<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GENERAL INSTRUMENT CORPORATION
(Exact name of registrant as specified in its charter)
------------------
<TABLE>
<S> <C> <C>
DELAWARE 3621 13-3575653
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
181 WEST MADISON STREET
CHICAGO, ILLINOIS 60602
(312) 541-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
THOMAS A. DUMIT, ESQ.
GENERAL INSTRUMENT CORPORATION
181 WEST MADISON STREET
CHICAGO, ILLINOIS 60602
(312) 541-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
Lois Herzeca, Esq. Robert E. Buckholz, Jr., Esq.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON SULLIVAN & CROMWELL
One New York Plaza 125 Broad Street
New York, New York 10004 New York, New York 10004
(212) 859-8000 (212) 558-4000
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share.................. 17,250,000 shares $34.625 $597,281,250 $205,960.49
<FN>
(1) Includes 2,250,000 shares which may be sold if the over-allotment options
granted to the Underwriters are exercised. See "Underwriting."
(2) Calculated pursuant to Rule 457(c) based upon the average of the high and
low prices per share as reported on the New York Stock Exchange Composite
Tape on March 30, 1995, solely for the purpose of calculating the
registration fee.
</TABLE>
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON EACH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one (the "U.S.
Prospectus") to be used in connection with an offering in the United States and
one (the "International Prospectus") to be used in connection with a concurrent
international offering outside the United States. The U.S. Prospectus and the
International Prospectus are identical except that they contain different
outside front and outside back cover pages and different descriptions of the
plan of distribution (contained under the caption "Underwriting" in both
prospectuses), and the International Prospectus contains an additional section
under the caption "Certain United States Federal Tax Considerations for Non-U.S.
Holders of Common Stock." The form of U.S. Prospectus is included herein and is
followed by those pages to be used in the International Prospectus which differ
from or are in addition to those in the U.S. Prospectus. Each of the pages for
the International Prospectus included herein is labeled "Alternate Page for
International Prospectus."
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 3, 1995
15,000,000 SHARES
[LOGO] GENERAL INSTRUMENT CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------
Of the 15,000,000 shares of Common Stock offered, 12,000,000 shares are
being offered hereby in the United States and 3,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. The largest stockholders of the Company, who are
affiliates of Forstmann Little & Co., are selling 14,891,035 shares of Common
Stock in the offerings. See "Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares offered hereby.
The last reported sale price of the Common Stock on the New York Stock
Exchange Composite Tape on March 31, 1995 was $34.75 per share. See "Price Range
of Common Stock and Dividend Policy".
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMMON STOCK.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING DISCOUNT PROCEEDS TO SELLING
OFFERING PRICE (1) STOCKHOLDERS (2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total(3)........................................ $ $ $
<FN>
- --------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Expenses of the offerings estimated at $1,002,460 will be paid by the
Company.
(3) Certain of the Selling Stockholders have granted the U.S. Underwriters an
option for 30 days to purchase up to an additional 1,800,000 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, such Selling Stockholders
have granted the International Underwriters an option for 30 days to
purchase up to an additional 450,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. If such options are exercised in full, the total initial
public offering price, underwriting discount and proceeds to the Selling
Stockholders will be $ , $ and $ , respectively. See
"Underwriting".
</TABLE>
--------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
April , 1995.
GOLDMAN, SACHS & CO.
LAZARD FRERES & CO.
MERRILL LYNCH & CO.
---------
The date of this Prospectus is April , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part and
which term shall encompass any amendments thereto) on Form S-3 pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which are omitted as permitted by the rules and regulations
of the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete;
with respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. For further information
about the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits filed as a part hereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement, the exhibits and schedules forming a part thereof and
the reports and other information filed by the Company with the Commission in
accordance with the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048 and Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material or any part thereof may also be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Such reports and other
information can be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
--------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-5442) are incorporated in this Prospectus by
reference:
(1) The Company's Annual Report on Form 10-K for the year ended December 31,
1994;
(2) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on April 17, 1992,
as amended; and
(3) The Company's Current Report on Form 8-K, dated April __, 1995.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offerings of shares of Common
Stock hereby shall be deemed incorporated by reference in this Prospectus and to
be a part hereof from the respective date of filing of such documents.
Any statement contained herein or in a document incorporated, or deemed to
be incorporated, by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained or incorporated by reference herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded,
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to any person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all information incorporated by
reference in this Prospectus (except exhibits to such information, unless such
exhibits are specifically incorporated by reference in such information). Such
requests should be directed to: Corporate Legal Department, General Instrument
Corporation, 181 West Madison Street, Chicago, Illinois 60602 (telephone (312)
541-5000).
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE, AND INCORPORATED BY REFERENCE, IN THIS PROSPECTUS. UNLESS
THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "GI" INCLUDE
GENERAL INSTRUMENT CORPORATION AND ITS DIRECT AND INDIRECT SUBSIDIARIES,
INCLUDING GENERAL INSTRUMENT CORPORATION OF DELAWARE (FORMERLY KNOWN AS GI
CORPORATION) ("GI DELAWARE"), THE COMPANY'S PRINCIPAL OPERATING SUBSIDIARY. ALL
SHARE AND PER SHARE INFORMATION CONTAINED IN THIS PROSPECTUS, UNLESS OTHERWISE
SPECIFIED, REFLECTS A TWO-FOR-ONE SPLIT OF THE COMMON STOCK ON AUGUST 8, 1994
EFFECTED IN THE FORM OF A 100% STOCK DIVIDEND.
THE COMPANY
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 and
CommScope (which together contributed approximately 84% of GI's consolidated
sales in the year ended December 31, 1994), the Company 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 the cable television industry. The Company believes that it has supplied a
majority of the addressable systems in use by cable television operators in the
United States and abroad. The GI Communications Division is also the world's
largest manufacturer and supplier of access control, scrambling and descrambling
equipment used by television programmers for the satellite delivery of their
programming. In addition, GI is the largest supplier of coaxial cable for the
U.S. cable television industry. Through its Power Semiconductor Division, the
Company is also a leading manufacturer of discrete power rectifying and
transient voltage suppression components used in telecommunications, automotive
and consumer electronics products.
In 1994, sales of GI's analog terrestrial products, including addressable
subscriber systems, distribution electronics and coaxial cable, reached their
highest levels to date. The Company believes this has been a result of increased
capital spending on analog equipment by cable television operators in the United
States and abroad. GI expects cable operators 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 and cable networks planned by some telephone
companies; second, a majority of U.S. cable subscribers do not yet have
addressable terminals, and a majority 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.
The Company is a worldwide leader in the development and implementation of
the "enabling" technologies upon which the Company believes the next generation
of broadband communications networks will be built. 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. The Company believes
that 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.
GI believes that an important future market for the Company will be the
commercialization of advanced digital broadband systems and equipment. During
the first stage of digital systems deployment, programmers and commercial
headend operators will use digital equipment to increase channel capacity,
improve signal quality and enhance security. The first stage began in late 1993,
when GI began shipping its first-generation DigiCipher-Registered Trademark- I
encoders and decoders for satellite programmers and cable television commercial
headend operators.
In the next stage of digital deployment, GI believes that 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 the digital networks. This stage began in the satellite
market during the second quarter of 1994, when GI began shipping
DigiCipher-Registered Trademark- I consumer receivers to
3
<PAGE>
PRIMESTAR Partners for the medium power Ku-band direct-to-home satellite market.
The Company's DigiCipher-Registered Trademark- II digital compression system,
which is compatible with the recently finalized industry standard for digital
compression and transport (Motion Picture Experts Group 2), is expected to be
available in mid-1995 for satellite applications. For cable television
applications, to date, GI has obtained orders and letters of intent for more
than 2.6 million of its DigiCable-TM- digital subscriber terminals from 11 major
cable operators. Volume shipments of these advanced digital subscriber terminals
for cable television applications are expected to begin in late 1995.
Additionally, 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. See "Risk Factors -- New
Technologies; Digital Products" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- New Technologies; Digital
Products."
The Company was organized in 1990 in connection with the acquisition (the
"Acquisition") of General Instrument Corporation, then a publicly traded
company, by affiliates of Forstmann Little & Co., a private investment firm
("Forstmann Little"). Affiliates of Forstmann Little (the "Forstmann Little
Partnerships") own approximately 30% of the currently outstanding shares of the
common stock, par value $.01 per share ("Common Stock"), of the Company, and 25%
of the shares of Common Stock on a fully diluted basis. After giving effect to
the Offerings (as defined below), the Forstmann Little Partnerships will own
approximately 18% of the currently outstanding shares of Common Stock, and 15%
of the shares of Common Stock on a fully diluted basis (13% if the Underwriters'
over-allotment options are exercised in full). See "Selling Stockholders."
The principal executive offices of the Company are located at 181 West
Madison Street, Chicago, Illinois 60602, and the telephone number of the Company
is (312) 541-5000.
RISK FACTORS
Before making an investment in the Common Stock, prospective purchasers
should carefully consider certain factors, including: that the Company's
business is dependent on capital spending in the cable television industry,
which has fluctuated significantly in the past; that the Company is subject to
restrictive financial and operating covenants, including restrictions on
dividends, under the Credit Agreement (as defined below); that the Company
competes with a substantial number of other companies and the rapid
technological changes occurring in the Company's markets are expected to lead to
the entry of new competitors; that the Company's future success will be
dependent upon its ability to continue to develop appropriate technologies and
successfully implement applications based on those technologies; and that sales
of substantial amounts of Common Stock in the public market could adversely
affect the market price of the Common Stock. See "Risk Factors."
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering................... 12,000,000 shares (1)
International Offering.......... 3,000,000 shares (1)
Total......................... 15,000,000 shares (1)
Common Stock outstanding.......... 122,572,004 shares (2)
Use of Proceeds................... All of the Common Stock offered hereby is being sold by
the Selling Stockholders. The Company will not receive
any proceeds from the sale of the shares offered
hereby.
New York Stock Exchange symbol.... GIC
<FN>
- --------------
(1) Assumes the Underwriters' over-allotment options are not exercised.
(2) Includes 108,965 shares to be issued upon exercise of stock options and
sold in the Offerings. See "Selling Stockholders." Does not include
6,029,229 shares issuable upon exercise of other stock options outstanding
as of March 31, 1995.
</TABLE>
____The offering of 12,000,000 shares of Common Stock being offered in the
United States (the "U.S. Offering") and the offering of 3,000,000 shares of
Common Stock being offered outside the United States (the "International
Offering") are collectively referred to herein as the "Offerings." The closing
of the International Offering is conditioned upon the closing of the U.S.
Offering, and vice versa.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
____The following table presents summary consolidated financial data derived
from the historical financial statements of the Company for periods subsequent
to the Acquisition (which occurred on August 15, 1990). As of December 31, 1991,
the Company changed the end of its fiscal year from the last day in February to
December 31. The pro forma statement of operations data for the twelve months
ended December 31, 1991 was derived from the historical statements of operations
of the Company adjusted to give effect to the change in fiscal year from the
last day of February to December 31. The following data should be read in
conjunction with the Company's consolidated financial statements and notes
thereto, which are included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AUGUST 15, TWELVE
1990 TEN MONTHS MONTHS
THROUGH ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
28, 1991 31, 1991 31, 1991 31, 1992 31, 1993 31, 1994
----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(PRO FORMA
FOR CHANGE
IN FISCAL
YEAR)
STATEMENTS OF
OPERATIONS DATA:
Net sales........... $ 533,118 $ 785,139 $ 928,826 $1,074,695 $1,392,522 $2,036,323
Cost of sales..... 406,235 566,358 668,441 755,466 956,154 1,403,585
Selling, general
and
administrative... 69,293 103,487 123,311 137,335 149,362 179,631
Research and
development...... 32,134 46,182 57,082 58,149 73,741 111,462
Amortization of
excess of cost
over fair value
of net assets
acquired......... 12,206 21,567 25,637 25,883 25,722 25,574
Operating income.... 13,250 47,545 54,355 97,862 187,543 316,071
Interest expense
-- net........... (64,718) (102,791) (123,440) (110,304) (72,458) (52,751)
Income (loss) from
operations before
extraordinary item
and cumulative
effect of changes
in accounting
principles......... (57,704) (93,787) (110,657) (41,395) 90,366 248,452(4)
Net income (loss)... $ (57,704) $ (93,787) $(110,657) $ (52,993)(1) $ 90,583 $ 246,535(4)
Weighted average
shares
outstanding(2)..... 72,700 72,624 72,624 97,985 122,237 123,393
Primary earnings
(loss) per share
before
extraordinary item
and cumulative
effect of changes
in accounting
principles(2)...... $ (.79) $ (1.29) $ (1.52) $ (.42) $ .74 $ 2.01(4)
Fully diluted
earnings (loss) per
share before
extraordinary item
and cumulative
effect of changes
in accounting
principles(2)...... (.79) (1.29) (1.52) (.42) .74(3) 1.89(3)(4)
BALANCE SHEET DATA
(AT END OF
PERIODS):
<CAPTION>
FEBRUARY DECEMBER DECEMBER DECEMBER DECEMBER
28, 1991 31, 1991 31, 1992 31, 1993 31, 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Working capital
(deficiency)....... $ (50,676) $ (149,541) $ (13,705) $ (16,102) $ 213,290
Property, plant and
equipment, net..... 309,862 286,443 265,974 262,173 343,868
Total assets........ 1,940,699 1,783,006 1,727,495 1,776,088 2,108,951
Long-term debt,
including current
maturities......... 1,352,800 1,253,901 989,222 840,204 796,849
Other non-current
liabilities........ 191,019 170,885 138,458 209,432 186,615
Redeemable
securities......... 3,724 3,500 -- -- --
Stockholders'
equity............. 120,634 26,847 291,332 389,105 677,178
<FN>
- ------------------
(1) Net loss includes a $12 million extraordinary charge for the write-off of
deferred financing costs in conjunction with the early extinguishment of
debt.
(2) On July 6, 1994, the Company's Board of Directors declared a two-for-one
split of 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.
(3) Fully diluted earnings per share assumes conversion of the Convertible
Junior Subordinated Notes and reflects adjustments for interest expense and
amortization of deferred financing costs, net of taxes, and number of
shares outstanding.
(4) Includes an income tax benefit of $30 million, 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.
</TABLE>
5
<PAGE>
RISK FACTORS
Prospective purchasers of the shares of Common Stock should carefully
consider the following factors, as well as other information set forth in this
Prospectus, before making an investment in the Common Stock.
