16 Inability to Determine Interest Rate.......................... 36
3.17 Pro Rata Treatment and Payments............................... 37
3.18 Illegality.................................................... 40
3.19 Requirements of Law........................................... 40
3.20 Indemnity..................................................... 41
</TABLE>
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3.21 Repayment of Loans, Evidence of Debt.......................... 42
3.22 Mitigation Obligations; Replacement of Banks.................. 43
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 44
4.1 Financial Condition........................................... 44
4.2 No Material Change............................................ 45
4.3 Corporate Existence; Compliance with Law...................... 46
4.4 Corporate Power; Authorization................................ 46
4.5 Enforceable Obligations....................................... 46
4.6 No Legal Bar.................................................. 47
4.7 No Material Litigation........................................ 47
4.8 Investment Company Act........................................ 47
4.9 Federal Regulation............................................ 47
4.10 No Default.................................................... 47
4.11 No Burdensome Restrictions.................................... 48
4.12 Taxes......................................................... 48
4.13 Subsidiaries.................................................. 48
4.14 Ownership of Property; Liens.................................. 48
4.15 ERISA......................................................... 48
4.16 Accuracy of Disclosure........................................ 49
4.17 Intellectual Property......................................... 49
SECTION 5. CONDITIONS PRECEDENT.......................................... 49
5.1 Conditions to Effectiveness of this Agreement................. 49
5.2 Conditions to Initial Loans and Letters of Credit............. 52
5.3 Conditions to All Loans and Letters of Credit................. 52
SECTION 6. AFFIRMATIVE COVENANTS......................................... 53
6.1 Financial Statements.......................................... 53
6.2 Certificates; Other Information............................... 55
6.3 Payment of Obligations........................................ 56
6.4 Conduct of Business and Maintenance of Existence.............. 56
6.5 Maintenance of Property; Insurance............................ 57
6.6 Inspection of Property; Books and Records; Discussions........ 57
6.7 Notices....................................................... 57
6.8 Additional Subsidiary Guarantors.............................. 58
SECTION 7. NEGATIVE COVENANTS............................................ 59
7.1 Amendments of Spin-Off Documents.............................. 59
7.2 Limitation on Liens........................................... 59
7.3 Limitation on Guarantee Obligations........................... 60
</TABLE>
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7.4 Prohibition of Fundamental Changes............................ 61
7.5 Limitation on Sale of Assets.................................. 61
7.6 Limitation on Investments, Loans and Advances................. 62
7.7 Maintenance of Consolidated Net Worth......................... 62
7.8 Maintenance of Interest Coverage.............................. 62
7.9 Maintenance of Leverage Ratio................................. 62
7.10 Limitation on Dividends and Stock Repurchases................. 62
7.11 Transactions with Affiliates.................................. 63
7.12 Foreign Exchange Contracts.................................... 63
7.13 Commodity Hedges.............................................. 63
7.14 Fiscal Year................................................... 63
7.15 Limitation on Indebtedness.................................... 63
SECTION 8. EVENTS OF DEFAULT............................................. 64
SECTION 9. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS.......................................... 67
9.1 Appointment................................................... 67
9.2 Delegation of Duties.......................................... 68
9.3 Exculpatory Provisions........................................ 68
9.4 Reliance by Co-Agents and Administrative Agent................ 68
9.5 Notice of Default............................................. 69
9.6 Non-Reliance on Co-Agents, Administrative Agent and
Other Banks................................................... 69
9.7 Indemnification............................................... 70
9.8 Co-Agents and Administrative Agent in their Individual
Capacities.................................................... 70
9.9 Successor Co-Agent or Administrative Agent.................... 70
9.10 An Issuing Bank as Issuer of Letters of Credit................ 71
SECTION 10. MISCELLANEOUS................................................. 71
10.1 Amendments and Waivers........................................ 71
10.2 Notices....................................................... 72
10.3 No Waiver; Cumulative Remedies................................ 74
10.4 Survival of Representations and Warranties.................... 75
10.5 Payment of Expenses and Taxes................................. 75
10.6 Successors and Assigns; Participations; Purchasing Banks...... 76
10.7 Adjustments; Set-off.......................................... 80
10.8 Judgment...................................................... 81
10.9 Counterparts.................................................. 82
10.10 Integration................................................... 82
10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS.......................... 82
10.12 SUBMISSION TO JURISDICTION; WAIVERS........................... 83
10.13 Acknowledgements.............................................. 83
10.14 No Bankruptcy Proceedings..................................... 84
</TABLE>
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SCHEDULES:
Schedule I Lists of Addresses for Notices; Lending Offices; Commitment
Amounts
Schedule II RESERVED
Schedule III Domestic Subsidiaries
Schedule IV Foreign Subsidiaries
Schedule V Consents
Schedule VI Guarantee Obligations
EXHIBITS:
Exhibit A Bid Loan Confirmation
Exhibit B Bid Loan Offer
Exhibit C Bid Loan Request
Exhibit D-1 Subsidiary Guarantee
Exhibit D-2 Holdings Guarantee
Exhibit E-1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
Exhibit E-2 Opinion of Frank B. Wyatt II, Esq.
Exhibit F-1 Company Closing Certificate
Exhibit F-2 Holdings Closing Certificate
Exhibit G L/C Participation Certificate
Exhibit H Swing Line Loan Participation Certificate
Exhibit I Assignment and Acceptance
Exhibit J Exemption Certificate
Exhibit K Designation Certificate
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CREDIT AGREEMENT, dated as of July 23, 1997, among COMMSCOPE, INC. OF
NORTH CAROLINA, a North Carolina corporation (the "Company"), the several
lenders from time to time parties hereto (the "Banks"), THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative agent for the Banks
(in such capacity, the "Administrative Agent"), and THE CHASE MANHATTAN BANK
("Chase"), Bank of America National Trust and Savings Association,
BankBoston, N.A., Bank of Tokyo-Mitsubishi Trust Company, CIBC Inc., Credit
Lyonnais Atlanta Agency, First Union National Bank, The Fuji Bank, Limited,
Atlanta Agency, NationsBank, N.A., Toronto Dominion (New York), Inc. and
Wachovia Bank, N.A., as co-agents for the Banks (in such capacity,
collectively, the "Co-Agents"; each, individually, a "Co-Agent").
W I T N E S S E T H:
1. Pursuant to the Distribution Agreement dated as of June 12, 1997
(as amended, modified or supplemented from time to time in accordance with
subsection 7.1, the "Distribution Agreement") among General Instrument
Corporation, a Delaware corporation ("GI Holdings"), NextLevel Systems, Inc.,
a Delaware corporation ("NextLevel") which is an indirect wholly-owned
Subsidiary (such term and the other capitalized terms used in these recitals
having the meaning set forth in this Agreement unless the context otherwise
requires) of GI Holdings, and CommScope, Inc., a Delaware corporation
("CommScope") which is an indirect wholly-owned Subsidiary of GI Holdings and
the sole shareholder of the Company, GI Holdings has agreed to separate and
divide the existing businesses of GI Holdings so that (a) the business (the
"Communications Business") of the manufacture and sale of broadband
communications products used in the cable television, satellite and
telecommunications industries shall be owned directly and indirectly by
NextLevel, (b) the business (the "Cable Manufacturing Business") of the
manufacture and sale of coaxial, fiber optic and other electronic cable used
in the cable television, satellite and other industries shall be owned
directly and indirectly by CommScope, and (c) the business (the "Power
Semiconductor Business") of the manufacture and sale of discrete power
rectifiers and transient voltage suppression components used in
telecommunications, automotive and consumer electronic products shall be
directly and indirectly owned by GI Holdings which will be merged with
General Instrument Corporation of Delaware, Inc., a Delaware corporation ("GI
Delaware"), with GI Holdings as the surviving corporation, and be renamed
"General Semiconductor, Inc.", a Delaware corporation ("General
Semiconductor"), immediately following the separation and division described
above and prior to the distribution described in the succeeding paragraph.
2. Following the separation and division described in the preceding
paragraph (a) GI Holdings shall distribute, as a dividend to the holders of
the shares of its common stock, all of the capital stock of NextLevel, which,
at the time of the distribution, will own all of the capital stock of
CommScope, and promptly thereafter (b) NextLevel shall distribute, as a
dividend to the holders of the shares of its common stock, all of the capital
stock of CommScope (the transactions described in paragraph 1 above and this
paragraph 2, as more particularly described in the S-4 Filing (as defined
below), the "Spin-Off").
3. Pursuant to the Distribution Agreement and in connection with
the Spin-Off, certain pre-existing indebtedness of GI Holdings, NextLevel and
CommScope and their respective Subsidiaries will be paid in full and
cancelled and certain other transactions will be
<PAGE>
consummated (the Spin-Off and the other transactions to be performed pursuant
to and in connection with the Spin-Off, the "Spin-Off Transactions").
4. The Company has requested that the Banks, the Administrative
Agent and the Co-Agents enter this Agreement in order to make available to
the Company the $350,000,000 credit facilities described herein on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Company, the Banks, the Administrative Agent
and the Co-Agents hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined in the
preamble hereto shall have the meanings set forth therein, and the following
terms have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by Chase as its
prime rate in effect at its principal office in New York City (the Prime
Rate not being intended to be the lowest rate of interest charged by
Chase in connection with extensions of credit to debtors); "Base CD Rate"
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b) the
C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any
day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the
public information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be published
in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such
day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money
center banks in New York City received at approximately 10:00 A.M., New
York City time, on such day (or, if such day shall not be a Business Day,
on the next preceding Business Day) by the Administrative Agent from
three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; and "Federal Funds Effective Rate"
shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. If for any reason the Administrative Agent
shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Base CD Rate or the
Federal Funds Effective Rate, or both, for any reason, including the
inability or failure of the Administrative Agent to obtain
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<PAGE>
sufficient quotations in accordance with the terms hereof, the ABR shall
be determined without regard to clause (b) or (c), or both, of the first
sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the ABR due
to a change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans": Loans whose interest rate is based on the ABR.
"Absolute Rate Bid Loan": any Bid Loan bearing interest at an
absolute fixed rate.
"Absolute Rate Bid Loan Request": any Bid Loan Request requesting
the Bid Loan Lenders to offer to make Bid Loans at an absolute fixed rate
for the term of the Bid Loan.
"Administrative Agent": as defined in the preamble hereto.
"Affiliate": of any Person (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person including NextLevel and its
Subsidiaries for any period during which Holdings is a Subsidiary of
NextLevel, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control
of a Person shall mean the power, direct or indirect, either to (i) vote
10% or more of the securities having ordinary voting power for the
election of directors of such Person, or (ii) direct or cause the
direction of the management and policies of such Person whether by
contract or otherwise.
"Aggregate Extensions of Credit": at any particular time, the sum
of (a) the aggregate then outstanding principal amount of the Revolving
Credit Loans, (b) the aggregate then outstanding principal amount of the
Bid Loans, (c) the aggregate amount then available to be drawn under all
outstanding Letters of Credit, (d) the aggregate amount of Revolving L/C
Obligations and (e) the aggregate then outstanding principal amount of
the Swing Line Loans.
"Agreement": this Credit Agreement, as amended, supplemented or
modified from time to time.
"Agreement Currency": as defined in subsection 10.8(b).
"Applicable Index Rate": in respect of any Bid Loan requested
pursuant to an Index Rate Bid Loan Request, the applicable Eurodollar
Rate.
"Applicable Margin": for each Eurodollar Loan, the Facility Fee and
the Standby L/C fees, the rate per annum determined from time to time
based upon the Leverage Ratio determined as of the last day of the most
recent fiscal quarter for which the Company has delivered financial
statements pursuant to subsections 6.1(a) and (b) and the related
certificate of the chief financial officer of the Company referred to in
subsection 6.2 as set
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<PAGE>
forth under the relevant column heading below opposite such Leverage
Ratio:
(in basis points)
<TABLE>
Eurodollar Loan Standby
Leverage Ratio Applicable Margin Facility Fee L/C Fee
--------------- ----------------- ------------ ---------
<S> <C> <C> <C>
Less than 1.50 to 1.0 22.50 10.00 22.50
Less than 2.0 to 1.0 but 25.00 15.00 25.00
greater than or equal to
1.5 to 1.0
Less than 2.5 to 1.0 but 41.25 18.75 41.25
greater than or equal to
2.0 to 1.0
Less than 2.75 to 1.0 but 50.00 25.00 50.00
greater than or equal to
2.5 to 1.0
Less than 3.0 to 1.0 but 60.00 30.00 60.00
greater than or equal to
2.75 to 1.0
Greater than or equal to 90.00 35.00 90.00
3.0 to 1.0
</TABLE>
For the purpose of this Agreement, any change in the Eurodollar
Loan Applicable Margin, the Facility Fee and the Standby L/C fees shall
become effective on the day following the delivery to the Administrative
Agent by the Company of the financial statements referred to in
subsections 6.1(a) and (b) and the related certificate of the chief
financial officer of the Company referred to in subsection 6.2 indicating
the Leverage Ratio as of the last day of such period. If the Company
shall fail to deliver the financial statements referred to in subsections
6.1(a) and (b) and the related certificate of the chief financial officer
of the Company referred to in subsection 6.2 indicating the Leverage
Ratio as of such last day, then the Applicable Margin, Facility Fee and
Standby L/C fee shall automatically, and without further act of the
Administrative Agent, the Co-Agents or any Bank, equal the highest
Applicable Margin, Facility Fee and Standby L/C fee set forth above.
Notwithstanding the foregoing, for the period from the Closing Date
through January 25, 1998, the Applicable Margin shall be calculated as if
the Leverage Ratio was less than 2.5 to 1.0 but greater than or equal to
2.0 to 1.0.
"Assignee": as defined in subsection 10.6(c).
"Assignment and Acceptance": an Assignment and Acceptance
substantially in the form of Exhibit I hereto.
"Available Revolving Credit Commitments": as to all the Banks, at a
particular time, an amount equal to the excess, if any, of (a) the
Revolving Credit Commitments at such time less (b) the Aggregate
Extensions of Credit.
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<PAGE>
"Banks": as defined in the preamble hereto and including the
Designated Lenders, if any, from time to time; provided however, that the
term "Bank" shall exclude each Designated Lender when used in reference
to a Revolving Credit Loan (except to the extent a Designated Lender is
the obligee of a Revolving Credit Loan actually funded by it pursuant to
subsection 2.1(c) hereof), the Revolving Credit Commitments or terms
relating to the Revolving Credit Loans (except as noted above) and the
Revolving Credit Commitments.
"Benefitted Bank": as defined in subsection 10.7 hereof.
"Bid Loan": each Bid Loan made pursuant to subsection 2.7.
"Bid Loan Commitment Period": the period from and including the
Closing Date until the date which is 15 days prior to the Revolving
Credit Termination Date.
"Bid Loan Confirmation": each confirmation by the Company of its
acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be
substantially in the form of Exhibit A and shall be delivered to the
Administrative Agent in writing, by telex or by facsimile transmission.
"Bid Loan Interest Payment Date": as to each Bid Loan, each
interest payment date specified by the Company for such Bid Loan in the
related Bid Loan Request.
"Bid Loan Lenders": Banks from time to time designated by the
Company as Bid Loan Lenders as provided in subsection 2.7.
"Bid Loan Maturity Date": as to any Bid Loan, the date specified by
the Company pursuant to subsection 2.8(d)(2) in its acceptance of the
related Bid Loan Offer.
"Bid Loan Offer": each offer by a Bid Loan Lender to make Bid Loans
pursuant to a Bid Loan Request, which Bid Loan Offer shall contain the
information specified in Exhibit B and shall be delivered to the
Administrative Agent by telephone, immediately confirmed by telex or
facsimile transmission.
"Bid Loan Request": each request by the Company for Bid Loan
Lenders to submit bids to make Bid Loans, which request shall contain the
information in respect of such requested Bid Loans specified in Exhibit C
and shall be delivered to the Administrative Agent in writing, by telex
or facsimile transmission, or by telephone, immediately confirmed by
telex or facsimile transmission.
"Board": the Board of Governors of the Federal Reserve System of
the United States.
"Borrowing Date": any Business Day specified in a notice pursuant
to (a) subsection 2.8, 2.10 or 3.1 as a date on which the Company
requests Bid Loan Lenders to make Bid Loans, a Swing Line Bank to make
Swing Line Loans or the Banks to make Revolving Credit Loans,
respectively, hereunder or (b) subsection 2.5 as a date on which the
Company requests an Issuing Bank to issue a Letter of Credit hereunder.
5
<PAGE>
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close, except that, when used in connection with a Eurodollar Loan,
"Business Day" shall mean any Business Day on which dealings in Dollars
between banks may be carried on in London, England and New York City.
"Cable Manufacturing Business": as defined in the recitals hereto.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
net annual assessment rate (rounded upward to the nearest 1/100th of 1%)
determined by the Administrative Agent to be payable on such day to the
Federal Deposit Insurance Corporation or any successor ("FDIC") for
FDIC's insuring time deposits made in Dollars at the offices of Chase in
the United States.
"CD Reserve Percentage": for any day as applied to any ABR Loan,
that percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board (or any successor), for determining the
maximum reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board) in respect of new non-personal time deposits
in Dollars having a maturity of 30 days or more.
"Change in Law": with respect to any Bank, the adoption of any law,
rule, regulation, policy, guideline or directive (whether or not having
the force of law) or any change therein or in the interpretation or
application thereof by any Governmental Authority, including, without
limitation, the issuance of any final rule, regulation or guideline by
any regulatory agency having jurisdiction over such Bank.
"Chase": as defined in the preamble hereto.
"Class": as to any Loan, its nature as a Revolving Credit Loan, Bid
Loan or Swing Line Loan.
"Closing Date": as defined in subsection 5.2.
"Co-Agents": as defined in the preamble hereto.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial L/C": a commercial documentary Letter of Credit under
which the relevant Issuing Bank agrees to make payments in Dollars for
the account of the Company, on behalf of the Company or any Subsidiary
thereof, in respect of obligations of the Company or any Subsidiary
thereof in connection with the importation or exportation of goods in the
ordinary course of business.
"Commitment Percentage" or "Revolving Credit Commitment Percentage":
as to any Bank at any time, the percentage which such Bank's Revolving
Credit Commitment constitutes of all Revolving Credit Commitments.
"Commitments": the collective reference to the Revolving Credit
Commitments
6
<PAGE>
and the Swing Line Commitment; individually, a "Commitment".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and which is treated as a single employer under Section 414 of
the Code.
"CommScope": as defined in the recitals hereto.
"Communications Business": as defined in the recitals hereto.
"Company": as defined in the preamble hereto.
"Consolidated EBITDA": for any period, Consolidated Net Income ((i)
including earnings and losses from discontinued operations and (ii)
excluding extraordinary non-cash gains and losses) of Holdings and its
Subsidiaries for such period, plus to the extent reflected as a charge in
the statement of consolidated net income for such period, the sum of (a)
interest expense (net of interest income), amortization and write-offs of
debt discount and debt issuance costs and commissions, discounts and
other fees and charges associated with Letters of Credit, (b) taxes
measured by income, (c) depreciation and amortization expenses and (d)
non-cash compensation expenses arising from the sale of stock, the
granting of stock options, the granting of stock appreciation rights and
similar arrangements.
"Consolidated Interest Expense": for any period the amount of
interest expense both expensed and capitalized (excluding amortization
and write offs of debt discount and debt issuance costs), net of interest
income, of Holdings and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"Consolidated Net Income": for any period, the net income or net
loss of Holdings and its Subsidiaries for such period (excluding pre-tax
charges related to costs incurred in connection with the Spin-Off not
exceeding $10,000,000 in the aggregate for the period from July 1, 1997
to December 31, 1997), determined in accordance with GAAP on a
consolidated basis, as reflected in the financial statements furnished to
the Administrative Agent in accordance with subsections 6.1(a) and (b)
hereof.
"Consolidated Net Worth": as of any date of determination, all
items which in conformity with GAAP would be included under shareholders'
equity on a consolidated balance sheet of Holdings and its Subsidiaries
at such date, provided, that such amount shall be increased, on a
cumulative basis from July 1, 1997, for (i) amortization and write-offs
of debt discount and debt issuance costs, (ii) any amount reflected as a
charge in Holdings' consolidated income statements for non-cash
compensation arising from the sale of stock, the granting of stock
options, the granting of stock appreciation rights and similar
arrangements and (iii) pre-tax charges related to costs incurred in
connection with the Spin-Off not exceeding $10,000,000 in the aggregate
for the period from July 1, 1997 to December 31, 1997.
"Consolidated Total Indebtedness": as of any date of determination,
all Indebtedness of Holdings and its Subsidiaries which would be
reflected as debt on a
7
<PAGE>
consolidated balance sheet of Holdings prepared in accordance with GAAP.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Credit Documents": the collective reference to this Agreement, any
Registered Form Notes, the Holdings Guarantee and any Subsidiary
Guarantee executed and delivered pursuant to the terms of subsection 6.8.
"Credit Parties": the collective reference to Holdings and each
Subsidiary which is a party, or which at any time becomes a party, to a
Credit Document.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Designated Lender": means a special purpose corporation that is
identified as such on the signature pages hereto next to the caption
"Designated Lender" as well as each special purpose corporation that (i)
shall have become a party to this Agreement pursuant to subsection
10.6(i) hereto, and (ii) is not otherwise a Bank.
"Designating Lender": shall mean each Bank that is identified as
such on the signature pages hereto next to the caption "Designating
Lender" and immediately below the signature of its Designated Lender as
well as each Bank that shall designate a Designated Lender pursuant to
subsection 10.6(i) hereof.
"Designation Agreement": means a designation agreement in
substantially the form of Exhibit K attached hereto, entered into by a
Bank and a Designated Lender and accepted by the Company and the
Administrative Agent.
"Distribution Agreement": as defined in the recitals hereto.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Lending Office": initially the office of each Bank
designated as such in Schedule I; thereafter, one or more other offices
of such Bank, as designated from time to time in a notice from such Bank
to the Administrative Agent.
"Domestic Subsidiary": any Subsidiary of the Company other than a
Foreign Subsidiary.
"DSC Litigation": the case entitled DSC Communications Corporation
and DSC Technologies Corporation v. Next Level Communications, Thomas R.
Eames and Peter W. Keeler, Case No. 4:95cv96 in the United States
District Court for the Eastern District of Texas, Sherman Division for
which the final judgment was entered on June 11, 1996.
"Effective Date": as defined in subsection 5.1.
"Environmental Laws": any and all Federal, state, local or
municipal laws, rules,
8
<PAGE>
orders, regulations, statutes, ordinances, codes, decrees or requirements
of any Governmental Authority regulating, relating to or imposing
liability or standards of conduct concerning environmental protection
matters, including without limitation, Hazardous Materials, as now or may
at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the arithmetic mean (rounded
to the nearest 1/100th of 1%) of the offered rates for deposits in
Dollars with a term comparable to such Interest Period that appears on
the Telerate British Bankers Assoc. Interest Settlement Rates Page (as
defined below) at approximately 11:00 A.M., London time, on the second
full Business Day preceding the first day of such Interest Period;
provided, however, that if there shall at any time no longer exist a
Telerate British Bankers Assoc. Interest Settlement Rates Page,
"Eurodollar Base Rate" shall mean, with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum equal
to the rate at which Chase is offered deposits in Dollars at
approximately 11:00 A.M., London time, two Business Days prior to the
first day of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in
respect of Dollars are then being conducted for delivery on the first day
of such Interest Period for the number of days comprised therein and in
an amount comparable to the amount of its Eurodollar Loan to be
outstanding during such Interest Period. "Telerate British Bankers
Assoc. Interest Settlement Rates Page" shall mean the display designated
as Page 3750 on the Telerate System Incorporated Service (or such other
page as may replace such page on such service for the purpose of
displaying the rates at which Dollar deposits are offered by leading
banks in the London interbank deposit market).
"Eurodollar Lending Office": initially, the office of each Bank
designated as such in Schedule I; thereafter, one or more other offices
of such Bank, if any, which shall be making or maintaining Eurodollar
Loans as designated as such from time to time in a notice from such Bank
to the Administrative Agent.
"Eurodollar Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------------
1.00 - Eurodollar Reserve Requirements
"Eurodollar Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto), as now
and from time
9
<PAGE>
to time hereafter in effect, dealing with reserve requirements prescribed
for eurodollar funding (currently referred to as "Eurodollar Liabilities"
in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System.
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excluded Litigation": the DSC Litigation and any other litigation
specifically described and identified in the S-4 Filing, in each case
only to the extent that the responsibility for the DSC Litigation or such
other litigation, as the case may be, is borne by the party to whom the
Distribution Agreement has allocated responsibility therefor.
"Existing GI Delaware Credit Agreement": The Third Amended and
Restated Credit Agreement dated as of August 12, 1996, as amended, to
which GI Delaware is a party and for which Chase acts as administrative
agent.
"Extensions of Credit": the collective reference to the making of
any Loans and the issuance of any Letters of Credit.
"FL Affiliate": any of FL & Co., the partners of FL & Co. on the
Closing Date, any subordinated debt and equity partnership controlled by
FL & Co., any equity partnership controlled by FL & Co., any Affiliate of
FL & Co., any directors, executive officers or other employees or other
members of the management of Holdings, the Company or any Subsidiary
thereof (or any "associate" (as defined in Rule 405 under the Securities
Act of 1933, as amended) of any thereof or employee benefit plan
beneficially owned by any thereof), the Company or any Subsidiary thereof
on the Closing Date, or any combination of the foregoing.
