<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
------------ to
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Commission file number 1-5442
GENERAL SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3575653
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
10 MELVILLE PARK ROAD, MELVILLE, NEW YORK 11747
(Address of principal executive offices)
(Zip Code)
(516) 847-3000
(Registrant's telephone number, including area code)
GENERAL INSTRUMENT CORPORATION; 8770 WEST BRYN MAWR AVENUE,
CHICAGO, ILLINOIS 60631
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JULY 31, 1997(1)
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Common Stock, par value $0.01 36,840,759
</TABLE>
(1) Reflects a one for four reverse stock split of the Company's common stock
effected July 25, 1997.
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<PAGE>
GENERAL SEMICONDUCTOR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGES
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<S> <C>
PART I. FINANCIAL INFORMATION
Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996............... 2
Consolidated Statements of Operations for the Three and Six Months ended June 30, 1997 and 1996
(unaudited).......................................................................................... 3
Consolidated Statement of Stockholders' Equity......................................................... 4
Consolidated Statements of Cash Flows for the Six Months ended June 30, 1997 and 1996.................. 5
Notes to Consolidated Financial Statements............................................................. 6-12
Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 13-15
PART II. OTHER INFORMATION
Legal Proceedings...................................................................................... 16
Submission of Matters to a Vote of Security Holders.................................................... 17
SIGNATURE................................................................................................ 18
Exhibits............................................................................................... 19
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
GENERAL SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT STOCK PAR VALUE)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996(1)
------------ ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents............................................................ $ 37,350 $ 20,252
Short-term investments............................................................... -- 49,946
Accounts receivable, less allowance for doubtful accounts of $905 and $866,
respectively....................................................................... 50,491 49,629
Inventories.......................................................................... 29,492 31,551
Prepaid expenses and other current assets............................................ 8,345 5,675
Deferred income taxes................................................................ 10,274 12,354
------------ ------------
Total current assets........................................................... 135,952 169,407
Property, plant and equipment--net................................................... 204,616 202,281
Excess of cost over fair value of net assets acquired, less accumulated amortization
of $36,212 and $33,641, respectively............................................... 170,448 173,022
Deferred income taxes, net of valuation allowance.................................... 22,342 41,590
Intangibles and other assets, less accumulated amortization of $38,299 and $36,876,
respectively....................................................................... 25,216 26,128
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Total non-current assets....................................................... 422,622 443,021
Net assets of discontinued operations................................................ 1,501,640 1,444,734
------------ ------------
TOTAL ASSETS......................................................................... $ 2,060,214 $2,057,162
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................................................... $ 34,525 $ 55,365
Accrued expenses..................................................................... 46,898 40,119
Current portion of long-term debt.................................................... 4,310 4,310
------------ ------------
Total current liabilities...................................................... 85,733 99,794
Long-term debt....................................................................... 664,922 688,025
Deferred income taxes................................................................ 15,250 15,104
Other non-current liabilities........................................................ 76,985 81,086
------------ ------------
Total liabilities.............................................................. 842,890 884,009
------------ ------------
Commitments and contingencies
Stockholders' Equity:
Preferred Stock, $0.01 par value; 20,000 shares authorized; no shares issued -- --
Common Stock, $0.01 par value; 400,000 shares authorized; 34,452 and 34,286 shares
issued, respectively............................................................... 345 343
Retained earnings.................................................................... 264,053 254,552
Other stockholders' equity........................................................... 952,926 918,258
------------ ------------
1,217,324 1,173,153
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................... $ 2,060,214 $2,057,162
------------ ------------
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</TABLE>
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(1) The consolidated balance sheet as of December 31, 1996 has been derived from
the audited General Instrument Corporation financial statements at that date
and condensed.
See notes to consolidated financial statements.
2
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED--IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ---------- ----------
NET SALES........................................................ $ 95,511 $ 100,002 $ 180,880 $ 197,904
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Cost of sales.................................................. 88,596 62,205 154,539 120,625
Selling, general and administrative............................ 11,410 7,662 22,577 21,329
Research and development....................................... 1,818 1,553 3,250 2,915
Amortization of excess of cost over fair value of net assets
acquired..................................................... 1,286 1,286 2,571 2,583
---------- ---------- ---------- ----------
Total operating costs and expenses......................... 103,110 72,706 182,937 147,452
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS).......................................... (7,599) 27,296 (2,057) 50,452
Other income (expense)-net....................................... (40) 27 11 (25)
Interest expense-net............................................. (2,277) (2,699) (5,340) (5,202)
---------- ---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES..... (9,916) 24,624 (7,386) 45,225
(Provision) Benefit from income taxes............................ 500 (10,023) (1,323) (18,407)
---------- ---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS......................... (9,416) 14,601 (8,709) 26,818
DISCONTINUED OPERATIONS
Income (Loss) from discontinued operations, net of income tax
expense of $11,443 and $23,331 in 1997 and an income tax
benefit of $38,779 and $28,082 in 1996......................... 1,234 (72,690) 18,210 (53,742)
---------- ---------- ---------- ----------
NET INCOME (LOSS)................................................ $ (8,182) $ (58,089) $ 9,501 $ (26,924)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted Average Shares Outstanding.............................. 34,433 32,102 34,394 31,849
PRIMARY EARNINGS (LOSS) PER SHARE:
Continuing operations.......................................... $ (0.27) $ 0.45 $ (0.25) $ 0.84
Discontinued operations........................................ 0.03 (2.26) 0.53 (1.69)
---------- ---------- ---------- ----------
Net income (loss).............................................. $ (0.24) $ (1.81) $ 0.28 $ (0.85)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations.......................................... $ 0.42 $ 0.77
---------- ----------
---------- ----------
</TABLE>
Fully diluted earnings (loss) per share from continuing operations for 1997,
and discontinued operations and net income (loss) for 1997 and 1996 are not
reported herein as the effect of such computations are anti-dilutive.
See notes to consolidated financial statements.
3
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED COMMON
---------------------- PAID-IN RETAINED GAIN ON STOCK IN
SHARES AMOUNT CAPITAL EARNINGS INVESTMENT TREASURY
--------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997..................... 34,286 $ 343 $ 926,194 $ 254,552 $ -- $ (7,271)
Net income for the six months ended June 30,
1997....................................... 9,501
Exercise of stock options and related tax
benefit.................................... 156 2 15,097
Conversion of Convertible Junior Subordinated
Notes...................................... 10 948
Amortization of unearned compensation........
Unrealized gain on investment, net of tax.... 18,487
Treasury stock transactions.................. (66)
--------- ----- ----------- --------- ----------- -----------
BALANCE, JUNE 30, 1997....................... 34,452 $ 345 $ 942,239 $ 264,053 $ 18,487 $ (7,337)
--------- ----- ----------- --------- ----------- -----------
--------- ----- ----------- --------- ----------- -----------
<CAPTION>
TOTAL
UNEARNED STOCKHOLDERS'
COMPENSATION EQUITY
--------------- ------------
<S> <C> <C>
BALANCE, JANUARY 1, 1997..................... $ (665) $1,173,153
Net income for the six months ended June 30,
1997....................................... 9,501
Exercise of stock options and related tax
benefit.................................... 15,099
Conversion of Convertible Junior Subordinated
Notes...................................... 948
Amortization of unearned compensation........ 202 202
Unrealized gain on investment, net of tax.... 18,487
Treasury stock transactions.................. (66)
----- ------------
BALANCE, JUNE 30, 1997....................... $ (463) $1,217,324
----- ------------
----- ------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED--IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
<S> <C> <C>
1997 1996
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OPERATING ACTIVITIES:
Income (Loss) from continuing operations.............................................. $ (8,709) $ 26,818
Adjustments to reconcile to net cash provided by continuing
operating activities:
Depreciation and amortization....................................................... 12,106 11,161
Changes in assets and liabilities:
Accounts receivable............................................................... (9,749) 11,966
Inventories....................................................................... 2,059 (6,835)
Prepaid expenses and other current assets......................................... (2,670) (92)
Other non-current assets.......................................................... (681) (1,309)
Deferred income taxes............................................................. (135) 3,256
Accounts payable and accrued expenses............................................. 14,236 (12,836)
Other non-current liabilities..................................................... 5,355 (2,222)
Other............................................................................... (220) 706
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Net cash provided by continuing operating activities.................................... 11,592 30,613
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Cash used in discontinued operations.................................................... (1,256) (133,673)
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INVESTING ACTIVITIES:
Expenditures for property, plant and equipment........................................ (10,454) (33,116)
Proceeds from sale of short-term investments.......................................... 24,972 --
Proceeds from sale of assets.......................................................... -- 4,368
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Net cash provided by (used in) investing activities..................................... 14,518 (28,748)
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FINANCING ACTIVITIES:
Costs associated with the issuance of Common Stock.................................... -- (289)
Net (repayments of) proceeds from revolving credit facilities......................... (20,000) 135,000
Redemption of Convertible Junior Subordinated Notes................................... -- (6,440)
Principal repayment of debt........................................................... (2,155) (2,155)
Exercise of stock options............................................................. 14,399 2,185
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Net cash (used in) provided by financing activities..................................... (7,756) 128,301
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Increase (decrease) in cash and cash equivalents........................................ 17,098 (3,507)
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Cash and cash equivalents, beginning of period.......................................... 20,252 36,382
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Cash and cash equivalents, end of period................................................ $ 37,350 $ 32,875
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</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
General Semiconductor, Inc. (the "Company" or "General Semiconductor") is a
world leader in the discrete segment of the semiconductor industry. The Company
designs, manufactures and sells low-to-medium-power rectifiers and transient
voltage suppression ("TVS") components in axial, bridge, surface mount and array
packages. Power rectifiers and TVS products are semiconductors that are
essential components of most electronic devices and systems. Rectifiers convert
alternating current (AC) into direct current (DC) which can be utilized by
electronic equipment. TVS devices provide protection from electrical surges,
ranging from electrostatic discharge to induced lightning. The Company's
products are primarily targeted for use in the computer, automotive,
telecommunications and consumer electronics industries.
General Instrument Corporation ("General Instrument") (i) transferred all
the assets and liabilities relating to the manufacture and sale of broadband
communications products used in the cable television, satellite, and
telecommunications industries to its wholly-owned subsidiary NextLevel Systems,
Inc. ("NextLevel Systems"), and all the assets and liabilities relating to the
manufacture and sale of coaxial, fiber optic and other electric cable used in
the cable television, satellite and other industries to its wholly-owned
subsidiary CommScope, Inc. ("CommScope") and (ii) distributed all of the
outstanding shares of capital stock of each of NextLevel Systems and CommScope
to its stockholders on a pro rata basis as a dividend (the "Distribution") in a
transaction that was finalized on July 28, 1997 (the "Distribution Date"). On
the Distribution Date, NextLevel Systems and CommScope began operating as
independent entities with publicly traded common stock. General Instrument
retained no ownership interest in either NextLevel Systems or CommScope.
Concurrent with the Distribution, General Instrument changed its name to General
Semiconductor, Inc. and effected a one for four reverse stock split.
In this report, all share and per share amounts have been retroactively
restated to reflect the reverse stock split. In addition, the number of common
shares issued have been adjusted to reflect the reverse stock split and an
amount equal to the par value of the reduction of the shares has been
transferred from common stock to additional paid-in capital as of June 30, 1997.
The revenues, costs and expenses, assets and liabilities and cash flows of
the businesses transferred to NextLevel Systems and CommScope (the "Discontinued
Operations"), have been excluded from the respective captions in the
Consolidated Statements of Operations, Condensed Consolidated Balance Sheets and
Consolidated Statements of Cash Flows. The net operating results of these
entities have been reported, net of applicable income taxes, as "Income (Loss)
from discontinued operations"; the net assets of these entities have been
reported as "Net assets of discontinued operations"; and the net cash flows of
these entities have been reported as "Cash used in discontinued operations". For
the purpose of governing certain of the ongoing relationships among General
Semiconductor, NextLevel Systems and CommScope after the Distribution, these
entities entered into various agreements that provide for an orderly transition,
the separation and distribution of the operating assets and liabilities and
pension plan assets and liabilities of General Instrument, as well as tax
sharing, and other matters.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all necessary adjustments (consisting
of normal recurring adjustments) and present fairly the Company's financial
position as of June 30, 1997, the results of its operations for the three and
six months ended June 30, 1997 and 1996, and its cash flows for the six months
ended June 30,1997 and 1996 in conformity with generally accepted accounting
principles for interim financial information applied on a consistent basis.
There were no adjustments of a non-recurring nature recorded during the six
months
6
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
ended June 30, 1997 and 1996 except for the charges discussed in Note 2 below.
The results of operations for the six months ended June 30, 1997, are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the General Instrument Annual Report on Form 10-K
for the year ended December 31, 1996 and the General Instrument Proxy Statement
dated June 13, 1997.
Certain reclassifications have been made to the prior year consolidated
financial statements to conform with the current year presentation.
2. DISCONTINUED OPERATIONS
Net sales for the Discontinued Operations were $609.7 million and $575.2
million for the three months ended June 30, 1997 and 1996, respectively, and
$1,165.6 million and $1,093.0 million for the six months ended June 30, 1997 and
1996, respectively.
Discontinued operations also includes $28.0 million and $32.1 million, net
of applicable income taxes, for the three and six months ended June 30, 1997,
respectively, for costs incurred primarily related to the separation of the
Taiwan operations of General Instrument between General Semiconductor and
NextLevel Systems and for certain other costs incurred directly related to the
Distribution.
In connection with the Distribution, the Company also recorded in income
(loss) from continuing operations a pre-tax charge of $25.4 million and $32.7
million to cost of sales during the three and six months ended June 30, 1997,
respectively. These costs relate to employees of General Semiconductor and were
incurred in connection with the separation of the Taiwan operations between
General Semiconductor and NextLevel Systems.
Net assets of Discontinued Operations are:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
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<S> <C> <C>
Short-term investments.......................................................... $ 30,306 $ --
Accounts receivable............................................................. 462,609 494,801
Inventories..................................................................... 335,247 304,965
Prepaid expenses................................................................ 23,787 18,944
Deferred income taxes........................................................... 82,261 94,968
Property, plant and equipment................................................... 385,439 368,770
Intangible and other non-current assets......................................... 153,363 140,323
Deferred income taxes, non-current.............................................. 30,670 32,499
Goodwill........................................................................ 644,622 654,351
Current liabilities............................................................. (412,600) (434,926)
Flexible term notes............................................................. (10,800) (10,800)
Other non-current liabilities................................................... (223,264) (219,161)
------------- -----------------
$ 1,501,640 $ 1,444,734
------------- -----------------
------------- -----------------
</TABLE>
7
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. PRO FORMA INFORMATION
Giving effect to the Distribution as of January 1, 1996, pro forma results
of operations for General Semiconductor, Inc. would have been as follows:
<TABLE>
<CAPTION>
PRO FORMA (A) PRO FORMA(A)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30
--------------------- ---------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- --------- ---------- ---------
Income (Loss) from continuing operations............................ $ (11,068) $ 13,259 $ (11,519) $ 24,013
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Primary earnings (loss) per share................................... $ (0.30) $ 0.36 $ (0.31) $ 0.65
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
(A) Assumes the conversion in full of the outstanding General Instrument
Convertible Junior Subordinated Notes, a net debt level of $275.0 million
and interest expense of $4.9 million and $9.8 million for the three and six
months ended June 30, 1997 and 1996, respectively.
Giving effect to the Distribution, the following pro forma capitalization
reflects (i) the cash paid by NextLevel Systems and CommScope on the
Distribution Date totaling $170.1 million, (ii) the conversion of the
Convertible Junior Subordinated Notes, (iii) the distribution of 147.3 million
shares of NextLevel Systems common stock and 49.1 million shares of CommScope
common stock to the General Instrument stockholders, (iv) changes in operating
assets and liabilities from June 30, 1997 through the Distribution Date, and (v)
additional charges to be incurred related to the Distribution.
<TABLE>
<S> <C>
Long-term debt, including current maturities...................... $ 275,000
---------
Stockholders' equity
Common stock.................................................... 345
Other stockholders' equity...................................... 73,721
---------
Total Stockholders' equity........................................ 74,066
---------
Total Capitalization.......................................... $ 349,066
---------
---------
</TABLE>
4. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials............................................. $ 5,787 $ 6,616
Work in process........................................... 11,951 11,813
Finished goods............................................ 11,754 13,122
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$ 29,492 $ 31,551
------------- -------
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</TABLE>
8
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. LONG-TERM DEBT
LONG-TERM DEBT CONSISTS OF:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Senior indebtedness:
Revolving credit facilities................................................... $ 394,000 $ 414,000
Taiwan loan................................................................... 48,229 50,384
Convertible Junior Subordinated Notes........................................... 227,003 227,951
------------- --------
669,232 692,335
Less: current maturities........................................................ 4,310 4,310
------------- --------
$ 664,922 $ 688,025
------------- --------
------------- --------
</TABLE>
In June 1997, approximately $1.0 million of the Convertible Junior
Subordinated Notes were converted into General Instrument common stock resulting
in the issuance of 10,000 shares. Additionally, during July 1997 the remaining
Convertible Junior Subordinated Notes outstanding were converted into General
Instrument common stock resulting in the issuance of 2.4 million shares. In
connection with the conversion, the Company charged approximately $1.5 million
to additional paid-in capital for unamortized deferred financing costs (net of
$1.0 million of accrued interest forfeited and net of applicable income taxes).
The Company repaid the General Instrument revolving credit facility in July
1997 utilizing a combination of the bank credit facility described below and
amounts received from NextLevel Systems and CommScope described in Note 3 above.
In July 1997, the Company entered into a bank credit agreement (the "Credit
Agreement") which provides for a $350.0 million secured revolving credit
facility and matures on December 31, 2002. The Credit Agreement requires the
Company to pay a facility fee on the total commitment. The Credit Agreement
permits the Company to choose between two interest rate options: an Adjusted
Base Rate (as defined in the Credit Agreement), which is based on the highest of
(i) the rate of interest publicly announced by The Chase Manhattan Bank as its
prime rate, (ii) 1% per annum above the secondary market rate for three-month
certificates of deposit and (iii) the federal funds effective rate from time to
time plus 0.5%, or a Eurodollar rate (LIBOR) plus a margin which varies based on
the Company's ratio of indebtedness to earnings before income taxes,
depreciation and amortization as defined in the Credit Agreement. The facility
fee also varies based on that ratio. The Company is also able to set interest
rates through a competitive bid procedure. The Credit Agreement contains
financial and operating covenants, including limitations on guarantee
obligations, liens, sale of assets, indebtedness, investments, capital
expenditures, payment of dividends and leases, and requires the maintenance of
certain financial ratios. In addition, certain changes in control of the Company
would cause an event of default under the Credit Agreement. None of the
restrictions contained in the Credit Agreement is expected to have a significant
effect on the Company's ability to operate.
Net interest expense included in the Consolidated Statements of Operations
represents an allocation based upon General Semiconductor's net assets as a
percentage of total assets of General Instrument.
9
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. INCOME TAXES
General Semiconductor, NextLevel Systems and CommScope entered into a tax
sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights
and obligations with respect to federal, state and other income or franchise
taxes relating to the businesses of General Instrument for tax periods prior to,
including and following the Distribution and with respect to certain other tax
matters. In general, NextLevel Systems will be responsible for consolidated
federal income taxes, consolidated or combined state income taxes and separate
state income taxes of General Instrument and its subsidiaries and preparation
and filings of the applicable returns through July 25, 1997. Such liability will
be determined assuming a closing of the books on July 25, 1997. Liability for
foreign income taxes and other taxes will generally be allocated to the legal
entity on which such taxes are imposed except that liability for such taxes
relating to the Broadband Networks Group (as defined in the Tax Sharing
Agreement) will generally be allocated to NextLevel Systems.
Notwithstanding the above, each of CommScope and General Semiconductor will
be responsible for any such taxes to the extent that such taxes are attributable
to action taken by that entity or its affiliates after the Distribution that is
inconsistent with the tax treatment contemplated in the Tax Ruling received from
the Internal Revenue Service. The Company believes that the Tax Sharing
Agreement is fair to each of the parties and contains terms which generally are
comparable to those which would have been reached at arm's-length negotiations
with unaffiliated parties.
The provision for income taxes for the six months ended June 30, 1997 and
1996 was computed utilizing the Company's expected annual effective income tax
rate and the tax effects of restructuring charges recorded during 1997 at the
applicable rates.
The tax effects of temporary differences that give rise to the deferred tax
assets at June 30, 1997 and December 31, 1996 consist principally of accrued
employee benefits and environmental liabilities. Deferred tax liabilities for
the periods presented primarily relate to foreign tax withholding liabilities.
7. LITIGATION
A securities class action is presently pending in the United States District
Court for the Northern District of Illinois, Eastern Division, IN RE GENERAL
INSTRUMENT CORPORATION SECURITIES LITIGATION. This action, which consolidates
numerous class action complaints filed in various courts between October 10 and
October 27, 1995, is brought by plaintiffs, on their own behalves and as
representatives of a class of purchasers of General Instrument common stock
during the period March 21, 1995 through October 18, 1995. The complaint alleges
that General Instrument and certain of its officers and directors, as well as
Forstmann Little & Co. and certain related entities violated the federal
securities laws, namely, Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934, as amended, by allegedly making false and misleading statements and
failing to disclose material facts about General Instrument's planned shipments
in 1995 of its CFT-2200 and DigiCipher II products. The plaintiffs have moved
for class certification. General Instrument has filed a motion to dismiss the
Consolidated Amended Class Action Complaint. Also pending in the same court,
under the same name, is a derivative action brought on behalf of General
Instrument. The derivative action alleges that the members of General
Instrument's Board of Directors, several of its officers and Forstmann Little &
Co. and related entities had breached their fiduciary duties by reason of the
matter complained of in the class action and the defendants' alleged use of
material non-public information to sell shares of the Company's stock for
personal gain. General Instrument has filed a motion to dismiss the derivative
complaint.
10
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. LITIGATION (CONTINUED)
An action entitled BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP. was
brought in February 1996 by shareholders of NextLevel Communications, which was
merged into General Instrument in September 1995. The action was originally
filed in the Northern District of California and was subsequently transferred to
the Northern District of Illinois. The complaint alleges that the General
Instrument common stock, which was received by the plaintiffs as a result of the
merger, was overpriced because of the matters complained of in the class action
and General Instrument's failure to disclose information concerning a
significant reduction in its gross margins. General Instrument has filed a
motion to dismiss the complaint.
An action entitled BROADBAND TECHNOLOGIES, INC. VS. GENERAL INSTRUMENT CORP.
was brought in March 1997 in the United States District Court for the Eastern
District of North Carolina. The complaint alleges that General Instrument
infringes BroadBand Technologies, Inc.'s U.S. Patent No. 5,457,560, covering an
electronic communications system which delivers television signals, and seeks
monetary damages and injunctive relief. On June 13, 1997, General Instrument's
motion to dismiss the complaint for lack of jurisdiction was denied.
NextLevel Systems has agreed to indemnify the Company in respect of its
obligations, if any, arising out of or in connection with the IN RE GENERAL
INSTRUMENT CORPORATION SECURITIES LITIGATION, the BKP PARTNERS, L.P., V. GENERAL
INSTRUMENT CORP. litigation and the action entitled BROADBAND TECHNOLOGIES, INC.
V. GENERAL INSTRUMENT CORP.
General Semiconductor is a not a party to any pending legal proceedings
other than various claims and lawsuits arising in the normal course of business
and those for which they are indemnified. Management is of the opinion that such
litigation or claims will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
8. EMPLOYEE BENEFITS AND POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
In connection with the Distribution, the Company, NextLevel Systems and
CommScope have entered into an Employee Benefits Allocation Agreement (the
"Agreement"). The Agreement provides that the Company generally will assume or
retain, as the case may be, all liabilities under employee benefit plans
maintained by General Instrument or any of its subsidiaries with respect to
employees of General Semiconductor or any of its retained subsidiaries and
employees of previously divested operations other than the liabilities related
to employees of NextLevel Systems or CommScope subsequent to the Distribution.
The Company believes that the Agreement is fair to each of the parties and
contains terms which generally are comparable to those which would have been
reached at arm's-length negotiations with unaffiliated parties.
The General Instrument Corporation Pension Plan for Salaried and Hourly Paid
Non-Union Employees (the "GI Pension Plan") intends to effect a spin-off of the
assets and liabilities pertaining to all active employees and former employees
(as defined in the Agreement) of NextLevel Systems and its subsidiaries to the
NextLevel Systems defined benefit pension plan. The GI Pension Plan will retain
the remainder of the assets and liabilities.
Other non-current liabilities includes $36.6 million and $36.1 million at
June 30, 1997 and December 31, 1996, respectively, for employee benefits and
postretirement and postemployment benefits other than pensions.
11
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. SUBSEQUENT EVENTS
On July 8, 1997 the Company entered into an agreement with ITT Industries,
Inc. to purchase for $8.0 million certain assets and assume certain liabilities
related to its discrete semiconductor business. The acquisition, which is
expected to be completed during the fourth quarter of 1997, will be accounted
for as a purchase transaction. By broadening the Company's served market to
include small signal transistors and zener products, this acquisition will
enable the Company to participate in approximately 45% of the $13.0 billion
worldwide discrete semiconductor market compared with 20% in which the Company
participates today.
On a pro forma basis, this transaction is not expected to have a material
impact on the Company's results of operations, financial position or cash flows
for the year ended December 31, 1997.
10. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("SFAS No. 128"), which will be adopted by the
Company on December 31, 1997. SFAS No. 128, which supersedes Accounting
Principles Board Opinion No. 15, Earnings per Share, ("APB No. 15") replaces
primary and fully diluted earnings per share with basic and diluted earnings per
share, respectively. The Company does not expect the result to be materially
different from that reported under APB No. 15.
12
<PAGE>
GENERAL SEMICONDUCTOR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management discussion and analysis pertains to the continuing
operations of General Semiconductor, Inc., unless otherwise noted, and describes
material changes in the Company's financial condition since December 31, 1996.
RESULTS OF OPERATIONS:
NET SALES
Net sales for the three and six months ended June 30, 1997 of $95.5 million
and $180.9 million compares to $100.0 million and $197.9 million for the
corresponding prior year periods. The decrease of 4.5% and 8.6%, respectively,
resulted from lower average selling prices than in the prior year due to
industry wide excess capacity, partly offset by increased volume. Order levels
increased more than 65% for the three months ended June 30, 1997 over the
depressed levels of the comparable prior year period. Net sales increased 11.9%
for the three months ended June 30, 1997 compared with the three months ended
March 31, 1997 also reflecting increased unit volume.
COST OF SALES
Cost of sales of $88.6 million and $154.5 million for the three and six
months ended June 30, 1997 compares to $62.2 million and $120.6 million for the
corresponding prior year periods. Excluding pre-tax costs of $25.4 million and
$32.7 million for the three and six months ended June 30, 1997, primarily
related to the separation of the Taiwan operations of General Instrument, cost
of sales increased 1.6% and 1.0%, respectively, over the prior year periods and
represents 66.2% and 67.3% of net sales compared to 62.2% and 61.0% as a result
of the decline in average selling prices discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses of $11.4 million and $22.6
million for the three and six months ended June 30, 1997 increased from $7.7
million and $21.3 million for the comparable prior year periods. The 48.9%
increase for the three months ended June 30, 1997 relates primarily to a $2.5
million credit in June 1996 for the settlement of an environmental liability and
a $1.0 million pre-tax charge recorded in June 1997 for transaction costs
related to the Distribution. Excluding such items, selling general and
administrative expenses total $10.4 million and $10.2 million representing 10.9%
and 10.1% of net sales for the three months ended June 30, 1997 and 1996,
respectively. For the six months ended June 30, 1997 and 1996, excluding a
pre-tax charge in 1997 of $1.1 million related to the Distribution, selling,
general and administrative expenses total $21.5 million and $21.3 million,
representing 11.9% and 10.8% of net sales, respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses of $1.8 million and $3.2 million for the
three and six months ended June 30, 1997 increased from $1.6 million and $2.9
million for the comparable prior year period. As a percentage of net sales,
research and development expenses approximate 1.9% for the three and six months
ended June 30, 1997 compared with 1.6% for the three and six months ended June
30, 1996 due mainly to the decrease in net sales. The increased level of
spending reflects the continued development of new products as well as the
modification of existing products.