DEPENDENCE ON THE CABLE TELEVISION INDUSTRY AND CABLE TELEVISION CAPITAL
SPENDING
Approximately 58% of the Company's consolidated sales and approximately 69%
of its operating income for the year ended December 31, 1994 came from sales of
systems and equipment to the cable television industry. Demand for these
products depends primarily on capital spending by cable television operators for
constructing, rebuilding or upgrading their systems. The amount of this capital
spending and, therefore, a majority of the Company's sales and profitability,
are affected by a variety of factors, including general economic conditions,
access by cable television operators to financing, regulation of cable
television operators and technological developments in the broadband
communications industry. Capital spending in the cable television industry fell
sharply in the middle of 1990 compared to 1989 and remained at a low level until
it began to recover in mid-1992. Although the Company believes that the
constraining pressures on cable television capital spending eased and that cable
television capital spending increased throughout 1993, 1994 and early 1995,
there can be no assurance that such increases will continue or that such
increased level of cable television capital spending will be maintained. In
addition, during 1993 and 1994, the Federal Communications Commission (the
"FCC") adopted rules under the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), regulating rates that cable
television operators may charge for lower tiers of service and generally not
regulating the rates for higher tiers of service. The Company believes that the
cable television industry continues to evaluate its capital spending plans based
on these regulations. Accordingly, the economic impact of the 1992 Cable Act and
those rules on the cable television industry and the Company is still uncertain.
Although the domestic cable television industry is comprised of more than
11,200 cable systems, a small number of cable television operators own a
majority of cable television systems and account for a majority of the capital
expenditures made by cable television operators. Ten cable television operators
accounted for approximately 34% of the Company's consolidated sales for the year
ended December 31, 1994. The loss of some or all of these cable television
operators as customers could have a material adverse effect on the business of
the Company.
CERTAIN RESTRICTIONS UNDER THE CREDIT AGREEMENT
The Credit Agreement governing the outstanding bank indebtedness of GI
Delaware (the "Credit Agreement"), contains restrictive financial and operating
covenants, including restrictions on 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, and contains
requirements that GI Delaware maintain certain financial ratios and meet certain
tests with respect to, among other things, minimum current ratio, net worth,
leverage and interest coverage. The Company has guaranteed the indebtedness
under the Credit Agreement.
General Instrument Corporation is a holding company with no operations or
significant assets other than its investment in GI Delaware. As a result, the
Company's ability to pay dividends on its Common Stock will be dependent upon
the ability of GI Delaware to pay cash dividends or make other distributions to
the Company. The Credit Agreement contains provisions which limit GI Delaware's
ability to pay cash dividends or make other distributions to the Company. See
"Price Range of Common Stock and Dividend Policy" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
SIGNAL PIRACY
The satellite television industry, in which the GI Communications Division
is engaged, experienced illegal modification of the first generation
VideoCipher-Registered Trademark- II descrambling modules (which were sold until
March 1991) for purposes of theft of programming (or "signal piracy"). In 1993,
the Company and
6
<PAGE>
several providers of premium programming completed a security upgrade program
which the Company believes has restored an acceptable level of security to the
backyard satellite dish industry. However, there can be no assurance that there
will not be unauthorized modification of descrambling modules or other methods
of signal piracy in the future, which could have a material adverse effect on
the business of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Broadband
Communications -- GI Communications Division -- Analog and Digital Satellite
Products."
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.
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-Registered Trademark-,
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-Registered Trademark- I
digital encoders and decoders for satellite programmers and cable television
commercial headend operators since 1993, and began deployment of
DigiCipher-Registered Trademark- 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-Registered Trademark- 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-Registered Trademark- II system ("MPEG2/DC-II") 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/DC-II 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/DC-II digital products for PRIMESTAR Partners, expected
to begin in mid-1995, will include an upgrade to MPEG2/DC-II, for a fee, of
DigiCipher-Registered Trademark- I receivers currently in use. As a result of
the high costs of initial production, DigiCipher-Registered Trademark- I
products and the upgrades to MPEG2/DC-II 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/DC-II
products, the Company expects margins of its digital products to improve. See
"Business -- Broadband Communications -- GI Communications Division."
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
7
<PAGE>
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.
See "Business -- Technology and Licensing" and "Business -- Research and
Development."
INTERNATIONAL OPERATIONS; FOREIGN CURRENCY RISKS
U.S. broadband system designs and equipment are increasingly being employed
in international markets, where cable television penetration is low. However,
there can be no assurance that international markets will continue to develop or
that the Company will receive additional contracts to supply its systems and
equipment in international markets. See "Risk Factors -- Competition" and
"Business -- International Markets."
A significant portion of GI's products are manufactured or assembled in
Mexico, Taiwan (Republic of China), Ireland and other countries outside the
United States. In addition, the Company's sales of its equipment into
international markets have grown. These foreign operations are subject to the
usual risks inherent in situating operations abroad, including risks with
respect to currency exchange rates, economic and political destabilization,
restrictive actions by foreign governments, nationalization, the laws and
policies of the United States affecting trade, foreign investment and loans, and
foreign tax laws. GI's cost-competitive status relative to other competitors
could be adversely affected if the Mexican peso, the New Taiwan dollar or
another relevant currency appreciates relative to the United States dollar. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Foreign Exchange."
SHARES ELIGIBLE FOR SALE
Sales of substantial amounts of Common Stock in the public market under Rule
144 ("Rule 144") under the Securities Act or otherwise, or the perception that
such sales could occur, may adversely affect prevailing market prices of the
Common Stock. The Selling Stockholders have agreed not to offer, sell or
otherwise dispose of shares of Common Stock acquired other than in the open
market and the Company has agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, in each case, for a period
of 180 days after the date of this Prospectus without the prior written consent
of the representatives of the Underwriters, subject to certain exceptions. See
"Underwriting." Following the 180-day period, the 22,303,665 shares of Common
Stock (20,053,665 shares if the Underwriters' over-allotment options are
exercised in full) held by the Forstmann Little Partnerships will be tradable
pursuant to Rule 144, subject to the volume and other resale limitations
thereof. In addition, after the 180-day period the Forstmann Little Partnerships
have the right to demand registration under the Securities Act of shares of
Common Stock and have the right to have shares of Common Stock included in
future registered public offerings of securities by the Company. Sales by the
Forstmann Little Partnerships in the future could adversely affect the market
price of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. See "Selling
Stockholders."
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 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
8
<PAGE>
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.
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 statements. 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.
9
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock has been listed on the New York Stock Exchange
since June 10, 1992 under the symbol "GIC". The following table sets forth on a
per share basis, as adjusted to give effect to a two-for-one stock split
effected in the third quarter of 1994, the high and low sale prices for the
Common Stock as reported on the New York Stock Exchange Composite Tape (the
"NYSE Composite Tape") for the periods indicated.
<TABLE>
<CAPTION>
COMMON STOCK
PRICE RANGE
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1993
First Quarter.................................................................. $ 18.125 $ 11.625
Second Quarter................................................................. 20.563 12.813
Third Quarter.................................................................. 28.125 18.750
Fourth Quarter................................................................. 30.125 25.250
1994
First Quarter.................................................................. 30.875 21.500
Second Quarter................................................................. 31.625 21.250
Third Quarter.................................................................. 33.000 28.250
Fourth Quarter................................................................. 34.625 26.750
1995
First Quarter.................................................................. 36.250 25.625
</TABLE>
For a recent sale price for the Common Stock, see the cover page of this
Prospectus.
Since the Acquisition, the Company has not paid dividends on its Common
Stock and does not anticipate paying dividends in the future. As a holding
company, the ability of the Company to pay dividends will depend upon the
receipt of dividends or other payments from its subsidiary, GI Delaware. The
Credit Agreement generally prohibits GI Delaware from declaring and paying
dividends to the Company, except that GI Delaware may pay dividends in an
aggregate amount equal to the excess of the Consolidated Net Worth (as defined)
of the Company and its subsidiaries at a specified date over the Consolidated
Net Worth required to be maintained under the Credit Agreement as of such date,
but in no event may the aggregate amount of dividends paid by GI Delaware (i)
the proceeds of which are used by the Company to pay dividends on its Common
Stock exceed $50 million in any fiscal year, or (ii) the proceeds of which are
used by the Company to purchase its outstanding Common Stock exceed $150 million
in any fiscal year. Any determination to pay cash dividends in the future will
be at the discretion of the Company's Board of Directors and will be dependent
upon the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant at that time by the Company's
Board of Directors.
10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries at December 31, 1994. The information presented
below should be read in conjunction with the Company's consolidated financial
statements and the related notes thereto incorporated herein by reference and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------
<S> <C>
(IN THOUSANDS)
Current debt:
Current portion of long-term debt............................................... $ 2,155
-----------
Long-term debt:
Revolving credit facilities..................................................... 240,000
Taiwan loan..................................................................... 54,694
5% Convertible Junior Subordinated Notes........................................ 500,000
-----------
Total long-term debt.......................................................... 794,694
-----------
Total debt.................................................................... 796,849
-----------
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 issued
(1)............................................................................ 1,222
Additional paid-in capital (1).................................................. 543,728
Retained earnings............................................................... 132,634
Less -- Treasury stock, at cost, 11,259 shares of Common Stock.................. (17)
Unearned compensation........................................................... (389)
-----------
Total stockholders' equity.................................................... 677,178
-----------
Total capitalization.......................................................... $ 1,474,027
-----------
-----------
<FN>
- --------------
(1) 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 distributed on August 8, 1994 to stockholders of record
on July 18, 1994. Common Stock was increased by the par value of the
additional shares issued with an offsetting reduction to additional paid-in
capital.
</TABLE>
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
The following table presents selected consolidated financial data derived
from the historical financial statements of the Company for periods subsequent
to the Acquisition (which occurred on August 15, 1990). As of December 31, 1991,
the Company changed the end of its fiscal year from the last day in February, to
December 31. The pro forma statement of operations data for the twelve months
ended December 31, 1991 was derived from the historical statements of operations
of the Company adjusted to give effect to the change in fiscal year from the
last day of February to December 31.
The following data should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto, which are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AUGUST 15, TEN TWELVE
1990 MONTHS MONTHS
THROUGH ENDED ENDED YEAR ENDED YEAR ENDED
FEBRUARY DECEMBER DECEMBER DECEMBER DECEMBER YEAR ENDED
28, 31, 31, 31, 31, DECEMBER
1991 1991 1991 1992 1993 31, 1994
----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(PRO FORMA
FOR CHANGE
IN FISCAL
YEAR)
STATEMENTS OF
OPERATIONS DATA:
Net sales........... $ 533,118 $ 785,139 $ 928,826 $1,074,695 $1,392,522 $2,036,323
Cost of sales..... 406,235 566,358 668,441 755,466 956,154 1,403,585
Selling, general
and
administrative... 69,293 103,487 123,311 137,335 149,362 179,631
Research and
development...... 32,134 46,182 57,082 58,149 73,741 111,462
Amortization of
excess of cost
over fair value
of net assets
acquired......... 12,206 21,567 25,637 25,883 25,722 25,574
Operating income.... 13,250 47,545 54,355 97,862 187,543 316,071
Interest expense
-- net........... (64,718) (102,791) (123,440) (110,304) (72,458) (52,751)
Income (loss) from
operations before
extraordinary item
and cumulative
effect of changes
in accounting
principles......... (57,704) (93,787) (110,657) (41,395) 90,366 248,452(4)
Net income (loss)... $ (57,704) $ (93,787) $(110,657) $ (52,993)(1) $ 90,583 $ 246,535(4)
Weighted average
shares outstanding
(2)................ 72,700 72,624 72,624 97,985 122,237 123,393
Primary earnings
(loss) per share
before
extraordinary item
and cumulative
effect of changes
in accounting
principles (2)..... $ (.79) $ (1.29) $ (1.52) $ (.42) $ .74 $ 2.01(4)
Fully diluted
earnings (loss) per
share before
extraordinary item
and cumulative
effect of changes
in accounting
principles (2)..... (.79) (1.29) (1.52) (.42) .74(3) 1.89(3)(4)
BALANCE SHEET DATA
(AT END OF
PERIODS):
<CAPTION>
FEBRUARY DECEMBER DECEMBER DECEMBER DECEMBER
28, 31, 31, 31, 31,
1991 1991 1992 1993 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Working capital
(deficiency)....... $ (50,676) $ (149,541) $ (13,705) $ (16,102) $ 213,290
Property, plant and
equipment, net..... 309,862 286,443 265,974 262,173 343,868
Total assets........ 1,940,699 1,783,006 1,727,495 1,776,088 2,108,951
Long-term debt,
including current
maturities......... 1,352,800 1,253,901 989,222 840,204 796,849
Other non-current
liabilities........ 191,019 170,885 138,458 209,432 186,615
Redeemable
securities......... 3,724 3,500 -- -- --
Stockholders'
equity............. 120,634 26,847 291,332 389,105 677,178
<FN>
- ------------------
(1) Net loss includes a $12 million extraordinary charge for the write-off of
deferred financing costs in conjunction with the early extinguishment of
debt.
(2) On July 6, 1994, the Company's Board of Directors declared a two-for-one
split of 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.
(3) Fully diluted earnings per share assumes conversion of the Convertible
Junior Subordinated Notes and reflects adjustments for interest expense and
amortization of deferred financing costs, net of taxes, and number of
shares outstanding.
(4) Includes an income tax benefit of $30 million, 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.
</TABLE>
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's major business segments are Broadband Communications and Power
Semiconductor. Segment net sales are presented below. The Company's Broadband
Communications segment is comprised of two divisions, GI Communications (formed
through a merger of the Company's former Jerrold Communications and VideoCipher
divisions in 1993 -- see "Business -- Broadband Communications -- GI
Communications Division") and CommScope. The principal determinant of sales for
GI Communications and CommScope is the amount of spending for development and/or
upgrade of cable television systems in the United States and around the world,
as well as the amount of spending by television programmers on access control,
scrambling and descrambling equipment for the satellite delivery of their
programming. Power Semiconductor products are incorporated into a variety of end
products, including computers, consumer electronics, automobiles, lighting
ballasts and telecommunications products. Power Semiconductor sales are
influenced by, among other things, the general level of economic activity.
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto
incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993 DECEMBER 31, 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
(IN MILLIONS)
SEGMENT INFORMATION:
Net Sales
Broadband Communications.............. $ 844 $ 1,125 $ 1,720
Power Semiconductor................... 231 268 316
------- ------- -------
Total............................... $ 1,075 $ 1,393 $ 2,036
------- ------- -------
------- ------- -------
</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
million compared to $1,393 million for the year ended December 31, 1993, an
increase of $643 million, 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 million, or 53%, to $1,720 million 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-Registered Trademark- digital compression products represented in
excess of 30% of the Broadband Communications sales increase. Sales of
DigiCipher-Registered Trademark- 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-Registered Trademark- 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-TM- analog satellite receiver
consumer modules for new owners of C-band satellite dishes increased in 1994
13
<PAGE>
over 1993. The Company expects sales opportunities to potential new owners of
C-band satellite dishes to continue into the second 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 million, 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 million, or 18%, to $224 million for the year
ended December 31, 1994 in comparison to 1993.