"FL & Co.": Forstmann Little & Co., a New York partnership.
"Facility Fee": the facility fee payable by the Company pursuant to
subsection 3.8.
"Foreign Subsidiary": any Subsidiary of the Company or Holdings (a)
which is organized under the laws of any jurisdiction outside the United
States (within the meaning of Section 7701(a)(9) of the Code), or (b)
whose principal assets consist of capital stock or other equity interests
of one or more Persons which conduct the major portion of their business
outside the United States (within the meaning of Section 7701(a)(9) of
the Code).
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"General Semiconductor": as defined in the recitals hereto.
"GI Delaware": as defined in the recitals hereto.
"GI Holdings": as defined in the recitals hereto.
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<PAGE>
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent (a) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation shall be
deemed to be an amount equal to the stated or determinable amount (based
on the maximum reasonably anticipated net liability in respect thereof as
determined by the Company in good faith) of the primary obligation or
portion thereof in respect of which such Guarantee Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated net
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by the Company in good faith; provided,
however, that the amount of any Guarantee Obligation associated with the
Company's vendor financing programs shall be deemed to be the amount
estimated by the Company to be its liability in connection therewith and
for which the Company has estimated reserves in accordance with GAAP.
"Guarantees": the collective reference to the Holdings Guarantee
and the Subsidiary Guarantee.
"Hazardous Materials": any substance (a) which is or becomes
defined as a "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, rule
or ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.); and (b) without
limitation, which is or contains petroleum products (including crude oil
or any fraction thereof), PCBs, asbestos, urea formaldehyde foam
insulation, radon gas or infectious or radioactive materials.
"Holdings": CommScope, Inc., a Delaware corporation.
"Holdings Guarantee": the Guarantee to be executed by Holdings in
favor of the Administrative Agent, for the ratable benefit of the Banks,
substantially in the form of Exhibit D-2 hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Indebtedness": of any Person, at any particular date, (a) all
indebtedness of such
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<PAGE>
Person for borrowed money or for the deferred purchase price of property
or services (other than current trade payables or liabilities and
deferred payment for services to employees or former employees incurred
in the ordinary course of business and payable in accordance with
customary practices), (b) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all drafts drawn
thereunder, (c) all liabilities (other than Lease Obligations) secured by
any Lien on any property owned by such Person, to the extent attributable
to such Person's interest in such property, even though such Person has
not assumed or become liable for the payment thereof, (d) lease
obligations of such Person which, in accordance with GAAP, should be
capitalized and (e) all indebtedness of such Person arising under
acceptance facilities; but excluding (y) customer deposits and interest
payable thereon in the ordinary course of business and (z) trade and
other accounts and accrued expenses payable in the ordinary course of
business in accordance with customary trade terms and in the case of both
clauses (y) and (z) above, which are not overdue for a period of more
than 90 days or, if overdue for more than 90 days, as to which a dispute
exists and adequate reserves in conformity with GAAP have been
established on the books of such Person.
"Indemnified Taxes": as defined in subsection 3.22(a).
"Indemnitee": as defined in subsection 3.22.
"Index Rate Bid Loan": any Bid Loan bearing interest based on the
Applicable Index Rate.
"Index Rate Bid Loan Request": any Bid Loan Request requesting the
Bid Loan Lenders to offer to make Bid Loans at an interest rate equal to
the Applicable Index Rate plus (or minus) a margin.
"Insolvency": with respect to a Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Interest Coverage Ratio": as at the last day of any fiscal quarter
of Holdings, the ratio of (a) Consolidated EBITDA for the period of four
fiscal quarters ending on such day on a consolidated basis of Holdings
and its Subsidiaries, to (b) Consolidated Interest Expense for the period
of four fiscal quarters ending on such day on a consolidated basis of
Holdings and its Subsidiaries.
"Interest Payment Date": (a) as to ABR Loans, the last day of each
March, June, September and December, commencing on the first such day to
occur after any ABR Loans are made or any Eurodollar Loans are converted
to ABR Loans, (b) as to any Eurodollar Loan in respect of which the
Company has selected an Interest Period of one, two or three months, the
last day of such Interest Period, (c) as to any Eurodollar Loan in
respect of which the Company has selected an Interest Period of six
months, the day which is three months after the date on which such
Eurodollar Loan is made or an ABR Loan is converted to such a Eurodollar
Loan, and the last day of such Interest Period, (d) as to any other
Eurodollar Loan, each day on which principal of such Eurodollar Loan is
payable and (e) in the case of the Revolving Credit Loans, on the
Revolving Credit Termination Date.
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"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on, as the case may be,
the Borrowing Date or conversion date with respect to such
Eurodollar Loan and ending one, two, three or six months thereafter
as selected by the Company in its notice of borrowing as provided in
subsection 2.10, 3.1 or its notice of conversion as provided in
subsection 3.2; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter as selected by
the Company by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect to such Eurodollar Loan;
provided that the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension
would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date, or if the Revolving Credit Termination Date shall
not be a Business Day, on the next preceding Business Day;
(C) if the Company shall fail to give notice as provided above
in clause (b), it shall be deemed to have selected a conversion of a
Eurodollar Loan into an ABR Loan (which conversion shall occur
automatically and without need for compliance with the conditions
for conversion set forth in subsection 3.2);
(D) any Interest Period that begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(E) the Company shall select Interest Periods so as not to
require a prepayment (to the extent practicable) or a scheduled
payment of a Eurodollar Loan during an Interest Period for such
Eurodollar Loan.
"Issuing Bank": Chase and any other financial institution which is
a Co-Agent, as selected by the Company, with the approval of the
Administrative Agent and such Co-Agent, in accordance with subsection 2.5.
"Judgment Currency": as defined in subsection 10.8(b).
"L/C Application": a letter of credit application in the relevant
Issuing Bank's
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then customary form for the type of letter of credit requested.
"L/C Participating Interest": an undivided participating interest
in the face amount of each issued and outstanding Letter of Credit and
the L/C Application relating thereto.
"L/C Participation Certificate": a certificate in substantially the
form of Exhibit G hereto.
"Lease Obligations": of the Company and its Subsidiaries, as of the
date of any determination thereof, the rental commitments of the Company
and its Subsidiaries determined on a consolidated basis, if any, under
leases for real and/or personal property (net of rental commitments from
sub-leases thereof), excluding however, obligations under leases which
are classified as Indebtedness under clause (d) of the definition of
Indebtedness.
"Letter of Credit": a letter of credit issued by an Issuing Bank
pursuant to the terms of subsection 2.3.
"Leverage Ratio": as of the last day of any fiscal quarter, the
ratio of Consolidated Total Indebtedness on a consolidated basis for
Holdings and its Subsidiaries on such day to Consolidated EBITDA for the
period of four consecutive fiscal quarters of Holdings ending on such day.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of any effective financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction in respect of any of the
foregoing, except for the filing of financing statements in connection
with Lease Obligations incurred by the Company or its Subsidiaries to the
extent that such financing statements relate to the property subject to
such Lease Obligations).
"Liquidity Bank": means for any Designated Lender, at any date of
determination, the collective reference to the financial institutions
which at such date are providing liquidity or credit support facilities
to or for the account of such Designated Lender to fund such Designated
Lender's obligations hereunder or to support the securities, if any,
issued by such Designated Lender to fund such obligations.
"Loans": the collective reference to the Revolving Credit Loans,
the Swing Line Loans and the Bid Loans; individually, a "Loan".
"Material Subsidiaries": any Subsidiary of the Company or Holdings
which at any time has a total asset book value (including the total asset
book values of any Subsidiaries), or for which Holdings, the Company or
any of its Subsidiaries shall have paid consideration (including the
assumption of Indebtedness) in connection with the acquisition of the
stock or the assets of such Subsidiary, in excess of $50,000,000, other
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than Foreign Subsidiaries or other Subsidiaries if more than 75% of the
assets of such Subsidiaries are securities of foreign companies (such
determination to be made on the basis of fair market value). A
Subsidiary which is a Material Subsidiary shall continue to be a Material
Subsidiary notwithstanding that its total asset book value may fall to
less than $50,000,000.
"Money Market Rate": for any day, with respect to any Money Market
Rate Loan, the rate per annum quoted by a Swing Line Bank to the Company
in accordance with subsection 2.10(a) as the rate at which such Swing
Line Bank is willing to make such Loan.
"Money Market Rate Loans": Swing Line Loans the rate of interest
applicable to which is based upon the Money Market Rate.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NextLevel": as defined in the recitals hereto.
"Non-U.S. Bank": as defined in subsection 3.17(e).
"Obligations": the unpaid principal of and interest on the Loans
and all other obligations and liabilities of the Company to the
Administrative Agent, the Co-Agents or the Banks, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with,
this Agreement, the other Credit Documents, any Letter of Credit or L/C
Application, any agreements between the Company and any Bank or any
Affiliate of a Bank relating to interest rate, currency or similar swap
and hedging arrangements or any other document made, delivered or given
in connection therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agent, the Co-Agents or any Bank) or otherwise.
"Other Taxes": as defined in subsection 3.22(b).
"Participant": as defined in subsection 10.6(b).
"Participating Bank": any Bank (other than the Issuing Bank with
respect to such Letter of Credit) with respect to its L/C Participating
Interest in each Letter of Credit.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": any pension plan which is covered by Title IV of ERISA and
in respect of which the Company or a Commonly Controlled Entity is an
"employer" as defined in
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Section 3(5) of ERISA.
"Power Semiconductor Business": as defined in the recitals hereto.
"Properties": each parcel of real property currently or previously
owned or operated by the Company or any Subsidiary.
"Refunded Swing Line Loans": as defined in subsection 2.10(b).
"Refunding Date": as defined in subsection 2.10(c).
"Register": as defined in subsection 10.6.
"Registered Form Note": as defined in subsection 3.21(e).
"Regulation G": Regulation G of the Board, as from time to time in
effect.
"Regulation U": Regulation U of the Board, as from time to time in
effect.
"Related Document": any agreement, certificate, document or
instrument relating to a Letter of Credit.
"Release Banks": at a particular time Banks that hold Revolving
Credit Commitments in an aggregate principal amount equal to at least 75%
of the aggregate Revolving Credit Commitments.
"Reorganization": with respect to a Multiemployer Plan, the
condition that such Plan is in reorganization as such term is used in
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA or the regulations thereunder.
"Required Banks": at a particular time Banks that hold Revolving
Credit Commitments in an aggregate principal amount equal to at least 51%
of the aggregate Revolving Credit Commitments, provided, however, that
for the purposes of clause (y)(ii) of Section 8, Required Banks shall
mean Banks that hold at least 51% of (a) the aggregate then outstanding
principal amount of the Revolving Credit Loans, (b) the aggregate
outstanding principal amount of Bid Loans, as of the most recent date of
calculation of such amount pursuant to subsection 3.5(b), (c) the L/C
Participating Interests in the aggregate amount then available to be
drawn under all outstanding Letters of Credit and (d) the aggregate then
outstanding principal amount of Revolving L/C Obligations.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation (including,
without limitation, Environmental Laws) or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its property is subject.
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"Responsible Officer": the chief executive officer or the chief
operating officer of the Company or, with respect to financial matters, the
chief financial officer or controller of the Company.
"Restricted Payment": as defined in subsection 7.10.
"Revolving Credit Commitment": as to any Bank, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 2.1, and
to purchase its L/C Participating Interest in any Letter of Credit, in an
aggregate amount on the Closing Date not to exceed at any time the amount
set forth opposite such Bank's name in Schedule I under the heading
"Revolving Credit" and in an aggregate amount not to exceed at any time the
amount equal to such Bank's Revolving Credit Commitment Percentage of the
aggregate Revolving Credit Commitments, as the aggregate Revolving Credit
Commitments may be reduced from time to time pursuant to this Agreement;
collectively, as to all the Banks, the "Revolving Credit Commitments".
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Revolving Credit Termination
Date.
"Revolving Credit Loan" and "Revolving Credit Loans": as defined in
subsection 2.1(a).
"Revolving Credit Termination Date": the earlier of (i) December 31,
2002 and (ii) any other date on which the Revolving Credit Commitments
shall terminate hereunder.
"Revolving L/C Obligations": the obligations of the Company to
reimburse the relevant Issuing Bank for any payments made by the relevant
Issuing Bank under any Letter of Credit that have not been reimbursed by
the Company pursuant to subsection 2.6.
"S-4 Filing": Amendment No. 4 to the Joint Registration Statement on
Form S-4 filed by CommScope and NextLevel Systems, Inc. with the Securities
and Exchange Commission on June 13, 1997 with respect to the Spin-Off.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Spin-Off": as defined in the recitals hereto.
"Spin-Off Documents": the collective reference to (i) the
Distribution Agreement, and (ii) the Ancillary Agreements (as defined in
the Distribution Agreement as in effect on the date hereof), as the same
may be amended, modified or supplemented from time to time.
"Spin-Off Transactions": as defined in the recitals hereto.
"Standby L/C": an irrevocable Letter of Credit under which the
relevant Issuing Bank agrees to make payments in Dollars for the account of
the Company, on behalf of
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the Company or any Subsidiary thereof, in respect of obligations of the
Company or a Subsidiary thereof, including, without limitation, obligations
to government entities and incurred pursuant to contracts made or
performance undertaken, or to be undertaken, or like matters relating to
contracts to which the Company or a Subsidiary thereof is or proposes to
become a party in the ordinary course of the Company's or such Subsidiary's
business, including, without limitation, for insurance purposes or in
respect of advance payments or as bid or performance bonds.
"Subsidiary": as to any Person, any corporation, partnership or other
entity of which shares of stock of each class or other equity interests
having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation, partnership or other
entity are at the time owned by such Person or by one or more Subsidiaries
of such Person or by such Person and one or more Subsidiaries of such
Person. A Subsidiary shall be deemed wholly-owned by a Person who owns all
of the voting shares of such Subsidiary except for directors' qualifying or
similar shares.
"Subsidiary Guarantee": the Subsidiary Guarantee to be executed by
each Subsidiary Guarantor in favor of the Administrative Agent, for the
ratable benefit of the Banks, substantially in the form of Exhibit D-1
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Subsidiary Guarantor": any Subsidiary which enters into a Subsidiary
Guarantee pursuant to subsection 6.8.
"Swing Line Bank": Chase and each Bank then acting as a Co-Agent
hereunder selected by the Company which has agreed to make Swing Line Loans
to the Company.
"Swing Line Commitment": each Swing Line Bank's obligation to make
Swing Line Loans pursuant to subsection 2.10.
"Swing Line Loan" and "Swing Line Loans": as defined in subsection
2.10(a).
"Swing Line Loan Participation Certificate": a certificate in
substantially the form of Exhibit H hereto.
"Taxes": any tax, assessment, or other charge or levy and any
liabilities with respect thereto, including any penalties, additions to
tax, fines or interest thereon, imposed by or on behalf of any Governmental
Authority or any taxing authority thereof.
"Type": as to any Loan, its nature as an ABR Loan, a Eurodollar Loan
or a Money Market Rate Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500 (or any successor publication), as the same may be amended from time to
time.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any other Credit
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Document or any certificate or other document made or delivered pursuant
hereto.
(b) As used herein, any other Credit Document and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
Holdings, the Company and its Subsidiaries not defined in subsection 1.1 and
accounting terms partly defined in subsection 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
(e) Reference herein to the business, financial condition, properties,
results of operations, value or prospects of Holdings and its Subsidiaries taken
as a whole shall refer to Holdings and its Subsidiaries taken as a whole from
time to time after giving effect to the Spin-Off and all transactions
contemplated thereby, including the financing thereof.
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Bank agrees to extend credit to the Company from time to
time on any Borrowing Date during the Revolving Credit Commitment Period (i)by
purchasing an L/C Participating Interest in each Letter of Credit issued by an
Issuing Bank and (ii) by making loans in Dollars (individually, a "Revolving
Credit Loan", and collectively the "Revolving Credit Loans") to the Company from
time to time. Notwithstanding the foregoing, in no event shall any Revolving
Credit Loan or Swing Line Loan be made, or any Letter of Credit be issued, if,
after giving effect to such making or issuance and the use of proceeds thereof
as irrevocably directed by the Company, the Aggregate Extensions of Credit would
exceed the aggregate Revolving Credit Commitments. During the Revolving Credit
Commitment Period, the Company may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans or Swing Line Loans in whole or
in part, and reborrowing, all in accordance with the terms and conditions
hereof, and/or by having the Issuing Banks issue Letters of Credit, having such
Letters of Credit expire undrawn upon or if drawn upon, reimbursing the relevant
Issuing Bank for such drawing, and having the Issuing Banks issue new Letters of
Credit.
(b) Each borrowing of Revolving Credit Loans pursuant to the Revolving
Credit Commitments shall be in an aggregate principal amount of the lesser of
(i) $3,000,000, or a whole multiple of $1,000,000 in excess thereof, and (ii)
the Available Revolving Credit Commitments, except that any borrowing of a
Revolving Credit Loan to be used solely to pay a like amount of Swing Line Loans
may be in the aggregate principal amount of such Swing Line Loans.
(c) Revolving Credit Loans by Designated Lenders. For any Bank which
is a
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Designating Lender, any Revolving Credit Loan to be made by such Bank may
from time to time be made by its Designated Lender in such Designated Lender's
sole discretion, and nothing herein shall constitute a commitment to make
Revolving Credit Loans by such Designated Lender; provided that if any
Designated Lender elects not to, or fails to, make such Revolving Credit Loan,
its Designating Lender hereby agrees that it shall make such Revolving Credit
Loan pursuant to the terms hereof. Any Revolving Credit Loan actually funded by
a Designated Lender shall constitute a utilization of the Revolving Credit
Commitment of the Designating Lender for all purposes hereunder.
2.2 Proceeds of Revolving Credit Loans. The Company shall use the
proceeds of Revolving Credit Loans solely for the purposes of (a) financing the
payment of fees and expenses incurred in connection with this Agreement and the
Spin-Off, (b) making payments to the Issuing Banks to reimburse the Issuing
Banks for drawings made under the Letters of Credit, (c) repaying Swing Line
Loans, Bid Loans and Revolving Credit Loans after the Closing Date,
(d) financing general working capital needs of the Company or any of its
Subsidiaries, (e) paying a dividend to GI Delaware on the Closing Date and (f)
other general corporate purposes of the Company or any of its Subsidiaries,
including, without limitation, supporting payment of commercial paper issued by
the Company or Holdings in the United States commercial paper market, financing
acquisitions, payment of dividends and repurchases of debt and equity securities
issued by Holdings and the Company, all in accordance with the terms and
conditions hereof.
2.3 Issuance of Letters of Credit. (a) The Company may from time to
time request an Issuing Bank to issue a Letter of Credit, which may be either a
Standby L/C or a Commercial L/C, by delivering to the Administrative Agent at
its address specified in subsection 10.2 and such Issuing Bank an L/C
Application completed to the satisfaction of such Issuing Bank, together with
the proposed form of such Letter of Credit (which shall comply with the
applicable requirements of paragraph (b) below) and such other certificates,
documents and other papers and information as such Issuing Bank may reasonably
request; provided that if such Issuing Bank informs the Company that it is for
any reason unable to open such Letter of Credit, the Company may request another
Issuing Bank or, if all Issuing Banks are unable to do so, any Bank to open such
Letter of Credit upon the same terms offered to the initial proposed Issuing
Bank and each reference to an Issuing Bank for purposes of the Credit Documents
shall be deemed to be a reference to such Bank and provided further that no
Issuing Bank shall issue any Letter of Credit if, after giving effect to such
issuance, the sum of (i) the aggregate amount then available to be drawn under
all outstanding Letters of Credit and (ii) the aggregate amount of Revolving L/C
Obligations would exceed $50,000,000.
(b) Each Letter of Credit issued hereunder shall, among other things,
(i) be denominated in Dollars, (ii) be in such form requested by the Company as
shall be acceptable to the relevant Issuing Bank in its sole discretion and
(iii) have an expiry date occurring not later than the earlier of (x) 365 days
after the date of issuance of such Letter of Credit and (y) the date five
Business Days prior to the Revolving Credit Termination Date; provided that
unless the Issuing Bank notifies the Company not less than 30 days prior to the
expiry of such Letter of Credit that the Issuing Bank is not willing to extend
it, any Letter of Credit which has an expiry date of 365 days after its date of
issuance may by its terms be automatically extended for periods of one year from
the current or any future expiration date thereof (but not to any date which is
later than five Business Days prior to the Revolving Credit Termination Date).
Each L/C Application and each Letter of Credit shall be subject to the Uniform
Customs and, to the extent
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not inconsistent therewith, the laws of the State of New York.
2.4 Participating Interests. Effective in the case of each Letter of
Credit opened by an Issuing Bank as of the date of the opening thereof, such
Issuing Bank agrees to allot and does allot, to itself and each other Bank, and
each Bank severally and irrevocably agrees to take and does take in such Letter
of Credit and the related L/C Application, an L/C Participating Interest in a
percentage equal to such Bank's Revolving Credit Commitment Percentage.
2.5 Procedure for Opening Letters of Credit. Upon receipt of any L/C
Application from the Company in respect of a Letter of Credit, the
Administrative Agent will promptly notify each Bank thereof. The relevant
Issuing Bank will process such L/C Application, and the other certificates,
documents and other papers delivered to such Issuing Bank in connection
therewith, upon receipt thereof in accordance with its customary procedures and,
subject to the terms and conditions hereof, shall promptly open such Letter of
Credit by issuing the original of such Letter of Credit to the beneficiary
thereof and by furnishing a copy thereof to the Company and each of the other
Banks, provided that no such Letter of Credit shall be issued if subsection 2.1
would be violated thereby.
2.6 Payments in Respect of Letters of Credit. (a) The Company agrees
forthwith upon demand by the relevant Issuing Bank and otherwise in accordance
with the terms of the L/C Application relating thereto (i) to reimburse such
Issuing Bank, through the Administrative Agent, for any payment made by such
Issuing Bank under any Letter of Credit on the next Business Day of such payment
by such Issuing Bank and (ii) to pay interest on any unreimbursed portion of any
such payment from the date of such payment until reimbursement in full thereof
at a rate per annum equal to (A) prior to the date which is one Business Day
after the day on which such Issuing Bank demands reimbursement from the Company
for such payment, the ABR and (B) on such date and thereafter, the ABR plus 2%.
(b) In the event that an Issuing Bank makes a payment under any Letter
of Credit and is not reimbursed in full therefor forthwith upon demand of such
Issuing Bank, and otherwise in accordance with the terms of the L/C Application
relating to such Letter of Credit, such Issuing Bank will promptly notify each
other Bank through the Administrative Agent. Forthwith upon its receipt of any
such notice, each other Bank will transfer to such Issuing Bank, through the
Administrative Agent, in immediately available funds, an amount equal to such
other Bank's pro rata share of the Revolving L/C Obligation arising from such
unreimbursed payment. Upon its receipt from such other Bank of such amount, the
Administrative Agent will complete, execute and deliver to such other Bank an
L/C Participation Certificate dated the date of such receipt and in such amount.
(c) Whenever, at any time after an Issuing Bank has made a payment
under any Letter of Credit and has received from any other Bank such other
Bank's pro rata share of the Revolving L/C Obligation arising therefrom, such
Issuing Bank receives any reimbursement on account of such Revolving L/C
Obligation or any payment of interest on account thereof (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Bank's participating interest was outstanding and funded), such
Issuing Bank will promptly distribute to such other Bank, through the
Administrative Agent, such other Bank's pro rata share thereof in like funds as
received; provided, that in the event that the receipt by such Issuing Bank of
such reimbursement or such payment of interest (as the case may be) is required
to be returned, such other Bank will return to such Issuing Bank, through the
Administrative
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Agent, any portion thereof previously distributed by such Issuing Bank to it
in like funds as such reimbursement or payment is required to be returned by
such Issuing Bank.
2.7 The Bid Loans. Subject to the terms and conditions of this
Agreement, the Company may borrow Bid Loans from time to time during the Bid
Loan Commitment Period on any Business Day. The Company shall designate Banks
from time to time as Bid Loan Lenders by written notice to the Administrative
Agent. The Administrative Agent shall transmit each such notice of designation
promptly to each designated Bid Loan Lender. Each Bid Loan shall bear interest
at rates, be payable on the dates, be made in Dollars, and shall mature on the
date, agreed between the Company and the relevant Bid Loan Lender at the time
such Bid Loan is made; provided, that the maturity date for each Bid Loan (i)
shall be not less than 15 days nor more than 180 days after the Borrowing Date
therefor with respect to an Absolute Rate Bid Loan and (ii) shall be on the last
day of an Interest Period with respect to an Index Rate Bid Loan (and, in each
case, in any event shall be not later than the Revolving Credit Termination
Date). Within the limits and on the conditions hereinafter set forth with
respect to Bid Loans, the Company from time to time may borrow, repay and
reborrow Bid Loans; provided that no Bid Loan shall be made if, after giving
effect to the making of such Loan and the simultaneous application of the
proceeds thereof, the Aggregate Extensions of Credit would exceed the aggregate
amount of the Revolving Credit Commitments.