13
<PAGE>
NET INTEREST EXPENSE
Net interest expense decreased to $2.3 million for the three months ended
June 30, 1997 from $2.7 million for the comparable prior year period. For the
six months ended June 30, 1997 interest expense remained constant compared with
the corresponding prior year period. Net interest expense represents an
allocation based upon General Semiconductor's net assets as a percentage of
total assets of General Instrument. Pro forma net interest expense, assuming a
net debt level of $275.0 million for each period presented and amortization of
debt issuance costs associated with the new borrowings, would have been $4.9
million and $9.8 million for the three and six months ended June 30, 1997 and
1996, respectively.
INCOME TAXES
The provision for income taxes for the three and six months ended June 30,
1997 was computed utilizing the Company's expected annual effective income tax
rate of 37% and the tax effects of restructuring charges recorded during 1997 at
the applicable rates. The decrease in the effective rate from 40.7% for 1996
relates primarily to increased income of foreign subsidiaries taxed at rates
lower than U.S. rates.
DISCONTINUED OPERATIONS
The net operating results of the businesses transferred to NextLevel Systems
and CommScope have been reported, net of applicable income taxes, as "Income
(Loss) from discontinued operations".
Discontinued operations also includes $28.0 million and $32.1 million, net
of applicable income taxes, for the three and six months ended June 30, 1997,
respectively, for costs incurred primarily related to the separation of the
Taiwan operations of General Instrument between General Semiconductor and
NextLevel Systems and for certain other costs incurred directly related to the
Distribution.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1997 was $50.2 million, compared to $69.6
million at December 31, 1996. The working capital decrease of $19.4 million
resulted primarily from the sale of short-term investments offset, in part, by a
decrease in accounts payable and accrued expenses and the increase in cash. The
current ratio remained relatively constant at 1.6 to 1 at June 30, 1997 compared
with 1.7 to 1 at December 31, 1996.
During the six months ended June 30, 1997, the Company invested $10.5
million in property, plant and equipment related primarily to the completion of
the manufacturing facility in Tianjin, China compared with $33.1 million for the
corresponding prior year period to expand capacity to meet anticipated future
production demands. The Company does not have any material commitments for
capital expenditures.
Long-term debt, excluding current maturities, was $664.9 million at June 30,
1997, compared to $688.0 million at December 31, 1996. In June 1997
approximately $1.0 million of the Convertible Junior Subordinated Notes were
converted into General Instrument common stock resulting in the issuance of
10,000 shares. Additionally, during July 1997 the remaining Convertible Junior
Subordinated Notes outstanding were converted into General Instrument common
stock resulting in the issuance of 2.4 million shares. In connection with the
conversion, the Company charged approximately $1.5 million to additional paid-in
capital for unamortized deferred financing costs (net of $1.0 million of accrued
interest forfeited and net of applicable income taxes).
The Company repaid the General Instrument revolving credit facility in July
1997 utilizing a combination of the bank credit facility described below and
amounts received from NextLevel Systems and CommScope.
14
<PAGE>
In July 1997, the Company entered into a bank credit agreement (the "Credit
Agreement") which provides for a $350.0 million secured revolving credit
facility and matures on December 31, 2002. The Credit Agreement requires the
Company to pay a facility fee on the total commitment. The Credit Agreement
permits the Company to choose between two interest rate options: an Adjusted
Base Rate (as defined in the Credit Agreement), which is based on the highest of
(i) the rate of interest publicly announced by The Chase Manhattan Bank as its
prime rate, (ii) 1% per annum above the secondary market rate for three-month
certificates of deposit and (iii) the federal funds effective rate from time to
time plus 0.5%, or a Eurodollar rate (LIBOR) plus a margin which varies based on
the Company's ratio of indebtedness to earnings before income taxes,
depreciation and amortization as defined in the Credit Agreement. The facility
fee also varies based on that ratio. The Company is also able to set interest
rates through a competitive bid procedure. The Credit Agreement contains
financial and operating covenants, including limitations on guarantee
obligations, liens, sale of assets, indebtedness, investments, capital
expenditures, payment of dividends and leases, and requires the maintenance of
certain financial ratios. In addition, certain changes in control of the Company
would cause an event of default under the Credit Agreement. None of the
restrictions contained in the Credit Agreement is expected to have a significant
effect on the Company's ability to operate.
During the second half of 1997, the Company expects to incur approximately
$15 to $20 million of additional charges, net of applicable income taxes, for
costs related to the Distribution. Cash payments after June 30, 1997 for these
charges, in addition to the unpaid portion of amounts recorded prior to June 30,
1997, will total approximately $40 to $45 million. Approximately half of such
payments will be made in 1997 and the remainder will be made in 1998.
The Company believes that it has adequate liquidity to meet its current and
anticipated needs from the results of its operations, working capital and the
existing credit facility. 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.
15
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A securities class action is presently pending in the United States District
Court for the Northern District of Illinois, Eastern Division, IN RE GENERAL
INSTRUMENT CORPORATION SECURITIES LITIGATION. This action, which consolidates
numerous class action complaints filed in various courts between October 10 and
October 27, 1995, is brought by plaintiffs, on their own behalves and as
representatives of a class of purchasers of General Instrument Common Stock
during the period March 21, 1995 through October 18, 1995. The complaint alleges
that General Instrument and certain of its officers and directors, as well as
Forstmann Little & Co. and certain related entities violated the federal
securities laws, namely, Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934, as amended, by allegedly making false and misleading statements and
failing to disclose material facts about General Instrument's planned shipments
in 1995 of its CFT-2200 and DigiCipher II products. The plaintiffs have moved
for class certification. General Instrument has filed a motion to dismiss the
Consolidated Amended Class Action Complaint. Also pending in the same court,
under the same name, is a derivative action brought on behalf of General
Instrument. The derivative action alleges that the members of General
Instrument's Board of Directors, several of its officers and Forstmann Little &
Co. and related entities had breached their fiduciary duties by reason of the
matter complained of in the class action and the defendants' alleged use of
material non-public information to sell shares of the Company's stock for
personal gain. General Instrument has filed a motion to dismiss the derivative
complaint.
An action entitled BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP. was
brought in February 1996 by shareholders of Next Level Communications, which was
merged into General Instrument in September 1995. The action was originally
filed in the Northern District of California and was subsequently transferred to
the Northern District of Illinois. The complaint alleges that the General
Instrument common stock, which was received by the plaintiffs as a result of the
merger, was overpriced because of the matters complained of in the class action
and General Instrument's failure to disclose information concerning a
significant reduction in its gross margins. General Instrument has filed a
motion to dismiss the complaint.
An action entitled BROADBAND TECHNOLOGIES, INC. VS. GENERAL INSTRUMENT CORP.
was brought in March 1997 in the United States District Court for the Eastern
District of North Carolina. The complaint alleges that General Instrument
infringes BroadBand Technologies, Inc.'s U.S. Patent No. 5,457,560, covering an
electronic communications system which delivers television signals, and seeks
monetary damages and injunctive relief. On June 13, 1997, General Instrument's
motion to dismiss the complaint for lack of jurisdiction was denied.
NextLevel Systems has agreed to indemnify the Company in respect of its
obligations, if any, arising out of or in connection with the IN RE GENERAL
INSTRUMENT CORPORATION SECURITIES LITIGATION, the BKP PARTNERS, L.P., V. GENERAL
INSTRUMENT CORP. litigation and the action entitled BROADBAND TECHNOLOGIES, INC.
V. GENERAL INSTRUMENT CORP.
General Semiconductor is not a party to any pending legal proceedings other
than various claims and lawsuits arising in the normal course of business and
those for which they are indemnified. Management is of the opinion that such
litigation or claims will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
See also Exhibit 99 to this Form 10-Q.
16
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
General Instrument held a combined Annual and Special Meeting of
Stockholders on July 23, 1997.
1. The stockholders approved the Distribution by a vote of: 112,708,544
for, 114,241 against and 134,846 abstaining:
2. The stockholders approved an amendment to General Instrument's
Certificate of Incorporation to change the name of General Instrument
Corporation to General Semiconductor, Inc. by a vote of: 112,981,562 for,
80,750 against and 132,283 abstaining.
3. The stockholders approved an amendment to General Instrument's
Certificate of Incorporation to effect a one for four reverse stock split
of the General Semiconductor common stock by a vote of: 112,866,616 for,
168,950 against and 159,029 abstaining.
4. The stockholders approved an amendment to General Instrument's
Certificate of Incorporation to declassify the Board of Directors and
provide for the annual election of all directors by a vote of:
112,231,959 for, 506,000 against and 220,122 abstaining.
5. The stockholders approved the election of four directors. The votes cast
for each nominee were as follows:
<TABLE>
<CAPTION>
FOR ABSTAIN
------------- ----------
<S> <C> <C>
Lynn Forester......................................................................... 120,329,437 1,604,949
Nicholas Forstmann.................................................................... 119,478,267 2,456,119
Richard S. Friedland.................................................................. 119,476,550 2,457,836
J. Tracy O'Rourke..................................................................... 120,324,042 1,610,344
</TABLE>
In connection with the Distribution, the above named directors (and all
other General Instrument directors except Steven B. Klinsky) resigned on July
25, 1997 and five new directors were appointed to the Company's Board: Ronald A.
Ostertag; Ronald Rosenzweig; Peter A. Schwartz; Samuel L. Simmons; and Dr.
Gerald T. Wrixon. Steven B. Klinsky remains a member of the Board of Directors.
ITEM 6. EXHIBITS
(a) Exhibits
See attached listing
(b) Report on Form 8-K
No reports on Form 8-K were filed by the Registrant during the three months
ended June 30, 1997.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
GENERAL SEMICONDUCTOR, INC.
August 14, 1997 /s/ ANDREW M. CAGGIA
- ------------- ---------------------------------------------
Date Andrew M. Caggia
Sr. Vice President and Chief Financial Officer
Signing both in his capacity as Sr. Vice
President on behalf of the Registrant and as
Chief Financial Officer of the Registrant
</TABLE>
18
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement of Merger, dated as of July 25, 1997, between General Instrument Corporation and General
Instrument Corporation of Delaware.
3.1 Amended and Restated Certificate of Incorporation of General Instrument Corporation.
3.2 Amended and Restated By-Laws of General Semiconductor, Inc.
10.1 Employee Benefits Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems Inc.,
CommScope, Inc. and General Semiconductor, Inc.
10.2 Debt and Cash Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc.,
CommScope, Inc. and General Semiconductor, Inc.
10.3 Insurance Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc. CommScope, Inc. and
General Semiconductor, Inc.
10.4 Tax Sharing Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc. CommScope, Inc. and
General Semiconductor, Inc.
10.5 Trademark License Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope,
Inc. and General Semiconductor, Inc.
10.6 Transition Services Agreement, dated as of July 25, 1997, between NextLevel Systems, Inc. and General
Semiconductor, Inc.
10.7 Credit Agreement, dated as of July 23, 1997, among General Semiconductor, Inc., Certain Banks, The
Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank, Bank of America National
Trust and Savings Association, Bank of Montreal, The Bank of Nova Scotia, CIBC, Inc., Credit Lyonnais
New York Branch, Fleet National Bank and Wachovia Bank, N.A., as Co-Agents.
10.8 Amended and Restated General Semiconductor, Inc. 1993 Long-Term Incentive Plan.
10.9 Form of Indemnification Agreement between General Semiconductor, Inc. and its directors and executive
officers.
11 Computation of Earnings Per Share
27 Financial Data Schedule
99 Forward Looking Information
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of July 25, 1997 (this "Agreement"),
between General Instrument Corporation of Delaware, a Delaware corporation ("GI
Delaware"), and its parent corporation, General Instrument Corporation, a
Delaware corporation ("GI"). GI Delaware and GI are hereinafter sometimes
collectively called the "Constituent Corporations."
RECITALS
WHEREAS, the Board of Directors of each of the Constituent
Corporations deems it advisable and to the welfare and advantage of such
Constituent Corporation and its respective stockholders that the Constituent
Corporations merge under and pursuant to Section 253 of the General Corporation
Law of the State of Delaware into a single corporation, and that GI shall be the
surviving corporation, and have approved this Agreement and the merger
contemplated hereby (the "Merger");
WHEREAS, the registered office of GI in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, and the name of its registered agent at such
address is The Corporation Trust Company; and the registered office of GI
Delaware in the State of Delaware is located at Corporation Trust Center, 1209
Orange Street in the City of Wilmington, County of New Castle, and the name of
its registered agent at such address is The Corporation Trust Company.
NOW, THEREFORE, the parties to this Agreement, in consideration of
the mutual covenants, agreements and provisions hereinafter contained do hereby
prescribe the terms and conditions of said merger and mode of carrying the same
into effect as follows:
ARTICLE I
THE MERGER
1.01.THE MERGER. In accordance with the provisions of this Agreement
and the applicable laws of the State of Delaware, at the Effective Time (as
defined in Section 1.02 hereof), GI Delaware shall be merged with and into GI,
and GI shall be the surviving corporation (such corporation in its capacity as
such surviving corporation being hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence and organization under
the laws of the State of Delaware, and the separate existence of GI Delaware
shall thereupon cease.
<PAGE>
1.02.EFFECTIVE TIME. A certificate of ownership and merger in
substantially the form annexed hereto as Annex A (the "Certificate of Merger")
shall be filed with the Secretary of State of the State of Delaware by GI to
effect the Merger. The term "Effective Time" shall mean the effective time
specified in the Certificate of Ownership and Merger.
1.03.CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of GI, as in effect at the Effective Time, shall
constitute and continue to be the Certificate of Incorporation of the Surviving
Corporation until further amended or changed as provided therein or by law.
1.04.BY-LAWS. At the Effective Time, the By-laws of GI, as in effect
at the Effective Time, shall constitute and continue to be the By-laws of the
Surviving Corporation until amended or changed as provided therein or by law.
1.05.DIRECTORS. The directors of GI at the Effective Time shall be
and remain the directors of the Surviving Corporation, and each shall hold
office until their respective successors are duly elected and qualified.
1.06.OFFICERS. The officers of GI at the Effective Time shall be and
remain the officers of the Surviving Corporation and shall hold office until
their respective successors are duly elected or appointed and qualified.
1.07.EFFECT OF THE MERGER. The Surviving Corporation shall succeed,
without other transfer, to all the rights and property of GI Delaware and shall
be subject to all the debts and liabilities thereof in the same manner as if the
Surviving Corporation had itself incurred them. All rights of creditors and all
liens put on the property of each of the Constituent Corporations shall be
preserved unimpaired.
1.08.CONFIRMATORY INSTRUMENTS. If any time after the Effective Time
the Surviving Corporation shall consider or be advised that any instruments of
further assurance are desirable in order to evidence the vesting in it of the
title of either of the Constituent Corporations to any of the property rights of
the Constituent Corporations, the appropriate officers or directors of either of
the Constituent Corporations, are hereby authorized to execute, acknowledge and
deliver all such instruments of further assurance and to do all other acts or
things, either in the name of GI Delaware or in the name of GI, as may be
requisite or desirable to carry out the provisions of this Agreement.
- 2 -
<PAGE>
ARTICLE II
MANNER OF CANCELLING SECURITIES
2.01.CANCELLATION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of GI Delaware or GI, all of the
outstanding shares of capital stock of GI Delaware shall be cancelled, and no
securities of GI or any other corporation, or any money or other property, shall
be issued in exchange therefor. The shares of capital stock of GI outstanding
immediately prior to the Effective Time shall continue as shares of capital
stock of the Surviving Corporation.
ARTICLE III
MISCELLANEOUS
3.01.TERMINATION OF MERGER. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned by the
board of directors of GI at any time prior to the date of filing the Certificate
of Merger with the Delaware Secretary of State. This Agreement may be amended by
the boards of directors of the Constituent Corporations at any time prior to the
date of filing the Certificate of Merger with the Delaware Secretary of State.
3.02.EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
- 3 -
<PAGE>
IN WITNESS WHEREOF, each party to this Agreement has caused it to be
executed by an authorized officer, and attested by the Secretary or Assistant
Secretary, thereof as the respective act, deed and agreement of each of said
corporations, on this 25th day of July, 1997.
GENERAL INSTRUMENT CORPORATION OF
DELAWARE
By: /s/ Thomas A. Dumit
-------------------------------
Name: Thomas A. Dumit
Title: Vice President, General
Counsel and Chief Administrative
Officer
ATTEST:
By: /s/ Keith A. Zar
-------------------------
Name: Keith A. Zar
Title: Assistant Secretary
GENERAL INSTRUMENT CORPORATION
By: /s/ Thomas A. Dumit
---------------------------------
Name: Thomas A. Dumit
Title: Vice President, General Counsel and
Chief Administrative Officer
ATTEST:
By: /s/ Richard C. Smith
------------------------------
Name: Richard C. Smith
Title: Assistant Secretary
- 4 -
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
GENERAL INSTRUMENT CORPORATION
The undersigned, Thomas A. Dumit, certifies that he is the Vice
President and General Counsel of General Instrument Corporation, a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), and does hereby further certify as follows:
(1) The name of the corporation is General Instrument Corporation.
The Corporation was originally incorporated under the name FLGI Holding Corp.
(2) The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on June 28, 1990.
(3) A Certificate of Amendment was filed with the Secretary of State
of the State of Delaware on August 9, 1990, a Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
November 12, 1990, a Certificate of Amendment was filed with the Secretary of
State of the State of Delaware on February 26, 1992, an Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on March 30, 1992, an Amended and Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
May 4, 1992, a Certificate of Correction was filed with the Secretary of State
of the State of Delaware on June 16, 1992, and an Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on June 2, 1993.
(4) This Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the original Certificate of
Incorporation of the Corporation as heretofore amended or supplemented and has
been duly adopted in accordance with Sections 242 and 245 of the General
Corporation Law of Delaware (the "GCL").
(5) Pursuant to Section 103(d) of the GCL, this Amended and Restated
Certificate of Incorporation shall become effective at 5:15 P.M., on July 25,
1997 (the "Effective Time").
<PAGE>
(6) The text of the Amended and Restated Certificate of Incorporation
of the Corporation as further amended hereby is again restated to read in its
entirety as follows:
FIRST: The name of the Corporation is General Semiconductor,
Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street
in the City of Wilmington, County of New Castle, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the GCL
as set forth in Title 8 of the Delaware Code.
FOURTH: The aggregate number of shares of all classes of capital
stock which the Corporation shall have authority to issue is (i)
400,000,000 shares of common stock, par value $.01 per share (the "New
Common Stock"), and (ii) 20,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock").
At the Effective Time, each four shares of the common stock, par
value $.01 per share, issued and outstanding immediately prior to the
Effective Time (the "Old Common Stock"), shall automatically, without
further action on the part of the Corporation or any holder of such
Old Common Stock, be reclassified as and converted into one fully paid
and nonassessable share of New Common Stock as herein authorized (the
"Reverse Stock Split"), subject to the treatment of fractional share
interests as described below. Such reclassification and conversion of
Old Common Stock into New Common Stock shall not change the par value
per share of the shares reclassified and converted, which par value
shall remain $.01 per share. The reclassification of the Old Common
Stock into New Common Stock, will be deemed to occur at the Effective
Time, regardless of when the certificates representing such Old Common
Stock are physically surrendered to the Corporation. After the
Effective Time, certificates representing the Old Common Stock will,
until such shares are surrendered to the Corporation, represent the
number of shares of New Common Stock into which such Old Common Stock
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shall have been converted pursuant hereto. The Corporation is
authorized to use a book-entry transfer facility to reflect ownership
of the New Common Stock; however, upon request and in accordance with
the procedures of any such book-entry transfer facility and Delaware
law, stockholders shall be entitled to receive a certificate
representing shares of New Common Stock. Fractional shares of New
Common Stock shall not be issued in connection with the Reverse Stock
Split. Fractional shares of New Common Stock shall be aggregated into
whole shares of New Common Stock and shall be sold in the open market
at prevailing prices on behalf of holders who otherwise would be
entitled to receive fractional share interests of New Common Stock.
Such holders shall then receive a cash payment equal to the amount of
their pro rata share of the total sale proceeds.
Following the Effective Time, the capital of the Corporation
shall be reduced to reflect the change in the outstanding shares of
the Corporation.
Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series, each of which
class or series shall have such distinctive designation or title as
shall be fixed by the Board of Directors of the Corporation (the
"Board of Directors") prior to the issuance of any shares thereof.
Each such class or series of Preferred Stock shall have such voting
powers, full or limited, or no voting powers, and such preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be
stated in such resolution or resolutions providing for the issue of
such class or series of Preferred Stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any shares
thereof pursuant to the authority hereby expressly vested in it, all
in accordance with the laws of the State of Delaware.
FIFTH: The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. The number of
directors of the Corporation shall be from time to time fixed by, or
in the manner provided in, the By-laws of the Corporation.
SIXTH: Subject to the rights, if any, of the holders of shares
of Preferred Stock then outstanding, any or all of the directors of
the
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Corporation may be removed from office, with or without cause, at any
time by the affirmative vote of the holders of a majority of the
outstanding shares of the Corporation then entitled to vote generally
in the election of directors, considered for purposes of this Article
SIXTH as one class.
SEVENTH: A director of the Corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, PROVIDED, HOWEVER, that the
foregoing shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the GCL, or (iv) for any transaction from
which the director derived an improper personal benefit. If the GCL
is hereafter amended to permit further elimination or limitation of
the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the GCL as so amended. Any repeal or modification
of this Article SEVENTH by the stockholders of the Corporation or
otherwise shall not apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
EIGHTH: The Corporation shall, to the fullest extent permitted
by Delaware law, indemnify any person (the "Indemnitee") who is or was
involved in any manner (including, without limitation, as a party or a
witness) in any threatened, pending or completed investigation, claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or
proceeding brought by or in the right of the Corporation to procure a
judgment in its favor) (a "Proceeding") by reason of the fact that the
Indemnittee is or was a director or officer of the Corporation, or is
or was serving another entity in such capacity at the request of the
Corporation, against all expenses and liabilities actually and
reasonably incurred by the Indemnitee in connection with the defense
or settlement of such Proceeding (including attorneys' fees).
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NINTH: The Corporation reserves the right to rescind, amend,
alter, change, or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
TENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized
to adopt, repeal, alter, amend or rescind the By-laws of the
Corporation. In addition, the By-laws of the Corporation may be
adopted, repealed, altered, amended or rescinded by the affirmative
vote of a majority of the outstanding stock of the Corporation
entitled to vote thereon.
ELEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them,
any court of equitable jurisdiction within the State of Delaware may,
on the application in a summary way of this Corporation or of any
creditor or stockholder thereof or on the application of any receiver
or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for
this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which said
application has been made, be binding on all the creditors or class of
creditors, and/or on all of the stockholders or class of stockholders,
of this Corporation, as the case may be, and also on this Corporation.
TWELFTH: Elections of directors need not be by written ballot
unless the By-laws of the Corporation shall otherwise provide.
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IN WITNESS WHEREOF, General Instrument Corporation has caused this
Amended and Restated Certificate of Incorporation to be signed by Thomas A.
Dumit, its Vice President and General Counsel, this 25 day of July, 1997.
GENERAL INSTRUMENT CORPORATION
By: /s/ Thomas A. Dumit
---------------------------------
Thomas A. Dumit
Vice President and General Counsel
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EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS OF
GENERAL SEMICONDUCTOR, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such time
and place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held
on such date and at such time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver thereof. At such annual meetings, the stockholders shall elect by a
plurality vote the directors standing for election and transact such other
business as may properly be brought before the meeting in accordance with these
Amended and Restated By-Laws.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any
purpose or purposes, unless otherwise prescribed by statute may be called by the
Board of Directors, the Chairman of the Board of Directors, if one shall have
been elected, or the President and shall be called by the Secretary upon the
request in writing of a stockholder or stockholders holding of record at least a
majority of the voting power of the issued and outstanding shares of capital
stock of the Corporation entitled to vote at such meeting.
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SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly required
by statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not less than ten nor
more than sixty days before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice. Notice shall be given personally or by mail and, if by mail, shall be
sent in a postage prepaid envelope, addressed to the stockholder at such
stockholder's address as it appears on the records of the Corporation. Notice
by mail shall be deemed given at the time when the same shall be deposited in
the United States mail, postage prepaid. Notice of any meeting shall not be
required to be given to any person who attends such meeting, except when such
person attends the meeting in person or by proxy for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened, or who, either before or
after the meeting, shall submit a signed written waiver of notice, in person or
by proxy. Neither the business to be transacted at, nor the purpose of, an
annual or special meeting of stockholders need be specified in any written
waiver of notice.
SECTION 5. ORGANIZATION. At each meeting of stockholders,
the Chairman of the Board, if one shall have been elected, or, in such
person's absence or if one shall not have been elected, the President, shall
act as chairman of the meeting. The Secretary or, in such person's absence
or inability to act, the person whom the chairman of the meeting shall
appoint secretary of the meeting, shall act as secretary of the meeting and
keep the minutes thereof.
SECTION 6. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seems to him or her in order. The date and time of the opening
and closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting.
SECTION 7. QUORUM, ADJOURNMENTS. The holders of a majority
of the voting power of the issued and outstanding shares of capital stock of
the Corporation entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at all
meetings of stockholders, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present
or represented by proxy at any meeting of stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented by proxy. At such adjourned meeting at which a quorum shall be
present or represented by proxy, any business may be transacted which might
have been transacted at the meeting as originally called. If the adjournment
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is for more than thirty days, or, if after adjournment a new record date is set,
a notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 8. VOTING. Except as otherwise provided by statute or the
Certificate of Incorporation and these Amended and Restated By-Laws, each
stockholder of the Corporation shall be entitled at each meeting of stockholders
to one vote for each share of capital stock of the Corporation standing in such
stockholder's name on the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of
Section 7 of Article V of these Amended and Restated By-Laws as
the record date for the determination of the stockholders who
shall be entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then
at the close of business on the day next preceding the day on
which notice thereof shall be given, or, if notice is waived, at
the close of business on the date next preceding the day on
which the meeting is held.
Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for such
stockholder by a proxy signed by such stockholder or such stockholder's
attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated
in the order of business for so delivering such proxies. When a quorum is
present at any meeting, the affirmative vote of the holders of a majority of
the voting power of the issued and outstanding stock of the Corporation
entitled to vote thereon, present in person or represented by proxy, shall
decide any question brought before such meeting, unless the question is one
upon which by express provision of statute or of the Certificate of
Incorporation or of these Amended and Restated By-Laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Unless required by statute, or determined by the
chairman of the meeting to be advisable, the vote on any question need not be
by ballot. On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by such stockholder's proxy, if there be such proxy.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. At least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder shall be prepared. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the
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meeting, either at a place within the city, town or village where the meeting is
to be held, which place shall be specified in the notice of the meeting, or, if
not so specified at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 10. INSPECTORS. The Board of Directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may appoint one or more
inspectors. Each inspector, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. The inspectors shall determine the number of
shares of capital stock of the Corporation outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting, the inspectors shall make a report in writing of any challenge, request
or matter determined by them and shall execute a certificate of any fact found
by them. No director or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be stockholders.
SECTION 11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided by statute or in the Certificate of Incorporation, any action
required to be taken or which may be taken at any annual or special meeting of
the stockholders of the Corporation may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of any such corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 12. ADVANCE NOTICE PROVISIONS FOR ELECTION OF DIRECTORS. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by
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any stockholder of the Corporation (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section 12 and on the
record date for the determination of stockholders entitled to vote at such
meeting and (ii) who complies with the notice procedures set forth in this
Section 12.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation (a)
in the case of an annual meeting, not less than 60 days nor more than 90 days
prior to the date of the annual meeting; PROVIDED, HOWEVER, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the 10th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the 10th day following the day on which notice of the date
of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder.
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Such notice must be accompanied by a written consent of each proposed nominee to
be named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 12.
If the chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
SECTION 13. ADVANCE NOTICE PROVISIONS FOR BUSINESS TO BE TRANSACTED AT
ANNUAL MEETING. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section 13 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 13.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the date of the annual meeting;
PROVIDED, HOWEVER, that in the event that less than 70 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such
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business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 13, provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 13 shall be deemed to preclude discussion by any
stockholder of any such business. If the chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, QUALIFICATION, ELECTION AND TERM OF DIRECTORS.