GROSS PROFIT (NET SALES LESS COST OF SALES). Gross profit increased $197
million, or 45%, to $633 million in 1994 from $436 million 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-Registered Trademark- 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 million, 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 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 million
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
million, or 51%, to $111 million in 1994 from $74 million 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 million, or 69%, to
$316 million in 1994 from $188 million 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
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.
INTEREST EXPENSE. Interest expense declined $19 million to $54 million in
1994 from $73 million in 1993. The decline was due primarily to lower interest
rates which were principally attributable to the June
14
<PAGE>
1993 debt restructuring and the July 1994 amendment and restatement of the
senior bank credit agreement of GI Delaware, 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 million which was
principally comprised of a $4 million 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 million which 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). Carrying costs
attributable to real estate held for sale were not significant.
INCOME TAXES Income taxes decreased $14 million in 1994 from 1993 due
primarily to the recognition of an income tax benefit of $30 million 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. For further discussion, see Note 6 to the
consolidated financial statements incorporated herein by reference.
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 million. 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
million compared to $1,075 million for the year ended December 31, 1992, an
increase of $318 million, 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 million, or 33%, to $1,125
million in 1993 primarily as a result of increased sales volume of the GI
Communications and CommScope divisions' cable 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
million, or 41%, due to increased sales volume of distribution electronics,
analog addressable terminals, VideoCipher RS-TM- analog satellite receiver
consumer modules and DigiCipher-Registered Trademark- digital compression
products. The Company believes that the increase in VideoCipher RS-TM- 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 million, 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.
15
<PAGE>
Power Semiconductor sales increased $37 million, or 16%, to $268 million 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 million to
1993 sales as compared to $11 million in 1992.
GROSS PROFIT (NET SALES LESS COST OF SALES). Gross profit increased $117
million, or 37%, to $436 million in 1993 from $319 million 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-TM- analog
satellite receiver consumer module sales, which have higher margins, partially
offset by a charge of $12 million associated with costs to be incurred in
effecting enhancements to the Company's DigiCipher-Registered Trademark- 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. SG&A expense increased $12 million, 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 million 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 million of
compensation expense attributable to stock appreciation rights compared to $9
million 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 million 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 million
in 1993 increased 27% in comparison to 1992 when research and development
expense was $58 million. 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 million, or
92%, to $188 million from $98 million in 1992.
OTHER INCOME (EXPENSE). See "-- Comparison of Results of Operations for the
Year Ended December 31, 1994 with the Year Ended December 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.
16
<PAGE>
INTEREST EXPENSE. Interest expense declined $38 million 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" 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 million which 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.
INCOME TAXES. Income taxes increased $9 million 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 million and a cumulative effect charge to
income of approximately $10 million, respectively. See Notes 6 and 10 to the
consolidated financial statements incorporated herein by reference. 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 million and $8 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for the year ended December 31, 1994 was $162
million compared to $166 million in 1993 and a negative $9 million in 1992. Cash
provided by operations 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
VideoCipher-Registered Trademark- 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 million compared to a
negative $16 million at December 31, 1993 and a negative $14 million 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 million as a result of
reductions in a valuation allowance related to domestic deferred income taxes,
and the reclassification of $31 million of debt outstanding at December 31, 1993
from short-term to long-term in connection with the 1994 amendment and
restatement of GI Delaware's senior bank credit agreement, as discussed below.
17
<PAGE>
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.
During the year ended December 31, 1994, the Company invested $136 million
in equipment and facilities compared with $67 million in 1993 and $37 million 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 million.
The Company's research and development expenditures (principally focused on
the Broadband Communications businesses) were $111 million for the year ended
December 31, 1994 compared to $74 million in 1993 and $58 million in 1992, and
are expected to approximate $135 million 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 million of cash and cash
equivalents on hand compared to $6 million at December 31, 1993 and $19 million
at December 31, 1992. At December 31, 1994, long-term debt (including current
maturities) was $797 million, compared to $840 million at December 31, 1993 and
$989 million 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 million 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 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. The proceeds from the offering of
the Notes and borrowings under the revolving credit facility were used to prepay
the entire $600 million 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 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 each year commencing December 31, 1995.
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 March 31, 1995, the Company had
borrowings of $194 million and credit commitments, which the Company had not
borrowed against, of $306 million under its revolving credit facilities. In
addition, on January 10, 1995, CommScope entered into a $10.8 million loan
agreement in connection with the issuance of notes by the Alabama State
Industrial Development Authority. At March 31, 1995, the entire amount under the
loan agreement was outstanding.
18
<PAGE>
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 million 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 consolidated financial
statements incorporated herein by reference 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-Registered Trademark-,
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-Registered Trademark- I
digital encoders and decoders for satellite programmers and cable television
commercial headend operators since 1993, and began deployment of
DigiCipher-Registered Trademark- 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-Registered Trademark- II compression system is
compatible with the recently finalized industry standard for digital compression
and transport, MPEG2. The development of the DigiCipher-Registered Trademark- II
system (MPEG2/DC-II) 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/DC-II 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/DC-II digital products for PRIMESTAR Partners, expected
to begin in mid-1995, will include an upgrade to MPEG2/DC-II, for a fee, of
DigiCipher-Registered Trademark- I receivers currently in use. As a result of
the high costs of initial production, DigiCipher-Registered Trademark- I
products and the upgrades to MPEG2/DC-II 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/DC-II
products, the Company expects margins of its digital products to improve.
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<PAGE>
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 incorporated herein by reference.
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.
20
<PAGE>
BUSINESS
GENERAL
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) and CommScope (which together
represented 84% of the Company's consolidated sales for 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 for 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.
The following table sets forth sales for the Company's Broadband
Communications segment, and each of that segment's divisions, and the Power
Semiconductor Division, for the years ended December 31, 1992, 1993 and 1994.
For further financial information regarding the Company's business segments, see
Note 14 to the consolidated financial statements incorporated herein by
reference.
<TABLE>
<CAPTION>
NET SALES FOR THE
YEAR ENDED
DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Broadband Communications
GI Communications (1)............................................................ $ 557 $ 783 $ 1,275
CommScope........................................................................ 287 342 445
--------- --------- ---------
Total.......................................................................... 844 1,125 1,720
Power Semiconductor Division....................................................... 231 268 316
--------- --------- ---------
Total.............................................................................. $ 1,075 $ 1,393 $ 2,036
--------- --------- ---------
--------- --------- ---------
<FN>
- --------------
(1) GI Communications Division was formed in 1993 as a result of the merger
between the former Jerrold Communications and VideoCipher divisions. See
"Business -- Broadband Communications."
</TABLE>
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
21
<PAGE>
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-Registered Trademark- and
VideoCipher-Registered Trademark- 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 the first quarter of 1995, 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 a majority 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,
22
<PAGE>
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. The 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-Registered Trademark- 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 "500-channel"
systems and interactive multimedia applications such as video-on-demand. The
Company's DigiCipher-Registered Trademark- 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-Registered Trademark- 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-TM- 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-TM- terminals will incorporate the Company's latest
generation digital compression system, DigiCipher-Registered Trademark- II,
which is compatible with the recently finalized industry standard for digital
compression and transport, Motion Picture Experts Group 2. The
DigiCipher-Registered Trademark- II system 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 MPEG2 compression. The features of MPEG2 were not finalized until November
1994 which, in addition to other system design issues, has caused delays in the
deployment of MPEG2/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 "Risk
Factors -- New Technologies; Digital Products" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- New Technologies;
Digital Products."
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.
23
<PAGE>
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-Registered Trademark- 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 by replacing the entire module. In 1993, the Company
completed a two-part security upgrade program pursuant to which GI replaced the
VideoCipher-Registered Trademark- II units of the customers of several providers
of premium programming with VideoCipher RS-TM- units and those programmers
ceased transmission of the VideoCipher-Registered Trademark- 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-TM- 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-Registered Trademark- descrambler in order to receive
scrambled programming. In 1994, new installations totalled 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 into the second quarter of 1995 (although there can be no
assurance as to the amount of those sales), and to decline, perhaps
substantially, thereafter. The Company believes that the providers of C-Band
delivered programming using VideoCipher-Registered Trademark- analog equipment
represent an important future opportunity for sales of the Company's
DigiCipher-Registered Trademark- satellite systems, although there can be no
assurance that such sales will occur.
GI Communication's digital satellite products include primarily the
DigiCipher-Registered Trademark- 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-Registered Trademark- 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-Registered Trademark- I
encoders had been installed by 21 different programmer/operators to encode
approximately 200 digital channels in North America and 21 programmer/operators
to encode approximately 150 digital channels internationally. In most cases, the
Company expects these programmers to upgrade to GI's new MPEG2/DC-II system
after it becomes available in mid-1995.
The Company supplies DigiCipher-Registered Trademark- 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. GI began shipments of DigiCipher-Registered Trademark- I
consumer decoders/receivers in the second quarter of 1994 and volumes are
expected to increase in 1995. Deployment of MPEG2/DC-II digital products for
PRIMESTAR Partners, expected to begin in mid-1995, will include an upgrade to
MPEG2/DC-II, for a fee, of DigiCipher-Registered Trademark- I receivers
currently in use. See "Risk Factors -- New Technologies; Digital Products" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- New Technologies; Digital Products."
24
<PAGE>
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 manufacturers 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 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
25
<PAGE>
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 suppressors 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 electronic 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.
26
<PAGE>
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 MPEG2/DC-II product line. In an effort to
make its DigiCipher-Registered Trademark- 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-Registered Trademark- II compression technology include
Scientific-Atlanta, Inc., Hewlett-Packard Company, and Zenith Electronics Corp.
In addition, GI has licensed Motorola, Inc., SGS-THOMSON Microelectronics, Inc.,
LSI Logic Corporation and C-Cube Microsystems to use
DigiCipher-Registered Trademark- 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 televison
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.
BACKLOG
The backlog information set forth below includes only orders for products
scheduled to be shipped within six months. Orders may be revised or cancelled,
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.
<TABLE>
<CAPTION>
BACKLOG
-------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1993 1994
--------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C>
Broadband Communications.......................................... $ 189 $ 418 $ 578
Power Semiconductor............................................... 84 95 122
----- ----- -----
Total......................................................... $ 273 $ 513 $ 700
----- ----- -----
----- ----- -----
</TABLE>
27
<PAGE>
MANAGEMENT
Set forth below are the directors and executive officers of the Company as
of the date of this Prospectus. 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 presidents of the various
divisions and subsidiaries of GI Delaware. Officers serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Daniel F. Akerson (b) 46 Chairman of the Board of Directors and Chief Executive
Officer
Richard S. Friedland (c) 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 (b) 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
John Seely Brown (d) 54 Director
Lynn Forester (c) 40 Director
Nicholas C. Forstmann (a)(c) 48 Director
Theodore J. Forstmann (a)(d) 55 Director
Steven B. Klinsky (b) 38 Director
Morton H. Meyerson (d) 56 Director
J. Tracy O'Rourke (c) 60 Director
Felix G. Rohatyn (d) 66 Director
Paul G. Stern (b) 56 Director
Robert S. Strauss (b) 76 Director
<FN>
- --------------
(a) Theodore J. Forstmann and Nicholas C. Forstmann are brothers.
(b) Member of Class I of the Board of Directors, with a term expiring in 1996.
(c) Member of Class II of the Board of Directors, with a term expiring in 1997.
(d) Member of Class III of the Board of Directors, with a term expiring in
1995.
</TABLE>
The principal occupations and positions for the past several years of each
of the directors and 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
28
<PAGE>
from 1987 to 1990, 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, L.P., 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 Corp. 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 employed by MCI from 1984 to 1994. He served
as Vice President, Finance and Administration, for several divisions of MCI from
1988 to 1994. From 1984 to 1988 he held various positions within MCI's corporate
staff.
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 of GI Delaware and from May 1991 to November 1994
he was Director of Taxes of the Company. From June 1987 to March 1989 he was
also Director, Risk Management and Customs of 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, Inc. 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 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,
29
<PAGE>
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, Director, Application Business
Systems from 1985 to 1991 and in various capacities prior to 1985.
John Seely Brown has been a director of the Company since July 1993. He has
been Chief Scientist of Xerox Corporation since 1992 and Corporate Vice
President of Xerox Corporation since 1990. From 1986 to 1990 he was Vice
President, Advanced Research, Palo Alto Research Center, of Xerox Corporation
and Associate Director of the Institute for Research on Learning. He is also the
director of the Xerox Palo Alto Research Center. He is a Fellow of the American
Association for Artificial Intelligence and a member of the National Academy of
Education.
Lynn Forester has been a director of the Company since February 1995. She
has been President and Chief Executive Officer of FirstMark Holdings, Inc., an
owner and operator of telecommunications companies, since 1984. From 1989 to
December 1994, she was also Chairman and Chief Executive Officer of TPI
Communications International, Inc., a radio common carrier and paging company.
She is a member of the U.S. Advisory Council on the National Information
Infrastructure.
Nicholas C. Forstmann served as a director of GI Delaware from August 1990
to March 1992, when he was elected to serve as a director of the Company. He has
been a General Partner of FLC Partnership, L.P., the General Partner of
Forstmann Little & Co., since he co-founded Forstmann Little & Co. in 1978. He
is a director of The Topps Company, Inc. and Department 56, Inc.
Theodore J. Forstmann served as a director of GI Delaware from August 1990
to March 1992, when he was elected to serve as a director of the Company. He has
been a General Partner of FLC Partnership, L.P., the General Partner of
Forstmann Little & Co., since he co-founded Forstmann Little & Co. in 1978. He
is a director of The Topps Company, Inc. and Department 56, Inc.
Steven B. Klinsky served as a director of GI Delaware from August 1990 to
March 1992, when he was elected to serve as a director of the Company. He has
been a General Partner of FLC Partnership, L.P., the General Partner of
Forstmann Little & Co., since December 1986.
Morton H. Meyerson has been a director of the Company since July 1993. Since
1992, he has served as Chairman and Chief Executive Officer of Perot Systems
Corporation, a computer and communication services company. From 1989 to 1992,
he was a private investor. He was President from 1979 to 1986, and Vice Chairman
in 1986, of Electronic Data Systems Corp., a company which designs, installs and
operates business information and communications systems. He serves on a number
of corporate and advisory boards, including Energy Service Company, Inc. and the
National Parks Foundation.