2.8 Procedure for Bid Loan Borrowing. (a) The Company shall request
Bid Loans by delivering a Bid Loan Request to the Administrative Agent, not
later than 12:00 Noon (New York City time) four Business Days prior to the
proposed Borrowing Date (in the case of an Index Rate Bid Loan Request), and not
later than 10:00 A.M. (New York City time) one Business Day prior to the
proposed Borrowing Date (in the case of an Absolute Rate Bid Loan Request).
Each Bid Loan Request may solicit bids for Bid Loans in an aggregate principal
of $10,000,000 or an integral multiple of $5,000,000 in excess thereof and
having not more than four alternative maturity dates. The Administrative Agent
shall notify each Bid Loan Lender promptly by telex or facsimile transmission of
the contents of each Bid Loan Request received by the Administrative Agent.
(b) In the case of an Index Rate Bid Loan Request, upon receipt of
notice from the Administrative Agent of the contents of such Bid Loan Request,
each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to
make one or more Bid Loans at the Applicable Index Rate plus or minus a margin
determined by such Bid Loan Lender in its sole discretion for each such Bid
Loan. Any such irrevocable offer shall be made by delivering a Bid Loan Offer
to the Administrative Agent, before 10:00 A.M. (New York City time) on the day
that is three Business Days before the proposed Borrowing Date, setting forth:
(1) the maximum amount of such Bid Loans for each maturity date and
the aggregate maximum amount of such Bid Loans for all maturity dates which
such Bank would be willing to make (which amounts may, subject to
subsection 2.7, exceed such Bid Loan Lender's Revolving Credit Commitment);
and
(2) the margin above or below the Applicable Index Rate at which such
Bid Loan Lender is willing to make each such Bid Loan.
The Administrative Agent shall advise the Company promptly but no later than
10:30 A.M. (New York City time) on the date which is three Business Days before
the proposed Borrowing
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Date of the contents of each such Bid Loan Offer received by it. If the
Administrative Agent, in its capacity as a Bid Loan Lender, shall elect, in
its sole discretion, to make any such Bid Loan Offer, it shall advise the
Company of the contents of its Bid Loan Offer before 9:45 A.M. (New York City
time) on the date which is three Business Days before the proposed Borrowing
Date.
(c) In the case of an Absolute Rate Bid Loan Request, upon receipt of
notice from the Administrative Agent of the contents of such Bid Loan Request,
each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to
make one or more Bid Loans at a rate of interest determined by such Bid Loan
Lender in its sole discretion for each such Bid Loan. Any such irrevocable
offer shall be made by delivering a Bid Loan Offer to the Administrative Agent
before 10:00 A.M. (New York City time) on the proposed Borrowing Date, setting
forth:
(1) the maximum amount of such Bid Loans for each maturity date, and
the aggregate maximum amount of such Bid Loans for all maturity dates,
which such Bid Loan Lender would be willing to make (which amounts may,
subject to subsection 2.7, exceed such Bid Loan Lender's Revolving Credit
Commitment); and
(2) the fixed rate of interest at which such Bid Loan Lender is
willing to make each such Bid Loan.
The Administrative Agent shall advise the Company promptly but in no event later
than 10:30 A.M. (New York City time) on the proposed Borrowing Date of the
contents of each such Bid Loan Offer received by it. If the Administrative
Agent, in its capacity as a Bid Loan Lender, shall elect, in its sole
discretion, to make any such Bid Loan Offer, it shall advise the Company of the
contents of its Bid Loan Offer before 9:45 A.M. (New York City time) on the
proposed Borrowing Date.
(d) Before 12:00 noon (New York City time) three Business Days before
the proposed Borrowing Date (in the case of Bid Loans requested by an Index Rate
Bid Loan Request) and before 11:00 A.M. (New York City time) on the proposed
Borrowing Date (in the case of Bid Loans requested by an Absolute Rate Bid Loan
Request), the Company, in its absolute discretion, shall:
(1) cancel such Bid Loan Request by giving the Administrative
Agent telephone notice to that effect, or
(2) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Bid Loan Confirmation in writing or by telex or fax transmission)(1)
subject to the provisions of subsection 2.8(e), accept one or more of
the offers made by any Bid Loan Lender or Bid Loan Lenders pursuant to
subsection 2.8(b) or subsection 2.8(c), as the case may be, of the
amount of Bid Loans for each relevant maturity date and (2) reject any
remaining offers made by Bid Loan Lenders pursuant to subsection
2.8(b) or subsection 2.8(c), as the case may be.
If the Company fails to give any such notice prior to such time, such Bid Loan
Request shall be deemed to have been canceled.
(e) The Company's acceptance of Bid Loans in response to any Bid Loan
Request
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shall be subject to the following limitations:
(1) the principal amount of Bid Loans accepted for each maturity date
specified by any Bid Loan Lender in its Bid Loan Offer shall not exceed the
maximum amount for such maturity date specified in such Bid Loan Offer;
(2) the aggregate principal amount of Bid Loans accepted for all
maturity dates specified by any Bid Loan Lender in its Bid Loan Offer shall
not exceed the aggregate maximum amount specified in such Bid Loan Offer
for all such maturity dates;
(3) the Company may not accept offers for Bid Loans for any maturity
date in an aggregate principal amount in excess of the maximum principal
amount of Bid Loan requested in the related Bid Loan Request for such
maturity date; and
(4) if the Company accepts any of such offers, it must accept offers
based solely upon pricing for such relevant maturity date and upon no other
criteria whatsoever and if two or more Bid Loan Lenders submit offers for
any maturity date at identical pricing and the Company accepts any of such
offers but does not wish to (or by reason of the limitations set forth in
subsection 2.7 or in clause 2.8(e)(3) cannot) borrow the total amount
offered by such Bid Loan Lenders with such identical pricing, the Company
shall accept offers from all of such Bid Loan Lenders in amounts allocated
among them pro rata according to the amounts offered by such Bid Loan
Lenders (or as nearly pro rata as shall be practicable after giving effect
to the requirement that Bid Loans made by a Bid Loan Lender on a Borrowing
Date for each relevant maturity date shall be in a principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof).
(f) If the Company notifies the Administrative Agent that a Bid Loan
Request is cancelled pursuant to subsection 2.8(d)(1), the Administrative Agent
shall give prompt telephone notice thereof to the Bid Loan Lenders.
(g) If the Company accepts pursuant to subsection 2.8(d)(2) one or
more of the offers made by any Bid Loan Lender or Bid Loan Lenders, the
Administrative Agent promptly shall notify each Bid Loan Lender which has made
such a Bid Loan Offer of (i) the aggregate amount of such Bid Loans to be made
on such Borrowing Date for each maturity date and (ii) the acceptance or
rejection of any offers to make such Bid Loans made by such Bid Loan Lender.
Before 12:00 Noon (New York City time) on the Borrowing Date specified in the
applicable Bid Loan Request, each Bid Loan Lender whose Bid Loan Offer has been
accepted shall make available to the Administrative Agent at its office set
forth in subsection 10.2 the amount of Bid Loans to be made by such Bid Loan
Lender in immediately available funds. The Administrative Agent will make such
funds available to the Company as soon as practicable on such date at the
Administrative Agent's aforesaid address. As soon as practicable after each
Borrowing Date, the Administrative Agent shall notify each Bank of the aggregate
amount of Bid Loans advanced on such Borrowing Date and the respective maturity
dates thereof.
(h) Unless otherwise agreed by the Bid Loan Lender making a Bid Loan,
such Bid Loan may not be optionally prepaid prior to the scheduled maturity date
thereof.
(i) For any Bid Loan Lender which is a Designating Lender, any Bid
Loan to be made by such Bid Loan Lender may from time to time be made by its
Designated Lender in such
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Designated Lender's sole discretion, and nothing herein shall constitute a
commitment to make Bid Loans by such Designated Lender; provided that if any
Designated Lender elects not to, or fails to, make any such Bid Loan that has
been accepted by the Company in accordance with the foregoing, its
Designating Lender hereby agrees that it shall make such Bid Loan pursuant to
the terms hereof.
2.9 Bid Loan Payments. (a) The Company shall repay to the
Administrative Agent for the account of each Bid Loan Lender which has made a
Bid Loan (or the Bid Loan Assignee in respect thereof, as the case may be) on
the applicable Bid Loan Maturity Date the then unpaid principal amount of such
Bid Loan. The Company shall not have the right to prepay any principal amount
of any Bid Loan except with the consent of the relevant Bid Loan Lender.
(b) The Company shall pay interest on the unpaid principal amount of
each Bid Loan from the Borrowing Date to the applicable Bid Loan Maturity Date
at the rate of interest specified in the Bid Loan Offer accepted by the Company
in connection with such Bid Loan (calculated on the basis of a 360-day year for
actual days elapsed), payable on each applicable Bid Loan Interest Payment Date.
(c) If all or a portion of the principal amount of any Bid Loan shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue principal amount shall, without limiting any rights of
any Bank under this Agreement, bear interest from the date on which such payment
was due at a rate per annum which is 2% above the rate which would otherwise be
applicable to such Bid Loan until the stated maturity date of such Bid Loan, and
for each day thereafter at a rate per annum which is 2% above the ABR, in each
case until paid in full (as well after as before judgment).
2.10 Swing Line Commitment. (a) Subject to the terms and conditions
hereof, each Swing Line Bank agrees to make swing line loans (individually, a
"Swing Line Loan"; collectively, the "Swing Line Loans") to the Company from
time to time during the Revolving Credit Commitment Period in Dollars in an
aggregate principal amount (when added together with all other Swing Line Loans)
at any one time outstanding not to exceed $30,000,000, provided that at no time
may the Aggregate Extensions of Credit exceed the Revolving Credit Commitments.
Amounts borrowed by the Company under this subsection may be repaid and, through
but excluding the Revolving Credit Termination Date, reborrowed.
The Swing Line Loans may from time to time be (i) ABR Loans, (ii)
Money Market Rate Loans or (iii) a combination thereof, as determined by the
Company and notified to the Administrative Agent and the applicable Swing Line
Bank in accordance herewith, and shall not be entitled to be converted into
Eurodollar Loans. The Company may, on any Borrowing Date for Swing Line Loans
and prior to the time that an irrevocable notice requesting such Swing Line
Loans must be made pursuant to this subsection 2.10(a), request a quote of the
Money Market Rate which would be applicable for such Swing Line Loans from a
Swing Line Bank, specifying the amount of the proposed Money Market Rate Loans
and the maturity date thereof (which shall be no less than one and no more than
30 days following such Borrowing Date). Upon receipt of such quote, the Company
shall promptly (but not later than the time that an irrevocable notice
requesting such Swing Line Loans must be made pursuant to this subsection
2.10(a)) notify the Administrative Agent and the applicable Swing Line Bank
whether it requests such Swing Line Bank to make Money Market Rate Loans at such
Money Market Rate. The Company shall give the Administrative Agent and the
applicable Swing Line Bank irrevocable
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notice (which notice must be received by the Administrative Agent and the
applicable Swing Line Bank prior to 12:00 Noon, New York City time) on the
requested Borrowing Date specifying the amount of each requested Swing Line
Loan, which shall be in minimum amount of (i) in the case of Swing Line Loans
which are ABR Loans, $500,000 or a whole multiple thereof and (ii) in the
case of Swing Line Loans which are Money Market Rate Loans, $1,000,000 or a
whole multiple of $1,000,000 in excess thereof.
The proceeds of each Swing Line Loan will be made available by the
applicable Swing Line Bank to the Company by crediting the specified account of
the Company with such proceeds in the manner from time to time agreed by the
Company and the applicable Swing Line Bank. The proceeds of Swing Line Loans
may be used solely for the purposes referred to in subsection 2.2.
(b) Each Swing Line Bank (i) at any time in its sole and absolute
discretion may, (ii) if any Event of Default has occurred and is continuing,
shall and (iii) on the thirtieth day (or if such day is not a Business Day, the
next Business Day) after the Borrowing Date with respect to any Swing Line Loans
shall, on behalf of the Company (which hereby irrevocably directs each Swing
Line Bank to act on its behalf), request each Bank, including such Swing Line
Bank, to make a Revolving Credit Loan in Dollars to the Company (which shall be
initially an ABR Loan) in an amount equal to such Bank's Revolving Credit
Commitment Percentage of the amount of such Swing Line Loans (the "Refunded
Swing Line Loans") outstanding on the date such notice is given. Unless any of
the events described in paragraph (f) of Section 8 shall have occurred (in which
event the procedures of paragraph (c) of this subsection shall apply) each Bank
shall make the proceeds of its Revolving Credit Loan available to the
Administrative Agent for the account of the applicable Swing Line Bank at the
office of the Administrative Agent located at 270 Park Avenue, New York, New
York 10017 prior to 12:00 Noon (New York City time) in funds immediately
available on the Business Day next succeeding the date such notice is given.
The proceeds of such Revolving Credit Loans shall be immediately applied to
repay the Refunded Swing Line Loans.
(c) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of this subsection one of the events described in paragraph (f) of
Section 8 shall have occurred, each Bank will, on the date such Loan would
otherwise have been made (the "Refunding Date"), purchase an undivided
participating interest in the Refunded Swing Line Loans in an amount equal to
its Revolving Credit Commitment Percentage of such Refunded Swing Line Loans.
On the Refunding Date, each Bank will immediately transfer to the Administrative
Agent, for the account of the applicable Swing Line Bank, in immediately
available funds, the amount of its participation in Dollars and upon receipt
thereof the Administrative Agent and the applicable Swing Line Bank will deliver
to such Bank a Swing Line Loan Participation Certificate dated the date of
receipt of such funds and in such amount.
(d) Whenever, at any time after the Administrative Agent or a Swing
Line Bank has received from any Bank such Bank's participating interest in a
Swing Line Loan, the Administrative Agent or such Swing Line Bank, as the case
may be, receives any payment on account thereof, the Administrative Agent or
such Swing Line Bank, as the case may be, will promptly distribute to such Bank
its participating interest in such amount (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Bank's
participating interest was outstanding and funded) in like funds as received;
provided, however, that in the event that such payment received by the
Administrative Agent or such Swing Line
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Bank, as the case may be, is required to be returned, such Bank will return
to the Administrative Agent or such Swing Line Bank, as the case may be, any
portion thereof previously distributed by the Administrative Agent or such
Swing Line Bank, as the case may be, to it in like funds as such payment is
required to be returned by the Administrative Agent or such Swing line Bank,
as the case may be.
(e) Each Bank's obligation to make Revolving Credit Loans pursuant to
subsection 2.10(b) shall be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against any other Bank or the Company, or the Company may have against any Bank
or any other Person, as the case may be, for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of the Company or any of its
Subsidiaries; (iv) any breach of this Agreement by the Company or any other Bank
(not including any Swing Line Bank); or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
2.11 Participations. Each Bank's obligation to purchase participating
interests pursuant to subsections 2.4 and 2.10(c) is absolute and unconditional
as set forth in subsection 3.15.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
3.1 Procedure for Borrowing. (a) Except with respect to Swing Line
Loans, for which borrowing procedures are set forth in subsection 2.10, the
Company may borrow under the Commitments on any Business Day, provided that,
with respect to the borrowings, if any, to take place on the Closing Date, the
Company shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 10:00 A.M., New York City
time, on the Closing Date), and with respect to any subsequent borrowings, the
Company shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 12:00 Noon, New York City
time, (i) three Business Days prior to the requested Borrowing Date if all or
any part of the Loans are to be Eurodollar Loans and (ii) one Business Day prior
to the requested Borrowing Date if the borrowing is to be solely of ABR Loans)
specifying (A) the amount of the borrowing, (B) whether such Loans are initially
to be Eurodollar Loans or ABR Loans, or a combination thereof, and (C) if the
borrowing is to be entirely or partly Eurodollar Loans, the length of the
Interest Period for such Eurodollar Loans. Upon receipt of such notice the
Administrative Agent shall promptly notify each Bank (which notice shall in any
event be delivered to each Bank by 4:00 P.M., New York City time, on such date).
Not later than 12:00 Noon, New York City time, on the Borrowing Date specified
in such notice, each Bank shall make available to the Administrative Agent at
the office of the Administrative Agent specified in subsection 10.2 (or at such
other location as the Administrative Agent may direct) an amount in immediately
available funds equal to the amount of the Loan to be made by such Bank. Loan
proceeds received by the Administrative Agent hereunder shall promptly be made
available to the Company by the Administrative Agent's crediting the account of
the Company, at the office of the Administrative Agent specified in subsection
10.2, with the aggregate amount actually received by the Administrative Agent
from the Banks and in like funds as received by the Administrative Agent.
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(b) Any borrowing of Eurodollar Loans hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (i) the aggregate principal amount of all Eurodollar Loans having the
same Interest Period shall not be less than $5,000,000, or a whole multiple of
$1,000,000 in excess thereof, and (ii) no more than ten Interest Periods shall
be in effect at any one time.
(c) Eurodollar Loans shall be made by each Bank at its Eurodollar
Lending Office and ABR Loans shall be made by each Bank at its Domestic Lending
Office.
3.2 Conversion Options. The Company may elect from time to time to
convert Eurodollar Loans into ABR Loans by giving the Administrative Agent
irrevocable notice of such election, to be received by the Administrative Agent
prior to 12:00 Noon, New York City time, at least one Business Day prior to the
proposed conversion date, provided that any such conversion of Eurodollar Loans
shall only be made on the last day of an Interest Period with respect thereto.
The Company may elect from time to time to convert all or a portion of the ABR
Loans (other than Swing Line Loans) then outstanding to Eurodollar Loans by
giving the Administrative Agent irrevocable notice of such election, to be
received by the Administrative Agent prior to 12:00 Noon, New York City time, at
least three Business Days prior to the proposed conversion date, specifying the
Interest Periods selected therefor, and, if no Default or Event of Default has
occurred and is continuing, such conversion shall be made on the requested
conversion date or, if such requested conversion date is not a Business Day, on
the next succeeding Business Day. Upon receipt of any notice pursuant to this
subsection 3.2, the Administrative Agent shall promptly, but in any event by
4:00 P.M., New York City time, notify each Bank thereof. All or any part of the
outstanding Loans (other than Swing Line Loans and Bid Loans) may be converted
as provided herein, provided that partial conversions of Loans shall be in the
aggregate principal amount of $5,000,000, or a whole multiple of $1,000,000 in
excess thereof, and the aggregate principal amount of the resulting Eurodollar
Loans outstanding in respect of any one Interest Period shall be at least
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.
3.3 Changes of Commitment Amounts. (a) The Company shall have the
right, upon not less than three Business Days' notice to the Administrative
Agent, to terminate or, from time to time, reduce the Revolving Credit
Commitments subject to the provisions of this subsection 3.3. To the extent, if
any, that the Aggregate Extensions of Credit exceeds the amount of the Revolving
Credit Commitments as then reduced, the Company shall be required to make a
prepayment equal to such excess amount, the proceeds of which shall be applied
first, to payment of the Swing Line Loans then outstanding, second, to payment
of the Revolving Credit Loans which are not Eurodollar Loans then outstanding,
third, to payment of any Revolving L/C Obligations then outstanding, and last,
to cash collateralize any outstanding Letters of Credit, Bid Loans and Revolving
Credit Loans which are Eurodollar Loans on terms reasonably satisfactory to the
Administrative Agent. Any termination of the Revolving Credit Commitments shall
be accompanied by prepayment in full of the Revolving Credit Loan which are not
Eurodollar Loans, Swing Line Loans and Revolving L/C Obligations then
outstanding and by cash collateralization of any outstanding Letter of Credit,
Bid Loans and Revolving Credit Loans which are Eurodollar Loans on terms
reasonably satisfactory to the Administrative Agent. Upon termination of the
Revolving Credit Commitments any Letter of Credit, Bid Loan or Revolving Credit
Loan which is a Eurodollar Loan then outstanding which has been so cash
collateralized shall no longer be considered a "Letter of Credit", "Bid Loan" or
"Eurodollar Loan", as the case
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may be, as defined in subsection 1.1 and any L/C Participating Interests
heretofore granted by an Issuing Bank to the Banks in such Letter of Credit
shall be deemed terminated (subject to automatic reinstatement in the event
that such cash collateral is returned and such Issuing Bank is not fully
reimbursed for any such L/C Obligations) but the Letter of Credit fees
payable under subsection 3.10 shall continue to accrue to such Issuing Bank
(or, in the event of any such automatic reinstatement, as provided in
subsection 3.10) with respect to such Letter of Credit until the expiry
thereof.
(b) Interest accrued on the amount of any partial prepayment pursuant
to this subsection 3.3 to the date of such partial prepayment shall be paid on
the Interest Payment Date next succeeding the date of such partial prepayment.
In the case of the termination of the Revolving Credit Commitments, interest
accrued on the amount of any prepayment relating thereto and any unpaid
commitment fee accrued hereunder shall be paid on the date of such termination.
Any such partial reduction of the Revolving Credit Commitments shall be in an
amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, and
shall reduce permanently the Revolving Credit Commitments then in effect.
3.4 Optional Prepayments. The Company may at any time and from time
to time prepay Loans (other than Bid Loans), in whole or in part, without
premium or penalty, upon at least one Business Days' irrevocable notice to the
Administrative Agent in the case of ABR Loans and two Business Days' irrevocable
notice to the Administrative Agent in the case of Eurodollar Loans and
specifying the date and amount of prepayment, subject to subsection 3.20. Upon
receipt of such notice the Administrative Agent shall promptly notify each Bank
thereof. If such notice is given, the Company shall make such prepayment, and
the payment amount specified in such notice shall be due and payable, on the
date specified therein. Accrued interest on the amount of any Loans paid in
full pursuant to this subsection 3.4 shall be paid on the date of such
prepayment. Accrued interest on the amount of any partial prepayment shall be
paid on the Interest Payment Date next succeeding the date of such partial
prepayment. Partial prepayments of Revolving Credit Loans shall be in an
aggregate principal amount equal to the lesser of (A) $2,500,000 or a whole
multiple of $1,000,000 in excess thereof and (B) the aggregate unpaid principal
amount of the Revolving Credit Loans, as the case may be.
3.5 Mandatory Prepayments. (a) The Company shall, without notice or
demand, immediately prepay the Loans (other than Bid Loan and Eurodollar Loans
until the respective current Interest Periods therefor expire) and, if
necessary, cash collateralize Bid Loans and Eurodollar Loans to the extent that
the Aggregate Extensions of Credit exceeds the aggregate Commitments of all the
Banks then in effect. The Company will implement and maintain internal
accounting controls to monitor the borrowings and repayments of Loans by the
Company and the issuance of and drawings under Letters of Credit, with the
object of preventing any request for an Extension of Credit that would result in
the Aggregate Extensions of Credit being in excess of the Revolving Credit
Commitments. In the event that at any time the Company determines that the
Aggregate Extensions of Credit exceeds the Revolving Credit Commitments the
Company will immediately make or cause to be made such repayments or prepayments
of Loans (other than Bid Loans and Eurodollar Loans until the respective current
Interest Periods therefor expire) and, if necessary, cash collateralize Bid
Loans and Eurodollar Loans as shall be necessary to cause the Aggregate
Extensions of Credit to no longer exceed the Revolving Credit Commitments.
(b) The Administrative Agent will calculate the Aggregate Extensions
of Credit
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from time to time, and in any event not less frequently than once during each
calendar month. In making such calculations, the Administrative Agent will
rely on the information most recently received by it from the Banks in
respect of outstanding Swing Line Loans, from the Bid Loan Lenders in respect
of outstanding Bid Loans, and Issuing Banks in respect of Revolving L/C
Obligations and the aggregate amount available to be drawn under outstanding
Letters of Credit. Upon making each such calculation, the Administrative
Agent will inform the Company and the Banks of the results thereof.
(c) In the event that on any date the Administrative Agent calculates
that the Aggregate Extensions of Credit exceeds the aggregate amount of the
Revolving Credit Commitments, the Administrative Agent will give notice to such
effect to the Company. The Company will immediately make or cause to be made
such repayments or prepayments of Loans or, if necessary, cash collateralize Bid
Loans as shall be necessary to cause the Aggregate Extensions of Credit to no
longer exceed the Revolving Credit Commitments.
(d) Upon the Revolving Credit Termination Date the Company shall, with
respect to each then outstanding Letter of Credit, if any, either (i) cause such
Letter of Credit to be cancelled without such Letter of Credit being drawn upon
or (ii) collateralize the Revolving L/C Obligations with respect to such Letter
of Credit with a letter of credit issued by banks or a bank satisfactory to the
Administrative Agent, or with cash collateral, all on terms satisfactory to the
Administrative Agent.
3.6 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto on
the unpaid principal amount thereof at a rate per annum equal to the applicable
Eurodollar Rate determined for such Interest Period plus the Applicable Margin.
(b) ABR Loans shall bear interest for the period from and including
the date thereof until maturity thereof on the unpaid principal amount thereof
at a rate per annum equal to the ABR.
(c) Money Market Rate Loans shall bear interest for the period from
and including the date thereof until maturity thereof on the unpaid principal
amount thereof at a rate per annum equal to the Money Market Rate.
