--------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
(Mark One) FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ________ to __________.
Commission file number 1-5442
GENERAL INSTRUMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3575653
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 West Madison Street 60602
Chicago, IL (Zip Code)
(Address of principal
executive offices)
(312) 541-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.01 New York Stock Exchange
5% Convertible Junior New York Stock Exchange
Subordinated Notes due 2000
Securities registered pursuant to Section 12(g) of the Act:
None
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 x No
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K .
------
The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $2.8 billion as
of March 15, 1995 (based on the closing price of the stock on
the New York Stock Exchange on that date). For purposes of this
computation, shares held by affiliates and by directors and
officers of the registrant have been excluded. Such exclusion
of shares held by directors and officers is not intended, nor
shall it be deemed, to be an admission that such persons are
affiliates of the registrant.
Number of shares of Common Stock, par value $.01 per share,
outstanding as of March 15, 1995: 122,361,067.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1994 are incorporated by
reference in Parts I, II, III and IV. Portions of the Company's
definitive Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days after the end of the
Company's fiscal year are incorporated by reference in Part III.
PART l
Item 1. BUSINESS
Unless the context otherwise requires, references to the
"Company" or "GI" include General Instrument Corporation and its
direct or indirect subsidiaries, including General Instrument
Corporation of Delaware ("GI Delaware"), the Company's principal
operating subsidiary.
General
General Instrument Corporation (the "Company" or "GI") is a
leading worldwide supplier of broadband communications systems
and equipment. Through its two Broadband Communications segment
divisions, GI Communications (formed through a merger of the
Company's former Jerrold Communications and VideoCipher divisions
- See "Business - GI Communications Division") and CommScope
(which together represented 84% of the Company's consolidated
sales in the year ended December 31, 1994), the Company supplies
a broad range of technologies and products required for the
distribution of video programming to consumers over cable and
satellite television systems. Through its Power Semiconductor
Division (which represented 16% of the Company's consolidated
sales in the year ended December 31, 1994), the Company is also a
leading manufacturer of discrete power rectifying and transient
voltage suppression components used in telecommunications,
automotive and consumer electronic products. Information
regarding the Company's organization and industry segments appear
in Notes 1, 11 and 14 to the Company's consolidated financial
statements included in the Annual Report to Stockholders for the
year ended December 31, 1994 (the "1994 Annual Report"),
incorporated herein by reference.
The Company's Broadband Communications Strategy
The Company's strategy is to enhance its market leadership
position as a provider of broadband systems and equipment by
emphasizing the following factors:
TECHNOLOGICAL LEADERSHIP AND NEW PRODUCT DEVELOPMENT.
GI is a worldwide leader in the
development and implementation of new enabling
technologies for advanced television signal transmission.
GI produced the first commercial application of digital
compression products and has been a leader in the
development of addressable cable television subscriber
terminals, advanced fiber optic electronics and high-
capacity coaxial cable.
HIGHLY INTEGRATED PRODUCT LINE.
GI has a broad, highly integrated product line
which is one of the largest in the broadband equipment
industry. The Company believes this extensive product
line gives it a significant competitive advantage in
developing new broadband technologies, in anticipating and
serving customer needs, and in providing customers with
highly integrated end-to-end systems.
INCREASING THE INSTALLED BASE.
The Company believes that it has supplied the
majority of the addressable systems in use by cable
television operators in the United States and abroad.
GI's strategy has been to expand the number of installed
systems which utilize its hardware and software to control
network security, services and programming access and to
increase its product content in these systems.
RAPID INTERNATIONAL EXPANSION.
The Company believes that the development of
international markets will be an important factor in its
future growth due to the relatively low penetration of
cable television systems and growing demand for
entertainment programming abroad. The Company believes
that its leadership position in the U.S. market enhances
its ability to provide analog and digital cable, satellite
and wireless products to its growing international
customer base.
STRATEGIC ALLIANCES.
GI has forged alliances with partners in other industries
possessing complementary technological and marketing
capabilities in order to maximize new opportunities, such
as the emerging market for multimedia equipment and the
increasing telephone company demand for broadband
equipment for video applications.
Broadband Communications
The Company's Broadband Communications segment consists of the
GI Communications and CommScope divisions. The GI Communications
Division was formed in 1993 by combining the Company's former
Jerrold Communications and VideoCipher divisions. This
combination was undertaken due to the rapid convergence of the
broadband technologies used for the wired and wireless
distribution of television programming by the cable, satellite,
and telephone industries. The names Jerrold(R) and
VideoCipher(R) remain as GI product brands. The GI
Communications Division is the world's largest manufacturer of
addressable systems and subscriber equipment, and is a leading
manufacturer of fiber optic and RF (radio frequency) distribution
electronics for broadband television systems. GI Communications
is also the world's largest manufacturer of access control,
scrambling, and descrambling equipment used by television
programmers for the satellite distribution of their proprietary
programming. In addition, GI Communications is leading the
development and commercialization of digital video compression
and decompression equipment for use in broadband cable, satellite
and wireless transmission systems. GI's CommScope division is
the largest supplier of coaxial cable for the U.S. cable
television industry.
GI Communications Division
Analog Terrestrial Products. The Company's principal analog
terrestrial products include subscriber and distribution hardware
and software. Analog terrestrial subscriber products represented
27%, 24% and 25% of the Company's consolidated sales in the years
ended December 31, 1994, 1993 and 1992, respectively. Subscriber
products include primarily addressable systems which permit
control, through a set-top terminal, of a subscriber's cable
television services from a central headend computer without
requiring access to the subscriber's premises. Addressable
systems also enable a cable television operator to more easily
provide pay-per-view programming services and multiple tiers of
programming packages. Analog terrestrial distribution products
represented 13%, 11% and 10% of the Company's consolidated sales
in the years ended December 31, 1994, 1993 and 1992,
respectively. Distribution products include headend signal
processing equipment, distribution amplifiers, fiber optic
transmission equipment, and passive components for wired
television distribution systems.
Beginning in mid-1992 and continuing through 1994, GI has
experienced significant increases in purchase orders for its
analog products both from domestic and international customers.
GI's sales of analog addressable systems reached their highest
levels to date in 1994 when the Company shipped more than 4.7
million analog addressable set-top terminals, a 73% increase over
1993 shipments. The Company believes that during this period
cable operators have sought to improve the quality, capacity and
capabilities of their networks and to increase their revenue per
subscriber by increasing their capital spending for addressable
systems and distribution infrastructure upgrades. GI expects
cable operators in the U.S. and abroad to continue to upgrade
their basic networks and invest in new system construction
primarily for four reasons: first, new competition has arisen
from other television programming sources, such as direct
broadcast satellite ("DBS") and cable networks planned by some
telephone companies; second, a majority of U.S. cable subscribers
do not yet have addressable terminals, and more than 60% are
served by a system that is not capable of offering more than 54
channels of programming; third, analog addressable systems are
the preferred choice for cable operators that have subscribers
with an expected usage profile that does not justify the higher
cost of more advanced digital systems; and fourth, international
markets, where cable penetration is low and demand for
entertainment programming is growing, are being developed using
U.S. architecture and systems. In addition, the Company has
continued to increase the functionality and features of its
analog addressable subscriber terminals. Its latest product, the
CFT 2200, scheduled to begin shipment in the second quarter of
1995, incorporates a user feature platform that will allow the
cable operator to write applications for new services including
electronic program guides, supplementary sports and entertainment
information and play-along game shows. This addressable terminal
can be modularly upgraded to deliver digital audio, providing CD-
quality simulcasts of premium services, and can also be upgraded
to GI's DigiCipher(R) II digital compression technology.
Digital Terrestrial Products. The Company believes that an
important future market for GI Communications will be the
commercialization of advanced digital broadband systems and
equipment, which will provide for greatly expanded channel
capacity and programming options, improved quality and security
of signal transmission and the capability of delivering enhanced
features and services. The Company believes that its potential
position in this developing market is significantly enhanced by
GI's leadership in a key enabling technology, digital
compression, which allows the broadcast of multiple digital
channels in the same bandwidth occupied by one uncompressed video
channel. Although there can be no assurances as to the
commercial development of this technology, digital compression is
considered to be the basis for the development of the "500-
channel" systems and interactive multimedia applications such as
video-on-demand. The Company's DigiCipher system was the first
digital video compression system to demonstrate capabilities over
cable and satellite television networks.
The Company believes that the commercialization of digital
broadband systems will follow a two-stage process. First,
programmers and operators of commercial headends will use digital
equipment to increase channel capacity, improve signal quality
and enhance security. This stage began in late 1993 when GI
Communications began shipping its first-generation DigiCipher I
digital satellite encoders and decoders for programmers and cable
television commercial headend operators. Second, the Company
expects that cable, satellite and other broadband network
operators will begin to deploy digital terminals in their
customers' homes in order to take advantage of the enhanced
capabilities of the digital networks. The rate of deployment
will depend largely on consumer demand for the new services made
available through the digital network and the relative cost of
the more advanced digital terminals. To date, GI has obtained
orders and letters of intent for more than 2.6 million of its
DigiCable digital subscriber terminals from 11 major cable system
operators. In addition, GI has entered into a letter of intent
and is negotiating a definitive agreement under which it expects
to supply digital and analog equipment for the deployment of Bell
Atlantic Corporation's announced large scale broadband network.
GI has also entered into an agreement under which it expects to
supply digital and analog equipment for the first three sites of
GTE Corporation's announced broadband network.
GI's DigiCable terminals will incorporate the Company's latest
generation digital compression system, DigiCipher II, which is
compatible with the recently finalized industry standard for
digital compression and transport, Motion Picture Experts Group 2
standard ("MPEG-2"). The DigiCipher II system ("MPEG-2/DC-II")
has the capacity to carry various video, audio and data elements
through a complex information infrastructure that will have an
improved capability to interact with other consumer devices using
MPEG-2 compression. The features of MPEG-2 were not finalized
until November 1994 which, in addition to other system design
issues, has caused delays in the deployment of MPEG-2/DC-II
products. As a result, volume shipments of these advanced
digital cable terminals are not expected to begin until late 1995
and there can be no assurance that additional delays will not
occur. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - New Technologies; Digital
Products", incorporated herein by reference from the 1994 Annual
Report.
Analog and Digital Satellite Products. GI Communications'
satellite products consist primarily of analog and digital access
control, scrambling and descrambling products for satellite-based
distribution of television programming. Satellite products
represented 23%, 22% and 16% of the Company's consolidated sales
in the years ended December 31, 1994, 1993 and 1992,
respectively. GI is the largest manufacturer of access control,
scrambling, and descrambling equipment used by television
programmers for the satellite distribution of their proprietary
programming.
The Company's analog satellite products are the exclusive
systems for the distribution of encrypted C-Band satellite-
delivered programming to cable television operators and large-
diameter backyard satellite dish owners. The system consists
primarily of scramblers, installed at the originating point for
the programming, and descramblers, which are installed at the
commercial headends of most cable television systems or purchased
by consumers for use with their backyard C-Band satellite dishes.
As a result of a number of factors, including significant black
market economic incentives, the Company's first generation
system, VideoCipher II, was illegally modified ("pirated"),
beginning in the mid-1980s, by approximately 1.3 million
consumers to receive programming without paying for the service.
In 1989, GI introduced VideoCipher II Plus(TM), a second
generation product which, to GI's knowledge, has not been
"pirated." In 1991, in recognition of the need to provide for
ongoing security enhancements, GI introduced VideoCipher RS(TM),
which provides the ability to upgrade security by inserting a
credit-card-like TVPass Card(TM) into a module rather than
replacing the entire module. In 1993, the Company completed a
two-part security upgrade program pursuant to which GI replaced
the VideoCipher II units of the customers of several providers of
premium programming with VideoCipher RS units and those
programmers ceased transmission of the VideoCipher II programming
signals. The Company believes this program has restored an
acceptable level of security to the backyard C-Band satellite
dish market. In addition, the Company believes that the security
upgrade resulted in the one-time sale of more than 800,000
VideoCipher RS units between the second-quarter of 1992 and the
second-quarter of 1994 to former "pirate" consumers who wanted to
restore their access to scrambled programming.
From 1991 through 1993, more than 250,000 new backyard C-Band
satellite dishes were installed annually in North America, each
requiring the use of an analog VideoCipher descrambler in order
to receive scrambled programming. In 1994, new installations
totaled more than 350,000 satellite dishes. The Company believes
that the introduction of the Hughes DirecTV and PRIMESTAR
satellite television services has contributed to increased
awareness about satellite programming and has resulted in a
higher rate of new installation of backyard C-Band satellite
equipment. The Company is a supplier to PRIMESTAR but not to
Hughes DirecTV. The Company expects sales opportunities for
VideoCipher RS(TM) modules to potential new owners of C-Band
satellite dishes to continue through the first quarter of 1995
(although there can be no assurance as to the amount of those
sales), and then possibly decline, perhaps substantially,
thereafter. The Company believes that the providers of C-Band
delivered programming using VideoCipher analog equipment
represent an important future opportunity for sales of the
Company's DigiCipher satellite systems, although there can be no
assurance that such sales will occur.
GI Communication's digital satellite products include
primarily the DigiCipher I system, the world's first digital
compression, access control and encryption transport system,
designed for the delivery of video entertainment signals. As in
the analog satellite system, the digital system relies on
encoders at the origination point of the programming, and
decoders, either at commercial headends or at consumers' homes
for use with their own satellite dishes. DigiCipher I encoders
and commercial decoders have been shipped worldwide and hold the
leading share of the equipment used by programmers of satellite
distributed digital video programming. As of December 31, 1994,
DigiCipher I encoders were being used by 17 different
programmer/operators to transmit 164 digital channels in North
America and 12 programmer/operators to transmit 86 digital
channels internationally. In most cases, the Company expects
these programmers to upgrade to GI's new MPEG-2/DC-II system
after it becomes available in mid-1995.
The Company supplies DigiCipher I digital consumer receivers
to PRIMESTAR Partners, a consortium of cable television operators
and GE Americom, which is offering a medium-power Ku-band direct-
to-home satellite television system currently transmitting 96
digital video channels. PRIMESTAR's business generally competes
with the Hughes DirecTV high-power Ku-band satellite television
system. Under agreements with PRIMESTAR, GI will be PRIMESTAR's
exclusive provider of receivers through 1996. GI began shipments
of DigiCipher I consumer decoders/receivers in the second quarter
of 1994 and volumes are expected to increase in 1995. Deployment
of MPEG-2/DC-II digital products for PRIMESTAR Partners, expected
to begin in mid-1995 will include an upgrade to MPEG-2/DC-II, for
a fee, of DigiCipher I receivers currently in use. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - New Technologies; Digital Products",
incorporated herein by reference from the 1994 Annual Report.
CommScope
CommScope (which represented 22%, 25% and 27% of the Company's
consolidated sales for the years ended December 31, 1994, 1993
and 1992, respectively) is the largest manufacturer and supplier
of coaxial cable for cable television applications in the U.S. in
terms of sales volume, with more than a 50% market share.
CommScope also manufactures fiber optic cable under a non-
exclusive license from AT&T Corporation for sale to cable
television customers in the United States. In addition,
CommScope manufactures and sells other electronic cable primarily
for local area network applications in the United States.
The Company believes that CommScope's competitive strength in
the coaxial cable market is due to its extensive coaxial cable
product line and its efficient, low-cost manufacturing and
delivery capability. CommScope's manufacturing facility in
Catawba, North Carolina is highly automated, operates 24 hours a
day and is capable of producing approximately 400 miles of trunk
and distribution coaxial cable and over 5 million feet of
dropwire per day. In 1994, CommScope shipments of dropwire and
distribution coaxial cable increased an average of 15% over the
levels shipped in 1993. The Company believes this growth is a
result of the network upgrades being undertaken by CommScope's
traditional cable television customers, in addition to increasing
orders from new customers such as telephone companies and
international cable television operators. In order to meet
increased demand, CommScope is expanding its Catawba, North
Carolina facility for distribution coaxial cable and is
constructing a new manufacturing facility in Scottsboro, Alabama
to be used primarily for the production of dropwire.
Growth in demand for coaxial cable has occurred despite the
replacement of coaxial cable with fiber optic cable in the trunk
portion of many cable television networks. This is because the
vast majority of the coaxial cable used in a typical, modern
cable television network occurs beyond the trunk, in the
distribution portion of the network, and in the dropwire into the
home. The Company believes that broadband networks will have an
ongoing need for coaxial cable to maintain, expand and upgrade
their facilities. The Company believes that coaxial cable
remains the most efficient means for the transmission of
broadband signals to the home over short distances because it is
less expensive to install in short lengths than fiber optic
cable, has less costly electronics and has the necessary capacity
to handle upstream and downstream signal transmission.
CommScope has recently received orders from U.S. telephone
operating companies, several of which have announced plans to
install broadband networks for the delivery of video, telephone
and other services to some portion, or all, of their telephone
service areas. The broadband networks that are being proposed by
some of the telephone companies utilize hybrid fiber
optic/coaxial cable technologies similar to those being utilized
by many cable television operators. While there is no assurance
that these proposed networks will be built, to the extent they
are implemented, they could represent a significant incremental
sales opportunity for CommScope beyond its traditional cable
television customer base.
Cable produced by CommScope for local area network
applications also grew significantly in 1994 with sales for these
applications increasing by more than 40%. CommScope is expanding
the capacity of its Claremont, North Carolina facility in order
to meet the growing demand for local area network and other
electronic cable.
International Markets
The Company believes that international markets represent a
key growth opportunity for its sales of broadband equipment.
During the year ended December 31, 1994, GI's international
broadband equipment sales increased 82% over the year ended
December 31, 1993, and accounted for approximately 23% of GI's
total broadband equipment revenues in 1994.
International markets employ broadband technology in three
ways: through broadband television systems similar to those in
the United States; through Multichannel Multipoint Distribution
Systems ("MMDS") or wireless microwave systems; and through
direct broadcast satellite ("DBS") systems. MMDS is typically
used in areas where the cost of installing a cable television
distribution infrastructure is not justified due to the low
density of homes, a relatively small potential subscriber base,
or geographic constraints. DBS systems with digital compression
capabilities are expected to have significant growth
internationally as programmers and satellite operators seek to
maximize their limited satellite transponder capacity in order to
reach geographically dispersed subscribers.
In certain countries, like the United Kingdom, operators have
been using system architectures that rely on U.S. broadband
designs partly because many of these systems are being developed
by affiliates of certain U.S. cable television operators and
telephone companies. In addition to the United Kingdom, plans
for new construction of significant systems have been announced
in Hong Kong, Thailand, Australia, Latin America and the Middle
East. The Company believes that these markets present
significant opportunities because cable, wireless and satellite
television penetration is low in these areas. For example,
according to industry sources, less than 35% of the households in
Western Europe have access to cable, compared with more than 95%
having access in the United States. In South America, industry
sources estimate that out of the region's approximately 72
million television households, less than 7 million receive any
sort of multichannel television service.
The Company believes that it enjoys significant competitive
strengths in these markets because of its leadership in the
United States market for broadband communications equipment, its
strong technology, its relationships with the U.S. cable
operators who are building many of the systems in international
markets, and its ability to deliver complete systems due to its
fully-integrated product line. The Company believes that, to
date, it has supplied a majority of the addressable systems and
equipment in use in international markets. However, because of
the need to form alliances in order to operate effectively in
many international markets and the larger number of competitors
in international markets than in U.S. markets, among other
factors, there can be no assurance as to the Company's future
success as international markets expand.
Power Semiconductor Division
The Power Semiconductor Division (which represented 16%, 19%
and 22% of the Company's consolidated sales in the years ended
December 31, 1994, 1993 and 1992, respectively) is a world leader
in the design, manufacture and sale of low-to-medium power
rectifiers and transient voltage suppressers in axial, bridge and
surface mount and array packages. These products are used
throughout the electrical and electronics industries to condition
current and voltage and to protect electrical circuits from power
surges. Applications include components for circuits in consumer
electronics, telecommunications, lighting ballasts, home
appliances, computers and automotive and industrial products.
The demand for increased electronic functions, global sourcing
and higher reliability within these markets is adding to the
growth of the Power Semiconductor Division worldwide business.
The Company believes that the competitive strengths of the
Power Semiconductor Division are the quality of its products, its
global sales and distribution channels and the low cost and
efficiency of its operation. The Division is a leader in sales
of low-to-medium power rectifiers and transient voltage
suppressers in North America, Southeast Asia and Europe, with 71%
of its sales, for the year ended December 31, 1994, generated
from customers outside of the United States.
New products and technologies continue to play a significant
role in the Power Semiconductor Division's growth. The
Division's patented PAR (Passivated Anisotrophic Rectifier)
process is serving to increase the reliability of many automotive
electronics applications. The Division has also developed a new
line of transient voltage protection and diode arrays, using
monolithic chip technology, which allows customers to use a small
single component to replace numerous larger components in
telecommunications and computer applications.
The Power Semiconductor Division has undertaken a significant
capacity expansion in its Taiwan, U.S. and Ireland facilities in
order to meet the increased demand for its products worldwide.
Technology and Licensing
The Company believes it is in the unique position of having
produced, and of currently producing, the majority of the world's
analog addressable systems, while also developing the digital
technology that will eventually replace these systems. As a
result, GI has sought to build upon its core enabling
technologies, digital compression, encryption and conditional
access and control, in order to lead the transition of the market
for broadband communications networks from analog to digital
systems.
GI has continued development efforts in digital compression
which are leading to the introduction of its MPEG-2/DC-II product
line. In an effort to make its DigiCipher II system architecture
and products widely available, the Company has chosen to make
available for licensing significant elements of its compression
technology. To date, licensees of GI's DigiCipher II compression
technology include Scientific-Atlanta, Inc., Hewlett-Packard
Company and Zenith Electronics Corporation. In addition, GI has
licensed Motorola, Inc., SGS-THOMPSON Microelectronics, Inc., LSI
Logic Corporation and C-Cube Microsystems to use DigiCipher II
technology to manufacture semiconductor circuits for use in
digital video products.
The Company has also entered into other license agreements,
both as licensor and licensee, covering certain products and
processes with various companies. Among those agreements, in
1993, GI granted an unaffiliated third party a license under
certain GI patents regarding addressable converters pursuant to
which GI will earn royalties of $1.5 million per year for five
years . The Company also holds a non-exclusive worldwide license
under an unaffiliated third party's patent regarding encryption
and decryption of satellite television signals. This license
agreement requires the payment of certain royalties, which are
not expected to be material to the Company's financial
statements.
Research and Development
The Company actively pursues the development of new
technologies and applications. Research and development
expenditures for the year ended December 31, 1994 were $111
million and are expected to be approximately $135 million for the
year ending December 31, 1995, compared to $74 million and $58
million for the years ended December 31, 1993 and 1992,
respectively. The Company's efforts are focused on: continued
development of the next generation of cable terminals, which
incorporate digital compression and multimedia capabilities;
development of enhanced addressable analog terminals; advanced
digital systems for cable and satellite television distribution;
and product development through strategic alliances. Emerging
research and development activities include broadband telephony
products and interactive multimedia technologies for broadband
networks.
Sales and Distribution
The Company's Broadband Communications products and services
are marketed primarily to cable television operators, cable and
satellite television programmers and programming services, and
telephone companies planning the development of cable networks.
Broadband Communications systems are sold primarily through the
efforts of sales engineers or other sales personnel employed by
the Company who are skilled in the technology of the particular
system. The Company markets VideoCipher descrambling modules
through an open distribution strategy, in which the Company and
its licensee sell descrambling modules to manufacturers of
Integrated Receiver/Descramblers, distributors, dealers,
consumers and others. The Company's Power Semiconductor products
are marketed to a wide variety of industries in the United States
and abroad. They are sold through distributors and sales
representatives, as well as directly by the Division's sales
personnel.
Because a limited number of cable television operators provide
services to a large percentage of cable television households in
the United States, the loss of some or all of them as customers
could have a material adverse effect on the Company's sales. Tele-
Communications, Inc., together with its affiliates, accounted for
15% of GI's consolidated sales for the year ended December 31,
1994, and was the only customer of GI which accounted for 10% or
more of GI's consolidated sales during such period.
Patents
The Company's policy is to protect its proprietary position
by, among other methods, filing United States and foreign patent
applications to protect technology, inventions and improvements
that the Company considers important to the development of its
business. Although the Company believes that its patents provide
a competitive advantage, the Company relies equally on its
proprietary knowledge and continuing technological innovation to
develop and maintain its competitive position.
Backlog
The backlog information set forth below includes only orders
for products scheduled to be shipped within six months. Orders
may be revised or canceled, either pursuant to their terms or as
a result of negotiations; consequently, it is impossible to
predict accurately the amount of backlog orders that will result
in sales.
Backlog
(In millions)
------------------------------
December 31, December 31,
1994 1993
------------ ------------
Broadband
Communications $578 $418
Power Semiconductor 122 95
------- -------
Total $700 $513
======= =======
Competition
The Company's products and services 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 change occurring in the Company's markets
are expected to lead to the entry of new competitors. The
Company's ability to anticipate such changes and introduce
enhanced products on a timely basis will be a significant factor
in the Company's ability to expand and remain competitive.
Existing competitors' actions and new entrants may have an
adverse impact on the Company's operations. The Company believes
that it enjoys a strong competitive position due to its large
installed cable television equipment base, its strong
relationships with the major cable television operators, its
technology leadership and new product development capabilities,
and the likely need for compatibility of new technologies with
currently installed systems. There can be no assurance, however,
that competitors will not be able to develop systems compatible
with, or that are alternatives to, the Company's proprietary
technology or systems.
Employees
At December 31, 1994, approximately 12,300 people were
employed by GI. Of these employees, approximately 5,100, 4,500
and 2,100 were located at GI's U.S., Taiwan and Mexico
facilities, respectively, with the balance located in Puerto
Rico, Japan and Europe. GI believes its relations with its
employees and, where they are represented by unions, its
relations with their unions, are good. As of December 31, 1994,
approximately 5,300 of GI's employees were covered by collective
bargaining agreements. Of these employees, approximately 4,300
were located at GI's Taiwan facilities, approximately 700 were
located at GI's Mexico facilities and the balance were located at
GI's Westbury, New York and certain European facilities.
Raw Materials
Raw materials are purchased from many sources in the United
States, as well as from sources in the Far East, Canada and
Europe. The Company's products include certain components that
are currently available only from single sources. The Company has
in effect inventory controls and other policies intended to
minimize the effect of any interruption in the supply of these
components. There is no single supplier, the loss of which would
have a continuing material adverse effect on GI's production.
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
is also involved in remediation programs, principally with
respect to former manufacturing sites, which are proceeding in
conjunction with federal or state regulatory oversight. In
addition, the Company is currently named as a "potentially
responsible party" with respect to the disposal of hazardous
wastes at seven hazardous waste sites located in four states.
The Company engages independent consultants to assist
management in evaluating potential liabilities related to
environmental matters. Management assesses the input from these
independent consultants along with other information known to the
Company in its effort to continually monitor these potential
liabilities. Management assesses its environmental exposure on a
site-by-site basis, including those sites where the Company has
been named a potentially responsible party. Such assessments
include the Company's share of remediation costs, information
known to the Company concerning the size of the hazardous waste
sites, their years of operation and the number of past users and
their financial viability. Although the Company estimates, based
on assessments and evaluations made by management, that its
exposure with respect to these environmental matters could be as
high as $64 million, the Company believes that the reserve for
environmental matters of $45 million at December 31, 1994 is
reasonable and adequate. However, there can be no assurance that
the ultimate resolution of these matters will approximate the
amount reserved. Further information regarding the Company's
environmental matters appears in Note 8 to the Company's
consolidated financial statements included in the 1994 Annual
Report, incorporated herein by reference.
Capital Expenditures
Capital expenditures were $136 million, $67 million and $37
million in the years ended December 31, 1994, 1993 and 1992,
respectively. Such expenditures were primarily in support of new
product development, cost reduction, capacity expansion and
production maintenance programs. In 1995, the Company expects to
continue to expand its capacity to meet current and future
demands for analog and digital products, cables and power
rectifiers with capital expenditures for the year ending December
31, 1995 expected to approximate $170 million.
Item 2. PROPERTIES
GI has manufacturing, warehouse, sales, research and
development, and administrative facilities worldwide which have
an aggregate floor space of approximately 3 million square feet.
Of these facilities, aggregate floor space of approximately 1.1
million square feet is leased, and the remainder is owned by GI.
Leases expire on various dates through the year 2004. GI
operates manufacturing facilities in ten locations worldwide
containing floor space of approximately 1.4 million square feet.
The Power Semiconductor Division utilizes three facilities with
an aggregate floor space of approximately .4 million square feet.
GI does not believe there is any material long-term excess
capacity in its facilities, although utilization is subject to
change based on customer demand. GI believes that its facilities
and equipment generally are well maintained, in good operating
condition and suitable for GI's purposes and adequate for its
present operations.
Item 3. LEGAL PROCEEDINGS
On October 25, 1994, the Company settled a U.S. Government
claim relating to GI's former Government Systems Division
("GSD"), which was sold by GI in 1991. The Company had
previously received three subpoenas, dated November 28, 1990,
February 6, 1992 and June 8, 1992, from the U.S. Attorney's
Office for the Eastern District of New York in connection with a
grand jury investigation of conduct by GSD prior to the
acquisition, in August 1990, of General Instrument Corporation,
then a publicly traded company, by affiliates of Forstmann Little
& Co., a private investment firm. The claim alleged improper
certification for reimbursement of overhead costs in connection
with certain contracts by former GSD employees. Under the terms
of the settlement with the U.S. Attorney, the Company agreed to
plead guilty to a misdemeanor and to pay a fine of $200,000 and
to make restitution of $9.8 million. The Company recorded a
charge of $4 million in 1994 to cover amounts that had not been
previously provided. The U.S. Attorney expressly acknowledged in
its court papers that there was no evidence implicating the
Company's current management or owners. The Company agreed to
the settlement because it is no longer in the defense business
and had neither the personnel nor the information adequately to
defend the litigation.
GI is involved in various litigation matters, including as
described below, the ultimate disposition of which, in GI's
opinion, will not have a material adverse effect on the financial
statements of the Company.
Based on published reports in the press, the Company believes
that the Antitrust Division of the Department of Justice ("DOJ")
is pursuing a broad investigation of arrangements and practices
that affect the cable television industry. On August 27, 1993,
the Company received a Civil Investigative Demand ("CID") from
the DOJ for documents and information relating to an
investigation of whether the antitrust laws have been violated by
agreements or unilateral action in restraint of trade in markets
for encryption hardware and software. On February 4, 1994, the
Company received a second CID from the DOJ for documents and
information relating to an investigation of whether the antitrust
laws have been violated by agreements in restraint of trade and
attempted monopolization in markets relating to delivery of
analog and digital video programming. The Company has complied
with these requests.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security
holders during the three months ended December 31, 1994.
Additional Item. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the executive officers of the Company as
of March 15, 1995. In connection with the Company's initial
public offering, on April 6, 1992, each executive officer of GI
Delaware as of that date, was appointed to serve as an executive
officer of the Company. Certain executive officers of the
Company also serve as president of the various divisions and
subsidiaries of GI Delaware. Officers serve at the discretion of
the Board of Directors.
Name Age Position(s) with the Company
-------------------- --- -----------------------------------
Daniel F. Akerson 46 Chairman of the Board of Directors
and Chief Executive Officer
Richard S. Friedland 44 President, Chief Operating Officer
and Director
J. A. Blanchard, III 52 Executive Vice President
Paul J. Berzenski 42 Vice President and Controller
Charles T. Dickson 40 Vice President and Chief Financial
Officer
Thomas A. Dumit 52 Vice President, General Counsel
and Secretary
Richard C. Smith 50 Vice President-Taxes, Treasurer
and Assistant Secretary
Frank M. Drendel 50 Chairman, President and Chief
Executive Officer of CommScope,
Inc., a subsidiary of GI
Delaware and Director of the
Company
Ronald A. Ostertag 54 Vice President of the Company and
President, Power Semiconductor
Division
Laurence L. Osterwise 47 Vice President of the Company and
President, GI Communications
Division
The principal occupations and positions for the past several
years of each of the executive officers of the Company are as
follows:
Daniel F. Akerson has served as Chairman of the Board and
Chief Executive Officer of the Company since August 1993 and as a
director of the Company since July 1993. He was President of the
Company from August 1993 to October 1993. He served as Chief
Operating Officer and President of MCI Communications Corporation
("MCI") from 1992 to August 1993. He served as Executive Vice
President and Group Executive of MCI from 1990 to 1992, Executive
Vice President and Chief Financial Officer of MCI from 1987 to
1990, and Senior Vice President of MCI from 1987 to 1988, and
held various positions within MCI since 1983. Mr. Akerson is a
General Partner of FLC Partnership, LP, the General Partner of
Forstmann Little & Co.
Richard S. Friedland has been a director of the Company since
October 1993. He became President and Chief Operating Officer of
the Company and GI Delaware in October 1993. He was Chief
Financial Officer of the Company and GI Delaware from March 1992
to January 1994 and Vice President, Finance of the Company from
May 1991 to October 1993. He was Vice President-Finance and
Assistant Secretary of GI Delaware from October 1990 to October
1993 and Vice President and Controller of GI Delaware from
November 1988 to January 1994. He is a director of Department
56, Inc.
J. A. Blanchard, III became Executive Vice President of the
Company on January 10, 1994. He was Chairman and Chief Executive
Officer of Harbridge Merchant Services from 1991 to 1993. From
1989 to 1991 he was a Senior Vice President at AT&T and prior to
that a Group Vice President of AT&T from 1986 to 1989. He is a
director of Telular Corporation and of Xpedite Systems, Inc.
Paul J. Berzenski became Controller of the Company in January
1994 and Vice President of the Company in November 1994. He was
Assistant Controller of GI Delaware from January 1991 to January
1994 and a Controller in the Company's former Jerrold
Communications Division from January 1988 to January 1991.
Charles T. Dickson became Vice President and Chief Financial
Officer of the Company on January 17, 1994. He was Vice
President, Finance and Administration of several divisions of MCI
from 1988 to 1993.
Thomas A. Dumit became Vice President, General Counsel and
Secretary of GI Delaware in January 1991. From January 1988
through 1990, Mr. Dumit was Senior Vice President and General
Counsel of Whitman Corporation, a diversified company. From 1986
to 1987 he was Senior Vice President and General Counsel of
Household Financial Services, a consumer finance division of
Household International, Inc., and from 1984 to 1985 he was Vice
President and General Counsel of American Hospital Supply
Corporation.
Richard C. Smith has been Vice President of GI Delaware since
March 1989, Treasurer of the Company since September 1991 and
Assistant Secretary of GI Delaware since June 1986. Mr. Smith
has been Vice President and Assistant Secretary of the Company
since May 1991 and has been Treasurer of the Company since March
1992. He was Assistant Treasurer of GI Delaware from June 1986
to June 1987 and from February 1991 to September 1991. From June
1986 to November 1994 he was Director of Taxes for GI Delaware
and from May 1991 to November 1994 he was Director of Taxes for
the Company. From June 1987 to March 1989 he was also Director,
Risk Management and Customs for GI Delaware.
Frank M. Drendel served as a director of GI Delaware and its
predecessors from 1987 to March 1992, when he was elected to
serve as a director of the Company. He has served as Chairman
and President of CommScope since 1986 and has served as Chief
Executive Officer of CommScope since 1976. Mr. Drendel was
Executive Vice President of the predecessor to the Company from
September 1986 to November 1988. From February 1981 to September
1986, Mr. Drendel was Executive Vice President and, from July
1982 to September 1986, he was Vice Chairman of the Board, of M/A-
COM. Mr. Drendel is a director of Alcatel Alsthom Compagnie
Generale d'Electricite.
Ronald A. Ostertag has been Vice President of GI Delaware
since February 1989, and President, Power Semiconductor Division
since September 1990. From April 1989 to September 1990 he was
Senior Vice President - Operations for the former VideoCipher
division and from August 1984 to April 1989 was Vice President
and General Manager of the Computer Products division of GI
Delaware.
Laurence L. Osterwise became Vice President of the Company and
President of GI Communications Division in November 1994. He was
employed by IBM Corporation from 1969 to November 1994, serving
as General Manager of Production Industries Consulting and
Services from January 1994 to November 1994, Corporate Director
of Market Driven Quality from December 1991 to January 1994, U.S.
Vice President of Market Driven Quality from January 1991 to
December 1991, Site General Manager Rochester, Minnesota and
Director, Application Business Systems from 1985 to 1991 and in
various capacities prior to 1985.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information required by this Item is contained in Notes
7, 11 and 16 to the consolidated financial statements
included in the 1994 Annual Report, incorporated herein by
reference.
As of March 15, 1995 the approximate number of
stockholders of record of the Company's Common Stock was
598.
Item 6. SELECTED FINANCIAL DATA
Information required by this Item is contained in the
Five Year Summary included in the 1994 Annual Report,
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information required by this Item is contained in
Management's Discussion and Analysis of Financial Condition
and Results of Operations included in the 1994 Annual
Report, incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this Item is contained in the
consolidated financial statements of the Company as of
December 31, 1994 and 1993 and for each of the years ended
December 31, 1994, 1993 and 1992, the notes to the
consolidated financial statements, and the independent
auditors' report thereon, and in the Company's unaudited
quarterly financial data for the two year period ended
December 31, 1994, and such information is incorporated
herein by reference from the 1994 Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item concerning directors
of the Company is included in the Company's definitive Proxy
Statement for the 1995 Annual Meeting of Stockholders, filed
with the Securities and Exchange Commission within 120 days
after the end of the Company's fiscal year (the "1995 Proxy
Statement") in the section captioned "Election of
Directors," and such information is incorporated herein by
reference. Information required by this item concerning the
executive officers of the Company is included in Part I of
this Annual Report on Form 10-K under the section captioned
"Additional Item. Executive Officers of the Registrant", as
permitted by General Instruction G(3). Information required
by this Item concerning compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included in the 1995
Proxy Statement under the caption "Compliance with Section
16(a) of the Exchange Act," and such information is
incorporated herein by reference. Theodore J. Forstmann and
Nicholas C. Forstmann, both of whom are directors of the
Company, are brothers.
Item 11. EXECUTIVE COMPENSATION
Information required by this Item is included in the
1995 Proxy Statement in the section captioned "Further
Information Concerning the Board of Directors and
Committees" under the subsections captioned "-Compensation
Committee Interlocks and Insider Participation" and "-
Director Compensation" and in the section captioned
"Compensation of Executive Officers" (other than the
subsections thereof captioned "-Compensation Committee
Report on Compensation of Executive Officers of the Company"
and "-Performance Graph"), and such information is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required by this Item is included in the
1995 Proxy Statement in the section captioned "Security
Ownership of Certain Beneficial Owners and Management", and
such information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is included in the
1995 Proxy Statement in the section captioned "Other Related
Party Transactions" and is included in Note 13 to the
consolidated financial statements included in the 1994
Annual Report, and such information is incorporated herein
by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
Consolidated Balance Sheets at December 31, 1994
and 1993
For the years ended December 31, 1994, 1993 and 1992:
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules
Independent Auditors' Report
I. Condensed financial information - Parent Company only
II. Valuation and qualifying accounts
All other schedules have been omitted because they
are not applicable, not required or the information
required is included in the consolidated financial
statements or notes thereto.
3. Exhibits
The exhibits are listed in the accompanying Index to
Exhibits.
(b) Reports on Form 8-K
None.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
General Instrument Corporation:
We have audited the consolidated financial statements of
General Instrument Corporation (the "Company") as of
December 31, 1994 and 1993, and for each of the three years
in the period ended December 31, 1994, and have issued our
report thereon dated January 31, 1995; such consolidated
financial statements and report are included in your 1994
Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement
schedules of the Company, listed in Item 14(a) 2. These
financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
/s/Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 31, 1995
<TABLE>
GENERAL INSTRUMENT CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
(In thousands except share data)
<CAPTION>
December 31,
---------------------------
1994 1993
---------- ---------
<S> <C> <C>
ASSETS
Investment in subsidiary $656,876 $382,113
Note receivable from subsidiary 500,000 500,000
Interest receivable from subsidiary 71,249 23,749
Deferred financing fees, less accumulated
amortization of $3,067and $1,056, respectively 11,013 13,024
---------- ---------
Total assets $1,239,138 $ 918,886
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to subsidiary $60,918 $28,739
---------- ---------
Accrued interest payable 1,042 1,042
---------- ---------
Convertible Junior Subordinated Notes 500,000 500,000
---------- ---------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized; no shares issued - -
Common Stock, $.01 par value; 175,000,000 shares
authorized; 122,231,348 and 120,261,610 issued at
December 31, 1994 and 1993, respectively 1,222 601
Additional paid-in capital 543,728 502,423
Retained earnings (accumulated deficit) 132,634 (113,901)
---------- ---------
677,584 389,123
Less - Treasury stock, at cost, 11,259 and 11,784 shares of
of Common Stock at December 31, 1994 and 1993,
respectively (17) (18)
- Unearned compensation (389) -
---------- ---------
Total stockholders' equity 677,178 389,105
---------- ---------
Total liabilities and stockholders' equity $1,239,138 $918,886
========== =========
<FN>
Note: Investment in subsidiary is accounted for under the equity method of accounting.
See notes to consolidated financial statements included in the 1994 Annual Report, incorporated
herein by reference.
</FN>
</TABLE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
(In thousands)
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Interest income $ 47,500 $ 52,224 $ 57,000
Interest expense (27,011) (41,474) (57,000)
----------- ----------- -----------
Interest Income - net 20,489 10,750 -
Income Taxes (7,171) (3,763) -
----------- ----------- -----------
Net Income - Parent Company 13,318 6,987 -
Net income (loss)
of subsidiary 233,217 83,596 (52,993)
----------- ----------- -----------
Net income (loss) $ 246,535 $ 90,583 $ (52,993)
<FN>
Note 1:
The parent company files a consolidated income tax return with its subsidiary.
The consolidated income tax provisions were $9,714, $23,526 and $14,941 for
the years ended December 31, 1994, 1993 and 1992, respectively.
Note 2:
Statements of cash flows are not required since the parent company did not
have any cash flows from operations. Interest income - net for the years ended
December 31, 1994 and 1993 relates to intercompany transactions.
See notes to consolidated financial statements included in the 1994 Annual
Report, incorporated herein by reference.
</FN>
</TABLE>
<TABLE>
GENERAL INSTRUMENT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<CAPTION>
Balance Balance
at at
beginning end of
of period Additions Deductions (1) Other period
---------- ---------- ------------- ----- -------
<S> <C> <C> <C> <C> <C>
Allowance For Doubtful Accounts:
Year ended December 31, 1994 $7,012 $1,967 ($1,397) - $7,582
========== ========== ============= ===== =======
Year ended December 31, 1993 $8,246 $2,262 ($3,496) - $7,012
========== ========== ============= ===== =======
Year ended December 31, 1992 $6,353 $2,533 ($640) - $8,246
========== ========== ============= ===== =======
<FN>
(1) Accounts receivable written off - net of recoveries
</FN>
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
General Instrument Corporation
By:/s/Daniel F. Akerson
------------------------
Daniel F. Akerson
Date: March 23, 1995 Chairman of the Board, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
----------------------- ----------------------- --------------
/s/Daniel F. Akerson Chairman of the Board, March 23, 1995
-------------------- Chief Executive Officer
Daniel F. Akerson and Director (Principal
Executive Officer)
/s/Richard S. Friedland President, Chief March 23, 1995
----------------------- Operating Officer and
Richard S. Friedland Director
/s/Charles T. Dickson Vice President and March 23, 1995
--------------------- Chief Financial
Charles T. Dickson Officer(Principal
Financial Officer)
/s/Paul J. Berzenski Vice President and March 23, 1995
-------------------- Controller(Principal
Paul J. Berzenski Accounting Officer)
/s/John Seely Brown Director March 23, 1995
-------------------
John Seely Brown
/s/Frank M. Drendel Director March 23, 1995
-------------------
Frank M. Drendel
/s/Lynn Forester Director March 23, 1995
-------------------
Lynn Forester
/s/Nicholas C. Forstmann Director March 23, 1995
------------------------
Nicholas C. Forstmann
/s/Theodore J. Forstmann Director March 23, 1995
------------------------
Theodore J. Forstmann
/s/Steven B. Klinsky Director March 23, 1995
-------------------
Steven B. Klinsky
/s/Morton H. Meyerson Director March 23, 1995
---------------------
Morton H. Meyerson
/s/J. Tracy O'Rourke Director March 23, 1995
--------------------
J. Tracy O'Rourke
/s/Felix G. Rohatyn Director March 23, 1995
-------------------
Felix G. Rohatyn
/s/Paul G. Stern Director March 23, 1995
-------------------
Paul G. Stern
/s/Robert S. Strauss Director March 23, 1995
--------------------
Robert S. Strauss
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No.(s) 33-60498, 33-61820, 33-50911,
33-52189, 33-54923, 33-55595 and 33-57737 of General
Instrument Corporation on Form(s) S-8 of our reports dated
January 31, 1995 appearing in and incorporated by reference
in this Annual Report on Form 10-K of General Instrument
Corporation for the year ended December 31, 1994.