Subject to the rights, if any, of holders of Preferred Stock of the Corporation,
the Board of Directors shall consist of not less than one (1) nor more than
twenty-one (21) members, the exact number of which shall be fixed from time to
time by affirmative vote of a majority of the entire Board of Directors. Except
as otherwise provided by Section 2 of this Article III, the directors standing
for election shall be elected by a plurality of the votes cast at annual
meetings of stockholders, and each director so elected shall hold office until
such directors' successor shall have been elected and qualified, or until such
directors' death, or until such directors shall have resigned, or have been
removed, as hereinafter provided by these By-Laws or the Certificate of
Incorporation. Directors need not be stockholders.
SECTION 2. VACANCIES. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director or by the stockholders at the next annual meeting
thereof or at a special meeting thereof. Each director so elected shall hold
office until such director's successor shall have been elected and qualified.
SECTION 3. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or
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by the Certificate of Incorporation or by these Amended and Restated By-Laws
directed or required to be exercised or done by the stockholders.
SECTION 4. PLACE OF MEETINGS. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 5. ANNUAL MEETING.. The annual meeting of the Board of
Directors may be held at such time or place (within or without the State of
Delaware) as shall be specified in a notice thereof given as hereinafter
provided in Section 8 of this Article III.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise be
held on that day shall be held at the same hour on the next succeeding business
day.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one shall have been
elected, or by two or more directors of the Corporation or by the President.
SECTION 8. NOTICE OF MEETINGS. Notice of regular meetings of the Board
of Directors need not be given except as otherwise required by law or these
Amended and Restated By-Laws. Notice of each special meeting of the Board of
Directors for which notice shall be required, shall be given by the Secretary as
hereinafter provided in this Section 8, in which notice shall be stated the time
and place of the meeting. Except as otherwise required by these Amended and
Restated By-Laws, such notice need not state the purposes of such meeting.
Notice of any special meeting, and of any regular or annual meeting for which
notice is required, shall be given to each director at least (a) four hours
before the meeting if by telephone or by being personally delivered or sent by
telex, telecopy, or similar means or (b) two days before the meeting if
delivered by mail to the director's residence or usual place of business. Such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage prepaid, or when transmitted if sent by telex,
telecopy, or similar means. Neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified in
the notice or waiver of notice of such meeting. Any director may waive notice
of any meeting by a writing signed by the director entitled to the notice and
filed with the minutes or corporate records. The attendance at or participation
of the director at a meeting shall constitute waiver of notice of such meeting,
unless the director at the beginning of the meeting or promptly upon such
director's arrival objects to holding the meeting or transacting business at the
meeting.
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SECTION 9. ORGANIZATION. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or, in the absence of
the Chairman of the Board or if one shall not have been elected, the President
(or, in the President's absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat.
The Secretary or, in such person's absence, any person appointed by the chairman
shall act as secretary of the meeting and keep the minutes thereof.
SECTION 10. QUORUM AND MANNER OF ACTING. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these Amended and Restated
By-Laws, the affirmative vote of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors.
In the absence of a quorum at any meeting of the Board of Directors, a majority
of the directors present thereat may adjourn such meeting to another time and
place. Notice of the time and place of any such adjourned meeting shall be
given to all of the directors unless such time and place were announced at the
meeting at which the adjournment was taken, in which case such notice need only
be given to the directors who were not present thereat. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called. The directors shall
act only as a Board and the individual directors shall have no power as such.
SECTION 11. ACTION BY CONSENT. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
SECTION 12. TELEPHONIC MEETING. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
SECTION 13. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified
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member at any meeting of the committee. In the absence of disqualification of
any member of a committee, the member or members present at any meeting and not
disqualified from voting, whether or not such members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Each such committee, to the extent provided in the resolution creating
it, shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which
require it; PROVIDED, HOWEVER, that no such committee shall have the power or
authority in reference to the following matters: (a) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (b) adopting, amending or repealing any by-law of the Corporation. Each such
committee shall serve at the pleasure of the Board of Directors and have such
name as may be determined from time to time by resolution adopted by the Board
of Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors.
SECTION 14. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 15. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice of such director's resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 16. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's or
persons' votes are counted for such purposes if (a) the material facts as to
such person's or persons' relationship or interest and as to the contract or
transaction are disclosed or are known to the directors or committee who then in
good faith authorizes the contract or transaction by
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the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum, (b) the material facts as to
such person's or persons' relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders or (c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee thereof or the stockholders. Interested directors may
be counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a President, one or more Vice
Presidents (including Senior, Executive or other classifications of Vice
Presidents) and a Secretary. The Board of Directors, in its discretion, may
also choose as an officer of the Corporation a Chairman of the Board and a Vice
Chairman of the Board and may choose other officers (including a Treasurer, one
or more Assistant Secretaries and one or more Assistant Treasurers) as may be
necessary or desirable. Such officers as the Board of Directors may choose
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors. The Board of Directors may delegate
to any officer of the Corporation the power to choose such other officers and to
proscribe their respective duties and powers. Any number of offices may be held
by the same person, unless otherwise prohibited by law, the Certificate of
Incorporation or these Amended and Restated By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board and Vice Chairman of the Board of Directors, need
such officers be directors of the Corporation.
SECTION 2. TERM. All officers of the Corporation shall hold office
until their successors are chosen and qualified, or until their earlier
resignation or removal. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
SECTION 3. RESIGNATIONS. Any officer of the Corporation may resign at
any time by giving written notice of such officer's resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon receipt. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to make it effective.
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SECTION 4. REMOVAL. Any officer may be removed at any time by the
Board of Directors with or without cause.
SECTION 5. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that such officer is also a
director of the Corporation.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. The Chairman of the Board shall advise and
counsel with the President, and in the President's absence with other executives
of the Corporation, and shall perform such other duties as may from time to time
be assigned to the Chairman of the Board by the Board of Directors.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or a Vice Chairman of the Board
or the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restriction of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile, engraved or printed. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have
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ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person was such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or the owner's legal representative, to
give the Corporation a bond in such sum as it may direct sufficient to indemnify
it against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; PROVIDED, HOWEVER, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these Amended and
Restated By-Laws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
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days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares of stock on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. GENERAL. Each person who was or is made a party or is
threatened to be made a party to or is involved (including, without limitation,
as a witness) in any threatened, pending or completed action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal, administrative or
investigative ("Proceeding") brought by reason of the fact that such person (the
"Indemnitee") is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, whether the basis of
such Proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving as such a director or officer,
shall be indemnified and held harmless by the Corporation to the full extent
authorized by the General Corporation Law of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expenses,
liabilities, losses and claims (including attorneys' fees, judgments, fines,
excise taxes under the Employee Retirement Income Security Act of 1974, as
amended from time to time, penalties and amounts to be paid in settlement)
actually incurred or suffered by such Indemnitee in connection with such
Proceeding (collectively, "Losses").
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to or is
involved (including, without limitation, as a witness) in any Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person (also an "Indemnitee") is or was a director
or officer of the Corporation, or is or was serving at the
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request of the Corporation as a director or officer of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, against Losses actually incurred or
suffered by the Indemnitee in connection with the defense or settlement of such
action or suit if the Indemnitee acted in good faith and in a manner the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation, provided that no indemnification shall be made in respect of
any claim, issue or matter as to which Delaware law expressly prohibits such
indemnification by reason of an adjudication of liability of the Indemnitee
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, the Indemnitee is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. INDEMNIFICATION IN CERTAIN CASES. Notwithstanding any other
provision of this Article VI, to the extent that an Indemnitee has been wholly
successful on the merits or otherwise in any Proceeding referred to in Sections
1 or 2 of this Article VI on any claim, issue or matter therein, the Indemnitee
shall be indemnified against Losses actually incurred or suffered by the
Indemnitee in connection therewith. If the Indemnitee is not wholly successful
in such Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding, the
Corporation shall indemnify the Indemnitee, against Losses actually incurred or
suffered by the Indemnitee in connection with each successfully resolved claim,
issue or matter. In any review or Proceeding to determine such extent of
indemnification, the Corporation shall bear the burden of proving any lack of
success and which amounts sought in indemnity are allocable to claims, issues or
matters which were not successfully resolved. For purposes of this Section 3
and without limitation, the termination of any such claim, issue or matter by
dismissal with or without prejudice shall be deemed to be a successful
resolution as to such claim, issue or matter.
SECTION 4. PROCEDURE. (a) Any indemnification under Sections 1 and 2
of this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the Indemnitee is proper (except that the right of the
Indemnitee to receive payments pursuant to Section 5 of this Article VI shall
not be subject to this Section 4) in the circumstances because the Indemnitee
has met the applicable standard of conduct. Such determination shall be made
promptly, but in no event later than 60 days after receipt by the Corporation of
the Indemnitee's written request for indemnification. The Secretary of the
Corporation shall, promptly upon receipt of the Indemnitee's request for
indemnification, advise the Board of Directors that the Indemnitee has made such
request for indemnification.
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(b) The entitlement of the Indemnitee to indemnification shall be
determined in the specific case (1) by the Board of Directors by a majority vote
of the directors who are not parties to such Proceeding, even though less than a
quorum (the "Disinterested Directors"), or (2) if there are no Disinterested
Directors, or if such Disinterested Directors so direct, by independent legal
counsel, or (3) by the stockholders.
(c) In the event the determination of entitlement is to be made by
independent legal counsel, such independent legal counsel shall be selected by
the Board of Directors and approved by the Indemnitee. Upon failure of the
Board of Directors to so select such independent legal counsel or upon failure
of the Indemnitee to so approve, such independent legal counsel shall be
selected by the American Arbitration Association in New York, New York or such
other person as such Association shall designate to make such selection.
(d) If the Board of Directors or independent legal counsel shall have
determined that the Indemnitee is not entitled to indemnification to the full
extent of the Indemnitee's request, the Indemnitee shall have the right to seek
entitlement to indemnification in accordance with the procedures set forth in
Section 6 of this Article VI.
(e) If the person or persons empowered pursuant to Section 4(b) of
this Article VI to make a determination with respect to entitlement to
indemnification shall have failed to make the requested determination within 60
days after receipt by the Corporation of such request, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and the Indemnitee shall be absolutely entitled to such indemnification,
absent (i) misrepresentation by the Indemnitee of a material fact in the request
for indemnification or (ii) a final judicial determination that all or any part
of such indemnification is expressly prohibited by law.
(f) The termination of any proceeding by judgment, order, settlement
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not,
of itself, adversely affect the rights of the Indemnitee to indemnification
hereunder except as may be specifically provided herein, or create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation or create a presumption that (with respect to any criminal
action or proceeding) the Indemnitee had reasonable cause to believe that the
Indemnitee's conduct was unlawful.
(g) For purposes of any determination of good faith hereunder, the
Indemnitee shall be deemed to have acted in good faith if the Indemnitee's
action is based on the records or books of account of the Corporation or an
affiliate, including financial statements, or on information supplied to the
Indemnitee by the officers of the
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Corporation or an affiliate in the course of their duties, or on the advice of
legal counsel for the Corporation or an affiliate or on information or records
given or reports made to the Corporation or an affiliate by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care to the Corporation or an affiliate. The Corporation shall have
the burden of establishing the absence of good faith. The provisions of this
Section 4(g) of this Article VI shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in these Amended and Restated
By-Laws.
(h) The knowledge and/or actions, or failure to act, of any other
director, officer, agent or employee of the Corporation or an affiliate shall
not be imputed to the Indemnitee for purposes of determining the right to
indemnification under these Amended and Restated By-Laws.
SECTION 5. ADVANCES FOR EXPENSES AND COSTS. All expenses (including
attorneys' fees) incurred by or on behalf of the Indemnitee (or reasonably
expected by the Indemnitee to be incurred by the Indemnitee within three months)
in connection with any Proceeding shall be paid by the Corporation in advance of
the final disposition of such Proceeding within twenty days after the receipt by
the Corporation of a statement or statements from the Indemnitee requesting from
time to time such advance or advances whether or not a determination to
indemnify has been made under Section 4 of this Article VI. The Indemnitee's
entitlement to such advancement of expenses shall include those incurred in
connection with any Proceeding by the Indemnitee seeking an adjudication or
award in arbitration pursuant to these Amended and Restated By-Laws. The
financial ability of an Indemnitee to repay an advance shall not be a
prerequisite to the making of such advance. Such statement or statements shall
reasonably evidence such expenses incurred (or reasonably expected to be
incurred) by the Indemnitee in connection therewith and shall include or be
accompanied by a written undertaking by or on behalf of the Indemnitee to repay
such amount if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified therefor pursuant to the terms of this Article VI.
SECTION 6. REMEDIES IN CASES OF DETERMINATION NOT TO INDEMNIFY OR TO
ADVANCE EXPENSES. (a) In the event that (i) a determination is made that the
Indemnitee is not entitled to indemnification hereunder, (ii) advances are not
made pursuant to Section 5 of this Article VI or (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to Section 4 of this Article VI, the Indemnitee shall be entitled to seek a
final adjudication either through an arbitration proceeding or in an appropriate
court of the State of Delaware or any other court of competent jurisdiction of
the Indemnitee's entitlement to such indemnification or advance.
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(b) In the event a determination has been made in accordance with the
procedures set forth in Section 4 of this Article VI, in whole or in part, that
the Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in paragraph (a) of this Section 6 shall be DE NOVO and
the Indemnitee shall not be prejudiced by reason of any such prior determination
that the Indemnitee is not entitled to indemnification, and the Corporation
shall bear the burdens of proof specified in Sections 3 and 4 of this Article VI
in such proceeding.
(c) If a determination is made or deemed to have been made pursuant
to the terms of Sections 4 or 6 of this Article VI that the Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration in the absence of (i) a
misrepresentation of a material fact by the Indemnitee or (ii) a final judicial
determination that all or any part of such indemnification is expressly
prohibited by law.
(d) To the extent deemed appropriate by the court, interest shall be
paid by the Corporation to the Indemnitee at a reasonable interest rate for
amounts which the Corporation indemnifies or is obliged to indemnify the
Indemnitee for the period commencing with the date on which the Indemnitee
requested indemnification (or reimbursement or advancement of expenses) and
ending with the date on which such payment is made to the Indemnitee by the
Corporation.
SECTION 7. RIGHTS NON-EXCLUSIVE. The indemnification and advancement
of expenses provided by, or granted pursuant to , the other Sections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
SECTION 8. INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
SECTION 9. DEFINITION OF CORPORATION. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or
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merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, shall stand in the same position under this
Article VI with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
SECTION 10. OTHER DEFINITIONS. For purposes of this Article VI,
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VI.
SECTION 11. SURVIVAL OF RIGHTS. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. No
amendment, alteration, rescission or replacement of these Amended and Restated
By-Laws or any provision hereof shall be effective as to an Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
position with the Corporation or any other entity which the Indemnitee is or was
serving at the request of the Corporation prior to such amendment, alteration,
rescission or replacement.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, by action of the Board of Directors from time to time,
grant rights to indemnification and advancement of expenses to employees and
agents of the Corporation with the same scope and effect as the provisions of
this Article VI with respect to the indemnification of directors and officers of
the Corporation.
SECTION 13. SAVINGS CLAUSE. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each person entitled to
indemnification under the first paragraph of this Article VI as to all losses
actually and reasonably incurred or suffered
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by such person and for which indemnification is available to such person
pursuant to this Article VI to the full extent permitted by any applicable
portion of this Article VI that shall not have been invalidated and to the full
extent permitted by applicable law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at Any Regular or Special
Meeting. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.
SECTION 7. Voting of stock in other corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes
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which the Corporation may be entitled to cast as a shareholder or otherwise in
any other Corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of the shares or other securities of
such other Corporation. In the event one or more attorneys or agents are
appointed, the Chairman of the Board or the President may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent. The Chairman of the Board or the President may, or may instruct the
attorneys or agents appointed to, execute or cause to be executed in the name
and on behalf of the Corporation and under its seal or otherwise, such written
proxies, consents, waivers or other instruments as may be necessary or proper in
the circumstances.
ARTICLE VIII
AMENDMENTS
These Amended and Restated By-Laws may be repealed, altered, amended
or rescinded in whole or in part, or new By-Laws may be adopted by either the
affirmative vote of the holders of at least a majority of the voting power of
all of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereon or by the Board of Directors.
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EXHIBIT 10.1
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
THIS BENEFITS AGREEMENT is made and entered into as of this 25th day of
July, 1997 by and among General Semiconductor, Inc. a Delaware corporation
("GS"), NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"),
and CommScope, Inc., a Delaware corporation ("CommScope").
WHEREAS, pursuant to the terms of that certain Distribution Agreement by
and among General Instrument Corporation, NextLevel Systems and CommScope and
dated as of June 12, 1997 (the "Distribution Agreement"), the parties have
entered into this Agreement regarding certain employment, compensation and
benefit matters occasioned by the Distributions.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each other member of its Group over
which it has direct or indirect legal or effective control, hereby agrees as
follows:
SECTION 1. Definitions. The following terms, when capitalized herein, shall have
the meanings set forth below in this Section 1. All other capitalized terms
which are used but are not otherwise defined herein shall have the meanings
ascribed to them in the Distribution Agreement.
"Active Employees" means, with respect to each Group, all employees
regularly engaged in the performance of services to, for or on behalf of
any member of such Group as of the close of business on the NextLevel
Systems Distribution Date.
"Former Employees" means, with respect to each Group, all former
employees of GI and/or its Subsidiaries (including, but not limited to,
such employees who, as of the close of business on the NextLevel Systems
Distribution Date, are on leave of absence, long-term disability or layoff
with recall rights and the dependents of those persons) who, if they were
regularly engaged in the performance of services to, for or on behalf of
GI or any of its Subsidiaries at the close of business on the NextLevel
Systems Distribution Date, would be an Active Employee of such Group,
determined on a basis consistent with the determination of the Active
Employees of such Group and shall, with respect to GS, include former
employees of previously disposed of businesses, discontinued operations
and the corporate office of GI.
"GS Salaried Welfare Plans" means, collectively, the General
Instrument Corporation Group Welfare Benefits Plan and the General
Instrument Corporation Cafeteria Plan.
SECTION 2. General Employment Matters.
2.01. General Obligations. Except as specifically provided herein, from
and after the NextLevel Systems Distribution Date, each of GS, NextLevel Systems
and CommScope shall and shall, as applicable, cause each of the other members of
its respective Group over which it has direct or indirect legal or effective
control to, (a) continue the employment of all of the Active Employees of its
respective Group, subject, however to the terms of Section 2.03 below and (b)
except as otherwise specifically provided herein, pay, perform and discharge any
and all labor, employment, compensation and benefit liabilities, whether arising
prior to, on or after the NextLevel Systems Distribution Date, with respect to
all such Active Employees and all Former Employees of its respective Group.
Except as specifically provided herein, each of GS, NextLevel Systems and
CommScope shall be solely responsible for the Former Employees of its respective
Group.
2.02. Initial Compensation of Active Employees. The initial compensation
(base salary or wage level) of each Active Employee of each Group shall be the
same as the compensation (base salary or wage level) of such Active Employee
immediately prior to the NextLevel Systems Distribution Date.
2.03. No Additional Employment Rights Created. Nothing in this Agreement
shall give any Active Employee of any Group any right to continued employment by
any member of that Group or any other Group beyond the NextLevel
<PAGE>
Systems Distribution Date, which is in addition to or supplemental to any
such right he or she may have arising under contract or otherwise.
SECTION 3. United States Salaried Pension and Savings Plan Benefits.
3.01. Defined Benefit Plans.
(a) Effective as of June 30, 1997, Next Level Communications (a
member of the NextLevel Group) ceased to be a sponsor of the General
Instrument Corporation Pension Plan for Salaried and Hourly Paid Non-Union
Employees (the "Pension Plan"), and GS and the members of the GS Group
became the only sponsors of the Pension Plan. Effective as of July 1,
1997, NextLevel Systems established a defined benefit plan (the "NextLevel
Systems Pension Plan") for the benefit of the Active Employees and Former
Employees of the NextLevel Group who were, immediately prior to such
effective date, participants in the Pension Plan. Upon the transfer of
assets contemplated in Section 3.01(c), all liabilities for benefits
accrued under the Pension Plan through June 30, 1997 in respect of the
Active Employees and Former Employees of the NextLevel Group shall be
transferred from the Pension Plan to the NextLevel Systems Pension Plan.
The Pension Plan shall retain all other liabilities of the Pension Plan.
(b) Promptly after the NextLevel Systems Distribution Date, GS shall
cause the actuary of the Pension Plan (the "Plan Actuary") to allocate the
assets of the Pension Plan as of June 30, 1997 between the Pension Plan
and the NextLevel Systems Pension Plan. Such allocation shall reflect the
division of liabilities set forth in Section 3.01(a) and shall be effected
in accordance with Section 414(l) of the Code and the regulations
thereunder, using for such purpose those actuarial assumptions prescribed
by the Pension Benefit Guaranty Corporation for calculating unfunded
benefit liabilities in connection with single employer plans terminating
on June 30, 1997 (the "Assumptions"). If the fair market value of the
assets of the Pension Plan as of June 30, 1997, exceeds the present value
of accrued benefit liabilities calculated on a plan termination basis
using the Assumptions, such excess shall be allocated between the Pension
Plan and the NextLevel Systems Pension Plan in proportion to the present
value of the accrued benefit liabilities allocated to each such plan. The
assets allocable to the NextLevel Systems Pension Plan pursuant to this
Section 3.01(b) as of June 30, 1997 is hereinafter referred to as the
"Distribution Date Asset Value."
(c) As promptly as practical after the determination of the
Distribution Date Asset Value pursuant to Section 3.01(b), GS shall cause
the trustee of the Pension Plan to transfer to the trustee of the
NextLevel Systems Pension Plan the Distribution Date Asset Value (i)
increased by a proportionate share of the earnings (or decreased by a
proportionate share of losses) of the Pension Plan from June 30, 1997
until the date of transfer (the "Interim Period") and (ii) decreased by
benefit payments to the Active Employees and Former Employees of the
NextLevel Group during the Interim Period (the "Transferred Amount"). The
Transferred Amount shall be transferred in cash or other property as may
be agreed between the trustees of the respective plans.
(d) During the Interim Period, the Pension Plan shall make all
benefit payments that become due in respect of the Active Employees and
Former Employees of the NextLevel Group to the extent such benefits were
accrued under the Pension Plan through June 30, 1997.
(e) All calculations required under this Section 3.01 shall
initially be made by the Plan Actuary. The Plan Actuary shall provide to
the actuary for the NextLevel Pension Plan (the "NextLevel Actuary"), for
review, all calculations made pursuant to this Section 3.01, together with
all supporting documentation, work papers, census data and other
information reasonably requested by the NextLevel Actuary. If the Plan
Actuary and the NextLevel Actuary cannot agree on the determination of the
Transferred Amount, a third actuary, mutually agreeable to GS and
NextLevel Systems, shall be appointed, whose determination of the
Transferred Amount shall be binding on all parties; provided, however,
that the amount determined by the third actuary may not be lower than the
lowest amount nor higher than the highest amount determined by the Plan
Actuary and the NextLevel Actuary.
3.02. CommScope, Inc. Employees Profit Sharing and Savings Plan. CommScope
shall, immediately following the NextLevel Systems Distribution Date, continue
to sponsor the CommScope, Inc. Employees Profit Sharing and Savings Plan (the
"CommScope DC Plan").
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<PAGE>
3.03. General Instrument (Puerto Rico), Inc. Savings Plan. NextLevel
Systems shall, immediately following the NextLevel Systems Distribution Date,
cause its subsidiary, General Instrument (Puerto Rico), Inc. ("GI Puerto Rico"),
to continue to sponsor the General Instrument (Puerto Rico), Inc. Savings Plan
(the "Puerto Rico Plan").
3.04. General Instrument Corporation Savings Plan. The active
participation in the General Instrument Corporation Savings Plan (the "GI
Savings Plan") by persons other than the Active Employees of the GS Group ceased
to be effective as of June 30, 1997. In addition, as of June 30, 1997, all
members of the NextLevel Group ceased to be sponsors of the GI Savings Plan and
the members of the GS Group became the only sponsors of the GI Savings Plan.
3.05. Establishment of NextLevel Systems Defined Contribution Plan.
(a) NextLevel Systems Plan. NextLevel Systems has established or
made available, effective as of July 1, 1997, a defined contribution plan
for the benefit of the Active Employees of the NextLevel Systems Group
(the "NextLevel Systems DC Plan").
(b) Transfer of Account Balances to NextLevel Systems DC Plans. As
promptly as practical after the NextLevel Systems Distribution Date, GS
shall cause the trustee of the GI Savings Plan to transfer to the trustee
of the NextLevel Systems DC Plan, the account balances of each Active
Employee of the NextLevel Systems Group and each Former Employee of the
NextLevel Systems Group with respect to whom the GI Savings Plan maintains
an account as of the close of business on the NextLevel Systems
Distribution Date. Such transfers shall be equal to the value of the
transferred account balances as of the close of business on the day
preceding the date of transfer and shall be in cash, except that the
NextLevel Systems DC Plan will accept the following: (i) GS Common Stock
for the GS Common Stock fund portion of such account balances (together
with any and all of the shares of the common stock of NextLevel Systems
and CommScope distributed in connection with the Distributions); and (ii)
amounts credited to the GI Savings Plan which are held in mutual funds
which are also investment media in the NextLevel Systems DC Plan.
3.06. Transfer of Employer Stock. Each of the sponsors of the GI Savings
Plan, the CommScope DC Plan, the NextLevel Systems DC Plan and the Puerto Rico
Plan shall cause their respective plans (i) to permit the participants therein
to sell from the GS Common Stock Fund portion of the plan the shares of Common
Stock of the two entities that do not sponsor the plan immediately after the
NextLevel Systems Distribution Date, or in the case of the Puerto Rico Plan, are
not the parent corporation of such plan's sponsor, immediately after the
NextLevel Systems Distribution Date and (ii) not to permit the future investment
in the shares of Common Stock of any entity that does not sponsor the plan, or
in the case of the Puerto Rico Plan, is not the parent corporation of such
plan's sponsor (except for investments in the stock of such entity indirectly
through mutual funds or other collective investment vehicles with respect to
which participants have no control over the individual investments thereof).
SECTION 4. Pension Matters Outside the United States. With respect to the
business and operations of each Group in jurisdictions outside the United
States, each of the parties hereto shall (and, as applicable, shall cause each
other member of its Group over which it has direct or indirect legal or
effective control to) assume or retain, as the case may be, any and all pension
liabilities and attendant plans and their assets related to its Active Employees
and Former Employees.
SECTION 5. Executive Compensation.
5.01. GI Supplemental Executive Retirement Plan. None of the Active
Employees of the NextLevel Group have accrued any benefits under the GI
Supplemental Executive Retirement Plan (the "SERP") from and after June 30,
1997. As of the NextLevel Systems Distribution Date, NextLevel Systems shall
assume all liabilities under the SERP in respect of the Active Employees and
Former Employees of the NextLevel Group.
5.02. GI Voluntary Deferred Compensation Plan. The participation of the
Active Employees and Former Employees of the NextLevel Systems Group and the
CommScope Group in the GI Voluntary Deferred Compensation Plan (the "Deferred
Compensation Plan") shall cease as of the NextLevel Systems Distribution Date.
As of the NextLevel Systems Distribution Date, NextLevel Systems and CommScope
shall assume the liability for the accounts of their respective Active Employees
and Former Employees in the Deferred Compensation Plan. GS shall continue to
sponsor the Deferred Compensation Plan and shall retain all other liabilities
under the Deferred Compensation Plan including the liability for the accounts of
its Active Employees and Former Employees in the Deferred Compensation Plan. The
total of each account of each
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<PAGE>
Active Employee or Former Employee of the NextLevel Systems Group and the
CommScope Group in the Deferred Compensation Plan as of the NextLevel Systems
Distribution Date shall become the opening balance of such Active Employee's or
Former Employee's account in a nonqualified deferred compensation plan
established, as of the NextLevel Systems Distribution Date, by NextLevel Systems
(the "NextLevel Systems Deferred Compensation Plan") or CommScope (the
"CommScope Deferred Compensation Plan"), as the case may be. As promptly as
practical after the NextLevel Systems Distribution Date, assets having a fair
market value as of the date of transfer equal to the transferred account
balances as of such date shall be transferred to a successor trust established
by NextLevel Systems in connection with the NextLevel Systems Deferred
Compensation Plan or to a successor trust established by CommScope in connection
with the CommScope Deferred Compensation Plan, as the case may be. Such
transferred assets shall be in cash or such other property as may be agreed
between GS and NextLevel Systems and between GS and CommScope.