(d) If all or a portion of (i) the principal amount of any of the
Loans (other than Bid Loans) or (ii) any interest payable thereon shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall, without limiting the rights of the Banks under
Section 8, bear interest at a rate per annum which is (x) in the case of overdue
principal, 2% above the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this subsection or (y) in the case of overdue
interest, 2% above the rate described in paragraph (b) of this subsection, in
each case from the date of such nonpayment until such amount is paid in full (as
well after as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment
Date; provided that interest accruing pursuant to paragraph (d) of this
subsection shall be payable on demand by the Administrative Agent made at the
request of the Required Banks.
3.7 Computation of Interest and Fees. (a) Interest in respect of ABR
Loans at
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any time when the ABR Loan is calculated based on the Prime Rate and all fees
hereunder shall be calculated on the basis of a 365 or 366, as the case may
be, day year for the actual days elapsed. Interest in respect of Eurodollar
Loans and other ABR Loans shall be calculated on the basis of a 360 day year
for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Company and the Banks of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR shall become effective as of the opening of business on the
day on which such change in the ABR becomes effective. The Administrative
Agent shall as soon as practicable notify the Company and the Banks of the
effective date and the amount of each such change.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company and the Banks in the absence of manifest error. The Administrative
Agent shall, at the request of the Company, deliver to the Company a statement
showing the quotations used by the Administrative Agent in determining the
Eurodollar Rate.
3.8 Facility Fees. The Company agrees to pay to the Administrative
Agent, for the account of each Bank, a facility fee from and including July 22,
1997 to, but excluding, the Revolving Credit Termination Date on the amount of
such Bank's Revolving Credit Commitment (whether or not utilized) at the rate
per annum for each day during the period for which payment is made set forth in
the definition of Applicable Margin under the column captioned "Facility Fee".
The Facility Fee provided for in this subsection shall be payable quarterly in
arrears on the last day of each fiscal quarter, commencing September 30, 1997,
and on the Revolving Credit Termination Date with respect to the Revolving
Credit Commitments.
3.9 Certain Fees. (a) The Company, together with NextLevel and
General Semiconductor, agrees to pay to the Administrative Agent for its own
account certain fees in the amounts, and on the dates, specified in the letter
agreement dated June 18, 1997 among GI Delaware, Chase and Chase Securities Inc.
3.10 Letter of Credit Fees. (a) (i) In lieu of any letter of credit
commissions and fees provided for in any L/C Application relating to Standby
L/Cs (other than standard administrative issuance, amendment and negotiation
fees), the Company agrees to pay the Administrative Agent, for the account of
the relevant Issuing Bank and the Participating Banks, with respect to each
Standby L/C, a Standby L/C fee on the amount available to be drawn under each
Standby L/C payable, in arrears, on the last day of each fiscal quarter of the
Company, at the rate per annum for each day during the period for which payment
is made set forth in the definition of "Applicable Margin" under the column
captioned "Standby L/C Fee". The Standby L/C Fee provided for in this
subsection shall be payable quarterly in arrears on the last day of each fiscal
quarter, commencing September 30, 1997, and on the Revolving Credit Termination
Date.
(ii) In addition, the Company shall pay to each Issuing Bank of a
Standby L/C, in arrears on such day, a fee of 1/8 of 1% per annum on the amount
available to be drawn on such Standby L/C solely for its own account as Issuing
Bank of such Standby L/C and not on account of its L/C Participating Interest
therein.
(b) In lieu of any letter of credit commissions and fees provided for
in any L/C Application relating to Commercial L/Cs (other than standard
administrative issuance,
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amendment and negotiation fees), the Company agrees to pay the Administrative
Agent, for the account of the relevant Issuing Bank and the Participating
Banks, with respect to each Commercial L/C, a Commercial L/C fee of 3/8 of 1%
(of which such Issuing Bank shall retain for its own account, as the issuing
bank and not on account of its L/C Participating Interest therein, 1/8 of 1%)
on the maximum face amount of each Commercial L/C payable on the date such
Commercial L/C is issued.
(c) In connection with any payment of fees pursuant to this
subsection 3.10, the Administrative Agent agrees to provide to the Company a
statement of any such fees so paid; provided that the failure by the
Administrative Agent to provide the Company with any such invoice shall not
relieve the Company of its obligation to pay such fees.
3.11 Letter of Credit Reserves. (a) If any Change in Law after the
date of this Agreement shall either (i) impose, modify, deem or make applicable
any reserve, special deposit, assessment or similar requirement against letters
of credit issued by an Issuing Bank or (ii) impose on such Issuing Bank any
other condition regarding this Agreement or any Letter of Credit, and the result
of any event referred to in clause (i) or (ii) above shall be to increase the
cost to such Issuing Bank of issuing or maintaining any Letter of Credit (which
increase in cost shall be the result of such Issuing Bank's reasonable
allocation of the aggregate of such cost increases resulting from such events),
then, upon demand by such Issuing Bank, the Company shall immediately pay to
such Issuing Bank, from time to time as specified by such Issuing Bank,
additional amounts which shall be sufficient to compensate such Issuing Bank for
such increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the ABR. A
certificate submitted by such Issuing Bank to the Company concurrently with any
such demand by such Issuing Bank, shall be conclusive, absent manifest error, as
to the amount thereof.
(b) In the event that at any time after the date hereof any Change in
Law with respect to an Issuing Bank shall, in the opinion of such Issuing Bank,
require that any obligation under any Letter of Credit be treated as an asset or
otherwise be included for purposes of calculating the appropriate amount of
capital to be maintained by such Issuing Bank or any corporation controlling
such Issuing Bank, and such Change in Law shall have the effect of reducing the
rate of return on such Issuing Bank's or such corporation's capital, as the case
may be, as a consequence of such Issuing Bank's obligations under such Letter of
Credit to a level below that which such Issuing Bank or such corporation, as the
case may be, could have achieved but for such Change in Law (taking into account
such Issuing Bank's or such corporation's policies, as the case may be, with
respect to capital adequacy) by an amount deemed by such Issuing Bank to be
material, then from time to time following notice by such Issuing Bank to the
Company of such Change in Law, within 15 days after demand by such Issuing Bank,
the Company shall pay to such Issuing Bank such additional amount or amounts as
will compensate such Issuing Bank or such corporation, as the case may be, for
such reduction. If such Issuing Bank becomes entitled to claim any additional
amounts pursuant to this subsection 3.11(b), it shall promptly notify the
Company of the event by reason of which it has become so entitled. A
certificate submitted by such Issuing Bank to the Company concurrently with any
such demand by such Issuing Bank, shall be conclusive, absent manifest error, as
to the amount thereof.
(c) The Company agrees that the provisions of the foregoing paragraphs
(a) and (b) and the provisions of each L/C Application providing for
reimbursement or payment to an
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Issuing Bank in the event of the imposition or implementation of, or increase
in, any reserve, special deposit, capital adequacy or similar requirement in
respect of the Letter of Credit relating thereto shall apply equally to each
Participating Bank in respect of its L/C Participating Interest in such
Letter of Credit, as if the references in such paragraphs and provisions
referred to, where applicable, such Participating Bank or any corporation
controlling such Participating Bank.
(d) Notwithstanding any other provision of this subsection 3.11, no
Bank shall demand compensation for any increased cost or reduction referred to
in subsection 3.11(a) or (b) if it shall not at the time be the general policy
or practice of such Bank to demand such compensation in similar circumstances
under comparable provisions of other credit agreements.
3.12 Further Assurances. The Company hereby agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by an Issuing Bank to effect more fully the
purposes of this Agreement and the issuance of Letters of Credit hereunder. The
Company further agrees to execute any and all instruments reasonably requested
by any Issuing Bank in connection with the obtaining and/or maintaining of any
insurance coverage applicable to any Letters of Credit.
3.13 Obligations Absolute. The payment obligations of the Company
under this Agreement with respect to the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
(i) the existence of any claim, set-off, defense or other
right which the Company or any of its Subsidiaries may have at any time
against any beneficiary, or any transferee, of any Letter of Credit (or
any Persons for whom any such beneficiary or any such transferee may be
acting), any Issuing Bank, the Administrative Agent, any Co-Agent or any
Bank, or any other Person, whether in connection with this Agreement,
the Related Documents, any Credit Documents, the transactions contemplated
herein, or any unrelated transaction;
(ii) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iii) payment by any Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which does not comply with
the terms of such Letter of Credit, except where such payment constitutes
gross negligence or wilful misconduct on the part of any Issuing Bank; or
(iv) any other circumstances or happening whatsoever, whether
or not similar to any of the foregoing, except for any such circumstances
or happening constituting gross negligence or wilful misconduct on the
part of any Issuing Bank.
3.14 Assignments. No Participating Bank's participation in any
Letter of Credit or any of its rights or duties hereunder shall be
subdivided, assigned or transferred (other than in connection with a transfer
of part or all of such Participating Bank's Revolving Credit Commitment in
accordance with subsection 10.6) without the prior written consent of the
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relevant Issuing Bank, which consent will not be unreasonably withheld. Such
consent may be given or withheld without the consent or agreement of any
other Participating Bank. Notwithstanding the foregoing, a Participating Bank
may subparticipate its L/C Participating Interest without obtaining the prior
written consent of the relevant Issuing Bank.
3.15 Participations. Each Bank's obligation to purchase
participating interests pursuant to subsections 2.4 and 2.10(c) shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against any Issuing Bank, the
Company, Holdings or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the Company; (iv)
any breach of this Agreement by the Company or any other Bank; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.
3.16 Inability to Determine Interest Rate. In the event that the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Company) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for any Interest Period with
respect to (i) proposed Loans that the Company has requested be made as
Eurodollar Loans, (ii) any Eurodollar Loans that will result from the
requested conversion of all or part of ABR Loans into Eurodollar Loans or
(iii) the continuation of any Eurodollar Loan as such for an additional
Interest Period, the Administrative Agent shall forthwith give notice of such
determination, confirmed in writing, to the Company and the Banks at least
one day prior to the requested Borrowing Date, the conversion date or the
last day of such Interest Period, as the case may be. If such notice is
given (i) any requested Eurodollar Loans shall be made as ABR Loans, (ii) any
ABR Loans that were to have been converted to Eurodollar Loans shall be
continued as ABR Loans, and (iii) any outstanding Eurodollar Loans shall be
converted, on the last day of the then current Interest Period applicable
thereto, into ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made.
3.17 Pro Rata Treatment and Payments. (a) Each borrowing of any
Loans (other than Swing Line Loans and Bid Loans) by the Company from the
Banks, each payment by the Company on account of any fee hereunder (other
than as otherwise set forth in subsections 3.9 and 3.10) and any reduction of
the Revolving Credit Commitments of the Banks hereunder shall be made pro
rata according to the relevant Commitment Percentages of the Banks. Each
payment (including each prepayment) by the Company on account of principal of
and interest on the Loans (other than Swing Line Loans and Bid Loans and
other than as set forth in subsections 3.18, 3.19 and 3.20) shall be made pro
rata according to the relevant Commitment Percentages of the Banks. All
payments (including prepayments) to be made by the Company on account of
principal, interest and fees shall be made without set-off or counterclaim
and shall be made to the Administrative Agent, for the account of the Banks,
at the Administrative Agent's office located at 270 Park Avenue, New York,
New York 10017 and in immediately available funds. The Administrative Agent
shall promptly distribute such payments ratably to each Bank in like funds as
received. If any payment hereunder (other than payments on Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
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(b) Unless the Administrative Agent shall have been notified in
writing by any Bank prior to a Borrowing Date that such Bank will not make
the amount which would constitute its relevant Commitment Percentage of the
borrowing on such date available to the Administrative Agent, the
Administrative Agent may assume that such Bank has made such amount available
to the Administrative Agent on such Borrowing Date in accordance with
subsection 3.1 and the Administrative Agent may, in reliance upon such
assumption, make available to the Company a corresponding amount. If such
amount is made available to the Administrative Agent by such Bank on a date
after such Borrowing Date, such Bank shall pay to the Administrative Agent on
demand an amount equal to the product of (i) the daily average Federal funds
rate during such period as quoted by the Administrative Agent, times (ii) the
amount of such Bank's relevant Commitment Percentage of such borrowing, times
(iii) a fraction the numerator of which is the number of days that elapse
from and including such Borrowing Date to the date on which such Bank's
relevant Commitment Percentage of such borrowing shall have become
immediately available to the Administrative Agent and the denominator of
which is 360. A certificate of the Administrative Agent submitted to any
Bank with respect to any amounts owing under this subsection 3.17(b) shall be
conclusive, absent manifest error. If such Bank's relevant Commitment
Percentage of such borrowing is not in fact made available to the
Administrative Agent by such Bank within three Business Days of such
Borrowing Date, the Administrative Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to ABR Loans
hereunder, on demand, from the Company, without prejudice to any rights which
the Company or the Administrative Agent may have against such Bank hereunder.
Nothing contained in this subsection 3.17(b) shall relieve any Bank which
has failed to make available its ratable portion of any borrowing hereunder
from its obligation to do so in accordance with the terms hereof.
(c) The failure of any Bank to make the Loan to be made by it on any
Borrowing Date shall not relieve any other Bank of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on such Borrowing Date.
(d) All payments and optional prepayments (other than prepayments as
set forth in subsection 3.19 with respect to increased costs) of Eurodollar
Loans hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal
amount of all Eurodollar Loans with the same Interest Period shall not be
less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
(e) Each Bank, Assignee, Participant and Designated Lender that is
not a citizen or resident of the United States of America, a corporation,
partnership or other entity created or organized in or under the laws of the
United States of America, or any estate or trust that is subject to U.S.
federal income taxation regardless of the source of its income (a "Non-U.S.
Bank") shall deliver to the Company and the Administrative Agent, and if
applicable, the assigning Bank (or, in the case of a Participant, to the Bank
from which the related participation shall have been purchased) on or before
the date on which it becomes a party to this Agreement (or, in the case of a
Participant, on or before the date on which such Participant purchases the
related participation) either:
(A) (x) two duly completed and signed original copies of either
Internal Revenue Service Form 1001 (relating to such Non-U.S. Bank
and entitling it to a complete exemption from withholding of United
States federal income taxes on
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all amounts to be received by such Non-U.S. Bank pursuant to this
Agreement and the other Credit Documents) or Form 4224 (relating to
all amounts to be received by such Non-U.S. Bank pursuant to this
Agreement and the other Credit Documents), or successor and related
applicable forms, as the case may be, and (y) two duly completed and
signed original copies of Internal Revenue Service Form W-8 or W-9, or
successor and related applicable forms, as the case may be; or
(B) in the case of a Non-U.S. Bank that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code and that does not comply
with the requirements of clause (A) hereof, (x) a statement in the form
of Exhibit J (or such other form of statement as shall be reasonably
requested by the Company from time to time) to the effect that such
Non-U.S. Bank is eligible for a complete exemption from withholding of
United States federal income taxes under Code Section 871(h) or 881(c),
and (y) two duly completed and signed original copies of Internal
Revenue Service Form W-8 or successor and related applicable form (it
being understood and agreed that no Participant and, without the prior
written consent of the Company described in clause (C) of the proviso
to the first sentence of subsection 10.6(c) or the second clause of
the first sentence of subsection 10.6(i), no Assignee or Designated
Lender shall be entitled to deliver any forms or statements pursuant to
this clause (B), but rather shall be required to deliver forms pursuant
to clause (A) of this subsection 3.17(e)).
Further, each Non-U.S. Bank agrees (i) to deliver to the Company and the
Administrative Agent, and if applicable, the assigning Bank (or, in the case
of a Participant, to the Bank from which the related participation shall have
been purchased) two further duly completed and signed original copies of such
Forms 1001, 4224, W-8 or W-9, as the case may be, or successor and related
applicable forms, on or before the date that any such form expires or becomes
obsolete and promptly after the occurrence of any event requiring a change
from the most recent form(s) previously delivered by it to the Company (or,
in the case of a Participant, to the Bank from which the related
participation shall have been purchased) in accordance with applicable U.S.
laws and regulations, (ii) in the case of a Non-U.S. Bank that delivers a
statement in the form of Exhibit J (or such other form of statement as shall
have been requested by the Company), to deliver to the Company and the
Administrative Agent, and if applicable, the assigning Bank, such statement
on an annual basis on the anniversary of the date on which such Non-U.S. Bank
became a party to this Agreement and to deliver promptly to the Company and
the Administrative Agent, and if applicable, the assigning Bank, such
additional statements and forms as shall be reasonably requested by the
Company from time to time, and (iii) to notify promptly the Company and the
Administrative Agent (or, in the case of a Participant, the Bank from which
the related participation shall have been purchased) if it is no longer able
to deliver, or if it is required to withdraw or cancel, any form or statement
previously delivered by it pursuant to this subsection 3.17(e). Each
Non-U.S. Bank agrees to indemnify and hold harmless the Company from and
against any Taxes imposed by or on behalf of the United States or any taxing
jurisdiction thereof, penalties, additions to tax, fines, interest or other
liabilities, costs or losses (including, without limitation, reasonable
attorneys' fees and expenses) incurred or payable by the Company as a result
of the failure of the Company to comply with its obligations to deduct or
withhold any Taxes imposed by or on behalf of the United States or any taxing
jurisdiction thereof (including penalties, additions to tax, fines or
interest on such Taxes) from any payments made pursuant to this Agreement to
such Non-U.S. Bank or the Administrative
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Agent which failure resulted from the Company's reliance on any form,
statement, certificate or other information provided to it by such Non-U.S.
Bank pursuant to clause (B) or clause (ii) of this subsection 3.17(e). The
Company hereby agrees that for so long as a Non-U.S. Bank complies with this
subsection 3.17(e), the Company shall not withhold any amounts from any
payments made pursuant to this Agreement to such Non-U.S. Bank, unless the
Company reasonably determines that it is required by law to withhold or
deduct any amounts from any payments made to such Non-U.S. Bank pursuant to
this Agreement. Notwithstanding any other provision of this subsection
3.17(e), a Non-U.S. Bank shall not be required to deliver any form or
statement pursuant to the immediately preceding sentences in this subsection
3.17(e) that such Non-U.S. Bank is not legally able to deliver (it being
understood and agreed that the Company shall withhold or deduct such amounts
from any payments made to such Non-U.S. Bank that the Company reasonably
determines are required by law). If any Credit Party other than the Company
makes any payment to any Non-U.S. Bank under any Credit Document, the
foregoing provisions of this subsection 3.17(e) shall apply to such Non-U.S.
Bank and such Credit Party as if such Credit Party were the Company (but a
Non-U.S. Bank shall not be required to provide any form or make any statement
to any such Credit Party unless such Non-U.S. Bank has received a request to
do so from such Credit Party and has a reasonable time to comply with such
request).
3.18 Illegality. Notwithstanding any other provisions herein, if
any Requirement of Law or any change therein or in the interpretation or
application thereof occurring after the date that any lender becomes a Bank
party to this Agreement, shall make it unlawful for such Bank to make or
maintain Eurodollar Loans as contemplated by this Agreement, the commitment
of such Bank hereunder to make Eurodollar Loans or to convert all or a
portion of ABR Loans into Eurodollar Loans shall forthwith be cancelled and
such Bank's Loans then outstanding as Eurodollar Loans, if any, shall, if
required by law and if such Bank so requests, be converted automatically on
the date specified by such Bank in such request to ABR Loans. To the extent
that such affected Eurodollar Loans are converted into ABR Loans, all
payments of principal which would otherwise be applied to such Eurodollar
Loans shall be applied instead to such Bank's ABR Loans. The Company hereby
agrees promptly to pay any Bank, upon its demand, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this subsection 3.18 including, but
not limited to, any interest or fees payable by such Bank to lenders of funds
obtained by it in order to make or maintain its Eurodollar Loans hereunder
(such Bank's notice of such costs, as certified to the Company through the
Administrative Agent, to be conclusive absent manifest error).
3.19 Requirements of Law. (a) In the event that, at any time after
the date hereof, the adoption of any Requirement of Law, or any change
therein or in the interpretation or application thereof or compliance by any
Bank with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority:
(i) does or shall subject any Bank to any tax of any kind
whatsoever with respect to this Agreement or any Eurodollar Loans made
by it, or change the basis of taxation of payments to such Bank of
principal, commitment fee, interest or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of such
Bank), it being understood and agreed that, in the case of a Non-U.S.
Bank that does not comply with clause (A) of subsection 3.17(e), this
clause (i) shall apply only to the extent that it would have applied if
such Non-U.S. Bank were able to comply with clause (A) of subsection
3.17(e);
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(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Bank which are not otherwise
included in the determination of the Eurodollar Rate; or
(iii) does or shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank
of making, converting, renewing or maintaining advances or extensions of
credit or to reduce any amount receivable hereunder, in each case, in respect
of its Eurodollar Loans, then, in any such case, the Company shall promptly
pay such Bank, on demand, any additional amounts necessary to compensate such
Bank for such additional cost or reduced amount receivable which such Bank
deems to be material as determined by such Bank with respect to such
Eurodollar Loans, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the ABR.
The Loans referred to in the last sentence of subsection 2.1(a) shall be
entitled to the benefits of this subsection 3.19.
(b) In the event that at any time after the date hereof, any Change
in Law with respect to any Bank shall, in the opinion of such Bank, require
that any Commitment of such Bank be treated as an asset or otherwise be
included for purposes of calculating the appropriate amount of capital to be
maintained by such Bank or any corporation controlling such Bank, and such
Change in Law shall have the effect of reducing the rate of return on such
Bank's or such corporation's capital, as the case may be, as a consequence of
such Bank's obligations hereunder to a level below that which such Bank or
such corporation, as the case may be, could have achieved but for such Change
in Law (taking into account such Bank's or such corporation's policies, as
the case may be, with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time following notice by such
Bank to the Company of such Change in Law as provided in paragraph (c) of
this subsection 3.19, within 15 days after demand by such Bank, the Company
shall pay to such Bank such additional amount or amounts as will compensate
such Bank or such corporation, as the case may be, for such reduction.
(c) A certificate submitted by such Bank, through the Administrative
Agent, to the Company shall be conclusive in the absence of manifest error.
The covenants contained in this subsection 3.19 shall survive the termination
of this Agreement and payment of the outstanding Loans.
(d) Notwithstanding any other provision of this subsection 3.19, no
Bank shall demand compensation for any increased cost or reduction referred
to above if it shall not at the time be the general policy or practice of
such Bank to demand such compensation in similar circumstances under
comparable provisions of other credit agreements.
3.20 Indemnity. The Company agrees to indemnify each Bank and to
hold such Bank harmless from any loss or expense which such Bank may sustain
or incur as a consequence of (a) default by the Company in payment of the
principal amount of or interest on any Eurodollar Loans or Absolute Rate Bid
Loans of such Bank, including, but not limited to, any such loss or expense
arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to make or maintain its Eurodollar Loans or Absolute
Rate Bid Loans
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hereunder, (b) default by the Company in making a borrowing of Eurodollar
Loans or Absolute Rate Bid Loans after the Company has given a notice in
accordance with subsection 2.10 or 3.1 or in making a conversion of ABR Loans
to Eurodollar Loans after the Company has given notice in accordance with
subsection 3.2, (c) default by the Company in making any prepayment of
Eurodollar Loans or Absolute Rate Bid Loans after the Company has given a
notice in accordance with subsection 3.4 or (d) a payment or prepayment of a
Eurodollar Loan, Money Market Rate Loan or Absolute Rate Bid Loan or
conversion of any Eurodollar Loan into an ABR Loan, in either case on a day
which is not the last day of an Interest Period with respect thereto (or,
with respect to a Money Market Rate Loan, the maturity date thereof),
including, but not limited to, any such loss or expense arising from interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain its Eurodollar Loans hereunder. This covenant shall survive
termination of this Agreement and payment of the outstanding Obligations.
3.21 Repayment of Loans, Evidence of Debt. (a) The Company hereby
unconditionally promises to pay (i) to the Administrative Agent for the
account of each Bank the then unpaid principal amount of each Revolving
Credit Loan on the Revolving Credit Termination Date, (ii) to the
Administrative Agent for the account of each Bid Loan Lender the then unpaid
principal amount of each Bid Loan on the Bid Loan Maturity Date applicable to
such Bid Loan, and (iii) to the Administrative Agent for the account of the
applicable Swing Line Bank the then unpaid principal amount of each Swing
Line Loan on the Revolving Credit Termination Date (or such other date as
required by subsection 2.10(a)).
(b) Each Bank shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Company to such
Bank resulting from each Loan made and each Letter of Credit issued by such
Bank, including the amounts of principal and interest payable and paid to
such Bank from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Extension of Credit made hereunder to the
Company, the Class and Type thereof and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Company to each Bank hereunder and (iii) the
amount of any sum received by the Administrative Agent hereunder for the
account of the Banks and each Bank's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Bank or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of each
Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Bank may request that Loans made by it be evidenced by a
promissory note. In such event, the Company shall prepare, execute and
deliver to such Bank either (i) a promissory note payable to the order of
such Bank or (ii) if requested by such Bank, a promissory note payable to
such Bank and its registered assigns (a "Registered Form Note") and in each
case in a form approved by the Administrative Agent. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 10.2) be represented by one
or more promissory notes in such form payable to the order of the payee named
therein or, if such promissory note is a Registered Form Note, to such payee
and its registered assigns. Registered Form Notes may not be exchanged for
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promissory notes that are not Registered Form Notes. A Registered Form Note
and the Obligation(s) evidenced thereby may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer of such Registered Form Note and the Obligation(s) evidenced thereby
on the Register (and each Registered Form Note shall expressly so provide).