/s/Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 23, 1995
GENERAL INSTRUMENT CORPORATION
INDEX TO EXHIBITS
(ITEM 14(c))
Exhibit Description
2.1 - Agreement and Plan of Merger, dated as of July 1,
1990, among FLGI Acquisition Corp. and General
Instrument Corporation.*
3.1 - Amended and Restated Certificate of Incorporation
of the Company.**
3.2 - Amended and Restated By-Laws of the Company.
4.1 - Specimen Form of Company's Common Stock
Certificate.***
4.2 - Indenture, dated as of June 15, 1993, between
General Instrument Corporation and Continental
Bank.****
10.1 - Second Amended and Restated Credit Agreement,
dated as of June 30, 1994, among General Instrument
Corporation, the banks and other financial
institutions from time to time parties thereto,
Chemical Bank, as Administrative Agent for the Banks,
and Chemical Bank, Continental Bank N.A., Deutsche
Bank AG, The Nippon Credit Bank, Ltd., The Bank of
Nova Scotia, The Toronto-Dominion Bank, National
Westminster Bank PLC, and the Bank of Tokyo Trust
Company, as Co-agents.
10.2 - Amended and Restated Guarantee, dated as of July
7, 1994, by the Company in favor of Chemical Bank.
10.3 - Amended and Restated Guarantee, dated as of July
7, 1994 by Cable/Home Communication Corporation and
CommScope, Inc. in favor of Chemical Bank.
10.4 - Form of Employee Subscription Agreement, dated as
of December 1990, between the Company and certain
Management Investors.*+
10.5 - Form of Employee Subscription Agreement, dated as
of March 21, 1992, between the Company and certain
Management Investors.*+
10.6 - Form of Waiver of Certain Company Rights under
the agreement referred to in 10.5.*+
10.7 - Form of Stock Option Agreement, dated as of
August 15, 1990, in connection with the purchase of
CommScope (including form of Stockholder's
Agreement).*+
10.8 - Form of Outside Director Stock Option Agreement
(including form of Outside Director Stockholder's
Agreement).*+
10.9 - Employment Agreement, dated as of November 28,
1988, between CommScope and Frank M. Drendel.*+
10.10 - Form of Indemnification Agreement between the
Company and its directors and executive officers.
10.11 - Registration Rights Agreement between the
Company, GI Corporation, MBO-IV and Instrument
Partners.*
10.12 - Form of Amendment to Outside Director Stock
Option Agreement (including form of Outside Director
Stockholder's Agreement) between the Company and each
of James M. Denny, J. Tracy O'Rourke, Derald H.
Ruttenberg and William C. Lowe.*+
10.13 - The General Instrument Corporation 1993 Long-Term
Incentive Plan (including form of Stock Option
Agreement).****+
10.14 - General Instrument Corporation Annual Incentive
Plan.+
10.15 - Amendment, dated May 20, 1993, to the Employment
Agreement referred to in 10.14.****+
10.16 - GI Deferred Compensation Plan.+
11. - Computation of Earnings(Loss) Per Share.
13. - Annual Report to Stockholders for fiscal year
ended December 31, 1994. (The Annual Report, except
for those portions thereof which are expressly
incorporated by reference in this Annual Report on
Form 10-K, is being furnished for the information of
the Commission and is not to be deemed "filed" as part
of the Form 10-K.)
21. - Subsidiaries of the Company.****
23. - Consent of Deloitte & Touche LLP (included herein)
27. - Financial Data Schedule (Filing only for the
Electronic Data Gathering, Analysis and Retrieval
system of the U.S. Securities and Exchange
Commission.)
* Incorporated by reference from Registration Statement
No. 33-46854.
** Incorporated by reference from Registration Statement
No. 33-63152.
*** Incorporated by reference from Registration Statement
No. 33-50215
**** Incorporated by reference from Annual Report on Form 10-K
for the fiscal year ended December 31, 1993
+ Management contract or compensatory plan
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS OF
GENERAL INSTRUMENT CORPORATION
(hereinafter called the "Corporation")
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 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, at which
meetings the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting in accordance with these Amended and Restated By-laws. Written
notice of the annual meeting stating the place, date and hour of the meeting
shall be given to each stockholder of record entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting.
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.
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 or stockholders holding of record at
least 50% of the voting power of the issued and outstanding shares of stock of
the Corporation entitled to vote at such meeting. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder of
record (as determined pursuant to Article V Section 7 hereof) entitled to vote
at such meeting, and only such business as is stated in such notice shall be
acted upon thereat. 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.
Section 4. Organization. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, or, in his absence or if one
shall not have been elected, the President, shall act as chairman of the
meeting. The Secretary or, in his 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 5. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
Section 6. Quorum, Adjournments. The holders of a majority of the
voting power of the issued and outstanding 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 Amended and Restated 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 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 7. Voting. Except as otherwise provided by statute or the
Amended and Restated Certificate of Incorporation, 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 his 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 him by a proxy signed by such stockholder
or his 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 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 Amended and Restated 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 his proxy, if there be such proxy, and shall state
the number of shares voted.
Section 8. Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Amended and
Restated Certificate of Incorporation or of these Amended and Restated By-
laws, the meeting and vote of stockholders may be dispensed with, and the
action taken without such meeting and 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 of stock of the
Corporation entitled to vote thereon were present and voted.
Section 9. List of Stockholders Entitled to Vote. At least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the 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 where the meeting is to be held,
which place shall be specified in the notice of the meting, 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 may, 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 his 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 his
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.
ARTICLE III
DIRECTORS
Section 1. Number, Qualification, Election and Term of Directors.
Subject to the rights, if any, of holders of the Preferred Stock of the
Corporation, the Board of Directors shall consist of not less than one nor
more than twenty-one members, the exact number of which shall be fixed from
time to time by the affirmative vote of a majority of the entire Board of
Directors. Except as provided in Section 2 of this Article III, directors
shall be elected by a plurality of the votes cast at annual meetings of
stockholders, and each director so elected shall hold office as provided by
Article FIFTH of the Amended and Restated Certificate of Incorporation. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
Section 2. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase
in the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director. Each director so elected shall hold office in
accordance with Article FIFTH of the Company's Amended and Restated
Certificate of Incorporation and until his successor shall have been elected
and qualified.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Amended and Restated Certificate of Incorporation
or by these Amended and Restated By-laws directed or required to be exercised
or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, by a majority of the board
of Directors or by the President of the Corporation. Notice thereof stating
the place, date and hour of the meeting shall be given to each director either
by mail not less than forty-eight hours before the date of the meeting, or
personally or by telephone, telegram, telex or similar means of communication
on twenty-four hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. 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 Amended and Restated Certificate of Incorporation or these
Amended and Restated By-laws, the act 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 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 6. Action by Consent. Unless restricted by the Amended and
Restated 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 7. Telephonic Meeting. Unless restricted by the Amended and
Restated 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 8. 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.
Except to the extent restricted by statute or the Amended and Restated
Certificate of Incorporation, 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 and may authorize the seal of the
Corporation to be affixed to all papers which require it. 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.
Section 9. 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 10. Resignations. Any director of the Corporation may resign
at any time by giving written notice of his 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 11. 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 his or their
votes are counted for such purposes if (a) the material facts as to his or
their 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 votes of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum, or (b) the material facts as to his or their 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. Common or 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 be a Chairman of the Board of Directors, a
Vice Chairman, a Chief Executive Officer, a President, a Chief Operating
Officer, one or more Vice Presidents, a Chief Financial Officer, a Secretary,
and a Treasurer. The Board of Directors, in its discretion, may also choose
Assistant Secretaries, Assistant Treasurers and other officers. 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 Amended and Restated 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 of Directors, need such officers be
directors of the Corporation.
Section 2. Election and Removal. The Board of Directors at its first
meeting held after each annual meeting of stockholders shall elect the
officers of the Corporation, who shall hold their offices for such terms as
shall be determined from time to time by the Board of Directors, and all
officers of the Corporation shall hold office until their successors are
chosen and qualified, or until their earlier resignation or removal. Any
officer elected by the Board of Directors may be removed at any time by the
board of Directors with or without cause. Any vacancy occurring in any office
of the Corporation shall be filled by the Board of Directors. The salaries of
all officers of the Corporation shall be fixed by the Board of Directors or
such committee or officers as the Board of Directors in its sole discretion
may designate.
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 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 him 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 the State 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. 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 he were 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 issues 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 his legal representative, to
advertise the same in such manner as the Board of Directors shall require
and/or 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.
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, shall
be entitled to hold liable for calls and assessments a person registered on
its records as the owner of shares of stock, 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 the laws of Delaware.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Amended and Restated Certificate of Incorporation of these Amended and
Restated By-laws to be given to any director or stockholder, such notice may
be given by mail, addressed to such director or stockholder, at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be
given personally or by telegram, telex, cable or facsimile transmission.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Amended and Restated Certificate of Incorporation or these Amended and
Restated By-laws to be given to any director or stockholder, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. General. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he 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, against
expenses (including attorneys' fees), judgements, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgement, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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 any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgement in its favor by reason of the fact that he
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 against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he 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 such person shall have been adjudged to be liable to the
Corporation 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 circumstances of the case, such person 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. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 1 or 2 of this Article VII, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 4. Procedure. Any indemnification under Sections 1 and 2 of
this Article VII (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 director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in such Sections 1 and 2. Such determination shall be made (a) by a majority
vote of the directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (b) if there are no such directors, or, if
such directors so direct, by independent legal counsel in a written opinion,
or (c) by the stockholders.
Section 5. Advances for Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, employee
or agent to repay such amount if it shall be ultimately determined that he is
not entitled to be indemnified by the Corporation as authorized in this
Article VII.
Section 6. Rights Non-Exclusive. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of this
Article VII 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 his official capacity and as to action in
another capacity while holding such office.
Section 7. 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 against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article VII.
Section 8. Definition of Corporation. For the purposes of this Article
VII, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a 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
shall stand in the same position under the provisions of this Article VII with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
Section 9. Survival of Rights. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article VII shall 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.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of statute and the
Amended and Restated Certificate of Incorporation, dividends upon the shares
of capital stock of the Corporation 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 Amended and Restated 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, such written proxies, consents, waivers or other
instruments as may be necessary or proper in the circumstances.
ARTICLE IX
AMENDMENTS
These Amended and Restated By-laws may be altered, amended or repealed,
in whole or in part, or new By-laws may be adopted by either the affirmative
vote of the holders of a majority of the outstanding capital stock of the
Corporation entitled to vote thereon or by the Board of Directors.
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
---
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
among
GENERAL INSTRUMENT CORPORATION OF DELAWARE,
CERTAIN LENDERS,
CHEMICAL BANK,
as Administrative Agent, and
CHEMICAL BANK,
CONTINENTAL BANK N.A.,
DEUTSCHE BANK AG,
THE NIPPON CREDIT BANK,
LTD., THE BANK OF NOVA
SCOTIA,
THE TORONTO-DOMINION BANK,
NATIONAL WESTMINSTER BANK
PLC
and
THE BANK OF TOKYO TRUST
COMPANY, as Co-
Agents
Dated as of June 30, 1994
------------------------------------------------------------------------------
------------------------------------------------------------------------------
--<PAGE>
TABLE OF CONTENTS
Pa
ge
--
--
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . .
1
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . .
24
SECTION 2. CONVERSION OF TERM LOANS . . . . . . . . . . . . . . . . . . . .
25
2.1 Conversion of Term Loans . . . . . . . . . . . . . . . . . . . .
25
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .
25
3.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . .
25
3.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . .
26
3.3 Proceeds of Revolving Credit Loans . . . . . . . . . . . . . . .
26
3.4 Issuance of Letters of Credit. . . . . . . . . . . . . . . . . .
27
3.5 Participating Interests. . . . . . . . . . . . . . . . . . . . .
27
3.6 Procedure for Opening Letters of Credit. . . . . . . . . . . . .
28
3.7 Payments in Respect of Letters of Credit . . . . . . . . . . . .
28
3.8 The Bid Loans. . . . . . . . . . . . . . . . . . . . . . . . . .
29
3.9 Procedure for Bid Loan Borrowing . . . . . . . . . . . . . . . .
29
3.10 Bid Loan Payments. . . . . . . . . . . . . . . . . . . . . . . .
32
3.11 Bid Loan Notes . . . . . . . . . . . . . . . . . . . . . . . . .
33
3.12 Swing Line Commitment. . . . . . . . . . . . . . . . . . . . . .
33
3.13 Participations . . . . . . . . . . . . . . . . . . . . . . . . .
35
SECTION 4. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT. . . . . . . . . . . . . . . . . .
35
4.1 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . .
35
4.2 Conversion Options . . . . . . . . . . . . . . . . . . . . . . .
36
4.3 Changes of Commitment Amounts. . . . . . . . . . . . . . . . . .
37
4.4 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . .
38
4.5 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . .
38
4.6 Interest Rates and Payment Dates . . . . . . . . . . . . . . . .
39
4.7 Computation of Interest and Fees . . . . . . . . . . . . . . . .
40
4.8 Commitment Fees. . . . . . . . . . . . . . . . . . . . . . . . .
40
4.9 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . .
41
4.10 Letter of Credit Fees. . . . . . . . . . . . . . . . . . . . . .
42
4.11 Letter of Credit Reserves. . . . . . . . . . . . . . . . . . . .
43
4.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . .
44
4.13 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . .
44
4.14 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . .
45
4.15 Participations . . . . . . . . . . . . . . . . . . . . . . . . .
45
4.16 Inability to Determine Interest Rate . . . . . . . . . . . . . .
46
4.17 Pro Rata Treatment and Payments. . . . . . . . . . . . . . . . .
46
4.18 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . .
48
4.19 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . .
49
4.20 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
-i-
<PAGE>
Pa
ge
--
--
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .
51
5.1 Corporate Existence; Compliance with Law . . . . . . . . . . . .
51
5.2 Corporate Power; Authorization . . . . . . . . . . . . . . . . .
52
5.3 Enforceable Obligations. . . . . . . . . . . . . . . . . . . . .
52
5.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . .
52
5.5 No Material Litigation . . . . . . . . . . . . . . . . . . . . .
53
5.6 Investment Company Act . . . . . . . . . . . . . . . . . . . . .
53
5.7 Federal Regulation . . . . . . . . . . . . . . . . . . . . . . .
53
5.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
5.9 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . .
54
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54
5.11 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
54
5.12 Ownership of Property; Liens . . . . . . . . . . . . . . . . . .
55
5.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . .
55
6.1 Conditions to Effectiveness of this Agreement,
Initial Loans and Letters of Credit. . . . . . . . . . . . . .
55
6.2 Conditions to All Loans and Letters of Credit. . . . . . . . . .
59
SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . .
60
7.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . .
60
7.2 Certificates; Other Information. . . . . . . . . . . . . . . . .
63
7.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . .
64
7.4 Conduct of Business and Maintenance of
Existence. . . . . . . . . . . . . . . . . . . . . . . . . . .
65
7.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . .
65
7.6 Inspection of Property; Books and Records;
Discussions. . . . . . . . . . . . . . . . . . . . . . . . . .
65
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . .
68
8.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . .
68
8.2 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . .
69
8.3 Limitation on Contingent Obligations . . . . . . . . . . . . . .
70
8.4 Prohibition of Fundamental Changes . . . . . . . . . . . . . . .
70
8.5 Prohibition on Sale of Assets. . . . . . . . . . . . . . . . . .
71
8.6 Limitation on Investments, Loans and Advances. . . . . . . . . .
71
8.7 Maintenance of Consolidated Net Worth. . . . . . . . . . . . . .
72
8.8 Maintenance of Interest Coverage . . . . . . . . . . . . . . . .
73
8.9 Maintenance of Current Ratio . . . . . . . . . . . . . . . . . .
73
8.10 Maintenance of Consolidated Senior Indebtedness
to Consolidated Total Capital Ratio. . . . . . . . . . . . . .
73
8.11 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . .
74
8.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . .
75
8.13 Foreign Exchange Contracts . . . . . . . . . . . . . . . . . . .
75
8.14 Terms of Subordinated Note; Prepayment of
Subordinated Note. . . . . . . . . . . . . . . . . . . . . . .
75
8.15 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . .
76
-ii-
<PAGE>
Pa
ge
--
--
SECTION 9. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . .
76
SECTION 10. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS. . . . . . . . . . . . . . . . . . . . .
80
10.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . .
80
10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . .
80
10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . .
81
10.4 Reliance by Co-Agents and Administrative Agent . . . . . . . . .
81
10.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . .
82
10.6 Non-Reliance on Co-Agents, Administrative Agent
and Other Banks. . . . . . . . . . . . . . . . . . . . . . . .
82
10.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .
83
10.8 Co-Agents and Administrative Agent in their
Individual Capacities. . . . . . . . . . . . . . . . . . . . .
83
10.9 Successor Co-Agent or Administrative Agent . . . . . . . . . . .
83
10.10 An Issuing Bank as Issuer of Letters of Credit . . . . . . . . .
84
SECTION 11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .
84
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . .
84
11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . .
88
11.4 Survival of Representations and Warranties . . . . . . . . . . .
88
11.5 Payment of Expenses and Taxes. . . . . . . . . . . . . . . . . .
88
11.6 Successors and Assigns; Participations;
Purchasing Banks . . . . . . . . . . . . . . . . . . . . . . .
90
11.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . .
93
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .
94
11.9 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . .
94
11.10 GOVERNING LAW; NO THIRD PARTY RIGHTS . . . . . . . . . . . . . .
95
11.11 SUBMISSION TO JURISDICTION; WAIVERS. . . . . . . . . . . . . . .
95
11.12 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . .
96
SCHEDULES:
Schedule I Lists of Addresses for Notices; Lending Offices;
Commitment Amounts
Schedule II Outstanding Letters of Credit
Schedule III Domestic Subsidiaries
Schedule IV Foreign Subsidiaries
Schedule V Consents
Schedule VI Contingent Obligations
Schedule VII Investments, Loans and
Advances
Schedule VIII Profit Centers
EXHIBITS:
Exhibit A Revolving Credit Note
Exhibit B Swing Line Note
Exhibit C Bid Loan Note
-
iii<PAGE>
Exhibit D Bid Loan Confirmation
Exhibit E Bid Loan Offer
Exhibit F Bid Loan Request
Exhibit G Holdings Guarantee
Exhibit H Subsidiary Guarantee
Exhibit I-1 Opinion of Fried, Frank, Harris, Shriver &
Jacobson
Exhibit I-2 Opinion of Thomas A. Dumit, Esq.
Exhibit J-1 Holdings Closing
Certificate
Exhibit J-2 Company Closing
Certificate
Exhibit J-3 Subsidiary Guarantor Closing Certificate
Exhibit K L/C Participation Certificate
Exhibit L Swing Line Loan Participation Certificate
Exhibit M Assignment and Acceptance
-iv-
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 30,
1994, among GENERAL INSTRUMENT CORPORATION OF DELAWARE (formerly named GI
Corporation), a Delaware corporation (the "COMPANY"), the several lenders from
time to time parties hereto (the "BANKS"), CHEMICAL BANK, a New York banking
corporation, as administrative agent for the Banks (in such capacity, the
"ADMINISTRATIVE AGENT"), and CHEMICAL BANK ("CHEMICAL"), CONTINENTAL BANK
N.A., THE BANK OF NOVA SCOTIA, DEUTSCHE BANK AG, THE NIPPON CREDIT BANK, LTD.,
THE TORONTO-DOMINION BANK, NATIONAL WESTMINSTER BANK PLC and THE BANK OF TOKYO
TRUST COMPANY, 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 :
WHEREAS, the Company, the banks and other financial institutions
parties thereto, the Administrative Agent and Chemical, Continental Bank N.A.,
The Bank of Nova Scotia, Deutsche Bank AG, The Nippon Credit Bank, Ltd., The
Toronto-Dominion Bank, National Westminster Bank PLC and The Bank of Tokyo
Trust Company, as co-agents, are parties to the Amended and Restated Credit
Agreement, dated as of June 30, 1993 (as amended, supplemented or otherwise
modified prior to the date hereof, the "EXISTING CREDIT AGREEMENT");
WHEREAS, the Company has requested that the Existing Credit
Agreement be further amended and restated upon the terms and subject to the
conditions herein contained; and
WHEREAS, the Banks, the Administrative Agent and the Co-Agents have
agreed to further amend and restate the Existing Credit Agreement, upon 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 CoAgents hereby agree that the Existing Credit Agreement shall be and
is amended and restated in its entirety 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
<PAGE>
2
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 Chemical 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 Chemical 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 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.
<PAGE>
3
"ABR LOANS": Loans whose interest rate is based on the ABR.
"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.
"ADJUSTED CONSOLIDATED NET WORTH": at any time, the sum of (a)
Consolidated Net Worth at such time PLUS (b) the 1994 Net Worth
Adjustment.
"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, 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.
"AGREEMENT": this Second Amended and Restated Credit Agreement, as
amended, supplemented or modified from time to time.
"AGGREGATE REVOLVING CREDIT 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 and (d) the
aggregate amount of Revolving L/C Obligations.
"APPLICABLE INDEX RATE": in respect of any Bid Loan requested
pursuant to an Index Rate Bid Loan Request, the Eurodollar Rate.
"APPLICABLE MARGIN": for each Type of Loan, the rate per annum set
forth under the relevant column heading below determined as follows:
(a) In the event that at any time (i) the Interest Coverage
Ratio of Holdings and its Subsidiaries, determined as of the last
day of the most recent fiscal quarter for which the Company has
delivered financial statements pursuant to subsections 7.1(a) and
(b) and the related certificate of the chief financial officer of
the Company referred to in subsection 7.2, is less than 2.50 to
1.00, or (ii) the
<PAGE>
4
ratio of Consolidated Total Indebtedness as of such day on a
consolidated basis for Holdings and its Subsidiaries to Consolidated
EBITDA for the period of four consecutive fiscal quarters of the
Company ending on such day is greater than 2.00 to 1.00, then the
Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
1/4% 1-1/4%
(b) In the event that at any time (i) the Interest Coverage
Ratio of Holdings and its Subsidiaries, determined as of the last
day of the most recent fiscal quarter for which the Company has
delivered financial statements pursuant to subsections 7.1(a) and
(b) and the related certificate of the chief financial officer of
the Company referred to in subsection 7.2, is greater than or equal
to 2.50 to 1.00 but less than 3.00 to 1:00, and (ii) the ratio of
Consolidated Total Indebtedness as of such day on a consolidated
basis for Holdings and its Subsidiaries to Consolidated EBITDA for
the period of four consecutive fiscal quarters of the Company ending
on such day is less than or equal to 2.00 to 1.00 but greater than
1.50 to 1.00, then the Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
0% 1%
(c) In the event that at any time (i) the Interest Coverage
Ratio of Holdings and its Subsidiaries, determined as of the last
day of the most recent fiscal quarter for which the Company has
delivered financial statements pursuant to subsections 7.1(a) and
(b) and the related certificate of the chief financial officer of
the Company referred to in subsection 7.2, is greater than or equal
to 3.00 to 1.00 but less than 4.00 to 1.00, and (ii) the ratio of
Consolidated Total Indebtedness as of such day on a consolidated
basis for Holdings and its Subsidiaries to Consolidated EBITDA for
the period of four consecutive fiscal quarters of the Company ending
on such day is less than or equal to 1.50 to 1.00 but greater than
1.10 to 1.00, then the Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
0% 7/8%
(d) In the event that at any time (i) the Interest Coverage
Ratio of Holdings and its Subsidiaries, determined as of the last
day of the most recent fiscal quarter for which the Company has
<PAGE>
5
delivered financial statements pursuant to subsections 7.1(a) and
(b) and the related certificate of the chief financial officer of
the Company referred to in subsection 7.2, is greater than or equal
to 4.00 to 1.00 but less than 5.00 to 1.00, and (ii) the ratio of
Consolidated Total Indebtedness for such day on a consolidated basis
for Holdings and its Subsidiaries to Consolidated EBITDA for the
period of four consecutive fiscal quarters of the Company ending on
such day is less than or equal to 1.10 to 1.00 but greater than
0.75 to 1.00, then the Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
0% 3/4%
(e) In the event that at any time:
(i)(A) the Interest Coverage Ratio of Holdings and its
Subsidiaries, determined as of the last day of the most recent
fiscal quarter for which the Company has delivered financial
statements pursuant to subsection 7.1(a) and (b) and the
related certificate of the chief financial officer of the
Company referred to in subsection 7.2, is greater than or equal
to 5.00 to 1.00, and (B) the ratio of Consolidated Total
Indebtedness for such day on a consolidated basis for Holdings
and its Subsidiaries to Consolidated EBITDA for the period of
four consecutive fiscal quarters of the Company ending on such
day is less than or equal to 0.75 to 1.00 but greater than 0.50
to 1.00, or
(ii) S&P and Moody's shall have rated the long-term senior
unsecured indebtedness of Holdings BB+ and Ba1, respectively,
or issued an implied rating of BB+ and Ba1, respectively, on
the long-term senior unsecured indebtedness of Holdings, and
such rating or implied rating remains in effect at such time
then the Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
0% 5/8%
(f) In the event that at any time:
(i)(A) the Interest Coverage Ratio of Holdings and its
Subsidiaries, determined as of the last day of the most recent
fiscal quarter for which the Company has delivered financial
statements pursuant to subsection 7.1(a) and (b)
<PAGE>
6
and the related certificate of the chief financial officer of
the Company referred to in subsection 7.2, is greater than or
equal to 5.00 to 1.00, and (B) the ratio of Consolidated Total
Indebtedness for such day on a consolidated basis for Holdings
and its Subsidiaries to Consolidated EBITDA for the period of
four consecutive fiscal quarters of the Company ending on such
day is less than or equal to 0.50 to 1.00, or
(ii) S&P and Moody's shall have rated the long-term senior
unsecured indebtedness of Holdings BBB- or higher and Baa3 or
higher, respectively, or issued an implied rating of BBB- or
higher and Baa3 or higher, respectively, on the long-term
senior unsecured indebtedness of Holdings, and such rating or
implied rating remains in effect at such time
then the Applicable Margin shall be:
ABR Loans Eurodollar Loans
--------- ----------------
0% 1/2%
For the purpose of this Agreement, any change in the Applicable Margin
shall become effective (i) on the day following the delivery to the
Administrative Agent by the Company of the financial statements referred
to in subsections 7.1(a) and (b) and the related certificate of the chief
financial officer of the Company referred to in subsection 7.2 indicating
the Interest Coverage Ratio for the period of four fiscal quarters ending
on the last day of the fiscal quarter preceding such day and the ratio of
Consolidated Total Indebtedness to Consolidated EBITDA for such period,
and (ii) with respect to the events referred to in paragraphs (e)(ii) and
(f)(ii) above, the day following the day that the Administrative Agent
shall have received a written notice from the Company that the long-term
senior indebtedness of Holdings shall have received or lost such ratings
or implied ratings, as the case may be (and which notice shall indicate
that the same requires a change in the Applicable Margin). If and for so
long as (A) the Company shall fail to deliver the financial statements
referred to in subsections 7.1(a) and (b) and the related certificate of
the chief financial officer of the Company referred to in subsection 7.2
indicating the Interest Coverage Ratio for such period of four fiscal
quarters and the ratio of Consolidated Total Indebtedness to Consolidated
EBITDA as of such last day and (B) the events referred to in paragraphs
(e)(ii) or (f)(ii) shall not have occurred and be continuing, then the
Applicable Margin shall automatically, and without further act of the
Administrative Agent, the CoAgents or any Bank, equal the highest
Applicable Margin set forth above. From the Closing Date to and including
the
<PAGE>
7
first date on which the Company is required to deliver the financial
statements referred to in subsections 7.1(a) and (b) and the related
certificate of the chief financial officer of the Company referred to in
subsection 7.2 indicating the Interest Coverage Ratio for the period of
four fiscal quarters ending on the last day of the fiscal quarter
preceding such day and the ratio of Consolidated Total Indebtedness to
Consolidated EBITDA for such period, the Applicable Margin shall be that
described in clause (d) of this definition.
"ASSET SALE": any sale, sale-leaseback, assignment, conveyance,
transfer or other disposition by the Company or any Subsidiary thereof of
any of its property or assets, including the stock of any Subsidiary of
the Company (except sales, sale-leasebacks, assignments, conveyances,
transfers and other dispositions permitted by clauses (a), (b), and (c)
of subsection 8.5).
"ASSIGNEE": as defined in subsection 11.6(c).
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance
substantially in the form of Exhibit M hereto.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Bank, at a
particular time, an amount equal to the excess, if any, of (a) the amount
of such Bank's Revolving Credit Commitment at such time less (b) the sum
of (i) the aggregate unpaid principal amount at such time of all
Revolving Credit Loans made by such Bank pursuant to subsection 3.1, (ii)
such Bank's L/C Participating Interest in the aggregate amount available
to be drawn at such time under all outstanding Letters of Credit, (iii)
such Bank's Revolving Credit Commitment Percentage of the aggregate
outstanding amount of Revolving L/C Obligations and (iv) such Bank's
Revolving Credit Commitment Percentage of the aggregate unpaid principal
amount at such time of all Swing Line Loans, PROVIDED that for purposes
of calculating Revolving Credit Commitments pursuant to subsection 4.8
the amount referred to in this clause (iv) shall be zero; collectively,
as to all the Banks,
the "AVAILABLE REVOLVING CREDIT COMMITMENTS".
"BANKS": as defined in the preamble hereto.
"BENEFITTED BANK": as defined in subsection 11.7 hereof. "BID
LOAN": each Bid Loan made pursuant to subsection 3.8.
"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.
<PAGE>
8
"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 D and shall be delivered to the
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 3.8.
"BID LOAN MATURITY DATE": as to any Bid Loan, the date specified by
the Company pursuant to subsection 3.9(d)(2) in its acceptance of the
related Bid Loan Offer.
"BID LOAN NOTES": as defined in subsection 3.11; each,
individually, a "BID LOAN NOTE."
"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 E and shall be delivered to the 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 F
and shall be delivered to the 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, or, in the case of Eurodollar
Loans, any Working Day, specified in a notice pursuant to (a) subsection
3.9, 3.12 or 4.1 as a date on which the Company requests Bid Loan Lenders
to make Bid Loans, Chemical to make Swing Line Loans or the Banks to make
Revolving Credit Loans, respectively, hereunder or (b) subsection 3.6 as
a date on which the Company requests an Issuing Bank to issue a Letter of
Credit hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Chicago, Illinois are
authorized or required by law to close.
"CAPITAL EXPENDITURES": for any period, all amounts (other than
those arising from the acquisition of businesses and assets which are
permitted by subsection 8.6) which
<PAGE>
9
would, in accordance with GAAP, be set forth as capital expenditures on
the consolidated statement of cash flows of Holdings and its Subsidiaries
for such period.
"CASH EQUIVALENTS": (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months
from the date of acquisition, (ii) certificates of deposit and eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case, with any Bank or with
any domestic commercial bank having capital and surplus in excess of
$300,000,000, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses
(i) and (ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper
issued by any Bank, the parent corporation of any Bank or any Subsidiary
of such Bank's parent corporation, and commercial paper rated A-1 or the
equivalent thereof by Standard & Poor's Corporation or P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within six months after the date of acquisition thereof.
"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 Chemical
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.
"CHEMICAL": as defined in the preamble hereto.
"CLOSING DATE": the date on which each of the conditions precedent
to the effectiveness of this Agreement
<PAGE>
10
contained in Section 6 has been either satisfied or waived in accordance
with the terms and provisions of Section 6.
"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.
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments 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": CommScope, Inc., a North Carolina corporation.
"COMPANY": as defined in the preamble hereto.
"COMPANY PLEDGE AGREEMENT": the Pledge Agreement dated as of June
30, 1993 made by the Company in favor of the Administrative Agent, for
the ratable benefit of the Banks, substantively in the form of Exhibit D
to the Existing Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"CONSOLIDATED CURRENT ASSETS": at a particular date, all amounts
which would, in conformity with GAAP, be included under current assets on
a consolidated balance sheet of Holdings and its Subsidiaries as at such
date and including the Available Revolving Credit Commitment on such
date.
"CONSOLIDATED CURRENT LIABILITIES": at a particular date, all
amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of Holdings and its
Subsidiaries as at such date.
"CONSOLIDATED EBITDA": for any period, the consolidated net income
((i) including earnings and losses from discontinued operations, (ii)
excluding extraordinary gains, and gains and losses arising from the
proposed or actual disposition of material assets, and (iii) including
<PAGE>
11
other non-recurring 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, determined in
accordance with GAAP on a consolidated basis, as reflected in the
financial statements furnished to the Administrative Agent in accordance
with subsections 7.1(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 December 31, 1992, for (i) amortization and write offs of debt
discount and debt issuance costs and (ii) any amount reflected as a
charge in Holdings's consolidated income statements for non-cash
compensation expenses arising from the sale of stock, granting of stock
options, the granting of stock appreciation rights and similar
arrangements.
"CONSOLIDATED SENIOR INDEBTEDNESS": as of any date of
determination, all Indebtedness of Holdings and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, EXCEPT the
Indebtedness evidenced by the Convertible Junior Notes.
"CONSOLIDATED TOTAL CAPITAL": as of any date of determination, the
sum of (a) all Indebtedness of Holdings and its Subsidiaries and (b) the
Consolidated Net Worth of Holdings and its Subsidiaries.
"CONSOLIDATED TOTAL INDEBTEDNESS": as of any date of determination,
all Indebtedness of Holdings and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, EXCEPT the Indebtedness
evidenced by
<PAGE>
12
the Convertible Junior Notes and the Taiwan Mortgage Indebtedness.
"CONTINGENT 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 Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent 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 Contingent 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.
"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.
"CONVERTIBLE JUNIOR INDENTURE": the Indenture, dated as of June 15,
1993, between Holdings and Continental Bank National Association, as
trustee, relating to the Convertible Junior Notes.
"CONVERTIBLE JUNIOR NOTES": the $500,000,000 in aggregate principal
amount of 5% Convertible Junior Subordinated Notes due June 15, 2000 of
Holdings, as the same may be amended, endorsed, substituted, replaced,
refinanced, supplemented or otherwise modified from time to time in
accordance with the terms and provisions of the Holdings Guarantee.
<PAGE>
13
"CREDIT DOCUMENTS": the collective reference to this Agreement, the
Notes, the Guarantees and any guarantee executed and delivered pursuant
to the terms of subsection 7.8.
"CREDIT PARTIES": the collective reference to Holdings, the Company
and each Subsidiary which is a party, or which at any time becomes a
party, to a Credit Document.
"DEFAULT": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United States
of America.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Company other than a
Foreign Subsidiary.
"ENVIRONMENTAL LAWS": any and all Federal, state, local or
municipal laws, rules, 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.
"EUROCURRENCY 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 current 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 to time hereafter in effect, dealing with reserve
requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency liabilities" in Regulation D of such Board) maintained
by a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during any
Interest Period for any Eurodollar Loan, the rate per annum equal to the
rate at which Chemical is offered Dollar deposits at or about 10:00 a.m.,
New York City time, two Working Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the foreign
currency and exchange operations in respect of its Eurodollar Loans then
are 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.
<PAGE>
14
"EURODOLLAR LENDING OFFICE": initially, the office of each Bank
designated as such in Schedule I; thereafter, such other office 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 at such time as they are made and/or
being maintained at a rate of interest based upon a 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 - Eurocurrency Reserve Requirement
"EVENT OF DEFAULT": any of the events specified in Section 9,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"EXISTING CREDIT AGREEMENT": as defined in the recitals hereto.
"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.
"FOREIGN SUBSIDIARY": any Subsidiary of the Company which is
organized under the laws of any jurisdiction outside the United States of
America or under the laws of the U.S. Virgin Islands.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"GITL": General Instrument of Taiwan, Ltd.
"GUARANTEES": the collective reference to the Holdings Guarantee
and the Subsidiary Guarantee.
<PAGE>
15
"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.
"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": General Instrument Corporation, a Delaware corporation.
"HOLDINGS GUARANTEE": the Amended and Restated Guarantee,
substantially in the form of Exhibit G hereto, made by Holdings in favor
of the Administrative Agent, for the ratable benefit of the Banks, as the
same may be amended, supplemented or otherwise modified from time to
time.
"HOLDINGS PLEDGE AGREEMENT": as defined in the Existing Credit
Agreement.
"INDEBTEDNESS": of any Person, at any particular date, (a) all
indebtedness of such 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
<PAGE>
16
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.
"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 less Capital
Expenditures, in each case for the period of four fiscal quarters ending
on such day on a consolidated basis for Holdings and its Subsidiaries, to
(b) Consolidated Interest Expense for the period of four fiscal quarters
ending on such day on a consolidated basis for 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 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.
"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 4.1 or its notice of conversion as provided in subsection
4.2; 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 Working Days prior to the
<PAGE>
17
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 Working Day, that Interest Period shall be extended to the
next succeeding Working 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 Working 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 Working Day, on the next preceding Working 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 4.2);
(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 Working 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": any financial institution which is a Co-Agent, as
selected by the Company, with the approval of the Administrative Agent,
in accordance with subsection 3.6.
"L/C APPLICATION": a letter of credit application in the relevant
Issuing Bank's 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 K hereto.
<PAGE>
18
"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 3.4.
"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 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).
"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 value (including the total asset
values of any Subsidiaries), or for which Holdings, the Company or any of
their respective 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
than (a) GITL, General Instrument (Puerto Rico), Inc., GSI-General
Instrument Semiconductor Industries, Inc. and General Semiconductor
Ireland and (b) 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).
"MBO-IV": Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership-IV, a New York limited partnership.
"MONEY MARKET RATE": for any day, with respect to any Money Market
Rate Loan, the rate per annum quoted by Chemical to the Company in
accordance with subsection
<PAGE>
19
3.12(a) as the rate at which Chemical 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.
"MOODY'S": Moody's Investors Service, Inc. or if such company shall
cease to issue ratings, another nationally recognized statistical rating
company selected in good faith by mutual agreement of the Administrative
Agent and the Company.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NET PROCEEDS": the aggregate cash proceeds received by the Company
or any Subsidiary of the Company in respect of any Asset Sale, and any
cash payments received in respect of promissory notes or other non-cash
consideration delivered to the Company or such Subsidiary in respect of
an Asset Sale (subject to the limitations set forth in subsection
8.6(g)), net
of (without duplication) (i) the reasonable expenses (including legal
fees and brokers' and underwriters' commissions paid to third parties
which are not Affiliates or Subsidiaries of the Company) incurred in
effecting such Asset Sale, (ii) any taxes reasonably attributable to such
Asset Sale and, in case of an Asset Sale in a foreign jurisdiction, the
repatriation of the proceeds of such Asset Sale reasonably estimated by
the Company or such Subsidiary to be actually payable, (iii) any
Indebtedness or Contractual Obligation of the Company and its
Subsidiaries (other than the Loans and other Obligations) required to be
paid or retained in connection with such Asset Sale and (iv) the
aggregate amount of reserves required in the Company's reasonable
judgment to be maintained on the books of the Company in order to pay
contingent liabilities with respect to such Asset Sale; PROVIDED that
amounts deducted from aggregate proceeds pursuant to clause (iv) and not
actually paid by the Company or any of its Subsidiaries in liquidation of
such contingent liabilities shall be deemed to be Net Proceeds and shall
be applied in accordance with subsection 4.5 at such time as such
contingent liabilities shall cease to be obligations of the Company or
any of its Subsidiaries.
"1994 NET WORTH ADJUSTMENT": at any date of determination, an
amount equal to $150,000,000 MINUS the sum of (a) the 6/30/94 Net Worth
Availability and (b) 50% of the cumulative Consolidated Net Income of
Holdings, if positive, from July 1, 1994 through the fiscal quarter most
recently ended, PROVIDED, however, that in the event such difference is
less than zero, the 1994 Net Worth Adjustment shall be zero.
<PAGE>
20
"NOTES": the collective reference to the Revolving Credit Notes,
the Swing Line Note and the Bid Loan Notes; one of the Notes, a "NOTE".
"OBLIGATIONS": the unpaid principal of and interest on the Notes
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 Notes, the other Credit Documents, any Letter of
Credit or L/C Application, any agreements between the Company and any
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.
"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, 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 Section 3(5) of ERISA.
"POWER SEMICONDUCTOR DIVISION": the Power Semiconductor division of
the Company.
"PROFIT CENTERS": the collective reference to the profit centers of
the Company and its Subsidiaries set forth on Schedule VIII, or such
other profit centers as the Company may specify by written notice to the
Administrative Agent and the Banks.
"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 3.12(c).
<PAGE>
21
"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 90%
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(b)
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 Section 9, 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 then outstanding principal
amount of the Bid Loans, (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.
"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.
"REVOLVING CREDIT COMMITMENT": as to any Bank, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 3.1,
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
<PAGE>
22
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 PERCENTAGE" or "COMMITMENT PERCENTAGE":
as to any Bank, the percentage set forth opposite such Bank's name under
such heading on Schedule I.
"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 3.1(a).
"REVOLVING CREDIT NOTE": as defined in subsection 3.2.
"REVOLVING CREDIT TERMINATION DATE": the earlier of (i) December
31, 1999 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 3.7.
"S&P": Standard & Poor's Corporation, or if such Company shall
cease to issue ratings, another nationally recognized statistical rating
company selected in good faith by mutual agreement of the Administrative
Agent and the Company.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"6/30/94 NET WORTH AVAILABILITY": the excess of Consolidated Net
Worth at June 30, 1994 over the minimum Consolidated Net Worth which
would be required to be maintained at such time pursuant to subsection
8.7(a).
"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 the Company or any Subsidiary thereof, in
respect of obligations of the Company or a Subsidiary thereof 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
<PAGE>
23
insurance purposes or in respect of advance payments or as bid or
performance bonds.
"SUBORDINATED LOAN": the subordinated loan made by Holdings to the
Company and evidenced by the Subordinated Note in the principal amount of
$500,000,000.
"SUBORDINATED NOTE": the 9-1/2% Note due August 1, 2003 and dated
August 15, 1990, as amended and restated pursuant to the Amended and
Restated 9-1/2% Note due June 15, 2000 and dated June 30, 1993, and as
further amended and restated pursuant to subsection 6.1(e), in the
principal amount of $500,000,000 made by the Company in favor of
Holdings,
to evidence the Subordinated Loan, as the same may be amended, endorsed,
substituted, replaced, refinanced, supplemented or otherwise modified
from time to time in accordance with subsection 8.14.
"SUBSIDIARY": as to any Person, any corporation of which shares of
stock of each class 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
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 Amended and Restated 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 H hereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"SUBSIDIARY GUARANTOR": CommScope, Inc. and Cable/Home
Communication, Corp., and any other Subsidiary which enters into a
Subsidiary Guarantee pursuant to subsection 7.8(b).
"SUBSIDIARY PLEDGE AGREEMENTS": as defined in the Existing Credit
Agreement.
"SWING LINE COMMITMENT": Chemical's obligation to make Swing Line
Loans pursuant to subsection 3.12.
"SWING LINE LOAN" and "SWING LINE LOANS": as defined in subsection
3.12(a).
"SWING LINE LOAN PARTICIPATION CERTIFICATE": a certificate in
substantially the form of Exhibit L hereto.
"SWING LINE NOTE": as defined in subsection 3.12(b).
<PAGE>
24
"TAIWAN MORTGAGE INDEBTEDNESS": the Indebtedness of the Company
and/or GITL in an aggregate principal amount not to exceed $60,000,000
(without duplication) at any time secured solely, directly or indirectly,
by a mortgage on the Taiwan Mortgaged Real Property, and any refinancing
thereof.
"TAIWAN MORTGAGED REAL PROPERTY": the real estate owned by GITL,
including the 10.2 acres of land and buildings thereon located at 233 Pao
Chiao Road, Hsintien, Taipei, Taiwan.
"TERM LOAN" and "TERM LOANS": as defined in the Existing Credit
Agreement.
"TERM LOAN NOTE" and "TERM LOAN NOTES": as defined in the Existing
Credit Agreement.
"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 (1983 Revision), International Chamber of Commerce Publication
No. 400 (or any successor publication), as the same may be amended from
time to time.
"WORKING DAY": any day on which dealings in foreign currencies and
exchange between banks may be carried on in London, England and in New
York, New York.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, any other Credit Document or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes, 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.