5.03. Options. NextLevel Systems and CommScope have established,
respectively, the NextLevel Systems 1997 Long-Term Incentive Plan (the
"NextLevel Systems Incentive Plan") and the CommScope 1997 Long-Term Incentive
Plan (the "CommScope Incentive Plan"). Effective as of the NextLevel Systems
Distribution Date, all outstanding options in respect of GI Common Stock held
immediately prior to the NextLevel Systems Distribution (the "Current Options"):
(i)(A) by Active Employees and Former Employees (except as otherwise provided
herein) of either the NextLevel Group or the CommScope Group and (B) current
directors of GI immediately prior to the NextLevel Systems Distribution will be
replaced with substitute options in respect of NextLevel Systems Common Stock or
CommScope Common Stock, as the case may be (the "Substitute Options"), issued
under either the NextLevel Systems Incentive Plan or the CommScope Incentive
Plan; and (ii) by one Former Employee (Daniel F. Akerson) and certain retired
directors (Daniel F. Akerson, Morton H. Meyerson, Felix G. Rohatyn, Paul G.
Stern and Robert S. Strauss) shall be adjusted so that, after the NextLevel
Systems Distribution, in addition to options held in respect of GS Common Stock
("GS Options"), such persons will also hold replacement options in respect of
NextLevel Systems Common Stock and CommScope Common Stock ("Spin-off Options").
The number of shares with respect to which the Spin-off Options shall be granted
shall be the number of shares of NextLevel Systems Common Stock and CommScope
Common Stock that the holder of the Current Options would have received in the
NextLevel Systems Distribution if he were a holder on the NextLevel Systems
Distribution Date of that number of shares of GI Common Stock covered by the
Current Option. Substitute Options, GS Options and Spin-off Options shall be
designed to preserve the economic value of the related Current Options, and the
vesting and expiration dates and other terms of the related awards will remain
in effect under the Substitute Options, GS Options and Spin-off Options, as
applicable. Effective as of the NextLevel Systems Distribution Date, all
outstanding options in respect of GS Common Stock held by Active Employees of
the GS Group as of the NextLevel Systems Distribution Date will be adjusted as
necessary to reflect the NextLevel Systems Distribution. The number of shares
covered by the Substitute Options, GS Options, and Spin-off Options, and the
exercise price thereof, shall be determined by a committee consisting of the
chief executive officers of GS, NextLevel Systems and CommScope.
5.04. Stock Appreciation Rights. Prior to the NextLevel Systems
Distribution Date, certain persons held stock appreciation right ("SAR")
agreements ("SAR Agreements") with respect to GI Common Stock. Effective as of
the NextLevel Systems Distribution Date, all outstanding SAR Agreements shall be
adjusted so that, after the NextLevel Systems Distribution, in addition to a SAR
held in respect of GS Common Stock ("GS SAR"), such persons will also hold a SAR
in respect of NextLevel Systems Common Stock and CommScope Common Stock
("Spin-off SARs "). The number of reference shares with respect to which each
Spin-Off SAR shall be granted shall be the number of shares of NextLevel Systems
Common Stock and CommScope Common Stock that the holder of the SAR would have
received in the NextLevel Systems Distribution if he were a holder on the
NextLevel Systems Distribution Date of that number of shares of GI Common Stock
covered by the SAR. A Spin-off SAR shall be designed to preserve the economic
value of the related SAR, and the other terms of the related SAR will remain in
effect under the Spin-off SAR, as applicable. The number of reference shares
covered by each Spin-off SAR shall be determined by a committee consisting of
the chief executive officers of GS, NextLevel Systems and CommScope.
5.05. Employment and Other Agreements. CommScope shall retain or assume,
as the case may be, any and all contractual obligations to Mr. Drendel with
respect to his employment agreement. GS shall have no further obligation to Mr.
Drendel with respect to his employment agreement.
SECTION 6. Welfare Benefits.
6.01. GS Salaried Welfare Plans. Effective on the NextLevel Systems
Distribution Date, GS shall serve as the sole sponsor of the GI Salaried Welfare
Plans from and after the NextLevel Systems Distribution Date.
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<PAGE>
6.02. Allocation and Discharge of Welfare Plan Liabilities. NextLevel
Systems shall retain or assume, as the case may be, and discharge all welfare
plan liabilities with respect to Active Employees and Former Employees of the
NextLevel Systems Group and their dependents. CommScope shall retain or assume,
as the case may be, and discharge all welfare plan liabilities with respect to
Active Employees and Former Employees of the CommScope Group and their
dependents. GS shall retain and discharge all other welfare plan liabilities
which remain after allocation of liabilities to CommScope and NextLevel Systems
under the two immediately preceding sentences, including, without limitation,
all such liabilities relating to the Active Employees and Former Employees of
the GS Group and their dependents.
SECTION 7. General.
7.01. Post-Distribution Administration of Plans. The parties hereto agree
to administer all plans consistently herewith, and to the extent necessary to
amend their respective employee benefit plans accordingly.
7.02. Cost and Expenses. Each party shall bear all costs and expenses,
including but not limited to legal and actuarial fees, incurred in the design,
drafting and implementation of any and all plans and compensation structures
which it establishes or creates and the amendment of its existing plans or
compensation structures.
SECTION 8. Miscellaneous.
8.01. Complete Agreement; Construction. This Agreement and the
Distribution Agreement shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement or the Distribution
Agreement to the contrary, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the provisions of the
Distribution Agreement or any other Ancillary Agreement, this Agreement shall
control.
8.02. Other Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by any of the other Ancillary Agreements.
8.03. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
8.04. Survival of Agreements. Except as otherwise expressly provided
herein, all covenants and agreements of the parties contained in this Agreement
shall survive the NextLevel Systems Distribution Date.
8.05. Notices. All notices and other communications to a party hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to such party (and
will be deemed given on the date on which the notice is received by such party)
at the address for such party set forth below (or at such other address for the
party as the party shall, from time to time, specify by like notice to the other
parties):
If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to NextLevel Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
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<PAGE>
8.06. Waivers. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
8.07. Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties hereto.
8.08. Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
8.09. Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and permitted assigns.
8.10. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and the members of their respective Groups and
Affiliates, after giving effect to the Distributions, and should not be deemed
to confer upon third parties any remedy, claim, liability, right of
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
8.11. Attorney Fees. A party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, reasonable legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in addition to any
other relief to which such other party may be entitled hereunder or otherwise.
8.12. Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. WITHOUT LIMITING THE
PROVISIONS OF SECTIONS 8.14 AND 8.15 HEREOF, EACH OF THE PARTIES IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF (A) THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND (B) IN THE CIRCUMSTANCE SET FORTH IN
THE NEXT SENTENCE, THE SUPREME COURT OF THE STATE OF NEW YORK, FOR THE PURPOSES
OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR OF ANY
ANCILLARY AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF
THE PARTIES AGREES TO COMMENCE ANY ACTION, SUIT OR PROCEEDING RELATING HERETO
ONLY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
OR, IF SUCH SUIT, ACTION OR OTHER PROCEEDING MAY NOT BE BROUGHT IN SUCH COURT
FOR JURISDICTIONAL REASONS, IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW
YORK COUNTY, AND IN NO OTHER FORUM. EACH OF THE PARTIES FURTHER AGREES THAT
SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO
SUCH PARTY'S RESPECTIVE ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY ACTION, SUIT OR PROCEEDING IN THE FORUM PROVIDED FOR HEREIN WITH
RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS
SECTION. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT
OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN (I) THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR (II) IN THE
CIRCUMSTANCES SET FORTH IN THE SECOND SENTENCE HEREOF, THE SUPREME COURT OF THE
STATE OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
8.14. Mediation. In the event of a controversy, dispute or claim arising
out of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any
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<PAGE>
way related to this Agreement or any transaction contemplated hereby or thereby,
including, without limitation, any claim based on contract, tort, statute or
constitution (collectively, "Agreement Disputes"), the general counsels (or
other chief legal officers) of the relevant parties shall negotiate in good
faith for a reasonable period of time to settle such Agreement Dispute.
8.15. Arbitration. If after the reasonable period of time provided for in
Section 8.14, the relevant general counsels (or other chief legal officers) are
unable to settle an Agreement Dispute, such Agreement Dispute shall be settled
by arbitration administered by the American Arbitration Association in
accordance with its applicable Rules for Commercial Arbitration and judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any such arbitration shall be commenced and all the
proceedings thereof conducted in New York City. If any such arbitration requires
the consent of a non-party to this Agreement to submit to arbitration, the party
initiating the arbitration shall use reasonable efforts to procure such consent.
If such consent cannot be procured, the initiating party shall nevertheless be
bound to proceed against all other parties herein solely by arbitration pursuant
to this Section 8.15, and shall (unless otherwise agreed by all parties herein
who may be affected by such Agreement Dispute) be bound by Section 8.13 with
respect to claims arising out of any Agreement Disputes against a non-party to
this Agreement which is amenable to, or consents to, jurisdiction in the forum
set forth in Section 8.13.
8.16. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
8.17. Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantee the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
NextLevel Systems Distribution Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
-----------------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
-----------------------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
-----------------------------
Name: Frank B. Wyatt, II
Title: Secretary
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<PAGE>
EXHIBIT 10.2
DEBT AND CASH ALLOCATION AGREEMENT
DEBT AND CASH ALLOCATION AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), among General Semiconductor, Inc., a Delaware corporation ("GS"),
NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), and
CommScope, Inc., a Delaware corporation ("CommScope").
WHEREAS, pursuant to the terms of the Distribution Agreement, dated as of
June 12, 1997 (the "Distribution Agreement"), among General Instrument
Corporation, a Delaware corporation ("GI"), NextLevel Systems and CommScope, the
parties have entered into this Agreement regarding the allocation of certain
indebtedness and cash of GI and its consolidated subsidiaries as of the close of
business on the NextLevel Systems Distribution Date (the "Distribution Time").
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each of the other members of its
Group, hereby agrees as follows:
SECTION 1. Certain Definitions. Unless otherwise defined herein or unless
the context otherwise requires, the following terms will have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined).
"Accounts Payable" shall have the meaning ascribed to such term under
GAAP.
"Accounts Receivable" shall have the meaning ascribed to such term under
GAAP.
"Actual CommScope Debt Amount" shall mean the aggregate amount (expressed
as a positive number), as of the Distribution Time, of the following, without
duplication:
(i) the then outstanding amount of the CommScope Credit
Facility plus accrued and accreted interest and fees and expenses in
respect thereof (as reflected on the CommScope Adjusted Closing Balance
Sheet); plus
(ii) the then outstanding principal amount of Consolidated
Debt of CommScope and the CommScope Subsidiaries other than that which is
described in clause (i) above (for this purpose undrawn letters of credit
and guarantees shall not be treated as outstanding), plus accrued and
accreted interest and fees and expenses in respect thereof as reflected on
the CommScope Adjusted Closing Balance Sheet, including without
limitation, outstanding indebtedness
<PAGE>
incurred in connection with the issuance of industrial revenue bonds by
the Alabama State Industrial Development Authority.
"Actual GS Debt Amount" shall mean the aggregate amount (expressed as a
positive number), as of the Distribution Time, of the following, without
duplication:
(i) the then outstanding amount of the GS Credit Facility plus
accrued and accreted interest and fees and expenses in respect thereof (as
reflected on the GS Adjusted Closing Balance Sheet) ; plus
(ii) the then outstanding principal amount of Consolidated
Debt of GS and the GS Subsidiaries other than that which is described in
clause (i) above (for this purpose undrawn letters of credit and
guarantees shall not be treated as outstanding), plus accrued and accreted
interest and fees and expenses in respect thereof as reflected on the GS
Adjusted Closing Balance Sheet, including without limitation, debt
incurred with respect to the General Instrument Taiwan, Ltd. ("GI Taiwan")
mortgage facility (the "Taiwan Facility").
"Agreement" shall have the meaning specified in the first paragraph
hereof.
"Auditors" shall have the meaning specified in Section 5(a).
"BKP Litigation" means the action entitled BKP Partners, L.P. v. General
Instrument Corp., as more fully described in the Proxy Statement.
"Cash and Cash Equivalents" shall have the meaning ascribed to such term
under GAAP; provided, however, that in all events checks issued by GS and the GS
Subsidiaries which remain unpaid as of the Distribution Time shall be deducted
from Cash and Cash Equivalents, and checks received by GS and the GS
Subsidiaries which remain uncollected prior to the Distribution Time (other than
checks that have been dishonored) shall be included in Cash and Cash
Equivalents.
"CommScope" shall have the meaning specified in the first paragraph
hereof.
"CommScope Adjusted Closing Balance Sheet" shall have the meaning
specified in Section 5(b).
"CommScope Base Amount" shall mean the amount designated as such on
Schedule I.
"CommScope Closing Balance Sheet" shall have the meaning specified in
Section 5(a).
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"CommScope Credit Facility" shall have the meaning specified in Section
3(c).
"CommScope Credit Facility Debt" shall have the meaning specified in
Section 3(c).
"CommScope Determination Date" shall have the meaning specified in Section
5(b).
"CommScope Dispute" shall have the meaning specified in Section 5(b).
"CommScope Distribution Date" shall have the meaning specified in the
Distribution Agreement.
"CommScope Dividend Amount" shall mean an amount equal to the CommScope
Base Amount (i) less the outstanding indebtedness with respect to the industrial
revenue bonds relating to CommScope issued by the Alabama State Industrial
Development Authority, as of the CommScope Distribution Date , (ii) plus the
amount of Cash and Cash Equivalents held by CommScope or the CommScope
Subsidiaries as of the CommScope Distribution Date.
"CommScope Group" means CommScope, the CommScope Subsidiaries and the
corporations, partnerships, joint ventures, investments and other entities that
represent equity investments of CommScope or any of the CommScope Subsidiaries
following the consummation of the Corporate Restructuring Transactions and the
NextLevel Systems Distribution.
"Consolidated Debt" shall mean (without duplication) with respect to any
Person, every obligation of such Person and its consolidated Subsidiaries (i)
for money borrowed, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) for reimbursement with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person or its
consolidated Subsidiaries, (iv) for the deferred purchase price of property or
services if, and to the extent that, such obligation would appear as a liability
upon a balance sheet of such Person or its consolidated Subsidiaries prepared in
accordance with GAAP (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), and (v) to guarantee or
otherwise be liable for, any obligation of the type referred to in clauses (i)
through (iv) of another Person.
"Corporate Restructuring Transactions" shall have the meaning specified in
the Distribution Agreement.
"Disputing Party" shall have the meaning ascribed to such term in Section
5(b).
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"Distribution Agreement" shall have the meaning specified in the recitals
to this Agreement.
"Distributions" shall have the meaning specified in the Distribution
Agreement.
"Distribution Time" shall have the meaning specified in the recitals to
this Agreement.
"DSC Litigation" means the action entitled DSC Communications Corporation
and DSC Technologies Corporation v. Next Level Communications, Thomas R. Eames
and Peter W. Keeler, Case No. 4:95cv96, as more fully described in the Proxy
Statement.
"GAAP" means United States generally accepted accounting principles and
practices, as in effect on the date of this Agreement, as promulgated by the
Financial Accounting Standards Board and its predecessors.
"GI" shall have the meaning specified in the recitals to this Agreement.
"GI Common Stock" means the shares of common stock, par value $.01 per
share of GI.
"GI Credit Agreement" shall mean the Third Amended and Restated Credit
Agreement dated as of August 12, 1996, among General Instrument Corporation of
Delaware, The Chase Manhattan Bank as administrative agent, and certain lenders
named therein.
"GI Delaware" means General Instrument Corporation of Delaware, a Delaware
corporation and a wholly owned subsidiary of GI.
"GI Taiwan" means General Instrument Taiwan, Ltd., a Taiwanese corporation
and an indirect wholly owned subsidiary of GI.
"Group" means (i) with respect to GS, the GS Group, (ii) with respect to
NextLevel Systems, the NextLevel Systems Group, and (iii) with respect to
CommScope, the CommScope Group.
"GS" shall have the meaning specified in the first paragraph hereof.
"GS Adjusted Closing Balance Sheet" shall have the meaning specified in
Section 5(b).
"GS Base Amount" shall mean the amount designated as such on Schedule I.
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"GS Closing Balance Sheet" shall have the meaning specified in Section
5(a).
"GS Credit Facility" shall have the meaning specified in Section 3(a).
"GS Credit Facility Debt" shall have the meaning specified in Section
3(a).
"GS Dispute" shall have the meaning specified in Section 5(b).
"GS Determination Date" shall have the meaning specified in Section 5(b).
"GS Group" means GS, the GS Subsidiaries and the corporations,
partnerships, joint ventures, investments and other entities that represent
equity investments of GS or any of the GS Subsidiaries following consummation of
the Corporate Restructuring Transactions and the Distributions.
"Independent Auditors" shall have the meaning specified in Section 5(b).
"NextLevel Systems" shall have the meaning specified in the first
paragraph hereof.
"NextLevel Systems Credit Facility" shall have the meaning specified in
Section 3(b).
"NextLevel Systems Distribution" shall have the meaning specified in the
Distribution Agreement.
"NextLevel Systems Distribution Date" shall have the meaning specified in
the Distribution Agreement.
"NextLevel Systems Group" means NextLevel Systems, the NextLevel Systems
Subsidiaries and the corporations, partnerships, joint ventures, investments and
other entities that represent equity investments of any of NextLevel Systems or
any of the NextLevel Systems Subsidiaries following the consummation of the
Corporate Restructuring Transactions and the Distributions.
"Notice" shall have the meaning specified in Section 7(j).
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company or other
entity, or any government, or any agency or political subdivision thereof.
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"Proxy Statement" means the Proxy Statement, dated June 13, 1997, sent to
the holders of GI Common Stock in connection with the Distributions, including
any amendment or supplement thereto.
"Securities Litigation" means the class action entitled In Re General
Instrument Corporation Securities Litigation, as more fully described in the
Proxy Statement.
"Subsidiary" means, with respect to any Person:
(i) any corporation of which at least a majority in interest
of the outstanding voting stock (having by the terms thereof voting power under
ordinary circumstances to elect a majority of the directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of a contingency) is at the time, directly or indirectly, owned or
controlled by such Person or by such Person and one or more of its Subsidiaries;
or
(ii) any non-corporate entity in which such Person or such
Person and one or more Subsidiaries of such Person either (A) directly or
indirectly, at the date of determination thereof, has at least majority
ownership interest, or (B) at the date of determination is a general partner or
an entity performing similar functions (e.g., manager of a Limited Liability
Company or a trustee of a trust).
SECTION 2. Allocation of Debt. Prior to or contemporaneously with the
consummation of the NextLevel Systems Distribution, each of the parties hereto
will take such action and make such transfers so that, to the extent possible,
as of the Distribution Time (a) the Actual GS Debt Amount (less the amount of
any Cash and Cash Equivalents held by GS or the GS Subsidiaries) shall equal the
GS Base Amount, and (b) the Actual CommScope Debt Amount (less the amount of any
Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) shall
equal the CommScope Base Amount.
SECTION 3. Credit Facilities. (a) GS shall, at its expense, obtain and
have in place on or prior to the Distribution Time a credit facility (the "GS
Credit Facility") for GS and the GS Subsidiaries in an aggregate principal
amount at least equal to (i) the GS Base Amount, less the outstanding
indebtedness with respect to the Taiwan Facility as of the Distribution Time,
but plus the amount of Cash and Cash Equivalents held by GS or the GS
Subsidiaries as of the Distribution Time (such portion of the GS Credit Facility
to be used to repay amounts under the GI Credit Agreement and for any other
purposes required in accordance with Section 2 hereof) and (ii) such additional
amounts as shall be sufficient (together with other funds available to GS) for
other general corporate purposes. The aggregate amount of debt (including
accrued and accreted interest and fees
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and expenses) outstanding as of the Distribution Time under this facility is
hereinafter called the "GS Credit Facility Debt".
(b) NextLevel Systems shall, at its expense, obtain and have in
place on or prior to the Distribution Time, a credit facility (the "NextLevel
Systems Credit Facility") for NextLevel Systems and the NextLevel Systems
Subsidiaries in an aggregate amount at least sufficient (together with other
funds available to NextLevel Systems): (i) to repay the portion of the
outstanding indebtedness under the GI Credit Agreement, if any, to be assumed
and repaid by NextLevel Systems so as to allocate debt among the parties hereto
in accordance with Section 2 hereof; (ii) to satisfy any reasonably anticipated
liabilities in connection with the Securities Litigation, the BKP Litigation,
the DSC Litigation and all other pending legal proceedings; and (iii) for other
general corporate purposes.
(c) CommScope shall, at its expense, obtain and have in place on or
prior to the Distribution Time, a credit facility (the "CommScope Credit
Facility") for CommScope and the CommScope Subsidiaries in an aggregate
principal amount at least sufficient (together with other funds available to
CommScope): (i) to pay the CommScope Dividend Amount to GI Delaware on or prior
to the Distribution Time and (ii) for other general corporate purposes. The
aggregate amount of debt (including accrued and accreted interest and fees and
expenses) outstanding as of the Distribution Time under this facility is
hereinafter called the "CommScope Credit Facility Debt".
SECTION 4. Conduct of Business. Each of NextLevel Systems, CommScope and
GS represents and warrants that the Accounts Payable and Accounts Receivable of
its respective business have been incurred and paid during 1997(to date),
consistent with past practice in all material respects.
SECTION 5. Post-Distribution Audit.
(a) Preparation of Closing Balance Sheets. As soon as practicable
after the Distribution Time, but in any event within 60 days following the
Distribution Time, NextLevel Systems shall cause Deloitte & Touche LLP (or
another comparable independent accounting firm selected by NextLevel Systems)
(the "Auditors") to:
(i) conduct an audit of GS and the GS Subsidiaries to
determine the aggregate amount, as of the Distribution Time, of each of
(a) the GS Credit Facility Debt, (b) the Consolidated Debt (other than the
GS Credit Facility Debt) of GS and the GS Subsidiaries, and (c) the Cash
and Cash Equivalents held by GS and the GS Subsidiaries, and to prepare
and deliver to each of NextLevel Systems, GS and CommScope a consolidated
balance sheet for GS and the GS Subsidiaries
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as of the Distribution Time reflecting the amount of each of the foregoing
(the "GS Closing Balance Sheet");
(ii) conduct an audit of CommScope and the CommScope
Subsidiaries to determine the aggregate amount, as of the Distribution
Time, of each of (a) the CommScope Credit Facility Debt, (b) the
Consolidated Debt (other than the CommScope Credit Facility Debt) of
CommScope and the CommScope Subsidiaries, and (c) the Cash and Cash
Equivalents held by CommScope and the CommScope Subsidiaries, and to
prepare and deliver to each of NextLevel Systems, GS and CommScope a
consolidated balance sheet for CommScope and the CommScope Subsidiaries as
of the Distribution Time reflecting the aggregate amount of each of the
foregoing (the "CommScope Closing Balance Sheet"); and
(iii) conduct procedures (to be agreed upon) to determine the
accuracy of the representations and warranties contained in Section 4
hereof.
The GS Closing Balance Sheet and the CommScope Closing Balance Sheet
shall each be prepared on the basis of an audit conducted by the Auditors in
accordance with GAAP consistently applied and without giving effect to any
change in accounting principles required on account of the consummation of the
Distributions, except that, to the extent that any definition contained herein
contemplates inclusion or exclusion of an item that would not be included or
excluded under GAAP, the Auditors shall compute such item in accordance with
such definition. During the course of the preparation of the GS Closing Balance
Sheet and the CommScope Closing Balance Sheet by the Auditors, and during any
period in which there is a dispute regarding either the GS Closing Balance Sheet
or the CommScope Closing Balance Sheet, each of GS and CommScope, as the case
may be, shall cooperate with the Auditors and each other and shall have access
to all work papers of the Auditors and all pertinent accounting and other
records of GS and the GS Subsidiaries and CommScope and the CommScope
Subsidiaries, as applicable. NextLevel Systems shall pay the fees and expenses
of the Auditors.
(b) Disputes Regarding Closing Balance Sheet. Unless (i) in the case
of the GS Closing Balance Sheet, GS delivers written notice to NextLevel Systems
on or prior to the 30th day after its receipt of the GS Closing Balance Sheet
that it disputes any of the amounts set forth on the GS Closing Balance Sheet (a
"GS Dispute"), or (ii) in the case of the CommScope Closing Balance Sheet,
CommScope delivers written notice to NextLevel Systems on or prior to the 30th
day after its receipt of the CommScope Closing Balance Sheet that it disputes
any of the amounts set forth on the CommScope Closing Balance Sheet (a
"CommScope Dispute") then, as applicable, GS and/or CommScope shall be deemed to
have accepted and agreed to the GS Closing Balance Sheet or the CommScope
Closing Balance Sheet, as applicable, in the form in which it
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was delivered to it by the Auditors. If such a notice of a GS Dispute is given
by GS or a notice of a CommScope Dispute is given by CommScope (in either case
such party being hereinafter referred to as the "Disputing Party") within such
30-day period, then NextLevel Systems and the Disputing Party shall, within 15
days after the giving of any such notice, attempt to resolve such GS Dispute or
CommScope Dispute, as the case may be, and agree in writing upon the final
content of the GS Closing Balance Sheet or CommScope Closing Balance Sheet, as
the case may be.
If the Disputing Party and NextLevel Systems are unable to resolve
any GS Dispute or CommScope Dispute, as the case may be, within such 15-day
period, then a mutually acceptable independent accounting firm (the "Independent
Auditors") shall be employed as arbitrator hereunder to settle such GS Dispute
and/or CommScope Dispute, as the case may be, as soon as practicable. The
Independent Auditors shall have access to all documents and facilities necessary
to perform its function as arbitrator. The determination of the Independent
Auditors with respect to any GS Dispute and/or CommScope Dispute, as the case
may be, shall be final and binding on the applicable parties hereto. NextLevel
Systems and the Disputing Party shall each pay one-half of the fees and expenses
of the Independent Auditors for such services. NextLevel Systems and the
Disputing Party each agree to execute, if requested by the Independent Auditors,
a reasonable engagement letter. The term "GS Adjusted Closing Balance Sheet", as
used herein, shall mean the definitive GS Closing Balance Sheet agreed to by GS
and NextLevel Systems or, as the case may be, the definitive GS Closing Balance
Sheet resulting from the determinations made by the Independent Auditors in
accordance with this Section 5(b) (in addition to the matters theretofore agreed
to by GS and NextLevel Systems). The term "CommScope Adjusted Closing Balance
Sheet", as used herein, shall mean the definitive CommScope Closing Balance
Sheet agreed to by CommScope and NextLevel Systems or, as the case may be, the
definitive CommScope Closing Balance Sheet resulting from the determinations
made by the Independent Auditors in accordance with this Section 5(b) (in
addition to the matters theretofore agreed to by CommScope and NextLevel
Systems). The date on which the GS Adjusted Closing Balance Sheet is determined
and provided to each of NextLevel Systems and GS pursuant to this Section 5(b)
is hereinafter referred to as the "GS Determination Date". The date on which the
CommScope Adjusted Closing Balance Sheet is determined and provided to each of
NextLevel Systems and CommScope pursuant to this Section 5(b) is hereinafter
referred to as the "CommScope Determination Date".
SECTION 6. Post Distribution Adjustments and Cash Payments.
(a) If the Actual GS Debt Amount (less the amount of any Cash and
Cash Equivalents held by GS or the GS Subsidiaries) exceeds the GS Base Amount,
NextLevel Systems shall pay to GS the amount of such excess in cash within 10
days
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after the GS Determination Date. If, on the other hand, the Actual GS Debt
Amount (less the amount of any Cash and Cash Equivalents held by GS or the GS
Subsidiaries) is less than the GS Base Amount, GS shall pay to NextLevel Systems
the amount of such deficiency in cash within 10 days after the GS Determination
Date.
(b) If the Actual CommScope Debt Amount (less the amount of any Cash
and Cash Equivalents held by CommScope or the CommScope Subsidiaries) exceeds
the CommScope Base Amount, NextLevel Systems shall pay to CommScope the amount
of such excess in cash within 10 days after the CommScope Determination Date.