J. Tracy O'Rourke served as a director of GI Delaware from September 1990 to
March 1992, when he was elected to serve as a director of the Company. He has
been Chairman and Chief Executive Officer of Varian Associates, Inc., a
manufacturer of electronic devices, semiconductor manufacturing equipment and
analytical instruments, since early 1990. Mr. O'Rourke was Executive Vice
President and Chief Operating Officer of Rockwell International from 1989 to
1990 and President of Allen-Bradley Inc., an electrical equipment manufacturer,
from 1981 to 1989. He is a director of National Semiconductor Corp.
Felix G. Rohatyn has been a director of the Company since October 1993. He
has been a general partner of Lazard Freres & Co., Investment Bankers, since
1960 and served as Chairman of the Municipal Assistance Corporation for the City
of New York from 1975 to October 1993. He is a director of Pfizer Inc. and
Howmet Corporation.
Paul G. Stern has been a director of the Company since February 1994. He has
been associated with Forstmann Little & Co. since July 1993. From March 1989
through March 1993, he served as Chairman and Chief Executive Officer of
Northern Telecom Ltd., a manufacturer of digital telecommunications equipment.
He is a director of The Dow Chemical Company, LTV Steel Co., Inc., Varian
Associates, Inc. and Whirlpool Corporation. He also serves on the White House
National Security Telecommunications Advisory Committee.
30
<PAGE>
Robert S. Strauss has been a director of the Company since December 1992. He
was a director of GI Delaware from August 1990 to September 1991. Mr. Strauss, a
founder of and partner in the law firm of Akin, Gump, Strauss, Hauer & Feld,
served as United States Special Trade Representative from 1977 to 1979 and as
U.S. Ambassador to the Soviet Union, and upon its dissolution, to the Russian
Federation from August 1991 to November 1992. Mr. Strauss is a director of
Archer-Daniels-Midland Co.
SELLING STOCKHOLDERS
All of the shares of Common Stock being offered hereunder are being sold by
certain stockholders as indicated below (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the shares of Common Stock
being sold. The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of the date hereof and as adjusted
after giving effect to the Offerings hereunder, by each Selling Stockholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE NUMBER OF NUMBER OF SHARES PERCENTAGE
BEFORE THE BEFORE SHARES BEING BENEFICIALLY OWNED AFTER
NAME OFFERINGS (1) OFFERINGS (1) OFFERED (1) AFTER OFFERINGS(1) OFFERINGS (1)
- ----------------------------------- ------------------ --------------- ------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
MBO-IV (2) 17,410,550 14.2% 6,970,378 10,440,172 8.5%
Instrument Partners (2) 19,784,150 16.2 7,920,657 11,863,493 9.7
Nicholas C. Forstmann (2) 37,194,700 30.4 14,891,035 22,303,665 18.2
Theodore J. Forstmann (2) 37,194,700 30.4 14,891,035 22,303,665 18.2
Winston W. Hutchins (2) 37,194,700 30.4 14,891,035 22,303,665 18.2
Steven B. Klinsky (2) 37,194,700 30.4 14,891,035 22,303,665 18.2
Wm. Brian Little (2) 19,784,150 16.2 7,920,657 11,863,493 9.7
John A. Sprague (2) 19,784,150 16.2 7,920,657 11,863,493 9.7
James M. Denny (3) 16,150 * 16,150 0 0
J. Tracy O'Rourke (4) 47,210 * 25,000 22,210 *
Derald H. Ruttenberg (5) 45,210 * 45,210 0 0
Robert S. Strauss (6) 55,210 * 22,605 32,605 *
<FN>
- --------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days after the date of this Prospectus. For
purposes of computing the percentage of outstanding shares of Common Stock
held by such person or group of persons named above, any security which
such person or persons has or have the right to acquire within 60 days
after the date of this Prospectus is deemed to be outstanding, but is not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. For purposes of this table, the number of
shares of Common Stock assumes that the Underwriters' over-allotment
options are not exercised.
(2) MBO-IV and Instrument Partners are the Forstmann Little Partnerships. The
general partner of Instrument Partners is FLC XXII Partnership, a general
partnership of which Messrs. Wm. Brian Little, Nicholas C. Forstmann, John
A. Sprague, Steven B. Klinsky and Winston W. Hutchins, and TJ/JA L.P., a
Delaware limited partnership ("TJ/JA L.P."), are general partners. The
general partner of TJ/ JA L.P. is Theodore J. Forstmann. The general
partner of MBO-IV is FLC Partnership, L.P., a limited partnership of which
Messrs. Theodore J. Forstmann, Nicholas C. Forstmann, Steven B. Klinsky,
Winston W. Hutchins and Daniel F. Akerson and Ms. Sandra J. Horbach are
general partners. Accordingly, each of such individuals and partnerships
(other than Mr. Akerson and Ms. Horbach, for the reasons described below)
may be deemed the beneficial owners of shares owned by MBO-IV and
Instrument Partners in which such individual or partnership is a general
partner and for purposes of this table, such beneficial ownership is
included. Neither Mr. Akerson nor Ms. Horbach has any voting or investment
power with respect to, or any economic interest in, the shares of Common
Stock held by MBO-IV; and, accordingly, Mr. Akerson and Ms. Horbach are not
deemed to be the beneficial owners thereof. Theodore J. Forstmann and
Nicholas C. Forstmann are brothers.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Mr. Little is a special limited partner in FLC Partnership, L.P. and each
of FLC Partnership L.P. and FLC XXII Partnership is a limited partner of
Instrument Partners. None of the other limited partners in each of MBO-IV
and Instrument Partners is otherwise affiliated with the Company, GI
Delaware or Forstmann Little. The address of MBO-IV and Instrument Partners
is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New York 10153.
(3) Includes 16,150 shares subject to options which are exercisable currently,
all of which are being exercised in order to sell the underlying shares in
the Offerings. Mr. Denny is a former director of the Company.
(4) Includes 45,210 shares subject to options which are exercisable currently.
Of such options, 25,000 are being exercised in order to sell the underlying
shares in the Offerings.
(5) Includes 45,210 shares subject to options which are exercisable currently,
all of which are being exercised in order to sell the underlying shares in
the Offerings. Mr. Ruttenberg is a former director of the Company. Mr.
Ruttenberg and an entity controlled by his children are limited partners of
Instrument Partners.
(6) Includes 45,210 shares subject to options which are exercisable currently.
Of such options, 22,605 are being exercised in order to sell the underlying
shares in the Offerings.
</TABLE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Pursuant to the Certificate of Incorporation, the Company's authorized
capital stock currently consists of (i) 20,000,000 shares of preferred stock,
par value $.01 per share ("Preferred Stock"), and (ii) 175,000,000 shares of
Common Stock, par value $.01 per share. As of March 31, 1995, 122,463,039 shares
of Common Stock were issued and outstanding. All outstanding shares of Common
Stock are fully paid and nonassessable. No shares of Preferred Stock are issued
and outstanding.
On March 30, 1992, the Company's name was changed from FLGI Holding Corp. to
General Instrument Corporation.
On November 3, 1994, the Board of Directors approved a proposed amendment to
the Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 175,000,000 to 400,000,000. The proposed amendment
will be presented to stockholders for approval at the Company's annual meeting
of stockholders on April 26, 1995.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. Accordingly, the holders of a majority of the shares
voting for the election of directors can elect all the directors if they choose
to do so, subject to any voting rights of holders of Preferred Stock to elect
directors. Subject to the preferential rights of any outstanding series of
Preferred Stock and to the restrictions on payment of dividends imposed by the
Credit Agreement (as described in "Price Range of Common Stock and Dividend
Policy"), the holders of Common Stock will be entitled to such dividends as may
be declared from time to time by the Board of Directors from funds legally
available therefor, and will be entitled, after payment of all prior claims, to
receive pro rata all assets of the Company upon the liquidation, dissolution or
winding up of the Company. Holders of Common Stock have no redemption,
conversion rights or preemptive rights to purchase or subscribe for securities
of the Company.
After giving effect to the Offerings, the Forstmann Little Partnerships will
own an aggregate of approximately 18% of the currently outstanding shares of
Common Stock or approximately 15% of the Common Stock on a fully diluted basis
(or 13% of the Common Stock on a fully diluted basis, assuming that the
Underwriters' over-allotment options are exercised in full). After the
Offerings, it is expected that the Forstmann Little Partnerships are likely to
continue to be among the largest stockholders of the Company.
The Common Stock is listed on the New York Stock Exchange under the symbol
"GIC."
32
<PAGE>
PREFERRED STOCK
The authorized capital stock of the Company includes 20,000,000 shares of
Preferred Stock, none of which is currently issued or outstanding. The Company's
Board of Directors is authorized to divide the Preferred Stock into series and,
with respect to each series, to determine the preferences and rights and the
qualifications, limitations or restrictions thereof, including the dividend
rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting the series and the designation of such series. The Board of
Directors could, without stockholder approval, issue Preferred Stock with voting
and other rights that could adversely affect the voting power of the holders of
Common Stock and could have certain anti-takeover effects. The Company has no
present plans to issue any shares of Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as a director, except in certain cases
where liability is mandated by the Delaware General Corporation Law (the
"DGCL"). The provision has no effect on any non-monetary remedies that may be
available to the Company or its stockholders, nor does it relieve the Company or
its directors from compliance with federal or state securities laws. The
Certificate of Incorporation and the By-Laws of the Company provide for
indemnification, to the fullest extent permitted by the DGCL, of any person who
is or was involved in any manner in any investigation, claim or other proceeding
by reason of the fact that such person is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director or
officer of another corporation, against all expenses and liabilities actually
and reasonably incurred by such person in connection with the investigation,
claim or other proceeding.
DELAWARE LAW AND LIMITATIONS ON CHANGES IN CONTROL
Section 203 of the DGCL prevents an "interested stockholder" (defined in
Section 203, generally, as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (as defined
in Section 203) with a publicly-held Delaware corporation (or its majority-owned
subsidiaries) for three years following the date such person became an
interested stockholder unless (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder.
The Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes. Each class consists, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board. At each annual meeting of stockholders, successors to the class of
directors whose term expires at that annual meeting will be elected for a
three-year term and until their respective successors are elected and qualified.
The classified Board of Directors, the provisions authorizing the Board of
Directors to issue Preferred Stock without stockholder approval, and the
provisions of Section 203 of the DGCL could have the effect of delaying,
deferring or preventing a change in control of the Company or the removal of
existing management.
TRANSFER AGENT
The transfer agent for the Common Stock is Chemical Bank.
33
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholders have agreed to sell to each of the U.S. Underwriters named
below, and each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Lazard
Freres & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting
as representatives, has severally agreed to purchase from the Selling
Stockholders, the respective number of shares of Common Stock set forth opposite
its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITER COMMON STOCK
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co..........................................................
Lazard Freres & Co...........................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated...........................
---------------
Total.................................................................... 12,000,000
---------------
---------------
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 3,000,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discount and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The representatives of
the International Underwriters are Goldman Sachs International, Lazard Capital
Markets and Merrill Lynch International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States"), and to U.S. Persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. Persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
Persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
34
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
Certain of the Selling Stockholders have granted the U.S. Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase, at
the initial public offering price per share less the underwriting discount as
set forth on the cover page of this Prospectus, up to an aggregate of 1,800,000
additional shares of Common Stock to cover over-allotments, if any. If the U.S.
Underwriters exercise their over-allotment option, the U.S. Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 12,000,000 shares of Common
Stock offered hereby. The U.S. Underwriters may exercise such option only to
cover over-allotments in connection with the sale of the 12,000,000 shares of
Common Stock offered hereby. Such Selling Stockholders have granted the
International Underwriters an option exercisable for 30 days after the date of
this Prospectus to purchase, at the initial public offering price less the
underwriting discount as set forth on the cover page of this Prospectus, up to
an aggregate of 450,000 additional shares of Common Stock solely to cover
over-allotments, if any.
The Selling Stockholders have agreed not to offer, sell or otherwise dispose
of any shares of Common Stock, and the Company has agreed not to offer, sell,
contract to sell or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock, in each
case for a period of 180 days after the date of this Prospectus, without the
prior written consent of the representatives of the Underwriters, except for
shares of Common Stock offered in connection with the Offerings, certain
permitted transfers by the Selling Stockholders to related parties who would
agree to abide by the foregoing restrictions and certain permitted sales by the
Selling Stockholders of shares of Common Stock acquired in the open market since
June 1992.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Felix G. Rohatyn, a director of the Company, is a general
partner of Lazard Freres & Co.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered by the Selling
Stockholders hereby will be passed upon for the Company by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York and for the Underwriters by Sullivan & Cromwell, New York, New
York. Fried, Frank, Harris, Shriver & Jacobson renders legal services to
Forstmann Little on a regular basis.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1993 and
1994, 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 and the financial statement schedules thereto incorporated by reference
in this Prospectus and in the Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
incorporated herein by reference. Such financial statements and financial
statement schedules of the Company for the periods referred to above are
included herein in reliance upon such reports of Deloitte & Touche LLP given
upon the authority of such firm as experts in accounting and auditing.
35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 6
Price Range of Common Stock and Dividend
Policy........................................ 10
Capitalization................................. 11
Selected Consolidated Financial Data........... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business....................................... 21
Management..................................... 28
Selling Stockholders........................... 31
Description of Capital Stock................... 32
Underwriting................................... 34
Validity of Shares............................. 35
Experts........................................ 35
</TABLE>
15,000,000 SHARES
GENERAL INSTRUMENT
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
[LOGO] GENERAL INSTRUMENT CORPORATION
--------------
GOLDMAN, SACHS & CO.
LAZARD FRERES & CO.
MERRILL LYNCH & CO.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[Alternate Page for International Prospectus]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED APRIL 3, 1995
15,000,000 SHARES
[LOGO] GENERAL INSTRUMENT CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------
Of the 15,000,000 shares of Common Stock offered, 3,000,000 shares are being
offered hereby in an international offering outside the United States and
12,000,000 shares are being offered in a concurrent offering in the United
States. The initial public offering price and the aggregate underwriting
discount per share will be identical for both offerings. See "Underwriting".
All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. The largest stockholders of the Company, who are
affiliates of Forstmann Little & Co., are selling 14,891,035 shares of Common
Stock in the offerings. See "Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares offered hereby.
The last reported sale price of the Common Stock on the New York Stock
Exchange Composite Tape on March 31, 1995 was $34.75 per share. See "Price Range
of Common Stock and Dividend Policy".
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMMON STOCK.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) STOCKHOLDERS (2)
-------------- ------------- -------------------
<S> <C> <C> <C>
Per Share.................................................... $ $ $
Total (3).................................................... $ $ $
<FN>
- --------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Expenses of the offerings estimated at $1,002,460 will be paid by the
Company.