<PAGE>
25
SECTION 2. CONVERSION OF TERM LOANS
2.1 CONVERSION OF TERM LOANS. Subject to the terms and conditions
hereof, each Bank severally agrees that, on the Closing Date, the Term Loans
outstanding from such Bank to the Company under the Existing Credit Agreement
(individually, a "TERM LOAN"; and collectively, the "TERM LOANS") shall be
converted into Revolving Credit Loans of the same Type (and, with respect to
any Eurodollar Loans, having the same Interest Periods) and, together with any
revolving credit loans outstanding under the Existing Credit Agreement, shall
be deemed to be outstanding under each Bank's Revolving Credit Note, and the
Term Note of such Bank shall be deemed to be cancelled.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS
3.1 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
(i) 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 sum of the
Aggregate Revolving Credit Extensions of Credit (including Bid Loans) and the
aggregate outstanding principal amount of the Swing Line Loans would exceed
the aggregate Revolving Credit Commitments or if subsection 3.6 would be
violated thereby or (ii) any Revolving Credit Loan or Swing Line Loan be made,
or any Letter of Credit be issued, if the amount of such Loan to be made or
any Letter of Credit to be issued would, after giving effect to the use of
proceeds, if any, thereof, exceed the Available Revolving Credit Commitment.
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. All revolving credit loans outstanding on the Closing
Date under the Existing Credit Agreement shall remain outstanding and,
together with all Term Loans outstanding under the Existing Credit Agreement,
shall be deemed to be outstanding under each Bank's Revolving Credit Note
under the terms of this Agreement.
(b) Each borrowing of Revolving Credit Loans pursuant to the
Revolving Credit Commitments shall be in an aggregate
<PAGE>
26
principal amount of the lesser of (i) $5,000,000, 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) On each December 31, commencing on December 31, 1995 and ending
with December 31, 1998, the Revolving Credit Commitments then in effect shall
automatically be reduced by $50,000,000.
3.2 REVOLVING CREDIT NOTES. The Revolving Credit Loans made by
each Bank shall be evidenced by a promissory note of the Company,
substantially in the form of Exhibit A (a "REVOLVING CREDIT NOTE") with
appropriate insertions, payable to the order of such Bank and representing the
obligation of the Company to pay the lesser of (a) the amount of the initial
Revolving Credit Commitment of such Bank and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Bank, with
interest thereon as prescribed in subsection 4.6. Each Bank is hereby
authorized to record the Borrowing Date, Type and amount of each Revolving
Credit Loan made by such Bank, the date and amount of each payment or
prepayment of principal thereof, the date of each interest rate conversion
pursuant to subsection 4.2 and the principal amount subject thereto on the
schedules annexed to and constituting a part of its Revolving Credit Note and,
in the absence of manifest error, any such recordation shall constitute PRIMA
FACIE evidence of the accuracy of the information so recorded, PROVIDED that
the failure of any Bank to make such recordation (or any error in such
recordation) shall not affect the obligations of the Company hereunder or
under such Note. Each Revolving Credit Note shall (i) be dated the Closing
Date, (ii) be stated to mature on the Revolving Credit Termination Date and
(iii) bear interest for the period from the date thereof on the unpaid
principal amount thereof from time to time outstanding at the applicable
interest rate per annum determined as provided in subsections 4.6(a), (b) and
(c). Interest on each Revolving Credit Note shall be payable on the dates
specified in subsection 4.6(d).
3.3 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 the amendment and
restatement of the Existing Credit Agreement hereby, (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 and Revolving Credit Loans
after the Closing Date, (d) financing general working capital needs of the
Company or any of its Subsidiaries, and (e) other general corporate purposes
of the Company or any of its Subsidiaries, including, without limitation, to
support commercial paper issued by the Company or Holdings in the United
States commercial paper market, all in accordance with the terms and
conditions hereof.
<PAGE>
27
3.4 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 11.2 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. All of the letters
of credit issued and outstanding on the Closing Date under the Existing Credit
Agreement and set forth on Schedule II hereto shall on the Closing Date remain
outstanding and shall in each case be a Letter of Credit issued and
outstanding under the terms of this Agreement.
(b) Each Letter of Credit issued hereunder shall, among other
things, (i) be in such form requested by the Company as shall be acceptable to
the relevant Issuing Bank in its sole discretion and (ii) have an expiry date,
in the case of each Standby L/C, occurring not later than the Revolving Credit
Termination Date, and in the case of each Commercial L/C, occurring not later
than the earlier of (x) 180 days after the date of issuance of such Commercial
L/C, PROVIDED, however, that at the request of the Company and upon the
consent, in its sole and absolute discretion, of the Issuing Bank issuing such
Commercial Letter of Credit, such date may be up to 360 days after the date of
issuance of such Commercial L/C and (y) 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 not inconsistent therewith, the laws of the State
of New York.
3.5 PARTICIPATING INTERESTS. Effective in the case of each Letter
of Credit opened by an Issuing Bank as of the date of the opening thereof
(including each Letter of Credit set forth on Schedule II hereto and deemed
opened and outstanding as of the Closing Date), 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.
3.6 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
<PAGE>
28
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 (a) if the amount of such requested
Letter of Credit, together with the sum of (i) the aggregate unpaid amount of
Revolving L/C Obligations outstanding at the time of such request and (ii) the
maximum aggregate amount available to be drawn under all Letters of Credit
outstanding at such time, would exceed $100,000,000 or (b) if subsection 3.1
would be violated thereby.
3.7 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 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 plus the
Applicable Margin for ABR Loans and (B) on such date and thereafter, the ABR
plus the Applicable Margin for ABR Loans 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 distribute to such other Bank, through the
Administrative Agent, its PRO RATA share thereof in like funds as received;
PROVIDED, that in the event
<PAGE>
29
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 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.
3.8 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 (in the case of Bid Loans made
pursuant to an Absolute Rate Bid Loan Request) or any Working Day (in the case
of Bid Loans made pursuant to an Index Rate Bid Loan Request). The Company
shall designate Banks from time to time as Bid Loan Lenders by written notice
to the Agent. The Agent shall transmit each such notice of designation
promptly to each designated Bid Loan Lender. Bid Loans shall be borrowed in
amounts such that the aggregate amount of Loans outstanding at any time shall
not exceed the aggregate amount of the Revolving Credit Commitments at such
time. 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.
3.9 PROCEDURE FOR BID LOAN BORROWING. (a) The Company shall
request Bid Loans by delivering a Bid Loan Request to the Agent, not later
than 12:00 Noon (New York City time) four Working 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 amount
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 maturity date for
each Bid Loan shall be not less than 15 days nor more than 180 days after the
Borrowing Date therefor (and
in any event shall be not later than the Revolving Credit Termination
Date). The Agent shall notify each Bid Loan Lender promptly by telex or
facsimile transmission of the contents of each Bid Loan Request received by
the Agent.
(b) In the case of an Index Rate Bid Loan Request, upon receipt
of notice from the 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
Agent, before 10:00 A.M. (New York City time) on the day that is three Working
Days before the proposed Borrowing Date, setting forth:
(1) the maximum amount of Bid Loans for each maturity date and the
aggregate maximum amount of Bid Loans for all
<PAGE>
30
maturity dates which such Lender would be willing to make (which amounts
may, subject to subsection 3.8, 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 Agent shall advise the Company promptly but no later than 10:30 A.M. (New
York City time) on the date which is three Working Days before the proposed
Borrowing Date of the contents of each such Bid Loan Offer received by it. If
the 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 Working Days before the proposed Borrowing Date.
(c) In the case of an Absolute Rate Bid Loan Request, upon receipt
of notice from the 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 Agent before 10:00 A.M.
(New York City time) on the proposed Borrowing Date, setting forth:
(1) the maximum amount of Bid Loans for each maturity date, and the
aggregate maximum amount for all maturity dates, which such Bid Loan
Lender would be willing to make (which amounts may, subject to subsection
3.8, 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 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 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 Working 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 Agent telephone
notice to that effect, or
<PAGE>
31
(2) by giving telephone notice to the Agent (immediately
confirmed by delivery to the Agent of a Bid Loan Confirmation in
writing or by telex or fax transmission) (1) subject to the
provisions of subsection 3.9(e), accept one or more of the offers
made by any Bid Loan Lender or Bid Loan Lenders pursuant to
subsection 3.9(b) or subsection 3.9(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
3.9(b) or subsection 3.9(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 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 requested in the related Bid Loan Request; 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 (1) 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 3.8 or in clause 3.9(e)(3) of this
proviso, 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 Agent that a Bid Loan Request is
cancelled pursuant to subsection 3.9(d)(1), the Agent
<PAGE>
32
shall give prompt telephone notice thereof to the Bid Loan Lenders.
(g) If the Company accepts pursuant to subsection 3.9(d)(2) one or
more of the offers made by any Bid Loan Lender or Bid Loan Lenders, the 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 Agent at its office set forth in subsection 11.2 the amount of Bid
Loans to be made by such Bid Loan Lender, in immediately available funds. The
Agent will make such funds available to the Company as soon as practicable on
such date at the Agent's aforesaid address. As soon as practicable after each
Borrowing Date, the Agent shall notify each Lender of the aggregate amount of
Bid Loans advanced on such Borrowing Date and the respective maturity dates
thereof.
3.10 BID LOAN PAYMENTS. (a) The Company shall repay to the 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.
(b) The Company shall pay interest on the unpaid principal amount
of each Bid Loan from the Borrowing Date to 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 pursuant to the Bid Loan Note evidencing 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).
3.11 BID LOAN NOTES. The Bid Loans made by each Bid Loan Lender
shall be evidenced initially by a promissory note of the Company,
substantially in the form of Exhibit C with appropriate insertions (a "BID
LOAN NOTE"), payable to the order of such Bid Loan Lender and representing the
obligation of the
<PAGE>
33
Company to pay the unpaid principal amount of all Bid Loans made by such Bid
Loan Lender, with interest on the unpaid principal amount from time to time
outstanding of each Bid Loan evidenced thereby as prescribed in subsection
3.10(b). Each Bid Loan Lender is hereby authorized to record the date and
amount of each Bid Loan made by such Bid Loan Lender, the maturity date
thereof, the date and amount of each payment of principal thereof and the
interest rate with respect thereto on the schedule annexed to and constituting
part of its Bid Loan Note, and any such recordation shall constitute PRIMA
FACIE evidence of the accuracy of the information so recorded; PROVIDED,
HOWEVER, that the failure to make any such recordation shall not affect the
obligations of the Company hereunder or under any Bid Loan Note. Each Bid
Loan Note shall be dated the Closing Date and each Bid Loan evidenced thereby
shall bear interest for the period from and including the Borrowing Date of
such Bid Loan on the unpaid principal amount thereof from time to time
outstanding at the applicable rate per annum determined as provided in, and
such interest shall be payable as specified in, subsection 3.10(b).
3.12 SWING LINE COMMITMENT. (a) Subject to the terms and
conditions hereof, Chemical 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 an aggregate
principal amount at any one time outstanding not to exceed $20,000,000,
PROVIDED that at no time may the sum of the aggregate outstanding principal
amount of the Swing Line Loans and the Aggregate Revolving Credit 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 Chemical 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 3.12(a), request a quote of the Money Market Rate which would
be applicable for such Swing Line Loans from Chemical, 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 3.12(a)) notify Chemical whether it
requests Chemical to make Money Market Rate Loans at such Money Market Rate.
The Company shall give Chemical irrevocable notice (which notice must be
received by Chemical 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, $2,000,000 or a whole
<PAGE>
34
multiple of $1,000,000 in excess thereof. The proceeds of each Swing Line
Loan will be made available by Chemical to the Company by crediting the
account of the Company at Chemical with such proceeds. The proceeds of Swing
Line Loans may be used solely for the purposes referred to in subsection 3.3.
(b) The Swing Line Loans shall be evidenced by a promissory note of
the Company substantially in the form of Exhibit B, with appropriate
insertions (the "SWING LINE NOTE"), payable to the order of Chemical and
representing the obligation of the Company to pay the aggregate unpaid
principal amount of the Swing Line Loans, with interest thereon as prescribed
in subsection 4.6. Chemical is hereby authorized to record the Borrowing Date,
Type, the amount of each Swing Line Loan and the date and amount of each
payment or prepayment of principal thereof, on the schedule annexed to and
constituting a part of the Swing Line Note and, in the absence of manifest
error, any such recordation shall constitute PRIMA FACIE evidence of the
accuracy of the information so recorded, PROVIDED that the failure of Chemical
to make such recordation (or any error in such recordation) shall not affect
the obligations of the Company hereunder or under the Swing Line Note. The
Swing Line Note shall (a) be dated the Closing Date, (b) be stated to mature
on the Revolving Credit Termination Date and (c) bear interest for the period
from the date thereof on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rate per annum determined as provided
in, and payable as specified in, subsection 4.6.
(c) Chemical at any time in its sole and absolute discretion may,
and 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 Chemical to
act on its behalf), request each Bank, including Chemical, to make a Revolving
Credit Loan (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 9 shall
have occurred (in which event the procedures of paragraph (d) of this
subsection shall apply) each Bank shall make the proceeds of its Revolving
Credit Loan available to Chemical for the account of Chemical at the office of
Chemical 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.
(d) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (c) of this subsection one of the events described in paragraph (f)
of Section 9 shall have occurred, each Bank will, on the date such Loan would
otherwise have been made, purchase an undivided participating interest in the
Refunded
<PAGE>
35
Swing Line Loans in an amount equal to its Revolving Credit Commitment
Percentage of such Refunded Swing Line Loans. Each Bank will immediately
transfer to Chemical, in immediately available funds, the amount of its
participation and upon receipt thereof Chemical will deliver to such Bank a
Swing Line Loan Participation Certificate dated the date of receipt of such
funds and in such amount.
(e) Whenever, at any time after Chemical has received from any Bank
such Bank's participating interest in a Swing Line Loan, Chemical receives any
payment on account thereof, Chemical will 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 Chemical is
required to be returned, such Bank will return to Chemical any portion thereof
previously distributed by Chemical to it in like funds as such payment is
required to be returned by Chemical.
3.13 PARTICIPATIONS. Each Bank's obligation to purchase
participating interests pursuant to subsections 3.5 and 3.12(d) is absolute
and unconditional as set forth in subsection 4.15.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
4.1 PROCEDURE FOR BORROWING. (a) The Company may borrow under the
Commitments on any Working Day, if the borrowing is of Eurodollar Loans, or on
any Business Day, if the borrowing is of ABR Loans, 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 Working 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
<PAGE>
36
Administrative Agent specified in subsection 11.2 (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 11.2, with the aggregate amount actually received by the
Administrative Agent from the Banks and in like funds as received by the
Administrative Agent.
(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 ABR Lending
Office.
4.2 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 three Working Days
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 Working Days prior to the proposed conversion
date, specifying the Interest Period 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 Working Day, on the next succeeding Working Day. Upon receipt of any notice
pursuant to this subsection 4.2, 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) 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.
4.3 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
<PAGE>
37
time, reduce the Revolving Credit Commitments subject to the provisions of
this subsection 4.3. To the extent, if any, that the sum of the amount of the
Revolving Credit Loans, Swing Line Loans, Bid Loans and Revolving L/C
Obligations then outstanding and the amounts available to be drawn under
outstanding Letters 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 then outstanding, THIRD, to payment of any
Revolving L/C Obligations then outstanding, and LAST, to cash collateralize
any outstanding Letters of Credit and Bid-Loans on terms reasonably
satisfactory to the Administrative Agent. Any such termination of the
Revolving Credit Commitments shall be accompanied by prepayment in full of the
Revolving Credit Loans, Swing Line Loans and Revolving L/C Obligations then
outstanding and by cash collateralization of any outstanding Letter of Credit
and Bid Loans on terms reasonably satisfactory to the Administrative Agent.
Upon termination of the
Revolving Credit Commitments any Letter of Credit or Bid Loan then outstanding
which has been so cash collateralized shall no longer be considered a "Letter
of Credit" or Bid Loan, 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 4.10 shall continue to accrue to such Issuing Bank (or, in
the event of any such automatic reinstatement, as provided in subsection 4.10)
with respect to such Letter of Credit until the expiry thereof. Any reduction
of the Revolving Credit Commitments pursuant to this paragraph (b) shall be
applied, FIRST, to the next scheduled reduction of the Revolving Credit
Commitments and SECOND, the balance, if any, to the remaining scheduled
reductions of the Revolving Credit Commitments on a PRO RATA basis.
(b) Interest accrued on the amount of any partial prepayment
pursuant to this subsection 4.3 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.
4.4 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 Working Days'
irrevocable notice to
<PAGE>
38
the Administrative Agent in the case of Eurodollar Loans and specifying the
date and amount of prepayment, PROVIDED that Eurodollar Loans may not be
optionally prepaid on other than the last day of any Interest Period with
respect thereto. 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 any Notes
or on the amount of any Loans paid in full pursuant to this subsection 4.4
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.
4.5 MANDATORY PREPAYMENTS. (a) Subject to the provisions of
clauses (a), (b) and (c) of subsection 8.5, promptly following the
consummation of any Asset Sale by the Company or any of its Subsidiaries, in
the case of cash proceeds, and promptly following receipt of cash proceeds
representing payments under notes or other securities received in connection
with any non-cash consideration obtained in connection with such Asset Sale,
the Revolving Credit Commitments shall, except as otherwise may be agreed by
the Company and the Required Banks, be permanently reduced in an amount equal
to 50% of the Net Proceeds of such Asset Sale (and, to the extent that the
Aggregate Revolving Credit Extensions of Credit exceed the Revolving Credit
Commitments as so reduced, such cash proceeds shall be applied to the
prepayment of the Loans (other than Bid Loans) and the cash collateralization
of the Letters of Credit and Bid Loans in an amount equal to such excess)
until the aggregate Revolving Credit Commitments equal $225,000,000. Subject
to the provisions of subsection 8.5 and notwithstanding anything to the
contrary contained in this subsection 4.5, once the Revolving Credit
Commitments have been reduced to $225,000,000 or
less, and so long as no Default or Event of Default has occurred or is
continuing, the Company may retain 100% of the Net Proceeds of Asset Sales.
Further, notwithstanding anything to the contrary contained in this subsection
4.5, so long as no Default or Event of Default has occurred or is continuing
or would result therefrom, the Company may elect to retain up to $100,000,000
in the aggregate of Net Proceeds from Asset Sales occurring after the Closing
Date which the Company would otherwise be required to apply to the reduction
of the Revolving Credit Commitments, and the Revolving Credit Commitments need
not be reduced by such amount.
(b) Upon receipt by the Administrative Agent of the Net Proceeds
required to be paid to the Banks hereunder from any Asset Sale consisting of
the sale of all of the shares of stock of any Subsidiary Guarantor, the
obligations of such Subsidiary
<PAGE>
39
Guarantor under its Guarantee shall automatically be discharged and released
without any further action by the Administrative Agent, any Co-Agent or any
Bank, PROVIDED that the Administrative Agent and the Banks agree, upon the
request of the Company, to execute and deliver any instrument or other
document in a form acceptable to the Administrative Agent which may reasonably
be required to evidence such discharge and release.
(c) The Company shall give the Administrative Agent (which shall
promptly notify each Bank) at least one Business Day's notice of each
prepayment pursuant to this subsection 4.5 setting forth the date and amount
thereof. Prepayment of Eurodollar Loans, if not on the last day of the
Interest Period with respect thereto, shall, at the Company's option as long
as no Default or Event of Default has occurred and is continuing, be prepaid
subject to the provisions of subsection 4.20 or such Net Proceeds (after
application to any ABR Loans and cash collateralization of any Bid Loans)
shall be deposited with the Administrative Agent as cash collateral for such
Eurodollar Loans on terms reasonably satisfactory to the Administrative Agent
and thereafter shall be applied to the prepayment of the Eurodollar Loans on
the last day of the respective Interest Periods for such Eurodollar Loans next
ending most closely to the date of receipt of such Net Proceeds. After such
application, unless a Default or an Event of Default shall have occurred and
be continuing, any remaining interest earned on such cash collateral shall be
paid to the Company.
(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 on terms satisfactory to the
Administrative Agent.
4.6 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 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 plus the Applicable Margin.
(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
<PAGE>
40
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 9, 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.
4.7 COMPUTATION OF INTEREST AND FEES. (a) Interest in respect of
ABR Loans 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 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.
4.8 COMMITMENT FEES. The Company agrees to pay to the
Administrative Agent, for the account of each Bank, a commitment fee from and
including the Closing Date to but excluding the Revolving Credit Termination
Date on the amount of such Bank's Available Revolving Credit Commitment, at
the rate per annum for each day during the period for which payment is made
set forth opposite the Applicable Margin in effect for Eurodollar Loans on
such day:
Eurodollar
Applicable Margin Commitment Fee
----------------- --------------
1-1/4% .375%
1% .375%
7/8% .250%
3/4% .250%
<PAGE>
41
5/8% .225%
1/2% .200%
Any reduction or increase in the commitment fee provided above shall become
effective (i) on the date following the delivery to the Administrative Agent
by the Company of the financial statements referred to in subsections 7.1(a)
and (b) and the related certificate of the chief financial officer of the
Company referred to in subsection 7.2 indicating the Interest Coverage Ratio
for the period of four fiscal quarters ending on the last day of the fiscal
quarter preceding such day and the ratio of Consolidated Total Indebtedness as
of the
last day of such fiscal quarter to Consolidated EBITDA for the period of four
consecutive fiscal quarters ended on such last day of such fiscal quarter, and
(ii) with respect to the events referred to in paragraphs (e)(ii) and (f)(ii)
of the definition of "Applicable Margin" above, the day following the day that
the long-term senior indebtedness of Holding shall have received or lost such
ratings or implied ratings, as the case may be. If and for so long as (A) the
Company shall fail to deliver the financial statements referred to in
subsections 7.1(a) and (b) and the related certificate of the chief financial
officer of the Company referred to in subsection 7.2 indicating the Interest
Coverage Ratio for such period of four fiscal quarters and the ratio of
Consolidated Total Indebtedness to Consolidated EBITDA as of such last day and
(B) the events referred to in paragraphs (e)(ii) and (f)(ii) of the definition
of "Applicable Margin", shall not have occurred and be continuing, then the
Commitment Fee shall automatically, and without further act of the
Administrative Agent, the Co-Agents or any Bank, equal the highest Commitment
Fee set forth above. The commitment fee provided for in this subsection shall
be payable quarterly in arrears on the last day of each fiscal quarter,
commencing September 30, 1994, and on the Revolving Credit Termination Date
with respect to the Revolving Credit Commitments.
4.9 CERTAIN FEES. (a) The Company agrees to pay to the
Administrative Agent for its own account a non-refundable agent's fee in the
amount, and on the dates, specified in the letter agreement dated as of June
6, 1994 between the Company and Chemical.
(b) The Company agrees to pay to the Administrative Agent, for the
account of each Bank, an amendment fee in the amount of 0.05% of such Bank's
Revolving Credit Commitment, payable on the Closing Date.
4.10 LETTER OF CREDIT FEES. (a) 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,
<PAGE>
42
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 opposite
the Applicable Margin in effect for Eurodollar Loans on such day:
Eurodollar
Applicable Margin Standby L/C Fee
----------------- ---------------
1-1/4% 1-1/4%
1% 1%
7/8% 7/8%
3/4% 3/4%
5/8% 5/8%
1/2% 1/2%
Any reduction or increase in the Standby L/C Fee provided above shall become
effective (i) on the date following the delivery to the Administrative Agent
by the Company of the financial statements referred to in subsections 7.1(a)
and (b) and the related certificate of the chief financial officer of the
Company referred to in subsection 7.2 indicating the Interest Coverage Ratio
for the period of four fiscal quarters ending on the last day of the fiscal
quarter preceding such day and the ratio of Consolidated Total Indebtedness as
of the last day of such fiscal quarter to Consolidated EBITDA for the period
of four consecutive fiscal quarters ended on such last day of such fiscal
quarter, and (ii) with respect to the events referred to in paragraphs (e)(ii)
and (f)(ii) of
the definition of "Applicable Margin" above, the day following the day that
the long-term senior indebtedness of Holding shall have received or lost such
ratings or implied ratings, as the case may be. If and for so long as (A) the
Company shall fail to deliver the financial statements referred to in
subsections 7.1(a) and (b) and the related certificate of the chief financial
officer of the Company referred to in subsection 7.2 indicating the Interest
Coverage Ratio for such period of four fiscal quarters and the ratio of
Consolidated Total Indebtedness to Consolidated EBITDA as of such last day and
(B) the events referred to in paragraphs (e)(ii) and (f)(ii) of the definition
of "Applicable Margin", shall not have occurred and be continuing, then the
Standby L/C Fee shall automatically, and without further act of the
Administrative Agent, the Co-Agents or any Bank, equal the highest Standby L/C
Fee set forth above. 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, 1994, and on the Revolving Credit Termination Date
with respect to the Revolving Credit Commitments.
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.
<PAGE>
43
(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, 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 4.10, 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.
4.11 LETTER OF CREDIT RESERVES. (a) If any Change in Law 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 plus the
Applicable Margin for ABR Loans. 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
<PAGE>
44
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 4.11(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 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.
4.12 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.
4.13 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;
<PAGE>
45
(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.
4.14 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 11.6) without the prior written consent of the 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.
4.15 PARTICIPATIONS. Each Bank's obligation to purchase
participating interests pursuant to subsections 3.5 and 3.12(d) 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.
4.16 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 (a) 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
<PAGE>
46
into Eurodollar Loans or (iii) the continuation of any Eurodollar Loan as such
for an additional Interest Period, or (b) dollar deposits in the relevant
amount and for the relevant period with respect to any such Eurodollar Loan
are not available to any of the Banks in their respective Eurodollar Lending
Offices' interbank eurodollar market, 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, as the case may be, the requested
Borrowing Date, the conversion date or the last day of such Interest Period.
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.
4.17 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 set forth in subsections 4.8, 4.9 and 4.10) 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 4.18, 4.19 and 4.20) 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, in lawful
money of the United States of America 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. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Working Day, the
maturity thereof shall be extended to the next succeeding Working Day unless
the result of such extension would be to extend such payment into another
calendar month in which event such payment shall be made on the immediately
preceding Working Day.
(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
<PAGE>
47
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 4.1 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
4.17(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 4.17(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 4.19 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 that is not incorporated under the laws of the United
States of America or a state thereof agrees that prior to the Closing Date it
will deliver to the Company and the Administrative Agent (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224
or successor applicable form, as the case may be, and (ii) an Internal Revenue
Service Form W-8 or W-9 or successor applicable form. Each such Bank also
agrees to deliver to the Company and the Administrative
<PAGE>
48
Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms or other manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company, and such extensions or renewals
thereof as may reasonably be requested by the Company or the Administrative
Agent. Such Bank shall certify (i) in the case of a Form 1001 or 4224, that
it is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any case as
to which a Form 1001 or 4224 is deliverable pursuant to the second sentence of
this subsection 4.17(e) an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises the Company that it is not
capable of so receiving payments without any deduction or withholding, and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption
from United States backup withholding tax.
4.18 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 to ABR Loans on the
date specified by such Bank in such request. 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 4.18 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).
4.19 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:
<PAGE>
49
(i) does or shall subject any Bank to any tax of any kind
whatsoever with respect to this Agreement, any Note 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);
(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 plus the
Applicable Margin for ABR Loans.
(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 4.19, 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) If any Bank becomes entitled to claim any additional amounts
pursuant to this subsection 4.19, it shall
<PAGE>
50
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 4.19, the Company at any time thereafter may,
upon at least two Working Days' notice to the Administrative Agent (which
shall promptly notify the Banks thereof), and subject to subsection 4.20,
prepay (or convert into ABR Loans) all (but not a part) of the Eurodollar
Loans then outstanding. Each Bank agrees that, upon the occurrence of any
event giving rise to the operation of paragraph (a) of this subsection 4.19
with respect to such Bank, it will, if requested by the Company and to the
extent permitted by law or by the relevant Governmental Authority, endeavor in
good faith to avoid or minimize the increase in costs or reduction in payments
resulting from such event (including, without limitation, endeavoring to
change its Eurodollar Lending Office); PROVIDED, HOWEVER, that such avoidance
or minimization can be made in such a manner that such Bank, in its sole
determination, suffers no economic, legal or regulatory disadvantage. If any
Bank has notified the Company, through the Administrative Agent, of any
increased costs pursuant to paragraph (b) of this subsection 4.19, the Company
at any time thereafter may, upon at least three Business Days' notice to the
Administrative Agent (which shall promptly notify
the Banks thereof), and subject to subsection 4.20, reduce or terminate the
Revolving Credit Commitments in accordance with subsection 4.3.
(d) 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 4.19 shall survive
the termination of this Agreement and payment of the outstanding Notes.
4.20 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 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 hereunder, (b) default by the Company in
making a borrowing of Eurodollar Loans after the Company has given a notice in
accordance with subsection 4.1 or in making a conversion of ABR Loans to
Eurodollar Loans after the Company has given notice in accordance with
subsection 4.2, (c) default by the Company in making any prepayment of
Eurodollar Loans after the Company has given a notice in accordance with
subsections 4.4 and 4.5 or (d) a payment or prepayment of a Eurodollar Loan or
Money Market Rate 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
<PAGE>
51
to maintain its Eurodollar Loans hereunder. This covenant shall survive
termination of this Agreement and payment of the outstanding Obligations.
SECTION 5. 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 on the date of each
Loan made or Letter of Credit issued thereafter, that (and, for the purposes
of this Agreement, Holdings shall be deemed to be a party to the Subordinated
Note to the extent Holdings has obligations thereunder):
5.1 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, assets, liabilities, net assets, properties, results of operations,
value or 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, assets, liabilities, net assets, 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, assets, liabilities, net assets,
properties, results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole.
5.2 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; the Company has the corporate
power and authority and
<PAGE>
52
legal right to borrow hereunder, to have Letters of Credit issued for its
account hereunder and to perform its obligations under the Subordinated Note;
and Holdings has the corporate power and authority and legal right to make,
maintain and perform its obligations under the Convertible Junior Notes, and
to make and maintain the Subordinated Loan. 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 (a) in case of
the Company, to authorize the borrowings hereunder, the issuance of Letters of
Credit for its account hereunder and to perform its obligations under the
Subordinated Note and (b) in case of Holdings, to perform its obligations
under the Convertible Junior Notes, and to make and maintain the Subordinated
Loan. 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, the
Subordinated Note and the Convertible Junior Notes to the extent that it is a
party thereto, or the guarantee of the Obligations pursuant to the Guarantees,
or the making or maintaining of the Subordinated Loan by Holdings.
5.3 ENFORCEABLE OBLIGATIONS. Each of the Credit Documents, the
Subordinated Note and the Convertible Junior Notes has been duly executed and
delivered on behalf of the Credit Party party thereto and each of such Credit
Documents, the Subordinated Note and the Convertible Junior Notes 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).
5.4 NO LEGAL BAR. The performance of each Credit Document, the
Subordinated Note and the Convertible Junior Notes, the guarantee of the
Obligations pursuant to the Guarantees, the use of the proceeds of the Loans
and of drawings under the Letters of Credit and the making of the Subordinated
Loan 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, the Convertible
Junior Notes or the Subordinated Note 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, assets, liabilities, net
assets, 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
<PAGE>
53
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.
5.5 NO MATERIAL LITIGATION. No litigation, investigation known to
the Company or 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, the Subordinated Note or the Convertible Junior Notes, or with
respect to the Loans made hereunder, the use of proceeds thereof or of any
drawings under a Letter of Credit, the making of the Subordinated Loan, the
issuance of the Subordinated Note or the Convertible Junior Notes and the
other transactions contemplated hereby or thereby, or (b) which would have a
material adverse effect on the business, financial condition, assets,
liabilities, net assets, properties, results of operations, value or prospects
of the Company and its Subsidiaries taken as a whole.
5.6 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).
5.7 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.
5.8 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, assets, liabilities, net assets, 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, assets, liabilities, net assets,
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
<PAGE>
54
conducted or the ability of any Credit Party to perform its obligations under
any Credit Document, the Subordinated Note or the Convertible Junior Notes to
which it is a party.
5.9 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, assets,
liabilities, net assets, properties, results of operations, value or prospects
of the Company and its Subsidiaries taken as a whole.
5.10 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,
assets, liabilities, net assets, 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, assets, liabilities, net assets, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole.
5.11 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.
5.12 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,
<PAGE>
55
except as permitted hereunder, to any Lien (including, without limitation,
Federal, state and other tax liens).
5.13 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) 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, assets, liabilities, net assets, 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, assets, liabilities,
net assets, 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 closely preceding
the date hereof would not be materially adverse to the business, financial
condition, assets, liabilities, net assets, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole. 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, assets, liabilities, net assets, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT, INITIAL LOANS
AND LETTERS OF CREDIT. The effectiveness of this Agreement, the conversion of
the Term Loans into Revolving Credit Loans, the obligation of each Bank to
make its Loans and the obligation of each Issuing Bank to issue any Letter of
Credit on the Closing Date are subject to the satisfaction, or waiver by such
Bank (or, in the case of the conditions specified in subsection 6.1(e), waiver
by the Required Banks, or, in the case of the conditions specified in
subsections 6.1(c), (d), (g), (l) and (m), waiver by the Administrative
Agent), immediately prior to or concurrently with the effectiveness of this
Agreement, the making of such Loans or the issuance of such Letter of Credit,
as the case may be, of the following conditions precedent:
<PAGE>
56
(a) NOTES. The Administrative Agent shall have received (i) for
the account of each Bank, a Revolving Credit Note and a Bid Loan Note and
(ii) for the account of Chemical, a Swing Line Note, in each case
conforming to the requirements hereof and executed by a duly authorized
officer of the Company. The Administrative Agent shall deliver to the
Company each of the Revolving Credit Notes and Term Loan Notes issued to
the banks and other financial institutions parties to the Existing Credit
Agreement.
(b) GUARANTEES. The Administrative Agent shall have received (i)
the Holdings Guarantee, executed and delivered by a duly authorized
officer of Holdings, and (ii) the Subsidiary Guarantee, executed and
delivered by a duly authorized officer of each Subsidiary Guarantor.
(c) LEGAL OPINIONS. The Administrative Agent shall have received,
dated the Closing Date and addressed to the Administrative Agent, the Co-
Agents and the Banks, (i) an opinion of Fried, Frank, Harris, Shriver &
Jacobson, counsel to Holdings and the Company, substantially in the form
of Exhibit I-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 Thomas A. Dumit, Esq., General
Counsel to the Company, substantially in the form of Exhibit I-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 Administrative Agent shall
reasonably require.
(d) CLOSING CERTIFICATES. The Administrative Agent shall have
received a Closing Certificate of Holdings, the Company and each
Subsidiary Guarantor, dated the Closing Date, substantially in the form
of Exhibits J1, J-2 and J-3 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,
the Company and each Subsidiary Guarantor, respectively.
(e) EXISTING INDEBTEDNESS. The Administrative Agent shall be
satisfied that the Obligations and Holding's guarantee thereof will
constitute "Senior Obligations" as defined in the Subordinated Note and
"Senior Indebtedness" as defined in the Convertible Junior Indenture.
The Administrative Agent shall have received a copy of an amendment and
restatement to the Subordinated Note, in form and substance reasonably
<PAGE>
57
satisfactory to the Agent, providing in substance that the subordination
provisions thereof shall remain effective until at least January 15,
2000.
(f) 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, assets, liabilities,
net assets, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole.
(g) 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, in the case of the Company, the Subordinated Note and, in the
case of Holdings, the Convertible Junior Notes, 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 affect on the business,
financial condition, assets, liabilities, net assets, properties, results
of operations, value or prospects of the Credit Parties and their
Subsidiaries taken as a whole.
(h) 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 (ii) has
or will have a material adverse effect on the business, financial
condition, assets, liabilities, net assets, 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.
<PAGE>
58
(i) 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) has or will have a material adverse effect on the
business, financial condition, assets, liabilities, net assets,
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 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.
(j) 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, assets, liabilities, net assets,
properties, results of operations, value or prospects of the Company and
its
Subsidiaries taken as a whole.
(k) 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 4.9) payable to the
Banks and the Administrative Agent on or prior to the Closing Date.
(l) 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.
(m) EXISTING CREDIT AGREEMENT. The Administrative Agent shall have
received evidence satisfactory to it that the Company has paid all of the
interest, fees, expenses and other costs payable through the Closing Date
under the Existing Credit Agreement including, without limitation, all
amounts payable to the Closing Date under subsection 4.9 of the Existing
Credit Agreement.
(n) RELEASE OF COLLATERAL. The Company shall have received from
the Administrative Agent (i) all of the outstanding capital stock of the
Company, Cable/Home
<PAGE>
59
Communication Corp. and CommScope, Inc. which was pledged to the
Administrative Agent under the terms of the Existing Credit Agreement;
(ii) the Subordinated Note, and (iii) documents or instruments
satisfactory to it evidencing the release of Holdings, the Company and
Cable/Home Communication Corp. from all of their respective obligations
under the Holdings Pledge Agreement, the Company Pledge Agreement and the
Subsidiary Pledge Agreement executed by such Persons in connection with
the Existing Credit Agreement.
(o) FINANCIAL STATEMENTS. The Administrative Agent shall have
received a copy of the financial statements referred to in subsection
7.1(a) and (b), with a photocopy thereof for each Bank, which shall be
satisfactory in form and substance to the Administrative Agent.
(p) 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.
6.2 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) and the
obligation of each Issuing Bank to issue any Letter of Credit 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 5, 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 5 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
<PAGE>
60
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 clauses (a) and (b) of this subsection 6.2
have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note 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 7.3, 7.4, 7.5, 7.6 and 7.8 cause each of its
Subsidiaries to:
7.1 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 or other
independent certified public accountants of nationally recognized
standing not unacceptable to the Required Banks; PROVIDED that if for any
reason whatsoever the consolidated balance sheet of Holdings and its
consolidated Subsidiaries and the related consolidated statements of
income, stockholders' equity and cash flows for any fiscal year would be
materially different (disregarding any difference (i) in the total
principal amount of, and interest on, the Subordinated Note and the
Convertible Junior Notes and (ii) in prepaid financing charges
attributable to the issuance of the Convertible Junior Notes, and in each
case the related effect thereof on the financial statements) than the
consolidated balance sheet of the Company and its consolidated
Subsidiaries and the related consolidated
<PAGE>
61
statements of operations, stockholders' equity and cash flows for such
fiscal year, then the Company shall also provide, as soon as available,
but in any event within 90 days after the end of each fiscal year of the
Company, a copy of the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and the related
consolidated statements of operations, stockholders' equity and of 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 or other independent certified
public accountants of nationally recognized standing not unacceptable to
the Required Banks;
(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 and the
related unaudited consolidated statements of operations, stockholders'
equity and cash flows of Holdings 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); 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 (disregarding any difference (i) in the total principal amount
of, and interest on, the Subordinated Note and the Convertible Junior
Notes and (ii) in prepaid financing charges attributable to the issuance
of the Convertible Junior Notes, and in each case the related effect
thereof on the financial statements) 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 Subsidiaries as at the end of such quarter
and the related unaudited 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);
<PAGE>
62
(c) as soon as available, but in any event not later than 45 days
after the end of each of the first three fiscal quarters and not later
than 90 days after the end of each fiscal year commencing with the fiscal
quarter ending June 30, 1994, the unaudited consolidated statement of
operations of each Profit Center of the Company and its Subsidiaries for
such fiscal quarter; and
(d) as soon as available, but in any event within 90 days after the
beginning of each fiscal year of the Company to which such budget
relates, an annual operating budget for each Profit Center of the Company
and its Subsidiaries, on a consolidating basis, and a consolidated
operating budget for the Company and its Subsidiaries taken as a whole,
in each case as adopted by the Board of Directors of the Company;
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 current year need not be shown in interim
financial statements as such either for the current period or comparable prior
period). In the event Holdings or the Company 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.
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent (with sufficient copies for each Bank other than reports listed in
Subsection 7.2(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 7.1(a), a letter from the
independent certified public accountants reporting on such financial
statements stating that in
<PAGE>
63
making the examination necessary to express their opinion on such
financial statements no knowledge was obtained of any Default or Event of
Default, except as specified in such letter;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of the chief
financial officer of the Company (i) stating that, to the best of such
officer's knowledge, each of Holdings, the Company and their respective
Subsidiaries has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement,
the Notes and the other Credit Documents and the Subordinated Note to be
observed, performed or satisfied by it, and 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 (g) of subsections 8.1, clauses (b) and
(f) of subsection 8.3, clauses (i) and (j) of subsection 8.6, subsections
8.7, 8.8, 8.9, 8.10 and clauses (b) and (c) of subsection 8.11, (iii)
showing in detail as of the end of the related fiscal period the Interest
Coverage Ratio of Holdings and its Subsidiaries and the ratio of
Consolidated Total Indebtedness as of the end of such fiscal period to
Consolidated EBITDA for the four consecutive fiscal quarters ended at the
end of such fiscal period and the calculations supporting such statement
and if applicable, stating the Applicable Margin and commitment fee
payable as a result of such ratios; (iv) if not specified in the
financial statements delivered pursuant to subsection 7.1, 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; (v) listing all Indebtedness
(other than Indebtedness hereunder) in each case incurred since the date
of the previous consolidated balance sheet of Holdings or the Company, as
the case may be, delivered pursuant to subsection 7.1(a) or (b) and (vi)
describing any rating or implied rating
of the long-term senior unsecured indebtedness of Holdings, or any change
in any such rating or implied rating, by S&P or Moody's since the date of
the most recent certificate provided under this subsection 7.2(b), and
stating the date of effectiveness thereof;
(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
<PAGE>
64
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
Holdings, the Company or any of their respective 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 7.1(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;
(f) promptly, such additional financial and other information as
any Bank may from time to time reasonably request.
7.3 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 affect on the business, financial condition, assets,
liabilities, net assets, 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.
7.4 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
rights, privileges and franchises the loss of which would not in the aggregate
have a material adverse effect on the business, financial condition, assets,
liabilities, net assets, properties, results of operations, value or prospects
of the Company and its
<PAGE>
65
Subsidiaries taken as a whole, and except as otherwise permitted by
subsections
8.4 and 8.5; 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, assets,
liabilities, net assets, properties, results of operations, value or prospects
of the Company and its Subsidiaries taken as a whole.
7.5 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.
7.6 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 which permit financial statements to be prepared in conformity 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.
7.7 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 the Company 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, assets, liabilities, net assets, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken
as a whole, or any other default or event of default under any such
instrument, agreement, guarantee or other collateral document which, but
for the proviso to clause
<PAGE>
66
(e) of Section 9, would have constituted a Default or Event of Default
under this Agreement, or (ii) litigation, investigation or proceeding
which may exist at any time between Holdings, the Company or any of their
respective Subsidiaries and any Governmental Authority, or receipt of any
notice of any environmental claim or assessment against Holdings, the
Company or any of their respective Subsidiaries by any Governmental
Authority, which in any such case would have a material adverse effect on
the business, financial condition, assets, liabilities, net assets,
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 $5,000,000 of the amount claimed
is not 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, assets, liabilities, net assets,
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 could have a material adverse effect on the
business, financial condition, assets, liabilities, net assets,
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 could have
a material adverse effect on the business, financial condition, assets,
liabilities, net assets, 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;
<PAGE>
67
(e) of a failure by the Company or Holdings to make payment when
due on the Subordinated Note or any Convertible Junior Note; and
(f) of the receipt of any rating or implied rating of the long-term
senior unsecured indebtedness of Holdings, or any change in any such
rating or implied rating, by S&P or Moody's; and
(g) of a material adverse change known to the Company or any of its
Subsidiaries in the business, financial condition, assets, liabilities,
net assets, 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 7.7 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.
7.8 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
Guarantee in favor of the Administrative Agent in substantially the form of
Exhibit I, each of which 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 reduces
or eliminates the adverse tax consequences to the Company or any of its
Subsidiaries which would have resulted on the date hereof from the guarantee
by a Subsidiary, which would be a Material Subsidiary but for the exception
contained in clause (b) of the definition thereof, of the Loans and the other
obligations of the Company hereunder, the Company shall promptly thereafter
cause any such Subsidiary that has not previously executed and delivered a
Guarantee because of such adverse tax consequences to deliver a Guarantee to
the
Administrative Agent to the extent any such guarantee can be so executed and
delivered without adverse tax consequences.