If, on the other hand, the Actual CommScope Debt Amount (less the amount of any
Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) is
less than the CommScope Base Amount, CommScope shall pay to NextLevel Systems
the amount of such deficiency in cash within 10 days after the CommScope
Determination Date.
(c) After the Distribution Time, (i) GS shall promptly pay over to
NextLevel Systems or CommScope, respectively, any payments received by GS in
respect of accounts receivable transferred to NextLevel Systems or CommScope, as
the case may be, pursuant to the Distribution Agreement, (ii) each of NextLevel
Systems, CommScope and GS shall be solely responsible for collecting, and taking
action regarding, accounts payable transferred or allocated to such company
pursuant to the Distribution Agreement, and (iii) each of NextLevel Systems and
CommScope shall have the right to endorse the name of General Instrument
Corporation or General Semiconductor, Inc. on any check or other evidence of
indebtedness received by such company in respect of accounts receivable
transferred to it pursuant to the Distribution Agreement.
SECTION 7. Miscellaneous Provisions.
(a) Termination. This Agreement may not be terminated except by an
agreement in writing signed by all of the parties hereto.
(b) Further Actions. If at any time after the Distribution Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of GS, NextLevel Systems and CommScope shall, on the written
request of any of them, take (or cause the appropriate member of its Group over
which it has direct or indirect legal or effective control to take) all such
reasonably necessary or desirable action.
(c) Cooperation. The parties hereto agree to use their reasonable
best efforts to cooperate with respect to the various matters contemplated by
this Agreement.
(d) Successors and Assigns. Except as otherwise expressly provided
herein, no party hereto may assign or delegate, whether by operation of law or
otherwise,
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any of such party's rights or obligations under or in connection with this
Agreement without the written consent of each other party hereto. No assignment
will, however, release the assignor of any of its obligations under this
Agreement or waive or release any right or remedy the other parties may have
against such assignor hereunder. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will be binding upon and enforceable against the
respective successors and assigns of such party and will be enforceable by and
will inure to the benefit of the respective successors and permitted assigns of
such party.
(e) Modification; Waiver; Severability. This Agreement may be
amended, supplemented or waived only by a subsequent writing signed by all of
the parties hereto. The failure of any party hereto to require strict
performance by any other party of any provision of this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby, so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to any
party.
(f) Counterparts. This Agreement may be executed with counterpart
signature pages or in one or more counterparts, all of which shall be one and
the same Agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to all the parties hereto.
(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
(h) Notices. All notices, consents, requests, waivers or other
communications required or permitted under this Agreement (each a "Notice")
shall be in writing and shall be sufficiently given (a) if hand delivered or
sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c)
if sent by registered or certified mail, postage prepaid, return receipt
requested, and in each case addressed as follows:
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If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to NextLevel Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
or such other address as shall be furnished by any of the Parties in a Notice.
Any Notice shall be deemed given upon receipt.
(i) Survival. Except as otherwise expressly provided herein, all
representations, warranties, covenants and agreements of the parties contained
in this Agreement shall survive the Distribution Time.
(j) No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and the members of their respective Groups, and
shall not be deemed to confer upon third parties any remedy, claim, liability,
right of reimbursement, claim or action or other right in excess of those
existing without reference to this Agreement.
(k) Governing Law and Consent to Jurisdiction. THIS AGREEMENT AND
THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
-------------------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
-------------------------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
-------------------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.3
INSURANCE AGREEMENT
This Insurance Agreement (the "Agreement") is made and entered into as of
this 25th day of July, 1997, by and among General Semiconductor, Inc., a
Delaware corporation ("GS"), NextLevel Systems, Inc., a Delaware corporation
("NextLevel Systems"), and CommScope, Inc., a Delaware corporation
("CommScope").
WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"),
NextLevel Systems, and CommScope have entered into that certain Distribution
Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), pursuant to
which (i) GI and its Subsidiaries shall cause to be consummated the Corporate
Restructuring Transactions in order to restructure, divide, and separate their
existing businesses and assets so that (a) the NextLevel Systems Assets and
NextLevel Systems Business shall be owned, controlled, and operated, directly
and indirectly, by NextLevel Systems, (b) the CommScope Assets and CommScope
Business shall be owned, controlled, and operated, directly and indirectly, by
CommScope, and (c) the GS Assets and GS Business shall be owned, controlled, and
operated, directly and indirectly, by GI, which will be renamed General
Semiconductor, Inc., a Delaware corporation, immediately following the NextLevel
Systems Distribution (as defined herein), (ii) GI shall distribute (the
"NextLevel Systems Distribution") to the holders of GI's outstanding shares of
common stock the outstanding shares of common stock of NextLevel Systems
("NextLevel Systems Common Stock"), and (iii) NextLevel Systems shall distribute
(the "CommScope Distribution") to the holders of NextLevel Systems Common Stock
(which holders also will be the stockholders of GI) the outstanding shares of
common stock of CommScope (such two distributions being collectively referred to
as the "Distributions"), upon the terms and subject to the conditions set forth
in the Distribution Agreement;
WHEREAS, GI, its Subsidiaries, and their respective predecessors have
historically maintained various Policies for the benefit or protection of one or
more of the NextLevel Systems Covered Persons, the CommScope Covered Persons,
and the GS Covered Persons;
WHEREAS, in connection with the transactions contemplated by the
Distribution Agreement, GI, NextLevel Systems, and CommScope have determined
that it is necessary and desirable to provide for the respective continuing
rights and obligations in respect of said Policies from and after the NextLevel
Systems Distribution Date; and
WHEREAS, pursuant to the Distribution Agreement the parties hereto have
agreed to enter into this Agreement,
NOW THEREFORE, in consideration of the mutual agreements, provisions, and
covenants contained in this Agreement and the Distribution Agreement, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. Unless otherwise defined herein or unless the context
otherwise requires, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined).
"Agreement" shall mean this Insurance Agreement, dated as of July 25,
1997, by and among GS, NextLevel Systems, and CommScope, including any
amendments hereto and each Schedule attached hereto.
"Cable Manufacturing Business" shall mean, when unqualified, the CommScope
Assets, CommScope Liabilities, and/or CommScope Business.
<PAGE>
"Claims Administration" shall mean, with respect to any Policy, the
processing of claims made under such Policy, including, without limitation, the
reporting of losses or claims to insurance carriers and the management, defense,
and settlement of claims.
"Claims Deposit" shall mean the amount of funds, as of the NextLevel
Systems Distribution Date, maintained by GS on deposit for the benefit of the
insurance carriers under the Retrospective-Rated Policies.
"Claims-Made" shall mean, with respect to any Policy, coverage provided by
such Policy for claims made during a period specified therein.
"Claims-Made Policies" shall mean those current and past Policies which
are Claims-Made in nature, including but not limited to those Policies
identified on Schedule A hereto, which show GI or any of its predecessors (or
such entity and its subsidiaries and/or affiliates) as the named insured, but
excluding (i) any directors' and officers' liability insurance policies which
are or were maintained by or on behalf of GI, (ii) the Exclusive Policies, and
(iii) the Retrospective-Rated Policies.
"Common Policies" shall mean the Claims-Made Policies, Occurrence-Based
Policies, and Retrospective-Rated Policies.
"CommScope Assets" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Business" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Covered Person" shall mean each member of the CommScope Group
and any other Person, in each case to the extent any Policy addressed herein
purports to provide insurance coverage in respect of any claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages, or expenses
incurred by such Person arising out of, in connection with, or otherwise related
to the Cable Manufacturing Business.
"CommScope Distribution" shall have the meaning set forth in the recitals.
"CommScope Exclusive Policies" shall mean all current and past Policies
identified on Schedule D hereto, which show CommScope, any other member of the
CommScope Group, or any of their respective predecessors (or such entity and its
subsidiaries and/or affiliates) as the named insured and do not purport to
relate to the Communications Business or the Power Semiconductor Business or to
cover any NextLevel Systems Covered Person or GS Covered Person, excluding (i)
any directors' and officers' liability policies which are or were maintained by
or on behalf of CommScope, and (ii) any Retrospective-Rated Policy.
"CommScope Group" shall have the meaning set forth in the Distribution
Agreement.
"CommScope Liabilities" shall have the meaning set forth in the
Distribution Agreement.
"Communications Business" shall mean, when unqualified, the NextLevel
Systems Assets, NextLevel Systems Liabilities, and/or NextLevel Systems
Business.
"Corporate Restructuring Transactions" shall have the meaning set forth in
the Distribution Agreement.
"Covered Persons" shall mean (i) with respect to GS, the GS Covered
Persons, (ii) with respect to NextLevel Systems, the NextLevel Systems Covered
Persons, and (iii) with respect to CommScope, the CommScope Covered Persons.
"Current Claims-Made Policies" shall mean the Claims-Made Policies in
effect as of the NextLevel Systems Distribution Date, which Policies are set
forth on Schedule A hereto.
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"Current Occurrence-Based Policies" shall mean the Occurrence-Based
Policies in effect as of the NextLevel Systems Distribution Date, which Policies
are set forth on Schedule B hereto.
"Distribution Agreement" shall mean that certain Distribution Agreement,
dated as of June 12, 1997, by and among GI, NextLevel Systems, and CommScope,
including any amendments, exhibits, and schedules thereto.
"Distributions" shall have the meaning set forth in the recitals.
"Distribution Time" shall mean the time at which the NextLevel Systems
Distribution shall become effective.
"Exclusive Policies" shall mean the NextLevel Systems Exclusive Policies
and the CommScope Exclusive Policies.
"Group" shall have the meaning set forth in the Distribution Agreement.
"GS Assets" shall have the meaning set forth in the Distribution
Agreement.
"GS Business" shall have the meaning set forth in the Distribution
Agreement.
"GS Covered Person" shall mean each member of the GS Group and any other
Person, in each case to the extent any Policy addressed herein purports to
provide insurance coverage in respect of any claims, suits, actions,
proceedings, injuries, losses, liabilities, occurrences, damages, or expenses
incurred by such Person arising out of, in connection with, or otherwise related
to the Power Semiconductor Business or the discontinued GI operations.
"GS Group" shall have the meaning set forth in the Distribution Agreement.
"GS Liabilities" shall have the meaning set forth in the Distribution
Agreement.
"Insurance Administration" shall mean, with respect to any Policy, the
accounting for premiums, defense costs, indemnity payments, deductibles, and
retentions, as appropriate, under the terms and conditions of such Policy, and
the distribution of Insurance Proceeds.
"Insurance Proceeds" shall mean those monies, net of any applicable
premium adjustment, deductible, retention, or similar cost paid or held by or
for the benefit of an insured party which are either (i) received by an insured
from an insurance carrier, or (ii) paid by an insurance carrier on behalf of an
insured.
"Letters of Credit" shall have the meaning set forth in Section 7.1
hereof.
"NextLevel Systems Assets" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Business" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Common Stock" shall have the meaning set forth in the
recitals. "NextLevel Systems Covered Person" shall mean each member of the
NextLevel Systems Group and any other Person, in each case to the extent any
Policy addressed herein purports to provide insurance coverage in respect of any
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
damages, or expenses incurred by such Person arising out of, in connection, with
or otherwise related to the Communications Business.
"NextLevel Systems Distribution" shall have the meaning set forth in the
recitals.
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"NextLevel Systems Distribution Date" shall have the meaning set forth in
the Distribution Agreement.
"NextLevel Systems Exclusive Policies" shall mean all current and past
Policies, including but not limited to the current Policies set forth on
Schedule E hereto, which show NextLevel Systems, any other member of the
NextLevel Systems Group, or any of their respective predecessors (or such entity
and its subsidiaries and/or affiliates) as the named insured and do not purport
to relate to the Cable Manufacturing Business or the Power Semiconductor
Business or to cover any CommScope Covered Person or GS Covered Person,
excluding (i) any directors' and officers' liability policies which are or were
maintained by or on behalf of NextLevel Systems, and (ii) any
Retrospective-Rated Policy.
"NextLevel Systems Group" shall have the meaning set forth in the
Distribution Agreement.
"NextLevel Systems Liabilities" shall have the meaning set forth in the
Distribution Agreement.
"Occurrence-Based" shall mean, with respect to any Policy, coverage
provided by such Policy for acts, omissions, damages, or injuries which occur or
are alleged to have occurred during a period specified in such Policy.
"Occurrence-Based Policies" shall mean those current and past Policies
which are Occurrence-Based in nature, including but not limited to those
policies identified on Schedule B hereto, which show GI or any of its
predecessors (or such entity and its subsidiaries and/or affiliates) as the
named insured, but excluding (i) any directors' and officers' liability policies
which are or were maintained by or on behalf of GI, (ii) the Exclusive Policies,
and (iii) the Retrospective-Rated Policies.
"Person" shall have the meaning set forth in the Distribution Agreement.
"Policies" means insurance policies and insurance contracts of any kind
(other than life and benefits policies or contracts), including, without
limitation, primary, excess, and umbrella policies, commercial general liability
policies, fiduciary liability, automobile, aircraft, property and casualty,
workers' compensation, and employee dishonesty insurance policies, bonds, and
self-insurance and captive insurance company arrangements, together with the
rights, benefits, and privileges thereunder.
"Power Semiconductor Business" shall mean, when unqualified, the GS
Assets, GS Liabilities, and/or GS Business.
"Retrospective-Rated Policies" shall mean the Policies identified on
Schedule C hereto, together with all other current and past primary workers'
compensation, automobile liability, and general liability (including products
liability) Policies showing GI, any member of the NextLevel Systems Group, the
CommScope Group, or the GS Group, or any of their respective predecessors (or
such entity and its subsidiaries and/or affiliates) as the insured party and
which are cost plus, fronting, high deductible, or retrospective premium
programs.
"Subsidiary" shall have the meaning set forth in the Distribution
Agreement.
"Termination Time" shall mean with respect to coverage under any Policy
for any Covered Person, the time as of which coverage under said Policy is to be
cancelled with respect to that Covered Person pursuant to the terms hereof.
1.2 References. References herein to a "Schedule" are, unless otherwise
specified, to one of the Schedules attached to this Agreement, and references to
an "Article" or a "Section" are, unless otherwise specified, to one of the
Articles or Sections, respectively, of this Agreement.
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ARTICLE II
CANCELLATION OF POLICIES
2.1 Current Occurrence-Based Policies. On or prior to the NextLevel
Systems Distribution Date, GI shall take or cause to be taken all necessary or
appropriate action to cause the Current Occurrence-Based Policies identified on
Schedule B hereto to be cancelled as of, and to afford no future coverage to the
insureds thereunder except as otherwise contemplated by this Agreement from and
after, the Distribution Time, with respect to any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person.
2.2 Current Claims-Made Policies. On or prior to the NextLevel Systems
Distribution Date, GI shall take or cause to be taken all necessary or
appropriate action to cause the Current Claims-Made Policies identified on
Schedule A hereto to be cancelled as of, and to afford no future coverage to the
insureds thereunder except as otherwise contemplated by this Agreement from and
after, the Distribution Time, with respect to any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person.
ARTICLE III
COVERAGE
3.1 Maintenance of Coverage Through Distribution Time. From the date
hereof up to the Distribution Time, the parties hereto agree to maintain (and to
cause each member of their respective Groups over which they have legal or
effective direct or indirect control to maintain) in full force and effect the
Occurrence-Based Policies, Claims-Made Policies, and Retrospective-Rated
Policies for the benefit of any NextLevel Systems Covered Person, CommScope
Covered Person, and GS Covered Person to which such Policies by their terms
relate.
3.2 Coverage Under Occurrence-Based Policies.
(a) Termination of Coverage Under Occurrence-Based Policies. The parties
hereto agree to take or cause to be taken all necessary or appropriate action so
that, notwithstanding anything to the contrary contained in any Occurrence-Based
Policy, coverage under the Occurrence-Based Policies shall be terminated so that
none of the Occurrence-Based Policies shall afford any future coverage to any
NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person
for occurrences which take place or are alleged to have taken place on or after
the Distribution Time, with respect to any NextLevel Systems Covered Person,
CommScope Covered Person, or GS Covered Person.
(b) Access to Policies Following Termination Time. Notwithstanding the
provisions of Section 3.2(a) hereof, from and after their respective Termination
Time under any Occurrence-Based Policy each NextLevel Systems Covered Person,
CommScope Covered Person, and GS Covered Person shall have the right to coverage
and to make or pursue a claim for coverage under such Occurrence-Based Policy
with respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, and damages incurred or claimed to have been incurred
prior to such Termination Time, as well as all expenses that relate to such
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
and damages, whether incurred prior to or after such Termination Time, by such
Covered Person in or in connection with the operation of, or otherwise related
to, (i) the Communications Business, with respect to any NextLevel Systems
Covered Person, (ii) the Cable Manufacturing Business, with respect to any
CommScope Covered Person, or (iii) the Power Semiconductor Business, with
respect to any GS Covered Person, in each case subject to the terms, conditions,
and limitations of such Occurrence-Based Policy, provided, however, that nothing
in this Section 3.2(b) shall be deemed to constitute or reflect an assignment of
any such Occurrence-Based Policy.
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(c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered
Person, or GS Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under an Occurrence-Based Policy may claim for such insurance
as and to the extent that such insurance is available up to the full extent of
the applicable limits of liability under such Occurrence-Based Policy.
Notwithstanding the foregoing, each of NextLevel Systems, CommScope, and GS
shall, to the extent any of its respective Covered Persons shall have exhausted
all or any portion of the limits of liability, if any, under any
Occurrence-Based Policy, use its best efforts to obtain and maintain in full
force and effect a Policy in replacement of the limits of liability exhausted
under such Occurrence-Based Policy for all claims which would be covered thereby
absent such exhaustion (including any pending or known claims), and be
responsible for and pay all costs and expenses in connection therewith, which
Policy shall provide at least the same coverage, and contain terms and
provisions which are no less favorable to the insured parties, as existed under
the Occurrence-Based Policy in respect of which such replacement is obtained,
provided, however, that no party hereto shall be required to expend more than an
amount equal to 350% of the original premium paid with respect to the portion of
the limits of liability under such Occurrence-Based Policy (determined on a pro
rata basis) exhausted by such party's respective Covered Persons to obtain a
replacement Policy as contemplated hereby, it being understood that each party
hereto shall nonetheless be required to obtain the maximum amount of replacement
coverage available for such 350% premium amount in accordance with the terms and
provisions of this sentence. If at any time a party (an "Impairing Party")
hereto becomes aware (such party being deemed to be aware whenever any of the
directors or executive officers of such party or any other member of its
respective Group become aware) of a claim or potential claim against any of such
Impairing Party's respective Covered Persons, which claim is reasonably likely
to exhaust (but has not yet exhausted) all or any portion of the aggregate
limits of liability, if any, under any Occurrence-Based Policy (a "Potential
Impairment"), such Impairing Party shall promptly provide notice of such
Potential Impairment to the other parties hereto. If such Potential Impairment
actually occurs, the Impairing Party shall have five business days thereafter to
obtain a Policy in replacement of such limits of liability (in accordance with
the terms and provisions of the second preceding sentence).
3.3 Coverage Under Claims-Made Policies.
(a) Termination of Coverage Under Claims-Made Policies. The parties hereto
agree to take or cause to be taken all necessary or appropriate action so that,
notwithstanding anything to the contrary contained in any Claims-Made Policy,
coverage under the Claims-Made Policies shall be terminated so that no
Claims-Made Policy shall afford any future coverage to any NextLevel Systems
Covered Person, CommScope Covered Person, or GS Covered Person for claims which
have not been reported or made as provided by the terms of such Claims-Made
Policy prior to the Distribution Time, with respect to any NextLevel System
Covered Person, CommScope Covered Person, or GS Covered Person.
(b) Access to Policies Following Termination Time. Notwithstanding the
provisions of Section 3.3(a) hereof, from and after their respective Termination
Time under any Claims-Made Policy each NextLevel Systems Covered Person,
CommScope Covered Person, and GS Covered Person shall have the right to coverage
and to make or pursue a claim for coverage under such Claims-Made Policy with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, damages, and expenses which are reported in accordance
with the terms of such Claims-Made Policy prior to such Termination Time and
which are incurred or claimed to be incurred by such Covered Person in or in
connection with the operation of, or otherwise related to, (i) the
Communications Business, with respect to any NextLevel Systems Covered Person,
(ii) the Cable Manufacturing Business, with respect to any CommScope Covered
Person, or (iii) the Power Semiconductor Business, with respect to any GS
Covered Person, in each case subject to the terms, conditions, and limitations
of such Claims-Made Policy, provided, however, that nothing in this Section
3.3(b) shall be deemed to constitute or reflect an assignment of any such
Claims-Made Policy.
(c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered
Person, or GS Covered Person entitled hereunder to make or pursue a claim for
insurance coverage under a Claims-Made Policy may claim for such insurance as
and to the extent that such insurance is available up to the full extent of the
applicable limits of
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liability under such Claims-Made Policy. Notwithstanding the foregoing, each of
NextLevel Systems, CommScope, and GS shall, to the extent any of its respective
Covered Persons shall have exhausted all or any portion of the limits of
liability, if any, under any Claims-Made Policy, use its best efforts to obtain
and maintain in full force and effect at its own cost a Policy in replacement of
the limits of liability exhausted under such Claims-Made Policy for all claims
which would be covered thereby absent such exhaustion (including any pending or
known claims), and be responsible for and pay all costs and expenses in
connection therewith, which Policy shall provide at least the same coverage, and
contain terms and provisions which are no less favorable to the insured parties,
as existed under the Claims-Made Policy in respect of which such replacement is
obtained, provided, however, that no party hereto shall be required to expend
more than an amount equal to 350% of the original premium paid with respect to
the portion of the limits of liability under such Claims-Made Policy (determined
on a pro rata basis) exhausted by such party's respective Covered Persons to
obtain a replacement Policy as contemplated hereby, it being understood that
each party hereto shall nonetheless be required to obtain the maximum amount of
replacement coverage available for such 350% premium amount in accordance with
the terms and provisions of this sentence. If at any time an Impairing Party
becomes aware (such party being deemed to be aware whenever any of the directors
or executive officers of such party or any other member of its respective Group
become aware) of a claim or potential claim against any of such Impairing
Party's respective Covered Persons which claim is reasonably likely to exhaust
(but has not yet exhausted) all or any portion of the aggregate limits of
liability, if any, under any Claims-Made Policy, such Impairing Party shall
promptly provide notice of such Potential Impairment to the other parties
hereto. If such Potential Impairment actually occurs, the Impairing Party shall
have five business days thereafter to obtain a Policy in replacement of such
limits of liability (in accordance with the terms and provisions of the second
preceding sentence).
3.4 Coverage Under Retrospective-Rated Policies.
(a) Termination of Coverage at Distribution Time. On or prior to the
NextLevel Systems Distribution Date, the parties hereto agree to take or cause
to be taken all necessary or appropriate action so that, except as otherwise
contemplated by the terms of this Agreement and notwithstanding anything to the
contrary contained in any Retrospective-Rated Policy, coverage under the
Retrospective-Rated Policies shall be terminated so that none of the
Retrospective-Rated Policies shall afford any future coverage to any NextLevel
Systems Covered Person, CommScope Covered Person, or GS Covered Person for
occurrences which take place or are alleged to have taken place on or after the
Distribution Time, with respect to any NextLevel Systems Covered Person,
CommScope Covered Person, or GS Covered Person.
(b) Access to Policies and Policy Limits. Notwithstanding the provisions
of Section 3.4(a) hereof, from and after their respective Termination Time under
any Retrospective-Rated Policy each NextLevel Systems Covered Person, CommScope
Covered Person, and GS Covered Person shall have the right to coverage and to
make or pursue a claim for coverage under such Retrospective-Rated Policy with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, occurrences, and damages incurred or claimed to have been incurred
prior to such Termination Time, as well as all expenses that relate to such
claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences,
and damages, whether incurred prior to or after such Termination Time, by such
Covered Person in or in connection with the operation of, or otherwise related
to, (i) the Communications Business, with respect to any NextLevel Systems
Covered Person, (ii) the Cable Manufacturing Business, with respect to any
CommScope Covered Person, or (iii) the Power Semiconductor Business, with
respect to any GS Covered Person, in each case subject to the terms, conditions,
and limitations of such Retrospective-Rated Policy, provided, however, that
nothing in this Section 3.4(b) shall be deemed to constitute or reflect an
assignment of any such Retrospective-Rated Policy. Any NextLevel Systems Covered
Person, CommScope Covered Person, or GS Covered Person may claim insurance
coverage under a Retrospective-Rated Policy as and to the extent that such
insurance is available up to the full extent of the applicable limits of
liability under such Retrospective-Rated Policy.
3.5 Coverage Under Exclusive Policies. From and after the Distribution
Time, coverage under any Exclusive Policy may (at the option of the party or
parties shown as the named insured thereunder, and subject to the rights of the
insurers thereunder) continue with respect to any claims, suits, actions,
proceedings, injuries, losses, liabilities,
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occurrences, damages, or expenses incurred or claimed to have been incurred
prior to, on, or after the Distribution Time, subject to the terms, conditions,
and limitations of such Exclusive Policy, provided, however, that (i) no member
of the NextLevel Systems Group or GS Group shall have any liability or
obligation with respect to any of the CommScope Exclusive Policies, and (ii) no
member of the CommScope Group or GS Group shall have any liability or obligation
with respect to any of the NextLevel Systems Exclusive Policies.
3.6 Assistance in Obtaining Additional Coverage. Each of the parties
hereto agrees to use its reasonable best efforts to assist the other parties in
the transition to obtain separate insurance coverage for the NextLevel Systems
Group, CommScope Group, and GS Group from and after the NextLevel Systems
Distribution Date, which assistance shall include, but shall not be limited to,
the identification of potential insurance carriers.
3.7 Discovery Periods. Except as specified in this Section 3.7 and except
as the parties hereto may otherwise agree, the parties hereto acknowledge and
agree that when this Agreement calls for the termination of insurance coverage
under a Claims-Made Policy, such insurance coverage shall be terminated as of
the time specified and that no discovery period of coverage in respect of such
Policy shall be provided thereunder, notwithstanding anything to the contrary
contained herein or in any such Policy. Notwithstanding the foregoing, GS shall
use its reasonable best efforts to cause the relevant insurers under the
Claims-Made Policies providing directors' and officers' liability insurance to
offer to GS the maximum discovery period of coverage available under said
Claims-Made Policies, and/or to purchase run-off coverage for the liabilities
insured under said Claims-Made Policies with an aggregate limitation of
liability separate from the limitation of liability under said Claims-Made
Policies. All premiums, costs, and other charges with respect to any discovery
period of coverage provided under any Claims-Made Policy or any run-off coverage
for the liabilities insured under any Claims-Made Policy shall be the sole
responsibility of (i) NextLevel Systems, with respect to coverage for NextLevel
Systems Covered Persons, (ii) CommScope, with respect to coverage for CommScope
Covered Persons, and (iii) GS, with respect to coverage for GS Covered Persons.
Each party hereto shall not (and shall not permit any of its respective Covered
Persons over which it has legal or effective direct or indirect control to) take
any action contrary to the provisions of this Section 3.7.
3.8 Further Assurances. Each of NextLevel Systems, CommScope, and GS
agrees to take (and to cause each of its respective Covered Persons over which
it has direct or indirect legal or effective control to take) all such actions
as are necessary or appropriate, including the provision of notice to all
relevant insurance carriers, to effectuate the purposes of this Article III.
ARTICLE IV
PREMIUMS, DEDUCTIBLES, AND RELATED MATTERS
4.1 Occurrence-Based and Claims-Made Policies.
(a) Premiums in Respect of Occurrence-Based and Claims-Made Policies. From
and after the Distribution Time, all premiums, costs, and other charges with
respect to any Occurrence-Based Policy or Claims-Made Policy shall be paid by
GS, provided, however, that (i) NextLevel Systems shall promptly reimburse GS in
full for any such premiums, costs, or other charges in respect of the cover
afforded under any such Occurrence-Based Policy or Claims-Made Policy to any
NextLevel Systems Covered Person, and (ii) CommScope shall promptly reimburse GS
in full for any such premiums, costs, or other charges in respect of the cover
afforded under any such Occurrence-Based Policy or Claims-Made Policy to any
CommScope Covered Person, in each case determined in accordance with GI's
historical practices with respect to the allocation of such premiums, costs, and
charges prior to the date hereof. All amounts refunded from and after the
Distribution Time by insurance carriers in respect of premiums previously paid
under any Occurrence-Based Policy or Claims-Made Policy shall be the sole
property of NextLevel Systems, provided, however, that NextLevel Systems shall
promptly pay to CommScope or GS, as applicable, upon receipt thereof from an
insurance carrier, the CommScope Group's or the GS Group's respective share of
any such amounts refunded (such respective share to be determined in accordance
with GI's historical practices with respect
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to the allocation of insurance premiums among its Subsidiaries and divisions
prior to the date hereof). Each of CommScope and GS shall (and shall cause each
member of its respective Group over which it has direct or indirect legal or
effective control to) promptly pay to NextLevel Systems any such refunded
amounts actually received by it to which NextLevel Systems is entitled pursuant
hereto.