Any assignment or transfer of all or part of such Obligation(s) and the
Registered Form Note(s) evidencing the same shall be registered on the
Register only upon surrender for registration of assignment or transfer of
the Registered Form Note(s) evidencing such Obligation(s), duly endorsed by
(or accompanied by a written instrument of assignment or transfer duly
executed by) the holder thereof, and thereupon one or more new Registered
Form Note(s) in the same aggregate principal amount shall be issued to the
designated Assignee(s) and the old Registered Form Note shall be returned to
the Company marked "cancelled". No assignment of a Registered Form Note and
the Obligation(s) evidenced thereby shall be effective unless it shall have
been recorded in the Register by the Administrative Agent as provided in this
subsection 3.21(e).
3.22 Mitigation Obligations; Replacement of Banks. (a) If any Bank
requests compensation under subsection 3.11 or 3.19 or gives notice to the
Company pursuant to subsection 3.18, or if the Company withholds any amounts
from any payments made pursuant to this Agreement to any Non-U.S. Bank, then
such Bank or Non-U.S. Bank, as the case may be, shall use reasonable efforts
to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Bank or Non-U.S.
Bank, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to subsection 3.11 or 3.19, make it no longer unlawful for
such Bank to make or maintain Eurodollar Loans or eliminate the need to
withhold any amounts from any payments made pursuant to the Agreement, as the
case may be, in the future and (ii) would not subject such Bank to any
unreimbursed cost or expense and would not otherwise be disadvantageous to
such Bank. The Company hereby agrees to pay all reasonable costs and
expenses incurred by any Bank in connection with any such designation or
assignment.
(b) If any Bank requests compensation under subsection 3.11 or 3.19
or gives notice to the Company pursuant to subsection 3.18, or if the Company
withholds any amounts from any payments made pursuant to this Agreement to
any Non-U.S. Bank, or if any Bank defaults in its obligation to fund Loans
hereunder, then the Company may, at its sole expense and effort, upon notice
to such Bank or Non-U.S. Bank, as the case may be, and the Administrative
Agent, either (i) reduce or terminate the Revolving Credit Commitment of such
Bank or Non-U.S. Bank (and pay all amounts owed to such Bank or Non-U.S. Bank
under this Agreement other than Bid Loans prior to the expiration of the
Interest Periods therefor, unless such Bank or Non-U.S. Bank agrees to such
payment) or (ii) require such Bank to assign and delegate, without recourse
(in accordance with and subject to the restrictions contained in subsection
10.6), all its interests, rights and obligations under this Agreement (other
than any outstanding Bid Loans held by it) to an assignee that shall assume
such obligations (which assignee may be another Bank, if such Bank accepts
such assignment); provided that (A) the Company shall have received the prior
written consent of the Administrative Agent (and, if a Revolving Credit
Commitment is being assigned, the Issuing Bank and the Swing Line Bank),
which consent shall not unreasonably be withheld, (B) such Bank shall have
received payment of an amount equal to the outstanding principal of its Loans
(other than Bid Loans) and participations in Letter of Credit and Swing Line
Loans, accrued interest thereon, accrued fees and all other amounts payable
to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and
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fees) or the Company (in the case of all other amounts) and (C) in the case
of any such assignment resulting from a claim for compensation under
subsection 3.11 or 3.19, a notice pursuant to subsection 3.18 or amounts
withheld from any payments made pursuant to this Agreement to any Non-U.S.
Bank, such assignment will result in a reduction in such compensation or
withholding or result in an assignment to a Bank which may make or maintain
Eurodollar Loans. A Bank shall not be required to make any such assignment
and delegation and the Company shall not be permitted to reduce or terminate
the Revolving Credit Commitments of a Bank if, prior thereto, as a result of
an irrevocable waiver by such Bank or otherwise, the circumstances entitling
the Company to require such assignment and delegation or make such reduction
or termination cease to apply.
(c) If any Bank becomes entitled to claim any additional amounts
pursuant to subsection 3.11 or 3.19, it shall promptly notify the Company,
through the Administrative Agent, of the event by reason of which it has
become so entitled. If any Bank has notified the Company through the
Administrative Agent of any increased costs pursuant to paragraph (a) of this
subsection 3.22, the Company at any time thereafter may, upon at least two
Business Days' notice to the Administrative Agent, prepay or convert into ABR
Loans all (but not a part) of the Eurodollar Loans then outstanding.
(d) The Company's indemnification obligations under subsection 3.20
shall apply to the transactions described in this subsection 3.22.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to
continue and make the Loans and to induce the Issuing Banks to issue, and the
Participating Banks to participate in, the Letters of Credit, the Company
hereby represents and warrants to each Bank, each Co-Agent and the
Administrative Agent, on and as of the Closing Date and, other than with
respect to subsection 4.2, on the date each Loan is made or Letter of Credit
is issued thereafter, that:
4.1 Financial Condition. (a) (i) The audited combined balance
sheet of the Cable Manufacturing Business at each of December 31, 1995 and
December 31, 1996 and the combined statements of operations, divisional net
equity and cash flows for each of the fiscal years ending December 31, 1994,
December 31, 1995 and December 31, 1996, reported on by Deloitte & Touche
LLP, and (ii) the unaudited combined balance sheet of the Cable Manufacturing
Business at March 31, 1997 and the related combined statements of operations,
divisional net equity and cash flows for the fiscal quarter ending March 31,
1997, certified as complete and correct and prepared in accordance with GAAP
(subject to normal year-end adjustments) by the chief financial officer of
the Company, copies of each of which have heretofore been furnished to each
Bank, are complete and correct and present fairly (except, with respect to
interim statements, for normal year-end adjustments) the combined financial
position of the Cable Manufacturing Business as at such dates, and the
combined results of operations and cash flows for the fiscal periods then
ended and, in the case of the statements referred to in the foregoing clause
(ii), the portion of the fiscal year through such date. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except, with respect to interim statements, for normal year-end
adjustments and that such interim statements may be condensed
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and exclude detailed footnote disclosure and except as concurred in by such
accountants or such chief financial officer, as the case may be, and as
disclosed therein).
(b) The unaudited pro forma combined balance sheet of the Cable
Manufacturing Business at March 31, 1997 (including the notes thereto) (the
"Pro Forma Balance Sheet"), and the related combined statements of operations
for the fiscal year ending December 31, 1996 and the fiscal quarter ended
March 31, 1997 (the "Pro Forma Statements of Operations"), copies of which
have heretofore been furnished to each Bank, have been prepared based upon
the combined balance sheet of the Cable Manufacturing Business as of March
31, 1997 and the combined statements of operations for the fiscal year ended
December 31, 1996 and the fiscal quarter ended March 31, 1997, respectively,
assuming that the Spin-Off occurred on January 1, 1996 and January 1, 1997,
respectively, and do not purport to represent what the financial position
actually would have been had the Spin-Off occurred on January 1, 1996 or
January 1, 1997, as the case may be, or to project the financial position of
the Cable Manufacturing Business for any future date. The Pro Forma Balance
Sheet presents fairly on a pro forma basis the combined financial position of
the Cable Manufacturing Business at March 31, 1997, and the Pro Forma
Statements of Operations present fairly on a pro forma basis the combined
operating results of the Cable Manufacturing Business for the respective
fiscal periods covered thereby, in each case assuming that the events and
assumptions specified in the preceding sentence had actually occurred or are
true, as the case may be, on March 31, 1997 or for the respective periods
covered by the Pro Forma Statements of Operations, as the case may be (except
(i) for changes in such financial position which are not materially adverse
to the financial position of the Cable Manufacturing Business, and (ii) as
provided in the notes thereto). The unaudited pro forma adjustments are based
upon currently available information and certain assumptions that the
management of the Cable Manufacturing Business believes to be reasonable. As
of the date of the Pro Forma Balance Sheet, the Cable Manufacturing Business
had no material obligation, contingent or otherwise, which was not reflected
therein or in the notes thereto and which would have a material adverse
effect on the business, financial condition, assets, liabilities, net assets,
properties, results of operations, value or prospects of Holdings and its
Subsidiaries taken as a whole (other than the Excluded Litigation, as to
which no representation is made).
4.2 No Material Change. Since June 13, 1997 (a) there has been no
occurrence (other than the Excluded Litigation as to which no representation
is made in this subsection 4.2) which has had a material adverse effect on
the business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole, and (b)
other than as disclosed in any financial statements delivered hereunder
pursuant to subsection 6.1, neither the Company nor any of its Subsidiaries
has, since December 31, 1996, incurred any material obligation, contingent or
otherwise (other than in connection with the Excluded Litigation, as to which
no representation is made in this subsection 4.2), which has had a material
adverse effect on the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole.
4.3 Corporate Existence; Compliance with Law. Each Credit Party and
its Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (b)
has the corporate power and authority and the legal right to own and operate
its property, to lease the property it operates and to conduct the business
in which it is currently engaged, except to the extent that the failure to
possess such corporate power and authority and such legal right would not, in
the aggregate, have a material adverse effect on the business, financial
condition, properties, results of operations, value or
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prospects of the Company and its Subsidiaries taken as a whole, (c) is duly
qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole and (d) is in compliance
with all Requirements of Law (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, or any applicable federal, state,
local or other statute, law, ordinance, code, rule, regulation, order or
decree regulating, relating to, or imposing liability or standards of conduct
concerning, any Hazardous Materials), except to the extent that the failure
to comply therewith would not, in the aggregate, have a material adverse
effect on the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole.
4.4 Corporate Power; Authorization. Each Credit Party has the
corporate power and authority and the legal right to make, deliver and
perform the Credit Documents to which it is a party; and the Company has the
corporate power and authority and legal right to borrow hereunder and to have
Letters of Credit issued for its account hereunder. Each Credit Party has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party and, in case of
the Company, to authorize the borrowings hereunder and the issuance of
Letters of Credit for its account hereunder. No consent or authorization of,
or filing with, any Person (including, without limitation, any Governmental
Authority) is required in connection with the execution, delivery or
performance by any Credit Party, or the validity or enforceability against
any Credit Party, of any Credit Document to the extent that it is a party
thereto, or the guarantee of the Obligations pursuant to the Guarantees.
4.5 Enforceable Obligations. Each of the Credit Documents has been
duly executed and delivered on behalf of each Credit Party which is a party
thereto and each of such Credit Documents constitutes the legal, valid and
binding obligation of such Credit Party, enforceable against such Credit
Party in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally and by general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
4.6 No Legal Bar. The performance of each Credit Document, the
guarantee of the Obligations pursuant to the Guarantees and the use of the
proceeds of the Loans and of drawings under the Letters of Credit will not
violate any Requirement of Law or any Contractual Obligation applicable to or
binding upon any Credit Party, any of its Subsidiaries or any of its
properties or assets, which violations, individually or in the aggregate,
would have a material adverse effect on the ability of such Credit Party to
perform its obligations under the Credit Documents to the extent that it is a
party thereto, or which would give rise to any liability on the part of the
Administrative Agent, any Co-Agent or any Bank, or which would have a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole, and will not result in the creation or imposition (or the
obligation to create or impose) of any Lien on any of its or their respective
properties or assets pursuant to any Requirement of Law applicable to it or
them, as the case may be, or any of its or their Contractual Obligations.
4.7 No Material Litigation. No litigation, investigation
known to the Company or
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proceeding of or by any Governmental Authority or any other Person is pending
against any Credit Party or any of its Subsidiaries, (a) with respect to the
validity, binding effect or enforceability of any Credit Document or with
respect to the Loans made hereunder, the use of proceeds thereof or of any
drawings under a Letter of Credit and the other transactions contemplated
hereby or thereby, or (b) except for the Excluded Litigation (as to which no
representation is made in this subsection 4.7), which would have a material
adverse effect on the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole.
4.8 Investment Company Act. Neither any Credit Party nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
4.9 Federal Regulation. No part of the proceeds of any of the Loans
or any drawing under a Letter of Credit will be used for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation
G, T, U or X of the Board. Neither the Company nor any of its Subsidiaries
is engaged or will engage, principally or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under said Regulation U.
4.10 No Default. Neither the Company nor any of its Subsidiaries is
in default in the payment or performance of any of its or their Contractual
Obligations in any respect which would be materially adverse to the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole. Neither the Company nor
any of its Subsidiaries is in default under any order, award or decree of any
Governmental Authority or arbitrator binding upon or affecting it or them or
by which any of its or their properties or assets may be bound or affected in
any respect which would be materially adverse to the business, financial
condition, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole, and no such order, award or
decree would materially adversely affect the ability of the Company and its
Subsidiaries taken as a whole to carry on their businesses as presently
conducted or the ability of any Credit Party to perform its obligations under
any Credit Document.
4.11 No Burdensome Restrictions. Neither the Company nor any of its
Subsidiaries is a party to or is bound by any Contractual Obligation or
subject to any Requirement of Law or other corporate restriction which
materially and adversely affects the business, financial condition,
properties, results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole.
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4.12 Taxes. Each of the Company and its Subsidiaries has filed or
caused to be filed or has timely requested an extension to file or has
received an approved extension to file all tax returns which, to the
knowledge of the Company, are required to have been filed, and has paid all
taxes shown to be due and payable on said returns or extension requests or on
any assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided in the
books of the Company or its Subsidiaries, as the case may be), except any
such filings or taxes, fees or charges, the making of or the payment of
which, or the failure to make or pay, would not materially adversely affect
the business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole; and, to
the knowledge of the Company, no claims are being asserted with respect to
any such taxes, fees or other charges (other than those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been provided in the books of the Company or its Subsidiaries, as the case
may be), except as to any such taxes, fees or other charges, the payment of
which, or the failure to pay, would not materially adversely affect the
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole.
4.13 Subsidiaries. The Subsidiaries of the Company listed on
Schedule III constitute all of the Domestic Subsidiaries of the Company and
the Subsidiaries listed on Schedule IV constitute all of the Foreign
Subsidiaries of the Company as of the Closing Date. The Company has no
Material Subsidiaries on the Closing Date.
4.14 Ownership of Property; Liens. The Company and each of its
Subsidiaries has good and marketable title to, or valid and subsisting
leasehold interests in, all its respective material real property, and good
title to all its respective material other property, and none of such
property is subject, except as permitted hereunder, to any Lien (including,
without limitation, Federal, state and other tax liens).
4.15 ERISA. No "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) or "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or Reportable Event (other than a Reportable
Event with respect to which the 30-day notice requirement under Section 4043
of ERISA has been waived or which occurs by reason of the Spin-Off
Transactions) has occurred during the five years preceding each date on which
this representation is made or deemed made with respect to any Plan in any
case the consequences of which would be materially adverse to the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole. The present value of all
accrued benefits under each Single Employer Plan maintained by the Company or
a Commonly Controlled Entity (based on those assumptions used to fund such
Plan) did not, as of the most recent annual valuation date in respect of each
such Plan, exceed the fair market value of the assets of the Plan (including
for these purposes accrued but unpaid contributions) allocable to such
benefits by an amount that would be materially adverse to the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole. The liability to which
the Company or any Commonly Controlled Entity would become subject under
ERISA if the Company or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation date most
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closely preceding the date hereof would not be materially adverse to the
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole. To the
Company's knowledge, no Multiemployer Plan is either in Reorganization or
Insolvent in any case the consequences of which would be materially adverse
to the business, financial condition, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole.
4.16 Accuracy of Disclosure. All written information, other than
financial projections, which has been made available to the Administrative
Agent or the Banks by the Company or any of its representatives and all other
information which has been made available to the Administrative Agent or the
Banks by any officers of the Company and its Subsidiaries is complete and
correct in all material respects and does not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements contained therein not materially misleading. The financial
projections that have been made available to the Administrative Agent and the
Banks by the Company or any of its representatives have been prepared in good
faith based upon reasonable assumptions.
4.17 Intellectual Property. The Company and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of
its business as currently conducted except for those the failure to own or
license which would not have any reasonable likelihood of having a material
adverse effect on the business, operations, property, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the satisfaction, or waiver by
each Bank (or, in the case of the conditions specified in subsections 5.1(b),
(c), (e) and (i), waiver by the Administrative Agent), immediately prior to
or concurrently with the effectiveness of this Agreement, of the following
conditions precedent on or prior to August 31, 1997 (the date of
effectiveness, the "Effective Date"):
(a) Agreement; Holdings Guarantee. The Administrative Agent shall
have received (i) this Agreement, executed and delivered by a duly
authorized officer of each of the Company, the Banks, the Co-Agents and
the Administrative Agent and (ii) the Holdings Guarantee, executed and
delivered by a duly authorized officer of Holdings.
(b) Legal Opinions. The Administrative Agent shall have received,
addressed to the Administrative Agent, the Co-Agents and the Banks, (i)
an opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel
to Holdings and the Company, dated the Effective Date, substantially in
the form of Exhibit E-1 hereto with such changes thereto as may be
approved by and otherwise in form and substance satisfactory to the
Administrative Agent and its counsel, and (ii) an opinion of Frank B.
Wyatt II, Esq., General Counsel to the Company, dated the Effective Date,
substantially in the form of Exhibit E-2 hereto with such changes thereto
as may be approved by and otherwise in form and substance satisfactory to
the Administrative Agent and its counsel. Such opinions shall also cover
such other matters incident to the transactions contemplated by this
Agreement as the
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Administrative Agent shall reasonably require.
(c) Closing Certificates. The Administrative Agent shall have
received a Closing Certificate of Holdings and the Company, each dated
the Effective Date, substantially in the form of Exhibits F-1 and F-2
hereto, respectively, with appropriate insertions and attachments,
satisfactory in form and substance to the Administrative Agent and its
counsel, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of Holdings and the Company,
respectively.
(d) No Violation. The consummation of the transactions contemplated
hereby shall not contravene, violate or conflict with, nor involve any
Bank in a violation of, any Requirement of Law, except for violations not
involving any Bank and which would not have a material adverse effect on
the business, financial condition, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole.
(e) Consents, Authorizations, and Filings, etc. The Administrative
Agent shall have received copies of all consents, authorizations and
filings, if any, required in connection with the execution, delivery and
performance by each Credit Party, and the validity and enforceability
against each Credit Party, of the Credit Documents to which it is a
party, and such consents, authorizations and filings shall be in full
force and effect, except such consents, authorizations and filings,
including, without limitation, the consents, authorizations and filings
listed on Schedule V, the failure to obtain which would not have a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Credit Parties and their
Subsidiaries taken as a whole.
(f) No Legal Constraints. There shall be no inquiry, injunction,
restraining order, action, suit or proceeding pending or entered or any
statute or rule proposed, enacted or promulgated by any Governmental
Authority or any other Person, which, in the opinion of the
Administrative Agent (i) would have a material adverse effect on the
making of the Loans or the issuance of the Letters of Credit or the
Spin-Off or (ii) other than the Excluded Litigation, has or will have a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Credit Parties and their
Subsidiaries taken as a whole or (iii) would give rise to any liability
on the part of any Bank, the Administrative Agent or any Co-Agent in
connection with this Agreement, any other Credit Document or the
transactions contemplated hereby or thereby or (iv) would bar the making
of the Loans, the issuance of the Letters of Credit or the use of the
proceeds thereof in accordance with the terms of this Agreement.
(g) Absence of Certain Legal Developments. There shall have been no
development in any action, suit or proceeding which, in any such case in
the opinion of the Administrative Agent, (i) would have a material
adverse effect on the making of the Loans or the issuance of the Letters
of Credit or (ii) (A) except for the Excluded Litigation, has or will
have a material adverse effect on the business, financial condition,
properties, results of operations, value or prospects of the Credit
Parties and their Subsidiaries taken as a whole or (B) would give rise to
any
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liability on the part of any Bank, the Administrative Agent or any
Co-Agent in connection with this Agreement, any other Credit Document or
the transactions contemplated hereby or thereby.
(h) Events of Default Under Other Agreements. There shall exist no
event of default (or condition which would constitute an event of default
with the giving of notice or the passage of time) under any capital
stock, financing agreements, lease agreements or other contracts of the
Company or its Subsidiaries which default would have a material adverse
effect on business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken
as a whole.
(i) Related Agreements. The Administrative Agent shall have
received each additional document, instrument or piece of information
reasonably requested by the Banks, including, without limitation, a copy
of any debt instrument, security agreement or other material contract to
which any Credit Party or their Subsidiaries may be a party.
(j) Financial Statements. The Administrative Agent shall have
received a copy of the financial statements referred to in subsection
4.1(a) and (b), with a photocopy thereof for each Bank, which shall be
satisfactory in form and substance to the Administrative Agent.
(k) Business Plan. The Banks shall have received a satisfactory
business plan for the 1997 through 1999 fiscal years of the Company and a
reasonably satisfactory written analysis of the business and prospects of
the Company and its subsidiaries for the period from the Closing Date
through the Revolving Credit Termination Date. The Banks acknowledge
that they have received such business plan and analysis and that this
condition is satisfied.
(l) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Administrative Agent and its
counsel.
5.2 Conditions to Initial Loans and Letters of Credit. The
obligation of each Bank to make its initial Loans and the obligation of each
Issuing Bank to issue its initial Letter of Credit are subject to the
satisfaction, or waiver by each Bank, immediately prior to or concurrently
with the making of such Loans or the issuance of such Letter of Credit, as
the case may be, of the following conditions precedent on or prior to
November 30, 1997 (the date of the initial Extensions of Credit, the "Closing
Date"):
(a) Effective Date. The conditions set forth in subsection 5.1 shall
have been satisfied or waived in accordance with the terms hereof.
(b) Spin-Off. (i) The Spin-Off Transactions that are scheduled to
occur under the Spin-Off Documents on or prior to the Closing Date shall
have been consummated in all material respects, and the conditions
precedent scheduled to occur under the Spin-Off Documents on or prior to
the Closing Date shall have been consummated in all material respects,
and the S-4 Filing and the Spin-Off
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Documents on or prior to the Closing Date shall not have been amended in
any material respect without the consent of the Administrative Agent.
(ii) The rulings received by GI Holdings from the Internal Revenue
Service, to the effect that the Spin-Off will be tax-free for federal
income tax purposes to GI Holdings, NextLevel, CommScope and their
respective Subsidiaries and to the stockholders of GI Holdings, shall be
in full force and effect.
(c) Fees. The Administrative Agent shall have received for the account
of the Banks, or for its own account, as the case may be, all fees
(including the fees referred to in subsection 3.9) payable to the Banks
and the Administrative Agent on or prior to the Closing Date.
5.3 Conditions to All Loans and Letters of Credit. The obligation
of each Bank to make any Loan (other than any Revolving Credit Loan the
proceeds of which are to be used to repay Refunded Swing Line Loans or a Loan
that does not increase the aggregate outstanding principal amount of the
Loans of any Bank) and the obligation of each Issuing Bank to issue any
Letter of Credit (other than any Letter of Credit which is an extension,
renewal or replacement of an existing Letter of Credit and which does not
increase the face amount thereof) is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date:
(a) Representations and Warranties. If such Loan is made (and/or
Letter of Credit issued) on the Closing Date, each of the representations
and warranties made in or pursuant to Section 4, or which are contained
in any other Credit Document or any certificate, document or financial or
other statement furnished by or on behalf of Holdings, the Company or any
Subsidiary thereof, at any time under or in connection herewith, shall be
true and correct in all material respects on and as of the Closing Date
as if made on and as of the Closing Date (unless stated to relate to a
specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier
date). If such Loan is made (and/or Letter of Credit issued) subsequent
to the Closing Date, each of the representations and warranties made in
or pursuant to Section 4 (excluding the representations made pursuant to
subsection 4.2 which shall be made only on the Closing Date) or which are
contained in any other Credit Document or in any certificate, document or
financial or other statement furnished by or on behalf of Holdings, the
Company or any Subsidiary thereof shall be true and correct in all
material respects on and as of the date of such Loan (or Letter of
Credit) as if made on and as of such date (unless stated to relate to a
specific earlier date, in which case, such representations and warranties
shall be true and correct in all material respects as of such earlier
date).
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect
to the Loan to be made or the Letter of Credit to be issued on such
Borrowing Date.
Each borrowing by the Company hereunder and the issuance of each
Letter of Credit by each Issuing Bank hereunder shall constitute a
representation and warranty by the Company as of the date of such borrowing
or issuance that the conditions in this subsection 5.3 have been satisfied.
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SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loan, or Revolving L/C Obligation remains outstanding and unpaid,
any amount remains available to be drawn under any Letter of Credit or any
other amount is owing to any Bank, any Co-Agent, any Issuing Bank, or the
Administrative Agent hereunder, it shall, and, in the case of the agreements
contained in subsections 6.3, 6.4, 6.5, 6.6 and 6.8 cause each of its
Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent (with
sufficient copies for each Bank):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of Holdings, a copy of the consolidated balance
sheet of Holdings and its consolidated Subsidiaries as at the end of such
year and the related consolidated statements of operations, stockholders'
equity and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a
"going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Deloitte & Touche LLP or other
independent certified public accountants of nationally recognized
standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of Holdings, the unaudited consolidated balance sheet of Holdings
and its consolidated Subsidiaries as at the end of such quarter, the
related unaudited consolidated statements of stockholders' equity and
cash flows of Holdings and its consolidated Subsidiaries from the
beginning of such fiscal year through the end of such quarter and the
related unaudited consolidated statements of operations of Holdings and
its consolidated Subsidiaries for such quarter, setting forth in each
case in comparative form the figures for the previous year, certified by
a Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event within 90 days after the
beginning of each fiscal year of Holdings to which such budget relates,
and a consolidated operating budget for Holdings and its Subsidiaries
taken as a whole, in each case as adopted by the Board of Directors of
Holdings.
All financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal year-end
audit adjustments) and shall be prepared in reasonable detail (except that
interim statements may be condensed and may exclude detailed footnote
disclosure to the extent consistent with the rules and regulations of the
Securities and Exchange Commission relating to the presentation of financial
information in Quarterly Reports on Form 10-Q) and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as concurred in by such accountants or officer, as the case
may be, and disclosed therein and except that interim financial statements
need not be restated for changes in accounting principles which require
retroactive application, and operations which have been discontinued (as
defined in Accounting Principles Board Opinion No. 30) during the
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current year need not be shown in interim financial statements as such either
for the current period or comparable prior period), provided that if for any
reason whatsoever the unaudited consolidated balance sheet of Holdings and
its consolidated Subsidiaries and the related unaudited consolidated
statements of operations, stockholders' equity and cash flows for such
quarter would be materially different than the unaudited consolidated balance
sheet of the Company and its consolidated Subsidiaries and the related
unaudited consolidated statements of operations, stockholders' equity and
cash flows for such quarter, then the Company shall also provide, as soon as
available, but in any event not later than 45 days after the end of each of
the first three quarterly periods of each fiscal year of the Company, the
unaudited consolidated balance sheet of the Company and its consolidated
statements of operations, stockholders' equity and cash flows of the Company
and its consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject
to normal year-end audit adjustments);
In the event Holdings changes its accounting methods because of changes in
GAAP, or any change in GAAP occurs which increases or diminishes the
protection and coverage afforded to the Banks under current GAAP accounting
methods, the Company or the Administrative Agent, as the case may be, may
request of the other parties to this Agreement an amendment of the financial
covenants contained in this Agreement to reflect such changes in GAAP and to
provide the Banks with protection and coverage equivalent to that existing
prior to such changes in accounting methods or GAAP, and each of the Company,
the Administrative Agent, the Co-Agents and the Banks agree to consider such
request in good faith.
6.2 Certificates; Other Information. Furnish to the Administrative
Agent (with sufficient copies for each Bank other than reports listed in
subsection 6.2(c) which shall be made available by the Administrative Agent
to any Bank upon request):
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 6.1(a), a letter from the
independent certified public accountants reporting on such financial
statements (i) stating that their audit examination has included a review
of the terms of subsections 7.3(b), 7.7, 7.8 and 7.9 of this Agreement
and any definitions set forth in this Agreement relating thereto, in each
case as they relate to accounting matters, and (ii) stating whether, in
connection with their audit examination, any condition or event that
constitutes any Default or Event of Default has come to their attention
and, if such a condition or event has come to their attention, specifying
the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be
disclosed in the course of their audit examination;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of the chief
financial officer of the Company (i) stating that such officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate; (ii) showing in detail as of the end of
the related fiscal period the figures and calculations supporting such
statement in respect of clause (b) of subsection 7.3, clause (i) of
subsection 7.2, clause (f) of subsection 7.15 and subsections 7.7, 7.8,
and 7.9; (iii) showing in detail as of the end of the related fiscal
period the Leverage Ratio as of the end of such fiscal period and the
calculations supporting such statement and stating the Applicable Margin
payable as a result of such
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Leverage Ratio; (iv) if not specified in the financial statements
delivered pursuant to subsection 6.1, specifying the aggregate amount of
interest paid or accrued by Holdings, the Company and their respective
Subsidiaries, and the aggregate amount of depreciation, depletion and
amortization charged on the books of Holdings and its Subsidiaries,
during such accounting period; and (v) listing all Indebtedness for
borrowed money (other than Indebtedness hereunder) in each case incurred
since the date of the previous consolidated balance sheet of Holdings
delivered pursuant to subsection 6.1(a) or (b);
(c) promptly upon receipt thereof, copies of all final reports
submitted to Holdings and the Company by independent certified public
accountants in connection with each annual, interim or special audit of
the books of Holdings and the Company made by such accountants,
including, without limitation, any final comment letter submitted by such
accountants to management in connection with their annual audit;
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by Holdings, the Company or any of their respective
Subsidiaries and all regular and periodic reports and all final
registration statements and final prospectuses, if any, filed by the
Company or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any Governmental Authority
succeeding to any of its functions;
(e) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a management summary
describing and analyzing the performance of Holdings, the Company and
their respective Subsidiaries during the periods covered by such
financial statements to the extent not included in the reports filed by
Holdings with the Securities and Exchange Commission which are delivered
to the Banks; and
(f) promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all
of its obligations and liabilities of whatever nature, except (a) when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Company or any of its
Subsidiaries, as the case may be, (b) for delinquent obligations which do not
have a material adverse effect on the business, financial condition,
properties, results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole and (c) for trade and other accounts payable in
the ordinary course of business in accordance with customary trade terms and
which are not overdue for a period of more than 90 days (or any longer period
if longer payment terms are accepted in the ordinary course of business) or,
if overdue for more than 90 days (or such longer period), as to which a
dispute exists and adequate reserves in conformity with GAAP have been
established on the books of the Company and its Subsidiaries, as the case may
be.
6.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it, and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except for
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rights, privileges and franchises the loss of which would not in the
aggregate have a material adverse effect on the business, financial
condition, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole, and except as otherwise
permitted by subsections 7.4 and 7.5; and comply with all applicable
Requirements of Law except to the extent that the failure to comply therewith
would not, in the aggregate, have a material adverse effect on the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole.
6.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition
(ordinary wear and tear excepted); and
(b) Maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and with
only such deductibles as are usually maintained by, and against at least such
risks as are usually insured against in the same general area by, companies
engaged in the same or a similar business; provided that the Company may
implement programs of self insurance in the ordinary course of business and
in accordance with industry standards for a company of similar size so long
as reserves are maintained in accordance with GAAP for the liabilities
associated therewith.
6.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities in accordance with GAAP and all Requirements of Law; and permit
representatives of any Bank upon reasonable notice to visit and inspect any
of its properties and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired upon
reasonable notice, and to discuss the business, operations, properties and
financial and other condition of the Company and its Subsidiaries with
officers and employees thereof and with their independent certified public
accountants.
6.7 Notices. Promptly give notice to the Administrative Agent and
each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any instrument or
other agreement, guarantee or collateral document of Holdings or any of
its Subsidiaries which default or event of default has not been waived
and would have a material adverse effect on the business, financial
condition, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole, or (ii) litigation,
investigation or proceeding which may exist at any time between Holdings
or any of its Subsidiaries and any Governmental Authority, or receipt of
any notice of any environmental claim or assessment against Holdings or
any of its Subsidiaries by any Governmental Authority, which in any such
case would have a material adverse effect on the business, financial
condition, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole;
(c) of any litigation or proceeding affecting the Company or any of
its Subsidiaries (i) in which more than $25,000,000 of the amount claimed
is not
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covered by insurance or (ii) in which injunctive or similar relief is
sought which if obtained would have a material adverse effect on the
business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole;
(d) of the following events, as soon as practicable after, and in
any event within 30 days after, the Company knows thereof: (i) the
occurrence of any Reportable Event with respect to any Single Employer
Plan which Reportable Event would have a material adverse effect on the
business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the institution of proceedings or the taking of any other action by
PBGC, the Company or any Commonly Controlled Entity to terminate,
withdraw from or partially withdraw from any Plan and, with respect to a
Multiemployer Plan, the Reorganization or Insolvency of such Plan, in
each of the foregoing cases which would have a material adverse effect on
the business, financial condition, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole,
and in addition to such notice, deliver to the Administrative Agent and
each Bank whichever of the following may be applicable: (A) a
certificate of the chief financial officer of the Company setting forth
details as to such Reportable Event and the action that the Company or
such Commonly Controlled Entity proposes to take with respect thereto,
together with a copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or (B) any notice delivered by PBGC
evidencing its intent to institute such proceedings or any notice to PBGC
that such Plan is to be terminated, as the case may be; and
(e) of a material adverse change known to the Company or any of its
Subsidiaries in the business, financial condition, properties, results of
operations, value or prospects of Holdings, the Company and their
respective Subsidiaries taken as a whole.
Each notice pursuant to this subsection 6.7 shall be accompanied by a
statement of the chief executive officer or the chief financial officer of
the Company setting forth details of the occurrence referred to therein and
(in the cases of clauses (a) through (e)) stating what action the Company
proposes to take with respect thereto.
6.8 Additional Subsidiary Guarantors. (a) If any Subsidiary of the
Company or Holdings (whether presently existing or hereafter created or
acquired) shall become a Material Subsidiary, the Company or Holdings shall
cause such Material Subsidiary to promptly thereafter execute and deliver a
Subsidiary Guarantee in favor of the Administrative Agent in substantially
the form of Exhibit D-1, each of which Subsidiary Guarantees shall be
accompanied by such resolutions, incumbency certificates and legal opinions
as are reasonably requested by the Administrative Agent and its counsel.
(b) In the event that there shall be a Change in Law which
eliminates the adverse tax consequences to the Company, Holdings or any of
their respective Subsidiaries which would have resulted on the date hereof
from the guarantee by a Subsidiary, which would be a Material Subsidiary but
for the fact that 75% of the assets of such Subsidiary are securities of
foreign companies, of the Loans and the other obligations of the Company
hereunder, the Company shall
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promptly thereafter cause any such Subsidiary that has not previously
executed and delivered a Subsidiary Guarantee because of such adverse tax
consequences to deliver a Subsidiary Guarantee to the Administrative Agent to
the extent any such guarantee can be so executed and delivered without
adverse tax consequences to the Company, Holdings or any of their respective
Subsidiaries.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that from and after the Closing Date it
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly so long as the Commitments remain in effect or any Loan or
Revolving L/C Obligation remains outstanding and unpaid, any amount remains
available to be drawn under any Letter of Credit or any other amount is owing
to any Bank, any Co-Agent, any Issuing Bank or the Administrative Agent
hereunder:
7.1 Amendments of Spin-Off Documents. Amend, waive or terminate, or
permit any amendment, waiver or termination of, any Spin-Off Document that
materially adversely affects (a) the Company and its Subsidiaries taken as a
whole, (b) the ability of Holdings or any of its Subsidiaries to perform
their respective obligations under the Spin-Off Documents or (c) the rights
and remedies of the Banks.
7.2 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets, income or profits, whether now
owned or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on
the books of the Company or such Subsidiary, as the case may be, in
accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business in respect of obligations which are not yet due or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) Liens or deposits to secure the performance of bids, tenders,
trade or government contracts (other than for borrowed money), leases,
licenses, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, right-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which do
not interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Company and its Subsidiaries
taken as a whole;
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(f) Liens in favor of the Banks pursuant to the Credit Documents and
bankers' liens arising by operation of law;
(g) Liens on assets of corporations which became or become
Subsidiaries of the Company, provided that such Liens exist at the time
such corporations became or become Subsidiaries and are not created in
anticipation thereof;
(h) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Letters of Credit which are
Commercial L/Cs;
(i) Liens not otherwise permitted by this subsection 7.2 securing
any Indebtedness permitted under this Agreement, provided that (i) the
aggregate principal amount of Indebtedness secured by such Liens
permitted by this paragraph (i) shall at no time exceed $75,000,000 and
(ii) no such Liens shall encumber any capital stock of Holdings, the
Company or any Subsidiary;
(j) any judgment or judicial attachment Lien with respect to any
judgment that does not constitute an Event of Default;
(k) license or leases in the ordinary course of business of patents,
copyrights, trademarks, trade names and other intellectual property owned
by the Company or any Subsidiary, which do not in the aggregate
materially detract from the value of its property or other assets or
materially impair the use thereof in the operation of its business, and
rights to royalties, fees and other compensation in respect of
intellectual property licensed, leased or used by the Company or any
Subsidiary;
(l) Liens arising solely out of consignments of inventory and
work-in-process in the ordinary course of business; and
(m) Liens on fixed or capital assets acquired or improved by the
Company or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by clause (d) of subsection 7.15, (ii) such
security interests and the Indebtedness secured thereby are incurred
prior to or within 180 days after such acquisition or the completion of
such improvements and the Indebtedness secured thereby does not exceed
100% of the cost of acquiring or improving such fixed or capital assets
and (iv) such security interests shall not apply to any other property or
assets of Holdings, the Company or any Subsidiary.
7.3 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) guarantees of obligations to third parties made in the ordinary
course of business in connection with relocation of employees of the
Company or any of its Subsidiaries;
(b) guarantees not otherwise permitted by this subsection 7.3 by the
Company and its Subsidiaries incurred in the ordinary course of business
for an aggregate amount not to exceed $75,000,000 at any one time;
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(c) Guarantee Obligations existing on the Closing Date and described
in Schedule VI;
(d) Guarantee Obligations in respect of foreign currency exchange
contracts permitted by subsection 7.12 and commodity hedge agreements
permitted by subsection 7.13;
(e) Guarantee Obligations pursuant to the Guarantees;
(f) guarantees by the Company of Indebtedness and other obligations
of its Subsidiaries and by Subsidiaries of Indebtedness and other
obligations of other Subsidiaries and the Company, in each case as
permitted under this Agreement; and
(g) indemnities and other similar Guarantee Obligations arising out
of the Spin-Off Documents.
7.4 Prohibition of Fundamental Changes. Enter into any transaction
of acquisition of, or merger or consolidation or amalgamation with, any other
Person (including any Subsidiary or Affiliate of the Company or any of its
Subsidiaries), or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any material change in the present
method of conducting business or engage in any type of business other than of
the same general type now conducted by it, except for the transactions
otherwise permitted pursuant to subsections 7.5 and 7.6.
7.5 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, tax benefits, receivables and leasehold
interests), whether now owned or hereafter acquired except (a) for the sale
or other disposition of any property that, in the reasonable judgment of the
Company, has become uneconomic, obsolete or worn out, and which is disposed
of in the ordinary course of business; (b) for sales of inventory and
receivables made in the ordinary course of business; (c) that any Subsidiary
of the Company may sell, lease, transfer or otherwise dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to the Company or a
wholly-owned Subsidiary of the Company and any Subsidiary of the Company may
sell or otherwise dispose of, or part with control of any or all of, the
stock of any Subsidiary to a wholly-owned Subsidiary of the Company or a
Subsidiary of the Company may merge with the Company (so long as the Company
is the surviving corporation) or another Subsidiary; and (d) for the sale or
other disposition by the Company or any of its Subsidiaries of other assets
consummated after the Closing Date, provided that (i) such sale or other
disposition shall be made for fair value on an arm's-length basis and (ii)
the aggregate fair market value of all such assets sold or disposed of under
this clause (d) shall not exceed 25% of the consolidated total assets of the
Company and its Subsidiaries as of the date of such sale; provided that in no
event shall the Company or any of its Subsidiaries sell any assets pursuant
to this clause (d) if the revenue generated by such assets would have
exceeded 25% of the consolidated net revenue of the Company and its
Subsidiaries for the preceding fiscal year.
7.6 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase
any stock, bonds, notes, debentures or other securities of, or make any other
investment in, any Person, unless, after giving effect to such loan, advance,
extension of credit to, or acquisition of or investment in such other Person,
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the Company shall be in pro forma compliance with subsections 7.7, 7.8 and
7.9 and no Default or Event or Default shall have occurred and be continuing
or shall result therefrom.
7.7 Maintenance of Consolidated Net Worth. Permit Consolidated Net
Worth at any time to be less than the sum (without duplication of any item)
of (i) $100,000,000 and (ii) 50% of the Consolidated Net Income of Holdings,
if positive, for each fiscal quarter (commencing with the fiscal quarter
beginning on or about July 1, 1997).
7.8 Maintenance of Interest Coverage. Permit the Interest Coverage
Ratio on the last day of any fiscal quarter to be less than 4.25 to 1.0.
7.9 Maintenance of Leverage Ratio. Permit, as of the last day of
any fiscal quarter, the Leverage Ratio to be greater than 3.25 to 1.0.
7.10 Limitation on Dividends and Stock Repurchases. Declare any
dividends on any shares of any class of stock, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, retirement or other acquisition of any shares of any
class of stock (including the outstanding capital stock of Holdings), whether
now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company or any of its Subsidiaries (all of the foregoing
being referred to herein as "Restricted Payments"); except that:
(a) Subsidiaries may pay dividends directly or indirectly to the
Company or other Subsidiaries and each other owner of an equity interest
in such Subsidiary on a pro rata basis based on their relative ownership
interests, and Foreign Subsidiaries may pay dividends directly or
indirectly to Foreign Subsidiaries and each other owner of an equity
interest in such Foreign Subsidiary on a pro rata basis based on their
relative ownership interests;
(b) the Company may pay dividends to Holdings in an amount equal to
the amount required for Holdings to pay franchise taxes, fees and
expenses necessary to maintain its status as a corporation and other fees
required to maintain its corporate existence, provided that Holdings
shall promptly pay such taxes, fees and expenses; and
(c) the Company at any time may make Restricted Payments in an
aggregate amount not exceeding the sum of (i) $40,000,000 and (ii) 50% of
positive Consolidated Net Income after July 1, 1997, so long as (x) after
giving effect to such Restricted Payments, the Company shall be in pro
forma compliance with subsection 7.7 and (y) at the time thereof and
after giving effect thereto, no Default or Event of Default shall have
occurred and be continuing or shall result therefrom.
7.11 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate except (a) for
transactions which are otherwise permitted under this Agreement and which are
in the ordinary course of the Company's or a Subsidiary's business and which
are upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than it would obtain in a hypothetical comparable arm's length
transaction with a Person not an Affiliate, (b) as permitted under
subsections 7.3(a) and (f), subsection 7.6 and subsection 7.10 or (c) any
transactions entered into as part of the Spin-Off Transactions.
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7.12 Foreign Exchange Contracts. Enter into any foreign currency
exchange contracts other than in the ordinary course of business.
7.13 Commodity Hedges. Enter into any commodity hedge agreements
other than in the ordinary course of business.
7.14 Fiscal Year. Permit the fiscal year of the Company to end on a
day other than December 31, unless the Company shall have given at least 45
days prior written notice to the Administrative Agent.
7.15 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness (including any Indebtedness of any of its
Subsidiaries), except:
(a) Indebtedness of the Company under this Agreement and under any
Registered Form Notes;
(b) (i) Indebtedness of the Company to any of its Subsidiaries and
of any wholly-owned domestic Subsidiary to the Company or any other
Subsidiary; and (ii) Indebtedness of any wholly-owned foreign Subsidiary
to the Company or any other Subsidiary to the extent permitted by
subsection 7.6;
(c) Indebtedness consisting of reimbursement obligations under
surety, indemnity, performance, release and appeal bonds and guarantees
thereof and letters of credit required in the ordinary course of business
or in connection with the enforcement of rights or claims of the Company
or its Subsidiaries;
(d) Capital lease obligations, mortgage financings, purchase money
Indebtedness and industrial revenue bond issues in respect of real
property or equipment incurred by the Company prior to or within 180 days
after a capital expenditure in order to finance the purchase or
improvement of properties;
(e) Indebtedness consisting of foreign currency exchange contracts
permitted under subsection 7.12 or commodity hedge agreements permitted
under Subsection 7.13; and
(f) Indebtedness not otherwise permitted by the preceding clauses of
this subsection 7.15 not exceeding $100,000,000 in aggregate principal
amount at any one time outstanding.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to (i) pay any principal of any Loan when
due in accordance with the terms hereof or thereof or to reimburse an
Issuing Bank in accordance with subsection 2.6 or (ii) pay any interest
on any Loan or any other amount payable hereunder within five days after
any such interest or other amount becomes due
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in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Credit
Party in any Credit Document or which is contained in any certificate,
guarantee, document or financial or other statement furnished under or in
connection with this Agreement shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Company shall default in the observance or performance of
any agreement contained in subsection 6.7(a) or Section 7 of this
Agreement or any Credit Party shall default in the observance or
performance of any agreement contained in Section 2 of the Guarantee to
which it is a party; or
(d) The Company or any other Credit Party shall default in the
observance or performance of any other agreement contained in any Credit
Document, and such default shall continue unremedied for a period of 30
days; or
(e) Holdings or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Loans, the Revolving L/C Obligations and any intercompany debt) or in the
payment of any Guarantee Obligation, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity,
any applicable grace period having expired, or such Guarantee Obligation
to become payable, any applicable grace period having expired, provided
that the aggregate principal amount of all such Indebtedness and
Guarantee Obligations under clauses (i) and (ii) equals or exceeds
$12,500,000; or
(f) (i) Holdings, the Company or any of their respective
Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it,
or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or Holdings, the Company or any of their respective Subsidiaries shall
make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against Holdings, the Company or any of their
respective Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against Holdings, the Company or any of their
respective Subsidiaries any case, proceeding or other action seeking
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issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) Holdings, the Company or any of their
respective Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the
Company or any of their respective Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA or which occurs by reason of the Spin-Off
Transactions), whether or not waived, shall exist with respect to any
Plan, (iii) a Reportable Event (other than a Reportable Event with
respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived) shall occur with respect to, or proceedings to
have a trustee appointed shall commence with respect to, or a trustee
shall be appointed to administer or to terminate, any Single Employer
Plan, which Reportable Event or institution of proceedings or appointment
of a trustee is, in the reasonable opinion of the Required Banks, likely
to result in the termination of such Plan for purposes of Title IV of
ERISA, and, in the case of a Reportable Event, such Reportable Event
shall continue unremedied for ten days after notice of such Reportable
Event is given and, in the case of the institution of proceedings, such
proceedings shall continue for ten days after commencement thereof or
(iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA; and in each case in clauses (i) through (iv) above, such event or
condition, together with all other such events or conditions relating to
such Plans, if any, could subject the Company or any of its Subsidiaries
to any tax, penalty or other liabilities which in the aggregate are
material in relation to the business, financial condition, properties,
results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole; or
(h) Except with respect to the Excluded Litigation, one or more
final judicial judgments or decrees shall be entered against the Company
or any of its Subsidiaries involving in the aggregate for all such
Persons a liability (not paid or fully covered by insurance) of
$10,000,000 or more and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within the time
required by the terms of such judgment; or
(i) Any Guarantee shall cease, for any reason, to be in full force
and effect or any Credit Party shall so assert in writing; or
(j) Holdings shall cease to own 100% of the issued and outstanding
capital stock of the Company, free and clear of all Liens; or Holdings
shall conduct, transact or otherwise engage in any business or
operations, incur, create, assume or suffer to exist any Indebtedness,
Guarantee Obligations or other liabilities or obligations or Liens, or
own, lease, manage or otherwise operate any properties or assets, other
than (i) incident to the ownership of all of the outstanding shares of
capital stock of the Company or the issuance of debt and equity
securities, provided that the net proceeds of such issuance are
concurrently advanced to, or contributed to the capital of, the Company,
unless such other
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business owned by Holdings is related to the business of the Company and
such business is effectively contributed to the Company by merger,
purchase or any other acquisition transaction, within 90 days of the
acquisition by Holdings of such business, (ii) the issuance of guarantees
of Indebtedness of the Company and its Subsidiaries and of reimbursement
obligations of the Company and its Subsidiaries under surety, indemnity,
performance and appeal bonds, letters of credit and like instruments and
other obligations that the Company or any Subsidiary is permitted to
incur or (iii) the performance by Holdings of its obligations under the
Spin-Off Documents; or
(k) (i) Any Person or two or more Persons (except FL Affiliates
and, prior to consummation of the Spin-Off, NextLevel) acting in concert
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission promulgated under the
Exchange Act) of more than 33% of the outstanding shares of voting stock
of Holdings; or (ii) any Person or two or more Persons (except FL
Affiliates) acting in concert shall acquire the power to elect a majority
of the Board of Directors of Holdings;
then, and in any such event, (x) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) above, automatically (i) the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement shall
immediately become due and payable, and (ii) all obligations of the Company
in respect of the Letters of Credit, although contingent and unmatured, shall
become immediately due and payable and the Issuing Banks' obligations to
issue Letters of Credit shall immediately terminate and (y) if such event is
any other Event of Default, so long as any such Event of Default shall be
continuing, either or both of the following actions may be taken: (i) with
the consent of the Required Banks, the Administrative Agent may, or upon the
request of the Required Banks, the Administrative Agent shall, by notice to
the Company, declare the Commitments and any Bank's obligations to issue
Letters of Credit to be terminated forthwith, whereupon the Commitments and
such obligations shall immediately terminate; and (ii) with the consent of
the Required Banks, the Administrative Agent may, or upon the request of the
Required Banks, the Administrative Agent shall, by notice of default to the
Company, (A) declare all or a portion of the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement to be due
and payable forthwith, whereupon the same shall immediately become due and
payable, and (B) declare all or a portion of the obligations of the Company
in respect of the Letters of Credit, although contingent and unmatured, to be
due and payable forthwith, whereupon the same shall immediately become due
and payable and/or demand that the Company discharge any or all of the
obligations supported by the Letters of Credit by paying or prepaying any
amount due or to become due in respect of such obligations. All payments
under this Section 8 on account of undrawn Letters of Credit shall be made by
the Company directly to a cash collateral account established by the
Administrative Agent for such purpose for application to the Company's
reimbursement obligations under subsection 2.6 as drafts are presented under
the Letters of Credit, with the balance, if any, to be applied to the
Company's obligations under this Agreement as the Administrative Agent shall
determine with the approval of the Required Banks. Except as expressly
provided above in this Section 8, presentment, demand, protest and all other
notices of any kind are hereby expressly waived. Notwithstanding anything
herein to the contrary, no Default or Event of Default shall arise solely as
a result of the failure of NextLevel to distribute as a dividend to the
holders of the shares of its common stock all of the capital stock of
Holdings.