SECTION 8. NEGATIVE COVENANTS
The Company hereby agrees that 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, Note or Revolving L/C Obligation remains
outstanding and unpaid, any amount remains available to be drawn under any
Letter of Credit
<PAGE>
68
or any other amount is owing to any Bank, any Co-Agent, any Issuing Bank or
the Administrative Agent hereunder:
8.1 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness of the Company evidenced by the Notes and in
connection with the Letters of Credit and this Agreement;
(b) (i) Indebtedness of the Company to any Subsidiary 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
8.6(j);
(c) Indebtedness of the Company evidenced by the Subordinated Note;
PROVIDED that (i) the Company shall not make any interest payment on such
Indebtedness on a date which is more than two Business Days prior to the
date on which Holdings is next scheduled to pay interest on the
Convertible Junior Notes, (ii) such interest payments shall not exceed
the amount necessary to pay interest on the Subordinated Note at a rate
of 9-1/2% per annum and (iii) the Company shall not make any payments on
account of the principal of such Indebtedness except for cancellations of
all or any portion of the principal amount;
(d) Indebtedness in respect of foreign currency exchange contracts
permitted by subsection 8.13;
(e) Taiwan Mortgage Indebtedness;
(f) 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, in each case to the extent a Letter of Credit
supports the obligations of the Company and its Subsidiaries with respect
to such bonds, guarantees and letters of credit; and
(g) other Indebtedness of the Company or any of its Subsidiaries
(other than Indebtedness of any wholly-owned Foreign Subsidiary to the
Company) incurred in the ordinary course of their respective businesses
in an aggregate principal amount not to exceed $150,000,000 at any time;
PROVIDED that no Indebtedness may be incurred under this clause (g) if,
after giving effect to the incurrence of such Indebtedness, the ratio of
Consolidated Senior Indebtedness to Consolidated Total Capital would
exceed 0.45 to 1.00.
<PAGE>
69
8.2 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;
(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 become Subsidiaries of
the Company after the date hereof, PROVIDED that such Liens exist at the
time such corporations become Subsidiaries and are not created in
anticipation thereof;
(h) Liens on the Taiwan Mortgaged Real Property securing the Taiwan
Mortgage Indebtedness permitted under subsection 8.1(e);
(i) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Letters of Credit which are
Commercial L/Cs; and
<PAGE>
70
(j) Liens securing any Indebtedness permitted under subsection
8.1(g), PROVIDED that (i) the aggregate principal amount of Indebtedness
secured by such Liens shall at no time exceed $75,000,000 and (ii) no
such Liens shall encumber the Subordinated Note or any capital stock of
Holdings, the Company or any Subsidiary.
8.3 LIMITATION ON CONTINGENT OBLIGATIONS. Create, incur, assume or
suffer to exist any Contingent 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 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;
(c) Contingent Obligations existing on the Closing Date and
described in Schedule VI;
(d) Contingent Obligations in respect of foreign currency exchange
contracts permitted by subsection 8.13;
(e) Contingent Obligations pursuant to the Subsidiary Guarantees;
and
(f) guarantees by the Company of the Indebtedness of its
Subsidiaries permitted under subsection 8.1(g).
8.4 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 8.5 and 8.6.
8.5 PROHIBITION 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 tangible personal 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 made in the ordinary course of business; (c) that any Subsidiary of
the
<PAGE>
71
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; (d) the Asset Sale of
the Power Semiconductor Division, PROVIDED that such Asset Sale shall be made
for fair value on an arm's-length basis and the Net Proceeds from such Asset
Sale shall be applied in accordance with subsection 4.5; and (e) 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, (ii) the
aggregate fair market value of all such assets sold or disposed of under this
clause after the Closing Date shall not exceed $100,000,000 and (iii) the Net
Proceeds from such sale or other disposition shall be applied in accordance
with the provisions of subsection 4.5.
8.6 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, except:
(a) the Company may make loans or advances to any Domestic
Subsidiary, and any Subsidiary may make loans or advances to the Company
or any other Domestic Subsidiary, to the extent the Indebtedness created
thereby is permitted by paragraph (b) of subsection 8.1;
(b) (i) any Subsidiary may make investments in the Company (by way
of capital contribution or otherwise) and (ii) the Company and any
Subsidiary may make investments in a wholly-owned Domestic Subsidiary (by
way of capital contribution or otherwise) or make investments permitted
by subsection 8.5(c), PROVIDED that the Company complies with the terms
of
subsection 7.8;
(c) the Company and its Subsidiaries may invest in, acquire and
hold Cash Equivalents;
(d) the Company or any of its Subsidiaries may make travel and
entertainment advances and relocation loans in the ordinary course of
business to officers and employees of the Company or any such Subsidiary;
(e) the Company or any of its Subsidiaries may make payroll
advances in the ordinary course of business;
(f) the Company or any of its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms (PROVIDED that nothing in this clause (f) shall prevent the Company
or any
<PAGE>
72
Subsidiary from offering such concessionary trade terms, or from
receiving such investments in connection with the bankruptcy or
reorganization of their respective suppliers or customers or the
settlement of disputes with such customers or suppliers arising in the
ordinary course of business, as management deems reasonable in the
circumstances);
(g) the Company and its Subsidiaries may make investments in
connection with Asset Sales permitted by subsection 8.5 or to which the
Required Banks consent;
(h) investments of the Company existing on the Closing Date and
described in Schedule VII;
(i) the Company and its Subsidiaries may make loans or advances to,
or acquisitions or investments in, other Persons (exclusive of Persons
which are, or become, Foreign Subsidiaries); PROVIDED that the
consideration paid by the Company or any of its Subsidiaries in all such
transactions after the Closing Date (net, in the case of loans and
advances, of any repayments or return of capital in respect thereof
actually received in cash by the Company or its Subsidiaries (net of
applicable taxes) after the Closing Date) does not exceed in the
aggregate $150,000,000;
(j) the Company and its Subsidiaries may make loans or advances to,
or investments in, Foreign Subsidiaries; PROVIDED that the consideration
paid by the Company or any of its Subsidiaries in all such transactions
after the Closing Date (net, in the case of loans and advances, of any
repayments or return of capital in respect thereof actually received in
cash by the Company or its Subsidiaries (net of applicable taxes) after
the Closing Date) does not exceed in the aggregate $100,000,000; and
(k) the Company and its Subsidiaries may purchase outstanding
common stock of Holdings to the extent the Company is permitted pursuant
to clause (y) of subsection 8.11.
8.7 MAINTENANCE OF CONSOLIDATED NET WORTH.
(a) Permit Consolidated Net Worth at any time to be less than the
sum (without duplication of any item) of (i) $275,000,000, (ii) 50% of
the Consolidated Net Income of Holdings, if positive, for each fiscal
quarter (commencing with the fiscal quarter ended March 31, 1993) and
(iii) 50% of any capital contributions made to Holdings after December
31, 1992.
(b) Notwithstanding clause (a) of this subsection 8.7, solely for
the
period commencing on the Closing Date and ending on December 30, 1994,
the Company shall not at any time during such period permit Adjusted
Consolidated Net
<PAGE>
73
Worth at such time to be less than the sum (without duplication of any
item) of (i) $275,000,000, (ii) 50% of the Consolidated Net Income of
Holdings, if positive, for each fiscal quarter (commencing with the
fiscal quarter ended March 31, 1993) and (iii) 50% of any capital
contributions made to Holdings after December 31, 1992.
8.8 MAINTENANCE OF INTEREST COVERAGE. Permit for any period of
four consecutive fiscal quarters ending during any period set forth below the
Interest Coverage Ratio for such period to be less than the ratio set forth
opposite such period below:
Period Ratio
------ -----
July 1, 1993 2.0 to 1.0
through
December 31, 1994
January 1, 1995 2.25 to 1.0
through
December 31, 1995
January 1, 1996 2.5 to 1.0
through
December 31, 1996
January 1, 1997 2.75 to 1.0
through
December 31, 1997
January 1, 1998 3.0 to 1.0
and at all
times thereafter
8.9 MAINTENANCE OF CURRENT RATIO. Permit the ratio of Consolidated
Current Assets to Consolidated Current Liabilities at any time to be less than
1.00 to 1.00.
8.10 MAINTENANCE OF CONSOLIDATED SENIOR INDEBTEDNESS TO
CONSOLIDATED TOTAL CAPITAL RATIO. Permit the ratio of Consolidated Senior
Indebtedness to Consolidated Total Capital at any time to be greater than 0.45
to 1.00.
8.11 LIMITATION ON DIVIDENDS. 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:
<PAGE>
74
(a) Subsidiaries may pay dividends to the Company or to Domestic
Subsidiaries which are directly or indirectly wholly-owned by the
Company;
(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 public corporation and
other fees required to maintain its corporate existence;
(c) so long as no Default or Event of Default has occurred or would
occur after giving effect to such declaration or payment, the Company
may, from time to time, declare and pay cash dividends to Holdings on the
common stock of the Company in an aggregate amount not to exceed
$12,500,000 (the "HOLDINGS DIVIDEND LIMIT"), PROVIDED that the proceeds
of such dividends shall be used within 30 days of the receipt of such
dividends by Holdings to repurchase Holdings stock from management
employees of Holdings and, PROVIDED FURTHER, the Holdings Dividend Limit
shall be increased by the proceeds of any additional Holdings capital
stock which is issued to any management employees of Holdings after June
30, 1993 so long as such proceeds are contributed by Holdings to the
capital of the Company;
(d) so long as no Default or Event of Default has occurred or would
occur after giving effect to such declaration or payment, the Company
may, from time to time, declare and pay cash dividends to Holdings to the
extent necessary to permit Holdings to acquire for cash, or to make cash
payments in lieu of issuing, fractional shares of common stock of the
Company in accordance with the terms of the Convertible Junior Indenture;
(e) in respect of the period commencing on the Closing Date and
ending on December 31, 1994, the Company may make Restricted Payments so
long as (i) the aggregate amount thereof made during such period does not
exceed the sum of (A) the 6/30/94 Net Worth Availability, (B) 50% of the
cumulative Consolidated Net Income of Holdings, if positive, from July 1,
1994 through the fiscal quarter most recently ended and (C) the 1994 Net
Worth Adjustment as of the end of the most recently ended fiscal quarter
and (ii) at the time thereof and after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing; and
(f) in respect of any fiscal year of the Company commencing on or
after January 1, 1995, the Company at any time may make Restricted
Payments so long as (i) after giving effect to such Restricted Payments,
together with all other Restricted Payments made since the date (the
"Dividend Test Date") on which the Company has most recently delivered
financial statements pursuant to subsection 7.1(a) or (b) does not exceed
the amount, if any, by which Consolidated Net Worth reflected on the most
recent quarter or year end
<PAGE>
75
balance sheet included in the financial statements delivered on such
Dividend Test Date exceeds the amount of Consolidated Net Worth required
to be maintained at such quarter or year end pursuant to subsection
8.7(a) and (ii) at the time thereof and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing provisions of this subsection 8.11, in no event
(except as permitted pursuant to subsection 8.11(e)) shall the aggregate
amount of dividends paid or declared by the Company (x) the proceeds of which
are used by Holdings to declare and pay dividends on the common stock of
Holdings exceed $50,000,000 in any fiscal year, and (y) the proceeds of which
are used by Holdings to purchase outstanding common stock of Holdings exceed
$150,000,000 in any fiscal year.
8.12 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, or (b) as permitted under subsections 8.3(a) and (f),
subsections 8.6(e), (f), (i), (j) and (k) and subsection 8.11.
8.13 FOREIGN EXCHANGE CONTRACTS. Enter into any foreign currency
exchange contracts other than in the ordinary course of business.
8.14 TERMS OF SUBORDINATED NOTE; PREPAYMENT OF SUBORDINATED NOTE.
(a) (i) Make any payment in violation of any of the subordination provisions
of the Subordinated Note; or (ii) waive or otherwise relinquish any of its
rights or causes of action arising under or arising out of the terms of the
Subordinated Note or consent to any amendment, modification or supplement to
the terms of the Subordinated Note in each case under this clause (ii) in any
material respect or in any respect adverse to the Banks, except (x) with the
consent of the Required Banks and (y) Holdings may contribute all or any
portion of the principal amount of the Subordinated Note to the capital of the
Company, to the extent that Holdings does not require interest payments on the
portion of the principal amount of the Subordinated Note so contributed in
order to make interest payments on the Convertible Junior Notes; PROVIDED that
promptly following any contribution of all or any portion of the principal
amount of the Subordinated Note, all or such portion, as the case may be, of
the Subordinated Note is cancelled and (z) Holdings and the Company may elect
to amend the terms of the Subordinated Note to the extent, and only to the
extent, necessary to reduce the interest rate or rates payable on all or any
portion or portions of the principal amount thereof so that the interest on
<PAGE>
76
any portion or portions of the Subordinated Note conforms to the interest
payable on the Convertible Junior Notes.
(b) Make any optional payment or prepayment on or redeem or
otherwise acquire, purchase or defease the Subordinated Note.
8.15 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.
SECTION 9. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to (i) pay any principal of any Note
when due in accordance with the terms hereof or thereof or to reimburse
an Issuing Bank in accordance with subsection 3.7 or (ii) pay any
interest on any Note or any other amount payable hereunder within five
days after any such interest or other amount becomes due 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 7.7(a) or Section 8 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 Holdings shall default in the performance or
observance of Section 10 of the Holdings Guarantee; 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) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Notes, the Revolving L/C Obligations and any intercompany debt) or in the
payment of any Contingent Obligation, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or
<PAGE>
77
Contingent 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 Contingent
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 Contingent Obligation
to become payable, any applicable grace period having expired, PROVIDED
that the aggregate principal amount of all such Indebtedness and
Contingent Obligations which would then become due or payable would equal
or exceed $5,000,000; 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
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
<PAGE>
78
(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), 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 pursuant to Section 4043(a), (c) or (d) of ERISA 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, assets, liabilities, net
assets, properties, results of operations, value or prospects of the
Company and its Subsidiaries taken as a whole; or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $5,000,000 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,
Contingent Obligations or other liabilities or obligations or Liens, or
own, lease, manage or otherwise operate any properties or assets, other
than incident to the ownership of all of the outstanding shares of
capital stock of the Company or the making of the Subordinated Loan or
the issuance of the Convertible Junior Notes; or
<PAGE>
79
(k) (i) In the event that FL Affiliates own more than 30% of the
outstanding capital stock of Holdings, any Person or two or more Persons
(except FL Affiliates) acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")) of more of the outstanding shares
of voting stock of Holdings than is beneficially owned by FL Affiliates,
at such time; or (ii) in the event that FL Affiliates own 30% or less of
the outstanding capital stock of Holdings, any Person or two or more
Persons (except FL Affiliates) 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
30% of the outstanding shares of voting stock of Holdings; (iii) 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; or (iv) a Repurchase Event (as defined in the Convertible
Junior Indenture) shall occur;
then, and in any such event, (a) 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 and the
Notes 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 (b) 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 and the
Notes 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 9 on account of undrawn Letters of Credit shall be
<PAGE>
80
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 3.7 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 and the Notes as the Administrative
Agent shall determine with the approval of the Required Banks. Except as
expressly provided above in this Section 9, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 10. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS
10.1 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints Chemical, Continental Bank N.A., Deutsche Bank AG, The Nippon Credit
Bank, Ltd., The Bank of Nova Scotia, The Toronto-Dominion Bank, National
Westminster Bank PLC and The Bank of Tokyo Trust Company 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 Chemical as the Administrative
Agent under this Agreement and irrevocably authorizes Chemical 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.
10.2 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 Chemical 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 10.3.
<PAGE>
81
10.3 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.
10.4 RELIANCE BY CO-AGENTS AND ADMINISTRATIVE AGENT. Each of the
CoAgents and the Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, 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 Note 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, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks and all future holders of
the Notes.
<PAGE>
82
10.5 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 such Co-
Agent or the Administrative Agent receives such a notice, such Co-Agent or 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.
10.6 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 CoAgent 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 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.
<PAGE>
83
10.7 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 original Commitments, 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 Notes) 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. The agreements contained in this
subsection 10.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
10.8 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, any Note issued to 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.
10.9 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)
whereupon 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
<PAGE>
84
rights, powers and duties 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 or any holders of the Notes.
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 10 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.
10.10 AN ISSUING BANK AS ISSUER OF LETTERS OF CREDIT. Each Bank
and each Co-Agent hereby acknowledge that the provisions of this Section 10
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 11. MISCELLANEOUS
11.1 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 11.1. 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 or any
Subsidiary Guarantor from their obligations under the Holdings Guarantee
or the Subsidiary
Guarantee, respectively, without the written consent of the Release
Banks, except as otherwise provided;
(b) no such waiver and no such amendment, supplement or
modification shall extend the scheduled maturity of any Note (other than
a Bid Note) or scheduled installment 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 any fee payable to the Banks hereunder, or reduce the
principal amount thereof, or increase the amount of any Bank's
Commitments, or amend, modify or waive any provision of this subsection
11.1 or reduce the percentages specified in the definition of Required
Banks or Release Banks, or change the percentage of
<PAGE>
85
the Banks required to waive a condition precedent under Section 6 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; and
(c) no such waiver and no such amendment, supplement or
modification shall amend, modify or waive any provision of Section 10
without the written consent of each of the then Co-Agents and the
Administrative Agent.
Any such waiver and any such amendment, supplement or modification described
in this subsection 11.1 shall apply equally to each of the Banks and shall be
binding upon each Credit Party, the Banks, the Co-Agents, the Administrative
Agent and all future holders of the Notes. No waiver, amendment, supplement
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.
11.2 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 and any future holders
of the Notes:
The Company: General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
Attention: Chief Financial
Officer Telecopy: (312) 541-5049
With a copy to: General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
Attention: General
Counsel Telecopy: (312)
541-5049
<PAGE>
86
and
General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
Attention: Treasurer
Telecopy: (312) 541-5049
With a copy to: Forstmann Little & Co.
767 Fifth Avenue
44th Floor
New York, New York
10153 Attention: Steven
Klinsky Telex: 497
23385LCO Telecopy:
(212) 759-9059
With a copy to: Fried, Frank, Harris,
Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: F. William Reindel,
Esq. Telex: 128173
Telecopy: (212) 747-1525 or
(212) 269-2644
The Administrative
Agent: Chemical Bank
c/o Chemical Securities Inc.
10 South LaSalle Street
Suite 2300
Chicago, Illinois 60603
Attention: Robert W.
Balmos Telecopy: (312)
807-4077
The Co-Agents: Chemical Bank
c/o Chemical Securities
Inc. 10 South LaSalle
Street Suite 2300
Chicago, Illinois 60603
Attention: Robert W.
Balmos Telecopy: (312)
807-4077
Continental Bank N.A.
231 S. LaSalle
Chicago, Illinois
Telecopy: (312) 828-
3864
Deutsche Bank AG
31 West 52nd Street
New York, New York
10019 Telecopy: (212)
474-8212
<PAGE>
87
The Nippon Credit Bank, Ltd.
245 Park Avenue
30th Floor
New York, New York 10167
Telecopy: (212) 490-
3895
The Bank of Nova Scotia
One Liberty Plaza
26th Floor
New York, New York 10006
Telecopy: (212) 225-5090
The Toronto-Dominion Bank
909 Fannin Street, 17th
Floor Houston, Texas 77010
Telecopy: (713) 951-9921
National Westminster Bank
PLC 175 Water Street
New York, New York 10038
Telecopy: (212) 602-4319
The Bank of Tokyo Trust
Company 100 Broadway
5th Floor
New York, New York 10005
Telecopy: (212) 766-8677
PROVIDED that any notice, request or demand to or upon the Administrative
Agent or the Banks pursuant to subsections 3.4, 3.12, 4.1, 4.2, 4.3, 4.4 and
4.5 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 11.2 shall not result in any liability to the Administrative Agent,
any Co-Agent or any Bank.
11.3 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.
11.4 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, the Letters of Credit and the
Notes.
11.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees:
<PAGE>
88
(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
CoAgent 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
<PAGE>
89
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 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 11.5(d)(z) is intended to limit the Company's
obligations pursuant to subsection 3.7);
(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 11.6). The agreements in this subsection 11.5 shall
survive repayment of the Notes and all other amounts payable hereunder.
11.6 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, all future holders of
the Notes, and their respective successors and assigns, except that the
Company may not 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 Note held by such Bank, any Commitment of such Bank or
any other interest of such Bank hereunder and under the other Credit
Documents. 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, such Bank shall
<PAGE>
90
remain the holder of any such Note 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
and the Notes 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 and any Note to
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement or any Note; 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 11.7. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 4.11, 4.18, 4.19 and 4.20
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 (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, the Notes 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 11.6(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 more and (II) to a Person which is then a Bank or an Affiliate of a Bank
may be in any amount and (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 at least 2% of the then
outstanding Commitments and/or Loans (without duplication); and PROVIDED
FURTHER that the foregoing shall not prohibit a Bank from selling
participating interests in accordance with subsection 11.6(b) in all or any
portion of its Commitments and/or Loans (without duplication) and PROVIDED,
FURTHER, that no
<PAGE>
91
Bank shall assign any Bid Loans pursuant to this subsection 11.6(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
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 11.6(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 this Agreement 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 and the Notes. As
soon as practicable after the effective date determined pursuant to such
Assignment and Acceptance, the Company, at its own expense, shall execute and
deliver to the Administrative Agent, in exchange for the surrendered Notes,
new Notes to the order of such Assignee in amounts equal to the respective
Commitments assumed by it pursuant to such Assignment and Acceptance and, if
the assigning Bank has retained Commitments hereunder, new Notes to the order
of the assigning Bank in an amount equal to the Commitments retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Notes replaced thereby. The Notes surrendered by the
assigning Bank shall be returned by the Administrative Agent to the Company
marked "cancelled".
(d) The Administrative Agent shall maintain at its address referred
to in subsection 11.2 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 Commitments of, the principal amount of any Term Loans,
Swing Line Loans and/or Revolving Credit 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 may treat
<PAGE>
92
each Person whose name is recorded in the Register as the owner of the Loans
or L/C Participating Interests recorded therein for all purposes of this
Agreement. 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.
(g) If, pursuant to this subsection 11.6, any interest in this
Agreement or any Note or Letter of Credit is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, 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 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) either U.S. Internal Revenue Service
Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee
claims entitlement to complete exemption from U.S. federal withholding tax on
all interest payments hereunder) and (iii) to agree (for the benefit of the
assigning Bank, the Administrative Agent and the Company) to provide the
assigning Bank (and, in the case of any Assignee registered in the Register,
the Administrative Agent and the Company) a new Form 4224 or Form 1001 upon
the expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and
<PAGE>
93
regulations and amendments duly executed and completed by such Transferee, and
to comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
11.7 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 9, 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 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 setoff) 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 9(a) or 9(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 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 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
<PAGE>
94
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, under any other Credit Document or
otherwise, 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.
11.8 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 such Bank has executed counterparts
of this Agreement or the signature pages hereto and sent the same to the
Administrative Agent.
11.9 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.
11.10 GOVERNING LAW; NO THIRD PARTY RIGHTS. THIS AGREEMENT AND THE
NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND
THE NOTES 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 11.6, NO OTHER PERSONS SHALL HAVE ANY
RIGHT, BENEFIT, PRIORITY OR INTEREST UNDER, OR BECAUSE OF THE EXISTENCE OF,
THIS AGREEMENT.
<PAGE>
95
11.11 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 11.2 OR AT SUCH OTHER
ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED
PURSUANT THERETO; AND
(iv) AGREES THAT NOTHING CONTAINED HEREIN SHALL 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.
11.12 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.
<PAGE>
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.
GENERAL INSTRUMENT CORPORATION
OF DELAWARE
By: /s/ Richard C. Smith -----------------------
--------------
Title: Vice President
CHEMICAL BANK, as Administrative Agent,
as a Co-Agent and as a Bank
By: --------------------------------
---- Title:
CONTINENTAL BANK N.A., as a Co-Agent
and as a Bank
By: /s/ -------------------------------
-----Title: Managing Director
DEUTSCHE BANK AG, NEW YORK and/or
CAYMAN ISLANDS BRANCHES, as a Co-
Agent and as a Bank
By: /s/ Jeffrey N. Wieser -------------
-----------------------Title:
Director
By: /s/ Gregory M. Hill ---------------
---------------------Title: Vice
President
THE NIPPON CREDIT BANK, LTD., as a Co-
Agent and as a Bank
By: ----------------------
-------------- Title: Vice
President and Manager
THE BANK OF NOVA SCOTIA, as a Co-Agent
and as a Bank
By: ----------------------
-------------- Title: Vice
President
<PAGE>
THE TORONTO-DOMINION BANK, as a Co-
Agent and as a Bank
By: ----------------------
-------------- Title: Director
NATIONAL WESTMINSTER BANK PLC, NEW YORK
and/or NASSAU BRANCH, as a
Co-Agent and as a Bank
By: ----------------------
-------------- Title: Senior
Vice President
THE BANK OF TOKYO TRUST COMPANY, as a
Co-Agent and as a Bank
By: /s/ M. R. Marron ------------------
------------------Title: Vice
President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: ---------------------------
--------- Title:
By: ---------------------------
--------- Title: Vice President
BANQUE PARIBAS
By: /s/ James G. Christian ------------
------------------------Title:
Vice President
By: /s/ Rowena P. Festin --------------
----------------------Title: Vice-
President
CREDITANSTALT BANKVEREIN
By: ---------------------------
--------- Title: Vice President
By: ---------------------------
--------- Title: Vice President
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.,
NEW YORK BRANCH
By: ---------------------------
--------- Title: Senior Vice
President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Rodney L. Guinn ---------------
---------------------Title: Vice
President
THE FUJI BANK, LIMITED
By: /s/ Hidekazu Seo --------------------
----------------Title: Joint General
Manager
BANK OF MONTREAL
By: /s/ Lisa Megeaski -------------------
-----------------Title: Director
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED
By: /s/ Kiichiro Kondo ------------------
------------------Title: Senior Vice
President & Manager
CREDIT LYONNAIS CHICAGO BRANCH
By:
------------------------------------
Title: Vice President
Corporate Group Head
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH
By: /s/ Armund J. Schoen, Jr. ---------
---------------------------Title:
Vice President and
Deputy General Manager
<PAGE>
NATIONSBANK OF NORTH CAROLINA, N.A.
By: ---------------------------
--------- Title: Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By: ---------------------------
--------- Title:
SOCIETE GENERALE
By:
-------------------------------------
Title: Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/ Suraj P. Bhatia -----------------------
-------------Title: Senior Vice President
Manager, Corporate Finance II Dept.
THE TOKAI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Masaharu Muto -------------------------
-----------Title: Deputy General Manager
YASUDA TRUST AND BANKING COMPANY, LIMITED
By: /s/ Neil T. Chau --------------------------
----------Title: First Vice President
EXHIBIT 10.2
<PAGE> TO THE 1994
FORM 10-K
EXHIBIT G
TO THE
CREDIT AGREEMENT
AMENDED AND RESTATED HOLDINGS GUARANTEE
AMENDED AND RESTATED HOLDINGS GUARANTEE, restated as of July 7,1994,
made by GENERAL INSTRUMENT CORPORATION, a Delaware corporation (the
"GUARANTOR"), in favor of CHEMICAL BANK a New York banking corporation
("CHEMICAL"), as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT") for the banks and other financial institutions (the "BANKS") parties to
the Second Amended and Restated Credit Agreement, dated as of June 30, 1994 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among General Instrument Corporation of Delaware (formerly GI
Corporation; the "COMPANY"), the Banks, the Administrative Agent and Chemical,
Continental Bank N.A., Deutsche Bank AG, The Nippon Credit Bank, Ltd., The Bank
of Nova Scotia, The Toronto-Dominion Bank, National Westminster Bank PLC and The
Bank of Tokyo Trust Company, as co-agents for the Banks (in such capacity,
collectively, the "CO-AGENTS").
W I T N E S S E T H :
WHEREAS, the Guarantor owns all of the issued and outstanding
capital stock of the Company; and
WHEREAS, pursuant to the Credit Agreement, the Banks have severally
agreed to hold and make loans to, and the Issuing Banks have agreed to issue
and keep outstanding letters of credit for the account of, the Company upon the
terms and subject to the conditions set forth therein, such loans to be
evidenced by the Notes issued by the Company thereunder, INTER ALIA; and
WHEREAS, pursuant to the Existing Credit Agreement (as defined in
the Credit Agreement), Holdings has previously made that certain Holdings
Guarantee, dated as of June 30, 1993 (the "EXISTING GUARANTEE"); and
WHEREAS, it is a condition precedent to the obligation of the Banks
to hold and make their respective loans to, and the Issuing Banks to issue and
keep outstanding letters of credit for the account of, the Company under the
Credit Agreement that the Guarantor shall have executed and delivered a
Guarantee to the Administrative Agent for the ratable benefit of the Banks; and
WHEREAS, the Company has requested that the Existing Guarantee be
amended and restated upon the terms and subject to the conditions herein
contained; and
<PAGE>
2
WHEREAS, it is a condition precedent to the obligation of the Banks
to hold and make their respective loans to, and the Issuing Banks to issue and
keep outstanding letters of credit for the account of, the Company under the
Credit Agreement that the Existing Guarantee shall have been amended and
restated upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Banks and the Co-Agents to enter into the Credit
Agreement and to induce the Banks to hold and make their respective loans to,
and the Issuing Banks to issue and keep outstanding letters of credit for the
account of, the Company under the Credit Agreement, the Guarantor hereby agrees
that the Existing Guarantee shall be and is amended and restated in its entirety
as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein are so used as so defined.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Banks, the prompt and complete payment and performance by the Company when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by the Administrative Agent, the Banks or
the Co-Agents in enforcing, or obtaining advice of counsel in respect of, any of
their rights under this Guarantee. This Guarantee constitutes a guarantee of
payment when due and not of collection, and the Guarantor specifically agrees
that it shall not be necessary or required that the Administrative Agent, any
Co-Agent or any Bank exercise any right, assert any claim or demand or enforce
any remedy whatsoever against the Company (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder. This Guarantee shall
remain in full force and effect until the Obligations are paid in full, no
Letters of Credit are outstanding and the Commitments are terminated,
notwithstanding that from time to time prior thereto the Company may be free
from any Obligations.
The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent, any Bank or any
Co-Agent on account of its liability hereunder, it will notify the
Administrative Agent, such Bank or such Co-Agent in writing that such payment is
made under this Guarantee for such purpose. No payment or payments made by the
Company or any other Person or received or collected by the Administrative
Agent, any Bank or any Co-Agent from the Company or any other Person by virtue
of any action or proceeding or any set-off or appropriation or application, at
any time or
<PAGE>
3
from time to time, in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder which shall, notwithstanding any such payment or payments,
remain liable for the amount of the Obligations until the Obligations are paid
in full and the Commitments are terminated.
3. RIGHT OF SETOFF. Upon the occurrence and during the
continuance of any Event of Default specified in the Credit Agreement, 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 Guarantor,
any such notice being hereby waived by the Guarantor, to set off and appropriate
and apply any and all deposits (general or 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 to or for the credit or the account of the Guarantor,
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 Guarantor
hereunder and claims of every nature and description of the Administrative
Agent, such Bank or such Co-Agent against the Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, the Notes, any other
Credit Document, any Letter of Credit or otherwise, 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 Guarantor 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.
4. NO SUBROGATION. Notwithstanding any payment or payments made
by the Guarantor hereunder, or any setoff or application of funds of the
Guarantor by the Administrative Agent, any Bank or any Co-Agent, the Guarantor
shall not be entitled to be subrogated to any of the rights of the
Administrative Agent, any Bank or any Co-Agent against the Company or against
any collateral security or guarantee or right of offset held by the
Administrative Agent, any Bank or any Co-Agent for the payment of the
Obligations, nor shall the Guarantor seek any reimbursement from the Company in
respect of payments made by the Guarantor hereunder, and any such rights of
subrogation and reimbursement of the Guarantor are hereby waived.
<PAGE>
4
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor, and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Administrative Agent, any Bank or any Co-Agent may be rescinded by the
Administrative Agent, such Bank or such Co-Agent, and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent, any Bank or any Co-Agent,
and the Credit Agreement, any Note, any other Credit Document, any Letter of
Credit and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Banks (or the Required Banks, as the case may be) may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by the Administrative Agent, any Bank or any Co-Agent for the payment
of the Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent, any Bank nor any Co-Agent shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto.
6. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, any
Bank or any Co-Agent upon this Guarantee or acceptance of this Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee; and all dealings between
the Company or the Guarantor, on the one hand, and the Administrative Agent, the
Banks and the Co-Agents, on the other, shall likewise be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. The Guarantor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Company or the Guarantor with respect to the
Obligations. This Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or
enforceability of the Credit Agreement, any Note, any other Credit Document, any
Letter of Credit, any of the Obligations or any collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent, any Bank or any Co-Agent, (b) any
defense, setoff or counterclaim (other than a defense of payment or performance)
which may at any time be available to or be asserted by the Company against the
Administrative Agent, any Bank or any Co-Agent, or (c) any other circumstance
whatsoever
<PAGE>
5
(with or without notice to or knowledge of the Company or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Company for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance. When the Administrative
Agent is pursuing its rights and remedies hereunder against the Guarantor, the
Administrative Agent, any Bank or any Co-Agent may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Company or any other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and any failure by
the Administrative Agent, any Bank or any Co-Agent to pursue such other rights
or remedies or to collect any payments from the Company or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Company or any such other Person or
of any such collateral security, guarantee or right of offset, shall not relieve
the Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Administrative Agent, the Banks and the Co-Agents against the Guarantor.
7. REINSTATEMENT. This Guarantee shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be restored or
returned by the Administrative Agent, any Bank or any Co-Agent upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Company or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
8. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Administrative Agent without setoff or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants that:
(a) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and 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, assets,
<PAGE>
6
liabilities, net assets, properties, results of operations, value or
prospects of the Guarantor and its Subsidiaries taken as a whole;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee,
and has taken all necessary corporate action to authorize its execution,
delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual
Obligation of the Guarantor and will not result in or require the creation
or imposition of any Lien on any of the properties or revenues of the
Guarantor pursuant to any Requirement of Law or Contractual Obligation of
the Guarantor;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or
creditor of the Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or (ii) which
would have a material adverse effect on the business, financial condition,
assets, liabilities, net assets, properties, results of operations, value
or prospects of the Guarantor and its Subsidiaries taken as a whole;
(g) it has good record and marketable title in fee simple to or
valid leasehold interests in all its material real property, and good
title to all its other material property, and none of such property is
subject to any Lien of any nature whatsoever; and
(h) it 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 required to be filed by it, and has paid all taxes due on said
returns or extension
<PAGE>
7
requests or on any assessments made against it (other than those being
contested in good faith by appropriate proceedings for which adequate
reserves have been provided on its books).
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by it on each Borrowing Date by the
Company under the Credit Agreement on and as of such Borrowing Date as though
made hereunder on and as of such Borrowing Date.
10. COVENANTS. (a) The Guarantor will not, directly or
indirectly, prepay, purchase, redeem, retire, defease or otherwise acquire the
Convertible Junior Notes, or any principal thereof or interest thereon, except
(i) with the consent of the Required Banks, (ii) scheduled payments of principal
and interest made in accordance with the terms of the Convertible Junior Notes
and (iii) conversion of the Convertible Junior Notes to common stock of the
Guarantor in accordance with the terms of the Convertible Junior Indenture,
including, without limitation, Article Twelve thereof. The Guarantor will not
consent to any amendment, modification or supplement to or of any provision of
the Convertible Note Indenture or any Convertible Junior Notes.
(b) To the extent that interest payments from the Company on the
Subordinated Note exceed in the aggregate the amount of interest required to be
paid by the Guarantor to the holders of the Convertible Junior Notes on any
interest payment date for the Convertible Junior Notes, the Guarantor shall
contribute to the capital of the Company, immediately upon receipt thereof, the
amount of any such excess, net of income taxes (including payments to the
Company on account of tax sharing arrangements).
(c) Notwithstanding the release of the collateral consisting of the
capital stock of the Company and the Subordinated Note that was pledged under
the Holdings Pledge Agreement, the Guarantor will not, without the prior written
consent of the Administrative Agent, create, incur or permit to exist any Lien
or option in favor of, or any claim of any Person with respect to, any of the
Capital Stock of the Company or the Subordinated Note.
11. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
8
12. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. NO WAIVER; CUMULATIVE REMEDIES. Neither the Administrative
Agent, any Bank nor any Co-Agent shall by any act (except by a written
instrument pursuant to paragraph 14 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
covenants, terms, or conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of the Administrative Agent, any Bank or any
Co-Agent, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any Bank or any Co-Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent, such Bank or such Co-Agent would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
14. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING
LAW. None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Administrative Agent, PROVIDED that any provision of
this Guarantee may be waived by the Administrative Agent in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Administrative Agent, the Banks and the Co-Agents and their successors
and assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. NOTICES. All notices, requests and demands to or upon the
Guarantor or the Administrative Agent, either Co-Agent or any Bank to be
effective shall be in writing or 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, in the case of mail, three days after deposit in the
postal system, first class postage pre-paid, 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 to a party at the address provided for
such party in subsection 11.2 of the Credit Agreement or on the signature pages
hereto, as the case may be.
<PAGE>
9
16. AUTHORITY OF ADMINISTRATIVE AGENT. The Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Administrative
Agent, the Banks and the Co-Agents, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Guarantor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Banks with full and valid authority so to act or refrain from acting, and
the Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
17. INTEGRATION; ACKNOWLEDGEMENTS. The Guarantor hereby
confirms its agreement with subsections 11.10 and 11.12 of the Credit Agreement.
18. SUBMISSION TO JURISDICTION; WAIVERS. (a) THE GUARANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE, 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 AFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
GUARANTOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH
OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED
PURSUANT TO SECTION 15 HEREOF; AND
(iv) AGREES THAT NOTHING HEREIN SHALL 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.
<PAGE>
10
(b) EACH OF THE ADMINISTRATIVE AGENT, EACH CO-AGENT, EACH BANK AND
THE GUARANTOR UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
19. CONTINUATION OF GUARANTEE. This Guarantee (a) continues in
full force and effect, unimpaired and undischarged, the indebtedness created
under the Existing Guarantee by the Guarantor in favor of the Administrative
Agent and (b) constitutes an amendment and restatement of the Existing
Guarantee.
<PAGE>
11
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
GENERAL INSTRUMENT CORPORATION
By:
---------------------
Richard C. Smith
Title: Vice President, Treasurer,
Assistant Secretary and Director of
Taxes
Address: 181 West Madison Street
Chicago, Illinois 60602
Attn: Chief Financial
Officer
<PAGE>
EXHIBIT 10.3
TO THE 1994
FORM 10-K
EXHIBIT H
TO THE
CREDIT AGREEMENT
AMENDED AND RESTATED SUBSIDIARY GUARANTEE
AMENDED AND RESTATED SUBSIDIARY GUARANTEE, dated as of July 7, 1994,
by each of the corporations that are signatories hereto (the "GUARANTORS") in
favor of CHEMICAL BANK, a New York banking corporation, as Administrative Agent
(in such capacity, the "ADMINISTRATIVE AGENT") for the banks and other
financial institutions (the "BANKS") that are parties to the Credit Agreement
described below.
W I T N E S S E T H :
WHEREAS, General Instrument Corporation of Delaware (formerly GI
Corporation), a Delaware corporation (the "COMPANY"), is party to the Second
Amended and Restated Credit Agreement, dated as of June 30, 1994, with the
Administrative Agent, the Banks and Chemical Bank, Continental Bank N.A.,
Deutsche Bank AG, The Nippon Credit Bank, Ltd., The Bank of Nova Scotia, The
Toronto-Dominion Bank, National Westminster Bank PLC and The Bank of Tokyo Trust
Company, as co-agents (the "CO-AGENTS") (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, pursuant to the terms of the Credit Agreement and the other
Credit Documents (as defined below), the Banks have severally agreed to hold and
make certain Extensions of Credit (as defined below) to or for the benefit of
the Company;
WHEREAS, the Company owns, directly or indirectly, all of the issued
and outstanding stock of each of the Guarantors;
WHEREAS, pursuant to the Existing Credit Agreement (as defined in
the Credit Agreement), the Guarantors have previously made that certain
Subsidiary Guarantee, dated as of June 30, 1993 (the "EXISTING GUARANTEE");
WHEREAS, the proceeds of Extensions of Credit may be used in part to
enable the Company to make Valuable Transfers (as defined below) to some of the
Guarantors in connection with the operation of their respective businesses;
WHEREAS, each Guarantor will derive substantial direct and indirect
benefit from the holding and making of the Extensions of Credit;
WHEREAS, the obligation of the Banks to hold and make the Extensions
of Credit is conditioned upon, among other things, the execution and delivery by
each of the Guarantors of a
<PAGE>
2
Guarantee to the Administrative Agent for the ratable benefit of the Banks;
WHEREAS, the Company has requested that the Existing Guarantee be
amended and restated upon the terms and subject to the conditions herein
contained; and
WHEREAS, the obligation of the Banks to hold and make the Extensions
of Credit is conditioned upon, among other things, that the Existing Guarantee
shall have been amended and restated upon the terms and subject to the
conditions herein contained;
NOW, THEREFORE, in consideration of the premises and to induce the
Banks to enter into the Credit Agreement and to hold and make Extensions of
Credit, each Guarantor hereby agrees with and for the benefit of the
Administrative Agent, the Co-Agents and the Banks that the existing Guarantee
shall be and is amended and restated in its entirety as follows:
1. DEFINED TERMS. As used in this Guarantee, terms defined in
the Credit Agreement are used herein as therein defined, and the following terms
shall have the following meanings:
"ADJUSTED NET WORTH" of any Guarantor shall mean, as of any
Determination Date for such Guarantor, the excess of (i) the amount of the
"present fair saleable value" of the assets as of the such Determination
Date for such Guarantor, over (ii) the amount of all "liabilities of such
Guarantor, contingent or otherwise", as of the Determination Date for such
Guarantor, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors.
"DETERMINATION DATE" shall mean, with respect to any Guarantor, the
earlier of (a) the date of commencement of a case under Title 11 of the
United States Code in which such Guarantor is a debtor and (b) the date
enforcement hereunder is sought with respect to such Guarantor.
"EXTENSION OF CREDIT" shall mean (i) all loans or advances made to the
Company under any Credit Document, (ii) all letters of credit issued for
the account of the Company under any Credit Document, (iii) all other
extensions of credit to or for the benefit of the Company under any Credit
Document and (iv) to the extent not otherwise included in the foregoing,
all other extensions of credit to or for the benefit of the Company under
any Credit Document.
"MAXIMUM GUARANTEED AMOUNT" for any Guarantor shall mean, as of the
Determination Date for such Guarantor, the sum of (i) an amount equal to
the sum of each Extension of Credit (or portion thereof) the proceeds of
which are used to make a Valuable Transfer (as hereinafter defined) to such
<PAGE>
3
Guarantor PLUS interest on such amount at the rate specified in the Credit
Agreement PLUS (ii) the greater of (I) ninety-five percent (95%) of the
Adjusted Net Worth of such Guarantor at the date of the execution of this
Guarantee before giving effect to any Extensions of Credit made on such
date and (II) ninety-five percent (95%) of the Adjusted Net Worth of such
Guarantor at the Determination Date for such Guarantor. For purposes
hereof, the proceeds of an Extension of Credit (or portion thereof) are
considered to be used to make a Valuable Transfer to a Guarantor if such
proceeds are used to (i) make a loan, advance or capital contribution to
such Guarantor, (ii) acquire from such Guarantor debt securities or other
obligations of such Guarantor, (iii) acquire property, any interest in
which is transferred to such Guarantor (but only to the extent of the
economic benefit to such Guarantor of the interest so transferred), (iv)
purchase equity securities of such Guarantor or (v) otherwise confer,
directly or indirectly, an economic benefit on such Guarantor (but only to
the extent of such benefit).
2. GUARANTEE. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, the Co-Agents and the Banks and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment by the Company when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations, and each Guarantor further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by the Administrative Agent, the
Co-Agents or any Bank in enforcing, or obtaining advice of counsel in respect
of, any rights with respect to, or collecting, any or all of the Obligations
and/or enforcing any rights with respect to, or collecting against, such
Guarantor under this Guarantee; PROVIDED, HOWEVER, that, anything herein or
in any other Credit Document to the contrary notwithstanding, the maximum
liability of each Guarantor hereunder and under the other Credit Documents shall
in no event exceed such Guarantor's Maximum Guaranteed Amount as determined at
the Determination Date for such Guarantor; and FURTHER PROVIDED, that the
Maximum Guaranteed Amount for each Guarantor hereunder shall in no event exceed
the amount which can be guaranteed by such Guarantor under applicable federal
and state laws relating to the insolvency of debtors.
(b) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the Maximum Guaranteed Amount of such Guarantor or of
all of the Guarantors without impairing this Guarantee or affecting the rights
and remedies of the Administrative Agent, the Co-Agents and the Banks hereunder.
<PAGE>
4
(c) No payment or payments made by the Company, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent, the Co-Agents or any Bank from the Company, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the Obligations, remain
liable for the Obligations up to its Maximum Guaranteed Amount until the
Obligations are paid in full and the Commitments are terminated.
(d) Each Guarantor agrees that whenever, at any time, or from time
to time, it shall make any payment to the Administrative Agent, the Co-Agents or
any Bank on account of its liability hereunder, it will notify the
Administrative Agent in writing that such payment is made under this Guarantee
for such purpose.