(b) Deductibles, Retentions, and Self-Insured Amounts. From and after the
Distribution Time, all deductibles, retentions, and self-insured amounts with
respect to coverage or a claim for coverage under any Occurrence-Based Policy or
Claims-Made Policy shall be the sole responsibility of (i) NextLevel Systems,
with respect to any coverage or claim for coverage in respect of any NextLevel
Systems Covered Person, (ii) CommScope, with respect to any coverage or claim
for coverage in respect of any CommScope Covered Person, and (iii) GS, with
respect to any coverage or claim for coverage in respect of any GS Covered
Person.
4.2 Retrospective-Rated Policies.
(a) Premiums, Costs, and Other Charges. From and after the Distribution
Time, all premiums, costs, and other charges with respect to any
Retrospective-Rated Policy, including claim payments and associated expenses
under cost plus or fronting policies or retrospective-rated premium programs,
shall be the sole responsibility of and be paid by GS, provided, however, that
(i) NextLevel Systems shall promptly reimburse GS for all such premiums, costs,
and other charges paid by GS (including amounts paid by GS as reimbursement in
respect of amounts drawn under Letters of Credit maintained by GS pursuant to
Section 7.1 hereof but excluding LC Maintenance Fees defined in Section 7.1
hereof) in respect of coverage provided for any NextLevel Systems Covered Person
to the extent such premiums, costs, and other charges exceed the amount of the
Claims Deposit, and (ii) CommScope shall promptly reimburse GS for all such
premiums, costs, and other charges paid by GS (including amounts paid by GS as
reimbursement in respect of amounts drawn under Letters of Credit maintained by
GS pursuant to Section 7.1 hereof but excluding LC Maintenance Fees defined in
Section 7.1 hereof) in respect of coverage provided for any CommScope Covered
Person to the extent such premiums, costs, and other charges exceed the amount
of the Claims Deposit. All amounts refunded from and after the Distribution Time
by insurance carriers pursuant to the terms of any Retrospective-Rated Policy
incepting before April 1, 1991 shall be shared equally by GS and NextLevel
Systems, and all amounts refunded from and after the Distribution Time by
insurance carriers pursuant to the terms of any Retrospective-Rated Policy
incepting on or after April 1, 1991 shall be shared equally by GS, NextLevel
Systems, and CommScope.
(b) Deductibles, Retentions, and Self-Insured Amounts. From and after the
Distribution Time, all deductibles, retentions, and self-insured amounts with
respect to coverage or a claim for coverage under any Retrospective-Rated Policy
shall be the sole responsibility of (i) NextLevel Systems, with respect to any
coverage or claim for coverage in respect of any NextLevel Systems Covered
Person, (ii) CommScope, with respect to any coverage or claim for coverage in
respect of any CommScope Covered Person, and (iii) GS, with respect to any
coverage or claim for coverage in respect of any GS Covered Person.
(c) Conversion to Guaranteed-Cost. From and after the Distribution Time,
(i) GS shall be authorized to negotiate with the insurance carrier of any
Retrospective-Rated Policy to convert such Policy to provide coverage in respect
of GS Covered Persons on a guaranteed-cost basis; (ii) NextLevel Systems shall
be authorized to negotiate with the insurance carrier of any Retrospective-Rated
Policy to convert such Policy to provide coverage in respect of NextLevel
Systems Covered Persons on a guaranteed-cost basis, and (iii) CommScope shall be
authorized to negotiate with the insurance carrier of any Retrospective-Rated
Policy to covert such Policy to provide coverage in respect of CommScope Covered
Persons on a guaranteed-cost basis, provided, however, that (i) GS shall not be
authorized to negotiate the conversion of any Retrospective-Rated Policy in
respect of NextLevel Systems Covered Persons or CommScope Covered Persons, (ii)
NextLevel Systems shall not be authorized to negotiate the conversion of any
Retrospective-Rated Policy in respect of GS Covered Persons or CommScope Covered
Persons, and (iii) CommScope shall not be authorized to negotiate the conversion
of any Retrospective-Rated Policy in respect of GS Covered Persons or NextLevel
Systems Covered Persons.
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4.3 Exclusive Policies. From and after the Distribution Time, all
deductibles, retentions, self-insured amounts, premiums, and other costs with
respect to any Exclusive Policy or claim for coverage thereunder shall be the
sole responsibility of, and all refunded premiums with respect to any Exclusive
Policy shall be the sole property of, (i) NextLevel Systems, with respect to any
NextLevel Systems Exclusive Policy, and (ii) CommScope, with respect to any
CommScope Exclusive Policy.
4.4 Excess Costs and Settlements. Each Covered Person shall be responsible
for any excess costs and expenses relating to its respective claims permitted
hereunder (or those of any member of its respective Group) under the Common
Policies, including defense costs to the extent such defense costs are not
covered under such Common Policies, and shall be responsible for obtaining or
reviewing the appropriateness of releases upon settlement of such claims.
4.5 Effect on Other Agreements. Notwithstanding anything to the contrary
contained herein, nothing in this Article IV shall be construed to alter or in
any way limit any rights to indemnity provided in the Distribution Agreement or
in any other Ancillary Agreement (as such term is defined in the Distribution
Agreement).
ARTICLE V
ADMINISTRATION
5.1 Occurrence-Based and Claims-Made Policies.
(a) Administration. From and after the NextLevel Systems Distribution
Date, Claims Administration and Insurance Administration with respect to the
Occurrence-Based Policies and Claims-Made Policies shall be the responsibility
of (i) NextLevel Systems, with respect to any coverage or claim for coverage of
any NextLevel Systems Covered Person, (ii) CommScope, with respect to any
coverage or claim for coverage of any CommScope Covered Person, and (iii) GS,
with respect to any coverage or claim for coverage of any GS Covered Person.
Each of NextLevel Systems and CommScope shall (and shall cause each of its
respective Covered Persons over which it has direct or indirect legal or
effective control to) provide prompt notice to GS of all actions taken by it
with respect to the Claims Administration and Insurance Administration for the
Occurrence-Based Policies and Claims-Made Policies as contemplated by this
Section 5.1. Each party hereto shall (and shall cause each other member of its
Group over which it has direct or indirect legal or effective control to) take
all necessary or appropriate action, if any, to delegate Claims Administration
and Insurance Administration with respect to the Occurrence-Based Policies and
Claims-Made Policies to any other party who is to assume such responsibilities
pursuant hereto, but, to the extent any party hereto (a "Precluded Party") is
not permitted by the terms of any such policy to engage in Claims Administration
or Insurance Administration with respect to coverage or claims for its
respective Covered Persons, the party permitted to engage in Claims
Administration or Insurance Administration shall do so with respect to coverage
or claims for the Precluded Party's Covered Persons only upon the express
authorization and direction of such Precluded Party. Each party hereto shall be
responsible for its own disbursements and out-of-pocket expenses and the direct
and indirect costs of its employees or agents relating to Claims Administration
and Insurance Administration contemplated by this Section 5.1. Notwithstanding
anything to the contrary contained herein, GS shall have the right to undertake
at its own cost and expense Claims Administration and/or Insurance
Administration with respect to any coverage or claim for coverage of any
NextLevel Systems Covered Person or CommScope Covered Person.
(b) Effect of Administrative Responsibilities. Each of NextLevel Systems,
CommScope, and GS acknowledges and agrees that each other party's
responsibilities under this Section 5.1 for Claims Administration and Insurance
Administration shall not relieve any party submitting an insured claim under any
Occurrence-Based Policy or Claims-Made Policy of (a) the primary responsibility
for reporting such insured claim accurately, completely, and in a timely manner,
or (b) any other right or responsibility which such party may have pursuant to
the terms of any Occurrence-Based Policy or Claims-Made Policy.
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5.2 Retrospective-Rated Policies. From and after the Distribution Time, GS
shall be solely responsible for Claims Administration and Insurance
Administration with respect to the Retrospective-Rated Policies including,
without limitation, the administration of all billings associated with the
Retrospective-Rated Policies by the insurance carriers thereunder.
Notwithstanding the foregoing, each of NextLevel Systems and CommScope shall
retain the right to, at its option, direct the management, defense, reporting,
and settlement of claims involving its respective Covered Persons under the
Retrospective-Rated Policies. GS shall not settle any claim against any
NextLevel Systems Covered Person or CommScope Covered Person under any
Retrospective-Rated Policy without the consent of NextLevel Systems or
CommScope, respectively.
ARTICLE VI
PROCEEDS
6.1 Occurrence-Based and Claims-Made Policies. From and after the
NextLevel Systems Distribution Date, Insurance Proceeds received with respect to
claims, costs, and expenses under the Occurrence-Based Policies and Claims-Made
Policies shall be paid to the Covered Person to which such Insurance Proceeds
are due pursuant to the terms of such Policies.
6.2 Retrospective-Rated Policies. From and after the NextLevel Systems
Distribution Date, Insurance Proceeds received with respect to claims, costs,
and expenses under the Retrospective-Rated Policies shall be paid, as
appropriate, to the Covered Person to which such Insurance Proceeds are due
pursuant to the terms of such Policies.
6.3 Return of Proceeds. Each of NextLevel Systems, CommScope, and GS shall
(and shall cause each of its respective Covered Persons over which it has direct
or indirect legal or effective control to) promptly pay to each other party any
Insurance Proceeds actually received by it to which any of such other party's
Covered Persons are entitled pursuant hereto, which other party shall then
distribute such Insurance Proceeds to the Covered Person to which they are due
pursuant hereto.
ARTICLE VII
LETTERS OF CREDIT AND SURETY BONDS
7.1 Maintenance. (a) Letters of Credit. From and after the NextLevel
Systems Distribution Date, to secure obligations under the Retrospective-Rated
Policies relating to periods preceding the Distribution Time, GS shall, for such
time as may be required by law or the terms of any Retrospective-Rated Policy,
maintain in full force and effect the letters of credit identified on Schedule
7.1-A hereto or, as necessary or appropriate, substitute therefor and maintain
in full force and effect letters of credit acceptable to the insurance carriers
and/or surety under the Retrospective-Rated Policies issued by comparably rated
lenders containing substantially identical terms and conditions (collectively,
the "Letters of Credit"). GS shall be solely responsible for the actual and
reasonable administrative fees and expenses (the "LC Maintenance Fees") in
respect of the issuance and maintenance of the Letters of Credit and shall not
obtain reimbursement for any portion thereof from either NextLevel Systems or
CommScope.
(b) Surety Bonds. The parties hereto acknowledge that GI is obligated to
indemnify the sureties under certain performance bonds and other surety
instruments that secure obligations of the NextLevel Systems Business, NextLevel
Systems Group, CommScope Business, CommScope Group, GS Business, and/or GS Group
including, but not limited to, the surety instruments identified on Schedule
7.1-B hereto (the "GI-Provided Bonds"). From and after the Distribution Time, GS
shall maintain such GI-Provided Bonds in place for such time as may be required
by law. To the extent possible on commercially reasonable terms, each of
NextLevel Systems and CommScope shall use reasonable commercial efforts to
obtain a replacement for each GI-Provided Bond that
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secures obligations of the NextLevel Systems Business or NextLevel Systems
Group (in the case of NextLevel Systems) or the CommScope Business or CommScope
Group (in the case of CommScope) and to thereafter arrange for the release of GS
from the GI-Provided Bond which has been so replaced. If the surety under any
GI-Provided Bond is required to and does in fact perform according to the terms
of said GI-Provided Bond and GS is required to and does in fact indemnify such
surety in respect thereof, (i) NextLevel Systems shall reimburse GS for all
amounts actually paid by GS to such surety to the extent such amounts constitute
NextLevel Systems Liabilities, and (ii) CommScope shall reimburse GS for all
amounts actually paid by GS to such surety to the extent such amounts constitute
CommScope Liabilities.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement may not be terminated except upon the
written agreement of each of the parties hereto.
8.2 Further Assurances. If at any time after the NextLevel Systems
Distribution Date any further action is necessary or desirable to carry out the
purposes of this Agreement, each of NextLevel Systems, CommScope, and GS shall,
on the written request of any of them, take (or cause the appropriate member of
its Group over which it has direct or indirect legal or effective control to
take) all such reasonably necessary or desirable action. If subsequent to the
NextLevel Systems Distribution Date any Policy showing any member of the
NextLevel Systems Group, CommScope Group, or GS Group, or any of their
respective predecessors, as named insured is discovered which was in effect for
periods prior to the Distribution Time and has not been addressed by the
provisions of this Agreement, the parties hereto agree to negotiate in good
faith an arrangement with respect to such Policy which shall give, to the
fullest extent possible, effect to the purposes of this Agreement and the
transactions contemplated by the Distribution Agreement.
8.3 Cooperation. The parties hereto agree to use their reasonable best
efforts to cooperate with respect to the various insurance matters contemplated
by this Agreement. Each party hereto shall not (and shall not permit any of its
respective Covered Persons over which it has legal or effective direct or
indirect control to) take any action or permit any inaction that could
reasonably be expected to jeopardize or otherwise interfere with the rights of
any other party (or any of such other party's respective Covered Persons)
hereunder or the ability of any other party (or any of such other party's
respective Covered Persons) to collect any proceeds which might be available
under any of the Policies addressed herein in accordance with the terms of this
Agreement.
8.4 No Representations and Warranties. The parties hereto understand and
agree that no representation or warranty as to the existence, applicability, or
extent of insurance coverage for the Communications Business, the Cable
Manufacturing Business, or the Power Semiconductor Business under any Policy is
herein being made.
8.5 Limitation on Liability. Except as may be otherwise expressly provided
for herein, no party hereto shall be liable hereunder to another party or any of
such other party's Covered Persons for claims not reimbursed by insurers for any
reason not within the control of such party including, without limitation,
coinsurance provisions, deductibles, quota share deductibles, exhaustion of
aggregates, self-insured retentions, bankruptcy or insolvency of an insurance
carrier, Policy limitations or restrictions, any coverage disputes, any failure
to timely claim, or any defect in such claim or its processing.
8.6 Successors and Assigns. Except as otherwise expressly provided herein,
no party hereto may assign or delegate, whether by operation of law or
otherwise, any of such party's rights or obligations under or in connection with
this Agreement without the written consent of each other party hereto. No
assignment will, however, release the assignor of any of its obligations under
this Agreement or waive or release any right or remedy the other parties may
have against such assignor hereunder. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will be binding upon and
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enforceable against the respective successors and assigns of such party and will
be enforceable by and will inure to the benefit of the respective successors and
permitted assigns of such party.
8.7 Modification; Waiver; Severability. This Agreement may not be amended
or modified except in a writing executed by each of the parties hereto. The
failure by any party to exercise or a delay in exercising any right provided for
herein shall not be deemed a waiver of any right hereunder. Whenever possible,
each provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law, such provision will
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same Agreement.
8.9 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.10 Notices. All notices, demands, or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or five
business days after mailing by certified or registered mail, return receipt
requested and postage prepaid, to the recipient at such recipient's address as
indicated below:
NextLevel Systems: 8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attention: General Counsel
CommScope: 1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attention: General Counsel
GS: 10 Melville Park Road
Melville, New York 11747-3113
Attention: General Counsel
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
8.11 Survival. Each of the agreements of the parties herein shall survive
the NextLevel Systems Distribution Date.
8.12 No Third Party Beneficiaries. This Agreement is made solely for the
benefit of the parties hereto and their respective Covered Persons and shall not
give rise to any rights of any kind to any other third parties.
8.13 Other. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION,
VALIDITY, AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO BE
SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS
OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF
DELAWARE. This Agreement, together with the Distribution Agreement and other
Ancillary Agreements (as such term is defined in the Distribution Agreement),
constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.
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8.14 Sole Agent. In all matters relating to this Agreement, including the
resolution of any disputes relating to this Agreement between any members of
different Groups, (i) NextLevel Systems shall be the sole agent for the members
of the NextLevel Systems Group, (ii) CommScope shall be the sole agent for the
members of the CommScope Group, and (iii) GS shall be the sole agent for members
of the GS Group. No member of any Group shall have any authority to represent
itself in any such matter or to terminate such agency without the prior written
consent of each party hereto.
8.15 No Double Recovery. No provision of this Agreement shall be construed
to provide recovery to any Person for any costs, expenses, or other amounts for
which such Person has been fully compensated under any other provision of this
Agreement, any other agreement, or otherwise.
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IN WITNESS WHEREOF, the parties have made and entered into this Insurance
Agreement as of the date first set forth above.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.4
TAX SHARING AGREEMENT
among
GENERAL SEMICONDUCTOR, INC.
COMMSCOPE, INC.
and
NEXTLEVEL SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Definition of Terms 2
SECTION 2. Allocation of Tax Liabilities 7
SECTION 3. Proration of Taxes for Straddle Periods 11
SECTION 4. Preparation and Filing of Tax Returns 12
SECTION 5. Tax Payments and Intercompany Billings 17
SECTION 6. Tax Benefits 21
SECTION 7. Assistance and Cooperation 22
SECTION 8. Tax Records 23
SECTION 9. Tax Contests 24
SECTION 10. Effective Date; Termination of Prior Intercompany Tax 25
Allocation Agreements
SECTION 11. No Inconsistent Actions 25
SECTION 12. Survival of Obligations 27
SECTION 13. Employee Matters 27
SECTION 14. Treatment of Payments; Tax Gross Up 27
SECTION 15. Disagreements 29
SECTION 16. Late Payments 29
SECTION 17. Expenses 29
SECTION 18. General Provisions 30
(i)
<PAGE>
TAX SHARING AGREEMENT
This Agreement is entered into as of July 25, 1997 by and among General
Semiconductor, Inc., a Delaware corporation ("GS"), CommScope, Inc., a Delaware
corporation ("CommScope"), and NextLevel Systems, Inc. a Delaware corporation
("Systems"). Capitalized terms used in this Agreement are defined in Section 1
below. Unless otherwise indicated, all "Section" references in this Agreement
are to sections of this Agreement.
RECITALS
WHEREAS, as of the opening of business on the date hereof, General
Instrument Corporation ("GI") was the common parent of an affiliated group of
corporations, including CommScope and Systems, which has elected to file
consolidated Federal income tax returns; and
WHEREAS, the Companies have entered into a Distribution Agreement, dated
as of June 12, 1997, setting forth the corporate transactions pursuant to which
GI will distribute all of the outstanding shares of common stock of Systems to
GI shareholders, and Systems will distribute all of the outstanding shares of
CommScope to Systems shareholders, in transactions intended to qualify as
tax-free distributions under Section 355 of the Code; and
WHEREAS, as a result of the Systems Distribution, CommScope and Systems,
and their respective subsidiaries, will cease to be members of the affiliated
group of which GI is the common parent, effective as of the Distribution Date;
and
WHEREAS, as a result of the CommScope Distribution, CommScope and its
subsidiaries will cease to be members of the affiliated group of which Systems
is the common parent, effective as of the CommScope Distribution Date; and
WHEREAS, as of the Distribution Date, GI will be renamed General
Semiconductor, Inc.; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the
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transactions contemplated by the Distribution Agreement, and to provide for and
agree upon other matters relating to Taxes;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the Companies hereby agree as follows:
SECTION 1. Definition of Terms. For purposes of this Agreement
(including the recitals hereof), the following terms have the following
meanings:
"Accounting Cutoff Date" means, with respect to each of GS, CommScope and
Systems, any date as of the end of which there is a closing of the financial
accounting records for such entity.
"Accounting Firm" shall have the meaning provided in Section 15.
"Adjustment Request" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, or (b) any claim for refund or credit of
Taxes previously paid.
"Affiliate" means any entity that directly or indirectly is "controlled"
by the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Distributions.
"Agreement" shall mean this Tax Sharing Agreement.
"Allocated Federal Tax Liability" shall have the meaning provided in
Section 5.01(b)(i).
"Carryback" means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item which may or must be carried from one Tax
Period to another Tax Period under the Code or other applicable Tax Law.
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"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
"CommScope" means CommScope, Inc., a Delaware corporation, and any
successor.
"CommScope Distribution" means the CommScope Distribution, as that term is
defined in the Distribution Agreement.
"CommScope Distribution Date" means the CommScope Distribution Date, as
that term is defined in the Distribution Agreement.
"CommScope Group" means Commscope and its Affiliates as determined
immediately after the Distributions.
"Companies" means GS, CommScope, and Systems, collectively, and "Company"
means any one of GS, CommScope or Systems.
"Consolidated or Combined Income Tax" means any Income Tax computed by
reference to the assets and activities of members of more than one Group.
"Consolidated or Combined State Income Tax" means any State Income Tax
computed by reference to the assets and activities of members of more than one
Group.
"Consolidated Tax Liability" means, with respect to any GI Federal
Consolidated Return, the "tax liability of the group" as that term is used in
Treasury Regulation Section 1.1552-1(a)(1) (including applicable interest,
additions to the tax, additional amounts, and penalties as provided in the
Code), provided that such tax liability shall be treated as including any
alternative minimum tax liability under Code Section 55.
"Cumulative Federal Tax Payment" shall have the meaning provided in
Section 5.01(b)(ii).
"Distribution Agreement" means the agreement, as amended from time to
time, setting forth the corporate transactions required to effect the
distribution to GI shareholders of Systems common shares, and the distribution
to Systems shareholders of CommScope common shares, and to which this Tax
Sharing Agreement is attached as an exhibit.
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"Distribution Date" means the NextLevel Systems Distribution Date, as that
term is defined in the Distribution Agreement.
"Distributions" means the NextLevel Systems Distribution and the CommScope
Distribution, as such terms are defined in the Distribution Agreement.
"Federal Income Tax" means any Tax imposed by Subtitle A or F of the Code.
"Foreign Income Tax" means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulation Section 1.901-2.
"GI Delaware" means General Instrument Corporation of Delaware, a
Delaware corporation.
"GI Federal Consolidated Return" means any United States federal Tax
Return for the affiliated group (as that term is defined in Code Section 1504)
that includes GI or GS as the common parent and includes any member of the
CommScope Group or the Systems Group.
"GS" means General Semiconductor, Inc., a Delaware corporation, and any
successor.
"GS Group" means GS and its Affiliates, excluding any entity that is a
member of the Systems Group or the CommScope Group.
"Group" means the GS Group, the CommScope Group, and the Systems Group, as
the context requires.
"Income Tax" means any Federal Income Tax, State Income Tax, or Foreign
Income Tax.
"Payment Date" means (i) with respect to any GI Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Code Section 6655, the due date (determined without regard to extensions)
for filing the return determined under Code Section 6072, and the date the
return is filed, and (ii) with respect to any Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
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"Pre-Distribution Consolidated Tax Liability" means Consolidated Tax
Liability with respect to all Tax Periods ending on or prior to the Distribution
Date and in the case of the Tax Period which includes the Distribution Date, the
Consolidated Tax Liability computed as if the Distribution Date were the last
day of the Tax Period.
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period beginning the day after the Distribution Date.
"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.
"Prime Rate" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded daily on the basis of a
year of 365 or 366 (as applicable) days and actual days elapsed.
"Prior Intercompany Tax Allocation Agreements" means any written or oral
agreement or any other arrangements relating to allocation of Taxes existing
between or among the GS Group, the CommScope Group, and the Systems Group as of
the Distribution Date (other than this Agreement and other than any such
agreement or arrangement between or among persons who are members of a single
Group).
"Responsible Company" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
"Restructuring Tax" means the Taxes described in Sections 2.06(a)(ii) or
2.06(a)(iii) (relating to Tax resulting from any income or gain recognized as a
result of the Transactions).
"Ruling Request" means the letter filed by GI with the Internal Revenue
Service requesting a ruling from the Internal Revenue Service regarding certain
tax consequences of the Transactions (including all attachments, exhibits, and
other materials submitted with such ruling request letter) and any amendment or
supplement to such ruling request letter.
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"Separate Company Tax" means any Tax computed by reference to the assets
and activities of a member or members of a single Group.
"Straddle Period" means any Tax Period that begins on or before and ends
after the Distribution Date.
"State Income Tax" means any Tax imposed by any State of the United States
or by any political subdivision of any such State which is imposed on or
measured by net income, including state and local franchise or similar Taxes
measured by net income.
"Systems" means NextLevel Systems, Inc., a Delaware corporation, and
any successor.
"Systems Delaware" means NextLevel Systems of Delaware, Inc., a
Delaware corporation.
"Systems Group" means Systems and its Affiliates as determined
immediately after the Distributions.
"Systems Distribution" means the NextLevel Systems Distribution, as that
term is defined in the Distribution Agreement.
"Tainting Act" shall have the meaning provided in Section 11.
"Tax" or "Taxes" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
and any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing.
"Tax Authority" means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
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"Tax Benefit" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated tax payments), net
of any associated or corresponding item of income, gain or other increase in
otherwise required Tax payments.
"Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including any
administrative or judicial review of any claim for refund).
"Tax Item" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, and credit.
"Tax Law" means the law of any governmental entity or political
subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for which the Tax
is reported as provided under the Code or other applicable Tax Law.
"Tax Records" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax Authority.
"Tax Return" means any report of Taxes due, any claims for refund of Taxes
paid, any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.
"Transactions" means the transactions contemplated by the Distribution
Agreement (including the Corporate Restructuring Steps and Distributions, as
defined in such agreement).
"Transferred Communications Businesses" shall have the meaning provided
in Section 2.05.
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"Treasury Regulations" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
SECTION 2. Allocation of Tax Liabilities. The provisions of this Section 2
are intended to determine each Company's liability for Taxes with respect to
Pre-Distribution Periods, Straddle Periods, and Post-Distribution Periods. Once
the liability has been determined under this Section 2, Section 5 determines the
time when payment of the liability is to be made, and whether the payment is to
be made to the Tax Authority directly or to another Company.
2.01 General Rule
(a) Systems Liability. Systems shall indemnify and hold harmless the
GS Group and the CommScope Group from and against any liability for Taxes
which Systems is liable for under this Section 2.
(b) GS Liability. GS shall be liable for, and shall indemnify and
hold harmless the Systems Group and the CommScope Group from and against
any liability for Taxes which are allocated to GS under this Section 2.
(c) CommScope Liability. CommScope shall be liable for, and shall
indemnify and hold harmless the Systems Group and the GS Group from and
against any liability for, Taxes which are allocated to CommScope under
this Section 2.
2.02 Allocation of United States Federal Income Tax. Except as
otherwise provided in this Agreement:
(a) Allocation of Tax Relating to GI Federal Consolidated Returns.
With respect to any GI Federal Consolidated Return: (i) Systems shall be
liable for all Pre-Distribution Consolidated Tax Liability and (ii) GS
shall be liable for any Consolidated Tax Liability for the Tax Period
which includes the Distribution Date in excess of Systems' liability under
clause (i).
(b) Allocation of GI Federal Consolidated Return Tax Adjustments.
With respect to any GI Federal Consolidated Return: (i) Systems shall be
liable for any adjustments to the
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reported Pre-Distribution Consolidated Tax Liability and (ii) GS shall be
liable for any adjustments to the Consolidated Tax Liability for the Tax
Period which includes the Distribution Date in excess of Systems'
liability under clause (i).
2.03 Allocation of State Income Taxes. Except as otherwise provided in
this Agreement, State Income Taxes shall be allocated as follows:
(a) Separate Company Taxes. In the case of any State Income Tax
which is a Separate Company Tax that is apportioned under this Agreement
to a Pre-Distribution Period, Systems shall be liable (i) to GS for such
Tax imposed on any members of the GS Group, and (ii) to CommScope for such
Tax imposed on any members of the CommScope Group.
(b) Consolidated or Combined State Income Taxes.
(i) Allocation of Tax Reported on Tax Returns Filed After the
Distribution Date. Systems shall be liable for any Consolidated or
Combined State Income Tax that is apportioned under this Agreement
to a Pre-Distribution Period.