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SECTION 9. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS
9.1 Appointment. Each Bank hereby irrevocably designates and
appoints Chase, Bank of America National Trust and Savings Association,
BankBoston, N.A., Bank of Tokyo-Mitsubishi Trust Company, CIBC Inc., Credit
Lyonnais Atlanta Agency, First Union National Bank, The Fuji Bank, Limited,
Atlanta Agency, NationsBank, N.A., Toronto Dominion (New York), Inc. and
Wachovia Bank, N.A., as the Co-Agents of such Bank under this Agreement and
acknowledges that no Co-Agent, in its capacity as such, shall have any duties
under the Credit Documents. Each Bank hereby irrevocably designates and
appoints Chase as the Administrative Agent under this Agreement and
irrevocably authorizes Chase as Administrative Agent for such Bank to take
such action on its behalf under the provisions of the Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to
the Administrative Agent by the terms of the Credit Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, neither the Co-Agents
nor the Administrative Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Credit Documents or
otherwise exist against the Co-Agents or the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and each of the other Credit Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Without limiting
the foregoing, the Administrative Agent may appoint Chase Manhattan Bank
Agency Services Corporation as its agent to perform the functions of the
Administrative Agent hereunder relating to the advancing of funds to the
Company and distribution of funds to the Banks and to perform such other
related functions of the Administrative Agent hereunder as are reasonably
incidental to such functions. None of the Co-Agents nor the Administrative
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care, except as otherwise
provided in subsection 9.3.
9.3 Exculpatory Provisions. Neither the Co-Agents nor the
Administrative Agent nor any of their officers, directors, employees, agents,
attorneys-in-fact, Affiliates or Subsidiaries shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with the Credit Documents (except for its or such Person's own
gross negligence or willful misconduct), or (ii) responsible in any manner to
any of the Banks for any recitals, statements, representations or warranties
made by any Credit Party or any officer thereof contained in the Credit
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by any Co-Agent or the Administrative
Agent under or in connection with, the Credit Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of the
Credit Documents or for any failure of any Credit Party to perform its
obligations thereunder. None of the Co-Agents or the Administrative Agent
shall be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, any Credit Document, or to inspect the properties, books or
records of any Credit Party.
9.4 Reliance by Co-Agents and Administrative Agent. Each of the
Co-Agents
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and the Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent
accountants and other experts selected by such Co-Agent or the Administrative
Agent. Each of the Co-Agents and the Administrative Agent may deem and treat
the payee of any promissory note issued under or in connection with this
Agreement as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with such
Co-Agent or the Administrative Agent. Each of the Co-Agents and the
Administrative Agent shall be fully justified in failing or refusing to take
any action under any Credit Document unless it shall first receive such
advice or concurrence of the Required Banks (or, where unanimous consent of
the Banks is expressly required hereunder, such Banks) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each of the
Co-Agents and the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under any Credit Document in
accordance with a request of the Required Banks (or the Release Banks with
respect to matters requiring the consent of the Release Banks), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks.
9.5 Notice of Default. None of the Co-Agents or the Administrative
Agent shall be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless such Co-Agent or the
Administrative Agent has received written notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
promptly give notice thereof to the Banks. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks.
9.6 Non-Reliance on Co-Agents, Administrative Agent and Other Banks.
Each Bank expressly acknowledges that none of the Co-Agents or the
Administrative Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has made any
representations or warranties to it and that no act by any Co-Agent or the
Administrative Agent hereafter taken, including any review of the affairs of
the Credit Parties, shall be deemed to constitute any representation or
warranty by any Co-Agent or the Administrative Agent to any Bank. Each Bank
represents to each Co-Agent and to the Administrative Agent that it has,
independently and without reliance upon any Co-Agent or the Administrative
Agent or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Credit Parties and made its own decision to make its
Loans hereunder, issue and participate in the Letters of Credit and enter
into this Agreement. Each Bank also represents that it will, independently
and without reliance upon any Co-Agent or the Administrative Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under the Credit
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Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other
condition and creditworthiness of the Credit Parties. Except for notices,
reports and other documents expressly required to be furnished to the Banks
by the Administrative Agent hereunder, none of the Co-Agents and the
Administrative Agent shall have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, financial
condition, assets, liabilities, net assets, properties, results of
operations, value, prospects and other condition or creditworthiness of the
Credit Parties which may come into the possession of any Co-Agent or the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact, Affiliates or Subsidiaries.
9.7 Indemnification. The Banks severally agree to indemnify each of
the Co-Agents and the Administrative Agent in its capacity as such (to the
extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to the
respective amounts of their Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including without limitation at any time following the payment of
the Loans) be imposed on, incurred by or asserted against any Co-Agent or the
Administrative Agent in any way relating to or arising out of the Credit
Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by any
Co-Agent or the Administrative Agent under or in connection with any of the
foregoing; provided that no Bank shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from any Co-Agent's or the Administrative Agent's gross negligence or willful
misconduct; and provided further that no Designated Lender shall be liable
for any payment under this subsection 9.7 so long as, and to the extent that,
its Designating Lender make such payments. The agreements contained in this
subsection 9.7 shall survive the payment of the Loans and all other amounts
payable hereunder.
9.8 Co-Agents and Administrative Agent in their Individual
Capacities. Each of the Co-Agents and the Administrative Agent and their
respective Affiliates and Subsidiaries may make loans to, accept deposits
from and generally engage in any kind of business with the Credit Parties as
though such Co-Agent or Administrative Agent were not a Co-Agent or the
Administrative Agent hereunder, as the case may be. With respect to its
Loans made or renewed by it and any Letter of Credit issued by or
participated in by it, each of the Co-Agents and the Administrative Agent
shall have the same rights and powers, duties and liabilities under the
Credit Documents as any Bank and may exercise the same as though it were not
a Co-Agent or the Administrative Agent, as the case may be, and the terms
"Bank" and "Banks" shall include each of the Co-Agents and the Administrative
Agent in their individual capacities.
9.9 Successor Co-Agent or Administrative Agent. Each Co-Agent and
the Administrative Agent may resign as Co-Agent or Administrative Agent, as
the case may be, upon 30 days' notice to the Banks. The resignation of any
Co-Agent shall be effective without any further act or deed on the part of
such former Co-Agent. If the Administrative Agent shall resign as
Administrative Agent under the Credit Documents, then the Required Banks
shall appoint from among the Banks a successor agent for the Banks which
successor agent shall be approved by the Company (which approval shall not be
unreasonably withheld) and upon its acceptance thereof, such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent
and the term "Administrative Agent" shall mean such successor agent effective
upon its appointment, and the former Administrative Agent's rights, powers
and duties
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as Administrative Agent shall be terminated, without any other or further act
or deed on the part of such former Administrative Agent or any of the parties
to this Agreement. After any retiring Co-Agent's or Administrative Agent's
resignation hereunder as Co-Agent or Administrative Agent, as the case may
be, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Co-Agent or
Administrative Agent, as the case may be, under the Credit Documents.
9.10 An Issuing Bank as Issuer of Letters of Credit. Each Bank and
each Co-Agent hereby acknowledge that the provisions of this Section 9 shall
apply to any Issuing Bank, in its capacity as issuer of any Letter of Credit,
in the same manner as such provisions are expressly stated to apply to the
Administrative Agent.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. No Credit Document nor any terms
thereof may be amended, supplemented or modified except in accordance with
the provisions of this subsection 10.1. With the written consent of the
Required Banks, the Administrative Agent and the respective Credit Parties
may, from time to time, enter into written amendments, supplements or
modifications to any Credit Document for the purpose of adding any provisions
to such Credit Document to which they are parties or changing in any manner
the rights of the Banks or of any such Credit Party or any other Person
thereunder or waiving, on such terms and conditions as the Administrative
Agent may specify in such instrument, any of the requirements of any such
Credit Document or any Default or Event of Default and its consequences;
provided, however, that:
(a) no such waiver and no such amendment, supplement or modification
shall directly or indirectly release Holdings from its obligations under
the Holdings Guarantee or any Subsidiary Guarantor from its obligations
under the Subsidiary Guarantee without the written consent of the Release
Banks, except as otherwise provided; and
(b) no such waiver and no such amendment, supplement or modification
shall (x) extend the scheduled final maturity of any Loan (other than a
Bid Loan) or extend the expiry date of any Letter of Credit beyond the
Revolving Credit Termination Date, or reduce the rate or extend the time
of payment of interest thereon, or change the method of calculating
interest thereon, or reduce or extend the time of payment of any fee
payable to the Banks hereunder, or reduce the principal amount thereof,
or increase the amount of any Bank's Commitments, without the written
consent of each Bank affected thereby, or (y) amend, modify or waive any
provision of this subsection 10.1 or reduce the percentages specified in
the definition of Required Banks or Release Banks, or change the
percentage of the Banks required to waive a condition precedent under
Section 5 or consent to the assignment or transfer by any Credit Party of
any of its rights and obligations under any Credit Document, in each
case, without the written consent of each Bank, provided that with
respect to any Bid Loan, no such waiver and no such amendment, supplement
or modification shall be made without the written consent of each Bank
holding such Bid Loan.
Any such waiver and any such amendment, supplement or modification described
in this subsection 10.1 shall apply equally to each of the Banks and shall be
binding upon each Credit Party, the Banks, the Co-Agents, the Administrative
Agent. No waiver, amendment, supplement
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or modification of any Letter of Credit shall extend the expiry date thereof
without the written consent of the Participating Banks. In the case of any
waiver, the Company, the Banks, the Co-Agents and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
outstanding Notes, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right
consequent thereon. Each Designating Lender may act on behalf of its
Designated Lender with respect to any rights of its Designated Lender to
grant or withhold any consent hereunder to the fullest extent it has been so
delegated to act by its Designated Lender pursuant to its Designation
Agreement.
The Administrative Agent shall in all cases be protected in relying
on the representation of a Designating Lender that such Designating Lender
may act on behalf of its Designated Lender without independent verification.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or three
Business Days after being deposited in the mail, postage prepaid, or, in the
case of telecopy notice, when sent, confirmation of receipt received, or, in
the case of telex notice, when sent, answerback received, addressed as
follows in the case of each Credit Party and the Administrative Agent, and as
set forth in Schedule I in the case of any Bank, or to such other address as
may be hereafter notified by the respective parties hereto:
The Company: CommScope, Inc. of North Carolina
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attention: Treasurer
Telecopy: (704) 431-2520
With a copy to: Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: F. William Reindel, Esq.
Telecopy: (212) 859-8587
The Administrative The Chase Manhattan Bank
Agent: c/o Chase Securities Inc.
10 South LaSalle Street
Suite 2300
Chicago, Illinois 60603
Attention: Leonard Essex
Telecopy: (312) 807-4077
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The Co-Agents: The Chase Manhattan Bank
c/o Chase Securities Inc.
10 South LaSalle Street
Suite 2300
Chicago, Illinois 60603
Attention: Leonard Essex
Telecopy: (312) 807-4077
Bank of America National Trust
and Savings Association
555 California Street
41st Floor
San Francisco, California 94104
Attention: Kevin McMahon
Telecopy: (415) 622-2514
BankBoston, N.A.
100 Federal Street
Corporate 01-09-05
Boston, Massachusetts 02110
Attention: Christopher M. Holtz
Telecopy: (617) 434-6685
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
12th Floor
New York, New York 10020-1104
Attention: Friedrich N. Wilms
Telecopy: (212) 782-6445
CIBC Inc.
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: E. Roger Colden
Telecopy: (770) 319-4954
Credit Lyonnais Atlanta Agency
303 Peachtree Street, N.E.
Suite 4400
Atlanta, Georgia 30308
Attention: Gerald Finney, Jr.
Telecopy: (404) 584-5249
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First Union National Bank
201 S. College Street
Suite 1300
Charlotte, North Carolina 28288-0656
Attention: Patrick McCormick
Telecopy: (704) 374-4820
The Fuji Bank, Limited, Atlanta Agency
Marquis One Tower, Suite 2100
245 Peachtree Center Avenue, NE
Suite 2100
Atlanta, Georgia 30303
Attention: Andy Smith
Telecopy: (404) 653-2119
NationsBank, N.A.
NationsBank Corporate Center
NC1-007-08-07
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: Richard G. Parkhurst, Jr.
Telecopy: (704) 386-1270
Toronto Dominion (New York), Inc.
31 West 52nd Street
New York, New York 10019
Attention: Robert G. Harris
Telecopy: (212) 262-1926
Wachovia Bank, N.A.
P.O. Box 31608
Charlotte, North Carolina 28231-6071
Attention: Christopher L. Fincher
Telecopy: (704) 378-5035
provided that any notice, request or demand to or upon the Administrative
Agent or the Banks pursuant to subsections 2.3, 2.8, 2.10, 3.1, 3.2, 3.3 and
3.4 shall not be effective until received and provided further that the
failure to provide the copies of notices to the Company provided for in this
subsection 10.2 shall not result in any liability to the Administrative
Agent, any Co-Agent or any Bank.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent, any Co-Agent or
any Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
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10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Letters of
Credit.
10.5 Payment of Expenses and Taxes. The Company agrees:
(a) to pay or reimburse the Administrative Agent for all of its
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement
or modification to, the Credit Documents and any other documents prepared
in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent;
(b) to pay or reimburse each Bank, each Co-Agent and the
Administrative Agent for all their costs and expenses incurred in
connection with, and to pay, indemnify, and hold the Administrative
Agent, each Co-Agent and each Bank harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever arising out of or in connection with, the enforcement or
preservation of any rights under any Credit Document and any such other
documents, including, without limitation, reasonable fees and
disbursements of counsel to the Administrative Agent, each Co-Agent and
each Bank incurred in connection with the foregoing and in connection
with advising the Administrative Agent with respect to its rights and
responsibilities under this Agreement and the documentation relating
thereto;
(c) to pay, indemnify, and to hold the Administrative Agent, each
Co-Agent and each Bank harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes (other than
withholding taxes), if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation
of any of the transactions contemplated by, or any amendment, supplement
or modification of, or any waiver or consent under or in respect of, any
Credit Document and any such other documents; and
(d) to pay, indemnify, and hold the Administrative Agent, each
Co-Agent and each Bank and their respective officers, directors,
employees and agents harmless from and against any and all other
liabilities, obligations, losses, damages (including punitive damages),
penalties, fines, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without
limitation, reasonable experts' and consultants' fees and reasonable fees
and disbursements of counsel and third party claims for personal injury
or real or personal property damage) which may be incurred by or asserted
against the Administrative Agent, any Co-Agent or the Banks (x) arising
out of or in connection with any investigation, litigation or proceeding
related to this Agreement, the other Credit Documents, the proceeds of
the Loans, or any of the other transactions contemplated hereby, whether
or not the Administrative Agent, any Co-Agent or any of the Banks is a
party thereto, (y) with respect to any environmental matters, any actual
or alleged environmental compliance expenses and any actual or
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alleged remediation expenses in connection with the presence, suspected
presence, release or suspected release of any Hazardous Materials in or
into the air, soil, groundwater, surface water or improvements at, on,
about, under, or within the Properties, or any portion thereof, or
elsewhere in connection with the transportation of Hazardous Materials to
or from the Properties or (z) without limiting the generality of the
foregoing, by reason of or in connection with the execution and delivery
or transfer of, or payment or failure to make payments under, Letters of
Credit (it being agreed that nothing in this subsection 10.5(d)(z) is
intended to limit the Company's obligations pursuant to subsection 2.6);
(all the foregoing, collectively, the "indemnified liabilities"), provided
that the Company shall have no obligation hereunder with respect to
indemnified liabilities of the Administrative Agent, any Co-Agent or any Bank
or any of their respective officers, directors, employees or agents arising
from (i) the gross negligence or willful misconduct of such Administrative
Agent, Co-Agent or Bank or their respective directors, officers, employees or
agents or (ii) legal proceedings commenced against the Administrative Agent,
any Co-Agent or any Bank by any security holder or creditor thereof arising
out of and based upon rights afforded any such security holder or creditor
solely in its capacity as such or (iii) legal proceedings commenced against
the Administrative Agent, any Co-Agent or any such Bank by any Transferee (as
defined in subsection 10.6). The agreements in this subsection 10.5 shall
survive repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks. (a)
This Agreement shall be binding upon and inure to the benefit of the Company,
the Banks, the Co-Agents and the Administrative Agent, and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations under this Agreement without the prior written
consent of each Bank.
(b) Any Bank may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Bank, any participating interest of such
Bank in the Letters of Credit, any Commitment of such Bank or any other
interest of such Bank hereunder and under the other Credit Documents,
provided, however, that no Bank shall sell any such participating interest to
any Participant which is a Non-U.S. Bank that is unable to deliver to such
Bank either an Internal Revenue Service Form 4224 or Form 1001 pursuant to
clause (A) of subsection 3.17(e) hereof. In the event of any such sale by a
Bank of participating interests to a Participant, such Bank's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof for all purposes under this Agreement and the other Credit Documents
and the Company and the Administrative Agent shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Credit Documents. The Company
agrees that if amounts outstanding under this Agreement are due and unpaid,
or shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have
the right of setoff in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement; provided
that such Participant shall only be entitled to such right of setoff if it
shall have agreed in the agreement pursuant to which it shall have acquired
its participating interest to share with the Banks the proceeds thereof, as
provided in subsection
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10.7. The Company also agrees that each Participant shall be entitled to the
benefits of subsections 3.11, 3.18, 3.19 and 3.20 with respect to its
participation in the Letters of Credit and in the Commitments and the Loans
outstanding from time to time; provided that no Participant shall be entitled
to receive any greater amount pursuant to such subsections than the
transferor Bank would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Bank to such Participant
had no such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, at any time sell
to any Bank or any Affiliate thereof (including any Affiliate or Subsidiary
of such transferor Bank) and, with the consent of the Company and the
Administrative Agent, the Issuing Bank, if applicable, and the Swing Line
Bank, if applicable (which in each case shall not be unreasonably withheld),
sell to one or more additional banks or financial institutions (an
"Assignee"), all or any part of its rights and obligations under this
Agreement and the other Credit Documents and with respect to the Letters of
Credit, pursuant to an Assignment and Acceptance executed by such Assignee,
such assigning Bank (and, in the case of an Assignee that is not then a Bank
or an affiliate thereof, by the Company and the Administrative Agent), and
delivered to the Administrative Agent for its acceptance and recording in the
Register (as defined below); provided that (A) each such sale pursuant to
this subsection 10.6(c) (I) to a Person which is not then a Bank or an
Affiliate of a Bank shall be of Commitments and/or Loans of $10,000,000 (or
if such assigning Bank has Commitments and Loans in an amount less than
$10,000,000 in the aggregate, such lesser amount) or more and (II) to a
Person which is then a Bank or an Affiliate of a Bank may be in any amount,
(B) in the event of a sale of less than all of such rights and obligations,
such Bank after such sale shall retain Commitments and/or Loans (without
duplication) aggregating $10,000,000; and provided further that the foregoing
shall not prohibit a Bank from selling participating interests in accordance
with subsection 10.6(b) in all or any portion of its Commitments and/or Loans
(without duplication) and (C) each Assignee which is a Non-U.S. Bank shall
comply with the provisions of clause (A) of subsection 3.17(e) hereof, or,
with the prior written consent of the Company which may be withheld in its
sole discretion, with or without cause, the provisions of clause (B) of
subsection 3.17(e) hereof (and, in either case, with all of the other
provisions of subsection 3.17(e) hereof), and provided, further, that no Bank
shall assign any Bid Loans pursuant to this subsection 10.6(c) except in
connection with the assignment of all of its Loans and Commitments under this
Agreement. If at any time any Co-Agent shall own less than 5% of the
Commitments and/or the Loans (without duplication), then such Co-Agent shall,
at the Company's request after consultation with the Administrative Agent, no
longer be entitled to the benefits of the title "Co-Agent" under this
Agreement and shall promptly resign as a Co-Agent; provided that nothing
contained in this sentence shall be construed or interpreted as impairing any
right of a resigning Co-Agent in its capacity as a Bank under this Agreement;
and provided further that the foregoing shall not prohibit a Co-Agent from
selling participating interests in accordance with subsection 10.6(b) in all
or any portion of its Commitments and/or Loans. Upon such execution,
delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder with the Commitments as set forth therein, and (y) the assigning
Bank thereunder shall, to the extent of the interest transferred, as
reflected in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Bank's rights and
obligations under this Agreement, such assigning Bank shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend
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this Agreement and Schedule I hereto to the extent, and only to the extent,
necessary to reflect the addition of such Assignee and the resulting
adjustment of Commitment Percentages arising from the purchase by such
Assignee of all or a portion of the rights and obligations of such assigning
Bank under this Agreement.
(d) The Administrative Agent acting on behalf of and as agent for
the Company, shall maintain at its address referred to in subsection 10.2 a
copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Banks and
the registered owners of the Obligations evidenced by the Registered Form
Notes and the Commitments of, the principal amount of any Loans owing to,
and, if such Bank has any Revolving Credit Commitment, the L/C Participating
Interests of, each Bank from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Company, the
Administrative Agent and the Banks shall treat each Person whose name is
recorded in the Register as the owner of the Loans, Registered Form Notes or
L/C Participating Interests recorded therein for all purposes of this
Agreement. Any assignment of a Loan, Registered Form Notes or other
obligation hereunder shall be effective only upon appropriate entries with
respect thereto being made in the Register. Any assignment or transfer of an
obligation hereunder evidenced by a promissory note shall be registered in
the Register only upon the surrender of such note for registration of such
assignment or transfer, and thereupon one or more new notes shall be issued
to the Assignee and the old note shall be returned by the Administrative
Agent to the Company, marked "cancelled". The Register shall be available
for inspection by the Company or any Bank at any reasonable time and from
time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an Assignee (and, in the case of an Assignee that is not
then a Bank or an Affiliate thereof, by the Company and the Administrative
Agent), together with payment to the Administrative Agent of a registration
and processing fee of $4,000 if the Assignee is not a Bank or an Affiliate
thereof prior to the execution of such Assignment and Acceptance and $1,000
otherwise, the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto,
record the information contained therein in the Register and give notice of
such acceptance and recordation to the Banks and the Company.
(f) The Company authorizes each Bank to disclose to any Participant
or Assignee (each, a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning Holdings, the
Company and their respective Subsidiaries and Affiliates which has been
delivered to such Bank by or on behalf of the Company pursuant to this
Agreement or which has been delivered to such Bank by or on behalf of the
Company in connection with such Bank's credit evaluation of Holdings, the
Company and their respective Subsidiaries and Affiliates prior to becoming a
party to this Agreement.
In addition, the Company authorizes the disclosure by any Designated
Lender of any non-public information with respect to itself which has been
delivered to the Banks hereunder to any rating agency, commercial paper
dealer, or provider of a surety, guaranty or credit or liquidity enhancement
to such Designated Lender.
(g) If, pursuant to this subsection 10.6, any interest in this
Agreement is transferred to any Transferee which would be a Non-U.S. Bank
upon the effectiveness of such
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transfer, the assigning Bank shall cause such Transferee, concurrently with
the effectiveness of such transfer, (i) to represent to the assigning Bank
(for the benefit of the assigning Bank, the Administrative Agent and the
Company) that under applicable law and treaties no United States federal
income taxes or United States backup withholding taxes will be required to be
withheld by the Administrative Agent, the Company or the assigning Bank with
respect to any payments to be made to such Transferee in respect of the Loans
or L/C Participating Interests, (ii) to furnish to the assigning Bank (and,
in the case of any Assignee registered in the Register, the Administrative
Agent and the Company) such Internal Revenue Service Forms required to be
furnished pursuant to subsection 3.17(e) and (iii) to agree (for the benefit
of the assigning Bank, the Administrative Agent and the Company) to be bound
by the provisions of subsections 3.17(e).
(h) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Bank of any Loan to any Federal
Reserve Bank in accordance with applicable law; provided that any transfer of
Loans upon, or in lieu of, enforcement of or the exercise of remedies under
any such pledge shall be treated as an assignment thereof which shall not be
made without compliance with the requirements of this subsection 10.6.