3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to
the extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Paragraph 5 hereof. The
provisions of this Paragraph 3 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent, the Co-Agents and the
Banks, and each Guarantor shall remain liable to the Administrative Agent, the
Co-Agents and the Banks for the full amount guaranteed by such Guarantor
hereunder.
4. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default specified in the Credit Agreement, each
Guarantor hereby irrevocably authorizes each Bank at any time and from time to
time without notice to such Guarantor or any other Guarantor, any such notice
being expressly waived by each Guarantor, to set-off and appropriate and apply
any and all deposits (general or 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 such Bank to or for the credit or the
account of such Guarantor, or any part thereof, in such amounts as such Bank may
elect, against and on account of the obligations and liabilities of such
Guarantor to such Bank
<PAGE>
5
hereunder and claims of every nature and description of such Bank against such
Guarantor, in any currency, whether arising hereunder, under the Credit
Agreement, the Notes, the other Credit Documents, the Letters of Credit or
otherwise, as such Bank may elect, whether or not the Administrative Agent, any
Co-Agents or any Bank has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. Each Bank
agrees to notify such Guarantor promptly of any such set-off and the application
made by such Bank, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Bank
under this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Bank may have.
5. NO SUBROGATION. Notwithstanding any payment or payments made
by any of the Guarantors hereunder or any set-off or application of funds of any
of the Guarantors by any Bank, no Guarantor shall be entitled to be subrogated
to any of the rights of the Administrative Agent, the Co-Agents or any Bank
against the Company or any other Guarantor or any collateral security or
guarantee or right of offset held by any Bank for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Administrative Agent, the Co-Agents and the Banks by the Company on account of
the Obligations are paid in full, no Letters of Credit are outstanding and the
Commitments are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, any Letter of Credit shall be outstanding or the
Commitments shall not have been terminated, such amount shall be held by such
Guarantor in trust for the Administrative Agent, the Co-Agents and the Banks,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.
6. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent, the Co-Agents or any Bank may be
rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for
<PAGE>
6
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent, the Co-Agents or any Bank
and the Credit Agreement, the Notes, the other Credit Documents, any Letter of
Credit and any other collateral security document or other guarantee or document
in connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent, the Co-Agents and/or any Bank may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Administrative Agent, the Co-Agents or
any Bank for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent, the Co-Agents nor
any Bank shall have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Obligations or for this
Guarantee or any property subject thereto. When making any demand hereunder
against any of the Guarantors, the Administrative Agent, the Co-Agents or any
Bank may, but shall be under no obligation to, make a similar demand on the
Company or any other Guarantor or guarantor, and any failure by the
Administrative Agent, the Co-Agents or any Bank to make any such demand or to
collect any payments from the Company or any such other Guarantor or guarantor
or any release of the Company or such other Guarantor or guarantor shall not
relieve any of the Guarantors in respect of which a demand or collection is not
made or any of the Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent, the
Co-Agents or any Bank against any of the Guarantors. For the purposes hereof
"demand" shall include the commencement and continuance of any legal
proceedings.
7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Co-Agents or any Bank upon this Guarantee or acceptance of this Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between the Company or any of the
Guarantors and the Administrative Agent, the Co-Agents or any Bank shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guarantee. Each Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Company or
any of the Guarantors with respect to the Obligations. Each
<PAGE>
7
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, the
Notes, the Letters of Credit, any of the other Credit Documents, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent, the Co-Agents or any Bank, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Company against the Administrative
Agent, the Co-Agents or any Bank, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Company or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Company for the Obligations, or of such Guarantor under this
Guarantee, in bankruptcy or in any other instance. When pursuing its rights and
remedies hereunder against any Guarantor, the Administrative Agent, each
Co-Agent and any Bank may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Company or any other Person or
against any collateral security or guarantee for the Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent, the
Co-Agents or any Bank to pursue such other rights or remedies or to collect any
payments from the Company or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Company or any such other Person or any such collateral security,
guarantee or right of offset, shall not relieve such Guarantor of any liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent,
the Co-Agents or any Bank against such Guarantor. This Guarantee shall remain
in full force and effect and be binding in accordance with and to the extent of
its terms upon each Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Administrative Agent, each Co-Agent and the Banks,
and their respective successors, indorsees, transferees and assigns, until all
the Obligations and the obligations of each Guarantor under this Guarantee shall
have been satisfied by payment in full, no Letter of Credit shall remain
outstanding and the Commitments shall be terminated, notwithstanding that from
time to time during the term of the Credit Agreement the Company may be free
from any Obligations.
8. REINSTATEMENT. This Guarantee shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be restored or
returned by the Administrative Agent, the Co-Agents or any
<PAGE>
8
Bank upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
of the Company or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
9. PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the office of the Administrative Agent located
at 270 Park Avenue, New York, New York 10017, U.S.A.
10. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
represents and warrants that:
(a) such Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction set forth
opposite its name on Schedule V of the Credit Agreement and 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, assets, liabilities, net assets, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as
a whole;
(b) such Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of such Guarantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual
Obligation of such Guarantor (not waived by the other parties thereto) and
will not result in or require the creation or imposition of any Lien on any
of the properties or revenues of such Guarantor pursuant to any Requirement
of Law or Contractual Obligation of such Guarantor;
<PAGE>
9
(e) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of
such Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or (ii) which
would have a material adverse effect on the business, financial condition,
assets, liabilities, net assets, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on each Borrowing
Date by the Company under the Credit Agreement on and as of such Borrowing Date
as though made hereunder on and as of such Borrowing Date.
11. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. NO WAIVER; CUMULATIVE REMEDIES. Neither the Administrative
Agent, the Co-Agents nor any Bank shall by any act (except by a written
instrument pursuant to paragraph 14 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, the Co-Agents or any Bank,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent, the Co-Agents
or any Bank of any right or remedy hereunder on any
<PAGE>
10
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Co-Agents or such Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
14. INTEGRATION; WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS;
GOVERNING LAW. This Guarantee represents the agreement of each Guarantor with
respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent, the Co-Agents or any Bank relative
to the subject matter hereof not reflected herein. None of the terms or
provisions of this Guarantee may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by each Guarantor and the
Administrative Agent, PROVIDED that any provision of this Guarantee may be
waived by the Administrative Agent, the Co-Agents and the Banks in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Guarantee shall be binding
upon the successors and assigns of each Guarantor and shall inure to the benefit
of the Administrative Agent, the Co-Agents and the Banks and their respective
successors and assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. NOTICES. All notices, requests and demands to or upon the
Guarantors or the Administrative Agent, the Co-Agents or any Bank to be
effective shall be in writing or 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, in the case of mail, three days after deposit in the
postal system, first class postage pre-paid, or, in the case of telecopy notice,
confirmation of receipt received, or, in the case of telex notice, when sent,
answerback received, addressed to a party at the address provided for such party
in subsection 11.2 of the Credit Agreement or Schedule I hereto, as the case may
be.
16. COUNTERPARTS. This Guarantee may be executed by one or more
of the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. ACKNOWLEDGEMENT. Each Guarantor hereby confirms its
agreement with subsections 11.10 and 11.12 of the Credit Agreement.
18. SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH GUARANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
<PAGE>
11
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO ANY CREDIT DOCUMENT, 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 AFFECTED BY MAILING A COPY THEREOF, BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH
GUARANTOR AT ITS ADDRESS SET FORTH ON SCHEDULE I HERETO OR AT SUCH OTHER
ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT
TO SECTION 15 HEREOF;
(iv) AGREES THAT NOTHING HEREIN SHALL 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 OF THE ADMINISTRATIVE AGENT, EACH CO-AGENT, EACH BANK AND EACH
GUARANTOR HEREBY UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
19. CONTINUATION OF GUARANTEE. This Guarantee (a) continues in
full force and effect, unimpaired and undischarged, the indebtedness created
under the Existing Guarantee made by the Guarantors in favor of the
Administrative Agent and (b) constitutes an amendment and restatement of the
Existing Guarantee.
<PAGE>
12
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
CABLE/HOME COMMUNICATION CORP.
By____________________
Richard C. Smith
Title: Vice President
COMMSCOPE, INC.
By
Richard C. Smith
Title: Secretary
<PAGE>
13
SCHEDULE I
ADDRESSES OF GUARANTORS
The address of each Guarantor is:
c/o General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of February 15, 1995, by
and between GENERAL INSTRUMENT CORPORATION, a Delaware
corporation (the "Company"), GENERAL INSTRUMENT CORPORATION OF
DELAWARE, a Delaware corporation and a wholly-owned subsidiary of
the Company ("GI Sub"), and the director and/or officer of the
Company whose name appears on the signature page of this
Agreement ("Indemnitee").
RECITALS
A. Highly competent persons are becoming more reluctant
to serve publicly-held corporations as directors, officers, or in
other capacities unless they are provided with reasonable
protection through insurance or indemnification against risks of
claims and actions against them arising out of their service to
and activities on behalf of the corporations.
B. The Board of Directors of the Company (the "Board" or
the "Board of Directors") has determined that the Company should
act to assure its directors and officers that there will be
increased certainty of such protection in the future.
C. It is reasonable, prudent and necessary for the
Company contractually to oblige itself to indemnify such persons
to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue
concern that they will not be so indemnified.
D. Indemnitee is willing to serve, continue to serve,
and to take on additional service for or on behalf of the Company
on the condition that Indemnitee be so indemnified.
E. In consideration of the capital contribution made by
the Company to GI Sub from the net proceeds of a public offering
of common stock, par value $.01 per share, of the Company, and
the other benefits received and to be received by GI Sub in
connection with actions taken and to be taken by the Board, GI
Sub has determined that it is in the best interest of GI Sub for
the reasons set forth above to be a party to this Agreement and
to provide indemnification to the directors and officers of the
Company in connection with their service to and activities on
behalf of the Company, GI Sub and its subsidiaries.
F. GI Sub acknowledges that for purposes of this
Agreement the directors and officers of the Company who enter
into this Agreement are serving in such capacities at the request
of GI Sub.
G. GI Sub further acknowledges that such directors and
officers are willing to serve, continue to serve, and to take on
additional service for or on behalf of the Company, and thereby
benefitting GI Sub and its subsidiaries, on the condition that GI
Sub enter into, and provide indemnification pursuant to, this
Agreement.
AGREEMENT
In consideration of the premises and the covenants
contained herein, the Company, GI Sub and Indemnitee do hereby
covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any corporation, partnership,
joint venture, trust or other enterprise in respect of which the
Indemnitee is or was serving as a director, officer, advisory
director or Board Committee member at the request of the Company
or GI Sub, and including, but not limited to, any employee
benefit plan of the Company or any of the foregoing.
(b) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the Proceeding in
respect of which indemnification is being sought by Indemnitee.
(c) "Expenses" shall include all reasonable attorneys'
fees and costs, retainers, court costs, transcripts, fees of
experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service fees and all other disbursements or expenses customarily
incurred in connection with asserting or defending claims.
(d) "Independent Counsel" shall mean a law firm or lawyer
that neither is presently nor in the past five years has been
retained to represent: (i) the Company, GI Sub or Indemnitee in
any matter material to any such party or (ii) any other party to
the Proceeding giving rise to a claim for indemnification
hereunder.
Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any firm or person who, under the applicable
standards of professional conduct then prevailing, would have a
conflict of interest in representing any of the Company, GI Sub
or Indemnitee in an action to determine Indemnitee's right to
indemnification under this Agreement. All Expenses of the
Independent Counsel incurred in connection with acting pursuant
to this Agreement shall be borne by the Company.
(e) "Losses" shall mean all losses, claims, liabilities,
judgments, fines and amounts paid in settlement in connection
with any Proceeding.
(f) "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative; provided, however,
that the term "Proceeding" shall include any action instituted by
an Indemnitee (other than an action to enforce indemnification
rights under this Agreement) only if such action is authorized by
the Board of Directors.
2. Service by Indemnitee. Indemnitee agrees to begin or
continue to serve the Company as a director or officer.
Notwithstanding anything contained herein, this Agreement shall
not create a contract of employment between the Company and
Indemnitee and the termination of Indemnitee's relationship with
the Company or an Affiliate by either party hereto shall not be
restricted by this Agreement.
3. Indemnification. The Company and GI Sub jointly and
severally agree to indemnify Indemnitee for, and hold Indemnitee
harmless from and against, any Losses or Expenses at any time
incurred by or assessed against Indemnitee arising out of or in
connection with the service of Indemnitee as an officer,
director, advisory director or Board Committee member of the
Company or of an Affiliate (collectively referred to as an
"officer or director of the Company") to the fullest extent
permitted by the laws of the State of Delaware in effect on the
date hereof or as such laws may from time to time hereafter be
amended to increase the scope of such permitted indemnification.
Without diminishing the scope of the indemnification provided by
this Section 3, the rights of indemnification of Indemnitee
provided hereunder shall include but shall not be limited to
those rights set forth hereinafter.
4. Action or Proceeding Other Than an Action by or in
the Right of the Company or GI Sub. Indemnitee shall be entitled
to the indemnification rights provided herein if Indemnitee is a
person who was or is made a party or is threatened to be made a
party to any pending, completed or threatened Proceeding, other
than an action by or in the right of the Company or GI Sub, as
the case may be, by reason of (a) the fact that Indemnitee is or
was an officer or director of the Company or any other entity
which Indemnitee is or was serving at the request of the Company
or GI Sub, as the case may be, or (b) anything done or not done
by Indemnitee in any such capacity. Pursuant to this Section,
Indemnitee shall be indemnified against Losses or Expenses
incurred by Indemnitee or on Indemnitee's behalf in connection
with any Proceeding, if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to
the best interests of the Company or GI Sub, as the case may be,
and, with respect to any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.
5. Actions by or in the Right of the Company.
Indemnitee shall be entitled to the indemnification rights
provided herein if Indemnitee is a person who was or is made a
party or is threatened to be made a party to any pending,
completed or threatened Proceeding brought by or in the right of
the Company to procure a judgment in its favor by reason of (a)
the fact that Indemnitee is or was an officer or director of the
Company or any other entity which Indemnitee is or was serving at
the request of the Company or GI Sub, as the case may be, or (b)
anything done or not done by Indemnitee in any such capacity.
Pursuant to this Section Indemnitee shall be indemnified against
Losses or Expenses incurred by Indemnitee or on Indemnitee's
behalf in connection with any Proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company or GI Sub.
Notwithstanding the foregoing provisions of this Section, no such
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
Indemnitee to the Company or GI Sub; provided, however, that in
such event such indemnification shall nevertheless be made by the
Company or GI Sub, or both, 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 equitable under the
circumstances.
6. Indemnification for Costs, Charges and Expenses of
Party Who is Wholly or Partly Successful. Notwithstanding any
provision of this Agreement, to the extent that Indemnitee has
been wholly successful on the merits or otherwise absolved in any
Proceeding on any claim, issue or matter, Indemnitee shall be
indemnified against all Expenses incurred by Indemnitee or on
Indemnitee's behalf in connection therewith. If 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 Company and GI
Sub jointly and severally agree to indemnify Indemnitee to the
maximum extent permitted by law, against all Losses and Expenses
incurred by Indemnitee in connection with each successfully
resolved claim, issue or matter. For purposes of this Section
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.
7. Payment for Expenses of a Witness. Notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee is, by reason of the fact that Indemnitee is or was an
officer or director of the Company or any other entity which
Indemnitee is or was serving at the request of the Company or GI
Sub, as the case may be, a witness in any Proceeding, the Company
and GI Sub jointly and severally agree to pay to Indemnitee all
Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection therewith.
8. Advancement of Expenses and Costs. All Expenses
incurred by or on behalf of Indemnitee (or reasonably expected by
Indemnitee to be incurred by Indemnitee within three months) in
connection with any Proceeding shall be paid by the Company or GI
Sub in advance of the final disposition of such Proceeding within
twenty days after the receipt by the Company or GI Sub of a
statement or statements from Indemnitee requesting from time to
time such advance or advances. Indemnitee's entitlement to such
advancement of Expenses shall include those incurred in
connection with any Proceeding by Indemnitee seeking an
adjudication or award in arbitration pursuant to this Agreement.
Such statement or statements shall reasonably evidence such
expenses incurred (or reasonably expected to be incurred) by
Indemnitee in connection therewith and shall include or be
accompanied by a written undertaking by or on behalf of
Indemnitee to repay such amount if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified
therefor pursuant to the terms of this Agreement.
9. Procedure for Determination of Entitlement to
Indemnification. (a) When seeking indemnification under this
Agreement (which shall not include in any case the right of
Indemnitee to receive payments pursuant to Section 7 and Section
8 hereof, which shall not be subject to this Section 9),
Indemnitee shall submit a written request for indemnification to
the Company and GI Sub. Such request shall include documentation
or information which is reasonably necessary for the Company and
GI Sub to make a determination of Indemnitee's entitlement to
indemnification hereunder and which is reasonably available to
Indemnitee. Determination of Indemnitee's entitlement to
indemnification shall be made not later than 30 days after
receipt by the Company and GI Sub of Indemnitee's written
request for indemnification. The Secretary of the Company shall,
promptly upon receipt of Indemnitee's request for
indemnification, advise the Board that Indemnitee has made such
request for indemnification.
(b) The entitlement of Indemnitee to indemnification
under this Agreement shall be determined in the specific case by
a majority vote of Disinterested Directors, even though less than
a quorum provided, however, that the determination shall be made
by Independent Counsel if there are no Disinterested Directors,
or if the Disinterested Directors so direct, or if the payment
under this Agreement is to be made by GI Sub.
(c) In the event the determination of entitlement is to
be made by Independent Counsel, such Independent Counsel shall be
selected by the Board and the Board of Directors of GI Sub and
approved by Indemnitee. Upon failure of the Board and the Board
of Directors of GI Sub to so select such Independent Counsel or
upon failure of Indemnitee to so approve, such Independent
Counsel shall be selected by the American Arbitration Association
in New York, New York or such other person as such Association
shall designate to make such selection.
(d) If the determination made pursuant to Section 9(b) is
that Indemnitee is not entitled to indemnification to the full
extent of Indemnitee's request, Indemnitee shall have the right
to seek entitlement to indemnification in accordance with the
procedures set forth in Section 10 hereof.
(e) If the person or persons empowered pursuant to
Section 9(b) hereof to make a determination with respect to
entitlement to indemnification shall have failed to make the
requested determination within 90 days after receipt by the
Company and GI Sub of such request, the requisite determination
of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be absolutely entitled to such
indemnification, absent (i) misrepresentation by 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 Indemnitee to indemnification hereunder except as may be
specifically provided herein, or create a presumption that
Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company or GI Sub, as the case may be, or
create a presumption that (with respect to any criminal action or
proceeding) Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
(g) For purposes of any determination of good faith
hereunder, Indemnitee shall be deemed to have acted in good faith
if in taking such action Indemnitee relied on the records or
books of account of the Company or an Affiliate, including
financial statements, or on information supplied to Indemnitee by
the officers of the Company or an Affiliate in the course of
their duties, or on the advice of legal counsel for the Company
or an Affiliate or on information or records given or reports
made to the Company or an Affiliate by an independent certified
public accountant or by an appraiser or other expert selected
with reasonable care by the Company or an Affiliate. The
provisions of this Section 9(g) 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 this Agreement.
(h) The knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Company or an
Affiliate shall not be imputed to Indemnitee for purposes of
determining the right to indemnification under this Agreement.
10. Remedies in Cases of Determination not to Indemnify
or to Advance Expenses. (a) In the event that (i) a
determination is made that Indemnitee is not entitled to
indemnification hereunder, (ii) advances are not made pursuant to
Section 8 hereof or (iii) payment has not been timely made
following a determination of entitlement to indemnification
pursuant to Section 9 hereof, Indemnitee shall be entitled to
seek a final adjudication in an appropriate court of the State of
Delaware or any other court of competent jurisdiction of
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 9 hereof, in
whole or in part, that Indemnitee is not entitled to
indemnification, any such judicial proceeding or arbitration
shall be made de novo and Indemnitee shall not be prejudiced by
reason of any such prior determination that Indemnitee is not
entitled to indemnification.
(c) If a determination is made or deemed to have been
made pursuant to the terms of Section 9 or 10 hereof that
Indemnitee is entitled to indemnification, the Company and GI Sub
shall be bound by such determination in any judicial proceeding
or arbitration in the absence of (i) a misrepresentation of a
material fact by Indemnitee or (ii) a final judicial
determination that all or any part of such indemnification is
expressly prohibited by law.
(d) The Company, GI Sub and Indemnitee agree that they
shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and
enforceable. The Company, GI Sub and Indemnitee further agree to
stipulate in any such court that the Company, GI Sub and
Indemnitee are bound by all the provisions of this Agreement and
are precluded from making any assertion to the contrary.
(e) To the extent deemed appropriate by the court,
interest shall be paid by the Company or GI Sub, or both, to
Indemnitee at a reasonable interest rate, for amounts which the
Company or GI Sub, or both, indemnifies the Indemnitee.
11. Expenses Incurred by Indemnitee to Enforce this
Agreement. All Expenses incurred by Indemnitee in connection
with the preparation and submission of Indemnitee's request for
indemnification hereunder shall be jointly and severally borne by
the Company and GI Sub. In the event that Indemnitee is a party
to or intervenes in any proceeding in which the validity or
enforceability of this Agreement is at issue or seeks an
adjudication to enforce Indemnitee's rights under, or to recover
damages for breach of, this Agreement, Indemnitee, if Indemnitee
prevails in whole in such action, shall be entitled to recover
from the Company and GI Sub and shall be jointly and severally
indemnified by the Company and GI Sub against, any Expenses
incurred by Indemnitee. If it is determined that Indemnitee is
entitled to indemnification for part (but not all) of the
indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably
prorated among the claims, issues or matters for which the
Indemnitee is entitled to indemnification and for such claims,
issues or matters for which the Indemnitee is not so entitled.
12. Non-Exclusivity. The rights of indemnification and
to receive advances as provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at
any time be entitled under applicable law, provision of a
certificate of incorporation or by-laws, any agreement, a vote of
stockholders or a resolution of directors or otherwise. No
amendment, alteration, rescission or replacement of this
Agreement or any provision hereof shall be effective as to
Indemnitee with respect to any action taken or omitted by such
Indemnitee in Indemnitee's position with the Company or an
Affiliate or any other entity which Indemnitee is or was serving
at the request of the Company or GI Sub prior to such amendment,
alteration, rescission or replacement.
13. Duration of Agreement. This Agreement shall apply to
any claim asserted and any Expenses incurred in connection with
any claim asserted on or after the effective date of this
Agreement and shall continue until and terminate upon the later
of: (a) 10 years after Indemnitee has ceased to occupy any of
the positions or have any of the relationships described in
Sections 3, 4 or 5 of this Agreement; or (b) the final
termination of all pending or threatened Proceedings of the kind
described herein with respect to Indemnitee. This Agreement
shall be binding upon the Company and GI Sub and their respective
successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's spouse, assigns, heirs, devisee,
executors, administrators or other legal representatives.
14. Maintenance of D&O Insurance. (a) The Company and GI
Sub each hereby covenants and agrees with Indemnitee that, so
long as Indemnitee shall continue to serve as a director or
officer of the Company and thereafter so long as Indemnitee shall
be subject to any possible claim or threatened, pending or
completed Proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was an officer or director
of the Company or any other entity which Indemnitee was serving
at the request of the Company or GI Sub, the Company and GI Sub
shall maintain in full force and effect (i) the directors' and
officers' liability insurance issued by the insurer and having
the policy amount and deductible as currently in effect with
respect to directors and officers of the Company or any of its
subsidiaries and (ii) any replacement or substitute policies
issued by one or more reputable insurers providing in all
respects coverage at least comparable to and in the same amount
as that currently provided under such existing policy
(collectively, "D&O Insurance").
(b) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the
same rights and benefits, subject to the same limitations, as are
accorded to the Company's directors or officers most favorably
insured by such policy.
(c) The Company and GI Sub shall have no obligation to
maintain D&O Insurance if the Company and GI Sub determine in
good faith that such insurance is not reasonably available, the
premium costs for such insurance is disproportionate to the
amount of coverage provided, or the coverage provided by such
insurance is limited by exclusions so as to provide an
insufficient benefit.
15. Severability. Should any part, term or condition
hereof be declared illegal or unenforceable or in conflict with
any other law, the validity of the remaining portions or
provisions of this Agreement shall not be affected thereby, and
the illegal or unenforceable portions of the Agreement shall be
and hereby are redrafted to conform with applicable law, while
leaving the remaining portions of this Agreement intact.
16. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
document.
17. Headings. Section headings are for convenience only
and do not control or affect meaning or interpretation of any
terms or provisions of this Agreement.
18. Modification and Waiver. No supplement, modification
or amendment of this Agreement shall be binding unless executed
in writing by each of the parties hereto.
19. No Duplicative Payment. The Company and GI Sub shall
not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under
this Agreement, any insurance policy, contract, agreement or
otherwise.
20. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing
(including telecopier or similar writing) and shall be deemed to
have been given at the time when mailed in a registered or
certified postpaid envelope in any general or branch office of
the United States Postal Service, or sent by Federal Express or
other similar overnight courier service, addressed to the address
of the parties stated below or to such changed address as such
party may have fixed by notice or, if given by telecopier, when
such telecopy is transmitted and the appropriate answerback is
received.
(a) If to Indemnitee, to the address appearing on the
signature page hereof.
(b) If to the Company to:
General Instrument Corporation
181 West Madison, 49th Floor
Chicago, IL 60602
Attention: General Counsel
(c) If to GI Sub to:
General Instrument Corporation of Delaware
181 West Madison, 49th Floor
Chicago, IL 60602
Attention: General Counsel
21. GOVERNING LAW. THE PARTIES AGREE THAT THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
22. Entire Agreement. This Agreement constitutes the
entire understanding between the parties and supersedes all
proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications
between the parties relating to the subject matter of this
Agreement. This Agreement may not be amended or otherwise
modified except in writing duly executed by all of the parties.
A waiver by any party of any breach or violation of this
Agreement shall not be deemed or construed as a waiver or any
subsequent breach or violation thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
GENERAL INSTRUMENT CORPORATION
By
---------------------------
Name:
Title:
GENERAL INSTRUMENT CORPORATION
OF DELAWARE
By
---------------------------
Name:
Title:
INDEMNITEE
------------------------------
Address:
------------------------------
------------------------------
------------------------------
EXHIBIT 10.14
GENERAL INSTRUMENT CORPORATION
ANNUAL INCENTIVE PLAN
1. Purpose
The purpose of the Annual Incentive Plan is to
enhance General Instrument Corporation's ability to attract,
motivate, reward and retain key employees, to strengthen their
commitment to the success of the Company and to align their
interests with those of the Company's stockholders by providing
additional compensation to designated key employees of the
Company based on the achievement of performance objectives. To
this end, the Annual Incentive Plan provides a means of annually
rewarding participants primarily based on the performance of the
Company and its divisions and secondarily based on the
achievement of personal performance objectives. The adoption of
this Plan as it relates to the CEO is subject to the approval of
the stockholders of the Company.
2. Definitions
(a) "Adjusted Operating Income", for any
Performance Period, shall mean the Business Unit's operating
income as reflected in its final consolidated financial
statements for such Performance Period.
(b) "Award" shall mean the incentive award earned
by a Participant under the Plan for any Performance Period.
(c) "Base Salary" shall mean the Participant's
annual base salary, based on the Company's Form 1153. Annual
base salary does not include Awards under the Plan, long-term
incentive awards, imputed income from such programs as executive
life insurance or nonrecurring earnings such as moving expenses
and is based on salary earnings before reductions for such items
as contributions under Section 401(k) of the Internal Revenue
Code of 1986, as amended, and Company-sponsored deferred
compensation arrangements.
(d) "Beneficial Owner", "Beneficially Owned" and
"Beneficially Owning" shall have the meanings applicable under
Rule 13d-3 promulgated under the 1934 Act.
(e) "Board" shall mean the Board of Directors of
the Company.
(f) "Business Plan", for any Performance Period,
shall mean the Business Unit's final business plan for such
Performance Period, submitted to and approved by the CEO, or such
other business plan as may be established by the Committee.
(g) "Business Plan Operating Income", for any
Performance Period, shall mean the Business Unit's operating
income as reflected in the Business Plan for such Performance
Period.
(h) "Business Unit" shall mean either the Company
or a Division, as applicable. For Participants employed at
Corporate Division, the Company shall be the Business Unit.
(i) "CEO" shall mean the Chief Executive Officer
of the Company.
(j) "Change of Control" shall mean any of the
following:
(i) the acquisition by any Person, other than
Instrument Partners or Forstmann Little & Co. Subordinated Debt
and Equity Management Buyout Partnership-IV or any of their
affiliates (collectively, the "Forstmann Little Companies") of
Beneficial Ownership of Voting Securities which, when added to
the Voting Securities then Beneficially Owned by such Person,
would result in such Person Beneficially Owning (A) 33% or more
of the combined Voting Power of the Company's then outstanding
Voting Securities and (B) a number of Voting Securities greater
than the aggregate number of Voting Securities then Beneficially
Owned by the Forstmann Little Companies; provided, however, that
for purposes of this paragraph (i), a Person shall not be deemed
to have made an acquisition of Voting Securities if such Person:
(1) acquires Voting Securities as a result of a stock split,
stock dividend or other corporate restructuring in which all
stockholders of the class of such Voting Securities are treated
on a pro rata basis; (2) acquires the Voting Securities directly
from the Company; (3) becomes the Beneficial Owner of 33% or more
of the combined Voting Power of the Company's then outstanding
Voting Securities solely as a result of the acquisition of Voting
Securities by the Company or any Subsidiary which, by reducing
the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by such Person,
provided that if (x) a Person would own at least such percentage
as a result of the acquisition by the Company or any Subsidiary
and (y) after such acquisition by the Company or any Subsidiary,
such Person acquires Voting Securities, then an acquisition of
Voting Securities shall have occurred; (4) is the Company or any
corporation or other Person of which a majority of its voting
power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Controlled Entity"); or
(5) acquires Voting Securities in connection with a "Non-Control
Transaction" (as defined in paragraph (iii) below); or
(ii) the individuals who, as of the Effective
Date, are members of the Board (the "Incumbent Board") cease for
any reason to constitute at least two-thirds of the Board;
provided, however, that if either the election of any new
director or the nomination for election of any new director by
the Company's stockholders was approved by a vote of at least
two-thirds of the Incumbent Board prior to such election or
nomination, such new director shall be considered as a member of
the Incumbent Board; provided further, however, that no
individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(iii) approval by stockholders of the Company
of:
(A) a merger, consolidation or
reorganization involving the Company (a "Business Combination"),
unless
(1) the stockholders of the
Company, immediately before the Business Combination, own,
directly or indirectly immediately following the Business
Combination, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting
from the Business Combination (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before the Business Combination,
and
(2) the individuals who were
members of the Incumbent Board immediately prior to the execution
of the agreement providing for the Business Combination
constitute at least a majority of the members of the Board of
Directors of the Surviving Corporation, and
(3) no Person (other than the
Company or any Controlled Entity, a trustee or other fiduciary
holding securities under one or more employee benefit plans or
arrangements (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Controlled Entity,
or any Person who, immediately prior to the Business Combination,
had Beneficial Ownership of 33% or more of the then outstanding
Voting Securities) has Beneficial Ownership of 33% or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities (a Business Combination satisfying
the conditions of causes (1), (2) and (3) of this subparagraph
(A) shall be referred to as a "Non-Control Transaction");
(B) a complete liquidation or
dissolution of the Company; or
(C) the sale or other disposition of all
or substantially all of the assets of the Company (other than a
transfer to a Controlled Entity).
Notwithstanding the foregoing, a Change of Control
shall not be deemed to occur solely because 33% or more of the
then outstanding Voting Securities is Beneficially Owned by (x) a
trustee or other fiduciary holding securities under one or more
employee benefit plans or arrangements (or any trust forming a
part thereof) maintained by the Company or any Controlled Entity
or (y) any corporation which, immediately prior to its
acquisition of such interest, is owned directly or indirectly by
the stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.
(k) "Committee" shall mean the Compensation
Committee of the Board.
(l) "Company" shall mean General Instrument
Corporation, its successors and assigns.
(m) "Corporate Division" shall mean the corporate
staff, which includes all employees not otherwise assigned to a
Division.
(n) "Disability" shall mean permanent disability,
as provided in the Company's long-term disability plan.
(o) "Division" shall mean the G.I. Communications,
CommScope and Power Semiconductor divisions of the Company, or as
may otherwise be designated in the Business Plan.
(p) "Earnings Per Share", for any Performance
Period, shall mean the income per share of the Company's common
stock on a fully diluted basis, before extraordinary items,
effects of changes in accounting principles and other similar
adjustments, as reflected in the Company's final consolidated
financial statements for such Performance Period.
(q) "Effective Date" shall mean the date that the
Plan is adopted by the Board.
(r) "Employee" shall mean any person (including an
officer) employed by the Company or any of its subsidiaries in a
management position on a full-time salaried basis.
(s) "EPS Target", for any Performance Period,
shall mean the Earnings Per Share goal for such Performance
Period, as established by the Committee.
(t) "Financial Target Award Earned", for any
Performance Period, shall mean (i) for Participants at Corporate
Division, the percentage based on the achievement of financial
performance targets and (ii) for Participants employed by any
Division, such percentage as adjusted by the Quality Performance
Adjustment, if any, as determined in accordance with the formula
set forth in Section 5 of the Plan.
(u) "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(v) "Participant", for any Performance Period,
shall mean an Employee selected to participate in the Plan for
such Performance Period.
(w) "Performance Period" shall mean the fiscal
year of the Company or any other period designated by the
Committee with respect to which an Award is earned.
(x) "Person" shall mean a person within the
meaning of Sections 13(d) and 14(d) of the 1934 Act.
(y) "Personal Performance Percentage", with
respect to Participants (other than the Presidents of the
Divisions or other officers of the Company) for any Performance
Period, shall mean the percentage based on the achievement of
personal performance goals, as determined in accordance with
Section 5(c) of the Plan.
(z) "Plan" shall mean this General Instrument
Corporation Annual Incentive Plan, as from time to time amended
and in effect.
(aa) "Quality Performance Adjustment", for any
Participant employed by a Division for any Performance Period,
shall mean the percentage based on such Division's quality
performance, as determined in accordance with Section 5(b) of the
Plan.
(bb) "Retirement" shall mean retirement at or after
age 65 or early retirement with the prior written approval of the
Company.
(cc) "Subsidiary" shall mean a corporation as
defined in Section 424(f) of the Internal Revenue Code of 1986,
as amended, with the Company being treated as the employer
corporation for purposes of this definition.
(dd) "Target Award Percentage" for any Participant
with respect to any Performance Period, shall mean the percentage
of the Participant's Base Salary that the Participant would earn
as an Award for that Performance Period if each of the Financial
Target Award Earned and Personal Performance Percentage (if
applicable) for that Performance Period is 100%, and shall be
determined by the Committee with respect to officers who are
Participants and the CEO with respect to all other Participants,
based on the Participant's responsibility level or the position
or positions held during the Performance Period; provided,
however, that if any Participant held more than one position
during the Performance Period, then the Committee or CEO, as
applicable, may designate different Target Award Percentages with
respect to each position and the Award will be pro-rated to
reflect the number of days during which such Participant had each
Target Award Percentage.
(ee) "Voting Power" shall mean the combined voting
power of the then outstanding Voting Securities.
(ff) "Voting Securities" shall mean, with respect
to the Company or any Subsidiary, any securities issued by the
Company or such Subsidiary, respectively, which generally entitle
the holder thereof to vote for the election of directors of the
Company or such Subsidiary, respectively.
3. Eligibility
Participation in the Plan for a Performance Period
shall be limited to those key Employees who, because of their
significant impact on the current and future success of the
Company, the Committee or CEO selects, in accordance with
Section 5 of this Plan, to participate in the Plan for that
Performance Period. Notwithstanding the foregoing, the CEO shall
participate in the Plan in every Performance Period. The
Committee is authorized to reduce the amount of the Award payable
to the CEO for any Performance Period.
To be eligible to participate in the Plan in any
Performance Period an Employee shall have had at least three
months active tenure during such Performance Period and be
actively employed by the Company on the Award payment date. The
Committee or CEO may approve, in accordance with Sections 7 and 8
of this Plan, exceptions for special circumstances.
Employees shall participate in only one annual cash
or sales incentive plan for any specific period in time. For
example, an individual may not participate in both the Plan and a
Division's sales incentive plan at the same time. An individual
may participate in two plans sequentially during any Performance
Period because of promotion or reassignment, provided that
participation in each such plan is pro-rated based on the number
of days he or she participated in each plan.
If an Employee becomes a Participant during a
Performance Period, such Participant's Award will be pro-rated
based on the number of days that he or she is a Participant,
unless, with respect to Employees other than the CEO, the
Committee otherwise determines.
4. Administration
The administration of the Plan shall be consistent
with the purpose and the terms of the Plan. The Plan shall be
administered by the Committee with respect to officers who are
Participants and by the CEO with respect to all other
Participants. Each member of the Committee shall be an "outside
director" within the meaning of Treasury Regulations proposed
under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Committee and the CEO, as the case may be, shall
have full authority to establish the rules and regulations
relating to the Plan, to interpret the Plan and those rules and
regulations, to select Participants in the Plan, to determine
each Participant's Target Award Percentage, to approve all the
Awards, to decide the facts in any case arising under the Plan
and to make all other determinations and to take all other
actions necessary or appropriate for the proper administration of
the Plan, including the delegation of such authority or power,
where appropriate; provided, however, that only the Committee
shall have authority to amend or terminate the Plan and the
Committee shall not be authorized to increase the amount of the
Award payable to the CEO that would otherwise be payable pursuant
to the terms of the Plan. The Committee's and the CEO's
administration of the Plan, including all such rules and
regulations, interpretations, selections, determinations,
approvals, decisions, delegations, amendments, terminations and
other actions, shall be final and binding on the Company, the
Subsidiaries, their respective stockholders and all employees of
the Company and the Subsidiaries, including the Participants and
their respective beneficiaries.
5. Determination of Awards
Prior to, or as soon as practicable following, the
commencement of each Performance Period, the Committee with
respect to officers and the CEO with respect to all other
Employees shall determine the Employees who shall be Participants
during that Performance Period and determine each Participant's
Target Award Percentage. The Company shall prepare schedules,
which will be treated as part of the Plan for that Performance
Period, setting forth (x) the Participants during that
Performance Period, (y) each Participant's Target Award
Percentage for that Performance Period and (z) the financial
targets for that Performance Period (which shall be established
within 90 days after the commencement of such Performance
Period). The Company shall notify each Participant of his or her
Target Award Percentage and the applicable financial targets for
the Performance Period. Notwithstanding the foregoing, the CEO
shall participate in the Plan for every Performance Period in
accordance with Section 3 hereof and the Committee shall
establish the Target Award Percentage of the CEO within 90 days
after the commencement of the relevant Performance Period.
Generally, a Participant earns an Award for a
Performance Period based on (i) the Company's and his or her
Business Unit's achievement of financial targets, (ii) in the
case of Participants other than the Presidents of Divisions or
other officers of the Company, his or her achievement of personal
performance goals, and (iii) in the case of Participants employed
by a Division, the Division's quality performance. The portion
of Awards based on Company performance will only be earned if the
Company achieves 90% or higher of the EPS Target for such
Performance Period. For Participants employed by any Division,
the portion of their Awards based on Divisional performance will
only be earned if the Division achieves 90% or higher of the
Division's operating income target, and for Participants at
Corporate Division, the portion of their Award based on another
measure of Company performance will only be earned if the Company
achieves 90% or higher of the Company's operating income target.
The awards of each Participant who has personal performance goals
may be adjusted based on the Participant's achievement of those
personal performance goals, and Awards based on Divisional
performance may be adjusted based on the Division's quality
performance. The calculation of Awards is more fully set forth
in this Section 5.
The maximum Award any Participant (other than the
CEO) may receive for any Performance Period is 150% of the
Participant's Base Salary times his or her Target Award
Percentage for that Performance Period. The maximum award the
CEO may receive for any Performance Period is $1.25 million.
Awards shall be earned by Participants in
accordance with the following formula:
Personal
Performance
Percentage
(other than
Financial officers
Target Target of the Company
Award Base Award and Presidents
Percentage x Salary x Earned x of Divisions)
Where:
. Target Award Percentage is as defined in
Section 2(dd) of the Plan.
. Base Salary is as defined in Section 2(c) of
the Plan.
. Financial Target Award Earned is based on the
formula set forth below.
. Personal Performance Percentage ranges from 80
percent to 120 percent and is determined, in
accordance with subsection (c) below, by the
Participant's satisfaction of personal performance
goals.
(a) Financial Targets
The Financial Target Award Earned is generally
based on the achievement of performance targets by the Company
and its Divisions.
In the case of Participants employed by any
Division, the Financial Target Award Earned may be adjusted for
the Division's quality performance.
The Financial Target Award Earned for any
Performance Period is determined for Participants employed by any
Division and Participants employed at Corporate Division in
accordance with the following formulas:
Financial Target Division Earnings
Award Earned = Award + Per Share
for Division Earned Award Earned
Participants
Financial Target Corporate Earnings
Award Earned = Award + Per Share
for Corporate Earned Award Earned
Division
Participants
Where:
. Division Award Earned is calculated by
multiplying (i) Division Operating Income Percent
(in accordance with the following table); (ii) the
percentage (which is deemed to be zero if it is not
at least 90 percent, but may not exceed 130 percent),
determined by dividing Adjusted Operating Income for the
Performance Period of the Division in which the
Participant is employed by the Division's Business
Plan Operating Income for the Performance Period;
and (iii) the Quality Performance Adjustment, which
ranges between 80 percent to 120 percent, as
determined under subsection (b) below.
. Corporate Award Earned is calculated by
multiplying (i) Corporate Operating Income Percent
(in accordance with the following table); and
(ii) the percentage (which is deemed to be zero if
it is not at least 90 percent, but may not exceed 130 percent),
determined by dividing Adjusted Operating Income of
the Company for the Performance Period by the
Company's Business Plan Operating Income for the
Performance Period.
. Earnings Per Share Award Earned is calculated
by multiplying (i) Earnings Per Share Percent (in
accordance with the following table); and (ii) the
percentage (which is deemed to be zero if it is not
at least 90 percent, but may not exceed 130 percent),
determined by dividing Earnings Per Share for the Performance
Period by the EPS Target for the Performance
Period.
In calculating an Award, the performance components
are weighted in accordance with the following table based on the
Participant's position, as set forth below:
Division Corporate
Operating Operating Earnings
Income Income Per Share
Percent Percent
Presidents and Chief
Operating Officers of
G.I. Communications and
CommScope 40% 0% 60%
President of the
Power Semiconductor
Division 60% 0% 40%
All other Division
positions 70% 0% 30%
Corporate Division 0% 40% 60%
(b) Quality Performance Adjustment
Division Presidents may recommend to the CEO that,
based on the quality performance of their Division in the
Performance Period, all Participants employed by the Division
receive an adjustment of their Awards. The CEO has discretion to
grant such adjustments (the "Quality Performance Adjustments"),
which may range from 80 percent to 120 percent. Participants
employed at Corporate Division are not eligible for an adjustment
based on quality performance.
(c) Personal Targets
The Presidents of the Divisions and other officers
of the Company are not eligible for an adjustment based on
personal performance. Each other Participant's performance shall
be evaluated and a Personal Performance Percentage for such
Participant shall be recommended for approval by the CEO. The
Personal Performance Percentage may range from 80 percent to 120
percent to reflect the achievement of the Participant's personal
performance goals during the Performance Period; provided,
however, that the application of this Section 5(c) shall not
result in (i) the Participant's Award exceeding 150 percent of
his or her Base Salary times his or her Target Award Percentage
for the Performance Period; or (ii) with respect to each Business
Unit, an increase in the aggregate dollar amount of all Awards
earned by all Participants in that Business Unit for that
Performance Period. Officers of the Company and the Presidents
of the Divisions are not eligible for an adjustment based on
personal performance.
6. Changes to the Target
The Committee, with respect to officers who are
Participants, and the CEO, with respect to all other
Participants, may at any time prior to the final determination of
Awards change the Target Award Percentage of any Participant
(other than the CEO) or assign a different Target Award
Percentage to a Participant (other than the CEO) to reflect any
change in the Participant's responsibility level or position
during the course of the Performance Period.
The Committee, with respect to officers who are
Participants, and the CEO, with respect to all other
Participants, may at any time prior to the financial
determination of Awards change the performance measures or
targets to reflect a change in corporate capitalization, such as
a stock split or stock dividend, or a corporate transaction, such
as a merger, consolidation, separation, reorganization or partial
or complete liquidation.