(ii) Allocation of Combined or Consolidated State Income Tax
Adjustments. Systems shall be liable for any adjustment to the
amount of Consolidated or Combined State Income Tax reported on any
Tax Return (or as previously adjusted) that is apportioned under
this Agreement to a Pre-Distribution Period.
2.04 Allocation of State Income Tax Effects of Federal Audit Adjustments.
Systems shall be liable for any State Income Taxes resulting from the
adjustments to GI Federal Consolidated Returns, to the extent that such State
Income Taxes are apportioned to a Pre-Distribution Period. In accordance with
Section 6, any Tax Benefit realized by the CommScope Group or by the GS Group as
a result of Systems' payment of such State Income Taxes shall be for the account
of Systems and shall be paid to Systems under Section 6. For example, if Systems
pays a State Income Tax liability of $100x related to adjustments to the Tax
Return of a member of the CommScope Group, and if such payment is available as a
deduction on the CommScope Group's Tax Return for Federal Income Tax, CommScope
shall pay to Systems the Federal Income Tax
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benefit attributable to the deduction (i.e., $35x assuming a 35% maximum
marginal tax rate under Code Section 11, and assuming the payment is treated as
a nondeductible dividend, capital contribution, or combination thereof under the
Code in accordance with Section 14 of this Agreement).
2.05 Allocation of Foreign Income Taxes and Other Taxes. Except as
provided in Section 2.06, all Taxes (including without limitation any Foreign
Income Taxes and any Taxes with respect to Post-Distribution Periods) other than
those specifically allocated pursuant to Sections 2.02 through 2.04 shall be
allocated based on the legal entity on which the legal incidence of the Tax is
imposed; provided, however, any such Taxes specifically related to the
businesses transferred by GI Delaware to Systems in the Transactions (the
"Transferred Communications Businesses") shall be allocated to Systems. Subject
to the proviso in the preceding sentence, as between the parties to this
Agreement, GS shall be liable for all Taxes imposed on any member of the GS
Group, Systems shall be liable for all Taxes imposed on any member of the
Systems Group and CommScope shall be liable for all Taxes imposed on any member
of the CommScope Group. The Companies believe that there is no Tax not
specifically allocated pursuant to Sections 2.02 through 2.04 relating to
Pre-Distribution Periods which is legally imposed on more than one legal entity
or is not solely allocable to the Transferred Communications Businesses (e.g.,
joint and several liability); however, if there is any such Tax, it shall be
allocated in accordance with past practices as reasonably determined by the
affected Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies.
2.06 Transaction and Other Taxes
(a) Systems Liability. Except as otherwise provided in this Section
2.06, Systems shall be liable for, and shall indemnify and hold harmless
the GS Group and the CommScope Group from and against any liability for,
all Taxes resulting from the Transactions, including:
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(i) Any sales and use, gross receipts, or other transfer
Taxes imposed on the transfers occurring pursuant to the
Transactions;
(ii) any Tax resulting from any income or gain recognized
under Treasury Regulation Sections 1.1502-13 or 1.1502-19 (or any
corresponding provisions of other applicable Tax Laws) as a result
of the Transactions; and
(iii) any Tax resulting from any income or gain recognized as
a result of any of the transactions contemplated by the Distribution
Agreement failing to qualify for tax-free treatment under Code
Sections 332, 351, 355, 361, or other provisions of the Code (as
contemplated in the Ruling Request) or other applicable Tax Laws.
(b) Indemnity for Inconsistent Acts. GS shall be liable for, and
shall indemnify and hold harmless the Systems Group and the CommScope
Group from and against any liability for, any Restructuring Tax (described
in subparagraphs (ii) and (iii) above) to the extent arising from any
breach of GS's representations or covenants under Section 11 or any
Tainting Act by GS or its Affiliates. CommScope shall be liable for, and
shall indemnify and hold harmless the Systems Group and the GS Group from
and against any liability for, any Restructuring Tax to the extent arising
from any breach of CommScope's representations or covenants under Section
11 or any Tainting Act by CommScope or its Affiliates.
(c) Indemnity for Representations. Systems shall be liable for, and
shall indemnify and hold harmless the GS Group and the CommScope Group
from and against any liability for, any Restructuring Tax to the extent
arising from the inaccuracy of any factual statements or representations
in connection with the Ruling Request, but only to the extent such
inaccuracy arises from facts in existence prior to the Distribution Date,
and excluding any inaccuracy with respect to any statements or
representations relating to CommScope or its Affiliates or any plan or
intention on the part of CommScope or its Affiliates as to actions to be
taken at or subsequent to the Distribution Date. CommScope shall be liable
for, and shall indemnify and hold harmless the Systems Group and the GS
Group from and against any liability for, any
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Restructuring Tax to the extent arising from the inaccuracy of any factual
statements or representations relating to the CommScope or its Affiliates
in connection with the Ruling Request.
2.07 Application to Interim Period Between Distributions. The parties
intend that Systems and CommScope will file consolidated and combined Income Tax
Returns for the period beginning on the day after the Systems Distribution and
ending on the date of the CommScope Distribution. In connection with such
period, Systems and CommScope intend that the principles of this Agreement (with
Systems having the role of both Systems and, as applicable, GS) shall apply
thereto mutatis mutandis, except as the parties hereto may otherwise agree.
SECTION 3. Proration of Taxes for Straddle Periods
3.01 General Method of Proration. In the case of any Straddle Period, Tax
Items shall be apportioned between Pre-Distribution Periods and
Post-Distribution Periods in accordance with the principles of Treasury
Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the
Companies. No election shall be made under Treasury Regulation Section
1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items). If the
Distribution Date is not an Accounting Cutoff Date, the provisions of Treasury
Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the
items (other than extraordinary items) for the month which includes the
Distribution Date.
3.02 Transaction Treated as Extraordinary Item. In determining the
apportionment of Tax Items between Pre-Distribution Periods and
Post-Distribution Periods, any Tax Items relating to the Transactions shall be
treated as an extraordinary item described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and
any Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be
allocated to Pre-Distribution Periods.
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SECTION 4. Preparation and Filing of Tax Returns
4.01 General. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. The
Companies shall provide, and shall cause their Affiliates to provide, assistance
and cooperate with one another in accordance with Section 7 with respect to the
preparation and filing of Tax Returns, including providing information required
to be provided in Section 7.
4.02 Pre-Distribution Period and Straddle Period Tax Returns. All Tax
Returns required to be filed for Pre-Distribution Periods or Straddle
Periods, if not filed by the Distribution Date, shall be:
(1) prepared and filed by Systems, in the case of any Tax Returns
relating to a Consolidated or Combined Income Tax;1 and
(2) prepared and filed, or caused to be prepared and filed, by the
Group to which such Tax Return relates in all other cases.
Each of GS and CommScope shall, for each Tax Period or portion thereof for
which a member of the GS Group or the CommScope Group, respectively, is included
in a Tax Return described in clause (1) of the preceding sentence, provide
Systems with (i) a true and correct tax return for its Group together with an
accompanying computation of Tax liability of its Group, (ii) separate tax
returns for each member of its Group together with accompanying computations of
the separate tax return Tax liabilities of each member of its Group, and (iii) a
reconciliation of book income to federal taxable income for each member of its
Group. GS and CommScope each hereby agrees to use its best efforts to provide
Systems with such returns and computations no later than the first day of the
sixth month following the end of the period to which such returns and
computations relate, but in any event shall provide such returns and
computations to Systems
- --------
1 Systems may prepare these Tax Returns under the Transition Services
Agreement.
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no later than the fifteenth day of the sixth month following the end of the
period to which such returns and computations relate. Each of GS and CommScope,
in preparing the above mentioned tax returns for its Group, shall not consider
or give effect to any (i) net operating loss carryover or carryover, (ii)
capital loss carryover or carryback, (iii) excess charitable deduction
carryover, (iv) excess tax carryover or carryback, or (v) other similar
carryback or carryback item.
4.03 Post-Distribution Period Tax Returns. Except as otherwise
provided in Section 4.02 with respect to Straddle Period Tax Returns:
(1) All Tax Returns related to the CommScope Group for
Post-Distribution Periods shall be prepared and filed (or caused to be
prepared and filed) by CommScope,
(2) All Tax Returns related to the Systems Group for
Post-Distribution Periods shall be prepared and filed (or caused to be
prepared and filed) by Systems.
(3) All Tax Returns related to the GS Group for Post-Distribution
Periods shall be prepared and filed (or caused to be prepared and filed)
by GS.
4.04 Manner of Filing.
(a) All Tax Returns filed or caused to be filed by GS, CommScope or
Systems after the Distribution Date shall be prepared on a basis that is
consistent with any IRS ruling obtained by GI in connection with the
restructuring of GI contemplated by the Distribution Agreement (in the absence
of a controlling change in law or circumstances), and shall be filed on a timely
basis by the party responsible for such filing under this Agreement.
(b) All Tax Returns filed or caused to be filed by GS, or CommScope or
Systems after the Distribution Date shall be prepared (in the absence of a
controlling change in law or circumstances) consistent with past practices,
elections, accounting methods, conventions, and principles of taxation used for
the most recent taxable periods for which Tax Returns involving similar items
have been filed prior to the Distribution Date.
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4.05 Right to Review Tax Returns
(a) General. The Responsible Company with respect to any Tax Return
shall make such Tax Return and related workpapers available for review by
the other Companies, if requested, to the extent (i) such Tax Return
relates to Taxes for which the requesting party may be liable, (ii) such
Tax Return relates to Taxes for which the requesting party may be liable
in whole or in part for any additional Taxes owing as a result of
adjustments to the amount of Taxes reported on such Tax Return, (iii) such
Tax Return relates to Taxes for which the requesting party may have a
claim for Tax Benefits under this Agreement, or (iv) the requesting party
reasonably determines that it must inspect such Tax Return to confirm
compliance with the terms of this Agreement. The Responsible Company shall
use its reasonable best efforts to make such Tax Return available for
review as required under this paragraph sufficiently in advance of the due
date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have
such Tax Returns modified before filing, taking into account the person
responsible for payment of the tax (if any) reported on such Tax Return
and the materiality of the amount of Tax liability with respect to such
Tax Return. The Companies shall attempt in good faith to resolve any
issues arising out of the review of such Tax Returns.
(b) Execution of Returns Prepared by Other Party. In the case of any
Tax Return which is required to be prepared and filed by one Company under
this Agreement and which is required by law to be signed by another
Company (or by its authorized representative), the Company which is
legally required to sign such Tax Return shall not be required to sign
such Tax Return under this Agreement if there is no reasonable basis for
the tax treatment of any material items reported on the Tax Return. Any
such Tax Return shall be supplied by the Company responsible for its
preparation and filing to the Company responsible for its signing at least
five days prior to the due date of such Tax Return (including applicable
extensions) and such signing Company shall deliver an executed copy of
such Tax Return to the filing
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Company at least two days prior to the due date of such Tax Return
(including applicable extensions).
4.06 Claims for Refund, Carrybacks, and Self-Audit Adjustments
("Adjustment Requests")
(a) Consent Required for Adjustment Requests Related to Consolidated
or Combined Income Taxes. Except as provided in paragraph (b) below, each
of the Companies hereby agrees that, unless each of the other Companies
consents in writing, which consent shall not be unreasonably withheld, (i)
no Adjustment Request with respect to any Consolidated or Combined Income
Tax for a Pre-Distribution Period shall be filed, and (ii) any available
elections to waive the right to claim in any Pre-Distribution Period with
respect to any Consolidated or Combined Income Tax any Carryback arising
in a Post-Distribution Period shall be made, and no affirmative election
shall be made to claim any such Carryback. Any Adjustment Request which
the Companies consent to make under this Section 4.06 shall be prepared
and filed by the Responsible Company under Sections 4.02 and 4.03 for the
Tax Return to be adjusted. The Company requesting the Adjustment Request
shall provide to the Responsible Company all information required for the
preparation and filing of such Adjustment Request in such form and detail
as reasonably requested by the Responsible Company.
(b) Exception for Adjustment Requests Related to Audit Adjustments.
Each of the Companies shall be entitled, without the consent of any other
Company, to require GS to file an Adjustment
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Request to take into account any net operating loss, net capital loss,
deduction, credit, or other adjustment attributable to such Company or any
member of its Group corresponding to any adjustment resulting from any
audit by the Internal Revenue Service or other Tax Authority with respect
to Consolidated or Combined Income Taxes for any Pre-Distribution Period.
For example, if the Internal Revenue Service requires a Company to
capitalize an item deducted for the taxable year 1993, such Company shall
be entitled, without the consent of any other Company, to require GS to
file an Adjustment Request for the taxable year 1994 (and later years) to
take into account any depreciation or amortization deductions in such
years directly related to the item capitalized in 1993. In addition,
Systems shall be entitled to require GS or CommScope, as appropriate, to
file an Adjustment Request of the same sort with respect to Separate
Company Taxes for any Pre-Distribution Periods.
(c) Other Adjustment Requests Permitted. Nothing in this Section
4.06 shall prevent any Company or its Affiliates from filing any
Adjustment Request with respect to Income Taxes which are not Consolidated
or Combined Income Taxes or with respect to any Taxes other than Income
Taxes; provided, however, that without the written consent of Systems
(which consent shall not be unreasonably withheld) neither GS nor
CommScope shall file an amended Tax Return with respect to Taxes for which
Systems is liable under this Agreement. Any refund or credit obtained as a
result of any such Adjustment Request (or otherwise) shall be for the
account of the person liable for the Tax under this Agreement.
(d) Payment of Refunds. Any refunds or other Tax Benefits received
by any Company (or any of its Affiliates) as a result of any Adjustment
Request which are for the account of another Company (or member of such
other Company's Group) shall be paid by the Company receiving (or whose
Affiliate received) such refund or Tax Benefit to such other Company in
accordance with Section 6.
SECTION 5. Tax Payments and Intercompany Billings
5.01 Payment of Taxes With Respect to GI Federal Consolidated Returns
Filed After the Distribution Date. In the case of any GI Federal Consolidated
Return the due date for which (including extensions) is after the
Distribution Date,
(a) Computation and Payment of Tax Due. At least ten business days
prior to any Payment Date, GS shall compute the amount of Tax required to
be paid to the Internal Revenue Service (taking into account the
requirements of Section 4.04 relating to consistent accounting practices)
with respect to such Tax Return on such Payment Date and shall notify
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Systems in writing of the amount of Tax required to be paid on such
Payment Date. GS will pay such amount to the Internal Revenue Service on
or before such Payment Date.
(b) Computation and Payment of Systems Liability With Respect to
Tax Due. Within 30 days following any Payment Date, Systems will pay to
GS the excess (if any) of
(i) the Pre-Distribution Consolidated Tax Liability determined
as of such Payment Date with respect to the applicable Tax Period
allocable to Systems in a manner consistent with the provisions of
Section 2.02(a) (the "Allocated Federal Tax Liability"), over
(ii) the cumulative net payments with respect to such Tax
Return prior to such Payment Date made before the Distribution Date,
plus all such payments by the members of the Systems Group made from
the Distribution Date to the Payment Date (the "Cumulative Federal
Tax Payment").
If the Systems Cumulative Federal Tax Payment is greater than the Systems
Allocated Federal Tax Liability as of any Payment Date, then GS shall pay
such excess to Systems within 30 days of GS's receipt of the corresponding
Tax Benefit (i.e., through either a reduction in GS's otherwise required
Tax payment, or a refund of prior Tax payments).
(c) Interest on Intergroup Tax Allocation Payments. In the case of
any payments to GS required under paragraph (b) of this subsection 5.01,
Systems shall also pay to GS an amount of interest computed at the Prime
Rate on the amount of the payment required based on the number of days
from the applicable Payment Date to the date of payment. In the case of
any payments by GS required under paragraph (b) of this subsection 5.01,
GS shall also pay to the payee an amount of interest computed at the Prime
Rate on the amount of the payment required based on the number of days
from the date of receipt of the Tax Benefit to the date of payment of such
amount to the payee.
(d) Representation Regarding Cumulative 1997 Federal Income Tax
Payments. Systems represents and warrants to GS that, as of the the
date hereof, $16,500,000 of cumulative net
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payments have been made by GI, and credited by the Internal Revenue
Service, with respect to the 1997 GI Federal Consolidated Return.
5.02 Payment of Federal Income Tax Related to Adjustments
(a) Adjustments Resulting in Underpayments. GS shall pay to the
Internal Revenue Service when due any additional Federal Income Tax
required to be paid as a result of any adjustment to the Pre-Distribution
Consolidated Tax Liability with respect to any GI Federal Consolidated
Return. Systems shall pay to GS such amount within 30 days from the later
of (i) the date the additional Tax was paid by GS or (ii) the date of
receipt by Systems of a written notice and demand from GS for payment of
the amount due, accompanied by evidence of payment and a statement
detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Any payments required under this Section
5.02(a) shall include interest computed at the Prime Rate based on the
number of days from the date the additional Tax was paid by GS to the date
of the payment under this Section 5.02(a).
(b) Adjustments Resulting in Overpayments. Within 30 days of receipt
by GS of any Tax Benefit resulting from any adjustment to the
Pre-Distribution Consolidated Tax Liability with respect to any GI Federal
Consolidated Return, GS shall pay to Systems its share of any such Tax
Benefit, as determined by Systems. Any payments required under this
Section 5.02(b) shall include interest computed at the Prime Rate based on
the number of days from the date the Tax Benefit was received by GS to the
date of payment to Systems Company under this Section 5.02(b).
5.03 Payment of State Income Tax Relating to Pre-Distribution
Periods With Respect to Returns Filed After the Distribution Date
(a) Computation and Payment of Tax Due. At least three business days
prior to any Payment Date for any Tax Return with respect to any State
Income Tax relating to a Pre-Distribution Period, the Responsible Company
shall compute the amount of Tax required to be paid to the applicable Tax
Authority (taking into account the requirements of Section 4.04
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relating to consistent accounting practices) with respect to such Tax
Return on such Payment Date and--
(i) If such Tax Return is with respect to a Consolidated or
Combined State Income Tax, GS shall notify Systems in writing of the
amount of Tax required to be paid on such Payment Date. GS will pay
such amount to such Tax Authority on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate Company
Tax, the Responsible Company shall, if it is not the Company liable
for the Tax reported on such Tax Return, notify the Company liable
for such Tax in writing of the amount of Tax required to be paid on
such Payment Date. The Company liable for such Tax will pay such
amount to such Tax Authority on or before such Payment Date.
(b) Computation and Payment of Systems Liability With Respect to Tax
Due. Within 120 days following the due date (including extensions) for
filing any Tax Return for any Consolidated or Combined State Income Tax
(excluding any Tax Return with respect to payment of estimated Taxes or
Taxes due with a request for extension of time to file) relating to a
Pre-Distribution Period, Systems shall pay to GS the tax liability
allocable to Systems as determined by Systems under the provisions of
Section 2.03(b)(i), plus interest computed at the Prime Rate on the amount
of the payment based on the number of days from the due date (including
extensions) to the date of payment by Systems to GS
5.04 Payment of State Income Taxes Related to Adjustments
(a) Adjustments Resulting in Underpayments. GS shall pay to the
applicable Tax Authority when due any additional State Income Tax required
to be paid as a result of any adjustment to the Tax liability with respect
to any Tax Return for any Consolidated or Combined State Income Tax for
any Pre-Distribution Period. Systems shall pay to GS its respective share
of any such additional Tax payment determined by Systems in accordance
with Section 2.03(b)(ii) within 120 days from the later of (i) the date
the additional Tax was
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paid by GS or (ii) the date of receipt by Systems of a written notice and
demand from GS for payment of the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in
reasonable detail the particulars relating thereto. Systems shall also pay
to GS interest on its respective share of such Tax computed at the Prime
Rate based on the number of days from the date the additional Tax was paid
by GS to the date of its payment to GS under this Section 5.04(a).
(b) Adjustments Resulting in Overpayments. Within 120 days of
receipt by GS of any Tax Benefit resulting from any adjustment to the Tax
liability with respect to any Tax Return for any Consolidated or Combined
State Income Tax for any Pre-Distribution Period, GS shall pay to Systems
its share of any such Tax Benefit determined by Systems. Any payments
required under this Section 5.04(b) computed at the Prime Rate based on
the number of days from the date the Tax Benefit was received by GS to the
date of payment to Systems under this Section 5.04(b).
5.05 Payment of Separate Company Taxes. Each Company shall pay, or
shall cause to be paid, to the applicable Tax Authority when due all Separate
Company Taxes owed by such Company or a member of such Company's Group.
5.06 Indemnification Payments. If any Company (the "payor") is
required to pay to a Tax Authority a Tax that another Company (the "responsible
party") is required to pay to such Taxing Authority under this Agreement, the
responsible party shall reimburse the payor within 30 days of delivery by the
payor to the responsible party of an invoice for the amount due, accompanied by
evidence of payment and a statement detailing the Taxes paid and describing in
reasonable detail the particulars relating thereto. The reimbursement shall
include interest on the Tax payment computed at the Prime Rate based on the
number of days from the date of the payment to the Tax Authority to the date of
reimbursement under this Section 5.06.
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Section 6. Tax Benefits
If a Tax Benefit accrues to a member of one Group as the result of
an adjustment to any Tax Return with respect to any Taxes for which a member of
another Group is liable hereunder, the Company to which such Tax Benefit accrues
shall make a payment to the Company that is liable for such Taxes hereunder
within 30 days following accrual of the Tax Benefit. Such payment shall be in an
amount equal to the present value of such Tax Benefit (including any Tax Benefit
realized as a result of the payment), plus interest on such amount computed at
the Prime Rate based on the number of days from the date of accrual of the Tax
Benefit to the date of payment of such amount under this Section; provided,
however, that no payment under this Section 6 by the Company to which such Tax
Benefit accrues shall exceed the present value of the detriment to the Company
liable for such Taxes, which deteriment results from the adjustment giving rise
to such Tax Benefit.
Section 7. Assistance and Cooperation
7.01 General. After the Distribution Date, each of the Companies
shall cooperate (and cause their respective Affiliates to cooperate) with each
other and with each other's agents, including accounting firms and legal
counsel, in connection with Tax matters relating to the Companies and their
Affiliates including (i) preparation and filing of Tax Returns, (ii) determining
the liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Companies
and their Affiliates available to such other Companies as provided in Section 8.
Each of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or
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for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes. Any information or
documents provided under this Section 7 shall be kept confidential by the
Company receiving the information or documents, except as may otherwise be
necessary in connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
7.02 Income Tax Return Information. Each Company will provide to
each other Company information and documents relating to their respective Groups
required by the other Companies to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with GI's past practices. Any additional information or documents the
Responsible Company requires to prepare such Tax Returns will be provided in
accordance with past practices, if any, or as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns timely.
Section 8. Tax Records
8.01 Retention of Tax Records. Except as provided in Section 8.02,
each Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of their respective Groups for Pre-Distribution Tax
Periods, and Systems shall preserve and keep all other Tax Records relating to
Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the
contents thereof may become material in the administration of any matter under
the Code or other applicable Tax Law, but in any event until the later of (i)
the expiration of any applicable statutes of limitation, and (ii) seven years
after the Distribution Date. If, prior to the expiration of the applicable
statute of limitation and such seven-year period, a Company reasonably
determines that any Tax Records which it is required to preserve and keep under
this Section 8 are no longer material in the administration of any matter under
the Code or other applicable Tax Law, such Company may dispose of such records
upon 90 days prior notice to the other Companies. Such notice shall include a
list of the records to be disposed of describing in reasonable detail each file,
book, or other record accumulation being disposed. The notified
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Companies shall have the opportunity, at their cost and expense, to copy or
remove, within such 90-day period, all or any part of such Tax Records.
8.02 State Income Tax Returns. Tax Returns with respect to State
Income Taxes and workpapers prepared in connection with preparing such Tax
Returns shall be preserved and kept, in accordance with the guidelines of
Section 8.01, by the Company responsible for preparing and filing the applicable
Tax Return.
8.03 Access to Tax Records. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
Section 9. Tax Contests
9.01 Notice. Each of the parties shall provide prompt notice to the
other parties of any pending or threatened Tax audit, assessment or proceeding
or other Tax Contest of which it becomes aware related to Taxes for Tax Periods
for which it is indemnified by one or more other parties hereunder. Such notice
shall contain factual information (to the extent known) describing any asserted
Tax liability in reasonable detail and shall be accompanied by copies of any
notice and other documents received from any Tax Authority in respect of any
such matters. If an indemnified party has knowledge of an asserted Tax liability
with respect to a matter for which it is to be indemnified hereunder and such
party fails to give the indemnifying party prompt notice of such asserted Tax
liability, then (i) if the indemnifying party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(ii) if the indemnifying party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying
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party is otherwise required to pay the indemnified party pursuant to this
Agreement shall be reduced by the amount of such detriment.
9.02 Control of Tax Contests. Each Company shall have full
responsibility and discretion in handling, settling or contesting any Tax
Contest involving a Tax for which it is liable pursuant to Section 2 of this
Agreement; provided, however, Systems may participate in any Tax Contest with
respect to Restructuring Taxes regardless of whether it has liability or
indemnification obligations with respect to such Taxes under this Agreement.
Section 10. Effective Date; Termination of Prior Intercompany Tax
Allocation Agreements. This Agreement shall be effective on the Distribution
Date. Immediately prior to the close of business on the Distribution Date (i)
all Prior Intercompany Tax Allocation Agreements (the "Prior Agreements") shall
be terminated, and (ii) amounts due under such Prior Agreements as of the
Distribution Date shall be settled as of the Distribution Date (including
capitalization or distribution of amounts due or receivable under such
agreements). Upon such termination and settlement, no further payments by or to
the GS Group, by or to the CommScope Group, or by or to the Systems Group, with
respect to such Prior Agreements shall be made, and all other rights and
obligations resulting from such Prior Agreements between the Companies and their
Affiliates shall cease at such time. Any payments pursuant to such Prior
Agreements shall be ignored for purposes of computing amounts due under this
Agreement.
Section 11. No Inconsistent Actions.
(a) Each of the Companies covenants and agrees that it will not take
any action, and it will cause its Affiliates to refrain from taking any
action, which may be inconsistent with the Tax treatment of the
Transactions as contemplated in the Ruling Request (any such action is
referred to in this Section 11 as a "Tainting Act"), unless (i) the
Company or Affiliate thereof proposing such Tainting Act (the "Requesting
Party") either (A) obtains a ruling with respect to the Tainting Act from
the Internal Revenue Service or other applicable Tax Authority that is
reasonably satisfactory to each other Company (the "Requested Parties")
(except that the
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Requesting Party shall not submit any such ruling request if a Requested
Party determines in good faith that filing such request might have a
materially adverse effect upon such Requested Party), or (B) obtains an
unqualified opinion of independent nationally recognized tax counsel
acceptable to each Requested Party, on a basis of assumed facts and
representations consistent with the facts at the time of such action, that
such Tainting Act will not affect the Tax treatment of the Transactions as
contemplated in the Ruling Request, or (ii) each Requested Party consents
in writing to such Tainting Act, which consent shall be granted or
withheld in the sole and absolute discretion of each such Requested Party.
Without limiting the foregoing:
(i) Specified Actions. During the two year period following
the Distribution Date, unless clause (i) or (ii) of the preceding
paragraph is satisfied with respect to the applicable action, no
Company or its Affiliate will (A) liquidate or merge with or into
any other corporation (other than a merger which results in the
outstanding stock of such Company or its Affiliates immediately
before the merger continuing to represent at least eighty (80)
percent of the outstanding voting stock and non-voting stock of the
merged corporations after the transaction); (B) issue more than 20%,
by vote or value, of its capital stock in one or more transactions;
(C) redeem, purchase or otherwise reacquire more than five (5)
percent, by vote or value, of its capital stock in one or more
transactions (other than in connection with future employee benefit
plans or pursuant to a future market purchase program involving five
(5) percent or less of its publicly traded stock); (D) sell,
exchange, distribute or otherwise dispose of, other than in the
ordinary course of business, more than 25% of the assets
constituting the trades or businesses relied upon in the Ruling
Request to sastisfy Section 355(b) of the Code; or (E) discontinue
or cause to be discontinued the active conduct of the trades or
businesses relied upon in the Ruling Request to satisfy Section
355(b) of the Code.
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(ii) No Inconsistent Plan or Intent. Each of the Companies
represents and warrants that neither it nor any of its Affiliates
has any plan or intent to take any action which is inconsistent with
any factual statements or representations in the Ruling Request.