(i) Any Bank may at any time designate not more than one Designated
Lender to fund Revolving Credit Loans and/or Bid Loans on behalf of such
Designating Lender subject to the terms of this subsection 10.6(i) and the
provisions of the foregoing subsections 10.6(c), (d) and (e) hereof shall not
apply to such designation; provided that each Designated Lender which is a
Non-U.S. Bank shall comply with the provisions of clause (A) of subsection
3.17(e) hereof, or, with the prior written consent of the Company which may
be withheld in its sole discretion, with or without cause, the provisions of
clause (B) of subsection 3.17(e) hereof (and, in either case, with all of the
other provisions of subsection 3.17(e) hereof). No Bank may have more than
one Designated Lender at any time. Such designation may occur either by the
execution of the signature pages hereof by such Bank and Designated Lender
next to the appropriate "Designating Lender" and "Designated Lender"
captions, or by execution by such parties of a Designation Agreement
subsequent to the date hereof; provided, that any Bank and its Designated
Lender executing the signature pages hereof as "Designating Lender" and
"Designated Lender", respectively, on the date hereof shall be deemed to have
executed a Designation Agreement, and shall be bound by the respective
representations, warranties and covenants contained therein, and such
designation shall be conclusively deemed to be accepted by the Company and
the Administrative Agent. The parties to each such designation occurring
subsequent to the execution date hereof shall execute and deliver to the
Administrative Agent and the Company for their acceptance a Designation
Agreement. Upon such receipt of an appropriately completed Designation
Agreement executed by a Designating Lender and a designee representing that
it is a Designated Lender and consented to by the Company, the Administrative
Agent will accept such Designation Agreement and will give prompt notice
thereof to the Company and the other Banks, whereupon, (i) from and after the
effective date specified in the Designation Agreement, the Designated Lender
shall become a party to this Agreement with a right to make Revolving Credit
Loans and Bid Loans on behalf of its Designating Lender pursuant to
subsections 2.1(c) and 2.8(i), respectively, (ii) if so requested by such
Designated Lender, the Company shall execute and deliver to such Designated
Lender a promissory note in accordance with the terms of subsection 3.21(e)
hereof, and (iii) the Designated Lender shall not be required to make
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payments with respect to any obligations and liabilities in this Agreement
except to the extent of excess cash flow of such Designated Lender which is
not otherwise required to repay obligations of such Designated Lender which
are then due and payable; provided, however, that regardless of such
designation and assumption by the Designated Lender, the Designating Lender
shall be and remain obligated to the Company, the Administrative Agent and
the Banks for each and every of the obligations of the Designating Lender and
its related Designated Lender with respect to this Agreement, including,
without limitation, any actions taken by the Designated Lender with respect
to the Agreement, any indemnification obligations under subsection 9.7 hereof
and any sums otherwise payable to the Company by the Designated Lender. Each
Designating Lender, or a specified branch or affiliate thereof, shall serve
as the administrative agent of its Designated Lender and shall on behalf of
its Designated Lender: (i) receive any and all payments made for the benefit
of such Designated Lender and (ii) give and receive all communications and
notices and take all actions hereunder, including, without limitation, votes,
approvals, waivers, consents and amendments under or relating to this
Agreement and the other Credit Documents. Any such notice, communication,
vote, approval, waiver, consent or amendment shall be signed by a Designating
Lender, or specified branch or affiliate thereof, as administrative agent for
its Designated Lender and need not be signed by such Designated Lender on its
own behalf. The Company, the Administrative Agent and the Banks may rely
thereon without any requirement that the Designated Lender sign or
acknowledge the same. No Designated Lender may assign or transfer all or any
portion of its interest hereunder or under any other Credit Document, other
than via an assignment to its Designating Lender or Liquidity Bank, if any,
or otherwise in accordance with the provisions of subsection 10.6(c) hereof.
10.7 Adjustments; Set-off. (a) If any Bank (a "Benefitted Bank")
shall at any time receive any payment of all or part of any of its Revolving
Credit Loans (other than payment of Swing Line Loans or Bid Loans) or L/C
Participating Interests, as the case may be, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
clause (f) of Section 8, or otherwise) in a greater proportion than any such
payment to and collateral received by any other Bank, if any, in respect of
such other Bank's Revolving Credit Loans or L/C Participating Interests, as
the case may be, or interest thereon, such benefitted Bank shall purchase for
cash from the other Banks such portion of each such other Bank's Revolving
Credit Loans or L/C Participating Interests, as the case may be, or shall
provide such other Banks with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Bank to
share the excess payment or benefits of such collateral or proceeds ratably
in accordance with their Commitment Percentages with each of the Banks;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Bank, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. The Company agrees that each
Bank so purchasing a portion of another Bank's Loans and/or L/C Participating
Interests may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Bank were
the direct holder of such portion. The Administrative Agent shall promptly
give the Company notice of any set-off, provided that the failure to give
such notice shall not affect the validity of such set-off.
(b) Upon the occurrence of an Event of Default specified in
subsection 8(a) or 8(f), the Administrative Agent, each Bank and each
Co-Agent are hereby irrevocably authorized at any time and from time to time
without notice to the Company, any such notice being hereby waived by the
Company, to set off and appropriate and apply any and all deposits (general
or
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special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Administrative Agent, such Bank or such Co-Agent or any
Affiliate thereof to or for the credit or the account of the Company, or any
part thereof in such amounts as the Administrative Agent, such Bank or such
Co-Agent may elect, on account of the liabilities of the Company hereunder
and under the other Credit Documents and claims of every nature and
description of the Administrative Agent, such Bank or such Co-Agent against
the Company, in any currency, whether arising hereunder or under any other
Credit Document, as the Administrative Agent, such Bank or such Co-Agent may
elect, whether or not the Administrative Agent, such Bank or such Co-Agent
has made any demand for payment and although such liabilities and claims may
be contingent or unmatured. The Administrative Agent, each Bank and each
Co-Agent shall notify the Company promptly of any such setoff made by it and
the application made by it of the proceeds thereof, provided that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of the Administrative Agent, each Bank and each
Co-Agent under this paragraph are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the
Administrative Agent, such Bank or such Co-Agent may have.
10.8 Judgment. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which
in accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency on the Business Day
preceding the day on which final judgment is given.
(b) The obligation of the Company in respect of any sum due to any
Bank or the Administrative Agent hereunder shall, notwithstanding any
judgment in a currency (the "Judgment Currency") other than that in which
such sum is denominated in accordance with the applicable provisions of this
Agreement or the other Credit Documents (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by
such Bank or the Administrative Agent (as the case may be) of any sum
adjudged to be so due in the Judgment Currency such Bank or the
Administrative Agent (as the case may be) may in accordance with normal
banking procedures purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than
the sum originally due to such Bank or the Administrative Agent (as the case
may be) in the Agreement Currency, the Company agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Bank or
the Administrative Agent (as the case may be) against such loss, and if the
amount of the Agreement Currency so purchased exceeds the sum originally due
to any Bank or the Administrative Agent (as the case may be), such Bank or
the Administrative Agent (as the case may be) agrees to remit to the Company
such excess.
10.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Administrative Agent. This
Agreement shall become effective with respect to the Company, the Co-Agents,
the Administrative Agent and the Banks when the Administrative Agent shall
have received copies of this Agreement executed by the Company, the Co-Agents
and the Banks, or, in the case of any Bank, shall have received telephonic
confirmation from such Bank stating that
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such Bank has executed counterparts of this Agreement or the signature pages
hereto and sent the same to the Administrative Agent and the other conditions
set forth in subsection 5.1 shall have been satisfied or waived in accordance
with the terms thereof.
10.10 Integration. This Agreement and the other Credit Documents
represent the entire agreement of the Credit Parties, the Administrative
Agent, the Co-Agents and the Banks with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent, any Co-Agent or any Bank relative to
the subject matter hereof or thereof not expressly set forth or referred to
herein or in the other Credit Documents.
10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK. THIS AGREEMENT IS SOLELY FOR THE BENEFIT OF THE PARTIES HERETO
AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AND, EXCEPT AS SET FORTH IN
SUBSECTION 10.6, NO OTHER PERSONS SHALL HAVE ANY RIGHT, BENEFIT, PRIORITY OR
INTEREST UNDER, OR BECAUSE OF THE EXISTENCE OF, THIS AGREEMENT.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OF THE OTHER CREDIT
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR
THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT
SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN
NOTIFIED PURSUANT THERETO; AND
(iv) AGREES THAT NOTHING CONTAINED HEREIN SHALL
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AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.
(b) EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
10.13 Acknowledgements. The Company hereby acknowledges that:
(a) none of the Administrative Agent, any Co-Agent or any Bank has
any fiduciary relationship to any Credit Party, and the relationship
between the Administrative Agent, the Co-Agents and the Banks, on the one
hand, and the Credit Parties, on the other hand, is solely that of
creditor and debtor; and
(b) no joint venture exists among the Banks or among any Credit
Parties and the Banks.
10.14 No Bankruptcy Proceedings. Each of the Company, the Banks and
the Administrative Agent agrees that it will not institute against any
Designated Lender or join any other Person in instituting against any
Designated Lender any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding under any federal or state bankruptcy or similar law,
for one year and one day after the payment in full of the latest maturing
commercial paper note issued by such Designated Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
COMMSCOPE, INC. OF NORTH CAROLINA
By: /s/ Frank B. Wyatt, II
-------------------------------
Title: Secretary
THE CHASE MANHATTAN BANK,
as Administrative Agent, as a Co-Agent
and as a Bank
By: /s/ Laurie B. Perper
---------------------------------
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent
and as a Bank
By: /s/
-------------------------------------
Title:
BANKBOSTON, N.A., as a Co-Agent
and as a Bank
By: /s/
-------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as a Co-Agent and as a Bank
By: /s/
-------------------------------------
Title:
CIBC INC., as a Co-Agent and as a Bank
By: /s/
--------------------------------------
Title:
CREDIT LYONNAIS ATLANTA AGENCY, as a
Co-Agent and as a Bank
By: /s/
---------------------------------------
Title:
FIRST UNION NATIONAL BANK, as a
Co-Agent and as a Bank
By: /s/
---------------------------------------
Title:
THE FUJI BANK, LIMITED, ATLANTA
AGENCY, as a Co-Agent and as a Bank
<PAGE>
By: /s/
-----------------------------------------
Title:
NATIONSBANK, N.A., as a Co-Agent
and as a Bank
By: /s/
-----------------------------------------
Title:
TORONTO DOMINION (NEW YORK), INC., as a
Co-Agent and as a Bank
By: /s/
-----------------------------------------
Title:
WACHOVIA BANK, N.A., as a Co-Agent
and as a Bank
By: /s/
------------------------------------------
Title:
BANQUE NATIONALE DE PARIS
By: /s/
------------------------------------------
Title:
By: /s/
------------------------------------------
Title:
<PAGE>
BANQUE PARIBAS
By: /s/
------------------------------------------
Title:
By: /s/
------------------------------------------
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/
------------------------------------------
Title:
COMMERZBANK AG, ATLANTA AGENCY
By: /s/
------------------------------------------
Title:
By: /s/
------------------------------------------
Title:
DESIGNATED LENDER:
FOUR WINDS FUNDING CORPORATION
By: /s/
-----------------------------------------
Title:
By: /s/
-----------------------------------------
Title:
DESIGNATING LENDER:
COMMERZBANK AG, ATLANTA AGENCY
By: /s/
-----------------------------------------
Title:
By: /s/
-----------------------------------------
Title:
FLEET NATIONAL BANK
By: /s/
-----------------------------------------
Title:
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By: /s/
-----------------------------------------
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED
By: /s/
-----------------------------------------
Title:
THE SANWA BANK LIMITED, CHICAGO
BRANCH
By: /s/
-----------------------------------------
Title:
SCOTIABANC INC.
By: /s/
-----------------------------------------
Title:
THE SUMITOMO BANK, LTD., CHICAGO
BRANCH
By: /s/
-----------------------------------------
Title:
THE SUMITOMO TRUST AND BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/
-----------------------------------------
Title:
<PAGE>
TOKAI BANK, LTD.- ATLANTA AGENCY
By: /s/
-----------------------------------------
Title:
YASUDA TRUST & BANKING COMPANY,
LTD. NEW YORK BRANCH
By: /s/
-----------------------------------------
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
CommScope, Inc. condensed consolidated financial statements as of and for the
six months ended June 30, 1997 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 110,298
<ALLOWANCES> 3,976
<INVENTORY> 52,618
<CURRENT-ASSETS> 178,230
<PP&E> 130,196
<DEPRECIATION> 0
<TOTAL-ASSETS> 509,661
<CURRENT-LIABILITIES> 55,936
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 417,186
<TOTAL-LIABILITY-AND-EQUITY> 509,661
<SALES> 307,165
<TOTAL-REVENUES> 307,165
<CGS> 228,554
<TOTAL-COSTS> 228,554
<OTHER-EXPENSES> 30,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,266
<INCOME-PRETAX> 43,710
<INCOME-TAX> 16,605
<INCOME-CONTINUING> 27,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,105
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99
COMMSCOPE, INC.
EXHIBIT 99 - FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. The Company's Form 10-K, the Company's
Annual Report to Stockholders, any Form 10-Q or Form 8-K of the Company, or any
other oral or written statements made by or on behalf of the Company, may
include forward-looking statements which reflect the Company's current views
with respect to future events and financial performance. These forward-looking
statements are identified by their use of such terms and phrases as "intends,"
"intend," "intended," "goal," "estimate," "estimates," "expects," "expect,"
"expected," "project," "projects," "projected," "projections," "plans,"
"anticipates," "anticipated," "should," "designed to," "foreseeable future,"
"believe," "believes" and "scheduled" and similar expressions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
The actual results of the Company may differ significantly from the
results discussed in forward-looking statements. Factors that might cause such
a difference include, but are not limited to, (a) the general political,
economic and competitive conditions in the United States and other markets where
the Company operates; (b) changes in capital availability or costs, such as
changes in interest rates, market perceptions of the industry in which the
Company operates, or security ratings; (c) employee workforce factors; (d)
authoritative generally accepted accounting principles or policy changes from
such standard-setting bodies as the Financial Accounting Standards Board and the
Securities and Exchange Commission, and the factors set forth below.
FACTORS RELATING TO THE DISTRIBUTION
General Instrument Corporation (i) transferred all the assets and
liabilities relating to the manufacture and sale of broadband communications
products used in the cable television, satellite, and telecommunications
industries (the "Communications Business") to its wholly-owned subsidiary
NextLevel Systems, Inc. ("NextLevel Systems") and all the assets and liabilities
relating to the manufacture and sale of coaxial, fiber optic and other
electronic cable used in the cable television, satellite and other industries
(the "Cable Manufacturing Business") to the Company (then a wholly-owned
subsidiary of GI) and (ii) then distributed all of the outstanding shares of
capital stock of each of NextLevel Systems and the Company to its shareholders
on a pro rata basis as a dividend (the "Distribution"), in a transaction that
was consummated on July 28, 1997. General Instrument Corporation prior to the
Distribution is herein referred to as "GI" and following the Distribution is
referred to herein as "General Semiconductor".
The Company is a smaller and less diversified company than GI was prior to
the Distribution and the Company has no recent operating history as a separate
entity. The ability of the Company to satisfy its obligations and maintain
profitability will be solely dependent upon
<PAGE>
its own future performance, and the Company will not be able to rely on the
capital resources and cash flows of the businesses of NextLevel Systems or
General Semiconductor. The future performance and cash flows of the Company
will be subject to prevailing economic conditions and to financial, business and
other factors affecting the business operations of the Company, including
factors beyond its control.
The division of GI may result in some temporary dislocation and
inefficiencies to the business operations, as well as the organization and
personnel structure, of the Company, and will also result in the duplication of
certain personnel, administrative and other expenses required for the operation
of an independent company. The management of the Company has not previously
operated its businesses as a separate public company so there can be no
assurance that the transition will not alter or disrupt, at least temporarily,
the management and operations of the Company's business.
The Distribution Agreement, dated as of June 12, 1997, among the Company,
NextLevel Systems and GI (the "Distribution Agreement") and certain other
agreements executed in connection with the Distribution (collectively, the
"Ancillary Agreements") allocate among the Company, NextLevel Systems, and
General Semiconductor and their respective subsidiaries responsibility for
various indebtedness, liabilities and obligations. It is possible that a court
would disregard this contractual allocation of indebtedness, liabilities and
obligations among the parties and require the Company or its subsidiaries to
assume responsibility for obligations allocated to another party, particularly
if such other party were to refuse or was unable to pay or perform any of its
allocated obligations.
Pursuant to the Distribution Agreement and certain of the Ancillary
Agreements, the Company has agreed to indemnify the other parties (and certain
related persons) from and after consummation of the Distribution with respect to
certain indebtedness, liabilities and obligations, which indemnification
obligations could be significant.
Although the Company has received a favorable ruling from the Internal
Revenue Service, if the Distribution were not to qualify as a tax free spin-off
under Section 355 of the Internal Revenue Code of 1986, as amended, then, in
general, a corporate tax would be payable by the consolidated group of which GI
was the common parent based upon the difference between the fair market value of
the stock distributed and the distributing corporation's adjusted basis in such
stock. The corporate level tax would be payable by General Semiconductor and
could substantially exceed the net worth of General Semiconductor. However,
under certain circumstances, the Company and NextLevel Systems have agreed to
indemnify General Semiconductor for such tax liability. In addition, under the
consolidated return rules, each member of the consolidated group (including the
Company and NextLevel Systems) is severally liable for such tax liability.
LEVERAGE; CERTAIN RESTRICTIONS UNDER CREDIT FACILITIES
-2-
<PAGE>
The Company is substantially leveraged. The degree to which the Company
is leveraged could have important consequences, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, product development, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a portion of the
Company's and its subsidiaries' cash flow from operations must be dedicated to
the payment of the principal of and interest on its indebtedness; (iii) the
Credit Agreement, dated as of July 23, 1997, among CommScope, Inc, of North
Carolina, a wholly owned subsidiary of the Company, certain banks, and The Chase
Manhattan Bank, as Administrative Agent, contains certain restrictive financial
and operating covenants, including, among others, requirements that the Company
satisfy certain financial ratios; (iv) a significant portion of the Company's
borrowings will be at floating rates of interest, causing the Company to be
vulnerable to increases in interest rates; (v) the Company's degree of leverage
may make it more vulnerable to a downturn in general economic conditions; and
(vi) the Company's degree of leverage may limit its flexibility in responding to
changing business and economic conditions.
In addition, in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, a court may be asked to void the
Distribution (in whole or in part) as a fraudulent conveyance and to require
that the stockholders return the special dividend (in whole or in part) to
General Semiconductor or require the Company to fund certain liabilities of
General Semiconductor and NextLevel Systems for the benefit of creditors.
DEPENDENCE OF THE COMPANY ON THE CABLE TELEVISION INDUSTRY AND CABLE TELEVISION
CAPITAL SPENDING
The majority of the Company's revenues come from sales of systems and
equipment to the cable television industry. Demand for these products depends
primarily on capital spending by cable television operators for constructing,
rebuilding or upgrading their systems. The amount of this capital spending, and,
therefore, the Company's sales and profitability will be affected by a variety
of factors, including general economic conditions, consolidation in the
industry, the financial condition of domestic cable television operators and
their access to financing, competition from satellite and wireless television
providers and telephone companies, technological developments in the broadband
communications industry and new legislation and regulation of cable television
operators as described below. Capital spending in the cable television industry
fell sharply in the middle of 1990 compared to 1989 and remained at a low level
until it began to recover in mid-1992. Although the Company believes that the
constraining pressures on domestic cable television capital spending eased and
that cable television capital spending generally increased from mid-1992 through
1996, there can be no assurance that such increases will continue or that such
increased level of cable television capital spending will be maintained.
In recent years, cable television capital spending has also been affected
by new legislation and regulation, on the federal, state and local level, and
many aspects of such regulation are currently the subject of judicial
proceedings and administrative or legislative proposals. During 1993 and 1994,
the Federal Communications Commission (the "FCC") adopted rules under the
-3-
<PAGE>
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"), regulating rates that cable television operators may charge for
lower tiers of service and generally not regulating the rates for higher tiers
of service. In 1996, the Telecommunications Act of 1996 (the "Telecom Act") was
enacted to eliminate certain governmental barriers to competition among local
and long distance telephone, cable television, broadcasting and wireless
services. When fully implemented by the FCC, the Telecom Act may significantly
impact the communications industry and alter federal, state and local laws and
regulations regarding the provision of cable and telephony services. Among other
things, the Telecom Act eliminates substantially all restrictions on the entry
of telephone companies and certain public utilities into the cable television
business. Telephone companies may now enter the cable television business as
traditional cable operators, as common carrier conduits for programming supplied
by others, as operators of wireless distribution systems, or as hybrid common
carrier/cable operator providers of programming on so-called "open video
systems." The economic impact of the 1992 Cable Act, the Telecom Act and the
rules thereunder on the cable television industry and the Company is still
uncertain.
Although the domestic cable television industry is comprised of
approximately 11,200 cable systems, a small number of cable television operators
own a majority of cable television systems and account for a majority of the
capital expenditures made by cable television operators. The loss of some or
all of the Company's principal cable television customers could have a material
adverse effect on the business of the Company.
TELECOMMUNICATIONS INDUSTRY COMPETITION AND TECHNOLOGICAL CHANGES AFFECTING THE
COMPANY
Many of the markets that the Company serves are characterized by advances
in information processing and communications capabilities which require
increased transmission speeds and greater capacity ("bandwidth") for carrying
information. These advances require ongoing improvements in the capabilities of
wire and cable products. The Company believes that its future success will
depend in part upon its ability to enhance existing products and to develop and
manufacture new products that meet or anticipate such changes. The failure to
introduce successful new or enhanced products on a timely and cost- competitive
basis could have an adverse impact on the Company's operations and financial
condition.
Fiber optic technology presents a potential substitute for the products
that comprise the majority of the Company's sales. To date, fiber optic cables
have penetrated the cable television and local area network ("LAN") markets
served by the Company in high-bandwidth point-to-point and trunking
applications. Fiber optic cables have not, to date, significantly penetrated the
local distribution and residential application markets served by the Company
because of the high relative cost of electro-optic interfaces and the high cost
of fiber termination and connection. At the same time, advances in data
transmission equipment and copper cable technologies have increased the relative
performance of copper-based cables which are the Company's principal product
offerings. However, a significant decrease in the cost of fiber optic systems
could make such systems superior on a price/performance basis to copper systems.
-4-
<PAGE>
While the Company is a fiber optic cable manufacturer and supplier to a small
portion of the cable television market and certain specialty markets, such a
significant decrease in the cost of fiber optic systems would likely have an
adverse effect on the Company.
The Company's sales to international markets have recently increased
substantially and will continue to be an important focus of the Company in the
future. However, there can be no assurance that international markets will
continue to expand, or that growth and profitability in international sales will
not be affected by political uncertainties, currency exchange rate fluctuations
or variations in capital spending cycles in developing countries.
COMPETITION
The Company's coaxial, fiber optic and electronic cable products compete
with those of a substantial number of foreign and domestic companies, some with
greater resources, financial or otherwise, than the Company, and the rapid
technological changes occurring in the telecommunications industry could lead to
the entry of new competitors. Existing competitors' actions and new entrants may
have an adverse impact on the Company's sales and profitability. the Company
believes that it enjoys a strong competitive position in the coaxial cable
market because of its position as a low-cost, high-volume coaxial cable producer
and its reputation as a high-quality provider of state-of-the-art cables, along
with its strong orientation toward customer service. However, there can be no
assurance that the Company will continue to compete successfully with its
existing competitors or that it will be able to compete successfully with new
competitors.
IMPACT OF PRICE FLUCTUATIONS OF RAW MATERIALS ON THE COMPANY; SOURCES OF RAW
MATERIALS
Fabricated aluminum, copper and plastics are the principal raw materials
purchased by the Company, and the Company's profitability may be affected by
changes in the market price of these materials (which are linked to the
commodity markets). Although the Company has generally been able to pass on
increases in the price of these materials to its customers, there can be no
assurance that the Company will be able to do so in the future. Additionally,
significant increases in the price of the Company's products due to increases in
the cost of raw materials could have a negative effect on demand for the
Company's products.
A significant portion of the Company's raw material purchases are
bi-metallic center conductors for coaxial cables, nearly all of which are
purchased from Copperweld Corporation under a long-term supply arrangement
expiring in [December 1998][may have been renewed]. In addition to bi-metallic
wires, fine aluminum wire is purchased primarily from a single source; neither
of these major raw materials could be readily replaced in sufficient quantities
if all supplies from the respective primary sources were disrupted for an
extended period.
INTERNATIONAL OPERATIONS; FOREIGN CURRENCY RISKS
-5-
<PAGE>
U.S. broadband system designs and equipment are increasingly being
employed in international markets, where cable television penetration is low.
However, there can be no assurance that international markets will continue to
develop or that the Company will receive additional contracts to supply its
systems and equipment in international markets.
In addition, sales of equipment into international markets by the Company
have recently grown. These foreign operations are subject to the usual risks
inherent in situating operations abroad, including risks with respect to
currency exchange rates, economic and political destabilization, restrictive
actions by foreign governments, nationalizations, the laws and policies of the
United States affecting trade, foreign investment and loans, and foreign tax
laws.
ENVIRONMENT
The Company is subject to various federal, state, local and foreign laws
and regulations governing the use, discharge and disposal of hazardous
materials. The Company's manufacturing facilities are believed to be in
substantial compliance with current laws and regulations. Compliance with
current laws and regulations has not had and is not expected to have a material
adverse effect on the Company's financial condition.
The Company's present and past facilities have been in operation for many
years, and over that time in the course of those operations, such facilities
have used substances which are or might be considered hazardous, and the Company
has generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the
future which the Company cannot now predict.
-6-