7. Payment of Awards
As soon as practicable after the close of a
Performance Period, the Committee, with respect to officers who
are Participants, and the CEO, with respect to all other
Participants, shall review and approve each Participant's Award.
Subject to the provisions of Section 8 of the Plan, each Award to
the extent earned shall be paid in a single lump sum cash
payment, as soon as practicable after the close of the
Performance Period, but no later than 120 days after the close of
the Performance Period. The Committee shall certify in writing
the amount of the CEO's Award prior to payment thereof.
If a Change of Control occurs, the Company shall,
within 60 days thereafter, pay to each Participant in the Plan
immediately prior to the Change of Control (regardless of whether
the Participant remains employed after the Change of Control) an
Award which is calculated assuming that all performance
percentages are 100 percent, and such Award shall be prorated to
the date of the Change of Control based on the number of days
that have elapsed during the Performance Period through the date
of the Change of Control.
8. Limitations on Rights to Payment of Awards
No Participant shall have any right to receive
payment of an Award under the Plan for a Performance Period
unless the Participant remains in the employ of the Company
through the payment date of the Award for such Performance
Period, except as provided in the last paragraph of Section 7 of
the Plan. However, if the Participant has active service with
the Company or the Subsidiary for at least three months during
any Performance Period, but, prior to payment of the Award for
such Performance Period, a Participant's employment with the
Company terminates due to the Participant's death, Disability or
Retirement (or, in the event of the Participant's death, the
Participant's estate, beneficiary or beneficiaries as determined
under Section 9 of the Plan) shall remain eligible to receive a
prorated portion of any earned Award, based on the number of days
that the Participant was actively employed and performed services
during such Performance Period.
9. Designation of Beneficiary
A Participant may designate a beneficiary or
beneficiaries who, in the event of the Participant's death prior
to full payment of any Award hereunder, shall receive payment of
any Award due under the Plan. Such designation shall be made by
the Participant on a form prescribed by the Committee. The
Participant may, at any time, change or revoke such designation.
A beneficiary designation, or revocation of a prior beneficiary
designation, will be effective only if it is made in writing on a
form provided by the Company, signed by the Participant and
received by the Secretary of the Company. If the Participant
does not designate a beneficiary or the beneficiary dies prior to
receiving any payment of an Award, Awards payable under the Plan
shall be paid to the Participant's estate.
10. Amendments
The Committee may at any time amend (in whole or in
part) this Plan. No such amendment which adversely affects any
Participant's rights to or interest in an Award earned prior to
the date of the amendment shall be effective unless the
Participant shall have agreed thereto.
11. Termination
The Committee may terminate this Plan (in whole or
in part) at any time. In the case of such termination of the
Plan, the following provisions of this Section 11 shall apply
notwithstanding any other provisions of the Plan to the contrary:
(i) The Committee shall promulgate administrative
rules applicable to Plan termination, pursuant to which
each affected Participant (other than the CEO) shall
receive, with respect to each Performance Period which
has commenced on or prior to the effective date of the
Plan termination (the "Termination Date") and for which
the Award has not yet been paid, the amount described in
such rules and the CEO shall receive an amount equal to
the amount his Award would have been had the Plan not
been terminated (prorated for the Performance Period in
which the Termination Date occurred), subject to
reduction in the discretion of the Committee.
(ii) Each Award payable under this Section 11
shall be paid as soon as practicable, but in no event
later than 120 days after the Termination Date.
12. Miscellaneous Provisions
(a) This Plan is not a contract between the
Company and the Employees or the Participants. Neither the
establishment of this Plan, nor any action taken hereunder, shall
be construed as giving any Employee or any Participant any right
to be retained in the employ of the Company. The Company is
under no obligation to continue the Plan.
(b) A Participant's right and interest under the
Plan may not be assigned or transferred, except as provided in
Section 9 of the Plan, and any attempted assignment or transfer
shall be null and void and shall extinguish, in the Company's
sole discretion, the Company's obligation under the Plan to pay
Awards with respect to the Participant.
(c) The Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund, or to
make any other segregation of assets, to assure payment of
Awards.
(d) The Company shall have the right to deduct
from Awards paid and any interest thereon, any taxes or other
amounts required by law to be withheld.
(e) Nothing contained in the Plan shall limit or
affect in any manner or degree the normal and usual powers of
management, exercised by the officers and the Board of Directors
or committees thereof, to change the duties or the character of
employment of any employee of the Company or to remove the
individual from the employment of the Company at any time, all of
which rights and powers are expressly reserved.
As amended and restated on February 28, 1995
EXHIBIT 10.16
THE GI DEFERRED COMPENSATION PLAN
ARTICLE 1 - INTRODUCTION
1.1 Purpose of Plan
General Instrument Corporation of Delaware has adopted the Plan
set forth herein to provide a means by which certain employees
may elect to defer receipt of designated percentages or amounts
of their Compensation.
1.2 Status of Plan
The Plan is intended to be "a plan which is unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees" within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), and shall be interpreted and
administered to the extent possible in a manner consistent with
that intent.
ARTICLE 2 - DEFINITIONS
Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning is clearly required by
the context:
2.1 Account means, for each Participant, the bookkeeping account
established for his or her benefit under Section 5.1.
2.2 Change of Control has the meaning set forth in the General
Instrument Corporation 1993 Long-Term Incentive Plan.
2.3 Code means the Internal Revenue Code of 1986, as amended
from time to time. Reference to any section or subsection of the
Code includes reference to any comparable or succeeding
provisions of any legislation which amends, supplements or
replaces such section or subsection.
2.4 Company means General Instrument Corporation of Delaware,
any successor to all or a major portion of the Company's assets
or business which assumes the obligations of the Company, and
each other entity that is affiliated with the Company which
adopts the Plan with the consent of General Instrument
Corporation of Delaware. With respect to any Participant, the
"Company" shall mean the entity by which he is employed.
2.5 Compensation means base salary payable to a Participant by
the Company or an affiliate, and any bonuses earned by a
Participant under the General Instrument Corporation Annual
Incentive Plan.
2.6 Effective Date means the date as of which the Plan first
becomes effective,
October 1, 1994.
2.7 Election Form means the participation election form as
approved and prescribed by the Plan Administrator.
2.8 Elective Deferral means the portion of Compensation which is
deferred by a Participant under Section 4.1.
2.9 Eligible Employee means each employee of the Company who is
at a salary level of Grade 16 or higher.
2.10 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time. Reference to any section or
subsection of ERISA includes reference to any comparable or
succeeding provisions of any legislation which amends,
supplements or replaces such section or subsection.
2.11 Insolvent means either (i) the Company is unable to pay its
debts as they become due, or (ii) the Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy
Code.
2.12 Participant means any individual who participates in the Plan in
accordance with Article 3.
2.13 Plan means the GI Deferred Compensation Plan and all
amendments thereto.
2.14 Plan Administrator means the person, persons or entity
designated by General Instrument Corporation of Delaware from
time to time to administer the Plan and to serve as the agent for
the Company with respect to the Trust as contemplated by the
agreement establishing the Trust. If no such person or entity is
so serving at any time, General Instrument Corporation of
Delaware shall be the Plan Administrator.
2.15 Plan Year means the 12-month period beginning January 1 and
ending December 31.
2.16 Total and Permanent Disability means the inability of a
Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not
less than 12 months, and the permanence and degree of which shall
be supported by medical evidence satisfactory to the Plan
Administrator.
2.17 Trust means the applicable trust established by General
Instrument Corporation of Delaware or an affiliate of General
Instrument Corporation of Delaware that identifies the Plan as a
plan with respect to which assets are to be held by the Trustee.
2.18 Trustee means the trustee or trustees under the Trust.
ARTICLE 3 - PARTICIPATION
3.1 Commencement of Participation
Any individual who elects to defer part of his or her
Compensation in accordance with Section 4.1 shall become a
Participant in the Plan as of the date such deferrals commence in
accordance with Section 4.1.
3.2 Continued Participation
A Participant in the Plan shall continue to be a Participant so
long as any amount remains credited to his or her Account.
ARTICLE 4 - ELECTIVE DEFERRALS
4.1 Elective Deferrals
An individual who is an Eligible Employee on the Effective Date
may, by completing an Election Form and filing it with the Plan
Administrator five days or more before the Effective Date, elect
to defer a percentage or dollar amount of one or more payments of
Compensation, on such terms as the Plan Administrator may permit,
which are payable to the Participant after the Effective Date. A
Participant may elect to defer only up to 50% of base salary and
up to 100% of any bonuses earned under the General Instrument
Corporation Annual Incentive Plan for any Plan Year (with the
exception of the period beginning on the Effective Date and
ending December 31, 1994, for which a participant may elect to
defer up to 100% of base salary). Base salary is determined
before giving effect to Elective Deferrals and other salary
reduction amounts which are not included in the Participant's
gross income under Code sections 125, 401(k), 402(h) or 403(b).
Any individual who becomes an Eligible Employee after the
Effective Date may, by completing an Election form and filing it
with the Plan Administrator within 30 days after becoming an
Eligible Employee, elect to defer a percentage or dollar amount
of one or more payments of Compensation, on such terms as the
Plan Administrator may permit, which are earned and payable to
the Participant after the date on which the individual files the
Election Form; provided that such Participant may not elect to
defer any part of his or her bonus payable in any Plan Year,
after November 15 of the year preceding such Plan Year. Any
Eligible Employee who has not otherwise initially elected to
defer Compensation in accordance with this paragraph 4.1 may
elect to defer a percentage or dollar amount of one or more
payments of Compensation, on such terms as the Plan Administrator
may permit, commencing with Compensation paid in the next
succeeding Plan Year, by completing an Election form, with
respect to base salary, prior to the first day of such succeeding
Plan Year, or with respect to bonus deferral, before November 15
of the year preceding such Plan Year. A Participant's
Compensation shall be reduced in accordance with the
Participant's election hereunder and amounts deferred hereunder
shall be paid by the Company to the Trust once per month and
credited to the Participant's Account as of the date the amounts
are received by the Trustee. Elective Deferrals shall not be in
effect for any Participant during any period in which such
Participant is eligible to receive benefits under the Company's
Long Term Disability policy.
An election to defer a percentage or dollar amount of
Compensation for any Plan Year shall apply for only such Plan
Year. An Eligible Employee must make a new deferral election as
of the first day of any Plan Year by giving written notice to the
Plan Administrator, with respect to base salary deferral, before
such first day or with respect to bonus deferral, before November
15 of the year preceding such Plan Year (or, in each case, any
such earlier date as the Plan Administrator may prescribe.)
ARTICLE 5 - ACCOUNTS
5.1 Accounts
The Plan Administrator shall establish a bookkeeping Account for
each Participant reflecting Elective Deferrals made for the
Participant's benefit together with any adjustments for income,
gain or loss and any payments from the Account. The Plan
Administrator may cause the Trustee to maintain and invest
separate asset accounts corresponding to each Participant's
Account. The Plan Administrator shall establish sub-accounts for
each Participant that has more than one election in effect under
Section 7.1 and such other sub-accounts as are necessary for the
proper administration of the Plan. As of the last business day
of each calendar quarter, the Plan Administrator shall provide
the Participant, as soon as practicable after the end of such
quarter, with a statement of his or her Account reflecting the
income, gains and losses (realized and unrealized), amounts of
deferrals, and distributions of such Account since the prior
statement.
5.2 Investments
The assets of the Trust shall be invested in such investments as
the Trustee shall determine. The Trustee may (but is not
required to) consider the Company's or a Participant's investment
preferences when investing the assets attributable to a
Participant's Account. A Participant, at the time of making a
deferral election, may designate the rate of return to be
credited to his accounts from among options offered by the
Company. A Participant (or the beneficiary or legal
representative of a deceased Participant) may change such
designated rate of return, effective as of the first business day
of any calendar quarter, by filing a written election specifying
the change with the Plan Administrator no later than the
fifteenth day of the month preceding the first month of such
calendar quarter. Such designations shall not obligate the
Company or the Trustee to set aside or invest assets designed to
provide such rate of return.
ARTICLE 6 - VESTING
6.1 General
A Participant shall be immediately vested in, i.e., shall have a
nonforfeitable right to, all Elective Deferrals, and all income
and gain attributable thereto, credited to his or her Account.
ARTICLE 7 - PAYMENTS
7.1 Election as to Time and Form of Payment
A Participant shall elect irrevocably on the Election Form the
date at which the Elective Deferrals (including any earnings
attributable thereto) will commence to be paid to the
Participant. Such date must be at least five years following the
date at which such Elective Deferrals commence. The Participant
shall also elect thereon for payments to be paid in either:
a. a single lump deferrals sum; or
b. annual installments over a period elected by the Participant
up to 10 years, the amount of each installment to equal the
balance of his or her Account immediately prior to the
installment divided by the number of installments remaining
to be paid ("Annual Installments").
Each such election will be effective only for deferrals
(including any earnings or losses attributable thereto) for the
Plan Year for which it is made. Except as provided in Sections
7.2, 7.3, 7.4, or 7.5, payment of a Participant's Account shall
be made in accordance with the Participant's elections under this
Section 7.1.
7.2 Change of Control
The Plan will terminate upon a Change of Control. Immediately
prior to the consummation of a transaction resulting in a Change
of Control or, if not possible, as soon as possible following a
Change of Control, each Participant shall be paid his or her
entire Account balance in a single lump sum. In the event that
General Instrument Corporation of Delaware or any of its
affiliates sells all of the capital stock or substantially all of
the assets of CommScope Inc. to an unrelated third party, each
Participant who is or was an employee of CommScope Inc. shall
cease to defer Compensation as of the date of such sale and shall
be paid his or her entire Account balance attributable to
Elective Deferrals made as an employee of CommScope, Inc. in a
single lump sum as soon as possible following such sale.
7.3 Termination of Employment Prior to Retirement Age
Upon termination of a Participant's employment for any reason
including Total and Permanent Disability, but other than death,
prior to the attainment of the Retirement Age, which is age 55,
the Participant's entire Account shall be paid to the
Participant, according to the Participant's irrevocable election
on the Election Form, in a single lump sum as soon as practicable
following the end of the quarter in which such termination
occurs, or in Annual Installments over a period elected by the
Participant up to 10 years, commencing the year immediately
following the year in which such termination occurs.
7.4 Death
If a Participant dies prior to the complete distribution of his
or her Account, the balance of the Account shall be paid,
according to the Participant's irrevocable election on the
Election Form, to the Participant's designated beneficiary or
beneficiaries, in a single lump sum as soon as practicable
following the end of the quarter in which death occurs, or in
Annual Installments over a period elected by the Participant up
to 10 years, commencing the year immediately following the year
in which death occurs.
Any designation of beneficiary and form of payment to such
beneficiary shall be made by the Participant on a
designation/change of beneficiary form filed with the Plan
Administrator and may be changed by the Participant at any time
by filing another designation/change of beneficiary form
containing the revised instructions. If no beneficiary is
designated or no designated beneficiary survives the Participant,
payment shall be made to the Participant's surviving spouse, or,
if none, to his or her issue per stirpes, in a single payment.
If no spouse or issue survives the Participant, payment shall be
made in a single lump sum to the Participant's estate.
7.5 Unforeseen Emergency
If a Participant suffers an unforeseen emergency, as defined
herein, the Plan Administrator, in its sole discretion, may pay
to the Participant only that portion, if any, of his or her
Account which the Plan Administrator determines is necessary to
satisfy the emergency need, including at the discretion of the
Plan Administrator any amounts necessary to pay any federal,
state and local income taxes reasonably anticipated to result
from the distribution.
A Participant requesting an emergency payment shall apply for the
payment in writing in a form approved by the Plan Administrator
and shall provide such additional information as the Plan
Administrator may require. For purposes of this paragraph,
"unforeseen emergency" means an immediate and heavy financial
need resulting from any of the following:
a. expenses which are not covered by insurance and which the
Participant or his or her spouse or dependent has incurred
as a result of sudden and unexpected illness or accident; or
b. expenses which are not covered by insurance and which the
Participant or his or her spouse or dependent has incurred
or must incur as a result of a casualty loss.
7.6 Taxes
All federal, state and local taxes that the Plan Administrator
determines are required to be withheld from any payments made
pursuant to this Article 7 shall be withheld.
7.7 Claims Procedure
A Participant or beneficiary (a "Claimant") entitled to benefits
may file a claim for such benefits with the Plan Administrator,
in such form as permitted by the Plan Administrator. The claim
will be evaluated and a decision rendered within ninety (90)
days, unless special circumstances require an additional ninety
(90) day extension of time.
A Claimant shall be given written notice of whether the claim is
granted or denied, in whole or in part, including (1) specific
reasons for the denial, (2) references to pertinent Plan
provisions on which the denial is based, (3) a description of any
additional material or information necessary to perfect the claim
and explanation as to why necessary, and (4) the Claimant's right
to seek review of the denial.
If denied, in whole or in part, the Claimant may make a written
request for review of such denial to the Plan Administrator,
within 60 days after receipt of the denial, and may include
pertinent documents, issues and comments to aid the Plan
Administrator. The request will be evaluated and a decision
rendered within sixty (60) days, unless special circumstances
require an additional sixty (60) day extension of time. The
written decision will specify reasons for the decision and
references to Plan provisions upon which the decision is based.
A Claimant who fails to file a claim, or submit a request for
review of an initial claim shall have no right to review and
shall have no right to bring action in any court. The denial of
the claim shall be final and binding on all persons for all
purposes.
7.8 Section 162(m) Limitations
In the event that any amount to be paid pursuant to Section 7.1,
7.3, 7.4 or 7.5 would, in the Company's judgment, result in the
non-deductibility, under Section 162(m) of the Code, of any
portion of such Participant's income payable by or attributable
to the Company for the year in which such amount is to be paid,
such amount shall not be paid in such year. Such non-deductible
amount shall be payable in the following calendar year, as an
addition to the annual installment scheduled to be paid in such
following calendar year, if applicable, subject to the provisions
of this Section 7.8.
ARTICLE 8 - PLAN ADMINISTRATOR
8.1 Plan Administration and Interpretation
The Plan Administrator shall oversee the administration of the
Plan. The Plan Administrator shall have complete control and
authority to determine the rights and benefits and all claims,
demands and actions arising out of the provisions of the Plan of
any Participant, beneficiary, deceased Participant, or other
person having or claiming to have any interest under the Plan.
The Plan Administrator shall have complete discretion to
interpret the Plan and to decide all matters under the Plan.
Such interpretation and decision shall be final, conclusive and
binding on all Participants and any person claiming under or
through any Participant, in the absence of clear and convincing
evidence that the Plan Administrator acted arbitrarily and
capriciously. Any individual(s) serving as Plan Administrator
who is a Participant will not vote or act on any matter relating
solely to himself or herself. In such case, the General
Instrument Corporation of Delaware will appoint an individual to
act as Plan Administrator to take such actions. When making a
determination or calculation, the Plan Administrator shall be
entitled to rely on information furnished by a Participant, a
beneficiary, the Company or the Trustee. The Plan Administrator
shall have the responsibility for complying with any reporting
and disclosure requirements of ERISA.
8.2 Powers, Duties, Procedures, Etc.
The Plan Administrator shall have such powers and duties, may
adopt such rules and tables, may act in accordance with such
procedures, may appoint such officers or agents, may delegate
such powers and duties, may receive such reimbursements, and
shall follow such claims and appeal procedures with respect to
the Plan as it may establish.
8.3 Information
To enable the Plan Administrator to perform its functions, the
Company shall supply full and timely information to the Plan
Administrator on all matters relating to the compensation of
Participants, their employment, retirement, death, termination of
employment, and such other pertinent facts as the Plan
Administrator may require.
8.4 Indemnification of Plan Administrator
The Company agrees to indemnify and to defend to the fullest
extent permitted by law any officer(s) or employee(s) who serve
as Plan Administrator (including any such individual, whether a
present or former employee, who formerly served as Plan
Administrator) against all liabilities, damages, costs and
expenses (including attorneys' fees and amounts paid in
settlement of any claims approved by General Instrument
Corporation of Delaware) occasioned by any act or omission to act
in connection with the Plan, if such act or omission is in good
faith.
ARTICLE 9 - AMENDMENT AND TERMINATION
9.1 Amendments
General Instrument Corporation of Delaware shall have the right
to amend the Plan from time to time, subject to Section 9.3, by
an instrument in writing which has been executed on General
Instrument Corporation of Delaware's behalf by its Chief
Executive Officer or his delegate designated in writing, with or
without the specific approval of the board of directors.
9.2 Termination of Plan
This Plan is strictly a voluntary undertaking on the part of the
Company and shall not be deemed to constitute a contract between
the Company and any Eligible Employee (or any other employee) or
a consideration for, or an inducement or condition of employment
for, the performance of the services by an Eligible Employee (or
other employee). General Instrument Corporation of Delaware
reserves the right to terminate the Plan at any time, subject to
Section 9.3, by an instrument in writing which has been executed
on General Instrument Corporation of Delaware's behalf by its
Chief Executive Officer or his delegate designated in writing,
with or without the specific approval of the board of directors.
In addition, the Plan shall terminate upon a Change of Control in
accordance with Section 7.2. Upon termination other than
pursuant to Section 7.2, General Instrument Corporation of
Delaware may (a) elect to continue to maintain the Trust to pay
benefits hereunder as they become due as if the Plan had not
terminated or (b) amend the Trust as provided therein to require
prompt payment to Participant's (or their beneficiaries) of the
balance of their Accounts.
9.3 Existing Rights
No amendment or termination of the Plan shall adversely affect
the rights of any Participant with respect to amounts that have
been credited to his or her Account prior to the date of such
amendment or termination.
ARTICLE 10 - MISCELLANEOUS
10.1 No Funding
The Plan constitutes a mere promise by the Company to make
payments in accordance with the terms of the Plan and
Participants and beneficiaries shall have the status of general
unsecured creditors of the Company. Nothing in the Plan will be
construed to give any employee or any other person rights to any
specific assets of the Company or of any other person. In all
events, it is the intent of the Company that the Plan be treated
as unfunded for tax purposes and for purposes of Title I of
ERISA.
10.2 Non-assignability
None of the benefits, payments, proceeds or claims of any
participant or beneficiary shall be subject to any claim of any
creditor of any Participant or beneficiary, nor shall any
Participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the
benefits or payments or proceeds which he or she may expect to
receive, contingently or otherwise, under the Plan.
10.3 Limitation of Participant's Rights
Nothing contained in the Plan shall confer upon any person a
right to be employed or to continue in the employ of the Company,
or interfere in any way with the right of the Company to
terminate the employment of a Participant in the Plan at any
time, with or without cause.
10.4 Participants Bound
Any action with respect to the Plan taken by General Instrument
Corporation of Delaware, the Plan Administrator or the Company or
the Trustee or any action authorized by or taken at the direction
of the Plan Administrator, the Company or the Trustee shall be
conclusive upon all Participants and beneficiaries entitled to
benefits under the Plan.
10.5 Receipt and Release
Any payment to any Participant or beneficiary in accordance with
the provisions of the Plan shall, to the extent thereof, be in
satisfaction of claims against the Company, the Plan
Administrator and the Trustee under the Plan, and the Plan
Administrator may require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and
release to such effect. If any Participant or beneficiary is
determined by the Plan Administrator to be incompetent by reason
of physical or mental disability, including minority, to give a
valid receipt and release, the Plan Administrator may cause the
payment or payments becoming due to such person to be made to
another person for his or her benefit without responsibility on
the part of the Plan Administrator, the Company or the Trustee to
follow the application of such funds.
10.6 Governing Law
The Plan shall be construed, administered, and governed in all
respects under and by the laws of the state of Illinois. If any
provision shall be held by a court of competent jurisdiction to
be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
10.7 Headings and Subheadings
Headings and subheadings in this Plan are inserted for
convenience only and are not to be considered in the construction
of the provisions hereof.
<TABLE>
GENERAL INSTRUMENT CORPORATION
Exhibit 11 - Computation of Earnings(Loss) Per Share
(In Thousands Except Per Share Amounts)
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
PRIMARY:
Income(loss) before extraordinary
item and cumulative effect of
changes in accounting principles $ 248,452 $ 90,366 $ (41,395)
Extraordinary charge - - (11,598)
Cumulative effect of changes in
accounting principles-net (1,917) 217 -
-------- ------- ---------
Net Income(loss) $246,535 $ 90,583 $ (52,993)
======== ======== =========
Weighted average common shares
outstanding 120,937 119,069 97,985
Incremental shares under stock
option plans 2,456 3,168 - (2)
-------- ------- ----------
Weighted average common and common
equivalent shares outstanding 123,393 122,237 97,985
======== ========= ==========
Primary earnings(loss) per share:
Income(loss) before extraordinary
item and cumulative effect of
changes in accounting principles $ 2.01 $ .74 $ (.42)
Extraordinary charge - - (.12)
Cumulative effect of changes in
accounting principles-net (.01) - -
--------- -------- --------
Net income(loss) $ 2.00 $ .74 $ (.54)
======== ========= ========
FULLY DILUTED:
Income(loss) before extraordinary item
and cumulative effect of changes
in accounting principles $248,452 $ 90,366 $(41,395)
Interest and amortization of
debt issuance costs related to
the Convertible Junior Sub-
ordinated Notes, net of income
tax effects 25,877 13,720 -
-------- ------- -------
-
Adjusted income(loss) before
extraordinary item and cumulative
effect of changes in accounting
principles 274,329 104,086 (41,395)
Extraordinary charge - - (11,598)
Cumulative effect of changes
in accounting principles-net (1,917) 217 -
-------- ------- -------
-
Adjusted net income(loss) $272,412 $ 104,303 $(52,993)
======== ========= ========
Weighted average common shares
outstanding 120,937 119,069 97,985
Incremental shares under stock option
plans 2,607 3,628 - (2)
Incremental shares attributable
to Convertible Junior Subordinated
Notes 21,053 11,132 -
-------- ------- -------
Adjusted weighted average shares
outstanding 144,597 133,829 97,985
======== ======= =======
Fully diluted earnings(loss) per share:
Income(loss) before extraordinary
item and cumulative effect of
changes in accounting principles $ 1.89 $ .78 (1) $ (.42)
Extraordinary charge - - (.12)
Cumulative effect of changes in
accounting principles-net (.01) - -
-------- ------- ------
Net income(loss) $ 1.88 $ .78 (1) $(.54)
======== ======= ========
<FN>
Note: The computations of primary and fully diluted earnings per
share assume incremental shares under stock option plans
using the treasury method.
(1) Differs from earnings per share as reported in the Consolidated
Statements of Operations because the effect of the Convertible
Junior Subordinated Notes was antidilutive.
(2) The effect of stock options is antidilutive and, therefore, not
included in the computation.
</FN>
</TABLE>
EXHIBIT 13
<PAGE> Inside Front Cover
General Instrument Corporation is a world leader in developing technology,
systems and product solutions for the interactive delivery of video, voice
and data.
GI is dedicated to deploying leading-edge technology through
intensive research and development, high quality, low-cost manufacturing and
superior customer service and support.
Each of GI's three divisions is a market leader in its own right: The
GI Communications Division is the world's number-one provider of addressable
systems and subscriber terminals for the cable television industry. It is
also the pioneer and market leader in satellite television encryption and
broadband digital compression technologies, as well as a major player in
radio frequency and fiber optic distribution electronics. CommScope, Inc. is
a top supplier of both coaxial and fiber optic cable to the cable television
industry. The Power Semiconductor Division is a world leader in the sale of
power rectifiers and related transient voltage suppression components.
<PAGE> 1
<TABLE>
Financial Highlights
Operations Data For The Year Ended December 31
(Dollars in millions, except per share data)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales $2,036 $1,393 $1,075
% change 46% 30% 16%
Operating income $ 316 $ 188 $ 98
% change 69% 92% 80%
Net interest expense $ (53) $ (72) $ (110)
Income (loss) before income taxes,
extraordinary item and cumulative
effect of changes in accounting principles 258 114 (26)
Net income (loss) 247(1) 91 (53)(2)
Net income (loss) per share (3):
Primary $ 2.00(1) $ .74 $ (.54)(2)
Fully diluted 1.88(1) .74 (.54)(2)
Investments
Research and development $ 111 $ 74 $ 58
Capital expenditures 136 67 37
Balance Sheet Data at December 31
Working capital (negative) $ 213 $ (16) $ (14)
Property, plant and equipment, net 344 262 266
Total assets 2,109 1,776 1,727
Long-term debt, including current maturities 797 840 989
Stockholders' equity 677 389 291
<FN>
(1) Includes an income tax benefit of $30, or $.24 per primary share and
$.20 per fully diluted share, as a result of a reduction
in a valuation allowance, as of December 31, 1994, related to domestic
deferred income tax assets.
(2) Includes an extraordinary charge of $12, or $.12 per share for the
write-off of deferred financing costs in conjunction with the early
extinguishment of debt.
(3) On July 6, 1994, the Company's Board of Directors declared a two-for-one
split of the Company's Common Stock, which was effected in the form of a 100%
stock dividend on August 8, 1994. All per share data have been restated for
all periods presented to reflect the stock split.
</FN>
</TABLE>
<PAGE> 2&3
Report to Investors
By almost any measure, 1994 was a great year for General Instrument Corporation.
Your company posted strong financial results. Revenue increased to $2.0 billion
from $1.4 billion last year, a 46% increase, and net income increased 172%,
to $247 million from $91 million in 1993. Earnings per share were $2.00 in 1994
compared to $0.74 in 1993, and backlog reached a record $700 million.
Beyond the financial returns, GI strengthened its leadership position
in the development and deployment of digital TV solutions for programmers and
network operators. The company also received significant orders for its next
generation of analog set-top terminals from network operators seeking to
improve consumer features in the analog TV domain. In addition, GI
experienced dramatic sales growth in international markets that are utilizing
both analog and digital technologies to deliver video, voice and data.
These accomplishments provide the company with a strong basis upon
which to play an integral role in the changing telecommunications industry.
That the telecommunications industry is undergoing significant change is
without question. As an agent of change through the development of new system
and product solutions, General Instrument understands the resulting risks and
opportunities and is responding to them every day.
To better understand the effects of this changing landscape,
evidenced by cable industry consolidation, cross-industry competition and
technical standards, it is helpful to step back and examine the underlying
drivers, both from a market and technology viewpoint.
The market dynamics underlying the local distribution of video, voice
and data result from competition among historically non-competing industries,
including cable and long-distance and regional telephone operating companies.
Changes in government regulation and the consumer demand for choice are
driving the new environment, sparking debate over issues such as evolving
regulatory policies, the competitive rules of engagement, potential
cross-industry subsidies, network architecture and industry structure and
concentration.
The technical catalyst for change is the transition from analog to
digital technology for the delivery of television signals, linking video to
voice and data on the digital information highway. GI pioneered digital
compression technology that heralded the possibility of 500 channel cable
systems.
Advanced communications are governed by the 1934 Communications
Act. As you consider the monumental changes that have occurred in the last 60
years, it is clear that the Act cannot provide adequate incentives for
investment, fair competition and growth. Think of the technology and services
that we accept as commonplace today that were unimaginable in 1934: satellite
communications, digital transmission and fiber optic technology;
video-on-demand, video telephony and internet services.
While Congress failed to pass an updated telecommunications bill in
1994, a pro-competitive version is expected to pass this year. General
Instrument is among a number of companies that have testified for a bill that
provides a level playing field for our customers while leaving important
issues such as technology evolution to the marketplace.
GI has taken bold and strategic steps to strengthen its position in
the midst of this change. We initiated a broad licensing program to infuse
our DigiCipherRegistration Mark digital technology throughout the industry to
assure open, interoperable systems. We invested in facility expansion to meet
global demand. We increased our efforts in developing digital and analog TV
solutions for a broad range of network operators. And we expanded our role as
a systems integrator in the development of interactive services.
During 1994, we licensed our DigiCipher digital TV system to
Hewlett-Packard Company, Scientific-Atlanta, Inc. and Zenith Electronics
Corporation. The success of our licensing program indicates the robustness
and viability of the DigiCipher technology. To assure our customers that
there will be an adequate supply of DigiCipher components, GI also licensed
component manufacturers Motorola, Inc., LSI Logic Corporation, C-Cube
Microsystems and SGS-THOMSON Microelectronics, Inc.
In response to customer demand, GI delivered over 4.7 million set-top
terminals and more than 580,000 miles of telecommunication cable during the
year. GI has expanded its worldwide manufacturing capacity in set-top
terminals, distribution electronics and coaxial cable to meet expanding
market opportunities.
A new direct-to-home digital satellite system was introduced to the
market in 1994 in conjunction with PRIMESTAR Partners. General Instrument is
the sole supplier of receivers for PRIMESTAR, and by the end of the year GI
had shipped more than 400,000 DigiCipher digital consumer receivers. In 1995,
GI will deliver the first of its DigiCipher II/MPEG-2 advanced digital cable
set-top terminals and satellite receivers.
Our customers showed strong acceptance of our next-generation analog
addressable set-top terminal, the CFT 2200. This terminal, which provides an
advanced electronic program guide and other enhanced consumer features, has
been ordered in significant quantities by Time Warner, Continental
Cablevision, and other major cable network operators.
Select telephone companies have been granted permission to
provide limited video dial tone (VDT) service, providing new market
opportunities for GI. In May 1994, General Instrument was selected by Bell
Atlantic to be a major supplier in its effort to construct VDT systems.
A key element in GI's dramatic growth in 1994 was the international
market, which accounted for 31% of GI's 1994 sales. GI's international
broadband sales grew by 82% from 1993 to 1994.
This increase in international revenue came from strong sales in
Europe, Latin America and the Pacific Rim. GI has successfully modified its
domestic systems and products to meet market needs around the globe. Markets
outside the U.S. represent over 80% of worldwide television households at
cable penetration rates only one fifth that of the U.S. This represents
tremendous opportunity for GI in the years ahead.
GI's Power Semi- conductor Division posted record results in 1994. As
an acknowledged world-leading provider of rectifiers and transient voltage
suppressors, PSD counts Sony, Samsung, Ford Motor Company, AT&T and other
multinational companies among its customers. More than two-thirds of PSD sales
are to international customers, with significant market penetration in
Europe, Japan and Southeast Asia.
Whether inter-national or domestic, it is the partnership with
our customers that has helped create the solutions for the advanced delivery
of superior entertainment and information services. We thank them for their
business and rededicate ourselves to meet and exceed their expectations.
Our employees have helped shape the successes of our past and
present. They are bringing even more dedication to our future because that is
what is required of all of us. The year ahead is full of challenge and
opportunity for your company. Our job as a public company is to provide a
return to you, our shareholders. The GI team is focused on improved
productivity and profitability and in translating opportunity to even greater
success. We look forward to working together to ensure a rich and rewarding
1995 and beyond.
Daniel F. Akerson
Chairman and
Chief Executive Officer
Richard S. Friedland
President and
Chief Operating Officer
PHOTO: Daniel F. Akerson,
CAPTION:Chairman and
Chief Executive Officer
CHART: Operating Income
(Dollars in Millions)
CHART: Total Sales
(Dollars in Millions)
PHOTO: Richard S. Friedland
CAPTION:Richard S. Friedland
President and
Chief Operating Officer
CHART: Primary Earnings Per Share
(In Dollars)
CHART: Net Income
(Dollars in Millions)
<PAGE> 4
Delivering Communication Power
As the leader in digital TV, General Instrument is adapting and integrating
its proven technology to deliver new and advanced services.
General Instrument's leadership only starts with technology. GI
offers complete digital compression and transmission systems_from the
equipment that encodes and transmits the signal up to the satellite, to the
intelligent set-top terminal in the consumer's home and everything in
between.
This report focuses on General Instrument's global leadership in
design, installation and systems integration for networks capable of
delivering advanced video, voice and data services.
<PAGE> 5
PHOTO: GLOBE
CAPTION:
Global Leadership
General Instrument's technology is in use worldwide, making enriched forms of
information and entertainment available to customers around the globe.
LEGEND:
GI Systems and Equipment in Use
DESCRIPTION:
Global Leadership
GI Communications Division
Cable Television Systems
Satellite Television Systems
Wireless Television Systems
Digital Television Systems
CommScope
Coaxial and fiber optic cable for cable television and telecommunications
applications delivered to 62 countries around the world.
PSD
Power rectifiers and transient voltage suppressors for use in computer,
telecommunications, automotive and consumer equipment delivered to 37
countries around the world.
<PAGE> 6
Partners in Technology Solutions
General Instrument has sharpened its expertise through years of design and
implementation of complete entertainment delivery systems for customers
around the globe. GI has earned a worldwide reputation for working in
partnership with customers to create solutions tailored specifically to their
particular needs.
GI's ability to customize sophisticated network systems is one reason
the largest cable network operator in Asia, Wharf Cable in Hong Kong, chose
GI as the systems integrator for its premium programming services. General
Instrument met the challenge by tailoring its product offering to fit Wharf's
unique network topology which consists of a Ku-band microwave distribution
network feeding signals to hundreds of individual apartment block cable
systems. GI not only developed the distribution hardware, enabling the
network to transport the GI-encrypted signal cost-effectively and without
distortion, but also managed the integration activities of three other
manufacturers that supplied specific system elements. In only 18 months, the
network was linked to more than one million homes.
The international broadband marketplace, where
General Instrument's sales grew by 82 percent in 1994, presents unique
customer challenges. By adapting and reconfiguring traditional U.S.
architectures, GI addresses the geographic and density constraints that
international customers often present. GI is working closely with customers
in diverse areas of the world to define their goals and develop
architectures, systems and products to meet their evolving requirements.
General Instrument's extensive customizing experience
is a competitive advantage no other company can match.
Chart: Growth-International
CAPTION:
GI's International Broadband Sales
(Dollars in Millions)
International markets, where cable television
penetration is low and demand for entertainment programming is growing
rapidly, present rich opportunities for GI's businesses.
<PAGE> 7
Photo: Wharf head-end
Caption:
GI developed a customized and sophisticated headend system
for the largest cable system
in Asia, Wharf Cable in
Hong Kong. GI works
closely with its
customers to
develop systems
and products.
<PAGE> 8
photo: NYNEX street cabinet
caption:
NYNEX
accesses its
advanced network
through street cabi-
nets in the North West
area of the United
Kingdom. GI is providing
CommScope QRRegistration Mark cable,
headend equipment and
addressable terminals.
<PAGE> 9
Building Networks for Today and Tomorrow
When one of the largest cable franchise holders in the United Kingdom decided
to build a network for the North West UK, it selected General Instrument.
NYNEX CableComms Limited, a subsidiary of NYNEX, one of the regional bell
operating companies, wanted a top-of-the-line system: an advanced interactive
and full-service network that is fully upgradable and future-proof. "We
sought out General Instrument for its expertise in providing network systems
and solutions in cable and advanced services," said Bruce Rabuffo, NYNEX
CableComms chief operating officer. "In providing the highest quality service
to our customers, we have found GI to be of the utmost value and we have
worked effectively together to meet subscribers' requirements in the UK."
The UK cable industry is investing $10 billion to build new,
state-of-the-art, full-service networks. Through its technology and
expertise, General Instrument is positioned to assist UK cable operators in
providing high-quality and advanced services to customers for years to come.
GI provides a full suite of products for full-service networks,
allowing operators to offer greatly expanded programming and integrated
voice, video and data services. GI systems deliver menu-based program guides
and personal messages to subscriber television sets. General Instrument's
feature-rich, highly functional and upgradable interactive set-top terminals
complete the state-of-the-art systems. In addition, GI's CommScope supplies
its patented QRRegistration Mark cable for one-stop access and flexibility.
CHART: Telecommunication Cable Shipped
by CommScope
CAPTION:
Telecommunication Cable Shipped by CommScope
(Thousands of Miles)
Worldwide sales of CommScope's fiber optic and coaxial cable increased by 56%
in 1994. CommScope supplied its patented QR(Registration Mark) cable to NYNEX
for its
advanced network.
<PAGE> 10
Making Digital Television a Reality
When consumers got their first taste of digital satellite television in 1994,
their reaction was enthusiastic. And General
Instrument is responding: during the year, GI more than doubled production of
its digital satellite consumer receivers for PRIMESTAR Partners, and is now
producing 100,000 digital consumer receivers a month. GI's DigiCipher
technology not only provides increased channel offerings for PRIMESTAR
customers, but also delivers outstanding image clarity and CD-quality digital
sound.
General Instrument's leadership in digital technology dates back to
the early '90s and its breakthrough work in high definition television (HDTV).
A January 1995 New York Times story noted that General Instrument "...turned
the HDTV race on its head by offering a fully digital system, something
broadcast engineers had considered virtually impossible."
GI's digital compression technology is the starting point for General
Instrument's complete, end-to-end DigiCipher system. Through its advanced
compression, access control and encryption, and transmission technologies,
the DigiCipher system delivers enriched forms of information and
entertainment from programming source to ultimate signal destination.
GI's work in defining system requirements in conjunction with key
digital TV proponents such as Tele-Communications, Inc. has resulted in the
development of systems capable of delivering today's programming as well as
future interactive services.
GI is poised for continued success in the digital TV marketplace with
its MPEG-2 compatible DigiCipher II satellite and cable system, bringing
consumers the vibrant picture, rich sound and advanced features of digital
TV.
CHART: Addressable Systems Penetration
CAPTION:
Addressable Systems Penetration (As Percent of Total Subscribers)
The increase in program options offered by cable operators has fueled the
growth of addressable systems. General Instrument is the world leader in
addressable systems sales.
(Source: Paul Kagan Associates)
<PAGE> 11
PHOTO: Primestar satellite dish
CAPION:
Using GI's DigiCipher system,
PRIMESTAR offers more than 80
channels of digital programming.
By dialing 1-800-PRIMESTAR,
customers can bring satel-
lite digital TV into their
homes without
buying the
equipment.
<PAGE> 12
PHOTO: Ford Motor Company's FORDSTAR
satellite network
CAPTION:
Ford Motor
Company's
FORDSTAR satellite
network provides dis-
tance learning to 5,000
Ford locations around the
country, using General
Instrument's high-speed com-
pressed digital video technology.
<PAGE> 13
Digitizing the Private Network
Thanks to GI technology, the information superhighway is real at Ford Motor
Company. General Instrument provides the network control system for the "FORDS
TAR" VSAT satellite network that will link Ford and its 5,000 dealerships in
a two-way data and one-way video network. With a 35,000-strong student body
of technicians around the country who need continuous training on new vehicle
requirements, Ford is dedicated to distance learning.
"While many of our competitors have networks in place, none sends
more than one television signal at a time, none uses high-speed compressed
digital video technology, and none is equipped to use interactive voice and
data for training and communication," said Tom Wagner, Ford's Vice President
of Customer Communications and Satisfaction. "By winning the competition in
education, training and communication, we are convinced we can execute the
customer satisfaction equation and make increased owner loyalty a reality."
Microsoft, Target Stores and Wal-Mart also are developing digital
television networks with General Instrument technology. These networks
provide instantaneous access to company and technology updates and speed the
exchange of data, such as customer buying trends and repair records, between
company headquarters and remote retail locations.
General Instrument's private networks offer the competitive edge that
companies demand.
CHART: Analog and Digital Channels
CAPTION:
Analog and Digital Channels
LEGEND:
GRAY - VideoCipher Analog Channels
RED - DigiCipher Digital Channels
The rapid expansion of digital capacity encoded by DigiCipher, compared to
the analog offerings on VideoCipher, demonstrates the interest in increased
program offerings made possible by General Instrument's pioneering work in
digital compression.
<PAGE> 14
Serving a Strong Analog Market
General Instrument's record earnings in 1994 point to the strength of
traditional cable television networks. At the same time
that digital technology is emerging, GI's analog product sales continue to
flourish.
In serving a diverse customer base, GI has created a variety of
solutions to meet a wide range of customer needs, both digital and analog.
Recognizing the viability and longevity of analog networks, GI has
developed a feature-rich, highly functional advanced analog addressable
terminal. The CFT 2200 delivers enhanced messaging, multilingual displays and
an interactive program guide. Subscribers use cursor keys to navigate through
program offerings. The CFT 2200 also makes possible near-video-on-demand,
supporting simultaneous delivery of many pay-per-view movies.
GI offers a broad analog product line, providing wired and wireless
solutions to customers with needs ranging from low-cost, pay-TV security to
advanced, interactive, expandable systems.
Time Warner has made a substantial commitment to the CFT 2200,
placing orders in excess of 1.5 million units. Continental Cablevision and
and other major cable network operators also have placed significant orders.
General Instrument is positioned to profit from its innovative offerings in
both the analog and digital TV markets.
CHART: Number of Set-Top Terminals Shipped by GI
CAPION:
Number of Set-Top Terminals Shipped by GI
(Units in Thousands)
In response to customer demand, General Instrument shipped almost 5 million
set-top terminals in 1994, adding to its already significant customer base.
<PAGE> 15
PHOTO: The CFT 2200
CAPTION:
GI has developed a feature-rich, highly functional advanced
analog addressable terminal.