(3) Certain of the Selling Stockholders have granted the International
Underwriters an option for 30 days to purchase up to an additional 450,000
shares at the initial public offering price per share, less the
underwriting discount, solely to cover over-allotments. Additionally, such
Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 1,800,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such options are exercised in full, the total initial
public offering price, underwriting discount and proceeds to the Selling
Stockholders will be $ , $ and $ , respectively. See
"Underwriting".
</TABLE>
--------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
April , 1995.
GOLDMAN SACHS INTERNATIONAL
LAZARD CAPITAL MARKETS
MERRILL LYNCH INTERNATIONAL LIMITED
---------
The date of this Prospectus is April , 1995.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following discussion concerns the material United States federal income
and estate tax consequences of the ownership and disposition of shares of Common
Stock applicable to Non-U.S. Holders of such shares of Common Stock. In general,
a "Non-U.S. Holder" is any holder other than (i) a citizen or resident of the
United States, (ii) a corporation or partnership created or organized in the
United States or under the laws of the United States or of any State, or (iii)
any estate or trust whose income is includible in gross income for United States
federal income tax purposes regardless of its source. The discussion is based on
the provisions of the United States Internal Revenue Code of 1986, as amended
and regulations thereunder and judicial and administrative interpretations as of
the date hereof, all of which are subject to change, and is for general
information only. The discussion does not address all aspects of federal income
and estate taxation (including, without limitation, special rules applicable to
certain United States expatriates and certain former United States residents)
nor any aspects of state, local or foreign tax laws. The discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder (including the fact that in the case of a Non-U.S. Holder that
is a partnership, the United States tax consequences of holding and disposing of
shares of Common Stock may be affected by certain determinations made at the
partner level). Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of Common
Stock.
DIVIDENDS. In general, dividends paid to a Non-U.S. Holder will be subject
to United States withholding tax at a 30% rate (or lower rate as may be
prescribed by an applicable tax treaty) unless the dividends are effectively
connected with a trade or business carried on by the Non-U.S. Holder within the
United States. Dividends effectively connected with such a trade or business
will generally not be subject to withholding tax (if the Non-U.S. Holder
properly files an executed IRS Form 4224 with the payor of the dividend) and
will generally be subject to United States federal income tax on a net income
basis at regular graduated rates. In the case of a Non-U.S. Holder which is a
corporation, such effectively connected income also may be subject to the branch
profits tax (which is generally imposed on a foreign corporation on the
repatriation from the United States of effectively connected earnings and
profits at a 30% rate). The branch profits tax may not apply (or may apply at a
reduced rate) if the recipient is a qualified resident of certain countries with
which the United States has an income tax treaty. To determine the applicability
of a tax treaty providing for a lower rate of withholding, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payor has definite knowledge that such presumption is not
warranted. Proposed Treasury regulations, if finally adopted, however, would
require Non-U.S. Holders to file certain forms to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends. Such forms would be required to contain the beneficial owner's name
and address and, subject to a de minimis exception, an official statement by the
competent authority in the foreign country (as designated in the applicable tax
treaty) attesting to the beneficial owner's status as a resident thereof. A
Non-U.S. Holder that is eligible for a reduced rate of U.S. withholding tax
pursuant to a tax treaty may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the Internal Revenue Service. The
Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides.
SALE OF COMMON STOCK. Generally, a Non-U.S. Holder will not be subject to
United States federal income tax on any gain realized upon the disposition of
such holder's shares of Common Stock unless (i) the gain is effectively
connected with a trade or business carried on by the Non-U.S. Holder within the
United States (in which case the branch profits tax described above may also
apply to a corporate Non-U.S. Holder); (ii) the Non-U.S. Holder is an individual
who holds the shares of Common Stock as a capital asset and is present in the
United States for 183 days or more in the taxable year of the disposition, and
either (a) such Non-U.S. Holder has a "tax home," for federal income tax
purposes, in the United States (unless the gain from the disposition is
attributable to an office or other fixed place of business maintained by such
Non-U.S. Holder in a foreign country and such gain has been subject to a foreign
income tax equal to at least 10%), or (b) the gain from the disposition is
attributed to an office or other fixed place of business maintained by such
non-U.S. Holder in the United States; (iii) the Non-U.S. Holder is subject
34
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
to tax pursuant to the provisions of U.S. tax law applicable to certain United
States expatriates or to certain former United States residents; or (iv) the
Company is or has been a "U.S. real property holding corporation" for federal
income tax purposes (which the Company does not believe that it has been, is or
is likely to become) at any time during the five year period ending on the date
of disposition (or such shorter period that such shares were held) and, subject
to certain exceptions, the Non-U.S. Holder held, directly or constructively,
more than five percent of the Common Stock.
ESTATE TAX. Shares of Common Stock owned or treated as owned by an
individual who is a Non-U.S. Holder at the time of death will be includible in
the individual's gross estate for the United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise, and may be subject to
United States federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current United States
federal income tax law, backup withholding tax (which generally is a withholding
tax imposed at the rate of 31 percent on certain payments to persons that fail
to furnish certain required information) and information reporting requirements
apply to payments of dividends (actual and constructive) made to certain
Non-corporate United States persons. The United States backup withholding tax
and information reporting requirements (other than those described above under
"Dividends") will generally not apply to dividends paid on Common Stock to a
Non-U.S. Holder at an address outside the United States.
The payment of the proceeds from the disposition of shares of Common Stock
through the United States office of a broker will be subject to information
reporting and backup withholding unless the holder, under penalty of perjury,
certifies, among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. Generally, the payment of the proceeds from the
disposition of shares of Common Stock to or through a non-U.S. office of a
non-U.S. broker will not be subject to backup withholding and will not be
subject to information reporting. In the case of the payment of proceeds from
the disposition of shares of Common Stock through a non-U.S. office of a broker
that is a U.S. person or a "U.S. related person," existing regulations require
information reporting (but not backup withholding) on the payment unless the
broker receives a statement from the owner, signed under penalties of perjury,
certifying, among other things, its status as a Non-U.S. Holder, or the broker
has documentary evidence in its files that the owner is a Non-U.S. Holder and
the broker has no actual knowledge to the contrary. Proposed regulations state
that backup withholding will not apply to such payments (absent actual knowledge
that the payee is a U.S. person). For this purpose, a "U.S.-related person" is
(i) a "controlled foreign corporation" for United States federal income tax
purposes or (ii) a foreign person, 50% or more of whose gross income from all
sources for the three year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively connected with the
conduct of a United States trade or business.
Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the United States
Internal Revenue Service. The backup withholding and information reporting rules
are currently under review by the U.S. Treasury Department and their application
to the shares of Common stock is subject to change.
Non-U.S. Holders should consult their tax advisors regarding the application
of these rules to their particular situations, the availability of an exemption
therefrom and the procedure for obtaining such an exemption, if available.
35
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Selling Stockholders have agreed to sell to each of the
international Underwriters named below, and each of such International
Underwriters, for whom Goldman Sachs International, Lazard Capital Markets and
Merrill Lynch International Limited are acting as representatives, has severally
agreed to purchase from the Selling Stockholders, the respective number of
shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------------------ ------------------
<S> <C>
Goldman Sachs International.........................................................
Lazard Capital Markets..............................................................
Merrill Lynch International Limited.................................................
----------
Total....................................................................... 3,000,000
----------
----------
</TABLE>
Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all of the
shares offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 12,000,000 shares
of Common Stock in a U.S. offering in the United States. The offering price and
aggregate underwriting discount and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the U.S. offering, and vice versa. The representatives of the U.S.
Underwriters are Goldman, Sachs & Co., Lazard Freres & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
International Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions, it
(i) will not, directly or indirectly, offer, sell or deliver the shares offered
hereby and other shares of Common Stock (a) in the United States (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (the "United States") or to any U.S. Persons
(which term shall mean, for purposes of this paragraph: (I) any individual who
is a resident of the United States or (II) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States) or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
Persons. and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction. Each of the U.S.
Underwriters has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the U.S. offering, and subject
to certain exceptions, it will offer, sell or deliver shares of Common Stock,
directly or indirectly, only in the United States and to U.S. Persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concessions.
36
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Certain of the Selling Stockholders have granted the International
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase, at the initial public offering price per share less the
underwriting discount as set forth on the cover page of this Prospectus, up to
an aggregate of 450,000 additional shares of Common Stock to cover
over-allotments, if any. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the 3,000,000 shares of Common Stock offered
hereby. The International Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 3,000,000 shares of Common
Stock offered hereby. Such Selling Stockholders have granted the U.S.
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase, at the initial public offering price less the underwriting discount
as set forth on the cover page of this Prospectus, up to an aggregate of
1,800,000 additional shares of Common Stock, solely to cover over-allotments, if
any.
Each International Underwriter has also agreed that (i) it has not offered
or sold, and it will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (ii) it has complied,
and will comply, with all applicable provisions of the Financial Services Act
1986 of Great Britain with respect to anything done by it in relation to the
Common Stock in, from or otherwise involving the United Kingdom and (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issuance of the shares of
Common Stock to a person who is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
The Selling Stockholders have agreed not to offer, sell or otherwise dispose
of any shares of Common Stock, and the Company has agreed not to offer, sell,
contract to sell or otherwise dispose of any Common Stock or any security
convertible into or exercisable or exchangeable for such Common Stock, in each
case for a period of 180 days after the date of this Prospectus, without the
prior written consent of the representatives of the Underwriters, except for
shares of Common Stock offered in connection with the Offerings, certain
permitted transfers by the Selling Stockholders to related parties who would
agree to abide by the foregoing restrictions and certain permitted sales by the
Selling Stockholders of shares of Common Stock acquired in the open market since
June 1992.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Felix G. Rohatyn, a director of the Company, is a general
partner of Lazard Freres & Co.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered by the Selling
Stockholders hereby will be passed upon for the Company by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York and for the Underwriters by Sullivan & Cromwell, New York, New
York. Fried, Frank, Harris, Shriver & Jacobson renders legal services to
Forstmann Little on a regular basis.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1993 and
1994, 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, and the financial statement schedules thereto incorporated by
reference in this Prospectus and in the Registration Statement have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
incorporated herein by reference. Such financial statements and financial
statement schedules of the Company for the periods referred to above are
included herein in reliance upon such reports of Deloitte & Touche LLP given
upon the authority of such firm as experts in accounting and auditing.
37
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 6
Price Range of Common Stock and Dividend
Policy........................................ 10
Capitalization................................. 11
Selected Consolidated Financial Data........... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business....................................... 21
Management..................................... 28
Selling Stockholders........................... 31
Description of Capital Stock................... 32
Certain United States Federal Tax
Considerations for Non-U.S. Holders of Common
Stock......................................... 34
Underwriting................................... 36
Validity of Shares............................. 37
Experts........................................ 37
</TABLE>
15,000,000 SHARES
GENERAL INSTRUMENT
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------
[LOGO] GENERAL INSTRUMENT CORPORATION
---------
GOLDMAN SACHS INTERNATIONAL
LAZARD CAPITAL MARKETS
MERRILL LYNCH INTERNATIONAL
LIMITED
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities being registered hereby, other than
underwriting discounts and commissions, all of which will be borne by the
Company.
<TABLE>
<S> <C>
SEC registration fee (actual).................................. $ 205,960
NASD fees (actual)............................................. 30,500
Blue sky fees and expenses..................................... 16,000
Accounting fees and expenses................................... 100,000
Legal fees and expenses........................................ 250,000
Printing and engraving expenses................................ 200,000
Miscellaneous.................................................. 200,000
----------
Total...................................................... $1,002,460
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Company provide for
indemnification, to the fullest extent permitted by the DGCL, of any person who
is or was involved in any manner in any investigation, claim or other
proceeding, by reason of the fact that such person is or was a director or
officer of the Company, against all expenses and liabilities actually and
reasonably incurred by such person in connection with the investigation, claim
or other proceeding. The By-Laws also provide that the Company may advance
litigation expenses to a director, officer, employee or agent upon receipt of an
undertaking by or on behalf of such director, officer, employee or agent to
repay such amount if it is ultimately determined that the director, officer,
employee or agent is not entitled to be indemnified by the Company.
The Certificate of Incorporation provides that directors of the Company
shall not be liable to the Company or any of its stockholders for monetary
damages for any breach of fiduciary duty as a director, except for liability in
respect of (i) a breach of the director's duty of loyalty to the Company or its
stockholders, (ii) any acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any willful or
negligent declaration of an unlawful dividend, stock purchase or redemption, or
(iv) any transaction from which the director derived an improper personal
benefit. The Certificate of Incorporation also provides that if the DGCL is
amended to permit further elimination or limitation of the personal liability of
directors, then the liability of the directors of the Company shall be
eliminated or limited to the fullest extent permitted by the DGCL as so amended.
The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in the Certificate of
Incorporation and By-Laws. These agreements, among other things, will indemnify
the Company's directors and officers to the fullest extent permitted by Delaware
law for certain expenses (including attorney's fees), liabilities, judgments,
fines and settlement amounts incurred by such person arising out of or in
connection with such person's service as a director or officer of the Company or
an affiliate of the Company.
Policies of insurance are maintained by the Company under which its
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
The form of Underwriting Agreement filed as Exhibit 1 hereto provides for
the indemnification of the Registrant, its controlling persons, its directors
and certain of its officers by the Underwriters against certain liabilities,
including liabilities under the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits:
<TABLE>
<C> <C> <S>
1.1 -- Proposed form of U.S. Underwriting Agreement.
1.2 -- Proposed form of International Underwriting Agreement.
2.1 -- Agreement and Plan of Merger, dated as of July 1, 1990, among FLGI
Acquisition Corp. and General Instrument Corporation.*
4.1 -- Specimen Form of Company's Common Stock Certificate.***
4.2 -- Amended and Restated Certificate of Incorporation of the Company.**
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the
validity of the securities being registered.
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 5.1).
23.2 -- Consent of Deloitte & Touche LLP
24.1 -- Power of Attorney (included on pages II-3 and II-4).
<FN>
- --------------
* 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.
</TABLE>
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been satisfied by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on April 3, 1995.