The CFT 2200 delivers
enhanced messaging, mul-
tilingual displays and an
interactive
program guide.
<PAGE> 16
PHOTO: Power Semiconductor manufacturing facility
CAPTION:
The Power Semiconductor Division is an acknowledged world-class provider of
rectifiers and transient voltage suppressors. PSD's manufacturing facilities
have achieved ISO9000 quality certification.
<PAGE> 17
Delivering Excellence
General Instrument has built its success on an unwavering commitment to
quality - a commitment that impacts every aspect of operations.
To ensure the highest quality products at the lowest prices, General
Instrument knows that its manufacturing facilities must be world class. GI's
flagship Taiwan facilities, home to both the GI Communications and Power
Semiconductor divisions, are breaking new ground in manufacturing excellence.
All GI manufacturing facilities are aggressively pursuing or have already
achieved ISO 9000 quality certification. This international merit badge of
capability assures our customers of strict standards of quality and
productivity.
As the acknowledged world-class provider of rectifiers and transient
voltage suppressors, the Power Semiconductor division counts Sony, Samsung,
Ford Motor Company, AT&T and other multinational companies among its
customers. In addition to its focus on modern facilities, GI has demonstrated
a continuous commitment to its employees and development programs, each year
providing more than 35 hours of education per employee. PSD was awarded GI's
annual Chairman's Award for Quality in 1994. The PSD team, made up of members
from facilities all over the world, was recognized for dramatically improved
delivery performance and reduced freight cost.
Being the best to GI means technological leadership and manufacturing
excellence.
CHART: Rectifiers Shipped by PSD
Rectifiers Shipped by PSD
(Units in Millions)
Power rectifying components are used to condition current and voltage and
protect electrical circuits from power surges for telecommunications,
automotive and consumer applications. From its market leadership position,
PSD's sales growth continued at more than twice the industry average.
<PAGE> 18
1994 Financial Index:
Five Year Summary 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations 20
Management's Responsibility 26
Independent Auditors' Report 26
Consolidated Statements of Operations 27
Consolidated Balance Sheets 28
Consolidated Statements of Stockholders' Equity 29
Consolidated Statements of Cash Flows 30
Notes to Consolidated Financial Statements 31
<PAGE> 19
<TABLE> Twelve Months
Ended
Five Year Summary December 31, August 15,
<CAPTION> Pro forma for Ten Months 1990
change in Ended Through
Year Ended December 31, fiscal year December 31, February 28,
(In millions, except per share data) 1994 1993 1992 1991(1) 1991 1991
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales $2,036 $1,393 $1,075 $ 929 $ 785 $ 533
Cost of sales 1,404 956 755 668 566 406
Selling, general and
administrative 180 149 137 123 103 69
Research and development 111 74 58 57 46 32
Operating income 316 188 98 54 48 13
Interest expense (54) (73) (112) (125) (104) (68)
Income (loss) before
extraordinary item and
cumulative effect of
changes in accounting
principles 248(2) 90 (41) (111) (94) (58)
Net income (loss) $ 247(2) $ 91(3) $ (53)(4) $ (111) $ (94) $ (58)
Weighted average shares
outstanding (5) 123 122 98 73 73 73
Primary earnings (loss) per share
before extraordinary item
and cumulative effect
of changes in accounting
principles (5) $ 2.01(2) $ .74 $ (.42) $(1.52) $(1.29) $ (.79)
Fully diluted earnings (loss)
per share before extraordinary
item and cumulative effect
of changes in accounting
principles (5) 1.89(2) .74 (.42) (1.52) (1.29) (.79)
December 31, February 28,
1994 1993 1992 1991 1991
Balance Sheet Data (at end of periods):
Working capital (negative) $ 213 $ (16) $ (14) $(150) $ (51)
Property, plant and equipment, net 344 262 266 286 310
Total assets 2,109 1,776 1,727 1,783 1,941
Long-term debt, including current maturities 797 840 989 1,254 1,353
Other non-current liabilities 187 209 138 171 191
Redeemable securities _ _ _ 4 4
Stockholders' equity 677 389 291 27 121
<FN>
(1) The pro forma statement of operations data for the twelve months ended
December 31, 1991 was derived from historical
statements of operations of the Company adjusted to give effect to the
change in fiscal year end from the last day of February to December 31st.
(2) Includes an income tax benefit of $30, or $.24 per primary share and
$.20 per fully diluted share, as a result of a reduction in a valuation
allowance, as of December 31, 1994, related to domestic deferred income tax
assets.
(3) Includes a cumulative effect credit of approximately $10 and a
cumulative effect charge of approximately $10 to reflect the adoption of
Financial Accounting Standards Board Statements No. 109, Accounting for
Income Taxes and No. 106, Employers' Accounting for Postretirement Benefits
other than Pensions, respectively.
(4) Includes a $12 extraordinary charge for the write-off of deferred
financing costs in conjunction with the early extinguishment of debt.
(5) On July 6, 1994, the Company's Board of Directors declared a
two-for-one split of the Company's Common Stock, which was effected in the
form of a 100% stock dividend on August 8, 1994. All share and per share
data have been restated for all periods presented to reflect the stock
split.
</FN>
</TABLE>
<PAGE> 20
Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Segment Information:
Net Sales
Broadband Communications $1,720 $1,125 $ 844
Power Semiconductor 316 268 231
Total $2,036 $1,393 $1,075
</TABLE>
Comparison of Results of Operations for the Year Ended December 31, 1994 with
the Year Ended December 31, 1993
Net Sales. Net sales for the year ended December 31, 1994, were
$2,036 compared to $1,393 for the year ended December 31, 1993, an increase
of $643, or 46%. This increase reflects continued higher sales volumes in
both the Broadband Communications and Power Semiconductor segments, partially
offset by a decline in selling prices of certain products. Broadband
Communications' sales increased $595, or 53%, to $1,720 in 1994, primarily as
a result of increased sales volume of analog addressable systems, distribution
electronics and CommScope cable products. This higher sales volume reflects
increased investment in infrastructure by major cable television operators in
the United States as well as the deployment of new cable television systems
in international markets. International sales of cable television electronics
and CommScope cables increased 75% for the year ended December 31, 1994 in
comparison to 1993. In addition, sales of DigiCipher digital compression
products represented in excess of 30% of the Broadband Communications sales
increase. Sales of DigiCipher digital compression products in 1994
represented the start of the second stage of the commercialization of digital
broadband systems, during which satellite programmers, cable operators and
other network providers will begin to deploy digital terminals in their
subscribers' homes in order to take advantage of the enhanced capabilities of
digital networks. This stage began with the satellite market during the
second quarter of 1994, when GI began shipping its first generation
DigiCipher I consumer receivers to PRIMESTAR Partners for the medium power
Ku-band direct-to-home satellite market. See "New Technologies; Digital
Products" below. During 1994, the Company continued sales of VideoCipher RS(TM)
analog satellite receiver consumer modules to persons who had been receiving
without authorization (or "pirating") the commercial satellite programming
data signals. In 1994, these sales declined to minimal levels as expected.
However, shipments of VideoCipher RS analog satellite receiver consumer
modules for new owners of C-band satellite dishes increased in 1994 over
1993. The Company expects sales opportunities to potential new owners of
C-band satellite dishes to continue through the first quarter of 1995
(although there can be no assurance as to the amount of those sales), and to
decline, perhaps substantially, thereafter.
Power Semiconductor sales increased $48, or 18%, in 1994 in
comparison to 1993. This increase reflects higher sales volumes to all major
end user product markets in which Power Semiconductor products are
incorporated, partially offset by a decline in selling prices of certain
products. The most significant sales volume increases were in the sales of
discrete power rectifying and transient voltage suppression components to be
incorporated in computers, consumer electronics, automotive and
telecommunications products. International sales increased $35, or 18% to
$224 for the year ended December 31, 1994 in comparison to 1993.
Gross Profit (Net sales less cost of sales). Gross profit increased
$197, or 45%, to $633 in 1994 from $436 in 1993, and was approximately 31% of
sales in each period. Broadband Communications segment gross profit increased
49% over 1993 and was approximately 31% of sales in each period. Broadband
Communications gross profit and gross profit margin were positively affected
by: the 53% increase in sales discussed above; reduced material costs because
of higher volume purchasing; and improved per unit labor and overhead costs
resulting from increased production. These positive effects were partially
offset by the shift in product mix to DigiCipher digital compression
products, which initially carry lower margins. Power Semiconductor gross
profit increased 28% from 1993 to 1994 and increased as a percentage of sales
to 34% in 1994 from 31% in 1993, primarily as a result of the 18% increase in
sales discussed above, and improved per unit labor and overhead costs resulting
from increased production volumes, partially offset by decreased selling
prices of certain products.
Selling, General and Administrative. Selling, general and
administrative ("SG&A") expense increased $30, or 20%, in 1994 in comparison
to 1993, and decreased as a percentage of sales to 9% in 1994 from 11% in
1993. The increase in SG&A expense was principally attributable to increased
<PAGE> 21
(Dollars in millions)
marketing and selling expenditures,which contributed to the higher sales
volumes discussed above. The Company has been increasing
its sales force, field support and marketing activities to take advantage of
increased growth opportunities in international cable and satellite
television and worldwide telecommunications markets. SG&A expense in 1993
also included a charge of approximately $6 to provide for costs to be
incurred in conjunction with the combining of the Company's former Jerrold
Communications and VideoCipher divisions into the GI Communications Division.
Research and Development. Research and development expense increased
$37, or 51%, to $111 in 1994 from $74 in 1993, and was approximately 5% of
sales in each period. The Company's efforts are focused on: continued
development of the next generation of cable terminals, which incorporate
digital compression and multimedia capabilities; development of enhanced
addressable analog terminals; advanced digital systems for cable and
satellite television distribution; and product development through strategic
alliances. Emerging research and development activities include broadband
telephony products and interactive multimedia technologies for broadband
networks.
Operating Income. Operating income increased by $128, or 69%, to $316
in 1994 from $188 in 1993.
Other Income (Expense). Other income (expense) for the year ended
December 31, 1994 consisted primarily of a charge related to the write-down
of non-operating real estate.
Other income (expense) for the year ended December 31, 1993 included
a net gain on the sale of a portion of a partnership interest in an affiliate
and equity in losses of this unconsolidated affiliate. Also included was a $7
charge related to the write-down of a facility which was principally offset
by a gain on the settlement of a lawsuit with regard to patent infringements.
Interest Expense. Interest expense declined $19 to $54 in 1994 from
$73 in 1993. The decline was due primarily to lower interest rates which were
principally attributable to the June 1993 debt restructuring and the July
1994 amendment and restatement of the senior bank credit agreement of General
Instrument Corporation of Delaware ("GIDelaware"), the Company's principal
operating subsidiary. See "Liquidity and Capital Resources" below.
Gain (Loss) From Divestiture Businesses and Assets. During the year
ended December 31, 1994, the Company recognized a net loss of $3 which was
principally comprised of a $4 charge related to a settlement of certain legal
matters associated with a former divestiture business, partially offset by
gains on the sale of certain real estate holdings and other divestiture
assets. Charges related to the carrying costs associated with divestiture
assets (principally real estate) were not significant.
During 1993, the Company substantially completed its divestiture
program with the sale of its Wagering Group for an amount that approximated
net book value. During the year ended December 31, 1993, the Company
recognized a net gain of $0.3 which was comprised of $4 in gains on the
settlement of an action related to the Company's divested Defense Systems
business, offset by charges related to changes in the estimated amount of
divestiture liabilities retained and carrying costs associated with the
remaining divestiture assets (principally real estate). Carrying costs
attributable to real estate held for sale were not significant.
Income Taxes. Income taxes decreased $14 in 1994 from 1993 due
primarily to the recognition of an income tax benefit of $30 as a result of a
reduction in a valuation allowance, as of December 31, 1994, related to
domestic deferred income tax assets. This benefit was partially offset by
increased taxes on higher foreign sourced income. Additionally, it is
anticipated that the Company's effective income tax rates for 1995 will
increase in comparison to 1994 and 1993. See Note 6 to the consolidated
financial statements for further discussion.
Cumulative Effect of a Change in Accounting Principle. Effective
January 1, 1994, the Company adopted Financial Accounting Standards Board
Statement No. 112, Employers' Accounting for Postemployment Benefits ("SFAS
No. 112"). As a result of adopting SFAS No. 112, the Company recorded a
cumulative effect charge to income of approximately $2. The annual charge to
operations as a result of adopting SFAS No. 112 is not significant.
Comparison of Results of Operations for the Year Ended December 31, 1993 with
the Year Ended December 31, 1992
Net Sales. Net sales for the year ended December 31, 1993, were
$1,393 compared to $1,075 for the year ended December 31, 1992, an increase
of $318, or 30%. This increase reflects continued higher sales volumes in
both the Broadband Communications and Power Semiconductor segments, partially
offset by a decline in selling prices of certain CommScope and Power
Semiconductor products. Broadband Communications' sales increased $281, or 33%,
to $1,125 in 1993 primarily as a result of increased sales volume of the GI
Communications and CommScope divisions' cable
<PAGE> 22
(Dollars in millions)
television and satellite products, partially offset by a decline in
selling prices of certain CommScope coaxial cable products.
The increases in Broadband Communications segment sales reflect continued
increased investment in infrastructure by major cable television operators in
the United States. GI Communications Division sales increased $226, or 41%,
due to increased sales volume of distribution electronics, analog addressable
terminals, VideoCipher RS analog satellite receiver consumer modules and
DigiCipher digital compression products. The Company believes that the
increase in VideoCipher RS analog satellite receiver consumer module sales
volume is attributable to sales to persons who had been receiving without
authorization (or "pirating") the commercial data signals and further
believes that those persons purchased consumer descrambler modules as a
result of the effectiveness of actions taken to make "pirating" of the
commercial data signals more difficult. CommScope sales increased by $55, or
19%, as compared to 1992, principally reflecting increased coaxial cable
sales volume, partially offset by a decline in selling prices of certain
coaxial cable products.
Power Semiconductor sales increased $37, or 16% to $268 in 1993. This
increase reflects higher sales volumes to all end user product markets in
which Power Semiconductor products are incorporated, including computers,
consumer electronics, lighting ballasts, automotive and telecommunications
products. The most significant sales volume increases were realized in the
sale of discrete power rectifying and transient voltage suppression
components to be incorporated in computer, lighting ballasts and consumer
electronics products. Power Semiconductor sales also reflect incremental
sales attributable to the acquisition, in August 1992, of General
Semiconductor Ireland ("GSI"), partially offset by a decline in selling
prices of certain products. The GSI operations contributed approximately $27
to 1993 sales as compared to $11 in 1992.
Gross Profit (Net sales less cost of sales). Gross profit increased
$117, or 37%, to $436 in 1993 from $319 in 1992, and increased as a
percentage of sales to 31% in 1993 from 30% in 1992. Broadband Communications
segment gross profit increased 37% over 1992 (constant as a percentage of
sales at 31%), reflecting the 33% increase in sales, as discussed above, as
well as an increase in the proportion of VideoCipher RS analog satellite
receiver consumer module sales, which have higher margins, partially offset
by a charge of $12 associated with costs to be incurred in effecting
enhancements to the Company's DigiCipher digital compression technology, and
incremental depreciation and amortization in 1993 relating to the adoption of
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes. See "Cumulative Effect of Changes in Accounting Principles" below.
Power Semiconductor Division gross profit increased 36% from 1992 to 1993,
and increased as a percentage of sales to 31% in 1993 from 27% in 1992. The
increase was due primarily to an increase in the proportion of sales of
transient voltage suppression components, which have higher margins, and
lower per unit manufacturing costs associated with the higher sales volumes
discussed above.
Selling, General and Administrative. Selling, general and
administrative ("SG&A") expense increased $12, or 9%, in 1993 in comparison
to 1992. SG&A expense was 11% of sales in 1993 as compared to 13% in 1992.
The increase in SG&A expense was principally attributable to increased
marketing and selling expenditures, which contributed to the higher sales
volumes discussed above, and a charge of $6 to provide for costs to be incurred
in conjunction with the combining of the Company's former Jerrold
Communications and VideoCipher divisions into the GI Communications Division.
SG&A expense in 1993 also included $2 of compensation expense attributable to
stock appreciation rights compared to $9 of compensation expense in 1992
related to the issuance of Common Stock, the granting of stock options and
the effects of stock appreciation rights. SG&A expense in 1992 also included
$9 of expense related to funding for Digital Cable Radio, a digital cable
audio venture. GI sold a portion of its ownership interest in Digital Cable
Radio in January 1993, thereby reducing future funding requirements.
Research and Development. Research and development expense of $74 in
1993 increased 27% in comparison to 1992 when research and development
expense was $58. This increase reflected the continued focus on development
activities for the next generation of cable terminals, which incorporate
digital compression and multimedia capabilities, and on advanced digital
systems for cable and satellite television distribution. Other major programs
included enhancement of addressable analog terminals, distribution
electronics, wireless terminal development and security enhancements for both
satellite and cable products.
Operating Income. Operating income in 1993 increased by $90, or 92%,
to $188 from $98 in 1992.
Other Income (Expense). See "Comparisonof Results of Operations for
the Year Ended December 31, 1994 with the Year Ended December
<PAGE> 23
(Dollars in millions)
31, 1993-Other Income (Expense)" above for 1993 components.
Other income (expense) for the year ended December 31, 1992 included
miscellaneous items that were not significant.
Interest Expense. Interest expense declined $38 in 1993 primarily as
a result of lower interest rates attributable to the restructuring of the
Company's senior and subordinated debt and a reduction in the amount of debt
outstanding. See "Liquidity and Capital Resources" below for further
discussion of the debt restructuring.
Gain (Loss) From Divestiture Businesses and Assets. See "Comparison
of Results of Operations for the Year Ended December 31, 1994 with the Year
Ended December 31, 1993_Gain (Loss) from Divestiture Businesses and Assets"
above for 1993 components.
During the year ended December 31, 1992, the Company recognized a net
loss of approximately $15 which was comprised of a $32 charge, which
represented the anticipated loss on sale of the Wagering Group, net of a gain
of approximately $11 from the sale of marketable securities and a $6 gain on
the settlement of an action related to the Company's divested Defense Systems
business.
Income Taxes. Income taxes increased $9 in 1993 from 1992, due
primarily to increased profitability in the foreign jurisdictions in which
the Company has operations.
Cumulative Effect of Changes in Accounting Principles. Effective
January 1, 1993, the Company adopted Financial Accounting Standards Board
Statements No. 109, Accounting for Income Taxes ("SFAS No. 109"), and No.
106, Accounting for Postretirement Benefits other than Pensions ("SFAS No.
106"). As a result of adopting SFAS No. 109 and SFAS No. 106, the Company
recorded a cumulative effect credit to income of approximately $10 and a
cumulative effect charge to income of approximately $10, respectively (see
Notes 6 and 10 to the consolidated financial statements). As a result of
adopting SFAS No. 109, the assets and liabilities that were adjusted to fair
value net of tax effects, as of the date of the Acquisition, were remeasured
to their unamortized gross amounts as of January 1, 1993. Consequently, there
was an increase in depreciation and amortization expense in 1994 and 1993 of
approximately $4 and $8, respectively.
Liquidity and Capital Resources
Cash provided by operations for the year ended December 31, 1994 was $162
compared to $166 in 1993 and a negative $9 in 1992. Cash provided by operation
s in 1994 was relatively constant with 1993 as the impact of increased
earnings in 1994 was offset by increased working capital. Cash provided by
operations in 1993 was impacted by costs associated with the issuance of debt,
as described below.
The improvement in cash flow from operations in 1993 compared to 1992
reflects increased sales volume and improved operating margins. Cash provided
by operations in 1992 was impacted by significant expenditures related to the
VideoCipherRegistration Mark security upgrade program and the payment of lump
sum royalties pursuant to a license under an unaffiliated third party's
patent regarding encryption and decryption of satellite television signals.
At December 31, 1994, working capital was $213 compared to a negative
$16 at December 31, 1993 and a negative $14 at December 31, 1992. The working
capital increase in 1994 over 1993 was due principally to increased sales
volume and projected business growth with corresponding increases in accounts
receivable, inventory, and accounts payable. Based on current levels of order
input and backlog, as well as significant sales agreements not yet reflected
in order and backlog levels, the Company believes that working capital levels
are appropriate to support future operations. There can be no assurance,
however, that future industry specific developments or general economic
trends will not alter the Company's working capital requirements. The
increase in working capital at December 31, 1994 also reflects the recognition
of net current deferred tax assets of $90 as a result of reductions in a
valuation allowance related to domestic deferred income taxes, and the
reclassification of $31 of debt outstanding at December 31, 1993 from
short-term to long-term in connection with the 1994 amendment and restatement
of GIDelaware's senior bank credit agreement, as discussed below.
Working capital at December 31, 1993 was relatively constant with the
1992 level but there were several significant changes in 1993 including:
increased accounts receivable and inventory reflecting increased and
projected sales; reduced accrued interest payable as a result of the
restructuring of the Company's existing indebtedness, as discussed below; a
reduction in assets held for sale due to the sale of the Company's remaining
divestiture business and the use of the proceeds to repay long-term debt;
increased accounts payable reflecting increased sales and investment in plant
and equipment; and an increase in the current maturities of long-term debt
consistent with the maturity payment schedule in effect at December 31, 1993.
<PAGE> 24
(Dollars in millions)
During the year ended December 31, 1994, the Company invested
$136 in equipment and facilities compared with $67 in 1993
and $37 in 1992. The higher level of capital spending was attributable to
capacity expansion across all businesses to meet increased current and future
demands. In 1995, the Company expects to continue to expand its capacity to
meet increased current and future demands for analog and digital products,
cables, and power rectifiers with capital expenditures for the year ending
December 31, 1995 expected to approximate $170.
The Company's research and development expenditures (principally
focused on the Broadband Communications businesses) were $111 for the year
ended December 31, 1994 compared to $74 in 1993 and $58 in 1992, and are
expected to approximate $135 for the year ending December 31, 1995. See
"Comparison of Results of Operations for the Year Ended December 31, 1994
with the Year Ended December 31, 1993_Research and Development" above for
further discussion.
At December 31, 1994, the Company had $5 of cash and cash equivalents
on hand compared to $6 at December 31, 1993 and $19 at December 31, 1992. At
December 31, 1994, long-term debt (including current maturities) was $797,
compared to $840 at December 31, 1993 and $989 at December 31, 1992.
In June 1993, the Company completed a two-part program to restructure
its existing indebtedness in order to lower its interest costs and obtain
greater operating flexibility. The first part of this program was consummated
with the public offering of $500 principal amount of 5% Convertible Junior
Subordinated Notes (the "Notes"). The second part of this program encompassed
amending and restating the senior bank credit agreement of GI Delaware to
include $275 of term loans and a $225 revolving credit facility maturing on
December 31, 1998, and to provide for lower interest rates and less
restrictive financial and operating covenants. The proceeds from the offering
of the Notes and borrowings under the revolving credit facility were used to
prepay the entire $600 of the Company's 9-1/2% Subordinated Debentures.
Effective July 7, 1994, the Company further amended and restated the
senior bank credit agreement of GI Delaware (as further amended and restated,
the "Credit Agreement") to lower its interest costs, increase available
credit commitments and obtain greater operating flexibility. The Credit
Agreement provides for a $500 unsecured Revolving Credit Facility which
matures on December 31, 1999 and converted all outstanding term loans to
long-term revolving credit loans under the new Revolving Credit Facility.
Amounts outstanding as of December 31,1994 under this facility are classified
as long-term based on the Company's intent and ability to maintain these
loans on a long-term basis. The Revolving Credit Facility commitment will be
reduced by $50 each year commencing December 31, 1995.
The Company also has a $15 uncommitted borrowing facility pursuant to
which the aggregate amount of borrowings outstanding under this facility and
the Revolving Credit Facility cannot exceed the total available credit
commitment under the Credit Agreement. At December 31, 1994, the Company had
borrowings of $240 and credit commitments, which the Company had not borrowed
against, of $260 under its revolving credit facilities.
The Credit Agreement contains numerous financial and operating
covenants, including: restrictions upon incurring indebtedness and liens;
entering into any transaction to acquire or merge with any entity; making
certain other fundamental changes; selling property; and paying dividends. At
December 31, 1994, the Company was in compliance with all financial and
operating covenants.
The Company's principal source of liquidity both on a short-term and
long-term basis is cash flow provided by operations. Occasionally, however,
the Company may borrow against the Credit Agreement to supplement cash flow
from operations. The Company believes that based upon its analysis of its
consolidated financial position, its cash flow during the past 12 months and
the expected results of operations in the future, operating cash flow and
available funding under the Credit Agreement will be adequate to fund
operations, research and development expenditures, capital expenditures and
debt service for the next 12 months. The Company intends to repay its
remaining indebtedness primarily with cash flow from operations. 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 a selective basis, the Company enters into interest rate cap or
swap agreements to reduce the potentially negative impact of increases in
interest rates on its outstanding variable rate debt. In the fourth quarter
of 1994, the Company entered into two interest rate cap agreements to hedge
an aggregate notional amount of $150 of outstanding variable rate borrowings
under the Credit Agreement covering the period from January 3, 1995 through
January 3, 1996. The Company monitors its underlying interest rate exposures on
its variable rate debt on an ongoing basis and believes that it can modify or
adapt its hedging strategies as needed. See Note 12 to the
<PAGE> 25
(Dollars in millions)
consolidated financial statements for additional information on the
Company's hedging strategies.
New Technologies; Digital Products
The Company is entering a new competitive environment in which its success
will be dependent upon numerous factors, including its ability to continue to
develop appropriate technologies and successfully implement applications
based on those technologies. The Company believes that a key step in the
evolution of cable television system architecture and satellite delivery of
programming will be the implementation of digital video compression, which
converts television signals to a digital format and then compresses the
signals of several channels of television programming into the bandwidth
currently used by just one channel. GI has developed a digital compression
system, DigiCipher, that enables satellite programmers and cable television
operators to deliver, over their existing networks, four to ten times as much
information as is possible with existing analog technology.
GI has been shipping its first-generation DigiCipher I digital
encoders and decoders for satellite programmers and cable television
commercial headend operators since 1993, and began deployment of DigiCipher I
consumer receivers to PRIMESTAR Partners for the medium power Ku-band
direct-to-home satellite market in the second quarter of 1994. The Company's
DigiCipher II compression system is compatible with the recently finalized
industry standard for digital compression and transport, Motion Picture
Experts Group 2 ("MPEG2"). The development of the DigiCipher II System
("MPEG2/DCII") has taken longer than anticipated as a result of several
factors, including increased system complexity, evolving international MPEG2
standards and other system design issues. Consequently, volume deployment of
MPEG2/DCII digital products, which had been anticipated in early 1995, is now
expected to begin in mid-1995 for satellite products and late 1995 for cable
products, although there can be no assurance that additional delays will not
occur.
Deployment of MPEG2/DCII digital products for PRIMESTAR Partners,
expected to begin in mid-1995, will include an upgrade to MPEG2/DCII, for a
fee, of DigiCipher I receivers currently in use. As a result of the high
costs of initial production, DigiCipher I products and the upgrades to
MPEG2/DCII that are shipped during 1995 will carry substantially lower
margins than the Company's mature analog products. As the Company progresses
through the initial stages of production of its MPEG2/DCII products, the
Company expects margins of its digital products to improve.
With other new technologies and applications under development, the
Company believes it is well positioned to take advantage of the opportunities
presented in the new competitive environment. There can be no assurance,
however, that these technologies and applications will be successfully
developed, or, if they are successfully developed, that they will be
implemented by the Company's traditional customers or that the Company will
otherwise be able to successfully exploit these technologies and
applications.
Foreign Exchange
A significant portion of the Company's products are manufactured or assembled
in countries outside the United States. In addition, as discussed above, the
Company's sales of its equipment into international markets have grown. These
foreign operations are subject to risk with respect to currency exchange
rates. The Company monitors its underlying exchange rate exposures on an
ongoing basis and continues to implement selective hedging strategies to
reduce the market risks from changes in exchange rates. See Note 12 to the
consolidated financial statements.
Effect of Inflation
The Company continually attempts to minimize any effect of inflation on
earnings by controlling its operating costs and selling prices. During the
past few years, the rate of inflation has been low and has not had a material
impact on the Company's results of operations.
<PAGE> 26
Management's Responsibility
Management is responsible for the preparation and accuracy of the
consolidated financial statements and other information included in this
report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles using, where
appropriate, management's best estimates and judgments.
In meeting its responsibility for the reliability of the consolidated
financial statements, management has developed and relies on the Company's
system of internal accounting control. The system is designed to provide
reasonable assurance that assets are safeguarded and that transactions are
executed as authorized and are properly recorded. The system is augmented by
written policies and procedures and an internal audit department.
The Board of Directors reviews the consolidated financial statements
and reporting practices of the Company through its Audit Committee, which is
composed entirely of directors who are not officers or employees of the
Company. The committee meets with the independent auditors, internal auditors
and management to discuss audit scope and results and to consider internal
control and financial reporting matters. Both the independent and internal
auditors have direct unrestricted access to the Audit Committee. The entire
Board of Directors reviews the Company's financial performance and financial
plan.
/s/ Daniel F. Ackerson /s/ Charles T. Dickson
----------------------- -----------------------
Daniel F. Akerson Charles T. Dickson
Chairman and Vice President and
Chief Executive Officer Chief Financial Officer
Independent Auditors' Report
To the Board of Directors and Stockholders of General Instrument Corporation:
We have audited the consolidated balance sheets of General Instrument
Corporation and its subsidiaries (the "Company"), as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of General
Instrument Corporation and its subsidiaries at December 31, 1994 and 1993 and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 6 and 10 to the consolidated financial
statements, effective January 1, 1994, the Company changed its method of
accounting for postemployment benefits and, effective January 1, 1993,
changed its methods of accounting for income taxes and postretirement
benefits other than pensions, to conform with Statements of Financial
Accounting Standards Nos. 112, 109 and 106, respectively.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Parsippany, New Jersey
January 31, 1995
<PAGE> 27
<TABLE>
Consolidated Statements of Operations
<CAPTION>
Year Ended December 31,
(In thousands, except per share data) 1994 1993 1992
<S> <C> <C> <C>
Net Sales $2,036,323 $1,392,522 $1,074,695
Operating Costs and Expenses:
Cost of sales 1,403,585 956,154 755,466
Selling, general and administrative 179,631 149,362 137,335
Research and development 111,462 73,741 58,149
Amortization of excess of cost over fair value of
net assets acquired 25,574 25,722 25,883
Total operating costs and expenses 1,720,252 1,204,979 976,833
Operating Income 316,071 187,543 97,862
Other income (expense)-net (2,001) (1,516) 775
Investment income 823 913 1,330
Interest expense (53,574) (73,371) (111,634)
Gain (loss) from divestiture businesses and
assets-net (3,153) 323 (14,787)
Income (loss) before Income Taxes,
Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles 258,166 113,892 (26,454)
Provision for income taxes (9,714) (23,526) (14,941)
Income (loss) before Extraordinary Item and
Cumulative Effect of Changes in
Accounting Principles 248,452 90,366 (41,395)
Extraordinary charge resulting from the write-off of
deferred financing costs in conjunction with
the early extinguishment of debt _ _ (11,598)
Cumulative effect of changes in accounting principles:
Accounting for postemployment benefits (1,917) _ _
Accounting for income taxes _ 10,331 _
Accounting for postretirement benefits
other than pensions _ (10,114) _
Net Income (loss) $ 246,535 $ 90,583 $ (52,993)
Weighted Average Shares Outstanding 123,393 122,237 97,985
Earnings (loss) Per Share:
Primary:
Income (loss) before extraordinary item and
cumulative effect of changes in
accounting principles $ 2.01 $ .74 $ (.42)
Extraordinary charge resulting from the write-off
of deferred financing costs in conjunction
with the early extinguishment of debt _ _ (.12)
Cumulative effect of changes in accounting
principles-net (.01) _ _
Net income (loss) $ 2.00 $ .74 $ (.54)
Fully Diluted:
Income (loss) before extraordinary item and
cumulative effect of changes in
accounting principles $ 1.89 $ .74 $ (.42)
Extraordinary charge resulting from the write-off
of deferred financing costs in conjunction
with the early extinguishment of debt _ _ (.12)
Cumulative effect of changes in accounting
principles-net (.01) _ _
Net income (loss) $ 1.88 $ .74 $ (.54)
See notes to consolidated financial statements.
</TABLE>
<PAGE> 28
<TABLE>
Consolidated Balance Sheets
<CAPTION>
(Dollars in thousands, except share data) December 31, 1994 December 31, 1993
<S>
Assets <C> <C>
Current Assets:
Cash and cash equivalents $ 5,128 $ 5,584
Accounts receivable, less allowance for doubtful accounts of
$7,582 and $7,012, respectively 306,754 211,719
Inventories 214,180 108,951
Prepaid expenses and other current assets 13,620 9,274
Deferred income taxes, net of valuation allowance 93,446 3,079
Assets held for sale 8,636 12,504
Total current assets 641,764 351,111
Property, plant and equipment_net 343,868 262,173
Intangibles, less accumulated amortization of $78,460 and $61,081,
respectively 161,410 178,789
Excess of cost over fair value of net assets acquired, less accumulated
amortization of $110,952 and $85,378, respectively 904,184 941,483
Investments and other assets 10,113 12,237
Deferred income taxes, net of valuation allowance 29,238 6,254
Deferred financing costs, less accumulated amortization of $22,980
and $17,313, respectively 18,374 24,041
Total Assets $2,108,951 $1,776,088
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 162,529 $ 118,291
Accrued interest payable 2,737 3,227
Income taxes payable 52,670 63,136
Accrued liabilities 208,383 149,559
Current portion of long-term debt 2,155 33,000
Total current liabilities 428,474 367,213
Deferred income taxes 21,990 3,134
Long-term debt 794,694 807,204
Other non-current liabilities 186,615 209,432
Commitments and contingencies (See Note 8)
Stockholders' Equity:
Preferred Stock, $.01 par value; 20,000,000
shares authorized; no shares issued _ _
Common Stock, $.01 par value; 175,000,000 shares authorized;
122,231,348 and 120,261,610 shares issued at December 31, 1994 and
1993, respectively 1,222 601
Additional paid-in capital 543,728 502,423
Retained earnings (accumulated deficit) 132,634 (113,901)
677,584 389,123
Less Treasury stock, at cost, 11,259 and 11,784 shares of Common
Stock at December 31, 1994 and 1993, respectively (17) (18)
Unearned compensation (389) _
Total stockholders' equity 677,178 389,105
Total Liabilities and Stockholders' Equity $2,108,951 $1,776,088
See notes to consolidated financial statements.
</TABLE>
<PAGE> 29
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION> Retained
Common Stock Additional Earnings Common
Paid-In (Accumulated Stock In Unearned
(In thousands) Shares Amount Capital Deficit) Treasury Compensation
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 16,500 $ 165 $178,173 $(151,491) $ _ $ _
Issuance of Class B Common Stock
and stock options at less than
fair value _ _ 5,734 _ _ _
Reclass redeemable securities _ _ 4,978 _ _ _
Conversion of Class B Common
Stock to Common Stock 1,882 19 (19) _ _ _
Two-for-one stock split 18,382 184 (184) _ _ _
Exercise of stock options 85 1 453 _ _ _
Purchase of Common Stock _ _ _ _ (18) _
Issuance of Common Stock 22,000 220 306,110 _ _ _
Net loss _ _ _ (52,993) _ _
Balance, December 31, 1992 58,849 589 495,245 (204,484) (18) _
Exercise of stock options 1,282 12 6,212 _ _ _
Costs associated with the sale of
Common Stock _ _ (2,743) _ _ _
Exchange of stock appreciation
rights for stock options _ _ 3,703 _ _ _
Issuance of Treasury stock _ _ 6 _ _ _
Net income _ _ _ 90,583 _ _
Balance, December 31, 1993 60,131 601 502,423 (113,901) (18) _
Two-for-one stock split 60,131 601 (601) _ _ _
Exercise of stock options 1,954 20 9,076 _ _ _
Issuance of Treasury stock _ _ 15 _ 1 _
Issuance of restricted stock 15 _ 480 _ _ (389)
Tax benefit from a reduction in
a valuation allowance related
to domestic deferred income
tax assets _ _ 32,335 _ _ _
Net income _ _ _ 246,535 _ _
Balance, December 31, 1994 122,231 $1,222 $543,728 $132,634 $(17) $(389)
See notes to consolidated financial statements.
</TABLE>
<PAGE> 30
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Year Ended December 31,
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ 246,535 $ 90,583 $ (52,993)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 97,350 97,458 107,589
Loss (gain) from divestiture businesses
and assets_net 3,153 (323) 14,787
Write-down of a facility held for sale _ 7,425 _
Write-off of deferred financing costs _ _ 11,598
Issuance of Class B Common Stock and stock
options at less than fair value _ _ 5,734
Costs associated with the issuance of debt (357) (17,803) _
Accounts receivable (95,035) (61,683) (16,654)
Inventories (105,229) (16,608) (23,969)
Prepaid expenses and other current assets (4,446) (3,010) 7,139
Deferred income taxes (50,435) (485) 3,742
Accounts payable, income taxes payable and
other accrued liabilities 60,513 47,496 (53,782)
Other non-current liabilities 4,605 23,953 (12,308)
Other 5,126 (1,145) (238)
Cash provided by (used in) operating activities 161,780 165,858 (9,355)
Investment Activities:
Acquisition of General Semiconductor Ireland, net of
cash acquired of $250 _ _ (16,214)
Proceeds from sale of assets 6,876 38,708 28,396
Additions to property, plant and equipment (135,740) (67,060) (37,370)
Proceeds from the sale of property, plant
and equipment 1,334 1,013 5,172
Net funding of divestiture businesses and assets _ (5,902) (20,872)
Investments in other assets _ (4,000) _
Cash used in investment activities (127,530) (37,241) (40,888)
Financing Activities:
Proceeds from issuance of Convertible Junior
Subordinated Notes _ 500,000 _
Costs associated with the sale of Common Stock (447) (1,792) _
Issuance of Common Stock_net _ _ 306,330
Issuance of Class B Common Stock to
management investors _ _ 1,478
Borrowings under Taiwan loan _ _ 60,000
Treasury stock acquired _ _ (18)
Proceeds from stock options 9,096 6,224 454
Net proceeds from (repayments of) revolving
credit facilities (26,645) 1,500 (3,500)
Repayments of debt (16,710) (648,050) (321,757)
Cash (used in) provided by financing activities (34,706) (142,118) 42,987
Decrease in cash and cash equivalents (456) (13,501) (7,256)
Cash and cash equivalents, beginning of the year 5,584 19,085 26,341
Cash and cash equivalents, end of the year $ 5,128 $ 5,584 $ 19,085
Supplemental Cash Flow Information:
Income taxes paid $ 70,815 $ 19,957 $ 14,422
Interest paid $ 45,594 $ 87,709 $ 107,240
See notes to consolidated financial statements.
</TABLE>
<PAGE> 31
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
1 Summary of Significant Accounting Policies
Basis of Presentation. General Instrument Corporation (the
"Company" or "GI") was organized in August 1990 in connection with the
acquisition of General Instrument Corporation, then a publicly traded
company, by affiliates of Forstmann Little & Co.("FL &Co."), a private
investment firm (the "Acquisition"). The Acquisition has been accounted
for in accordance with the purchase method of accounting, and the
accompanying consolidated financial statements of the Company reflect the
purchase price allocation to assets acquired and liabilities assumed
based upon their then determined fair values.
Principles of Consolidation. The accompanying consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
Revenue Recognition. The Company recognizes revenue when
products are shipped and services are performed.
Cash Equivalents. The Company considers all highly liquid
debt instruments with a maturity of three months or less at the date of
purchase to be cash equivalents.
Inventories. Inventories are stated at the lower of cost,
determined on a first-in, first-out (FIFO) basis, or market.
Property, Plant and Equipment. Property, plant and equipment
is stated at cost. Provisions for depreciation are computed using the
straight-line method for the following:
Asset Life
Building and improvements 5-35 years
Leasehold improvements Economic useful
life or lease term,
whichever is
shorter
Machinery and equipment 3-10 years
Deferred Financing Costs. All costs associated with the
issuance of debt are being amortized over the life of the
related debt using the interest method.
Intangible Assets. Intangible assets consist primarily of
patents which are being amortized on a straight line basis over a range
of 5 to 17 years.
Excess of Cost Over Fair Value of Net Assets Acquired. The
excess of cost over fair value of net assets acquired is being amortized
on a straight line basis over forty years. Management continually
reassesses the appropriateness of both the carrying value and remaining
life of the excess of cost over fair value of net assets acquired, by
assessing recoverability based on forecasted operating cash flows, on an
undiscounted basis, and other factors. Management believes that, as of
December 31, 1994, the carrying value and remaining life of the excess of
cost over fair value of net assets acquired continues to be appropriate.
Foreign Currency Translation. The Company has determined the
U.S. dollar to be the functional currency of all foreign subsidiaries.
Accordingly, gains and losses recognized as a result of translating foreign
subsidiaries' monetary assets and liabilities from local foreign currencies
to U.S. dollars are reflected in the accompanying consolidated statements
of operations. To hedge foreign currency exposure with regard to such
monetary assets and liabilities, the Company enters into foreign currency
forward contracts on a month to month basis (See Note 12). Foreign
currency transaction gains and losses during each of the three years in
the period ended December 31, 1994 were not significant.
Benefit Plans. Substantially all employees, including certain
employees of the divested businesses, are covered by pension plans. The
benefits under the plans are based on years of service and compensation
levels. Contributions to pension funds are made when actuarial
computations prescribe such funding. Effective January 1, 1994, the
Company adopted Financial Accounting Standards Board Statement No. 112,
Employers' Accounting for Postemployment Benefits ("SFASNo. 112", See
Note 10).
Income Taxes. Deferred income taxes reflect the future tax
consequences of differences between the financial reporting and tax bases
of assets and liabilities. Deferred income taxes have been provided for
the income tax liability which would be incurred on the repatriation of
undistributed earnings of the Company's foreign subsidiaries.
Other Income and Expense. Costs and gains derived from
non-operating assets are included in "Other income (expense) _ net" in
the accompanying consolidated statements of operations.
In 1994, other income (expense) consisted primarily of a
charge related to the write-down of non-operating real estate. In 1993,
other income (expense) included a net gain on the sale of a portion of a
partnership interest in an affiliate and equity in losses of this
unconsolidated affiliate (See Note 15). Also included was a $7 million
charge related to the write-down of a facility which was principally
offset by a gain on the settlement of a lawsuit with regard to patent
infringements. In 1992, other income (expense) included miscellaneous
items that were not significant.
Earnings (Loss) Per Share. Primary earnings (loss) per share
is computed based on the weighted average number of common and common
equivalent
<PAGE> 32
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
shares outstanding during the applicable periods.
Fully diluted earnings (loss) per share computations for all
periods are based on net income (loss) adjusted for interest and
amortization of debt issuance costs related to convertible debt and the
weighted average number of common shares outstanding adjusted for the
dilutive effect of stock options and convertible securities.
The computations of primary and fully diluted earnings (loss)
per share assume the exercise of stock options using the treasury stock
method and to the extent that stock options are antidilutive, they are
excluded from the computation (See Note 11 regarding the two-for-one
split of the Company's Common Stock during 1994).
Reclassifications. Certain reclassifications have been made
to prior years' financial statements to conform to the current year
presentation.
2 Assets Held for Sale
At the time of the Acquisition, the Company identified certain
businesses and assets which it intended to divest. At December 31, 1993,
this program was substantially completed with the sales of the Company's
Defense Systems Group in 1991, Transportation Electronics Division in
1992 and Wagering Group in 1993. As of December 31, 1994, assets held for
sale consisted of the former headquarters office of the Company's Power
Semiconductor Division and a real estate property related to the divested
Wagering Group.
The net loss from divestiture businesses and assets for the
year ended December 31, 1994 of approximately $3 million, included in the
accompanying consolidated statement of operations, was principally
comprised of a $4 million charge related to the settlement of certain
legal matters associated with a former divestiture business, partially
offset by gains on the sale of certain real estate holdings and other
divestiture assets. Charges related to carrying costs associated with
divestiture assets (principally real estate) were not significant.
The net gain from divestiture businesses and assets for the
year ended December 31, 1993 of approximately $0.3 million included in
the accompanying consolidated statement of operations was comprised of $4
million in gains on the settlement of an action related to the Company's
divested Defense Systems business, offset by charges related to changes
in the estimated amount of divestiture liabilities retained and carrying
costs associated with the remaining divestiture assets (principally real
estate) which were not significant.
The net loss from divestiture businesses and assets for the
year ended December 31, 1992 of approximately $15 million included in the
accompanying statement of operations was comprised of a $32 million
charge, which represented the anticipated loss on sale of the Wagering
Group, net of a gain of approximately $11 million from the sale of
marketable securities and a $6 million gain on the settlement of an
action related to the Company's divested Defense Systems business.
<TABLE>
3 Inventories
Inventories consist of:
<CAPTION>
December 31, 1994 December 31, 1993
<S> <C> <C>
Raw materials $ 81,987 $ 44,971
Work in process 25,822 14,657
Finished goods 106,371 49,323
$214,180 $108,951
</TABLE>
<TABLE>
4 Property, Plant and Equipment-net
Property, plant and equipment-net consists of:
<CAPTION>
December 31, 1994 December 31, 1993
<S> <C> <C>
Land and land improvements $ 93,983 $ 98,090
Buildings, improvements and leasehold improvements 65,824 58,410
Machinery and equipment 439,452 318,160
599,259 474,660
Less accumulated depreciation (255,391) (212,487)
$ 343,868 $ 262,173
</TABLE>
<PAGE> 33
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
<TABLE>
5 Accrued Liabilities
Accrued liabilities are summarized as follows:
December 31, 1994 December 31, 1993
<S> <C> <C>
Salaries and wages $ 39,018 $ 27,902
Payroll, state and local taxes 9,965 6,340
Product and warranty reserves 85,694 34,221
Other 73,706 81,096
$208,383 $149,559
</TABLE>
<TABLE>
6 Income Taxes
The domestic and foreign components of income
(loss) before income taxes, extraordinary item and
cumulative effect of changes in accounting principles
are as follows:
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Domestic $194,112 $ 54,414 $(66,873)
Foreign 64,054 59,478 40,419
$258,166 $113,892 $(26,454)
The components of the provision for income taxes
are as follows:
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S>
Current: <C> <C> <C>
Federal $ 26,153 $ 2,620 $ _
Foreign 19,680 11,098 8,760
State 7,614 3,398 2,439
53,447 17,116 11,199
Deferred:
Federal 55,534 11,167 _
Foreign 3,543 4,832 3,573
State 3,941 (6,148) 169
63,018 9,851 3,742
Net change in valuation allowance (106,751) (3,441) _
Provision for income taxes $ 9,714 $ 23,526 $ 14,941
The provision for deferred income taxes arises from
the following:
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Fixed and intangible assets $ (6,795) $(15,439) $ (249)
Working capital (20,636) (5,549) 1,339
Employee benefits 4,230 (6,827) 1,452
Domestic tax loss carryforwards 63,819 42,073 _
Tax credit carryforwards 1,638 (4,977) _
Undistributed foreign earnings 4,820 _ _
Other 15,942 570 1,200
$ 63,018 $ 9,851 $ 3,742
</TABLE>
<PAGE> 34
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
<TABLE>
The differences between the U.S. statutory income
tax rate and the effective tax rate are summarized below:
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% (34.0%)
Valuation allowance benefit (41.3) (19.5) _
Domestic loss for which no current
benefit could be derived _ _ 13.7
State income taxes, net 2.9 (2.4) 9.9
Foreign operations 2.9 0.3 9.7
Non-deductible purchase accounting items 3.5 7.9 62.2
Other permanent items, net 0.8 (0.6) (5.0)
Effective rate 3.8% 20.7% 56.5%
</TABLE>
<TABLE>
Deferred income taxes as recorded in the
accompanying consolidated balance sheets were
comprised of the following:
<CAPTION>
December 31, 1994 December 31, 1993
Asset Liability Net Asset Liability Net
<S> <C> <C> <C> <C> <C> <C>
Current Deferred Income Taxes:
Domestic net operating loss
carryforward (expiring
through 2007) $18,193 $ - $18,193 $ _ $ _ $ _
_
Accounts receivable and
inventory reserves 24,883 _ 24,883 14,000 _ 14,000
Product and warranty reserves 19,884 _ 19,884 9,754 _ 9,754
Employee benefits 6,227 _ 6,227 8,978 _ 8,978
Other current assets (842) _ (842) 570 _ 570
Other current liabilities 25,101 _ 25,101 19,195 _ 19,195
93,446 _ 93,446 52,497 _ 52,497
Valuation allowance _ _ _ (49,418) _ (49,418)
$93,446 $ _ $93,446 $ 3,079 $ _ 3,079
Non-Current Deferred Income Taxes:
Domestic net operating loss
carryforward (expiring
through 2007) $ _ $ _ $ _ $72,907 $ _ $ 72,907
Domestic capital loss
carryforward (expiring
in 1996) 32,118 _ 32,118 31,450 _ 31,450
Tax credit carryforwards 5,787 _ 5,787 7,425 _ 7,425
Fixed assets and
intangible assets (48,057) _ (48,057) (54,561) 291 (54,852)
Environmental liabilities 17,787 _ 17,787 18,413 _ 18,413
Employee benefits 21,960 _ 21,960 23,439 _ 23,439
Product and warranty reserves 10,567 _ 10,567 11,388 _ 11,388
Investments and other assets 12,397 _ 12,397 12,939 _ 12,939
Other non-current 13,163 21,990 (8,827) 13,004 2,843 10,161
65,722 21,990 43,732 136,404 3,134 133,270
Valuation allowance (36,484) _ (36,484) (130,150) _ (130,150)
$ 29,238 $21,990 $ 7,248 $ 6,254 $3,134 $ 3,120
</TABLE>
<PAGE> 35
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board Statement No. 109, Accounting for Income Taxes
("SFAS No. 109"). Prior to the adoption of SFAS No. 109, the Company
accounted for income taxes under the deferral method and prior periods
have not been restated to reflect this change in accounting principle.
As a result of adopting SFAS No. 109, the Company recorded a cumulative
effect credit to income of approximately $10 million and recorded
deferred tax assets of approximately $182 million, deferred tax
liabilities of approximately $3 million and a valuation allowance of
approximately $173 million to fully reserve its domestic deferred tax
assets. The realization of these domestic deferred income tax assets were
not considered to be more likely than not as a result of domestic tax
losses and capital losses incurred since the date of the Acquisition.
Subsequent to January 1, 1993, the valuation allowance had
been periodically reduced to the extent that the Company generated
domestic taxable income. During 1994, the Company reduced the valuation
allowance by $90 million as domestic taxable income was generated, $10
million of such reduction adjusted goodwill since certain benefits were
attributable to the pre-Acquisition period. In addition, based on
operating trends, positive industry and technological developments and
management's assessment of expected domestic taxable income included in
the Company's planning process, the Company recorded a further reduction
to the valuation allowance, as of December 31, 1994, of approximately $63
million. Such reduction resulted in an income tax benefit of $30 million,
an increase in stockholders' equity of $32 million ($10 million of which
arose in 1994 as a result of stock options exercised) and a reduction in
goodwill of $1 million. The valuation allowance which exists at December
31, 1994, relates principally to domestic capital loss carryforwards
which can only be utilized to the extent the Company can generate
domestic capital gains.
In August 1993, the U.S. Congress enacted the Omnibus Budget
Reconciliation Act of 1993 (the "Act") which, among other things, increased
the Federal income tax rates for Corporations to 35% from 34%, effective
January 1, 1993. The effect of this Act on the 1993 provision for income
taxes was not significant.
<TABLE>
7 Long-Term Debt
Long-term debt consists of:
<CAPTION>
December 31, 1994 December 31, 1993
<S> <C> <C>
Senior bank indebtedness:
Term loans $ _ $261,250
Revolving credit facilities 240,000 22,000
Taiwan loan 56,849 56,954
Convertible Junior Subordinated Notes 500,000 500,000
796,849 840,204
Less current maturities 2,155 33,000
Long-term debt $794,694 $807,204
</TABLE>
In 1993, the Company completed a two-part program to restructure its
existing indebtedness in order to lower its interest costs and obtain
greater operating flexibility. The first part of this program was
completed when the Company consummated a public offering (the "Note
Offering") of an aggregate principal amount of $500 million of 5%
Convertible Junior Subordinated Notes (the "Notes"). The Notes mature on
June 15, 2000 and have semi-annual interest payments on each June 15th
and December 15th, which commenced December 15, 1993. The Notes are not
redeemable prior to June 18, 1996 and are thereafter redeemable in whole
or in part at the Company's option at amounts decreasing from 102.857% of
principal at June 18, 1996 to 100% of principal at June 15, 2000. Holders
of the Notes have a repurchase right, whereby, in the event certain
changes of control of the Company occur, each holder will have the right,
at the holder's option, to require the Company to repurchase all or any
part of the holder's Notes at 100% of principal plus accrued interest to
the repurchase date. The Company incurred expenses of approximately $14
million associated with the Note Offering and
<PAGE> 36
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
capitalized these costs as deferred financing costs which are being
amortized over the term of the Notes.
The second part of this program encompassed amending and
restating the senior bank credit agreement of General Instrument
Corporation of Delaware ("GIDelaware"), the Company's principal operating
subsidiary, to include $275 million of term loans and a $225 million
revolving credit facility, maturing on December 31, 1998, and to provide
for lower interest rates and less restrictive financial and operating
covenants. In connection with this amendment and restatement of GI
Delaware's senior bank credit agreement, the Company incurred
approximately $4 million of expenses that were capitalized and will be
amortized through December 31, 1998 using the interest method. The
proceeds of the Note Offering and borrowings under the revolving credit
facility were used to prepay the entire $600 million of the Company's
9-1/2% Subordinated Debentures.
In July 1994, the Company further amended and restated the
senior bank credit agreement of GI Delaware (as further amended and
restated, the "Credit Agreement") to lower its interest costs and
commitment fees, increase available credit commitments and obtain greater
operating flexibility. The Credit Agreement provides for a $500 million
unsecured Revolving Credit Facility, which matures on December 31, 1999
and converted all outstanding term loans to long-term revolving credit
loans under the new Revolving Credit Facility. Amounts outstanding as of
December 31, 1994, under this facility, are classified as long-term based
on the Company's intent and ability to maintain these loans on a
long-term basis. The Revolving Credit Facility commitment will be reduced
by $50 million per year commencing December 31, 1995. The Credit
Agreement requires the Company to pay a commitment fee of .225% per annum
of the unused portion of the total commitment, and agent fees of $63 per
quarter. The Credit Agreement permits the Company to choose between two in
terest rate options. The interest rate options are ABR (Adjusted Base Rate),
which is based on the bank's prime rate, and a Eurodollar rate (LIBOR)
plus 5/8 of 1%. The interest rates and commitment fees are subject to
change based on the Company's performance with respect to certain
financial ratios and credit ratings by nationally recognized statistical
rating companies contained in the Credit Agreement.
The Company also has a $15 million uncommitted borrowing
facility, pursuant to which the aggregate amount of borrowings
outstanding under this facility and the Revolving Credit Facility cannot
exceed the total available credit commitment under the Credit Agreement.
At December 31, 1994 and 1993, the Company had credit commitments of $260
million and $203 million, respectively, which the Company had not borrowed
against, under its revolving credit facilities.
The Credit Agreement contains certain restrictions, including
restrictions on additional borrowings and payment of dividends, and
requires the maintenance of certain financial ratios. In addition, under
the Credit Agreement certain changes in control of the Company would
cause an event of default, and the banks could declare all outstanding
borrowings under the Credit Agreement immediately due and payable. None
of the restrictions contained in the Credit Agreement are expected to
have a significant effect on the ability of the Company to operate. As of
December 31, 1994 and 1993 the Company was in compliance with all
financial and operating covenants under existing senior bank credit
agreements.
The Company has a $60 million loan agreement with a
consortium of banks in Taiwan (the "Taiwan Loan Agreement"). Borrowings
under the Taiwan Loan Agreement are secured by a mortgage on land and
buildings in Taiwan.
In July 1994, the interest rate under the Taiwan Loan
Agreement was reduced from the Singapore Interbank Offered Rate (SIBOR)
plus 1-1/4% to SIBOR plus 3/4% and in October 1994, the Taiwan Loan
Agreement was amended to extend required installment repayment dates and
maturity by one year. The borrowings under the Taiwan Loan Agreement will
mature on June 30, 2000 with nine semi-annual installments of $2,155 to
be paid beginning December 31, 1995 and the remaining balance to be paid
at maturity.
The effective interest rate on the Company's long-term debt
at December 31, 1994 and 1993 was 5.62% and 4.93%, respectively.
In 1992, the Company utilized the net proceeds of $306
million from the initial public offering of the Company's Common Stock,
as described in Note 11, for the repayment of debt and, accordingly,
recorded an extraordinary charge of $12 million to reflect the write-off
of deferred financing costs in conjunction with the early extinguishment
of debt.
<PAGE> 37
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
8 Commitments and Contingencies
The Company leases office space, manufacturing and warehouse
facilities, transportation, and other equipment under operating leases
which expire at various dates through the year 2004. Rent expense
for the years ended December 31, 1994 and 1993 is net of sublease
income of $58 and $109, respectively. There was no sublease income in
1992. Total rent expense was as follows:
Year ended December 31,
1994 $12,565
1993 9,385
1992 9,309
Future minimum lease payments required under these lease
arrangements as of December 31, 1994 were as follows:
1995 $10,099
1996 9,053
1997 5,799
1998 4,561
1999 2,428
Thereafter 7,688
Future minimum lease payments have not been reduced by minimum
sublease rentals of $363 due in the future under noncancellable
subleases.
The Company is either a plaintiff or a defendant
in several pending legal matters. In addition, 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 is also
involved in remediation programs, principally with respect to former
manufacturing sites, which are proceeding in conjunction with federal and
state regulatory oversight. In addition, the Company is currently named
as a "potentially responsible party" with respect to the disposal of
hazardous wastes at seven hazardous waste sites located in four states.
The Company engages independent consultants to assist
management in evaluating potential liabilities related to environmental
matters. Management assesses the input from these independent consultants
along with other information known to the Company in its effort to
continually monitor these potential liabilities. Management assesses its
environmental exposure on a site-by-site basis, including those sites
where the Company has been named as a potentially responsible party. Such
assessments include the Company's share of remediation costs, information
known to the Company concerning the size of the hazardous waste sites,
their years of operation and the number of past users and their financial
viability. Although the Company estimates, based on assessments and
evaluations made by management, that its exposure with respect to these
environmental matters could be as high as $64 million, the Company
believes that the reserve for environmental matters of $45 million at
December 31, 1994 ($44 million at December 31, 1993) is reasonable and
adequate. However, there can be no assurance that the ultimate resolution
of these matters will approximate the amount reserved.
Based on the factors discussed above, capital expenditures
and expenses for the Company's remediation programs, and the
proportionate share of the cost of the necessary investigation and
eventual remedial work that may be needed to be performed at the sites
for which the Company has been named as a "potentially responsible
party," are not expected to have a material adverse effect on the
Company's financial condition, results of operations or cash flows. The
Company's present and past facilities have been in operation for many
years, and over that time in the course of those operations, GI's
facilities have used substances which are or might be considered hazardous,
and GI 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.
<PAGE> 38
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
9 Employee Benefits
Net pension cost consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Domestic Foreign Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,113 $ 3,149 $ 1,808 $ 3,033 $ 1,453 $ 2,861
Interest 6,580 4,851 6,638 4,287 5,270 3,957
Loss (return) on plan assets 5,974 (2,092) (11,776) (1,853) (4,860) (1,584)
Net amortization and deferral (12,097) (99) 4,949 (22) (692) 422
Net pension cost $ 2,570 $ 5,809 $ 1,619 $ 5,445 $ 1,171 $ 5,656
</TABLE>
<TABLE>
The funded status of the pension plans and the
related amounts as recorded in the accompanying
consolidated balance sheets were as follows:
<CAPTION>
December 31, 1994 December 31, 1993
Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $ 71,604 $ 8,828 $ 79,252 $ 6,180
Accumulated benefits $ 73,540 $ 29,793 $ 81,881 $ 22,453
Projected benefit obligation $ 83,017 $ 64,302 $ 91,725 $ 55,074
Market value of plan assets 64,849 28,955 76,255 26,911
Funded status (18,168) (35,347) (15,470) (28,163)
Unrecognized loss 7,422 15,356 7,294 9,608
Accrued pension obligation $(10,746) $(19,991) $ (8,176) $(18,555)
Actuarial assumptions:
Discount rate 8.5% 8% 7.25% 9%
Investment return 9.5% 8% 10% 9%
Compensation increases 5.5% 6% 4.75% 7%
</TABLE>
The impact of the changes in the actuarial assumptions, as of
December 31, 1994, has been reflected in the funded status
of the domestic and foreign pension plans and the Company believes that
such changes will not have a material effect on net pension cost in 1995.
Domestic and foreign net pension cost for the year ended December 31,
1994 was actuarially determined using discount rates of 7.25% and 9%,
respectively, investment return assumptions of 10% and 9%, respectively,
and compensation increases of 4.75% and 7%, respectively.
The domestic pension plans consist principally of a qualified
retirement plan which has satisfied the full funding limitation
requirement under the Employee Retirement Income Security Act of 1974
("ERISA") and therefore, no contributions were made to the plan during
1994. It is not anticipated that any pension contributions will be
required under ERISA during 1995. In 1994, the Company established
unfunded supplemental retirement plans for certain members of management.
Net pension cost and accrued pension obligations for these plans are
included in the disclosed amounts above. The foreign pension plans
consist principally of a Taiwan pension plan, which is funded under
Taiwan's statutory requirements. Pension contributions for the Taiwan
pension plan during 1994 were $4 million and are expected to approximate
a comparable amount during 1995. Management believes that cash flow
provided by operations will be sufficient to fund all future
contributions.
Domestic plans' assets consist of fixed income and equity
securities. Foreign plan assets principally consist of fixed income
securities.
One of the Company's subsidiaries maintains an Employees
Profit Sharing and Savings Plan (the "Profit Sharing and Savings Plan").
The majority of contributions to the Profit Sharing and Savings Plan are
made at the discretion of the subsidiary's Board of Directors. In
addition, eligible employees may elect to contribute up to 10% of their
salaries. The subsidiary contributes an amount equal to 50% of the first
4% of the employee's salary that the employee contributes. During the
years ended December 31, 1994, 1993 and 1992, the subsidiary contributed
$6,065, $4,279 and $3,418, respectively
<PAGE> 39
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
to the Profit Sharing and Savings Plan, $5,193, $3,710, and $3,000,
respectively, of which was discretionary.
The Company maintains a voluntary savings plan covering all
domestic non-union employees. Eligible employees not covered by the
Profit Sharing and Savings Plan (as described in the preceding paragraph)
may elect to contribute up to 10% of their salaries. Effective January 1,
1994, the Company increased its contribution to an amount equal to 50% of
the first 6% of the employee's salary that the employee contributes from
an amount equal to 50% of the first 4% of the employee's salary that the
employee contributed. The Company contributed $1,900, $1,184 and $1,206
in the years ended December 31, 1994, 1993 and 1992, respectively, under
this plan.
10 Postretirement and Postemployment Benefits Other Than Pensions
Postretirement. The Company maintains an unfunded
contributory group medical plan (the "Plan") for all full-time U.S.
employees, not covered by a collective bargaining agreement, who retire
under the General Instrument Pension Plan directly after active service.
The Plan is the primary provider of benefits for retirees up to age 65.
After age 65 Medicare becomes the primary provider. In 1993, the Company
adopted Financial Accounting Standards Board Statement No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions ("SFAS No.
106"). Under SFAS No. 106, the Company is required to recognize the cost
of providing and maintaining postretirement benefits during employees'
active service periods. Upon adoption of SFAS No. 106, the Company
recorded a cumulative effect charge to income of approximately $10
million to recognize the accumulated postretirement benefit obligation as
of January 1, 1993, which had not been previously accrued.
Subsequent to the adoption of SFAS No. 106, in 1993 the Company
amended the Plan with respect to future retirees. The effects of these plan
amendments are being amortized as a reduction in determining net
postretirement benefit cost. Net postretirement benefit cost consisted of
the following:
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993
<S> <C> <C>
Service Cost $ 663 $ 458
Interest 1,424 1,646
Amortization of Prior Service Cost (515) (472)
Net postretirement benefit cost $1,572 $1,632
</TABLE>
<TABLE>
The status of the Plan and the related amounts as recorded in the
accompanying consolidated balance sheets were as follows:
<CAPTION>
December 31, 1994 December 31, 1993
<S> <C> <C>
Accumulated postretirement benefit obligation ("APBO"):
Retirees $13,380 $13,513
Active participants 6,306 8,429
Total accumulated postretirement benefit obligation 19,686 21,942
Unrecognized prior service cost 8,563 9,078
Unrecognized gain (loss) 1,868 (696)
Accrued postretirement benefit obligation $30,117 $30,324
Discount rate used in determining APBO 8.5% 7.25%
</TABLE>
The assumed rate of future increases in health care cost during 1994
and 1993 was 16.0% and 13.0% for pre- and post-age
65 retirees, respectively, and is expected to decline to 6.5% by the year
2004. Under the amended Plan, the actuarially determined effect of a one
percentage point increase in the assumed health care cost trend rate on
annual net postretirement benefit cost and the APBO would be $0.4 million
and $3 million, respectively. During the years ended December 31, 1994,
1993 and 1992, the Company paid approximately $2 million, $1 million and
$1 million, respectively, for postretirement benefits.
Postemployment. Effective January 1, 1994, the Company
adopted SFAS No. 112. Under SFAS No. 112, the Company is required to
accrue the cost of providing benefits to employees after employment but
before retirement. The postemployment benefit obligation relates
principally to medical costs for former employees on long-term disability.
<PAGE> 40
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
The Company's previous accounting policy had been to expense costs of
providing postemployment benefits on an as-incurred basis. Upon adoption
of SFAS No. 112, the Company recorded a cumulative effect charge to
income of approximately $2 million to recognize the accumulated
postemployment benefit obligation as of January 1, 1994.
11 Stockholders' Equity
On July 6, 1994, the Company's Board of Directors declared a
two-for-one split of the Company's Common Stock, which was effected in
the form of a 100 percent stock dividend on August 8, 1994 to
stockholders of record on July 18, 1994. Common Stock has been increased
by the par value of the additional 60,131 shares of Common Stock issued
with an offsetting reduction to additional paid-in capital. Common Stock
in Treasury was increased by approximately 6 shares. All stock option,
share and per share data have been restated for all periods presented to
reflect the stock split. In addition, the conversion price of the Notes
into Common Stock and the number of shares reserved for issuance upon
conversion of the Notes were adjusted to give effect to the stock split.
Common Stock par value remained at $.01 per share.
During 1992, the Company's Restated Certificate of
Incorporation was amended to redesignate Class A Common Stock as Common
Stock. This redesignation has been reflected in the accompanying
consolidated financial statements.
In June 1992, the Company sold 44 million shares of Common
Stock in an initial public offering, receiving net proceeds of $306
million after deducting underwriting discounts and expenses. The net
proceeds were utilized to repay indebtedness. During 1992, the Company
recorded a charge of approximately $7 million for compensation expense
relating to the grants of options and stock appreciation rights ("SARs")
and the issuance of Class B Common Stock which was subsequently exchanged
for Common Stock as described below. Such charge is included in selling,
general and administrative expense in the accompanying consolidated
statement of operations for the year ended December 31, 1992. Additional
paid-in capital was increased by approximately $6 million in connection
with the issuance of Class B Common Stock and options.
Prior to the initial public offering, all of the Common Stock
issued and outstanding was owned by affiliates of FL & Co. Class B Common
Stock was owned by management investors. In March 1992, the Company sold
806 additional shares of Class B Common Stock to certain management
investors. Immediately prior to the closing of the initial public
offering, each outstanding share of Class B Common Stock, formerly
classified as redeemable securities, was exchanged for .6067 shares of
Common Stock and the Company issued 36,764 shares of Common Stock
pursuant to a two-for-one stock split.
During 1993, the authorized number of shares of Common Stock
was increased to 175 million.
In March and September of 1993, affiliates of FL & Co. and
certain current and former directors, senior managers and other employees
of the Company sold an aggregate 20 million shares and 13 million shares,
respectively, of Common Stock pursuant to public offerings. The Company
received no proceeds from these offerings. Costs associated with these
offerings have been charged to additional paid-in-capital.
In May 1993, the Board of Directors adopted the General
Instrument Corporation 1993 SAR Replacement Stock Option Plan. Pursuant
to this plan, the Company granted approximately 288 stock options to
certain holders of SARs in consideration for the amendment and
cancellation of the rights under the Stock Appreciation Right Agreement
("SAR Agreement") between the Company and each such holder. These stock
options were granted at an exercise price of $2.75 per share (the
reference price with respect to the SARs) and are exercisable consistent
with the vesting schedule as stipulated in the SAR Agreement. The SARs
become fully vested on the third anniversary of the date of grant.
Consistent with this plan, the Company charged its SARs reserves and
increased additional paid-in-capital by approximately $4 million. At
December 31, 1994, there were approximately 31 SARs outstanding.
In May 1993, the stockholders of the Company approved the
General Instrument Corporation 1993 Long-Term Incentive Plan and the
Amended and Restated Certificate of Incorporation of the Company to
eliminate Class B Common Stock and provisions relating to multiple
classes of common stock. The 1993 Long-Term Incentive Plan provides for
the granting of stock options, SARs, restricted stock, performance units,
performance shares, and phantom stock to employees of the Company and its
subsidiaries and the granting of stock options to non-employee directors
of the Company.
In June 1993, the Company issued $500 million principal
amount of Convertible Junior Subordinated Notes (see Note 7), which are
initially convertible into Common Stock at a conversion price of $23.75
per share. Approximately 21 million shares were
<PAGE> 41
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
reserved for issuance upon conversion of the Notes.
In May 1994, the stockholders approved an increase of 5
million shares of Common Stock that may be awarded under the 1993
Long-Term Incentive Plan. As of December 31, 1994, the exercise prices of
all stock options granted under the 1993 Long-Term Incentive Plan were
equal to the closing price of the Common Stock on the New York Stock
Exchange on the date of grant.
In November 1994, the Company awarded 15 shares of restricted
stock which are earned through continued employment. Unearned
compensation, based on the excess of the market value of the shares
awarded over the price paid by the recipient at the date of grant, was
charged to stockholders' equity and is being amortized to expense over
the vesting period which expires in April 1997.
<TABLE>
The following table summarizes stock option activity relating
to the Company's stock option plans.
<CAPTION>
Number of Option Price
Shares (range per share)
<S> <C> <C>
Outstanding at December 31, 1991 3,600 $ $ 2.75
Grants 1,014 1.51
Exercised (170) 1.51 - 2.75
Outstanding at December 31, 1992 4,444 1.51 - 2.75
Grants 3,069 15.88 - 28.88
Exercised (2,564) 1.51 - 2.75
Exchange of SARs 288 2.75
Cancelled (178) 2.75 - 15.88
Outstanding at December 31, 1993 5,059 1.51 - 28.88
Grants 4,470 25.19 - 32.13
Exercised (1,955) 1.51 - 23.50
Cancelled (2,637) 2.75 - 29.94
Outstanding at December 31, 1994 4,937 1.51 - 32.13
Exercisable at December 31, 1994 1,116 1.51 - 23.50
</TABLE>
At December 31, 1994 and 1993 the Company had approximately 6,100 and
3,000 shares, respectively, reserved in connection with its stock award
plan.
12 Derivatives and Other Financial Instruments
Derivative financial instruments are utilized by the Company to
reduce market risks arising from changes in foreign exchange rates and
interest rates. The Company does not use derivative financial instruments
for trading purposes, nor does it engage in currency or interest rate
speculation. The Company believes that the various counterparties with
which the Company enters into interest rate hedge agreements and currency
exchange contracts consist of only financially sound institutions and,
accordingly, believes that the credit risk for non-performance of these
contracts or concentration of instruments with a single counterparty is
remote. The Company monitors its underlying exchange rate and interest
rate exposures and its derivative hedging instruments on an ongoing basis
and believes that it can modify or adapt its hedging strategies as
needed.
Foreign Exchange Instruments. The Company enters into forward
exchange contracts on a month-to-month basis to hedge foreign currency
exposure with regard to certain monetary assets and liabilities
denominated in currencies other than the U.S. dollar. These contracts
generally do not subject the Company's results of operations to risk of
exchange rate movements because gains and losses on these contracts
generally offset, in the same period, gains and losses on the monetary
assets and liabilities being hedged.
On a selective basis, the Company enters into forward
exchange and purchased option contracts to hedge the currency exposure of
contractual and other firm commitments denominated in foreign currencies.
The Company may also enter into forward exchange and purchased option
contracts designed to hedge the currency exposure of anticipated but not
yet committed transactions expected to be denominated in foreign
currencies. The purpose
<PAGE> 42
Notes to Consolidated Financial Statements (continued)
(In thousands, unless otherwise noted)
of these activities is to protect the Company from the risk that the
eventual net cash flows in U.S. dollars from foreign receivables and
payables will be adversely affected by changes in exchange rates. Gains
and losses on hedges related to contractual and other firm commitments
are deferred and recognized in the Company's results of operations in the
same period as the gain or loss from the underlying transactions. Gains
and losses on forward exchange contracts used to hedge anticipated but
not yet committed transactions are recognized in the Company's results of
operations as changes in exchange rates for the applicable foreign
currencies occur. Historically, foreign exchange contracts with respect
to contractual and other firm commitments and anticipated, but not yet
committed, transactions have been short-term in nature and the gains and
losses recognized in the Company's results of operations with respect to
these contracts have not been significant. In addition, purchased options
have had no intrinsic value at the time of purchase.
The Company generally settles forward exchange contracts at
maturity, at prevailing market rates. The Company recognizes in its
results of operations, over the life of the contract, the amortization of
contract premium or discount. The amortization of these premiums or
discounts during each of the three years in the period ended December 31,
1994 was not significant. As of December 31, 1994 and 1993, the Company
had outstanding forward exchange contracts in the amounts of
approximately $3 million and $1 million, respectively, comprised of
foreign currencies which were to be purchased (principally the Irish
Punt) and approximately $36 million and $24 million, respectively,
comprised of foreign currencies which were to be sold (principally the
Japanese yen, Hong Kong dollar, Deutschemark, Canadian dollar, French
franc, and Pound sterling). All outstanding forward exchange contracts at
December 31, 1994 and 1993 had original maturities of one month and the
fair values of such contracts approximated their carrying values.
Accordingly, deferred gains or losses on such contracts at December 31,
1994 and 1993 were not significant. As of December 31, 1994 and 1993, the
Company had no purchased option contracts outstanding.
Interest Rate Instruments. On a selective basis, the Company
from time to time enters into interest rate cap or swap agreements to
reduce the potentially negative impact of increases in interest rates on
its outstanding variable rate debt under the Credit Agreement. The
Company recognizes in its results of operations over the life of the
contract, as interest expense, the amortization of contract premium
incurred from buying interest rate caps. Net payments or receipts
resulting from these agreements are recorded as adjustments to interest
expense. The effect of interest rate instruments on the Company's results
of operations in each of the three years in the period ended December 31,
1994 was not significant.
In the fourth quarter of 1994, the Company entered into two
interest rate cap agreements to hedge an aggregate notional amount of
$150 million of outstanding variable rate borrowings under the Credit
Agreement. Each contract has a notional amount of $75 million and a
one-year term, covering the period from January 3, 1995 through January
3, 1996. At December 31, 1994, the fair value of these cap agreements
approximated the $1 million carrying value.
Other Financial Instruments. The carrying value of cash and
cash equivalents approximates fair value because of the immediate or
short-term maturity of these financial instruments. The carrying amount
of the Company's senior bank indebtedness approximates fair value because
the underlying instruments have variable interest rates that adjust to
market on a short-term basis. The estimated fair value of the Notes,
which are publicly traded, as of December 31, 1994 and 1993 was $633
million and $655 million, respectively, based on quoted market prices.
13 Related Party Transactions
Since 1992, officers and directors of the Company have periodically
traveled in aircraft leased by related parties, for which the Company
paid such related parties at commercial rates. During the years ended
December 31, 1994, 1993 and 1992, payments totaling $50, $112 and $397,
respectively, were made with respect to such travel. In addition, a
subsidiary of the Company from time to time enters into transactions with
companies owned or controlled by one of its officers. In 1992, a related
party sold an aircraft to an unrelated third party for $1,650 and,
following the sale, the subsidiary entered into an operating lease
agreement for this aircraft. During the years ended December 31, 1993 and
1992, the subsidiary received $25 and $297, respectively, from related
parties for aircraft maintenance services provided. Additionally, during
the years ended December 31, 1994, 1993 and 1992, charges totaling
$2,137, $603 and $989, respectively, were made to related parties for
aircraft services.
<PAGE> 43
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
14 Segment Information
The Company's major business segments are Broadband Communications
and Power Semiconductor. Broadband Communications
offers a variety of products and services for the cable and satellite
television industries, including active and passive electronics, subscriber
terminals, coaxial and fiber optic cable, and encryption/decryption
equipment for the scrambling and descrambling of satellite television
programming. Products offered by Power Semiconductor include discrete
power rectifying and transient voltage suppression components.
Operating profit (loss) represents net revenue less operating
expenses including the effects of acquisition adjustments, but excluding
interest, unallocated corporate expenses and income taxes. Identifiable
assets are those used in the operations of each segment or geographic
area.
<TABLE>
<CAPTIONS>
United States(1) Europe Far East 0ther Eliminations Consolidated
Operations by Geographic Area:
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Net sales $1,822,383 $151,644 $ 32,803 $29,493 $ _ $2,036,323
Transfers (2) 140,691 32,772 221,930 23,264 (418,657) _
Net revenue 1,963,074 184,416 254,733 52,757 (418,657) 2,036,323
0perating profit 300,797 16,854 20,186 4,336 _ 342,173
Identifiable assets 1,688,647 85,007 179,426 17,331 _ 1,970,411
Year ended December 31, 1993:
Net sales 1,224,968 123,752 28,483 15,319 _ 1,392,522
Transfers (2) 111,507 15,289 163,171 17,331 (307,298) _
Net revenue 1,336,475 139,041 191,654 32,650 (307,298) 1,392,522
0perating profit 183,635 9,334 15,218 821 _ 209,008
Identifiable assets 1,517,015 66,749 163,957 6,101 _ 1,753,822
Year ended December 31, 1992:
Net sales 926,932 113,214 22,838 11,711 _ 1,074,695
Transfers (2) 95,943 90 131,093 15,791 (242,917) _
Net revenue 1,022,875 113,304 153,931 27,502 (242,917) 1,074,695
Operating profit (loss) 84,750 9,435 15,692 (213) _ 109,664
Identifiable assets 1,476,017 55,937 141,268 5,876 _ 1,679,098
<FN>
(1) Net export sales to unaffiliated customers were $413,442, $237,923 and
$194,723 for the years ended December 31, 1994, 1993 and 1992, respectively,
principally to the Far East, Europe and Canada. During the years ended
December 31, 1994, 1993 and 1992, one customer, including its affiliates,
accounted for approximately 15%, 11% and 10%, respectively, of the Company's
consolidated net sales. Sales to this customer are made primarily from the
Broadband Communications segment.
(2) Principally product assembly which is accounted for at cost plus a
nominal profit.
</FN>
</TABLE>
<PAGE> 44
Notes to Consolidated Financial Statements
(In thousands, unless otherwise noted)
<TABLE>
<CAPTION>
Broadband Power
Communications Semiconductor Corporate Consolidated
Operations by Segment:
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Net sales $1,720,634 $315,689 $ _ $2,036,323
Operating profit 281,612 60,561 _ 342,173
Corporate expenses _ _ (26,102) (26,102)
Identifiable assets 1,600,559 369,852 _ 1,970,411
Corporate assets _ _ 129,904 129,904
Assets held for sale _ 1,961 6,675 8,636
Total assets 1,600,559 371,813 136,579 2,108,951
Capital expenditures 112,080 23,406 254 135,740
Depreciation and amortization expense 77,333 19,642 375 97,350
Year ended December 31, 1993:
Net sales 1,124,749 267,773 _ 1,392,522
Operating profit 165,617 43,391 _ 209,008
Corporate expenses _ _ (21,465) (21,465)
Identifiable assets 1,397,321 356,501 _ 1,753,822
Corporate assets _ _ 9,762 9,762
Assets held for sale _ 2,328 10,176 12,504
Total assets 1,397,321 358,829 19,938 1,776,088
Capital expenditures 43,630 23,319 111 67,060
Depreciation and amortization expense 73,501 23,546 411 97,458
Year ended December 31, 1992:
Net sales 843,635 231,060 _ 1,074,695
Operating profit 84,875 24,789 _ 109,664
Corporate expenses _ _ (11,802) (11,802)
Identifiable assets 1,331,671 347,427 _ 1,679,098
Corporate assets _ _ 12,697 12,697
Assets held for sale _ _ 35,700 35,700
Total assets 1,331,671 347,427 48,397 1,727,495
Capital expenditures 28,759 8,231 380 37,370
Depreciation and amortization expense 73,465 33,436 688 107,589
</TABLE>
15 Interest in Digital Cable Radio
In January 1993, the Company sold a portion of its partnership
interest in Digital Cable Radio ("DCR") which resulted in a net gain of
approximately $3 million. This gain was included in other income
(expense) in the accompanying consolidated statement of operations. Upon
the consummation of the sale, the Company reduced its interest in the
partnership from approximately 50% to approximately 20% and, accordingly,
modified its accounting for DCR from consolidation to the equity method.
During the year ended December 31, 1993, the Company incurred losses of
$3 million representing its share of DCR's operating results. These
losses were included in other income (expense) in the accompanying
statement of operations. In April 1994, DCR admitted a third party
investor into the partnership and, as a result, the Company's interest in
DCR was further diluted to approximately 18%. Consequently, the Company
began accounting for its interest in DCR utilizing the cost method.
During the year ended December 31, 1994, the Company's share of DCR's
operating results was not significant.
<PAGE> 45
Notes to Consolidated Financial Statements
(In thousands, except per share data, unless otherwise noted)
16 Quarterly Financial Data (Unaudited)
<TABLE>
Summarized quarterly data for 1994 and 1993 are
as follows:
<CAPTION>
Quarter Ended
March 31, June 30, September 30, December 31,
1994(a) 1993(b) 1994 1993 1994 1993(c) 1994(d) 1993(e)(f)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $432,521 $303,244 $508,783 $311,761 $554,750 $369,145 $540,269 $408,372
Gross profit 149,152 93,778 154,913 95,266 165,370 112,897 163,302 134,427
Income before
cumulative
effect of changes
in accounting
principles 52,901 11,193 52,001 12,269 56,781 27,367 86,768 39,537
Net income $50,984 $11,410 $52,001 $12,269 $56,781 $27,367 $86,768 $39,537
Earnings per share:(g)
Primary:
Income before
cumulative effect
of changes in
accounting
principles $ .43 $ .09 $ .42 $ .10 $ .46 $ .22 $ .70 $ .32
Net income .41 .09 .42 .10 .46 .22 .70 .32
Fully diluted:
Income before
cumulative effect
of changes in
accounting principles .41 .09 .40 .10 .44 .22 .64 .32
Net income .40 .09 .40 .10 .44 .22 .64 .32
Common Stock
Prices:(g)(h)
High $ 30 7\8 $ 18 1\8 $ 31 5\8 $ 20 9\16 $ 33 1\2 $ 28 1\8 $ 34 5\8 $ 30 1\8
Low 21 1\2 11 5\8 21 1\4 12 13\16 28 3\8 18 3\4 26 3\4 25 1\4
<FN>
(a) Includes a cumulative effect charge of $2 million to reflect the
adoption of SFAS No. 112 (See Note 10).
(b) Includes a net cumulative effect credit of $0.2 million to reflect the
adoption of SFAS No. 109 and SFAS No. 106 (See Notes 6 and 10).
(c) Includes a charge of $12 million for costs to be incurred in effecting
enhancements to the Company's DigiCipher digital compression technology. This
charge is included in cost of sales in the accompanying consolidated
statement of operations.
(d) Includes an income tax benefit of $30 million as a result of a reduction
in a valuation allowance related to domestic deferred income tax assets (See
Note 6).
(e) Includes a charge of $7 million related to the write-down of a facility
held for sale which was principally offset by a gain on the settlement of a
lawsuit (See Note 1 - Other Income and Expense).
(f) Includes a charge of approximately $6 million related to the combining
of the Jerrold Communications and VideoCipher divisions into one division,
the GI Communications Division. This charge is included in selling, general
and administrative expense in the accompanying consolidated statement of
operations, to provide for costs associated with this reorganization.
(g) On July 6, 1994, the Company's Board of Directors declared a two-for-one
split of the Company's Common Stock, which was effected in the form of a 100%
stock dividend on August 8, 1994. Earnings per share and Common Stock Price
data have been restated to reflect the stock split.
(h) The New York Stock Exchange is the principal market on which these
securities are traded. Since the Acquisition, the Company has not paid
dividends on its Common Stock.
</FN>
</TABLE>
<PAGE> 46
<TABLE>
Board of Directors
<C> <C> <C> <C>
Daniel F. Akerson Lynn Forester Richard S. Friedland J. Tracy O'Rourke
Chairman and President and Chief President and Chairman and
Chief Executive Executive Chief Operating Chief Executive
Officer Officer, FirstMark Officer, Officer, Varian
General Instrument Holdings, Inc. General Instrument Associates, Inc.
Corporation Corporation
John Seely Brown Nicholas C. Forstmann Steven B. Klinsky Felix G. Rohatyn
Chief Scientist and General Partner, General Partner, General Partner,
Corporate Vice Forstmann Little & Co. Forstmann Little Lazard Freres & Co.
President, & Co
Xerox Corporation
Theodore J. Forstmann Morton H. Meyerson Paul G. Stern
Frank M. Drendel General Partner, Chairman and Special Limited Partner
President and Forstmann Little & Co. Chief Executive Forstmann Little
Chief Executive Officer, & Co.
Officer, Perot Systems Corp
CommScope, Inc. Robert S. Strauss
Partner, Akin, Gump,
Strauss, Hauer & Held
Audit Committee: Executive Committee: Compensation Committee:
J. Tracy O'Rourke, Daniel F. Akerson Nicholas C. Forstmann,
Chairman Theodore J. Forstmann Chairman
John Seely Brown Steven B. Klinsky Morton H. Meyerson
Felix G. Rohatyn Robert S. Strauss
Corporate Officers
Daniel F. Akerson Ronald A. Ostertag J.A. Blanchard,III Thomas A. Dumit
Chairman and Vice President and Executive Vice Vice President,
Chief Executive President, President General Counsel
Officer Power Semiconductor and Secretary
Division Paul J. Berzenski
Vice President and Richard C. Smith
Richard S. Friedland Lawrence L. Osterwise Controller Vice President,
President and Vice President and Taxes and Treasurer
Chief Operating President Edward D. Breen
Officer GI Communications Vice President
Division
Frank M. Drendel Charles T. Dickson
President and Chief Vice President and
Executive Officer, Chief Financial Officer
CommScope, Inc.
Corporate and Stockholder Information
Corporate Transfer Agent, Independent Auditors 10-K Report
Headquarters Registrar and Deloitte & Touche LLP Single copies of the
181 West Madison Stockholder Services Two Hilton Court Corporation's Form 10-K
Street Chemical Bank Parsippany, NJ 07054 annual report, filed
Chicago, Illinois 450 West 33rd Street with the Securities and
60602 New York, NY 10001 Investor Contact Exchange Commission, are
Tel 312 541 5000 Tel 212 946 7200 Charles T. Dickson available to stockholders
Vice President and upon written request.
Stock Exchange Annual Meeting of Chief Financial
New York Stock Stockholders Officer
Exchange Wednesday, April 26, General Instrument
1995 3:0 p.m. CST Corporation
Ticker Symbol The Palmer House 181 West Madison
GIC Hilton Chicago, Illinois 60602
17 East Monroe Street Tel 312 541 5000
Chicago, Illinois
60603
</TABLE>
Outside Front Cover
General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
Tel 312 541 5000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $5,128
<SECURITIES> 0
<RECEIVABLES> 306,754
<ALLOWANCES> 7,582
<INVENTORY> 214,180
<CURRENT-ASSETS> 641,764
<PP&E> 599,259
<DEPRECIATION> 255,391
<TOTAL-ASSETS> 2,108,951
<CURRENT-LIABILITIES> 428,474
<BONDS> 794,694
<COMMON> 1,222
0
0
<OTHER-SE> 675,956
<TOTAL-LIABILITY-AND-EQUITY> 2,108,951
<SALES> 2,036,323
<TOTAL-REVENUES> 2,036,323
<CGS> 1,403,585
<TOTAL-COSTS> 1,403,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,967
<INTEREST-EXPENSE> 53,574
<INCOME-PRETAX> 258,166
<INCOME-TAX> 9,714
<INCOME-CONTINUING> 248,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,917)
<NET-INCOME> 246,535
<EPS-PRIMARY> $2.00
<EPS-DILUTED> $1.88
</TABLE>