GENERAL INSTRUMENT CORPORATION
By _______/s/_DANIEL F. AKERSON_______
Daniel F. Akerson
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Richard S. Friedland, Charles T. Dickson,
Richard C. Smith and Thomas A. Dumit, and each of them, as his true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Registration
Statement, including any and all pre-effective and post-effective amendments,
and any and all documents in connection therewith, and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratifies,
approves and confirms all that his said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/DANIEL F. AKERSON Chairman of the Board Chief Executive
------------------------------------------- Officer and Director (Principal April 3, 1995
Daniel F. Akerson Executive Officer)
/s/RICHARD S. FRIEDLAND
------------------------------------------- President, Chief Operating Officer and April 3, 1995
Richard S. Friedland Director
/s/CHARLES T. DICKSON
------------------------------------------- Vice President and Chief Financial April 3, 1995
Charles T. Dickson Officer (Principal Financial Officer)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/PAUL J. BERZENSKI
------------------------------------------- Vice President and Controller April 3, 1995
Paul J. Berzenski (Principal Accounting Officer)
/s/JOHN SEELY BROWN
------------------------------------------- Director April 3, 1995
John Seely Brown
/s/FRANK M. DRENDEL
------------------------------------------- Director April 3, 1995
Frank M. Drendel
/s/LYNN FORESTER
------------------------------------------- Director April 3, 1995
Lynn Forester
/s/NICHOLAS C. FORSTMANN
------------------------------------------- Director April 3, 1995
Nicholas C. Forstmann
/s/THEODORE J. FORSTMANN
------------------------------------------- Director April 3, 1995
Theodore J. Forstmann
/s/STEVEN B. KLINSKY
------------------------------------------- Director April 3, 1995
Steven B. Klinsky
/s/MORTON H. MEYERSON
------------------------------------------- Director April 3, 1995
Morton H. Meyerson
/s/J. TRACY O'ROURKE
------------------------------------------- Director April 3, 1995
J. Tracy O'Rourke
/s/FELIX G. ROHATYN
------------------------------------------- Director April 3, 1995
Felix G. Rohatyn
/s/PAUL G. STERN
------------------------------------------- Director April 3, 1995
Paul G. Stern
/s/ROBERT S. STRAUSS
------------------------------------------- Director April 3, 1995
Robert S. Strauss
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
1.1 -- Proposed form of U.S. Underwriting Agreement..................................................
1.2 -- Proposed form of International Underwriting Agreement.........................................
2.1 -- Agreement and Plan of Merger, dated as of July 1, 1990, among FLGI Acquisition Corp. and
General Instrument Corporation*..............................................................
4.1 -- Specimen Form of Company's Common Stock Certificate***........................................
4.2 -- Amended and Restated Certificate of Incorporation of the Company**............................
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the securities being
registered...................................................................................
23.1 -- Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).................
23.2 -- Consent of Deloitte & Touche LLP..............................................................
24.1 -- Power of Attorney (included on pages II-3 and II-4)...........................................
<FN>
- --------------
* 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.
</TABLE>
<PAGE>
GENERAL INSTRUMENT CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
---------------------
, 1995
Goldman, Sachs & Co.,
Lazard Freres & Co.,
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of General Instrument Corporation, a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 12,000,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 1,800,000 additional shares (the "Optional Shares") of
Common Stock (par value $.01 per share) ("Stock") of the Company (the Firm
Shares and the Optional Shares which the Underwriters elect to purchase pursuant
to Section 2 hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Selling Stockholders
are concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Selling Stockholders of up to a total
of 3,450,000 shares of Stock (the "International Shares"), including the
overallotment option thereunder, through arrangements with certain underwriters
outside the United States (the "International Underwriters") for whom Goldman
Sachs International, Lazard Capital Markets and Merrill Lynch International
Limited are acting as lead managers. Anything herein or therein to the contrary
notwithstanding, the respective closings under this Agreement and the
International Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein,
and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
1
<PAGE>
1. (a) The Company represents and warrants to, and agrees with, each of the
Underwriters and the Selling Stockholders that:
(i) A registration statement in respect of the Firm Shares and Optional
Shares has been filed with the Securities and Exchange Commission (the
"Commission"); such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference in
the prospectus contained therein, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; no other
document with respect to such registration statement or other document
incorporated by reference in the prospectus contained therein has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Securities Act of 1933, as
amended (the "Act"), being hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all exhibits
thereto and including (i) the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act
in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement"; and such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, being hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus or Prospectus,
as the case may be, under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report on Form 10-K of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the Registration
Statement);
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by any Underwriter through you expressly for use
therein or by a Selling Stockholder expressly for use in the preparation of
the answers therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents, when they became effective or were
filed with the Commission, as the case may be, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the
2
<PAGE>
Prospectus or any further amendment or supplement thereto will, when such
documents become effective or are filed with the Commission, as the case may
be, conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder and not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through you expressly for use
therein;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder and do not
and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the applicable filing date as
to the Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by any Underwriter through
you expressly for use therein or by a Selling Stockholder expressly for use
in the preparation of the answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included or incorporated
by reference in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development that may
reasonably be expected to involve a prospective material adverse change, in
or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere in any material respect with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere in any material respect with the
use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(viii) Each material subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of Incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized
3
<PAGE>
and issued, are fully paid and non-assessable, and (except for directors'
qualifying shares) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims, except as provided
under the Credit Agreement.
(ix) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except as provided under the Credit
Agreement (as defined in the Prospectus);
(x) The unissued shares of Common Stock issuable upon the exercise of
options to be exercised by certain of the Selling Stockholders (the
"Options") have been duly and validly authorized and reserved for issuance,
and at the Time of Delivery (as defined below) with respect to such shares,
such shares will be issued and delivered in accordance with the provisions
of the Stock Option Agreements between the Company and such Selling
Stockholders pursuant to which such options were granted (the "Option
Agreements") and will be duly and validly issued, fully paid and
non-assessable and will conform to the description thereof in the
Prospectus;
(xi) The Options were duly authorized and issued pursuant to the Option
Agreements and constitute valid and binding obligations of the Company; the
Optionholders are entitled to the benefits provided by the Option
Agreements; the Option Agreements were duly authorized, executed and
delivered and constitute valid and binding instruments enforceable in
accordance with their terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(xii) The compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the consummation
of the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, which conflict, breach,
violation or default would have, or may reasonably be expected to have, a
material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the sale of the Firm
Shares and Optional Shares, the issuance of Common Stock upon exercise of
the Options by certain Selling Stockholders or the consummation by the
Company of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration under the Act
of the Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;
(xiii) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which individually or in the
aggregate would have, or may reasonably be expected to have, a material
adverse effect on the
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consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, and, to
the best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xiv) Deloitte & Touche, who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder; and
(xv) The Company and its subsidiaries own or possess, or own or possess
adequate licenses or other rights to use, all patents and trademarks used in
connection with the businesses conducted by them as described in the
Prospectus; and neither the Company nor any of its subsidiaries has received
any notice of infringement of or conflict with (and knows of no such
infringement of or conflict with) asserted rights of others with respect to
any such patents, trademarks or licenses of the Company, which infringement
or conflict, individually or considered together with all other such
infringements and conflicts, would have, or may reasonably be expected to
have, a material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole.
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Stockholder of this Agreement,
the International Underwriting Agreement and the Power of Attorney (the
"Power of Attorney") and the Custody Agreement (the "Custody Agreement")
hereinafter referred to, and for the sale and delivery of the Shares to be
sold by such Selling Stockholder hereunder and under the terms of the
International Underwriting Agreement, have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement, the Power of Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and under the terms of the International Underwriting Agreement
and the compliance by such Selling Stockholder with all of the provisions of
this Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound or to which any of the
property or assets of such Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the Articles of
Partnership of such Selling Stockholder if such Selling Stockholder is a
partnership, or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has good and valid title to the Shares to
be sold at each Time of Delivery (as defined in Section 4 hereof) by such
Selling Stockholder hereunder and under the terms of the International
Underwriting Agreement (other than the Shares to be issued upon exercise of
Options), free and clear of all liens, encumbrances, equities or adverse
claims, except for those arising under this Agreement, the International
Underwriting Agreement, the Custody Agreement, the Power of Attorney and the
applicable subscription agreement or stockholder's agreement with respect to
the Shares and except as otherwise previously identified in writing to the
Underwriters; such Selling Stockholder will have, immediately prior to the
Time of Delivery, assuming due issuance of any Shares to be issued upon
exercise of options, good and valid title to the Shares to be sold at such
Time of Delivery by such Selling Stockholder, free and clear of all liens,
encumbrances, equities or adverse claims, except for those arising under
this Agreement, the International Underwriting Agreement, the Custody
Agreement, the Power of Attorney and the applicable subscription agreement
or stockholder's agreement with respect to the Shares; and, upon delivery of
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the certificates representing such Shares and payment therefor pursuant
hereto, good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or adverse claims, will pass to the several
Underwriters and the International Underwriters.
(iv) No offering, sale or other disposition of any Stock will be made
within 180 days after the date of the Prospectus, directly or indirectly, by
such Selling Stockholder, otherwise than hereunder or under the
International Underwriting Agreement other than transfers to (i) any spouse,
parent, child, brother or sister of such Selling Stockholder, or any issue
of the foregoing (including for this purpose persons legally adopted into
the line of descent), (ii) a trust established solely for the benefit of
such Selling Stockholder or any spouse, parent, child, brother or sister of
such Selling Stockholder, or for the benefit of any issue of the foregoing,
or (iii) any corporation or partnership which is controlled by such Selling
Stockholder, or by any spouse, parent, child, brother or sister of such
Selling Stockholder, or by any issue of the foregoing; provided, however,
that prior to each such transfer such transferee shall have entered into a
letter agreement with the Underwriters agreeing to abide by the restrictions
contained in this clause;
(v) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares; and
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus, and the
Registration Statement did, and the Prospectus and any further amendments or
supplements to the Registration Statement and the Prospectus will, when they
become effective or are filed with the Commission, as the case may be,
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or at the First Time of Delivery
(as hereinafter defined) a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
Each of the Selling Stockholders represents and warrants that certificates
in negotiable form representing all of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting Agreement, other
than any such Shares to be issued upon the exercise of Options, have been, and
each of the Selling Stockholders who is selling Shares upon the exercise of
Options represents and warrants that duly completed and executed irrevocable
Option exercise notices, in the forms specified by the relevant Option
Agreement, with respect to all of the Shares to be sold by such Selling
Stockholder hereunder have been, placed in custody under a Custody Agreement
relating to such Shares, in the form heretofore furnished to you, duly executed
and delivered by such Selling Stockholder to Chemical Bank, N.A., as custodian
(the "Custodian"), and that such Selling Stockholder has duly executed and
delivered Powers of Attorney, in the form heretofore furnished to you,
appointing the persons indicated in Schedule II hereto, and each of them, as
such Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of such Selling
Stockholder, to determine the purchase price to be paid by the Underwriters to
the Selling Stockholders as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder hereunder, to
authorize (if applicable) the exercise of the Options to be exercised
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<PAGE>
with respect to the Shares to be sold by such Selling Stockholder hereunder and
otherwise to act on behalf of such Selling Stockholder in connection with the
transactions contemplated by this Agreement, the International Underwriting
Agreement and the Custody Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates or the irrevocable Option exercise notice, in
either case held in custody for such Selling Stockholder under the Custody
Agreement, are subject to the interests of the Underwriters hereunder and the
International Underwriters under the International Underwriting Agreement and
that the arrangements made by such Selling Stockholder for such custody, and the
appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of
Attorney, are to that extent irrevocable. Each of the Selling Stockholders
specifically agrees that the obligations of the Selling Stockholders hereunder
and under the International Underwriting Agreement shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
Stockholder, or, in the case of an estate or trust, by the death or incapacity
of any executor or trustee or the termination of such estate or trust, or in the
case of a partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event. If any individual Selling
Stockholder or any such executor or trustee should die or become incapacitated,
or if any such estate or trust should be terminated, or if any such partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the Custody
Agreements, and actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Stockholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Stockholders at a purchase price per share of
$ the number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
to be sold by each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from all the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, each of the Selling Stockholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Stockholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares set forth
opposite such Selling Stockholder's name in Schedule II hereto as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction, the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares which all of the Underwriters are entitled to purchase
hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 1,800,000 Optional Shares in the aggregate,
at the purchase price per share set forth in the paragraph above, for the sole
purpose of covering over-allotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the number
of Optional Shares to be sold by each Selling Stockholder. Any such election to
purchase Optional Shares may be exercised only by written notice from you to the
Attorneys-in-Fact, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the
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<PAGE>
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Attorney-in-Fact otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names as
Goldman, Sachs & Co. may request upon at least forty-eight hours prior notice to
the Selling Stockholders, shall be delivered by or on behalf of the Selling
Stockholders to you for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Custodian in New York
Clearing House funds, all at the office of Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004. The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
, 1995, or at such other time and date as you and the Company may agree
upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York
City time, on the date specified by you in the written notice given by you of
the Underwriters' election to purchase such Optional Shares, or at such other
time and date as you and the Attorneys-in-Fact may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery," such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery," and each
such time and date for delivery herein called a "Time of Delivery." Such
certificates will be made available for checking and packaging at least
twenty-four hours prior to each Time of Delivery at the office of Goldman, Sachs
& Co., 85 Broad Street, New York, New York.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus
which shall be reasonably disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of
the time when the Registration Statement, or any amendment thereto, has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Shares; to advise you, promptly
after it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the qualification
of the Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement
or Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws
so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Shares, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or to file a general consent
to service of process in any jurisdiction;
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<PAGE>
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act, to notify you and upon your
request to file such document and to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is required to
deliver a prospectus in connection with sales of any of the Shares at any
time nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver
to such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)), an
earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including at the option of the Company Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any Stock, securities
of the Company (other than pursuant to employee stock option plans or
agreements existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Agreement) which
are substantially similar to the Stock, or any other securities which are
exercisable or exchangeable for, or convertible into, Stock or any such
securities substantially similar to the Stock, without your prior written
consent;
(f) Upon delivery to the Company of the irrevocable Option exercise
notices referred to in Section 1(b) hereof and the receipt of the
appropriate instructions from the Attorneys-in-Fact, to issue the Shares
relating thereto in accordance with the provisions of the applicable Option
Agreement, and, notwithstanding any other provision of such Option
Agreement, to deliver the Shares to you as contemplated in the Custody
Agreement;
(g) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statement of income, stockholders' equity and cash flow of the Company and
its consolidated subsidiaries certified by independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending after
the effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such quarter
in reasonable detail; and
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver
to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commissioner or any
national securities exchange on which any class of securities of the Company
is listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such
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financial statements to be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission).
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants and the Selling
Stockholders' counsel in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the International
Underwriting Agreement, the Agreement between Syndicates, the Selling Agreement,
the Blue Sky Memorandum and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey; (iv) the cost of preparing stock
certificates; (v) the cost and charges of any transfer agent or registrar; (vi)
the fees and expenses of the Attorneys-in-Fact of the Custodian; (vii) all
expenses and taxes incident to the sale and delivery of the Shares to be sold by
the Selling Stockholders to the Underwriters hereunder, except as provided
below; and (viii) all other costs and expenses incident to the performance of
its obligations or the Selling Stockholders' obligations hereunder which are not
otherwise specifically provided for in this Section. In connection with clause
(vii) of the preceding sentence, the Underwriters agree to pay New York State
stock transfer tax, and the Company agrees to reimburse the Underwriters for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that, except as provided in this Section, Section 8 and Section 11
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery, with
respect to the incorporation of the Company, the validity of the Shares
being delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Thomas A. Dumit, Esq., Vice President, General Counsel and Secretary
of the Company, shall have furnished to you his written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, or is subject to no
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material liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in respect
of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that he believes that both you and
he are justified in relying upon such opinions and certificates);
(ii) Each material subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the
issued shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except as provided under the Credit Agreement (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
(iii) The Company and its subsidiaries have good and marketable title
in fee simple to all real property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially affect the value of such
property and do not interfere in any material respect with the use made
and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere in any material respect with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries
(in giving the opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion has been
made, and that he is relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local counsel and
abstracts, reports and policies of title companies rendered or issued at
or subsequent to the time of acquisition of such property by the Company
or its subsidiaries, upon opinions of counsel to the lessors of such
property and, in respect of matters of fact, upon certificates of
officers of the Company or its subsidiaries, provided that such counsel
shall state that he believes that both you and he are justified in
relying upon such opinions, abstracts, reports, policies and
certificates);
(iv) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which individually or in the aggregate would have, or may
reasonably be expected to have, a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole; and, to
the best of such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
(v) The compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known to
such counsel to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject and which is material to the Company and its subsidiaries,
taken as a whole, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
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Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties;
(vi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issuance by the Company of the Shares to be issued upon
the exercise of the Options or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the
Shares, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters;
(vii) The documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements, related schedules
and other financial data included or incorporated by reference therein,
as to which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be, appeared
on their face to be responsive as to form in all material respects with
the requirements of the Act or the Exchange Act, as applicable and the
rules and regulations of the Commission thereunder; and he has no reason
to believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case of
a registration statement which became effective under the Act, an untrue
statement of a material fact, or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or, in the case of other documents which were filed under
the Exchange Act with the Commission, an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading; and
(viii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
and other financial data included or incorporated by reference therein,
as to which such counsel need express no opinion) as of their respective
effective or issue dates, appear on their face to be responsive as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; he has no reason to believe that, as of
its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than
the financial statements, related schedules and other financial data
included or incorporated by reference therein, as to which such counsel
need express no opinion) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of
its date, the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements, related schedules and other financial data included
or incorporated by reference therein, as to which such counsel need
express no opinion) contain an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading or that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than
the financial statement, related schedules and other financial data
included or incorporated by reference therein, as to which such counsel
need express no opinion) contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States.
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(d) Fried, Frank, Harris, Shriver & Jacobson, counsel for the Company,
shall have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery) have been
duly and validly authorized and are fully paid and non-assessable
(assuming, with respect to Shares being issued upon the exercise of the
Options, that payment of the exercise price therefor is made to the
Company as provided in the Custody Agreement); and the Shares conform as
to legal matters to the description of the Stock contained in the
Prospectus;
(iii) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
(iv) The documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements, related schedules
and other financial data included or incorporated by reference therein,
as to which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be, appeared
on their face to be responsive as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder; and
(v) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements, related schedules and
other financial data included or incorporated by reference therein, as to
which such counsel need express no opinion) as of their respective
effective or issue dates, appear on their face to be responsive as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; no facts have come to their attention
to cause them to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements, related
statements and related schedules and other financial data included or
incorporated by reference therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data included or
incorporated by reference therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or
that, as of such Time of Delivery, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data included or
incorporated by reference therein, as to which such counsel need express
no opinion) contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State
of New York, the Federal law of the United States and the General
Corporation Law of the State of Delaware.
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(e) Fried, Frank, Harris, Shriver & Jacobson, counsel for each of the
Selling Stockholders, shall have furnished to you their written opinion,
with respect to Instrument Partners and Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-IV, each of which is a Selling
Stockholder (the "FL Selling Stockholders"), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by such FL Selling Stockholder and constitute
valid and binding agreements of such FL Selling Stockholder in accordance
with their terms, subject as to enforcement to (i) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws affecting creditors' rights generally and (ii) general
principles of equity (whether considered in a proceeding at law or in
equity);
(ii) This Agreement has been duly executed and delivered by or on
behalf of such FL Selling Stockholder; and the sale of the Shares to be
sold by such FL Selling Stockholder hereunder and the compliance by such
FL Selling Stockholder with all of the provisions of this Agreement, the
Power of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any terms or provisions of, or
constitute a default under, any statute of the State of New York or the
United States of America, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument identified after due inquiry
to such counsel to which such FL Selling Stockholder is a party or by
which such FL Selling Stockholder is bound or to which any of the
property or assets of such FL Selling Stockholder is subject, or the
Partnership Agreement of such FL Selling Stockholder, or any order, rule
or regulation identified after due inquiry to such counsel of any court
or governmental agency or body of the State of New York or the United
States of America having jurisdiction over such FL Selling Stockholder or
the property of such FL Selling Stockholder;
(iii) No consent, approval, authorization or order of any court or
governmental agency or body of the State of New York or the United States
of America is required for the consummation of the transactions
contemplated by this Agreement in connection with the Shares to be sold
by such FL Selling Stockholder hereunder and under the International
Underwriting Agreement, except such as have been obtained under the Act
and such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters and the International Underwriters; and
(iv) Assuming that the Underwriters purchase the Shares to be
delivered at such Time of Delivery in good faith and without notice of
any adverse claim as such term is used in Section 8-302 of the Uniform
Commercial Code in effect in the State of New York, the delivery of
certificates representing the Shares will pass to the Underwriters valid
title to such Shares, free and clear of all security interests, liens,
encumbrances, equities or other adverse claims.
(f) Fried, Frank, Harris, Shriver & Jacobson, counsel for each of the
Selling Stockholders, shall have furnished to you their written opinion,
dated such Time of Delivery, with respect to each of the Selling
Stockholders other than the FL Selling Stockholders (the "Other Selling
Stockholders"), in form and substance satisfactory to you, to the effect
that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by each Other Selling Stockholder and constitute
valid and binding agreements of such Other Selling Stockholder in
accordance with their terms, subject as to enforcement to (i) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws affecting creditors' rights generally and (ii)
general principles of equity (whether considered in a proceeding at law
or in equity);
(ii) This Agreement has been duly executed and delivered by or on
behalf of each Other Selling Stockholder;
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(iii) No consent, approval, authorization or order of any court or
governmental agency or body of the State of New York or the United States
of America is required for the consummation of the transactions
contemplated by this Agreement in connection with the Shares to be sold
by any Other Selling Stockholder hereunder and under the International
Underwriting Agreement, except such as have been obtained under the Act
and such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters and the International Underwriters; and
(iv) Assuming that the Underwriters purchase the Shares to be
delivered at such Time of Delivery in good faith and without notice of
any adverse claim as such term is used in Section 8-302 of the Uniform
Commercial Code in effect in the State of New York, the delivery of
certificates representing the Shares will pass to the Underwriters valid
title to such Shares, free and clear of all security interests, liens,
encumbrances, equities or other adverse claims.
In rendering the opinion in subparagraphs (i) and (ii) such counsel may
assume the authenticity of all signatures and the capacity of the Other
Selling Stockholders to enter into and perform the agreements referred to
therein.
(g) At 10:00 a.m., New York City time, on the effective date of the
Registration Statement and the most recently filed post-effective amendment
to the Registration Statement and also at each Time of Delivery, Deloitte &
Touche LLP shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, each in form and substance satisfactory
to you, to the effect set forth in Annex I hereto;
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or government
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus, and (ii) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
change, or any development that may reasonably be expected to involve a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated by the Prospectus; and
(j) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery (i) certificates of
officers of the Company, satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such Time
of Delivery, as to the performance by the Company of all of its respective
obligations hereunder to be performed at or prior to such Time of Delivery,
as to the matters set forth in subsections (a) and (h) of this Section and
as to such other matters as you may reasonably request and (ii) certificates
of the Selling Stockholders satisfactory to you as to the accuracy of the
representations and warranties of
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the Selling Stockholders herein at and as of such Time of Delivery, as to
the performance by the Selling Stockholders of all of their obligations
hereunder to be performed at or prior to such Time of Delivery and as to
such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you expressly for use therein; and provided, further, that the Company
shall not be liable to any Underwriter under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company has previously furnished copies thereof in sufficient quantity to such
Underwriter and the loss, claim, damage or liability of such Underwriter results
from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was identified in writing at such time to such
Underwriter and corrected in the Prospectus or in the Prospectus as then amended
or supplemented.
(b) Each of the Selling Stockholders named in Schedule III hereto (the
"Indemnifying Stockholders") severally in proportion to the number of Shares to
be sold by such Indemnifying Stockholder hereunder, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Indemnifying Stockholders
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon or in conformity with written information
furnished to the Company by any Underwriter through you expressly for use
therein; and provided, further, that the Indemnifying Stockholders shall not be
liable to any Underwriter under the indemnity agreement in this subsection (b)
with respect to any Preliminary Prospectus to the extent that any such loss,
claim, damage or liability of such Underwriter results from the fact that such
Underwriter sold Shares to a person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company or the Selling Stockholders have previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was
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identified in writing at such time to such Underwriter and corrected in the
Prospectus or in the Prospectus as then amended or supplemented. Notwithstanding
the provisions of this subsection (b), no Indemnifying Stockholder shall be
required to pay an amount in excess of the gross proceeds received by such
Selling Stockholder from the Shares sold by it hereunder.
(c) Each of the Selling Stockholders severally in proportion to the number
of Shares to be sold by such Selling Stockholder hereunder, will indemnify and
hold harmless the Company and each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Selling Stockholder expressly for use therein, and provided,
further, that the Selling Stockholders shall not be liable to any Underwriter
under the indemnity agreement in this subsection (c) with respect to any
Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such Underwriter results from the fact that such Underwriter sold
Shares to a person as to whom it shall be established that there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus or of the Prospectus as then amended or supplemented in any case
where such delivery is required by the Act if the Company or the Selling
Stockholders have previously furnished copies thereof in sufficient quantity to
such Underwriter and the loss, claim, damage or liability of such Underwriter
results from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was identified in writing at such time to such
Underwriter and corrected in the Prospectus or in the Prospectus as then amended
or supplemented. Notwithstanding the provisions of this subsection (c), no
Selling Stockholder shall be required to pay an amount in excess of the gross
proceeds received by such Selling Stockholder from the Shares sold by it
hereunder.
(d) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will reimburse the
Company and such Selling Stockholders for any legal or other expenses reasonably
incurred by the Company and such Selling Stockholders in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(e) Promptly after receipt by an indemnified party under subsection (a),
(b), (c) or (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying
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party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation.
(f) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b),
(c) or (d) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (e) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Selling Stockholders bear
to the total underwriting discounts and commissions received by the Underwriters
with respect to the Shares purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholders and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (f) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (f). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (f) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (f), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling
Stockholder shall be required to contribute, in the aggregate, any amount in
excess of the gross proceeds received by such Selling Stockholder from the
Shares sold by it hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within
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the meaning of the Act; and the obligations of the Underwriters under this
Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to become
a director of the Company), to each partner of any Selling Stockholder that is a
partnership and to each person, if any, who controls the Company or any Selling
Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares
then the Selling Stockholders shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Selling Stockholders
that you have so arranged for the purchase of such Shares, or the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Selling Stockholders shall have the right to postpone such
Time of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Selling
Stockholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Selling Stockholders to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Stockholders, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, or any partner of any Selling Stockholder that is a
partnership and shall survive delivery of and payment for the Shares.
19
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Selling Stockholders as provided herein, each of the Selling
Stockholders pro rata (based on the number of Shares to be sold by such Selling
Stockholder) will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of counsel
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company and the
Selling Stockholders shall then be under no further liability to any Underwriter
in respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., at 85 Broad Street, New York, N.Y. 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Selling Stockholders, the Company and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company,
each partner of any Selling Stockholder that is a partnership and each person
who controls the Company, any Selling Stockholder or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters, each Selling
Stockholder and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
20
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
General Instrument Corporation
By:
...................................
Name: Thomas A. Dumit
Title: Vice President, General
Counsel and Secretary
Selling Stockholders
By:
...................................
Name:
By:
...................................
Name:
As Attorneys-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule II
to this Agreement
Accepted as of the date hereof:
Goldman, Sachs & Co.
Lazard Freres & Co.
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:
.....................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
21
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TO BE PURCHASED
NUMBER OF IF MAXIMUM
FIRM SHARES OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Goldman, Sachs & Co...............................
Lazard Freres & Co................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated
--------------- ---------------
Total..................................... 12,000,000 1,800,000
--------------- ---------------
--------------- ---------------
</TABLE>
22
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
NUMBER OF TO BE SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
----------- ---------------
<S> <C> <C>
The Selling Stockholders (a):
Forstmann Little & Co. Subordinated Debt
and Equity Management
Buyout Partnership-IV.......................... 5,576,302 842,566
Instrument Partners............................. 6,336,526 957,434
James M. Denny................................. 12,920 0
J. Tracy O'Rourke.............................. 20,000 0
Derald H. Ruttenberg........................... 36,168 0
Robert S. Strauss.............................. 18,084 0
----------- ---------------
Total..................................... 12,000,000 1,800,000
----------- ---------------
----------- ---------------
</TABLE>
- --------------
(a) The Selling Stockholders have appointed Daniel F. Akerson, Richard S.
Friedland, Charles T. Dickson, Thomas A. Dumit and Richard C. Smith as the
Attorneys-in-Fact for the Selling Stockholders.
23
<PAGE>
SCHEDULE III
Forstmann Little & Co. Subordinated Debt
and Equity Management
Buyout Partnership-IV
Instrument Partners
24
<PAGE>
ANNEX I
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, prospective
financial statements and/or pro forma financial information) examined by
them and included or incorporated by reference in the Prospectus or the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations thereunder; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, prospective financial statements
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been furnished to
the representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and/or
included in the Company's Quarterly Report on Form 10-Q incorporated by
reference into the Prospectus; and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi) (A) (i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that caused
them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the fiscal years included in the Prospectus and included or incorporated by
reference in Item 6 of the Company's Annual Report on Form 10-K for the most
recent fiscal year agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for such
fiscal years which were included or incorporated by reference in the
Company's Annual Reports on Form 10-K for such fiscal years;
(v) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies to
Form 10-Q and the related published rules and regulations (ii) any
material modifications should be made to the unaudited
A-1
<PAGE>
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited financial statements
referred to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred to in Clause
(B) were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included or
incorporated by reference in the Company's Annual Report on Form 10-K for
the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case in which were
outstanding on the date of the latest financial statements included or
incorporated by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or net assets or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with amounts shown in
the latest balance sheet included in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified
date referred to in Clause (E) there were any decreases in consolidated
net revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the Representatives,
or any increase in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are described in
such letter; and
(vi) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (v) above, they have carried out certain
specified procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company and its
subsidiaries, which appear in the Prospectus (excluding documents
incorporated by reference), or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives or in
documents incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
A-2
<PAGE>
GENERAL INSTRUMENT CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
---------------------
1995
Goldman Sachs International,
Lazard Capital Markets
Merrill Lynch International Limited,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB England.
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of General Instrument Corporation, a Delaware corporation (the
"Company"), propose, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 3,000,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 450,000 additional shares (the "Optional Shares") of Common
Stock (par value $.01 per share) ("Stock"), of the Company (the Firm Shares and
the Optional Shares which the Underwriters elect to purchase pursuant to Section
2 hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Selling Stockholders
are concurrently entering into an agreement, a copy of which is attached hereto
(the "U.S. Underwriting Agreement"), providing for the offering by the Selling
Stockholders of up to a total of 13,800,000 shares of Stock (the "U.S. Shares"),
including the overallotment option thereunder, through arrangements with certain
underwriters in the United States (the "U.S. Underwriters"), for whom Goldman,
Sachs & Co., Lazard Freres & Co. and Merrill Lynch & Co. are acting as
representatives. Anything herein and therein to the contrary notwithstanding,
the respective closings under this Agreement and the U.S. Underwriting Agreement
are hereby expressly made conditional on one another. The Underwriters hereunder
and the U.S. Underwriters are simultaneously entering into an Agreement between
U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates and for consultation by the Lead Managers
hereunder with Goldman, Sachs & Co. prior to exercising the rights of the
Underwriters under Section 7 hereof. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
U.S. Shares. The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the registration statement
and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9
and 11 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all of the shares of Stock which may be
sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both of the U.S. and the
international versions thereof.
<PAGE>
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied MUTATIS MUTANDIS as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Stockholders hereby make
with the Underwriters the same representations, warranties and agreements as are
set forth in Section 1 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Stockholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Stockholders, at a purchase price per share of
$ , the number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
to be sold by each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by each Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from all the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, each of the Selling Stockholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Stockholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares set forth
opposite such Selling Stockholder's name in Schedule II hereto as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares which all of the Underwriters are entitled to purchase
hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 450,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the number of Optional
Shares to be sold by each Selling Stockholder. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Attorneys-in-Fact, (as defined in Section 1 of the U.S. Underwriting Agreement,
which is incorporated herein by reference) given within a period of 30 calendar
days after the date of this Agreement, setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by you but in no event earlier than the First
Time of Delivery (as defined in Section 4 hereof) or, unless you and the
Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which
2
<PAGE>
have been previously submitted to the Company by you. Each Underwriter hereby
makes to and with the Selling Stockholders the representations and agreements of
such Underwriter as a member of the selling group contained in Sections 3(d) and
3(e) of the form of Selling Agreements.
4. Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names as
GSI may request upon at least forty-eight hours' prior notice to the Selling
Stockholders, shall be delivered by or on behalf of the Selling Stockholders to
GSI for the account of such Underwriter, against payment by such Underwriter or
on its behalf of the purchase price therefor by certified or official bank check
or checks, payable to the order of the Custodian in New York Clearing House
funds, all at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004. The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 a.m., New York City time, on , 1995,
or at such other time and date as you and the Attorneys-in-fact may agree upon
in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City
time, on the date specified in the written notice of the Underwriters' election
to purchase such Optional Shares, or at such other time and date as you and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery," such time and date for
delivery of the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery." Such certificates will be made available
for checking and packaging at least twenty-four hours prior to each Time of
Delivery at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York.
5. The Company hereby makes to the Underwriters the same agreements as are
set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery, to the condition that all representations and
warranties and other statements of the Company and each of the Selling
Stockholders herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company and each of the Selling Stockholders shall have
performed all of their obligations hereunder theretofore to be performed, and
additional conditions identical to those set forth in Section 7 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein; and provided, further, that the Company
shall not be liable to any Underwriter under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given,
3
<PAGE>
at or prior to the written confirmation of such sale, a copy of the Prospectus
or of the Prospectus as then amended or supplemented in any case where such
delivery is required by the Act if the Company has previously furnished copies
thereof in sufficient quantity to such Underwriter and the loss, claim, damage
or liability of such Underwriter results from an untrue statement or omission of
a material fact contained in the Preliminary Prospectus which was identified in
writing at such time to such Underwriter and corrected in the Prospectus or in
the Prospectus as then amended or supplemented.
(b) Each of the Selling Stockholders named in Schedule III hereto (the
"Indemnifying Stockholders") severally in proportion to the number of Shares to
be sold by such Indemnifying Stockholder hereunder, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Indemnifying Stockholders
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through you expressly for use
therein; and provided, further, that the Indemnifying Stockholders shall not be
liable to any Underwriter under the indemnity agreement in this subsection (b)
with respect to any Preliminary Prospectus to the extent that any such loss,
claim, damage or liability of such Underwriter results from the fact that such
Underwriter sold Shares to a person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company or the Selling Stockholders has previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Prospectus which was identified in writing at
such time to such Underwriter and corrected in the Prospectus or in the
Prospectus as then amended or supplemented. Notwithstanding the provisions of
this subsection (b), no Indemnifying Stockholder shall be required to pay an
amount in excess of the gross proceeds received by such Selling Stockholder from
the Shares sold by it hereunder.
(c) Each of the Selling Stockholders severally in proportion to the number
of Shares to be sold by such Selling Stockholder hereunder, will indemnify and
hold harmless the Company and each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Selling Stockholder expressly for use therein and provided,
further, that the Selling Stockholders shall not be liable to any Underwriter
under the indemnity agreement in this subsection (c) with respect to any
Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such
4
<PAGE>
Underwriter results from the fact that such Underwriter sold Shares to a person
as to whom it shall be established that there was not sent or given, at or prior
to the written confirmation of such sale, a copy of the Prospectus or of the
Prospectus as then amended or supplemented in any case where such delivery is
required by the Act if the Company or the Selling Stockholders have previously
furnished copies thereof in sufficient quantity to such Underwriter and the
loss, claim, damage or liability of such Underwriter results from an untrue
statement or omission of a material fact contained in the Preliminary Prospectus
which was identified in writing at such time to such Underwriter and corrected
in the Prospectus or in the Prospectus as then amended or supplemented.
Notwithstanding the provisions of this subsection (c), no Selling Stockholder
shall be required to pay an amount in excess of the gross proceeds received by
such Selling Stockholder from the Shares sold by it hereunder.
(d) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or each Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company and such Selling Stockholders for any legal or other expenses reasonably
incurred by the Company and such Selling Stockholders in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(e) Promptly after receipt by an indemnified party under subsection (a),
(b), (c) or (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
(f) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b),
(c) or (d) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (e) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other
5
<PAGE>
relevant equitable considerations. The relative benefits received by the Company
and Selling Stockholders on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (f) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (f). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (f) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (f), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling
Stockholder shall be required to contribute, in the aggregate, any amount in
excess of the gross proceeds received by such Selling Stockholder from the
Shares sold by it hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in the Registration Statement as about to become a director of the
Company), to each partner of any Selling Stockholder that is a partnership and
to each person, if any, who controls the Company or any Selling Stockholder
within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Selling Stockholders shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Selling Stockholders
that you have so arranged for the purchase of such Shares, or any Selling
Stockholder notifies you that it has so arranged for the purchase of such
Shares, you or the Selling Stockholders shall have the right to postpone such
Time of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
6
<PAGE>
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the number of shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Selling
Stockholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligation of the Underwriters to purchase and of the
Selling Stockholders to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Stockholders, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, or the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder or any partner of any Selling Stockholder that is a
partnership, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof, but, if for any other reason any Shares are not delivered by or on
behalf of the Selling Stockholders as provided herein, each of the Selling
Stockholders pro rata (based on the number of Shares to be sold by such Selling
Stockholder) will reimburse the Underwriters through GSI for all out-of-pocket
expenses approved in writing by GSI, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company and
the Selling Stockholders shall then be under no further liability to any
Underwriter in respect of the Shares not so delivered except as provided in
Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission no. (071) 774-1550; and if to the
Company shall be delivered or sent by registered mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
7
<PAGE>
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by GSI upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Selling Stockholders, the Company and, to the extent
provided in Section 8 and Section 10 hereof, the officers and directors of the
Company, each partner of any Selling Stockholder that is a partnership and each
person who controls the Company, any Selling Stockholders or any Underwriter,
and their respective heirs, executors, administrators, successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, each Selling
Stockholder and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (International Version), the
form of which shall be furnished to the Company for examination upon request,
but without warranty on your part as to the authority of the signers thereof.
8
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
General Instrument Corporation
By:
...................................
Name: Thomas A. Dumit
Title: Vice President, General
Counsel and Secretary
Selling Stockholders
By:
...................................
Name:
By:
...................................
Name:
As Attorneys-in-Fact acting on behalf
of each of the Selling Stockholders
named in Schedule II to this
Agreement.
Accepted as of the date hereof:
Goldman Sachs International
Lazard Capital Markets
Merrill Lynch International Limited
By: Goldman Sachs International
By:
...................................
(Attorney-in-fact)
On behalf of each of the
Underwriters
9
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL SHARES
NUMBER OF FIRM TO BE PURCHASED IF
SHARES TO BE MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
- ---------------------------------------- -------------- -------------------------
<S> <C> <C>
Goldman Sachs International.............
Lazard Capital Markets..................
Merrill Lynch International Limited.....
-------------- --------
Total............................... 3,000,000 450,000
-------------- --------
-------------- --------
</TABLE>
10
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
NUMBER OF TO BE SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
----------- ---------------
<S> <C> <C>
The Selling Stockholders(a):
Forstmann Little & Co. Subordinated Debt
and Equity Management
Buyout Partnership-IV.......................... 1,394,076 210,641
Instrument Partners............................. 1,584,131 239,359
James M. Denny.................................. 3,230 0
J. Tracy O'Rourke............................... 5,000 0
Derald H. Ruttenberg............................ 9,042 0
Robert S. Strauss............................... 4,521 0
----------- ---------------
Total..................................... 3,000,000 450,000
----------- ---------------
----------- ---------------
</TABLE>
- --------------
(a) The Selling Stockholders have appointed Daniel F. Akerson, Richard S.
Friedland, Charles T. Dickson, Thomas A. Dumit and Richard C. Smith as the
Attorneys-in-Fact for the Selling Stockholders.
11
<PAGE>
SCHEDULE III
Forstmann Little & Co. Subordinated Debt
and Equity Management
Buyout Partnership-IV
Instrument Partners
12
<PAGE>
ANNEX I
Pursuant to Section 7 of the Underwriting Agreement, the accountants shall
furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, prospective
financial statements and/or pro forma financial information) examined by
them and included or incorporated by reference in the Prospectus or the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations thereunder; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, prospective financial statements
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been furnished to
the representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and/or
included in the Company's Quarterly Report on Form 10-Q incorporated by
reference into the Prospectus; and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules
and regulations, nothing came to their attention that caused them to believe
that the unaudited condensed consolidated financial statements do not comply
as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules
and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the five most recent fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual Report on Form
10-K for the most recent fiscal year agrees with the corresponding amounts
(after restatements where applicable) in the audited consolidated financial
statements for such five fiscal years which were included or incorporated by
reference in the Company's Annual Reports on Form 10-K for such fiscal
years;
(v) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by
A-1
<PAGE>
reference in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Exchange Act
as it applies to Form 10-Q and the related published rules and
regulations (ii) any material modifications should be made to the
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited financial statements
referred to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred to in Clause
(B) were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included or
incorporated by reference in the Company's Annual Report on Form 10-K for
the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case in which were
outstanding on the date of the latest financial statements included or
incorporated by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or net assets or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with amounts shown in
the latest balance sheet included in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified
date referred to in Clause (E) there were any decreases in consolidated
net revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the Representatives,
or any increase in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are described in
such letter; and
(vi) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
A-2
<PAGE>
and its subsidiaries, which appear in the Prospectus (excluding documents
incorporated by reference), or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives or in
documents incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
A-3
<PAGE>
[FRIED, FRANK, HARRIS, SHRIVER & JACOBSON - LETTERHEAD]
April 3, 1995
General Instrument Corporation
181 West Madison Street
Chicago, Illinois 60602
Ladies and Gentlemen:
We are acting as special counsel to General Instrument Corporation, a
Delaware corporation (the "Company"), in connection with the underwritten public
offering by certain of the Company's stockholders (the "Selling Stockholders")
of up to 17,250,000 shares (the "Shares") of common stock, par value $.01 per
share, of the Company, including up to 2,250,000 Shares that may be sold upon
exercise of over-allotment options granted to the U.S. underwriters and the
international underwriters. Of the up to 17,250,000 Shares to be offered to the
public, up to 12,000,000 Shares are to be offered in the United States pursuant
to an underwriting agreement among the Company, the Selling Stockholders,
Goldman, Sachs & Co., Lazard Freres & Co. and Merrill Lynch & Co., as
representatives of the several U.S. underwriters, and up to 3,000,000 Shares are
to be offered outside the United States pursuant to an underwriting agreement
among the Company, the Selling Stockholders, Goldman Sachs International,
Lazard Capital Markets and Merrill Lynch International Limited, as
representatives of the several international underwriters.
We have examined the originals, or certified, conformed or reproduction
copies, of all such records, agreements, instruments and documents as we have
deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to such opinions, we have
relied upon certificates and statements of public officials and officers or
representatives of the Company and of others.
Based upon the foregoing and subject to the limitations set forth herein,
it is our opinion that the Shares have been duly authorized and have been or
will be (when issued, paid for and delivered as authorized) validly issued,
fully paid and non-assessable.
<PAGE>
General Instrument Corporation -2- April 3, 1995
This opinion is limited to the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement on Form S-3 and to the reference to this firm
under the caption "Validity of Shares" in the Prospectus forming part of the
Registration Statement. In giving such consent, we do not hereby admit that we
are in the category of such persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
The opinion expressed herein is solely for your benefit and may not be
relied upon in any manner for any purpose except as specifically provided for
herein.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Lois Herzeca
-----------------------------------
Lois Herzeca
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of General Instrument Corporation on Form S-3 of our reports dated January 31,
1995 appearing in and incorporated by reference in the Annual Report on Form
10-K of General Instrument Corporation for the year ended December 31, 1994 and
to the reference to Deloitte & Touche LLP under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 31, 1995