Regardless of any change in circumstances, each of the Companies
covenants and agrees that it will not take, and it will cause its
Affiliates to refrain from taking, any such inconsistent action on
or before the last day of the calendar year ending after the second
anniversary of the Distribution Date other than as permitted in this
Section 11.
(iii) Amended or Supplemental Rulings. Each of the Companies
covenants and agrees that it will not file, and it will cause its
Affiliates to refrain from filing, any amendment or supplement to
the Ruling Request subsequent to the Distribution Date without the
consent of the other Companies, which consent shall not be
unreasonably withheld.
(b) Notwithstanding anything to the contrary in this Agreement, each
Company shall be solely liable for, and shall indemnify and hold harmless
each other Company from any Restructuring Tax resulting from a Tainting
Act by such first Company or its Affiliates, regardless of whether clause
(i) or (ii) of Section 11(a) was satisfied with respect to such Tainting
Act.
Section 12. Survival of Obligations. The representations,
warranties, covenants and agreements set forth in this Agreement shall be
unconditional and absolute and shall remain in effect without limitation as to
time.
Section 13. Employee Matters. Each of the Companies agrees to
utilize, or cause its Affiliates to utilize, the alternative procedure set forth
in Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to wage reporting.
Section 14. Treatment of Payments; Tax Gross Up
14.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the
absence of any change in tax treatment under the Code or other applicable Tax
Law,
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(a) any Tax indemnity payments made by a Company under Section 5
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring
immediately before the Systems Distribution on the Distribution Date, but
only to the extent the payment does not relate to a Tax allocated to the
payor in accordance with Treasury Regulation Section 1.1502-33(d) (or
under corresponding principles of other applicable Tax Laws), and
(b) any Tax Benefit payments made by a Company under Section 6,
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring
immediately before the Systems Distribution on the Distribution Date, but
only to the extent the payment does not relate to a Tax allocated to the
payor in accordance with Treasury Regulation Section 1.1502-33(d) (or
under corresponding principles of other applicable Tax Laws).
14.02 Tax Gross Up. If notwithstanding the manner in which Tax
indemnity payments and Tax Benefit payments were reported, there is an
adjustment to the Tax liability of a Company as a result of its receipt of a
payment pursuant to this Agreement, such payment shall be appropriately adjusted
so that the amount of such payment, reduced by the amount of all Income Taxes
payable with respect to the receipt thereof (but taking into account all
correlative Tax Benefits resulting from the payment of such Income Taxes), shall
equal the amount of the payment which the Company receiving such payment would
otherwise be entitled to receive pursuant to this Agreement.
14.03 Interest Under This Agreement. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest
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payment shall be treated as interest expense to the indemnitor (deductible to
the extent provided by law) and as interest income by the indemnitee (includible
in income to the extent provided by law). The amount of the payment shall not be
adjusted under Section 14.02 to take into account any associated Tax Benefit to
the indemnitor or increase in Tax to the indemnitee.
Section 15. Disagreements. If after good faith negotiations the
parties cannot agree on the application of this Agreement to any matter, then
the matter will be referred to a nationally recognized accounting firm
acceptable to each of the parties (the "Accounting Firm"). The Accounting Firm
shall furnish written notice to the parties of its resolution of any such
disagreement as soon as practical, but in any event no later than 45 days after
its acceptance of the matter for resolution. Any such resolution by the
Accounting Firm will be conclusive and binding on all parties to this Agreement.
In accordance with Section 17, each party shall pay its own fees and expenses
(including the fees and expenses of its representatives) incurred in connection
with the referral of the matter to the Accounting Firm. All fees and expenses of
the Accounting Firm in connection with such referral shall be shared equally by
the parties affected by the matter.
Section 16. Late Payments. Any amount owed by one party to another
party under this Agreement which is not paid when due shall bear interest at the
Prime Rate plus two percent, compounded semiannually, from the due date of the
payment to the date paid. To the extent interest required to be paid under this
Section 16 duplicates interest required to be paid under any other provision of
this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
Section 17. Expenses. Except as provided in Section 15, each party
and its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.
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Section 18. General Provisions
18.01 Addresses and Notices. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered in party or
when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
address as follows:
If to GS, at: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
If to Systems, at: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.
18.02 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
18.03 Waiver. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
18.04 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
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<PAGE>
18.05 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.
18.06 Integration. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter of this Agreement and
supersedes all prior agreements and understandings pertaining thereto. In the
event of any inconsistency between this Agreement and the Distribution Agreement
or any other agreements relating to the transactions contemplated by the
Distribution Agreement, the provisions of this Agreement shall control.
18.07 Construction. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning and shall not be
strictly construed for or against any party.
18.08 No Double Recovery; Subrogation. No provision of this
Agreement shall be construed to provide an indemnity or other recovery for any
costs, damages, or other amounts for which the damaged party has been fully
compensated under any other provision of this Agreement or under any other
agreement or action at law or equity. Unless expressly required in this
Agreement, a party shall not be required to exhaust all remedies available under
other agreements or at law or equity before recovering under the remedies
provided in this Agreement. Subject to any limitations provided in this
Agreement (for example, the limitation on filing claims for refund in Section
4.06), the indemnifying party shall be subrogated to all rights of the
indemnified party for recovery from any third party.
18.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
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<PAGE>
18.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
EXHIBIT 10.5
TRADEMARK LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), between and among NextLevel Systems, Inc., a Delaware corporation
("NextLevel Systems"), CommScope, Inc., a Delaware corporation ("CommScope"),
and General Semiconductor, Inc., a Delaware corporation ("GS").
RECITALS
WHEREAS, General Instrument Corporation, a Delaware corporation
("GI"), is being separated and divided into three separate and independent
public companies and, in order to effectuate the separation, (a) GI intends to
distribute (the "Next Level Systems Distribution"), as a dividend to the holders
of shares of common stock, par value $.01 per share, of GI, shares of common
stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems
Common Stock") and (b) NextLevel Systems intends to distribute, following the
NextLevel Systems Distribution, as a dividend to the holders of NextLevel
Systems Common Stock, shares of common stock, par value $.01 per share of
CommScope (the "CommScope Distribution"; and, together with the NextLevel
Systems Distribution, the "Distributions");
WHEREAS, the Distributions will be effected pursuant to a
Distribution Agreement, dated as of June 12, 1997 (the "Distribution
Agreement"), among NextLevel Systems, CommScope and GI;
WHEREAS, the NextLevel Systems Distribution is becoming effective as
of the date hereof (the "NextLevel Systems Distribution Date");
WHEREAS, NextLevel Systems, as a result of the NextLevel Systems
Distribution, is the owner of all right, title and interest in and to the GI
Trademarks (as hereinafter defined);
WHEREAS, NextLevel Systems desires to license to both CommScope and
GS the use of the GI Trademarks for limited purposes for a transitional period
of time after the NextLevel Systems Distribution Date to avoid operating
inefficiencies and unnecessary expense, and CommScope and GS desire to take such
license for said purposes; and
WHEREAS, the parties hereto have determined that this Agreement is
appropriate in order to effectuate the purposes of the Distribution Agreement as
described therein.
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NOW, THEREFORE, in consideration of the mutual agreements,
undertakings and covenants herein and therein, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01 General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Agreement" shall have the meaning specified in the first paragraph
hereof.
"Ancillary Agreements" shall have the meaning as set forth in the
Distribution Agreement.
"CommScope Distribution" shall have the meaning specified in the
recitals to this Agreement.
"Distributions" shall have the meaning specified in the recitals to
this Agreement.
"Distribution Agreement" shall have the meaning specified in the
recitals to this Agreement.
"GI Trademarks" shall mean GENERAL INSTRUMENT, the logo "GI", and
all other trademarks, service marks, and trade names containing "General
Instrument" or variations thereof, along with their respective applications and
registrations wherever used or registered and the goodwill associated therewith.
"NextLevel Systems Common Stock" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution" shall have the meaning specified in
the recitals to this Agreement.
"NextLevel Systems Distribution Date" shall have the meaning
specified in the recitals to this Agreement.
"Notice" shall have the meaning specified in Section 4.03 hereof.
"Subsidiary", with respect to any party, shall mean any corporation,
partnership, joint venture or other entity of which such party, directly or
indirectly, owns an interest sufficient to elect a majority of the board of
directors (or persons performing
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similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency).
"Transition Period" shall have the meaning specified in Section
2.01(a) hereof.
ARTICLE II. GI TRADEMARKS LICENSE
Section 2.01 Subject to the terms and conditions of this Agreement,
NextLevel Systems hereby grants to each of CommScope and GS a limited,
non-assignable, worldwide, non-exclusive, royalty-free license, without right to
grant sublicenses (except to Subsidiaries of each of CommScope or GS, as the
case may be), to use the GI Trademarks and the goodwill appurtenant thereto, as
follows:
(a) For a period of up to 12 months (the "Transition Period")
following the NextLevel Systems Distribution Date, each of CommScope and GS and
their respective Subsidiaries shall be entitled to use and/or sell its existing
parts and products which have imprinted thereon the GI Trademarks to the extent
that such parts and products were existing inventory (or had been sold by GI)
prior to the NextLevel Systems Distribution Date. From and after the NextLevel
Systems Distribution Date, CommScope, GS and their respective Subsidiaries shall
not print or manufacture any new parts or products bearing the GI Trademarks.
Each of CommScope, GS and their respective Subsidiaries shall cease using and/or
selling any parts and products bearing the GI Trademarks as soon as practicable
but in no event later than the end of the Transition Period.
(b) For the Transition Period, each of CommScope and GS and their
respective Subsidiaries shall be entitled to use the GI Trademarks on existing
signs, stationery, displays or other identification or advertising material to
the extent that such signs, stationery, displays or other identification or
advertising material were existing prior to the NextLevel Systems Distribution
Date. From and after the NextLevel Systems Distribution Date, CommScope, GS and
their respective Subsidiaries shall not prepare, print or install any new signs,
stationery, displays or other identification or advertising material bearing the
GI Trademarks. Each of CommScope, GS and their respective Subsidiaries shall
remove any and all references to the GI Trademarks from any and all signs,
stationery, displays or other identification or advertising material as soon as
practicable but in no event later than the end of the Transition Period.
Section 2.02 Each of CommScope and GS, when using the GI Trademarks
under this Agreement, undertakes to comply substantially with all laws
pertaining to
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the GI Trademarks. This provision includes compliance with marking requirements.
Each of CommScope and GS represents and warrants that all goods and services to
be sold under the GI Trademarks and the marketing, sales, and distribution of
them shall meet or exceed all federal, state, and local laws, ordinances,
standards, regulations, and guidelines pertaining to such products or
activities, including, but not limited to, those pertaining to product safety,
quality, labeling and propriety. Each of CommScope and GS agrees that it will
not package, market, sell, or distribute any goods or services or cause or
permit any goods or services to be packaged, marketed, sold, or distributed in
violation of any such federal, state, or local law, ordinance, standard,
regulation, or guideline.
Section 2.03 The GI Trademarks license granted herein is for the
sole purpose of assisting each of CommScope and GS to effectuate the purposes of
the Distribution Agreement as described therein and is not assignable or
transferable in any manner whatsoever.
Section 2.04 Any and all goodwill arising from CommScope's or GS's
use of the GI Trademarks shall inure solely to the benefit of NextLevel Systems,
and neither CommScope nor GS shall assert any claims to the GI Trademarks or
such goodwill. Neither CommScope nor GS shall, at any time, do or suffer to be
done any act or thing which in any way adversely affects any rights in and to
the GI Trademarks or any goodwill associated therewith or which reduces the
value of the GI Trademarks or detracts from their reputation.
Section 2.05 (a) The GI Trademarks license granted herein to
CommScope may be terminated by NextLevel Systems at any time, at NextLevel
Systems' option, in the event of a material breach of any term of this Article
II by CommScope, upon written Notice to CommScope.
(b) The GI Trademarks license granted herein to GS may be terminated
by NextLevel Systems at any time, at NextLevel Systems' option, in the event of
a material breach of any term of this Article II by GS, upon written Notice to
GS.
Section 2.06 Upon termination under Section 2.05 of the GI
Trademarks license granted herein, or expiration of the time periods set forth
in Section 2.01, (a) CommScope and GS's rights, as applicable, with respect to
use of the GI Trademarks in any way shall be as if this Agreement had not been
entered into and (b) CommScope and GS, as applicable, shall cease using the GI
Trademarks immediately in all ways. In addition, CommScope and GS, as
applicable, will destroy all documents and materials bearing the GI Trademarks
and will certify to NextLevel Systems that it has done so. CommScope and GS will
not at any time adopt or use without NextLevel Systems' prior
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written consent, any word or mark which is likely to be similar to or confusing
with the GI Trademarks.
Section 2.07 Each of CommScope and GS hereby acknowledge NextLevel
Systems' exclusive right, title and interest in and to the GI Trademarks and
agree that it will not at any time do or cause to be done any act or thing
contesting or in any way impairing any part or all of such right, title and
interest. CommScope and GS agree that they shall not in any manner represent
that they have any ownership in the GI Trademarks or registrations thereof and
hereby acknowledge that use of the GI Trademarks will inure to the benefit of
NextLevel Systems.
ARTICLE III. UNDERTAKINGS
Section 3.01 To the extent that the grants of the GI Trademarks
licenses under Article II herein would violate or be prohibited by any agreement
with a third party, and such GI Trademarks are actually used by the grantee
party, then the granting party undertakes to use reasonable efforts to obtain
the necessary consent(s) from such third party so as to be permitted to make
such grants. However, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications, possibly
contemplated by this Agreement will satisfy the provisions of any and all
applicable agreements or the requirements of any or all applicable laws or
judgments.
ARTICLE IV. MISCELLANEOUS
Section 4.01 Entire Agreement. This Agreement, together with the
Distribution Agreement and the Ancillary Agreements (as defined in the
Distribution Agreement) constitute the entire agreement and understanding
between and among the parties with respect to the subject matter hereof and
shall supersede any prior agreements and understandings among the parties with
respect to such subject matter.
Section 4.02 Counterparts. This Agreement may be executed with
counterpart signature pages or in one or more counterparts, all of which shall
be one and the same Agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to all the
parties.
Section 4.03 Notices. All notices, consents, requests, waivers or
other communications required or permitted under this Agreement (each a
"Notice") shall be in writing and shall be sufficiently given (a) if hand
delivered or sent by telecopy, (b) if sent
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by nationally recognized overnight courier, or (c) if sent by registered or
certified mail, postage prepaid, return receipt requested, and in each case
addressed as follows:
If to NextLevel Systems, to: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to CommScope, to: CommScope, Inc.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
Attn: General Counsel
If to GS, to: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
or such other address as shall be furnished by any of the parties in a Notice.
Any Notice shall be deemed given upon receipt.
Section 4.04 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish the first party's right to demand strict performance thereafter of
that or any other provision hereof.
Section 4.05 Amendments. This Agreement may be amended, supplemented
or waived only by a subsequent writing signed by each of the parties.
Section 4.06 Assignment. This Agreement may not be assigned by any
party without the consent of the other parties.
Section 4.07 Successors and Assigns. All terms and conditions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and permitted assigns of the parties.
Section 4.08 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any
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entity that becomes a Subsidiary of such party on and after the NextLevel
Systems Distribution Date.
Section 4.09 Third Party Beneficiaries. Each party intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
Section 4.10 Specific Performance. Each of the parties hereto
acknowledges that there is no adequate remedy at law for failure by such parties
to comply with the provisions of this Agreement and that such failure would
cause immediate harm that would not be adequately compensable in damages, and
therefore agree that their agreements contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Agreement.
Section 4.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
Section 4.12 Interpretation. The parties intend that the
Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986,
as amended, so that no gain or loss shall be recognized for Federal income tax
purposes as a result of the transaction, and all provisions of this Agreement
shall be so interpreted.
Section 4.13 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby, so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to any
party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General Counsel
COMMSCOPE, INC.
By: /s/ Frank B. Wyatt, II
----------------------
Name: Frank B. Wyatt, II
Title: Secretary
<PAGE>
Exhibit 10.6
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated as of July 25, 1997 (this
"Agreement"), between NextLevel Systems, Inc., a Delaware corporation
("Service Provider" or "NextLevel Systems") and General Semiconductor, Inc.,
a Delaware corporation ("Recipient" or "GS").
WHEREAS, General Instrument Corporation, a Delaware corporation
("GI"), is being separated and divided into three separate and independent
public companies and, in order to effectuate the separation, (a) GI intends
to distribute (the "Next Level Systems Distribution"), as a dividend to the
holders of shares of common stock, par value $.01 per share, of GI, shares of
common stock, par value $.01 per share, of NextLevel Systems (the "NextLevel
Systems Common Stock") and (b) NextLevel Systems intends to distribute,
following the NextLevel Systems Distribution, as a dividend to the holders of
NextLevel Systems Common Stock, shares of common stock, par value $.01 per
share of CommScope (the "CommScope Distribution"; and, together with the
NextLevel Systems Distribution, the "Distributions");
WHEREAS, the Distributions will be effected pursuant to a
Distribution Agreement, dated as of June 12, 1997 (the "Distribution
Agreement"), among NextLevel Systems, CommScope and GI;
WHEREAS, the NextLevel Systems Distribution is becoming effective as
of the date hereof (the "NextLevel Systems Distribution Date"); and
WHEREAS, in order to facilitate the orderly continuation of
Recipient's business for a transitional period after the NextLevel Systems
Distribution Date, Service Provider has agreed to provide to Recipient, and
Recipient has agreed to purchase from Service Provider, the Transition
Services described in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
respective covenants and agreements set forth herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the following
terms shall have the following respective meanings (capitalized terms used but
not defined herein shall have the respective meanings ascribed thereto in the
Distribution Agreement):
"Agreement" shall have the meaning specified in the first paragraph
hereof.
<PAGE>
"CommScope" shall have the meaning specified in the recitals to this
Agreement.
"CommScope Distribution" shall have the meaning set forth in the
recitals.
"Distributions" shall have the meaning specified in the recitals to
this Agreement.
"Distribution Agreement" shall have the meaning specified in the
recitals to this Agreement.
"Distribution Date" shall have the meaning specified in the recitals
to this Agreement.
"GI" shall have the meaning specified in the recitals to this
Agreement.
"NextLevel Systems Common Stock" shall have the meaning set forth in
the recitals.
"NextLevel Systems Distribution" shall have the meaning set forth in
the recitals.
"NextLevel Systems Distribution Date" shall have the meaning specified
in the recitals to this Agreement.
"Notice" shall have the meaning specified in Section 4.08 hereof.
"Other Services" shall have the meaning specified in Section 2.04.
"Recipient" shall have the meaning set forth in the first paragraph
hereof.
"Service Provider" shall have the meaning set forth in the first
paragraph hereof.
"Transition Period" shall mean, for each Transition Service, the
transition period (commencing on the NextLevel Systems Distribution Date) set
forth opposite such Transition Service on Schedule I hereto.
"Transition Services" shall mean the administrative services set forth
on Schedule I hereto.
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ARTICLE II
TRANSITION SERVICES
Section 2.01. Transition Period. Service Provider shall make
available to Recipient each of the Transition Services for the applicable
Transition Period on the terms and subject to the conditions set forth herein.
The Transition Period for each Transition Service may be extended for such
additional periods as may be mutually agreed by the parties hereto. The Service
Provider shall only be obligated to provide Transition Services during normal
business hours and in a manner that will not interfere with the Service
Provider's business operations.
Section 2.02. Fees. Recipient shall pay to Service Provider the fees
set forth on Schedule I hereto in respect of each of the Transition Services,
plus reasonable out-of-pocket expenses incurred by the Service Provider in
providing the Transition Services (including, but not limited to travel,
overnight lodging, telephone, postage, reproduction costs, computer time,
supplies and parts). Any payments required to be made hereunder shall be due
and payable within 30 days of the date of invoice. Recipient shall pay any
value-added tax and any tariff, duty, export or import fee, sales tax, use tax,
service tax or other tax or charge subsequently imposed by any government or
government agency on Recipient or Service Provider with respect to the
Transition Services or the execution or performance of this Agreement.
Section 2.03. Performance of Transition Services. Service Provider
agrees to perform the Transition Services to be provided hereunder in a
professional and competent manner, using at least the same standard of care that
it uses in performing such services in its own affairs. Recipient understands
that the Transition Services provided hereunder are transitional in nature and
are furnished by Service Provider solely for the purpose of facilitating the
Distributions. Recipient understands that Service Provider is not in the
business of providing Transition Services to third parties and has no long term
interest in continuing this Agreement. Recipient agrees to make a transition to
its own internal organization or other third party suppliers for the Transition
Services as promptly as practicable.
Section 2.04. Other Services. From time to time, Recipient may find
it desirable to request, in addition to the Transition Services, additional
services to be made available to Recipient by Service Provider ("Other
Services"). It is understood and agreed, however, that Service Provider is
under no obligation to provide Other Services, nor has Service Provider made any
promises, representations, or commitments to provide Recipient with any such
Other Services. Upon Recipient's written request for such Other Services, the
parties shall commence negotiations in good faith in order to arrange for the
delivery thereof and compensation therefor. Any such Other Services shall only
be
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deemed to be Transition Services upon execution of an amendment to Schedule I
signed by each party hereto.
Section 2.05. Personnel. Service Provider shall select, employ, pay,
supervise, and direct all Service Provider personnel providing Transition
Services hereunder. Service Provider shall be solely responsible for the
payment of all direct and indirect compensation (including fringe benefits) for
Service Provider personnel assigned to perform services under this Agreement,
and shall be responsible for worker's compensation insurance, employment taxes,
and other employer liabilities relating to such personnel. Service Provider
shall be solely responsible for assigning personnel to perform the Transition
Services, which personnel shall be instructed by Service Provider to perform the
Transition Services in a timely, efficient and workmanlike manner.
ARTICLE III
NO WARRANTIES; LIMITATION ON LIABILITY; INDEMNIFICATION
Section 3.01. No Warranties. Service Provider makes no warranties,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose with respect to the
Transition Services to be provided hereunder.
Section 3.02. Limitation on Liability. In no event shall Service
Provider be liable for any incidental or consequential damages (including
without limitation lost profits) to Recipient arising from the provision of the
Transition Services by Service Provider hereunder, other than for Service
Provider's gross negligence or willful misconduct.
Section 3.03. Indemnification. Recipient agrees to indemnify,
defend and hold harmless Service Provider, its directors, officers,
employees, agents and representatives from any and all claims, actions,
demands, judgments, losses, costs, expenses, damages and liabilities
(including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Transition Services supplied
under this Agreement or in any way related to this Agreement, regardless of
the legal theory asserted (other than such as result directly from Service
Provider's gross negligence or willful misconduct). Recipient further agrees
to reimburse Service Provider and indemnify, defend and hold harmless Service
Provider, its directors, officers, employees, agents, and representatives
from any and all claims, actions, demands, judgments, losses, costs,
expenses, damages, and liabilities (including but not limited to attorneys
fees and expenses of litigation), arising from or related to any Recipient
act or omission connected with the provision of any Transition Service by
Service Provider in the performance of this Agreement or caused by any
Recipient product or information provided to Service Provider in connection
with the Transition Services. This indemnity
4
<PAGE>
shall apply to claims, actions and demands for which Service Provider may be, or
may be claimed to be, partially or solely liable. The parties agree that the
indemnities set forth in this Section 3.03 shall not apply to claims between the
parties arising out of or connected to this Agreement. Service Provider shall
promptly notify Recipient in writing of any claim, action, or demand for which
Service Provider intends to claim indemnification hereunder (however, failure to
give such notice shall not relieve Recipient from its obligations hereunder).
Service Provider agrees that Recipient will control the defense of all claims,
actions, or demands which are indemnified against hereunder at Recipient's
expense, unless Service Provider notifies Recipient that it will assume
responsibility therefor (in which event Recipient shall bear all expenses
thereof, including fees and expenses of one counsel and any local counsel).
Service Provider will cooperate fully with Recipient and its legal
representatives in the investigation and defense of any claim, action, or demand
covered by this indemnification. Service Provider will permit Recipient to
settle any claim, action or demand and agrees that Recipient will control such
settlement, provided, however that such settlement does not adversely affect
Service Provider's rights under this Agreement or impose any obligations on
Service Provider in addition to those stated in this Agreement. Recipient, in
the defense of any claims, actions or demands, will not consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term the giving by the claimant or plaintiff to Service Provider of a release
from all liability with respect to the claim, action, or demand. No such claim,
action, or demand will be settled by Service Provider without the prior written
consent of Recipient.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Cooperation. The parties hereto shall cooperate with
each other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other during the Transition Period to
facilitate the orderly transition of the separation of the businesses of
NextLevel Systems, CommScope and GS and to minimize any disruption to the
respective businesses that might result from the transactions contemplated by
the Distribution Agreement and hereby.
Section 4.02. Relationship of the Parties. The parties hereto agree
that, from after the NextLevel Systems Distribution Date, nothing herein shall
constitute, be construed to be, or create a partnership, joint venture or
similar relationship between them, and that any actions performed by or on
behalf of another party hereunder shall be as an agent for such other party.
Section 4.03. Amendments. This Agreement may be amended,
supplemented or waived only by a subsequent writing signed by all of the parties
hereto.
5
<PAGE>
Section 4.04. Successors and Assigns. All terms and conditions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and permitted assigns of the parties hereto.
Section 4.05. Termination. This Agreement shall be automatically
terminated without action by either party if the Distribution Agreement is
terminated and the NextLevel Systems Distribution is abandoned. In the event of
such termination, neither party shall have any liability of any kind to the
other party. This Agreement, or any Transition Service provided hereunder, may
be terminated by either party upon written notice to the other party if the
other party fails to perform or otherwise breaches an obligation under this
Agreement; provided, however, that such party failing to perform or otherwise
breaching shall have thirty days from the date notice of intention to terminate
is received to cure the failure to perform or breach of an obligation.
Notwithstanding the foregoing, neither party shall be responsible for any delay
in the performance of any obligation hereunder due to labor disturbances,
accidents, fires, floods, wars, riots, rebellions, blockages, acts of
governments, governmental requirements and regulations, restrictions imposed by
law or any other similar conditions, beyond the reasonable control and without
the fault or negligence of such party, and the time for performance by such
party shall be extended by the period of such delay.
Section 4.06. Confidentiality. From and after the NextLevel Systems
Distribution Date, each of Service Provider and Recipient shall hold, and cause
their affiliates, directors, officers, employees, agents, consultants, advisors
and representatives to hold, in strict confidence, and shall not make use of,
divulge or otherwise disclose any Information (as defined in the Distribution
Agreement) concerning the other party's business obtained by it prior to the
NextLevel Systems Distribution Date, including any trade secret or other similar
proprietary data, or furnished to it by such other party pursuant to the
Distribution Agreement, any ancillary agreements to the Distribution Agreement
or this Agreement, except disclosure to such of its directors, officers,
employees, agents, consultants, advisors, affiliates and representatives, who
shall have a bona fide "need to know" and (in the case of agents, consultants,
advisors and representatives) who shall execute an agreement agreeing to be
bound by the provisions of this Section 4.06, and each party shall be
responsible for a breach by any of such persons or representatives; provided,
however, that the Service Provider or Recipient, or any of their respective
affiliates, may disclose such Information to the extent that: (a) disclosure is
compelled by an order of a court of competent jurisdiction or is required by law
to be disclosed to a governmental authority and the applicable party uses
reasonable efforts to notify the other party prior to (and, to the extent
practicable, at least ten days prior to) any disclosure of Information pursuant
to the foregoing clause (a), except to the extent that the giving of such notice
would be unlawful or violate any order, ruling or directive of any governmental
authority; or (b) such party can show that such Information was (i) available to
such person on a nonconfidential basis (other than from the other
6
<PAGE>
party or its affiliates or representatives) prior to the disclosure by the other
party, (ii) in the public domain through no fault of such person, or (iii)
lawfully acquired by such person from another source after the time it was
furnished to such person by the other party, and not acquired from such source
subject to any confidentiality obligation on the part of such source, or on the
part of the acquiror.
Section 4.07. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
Section 4.08. Notices. All notices, consents, requests, waivers or
other communications required or permitted under this Agreement (each a
"Notice") shall be in writing and shall be sufficiently given (a) if hand
delivered or sent by telecopy, (b) if sent by nationally recognized overnight
courier, or (c) if sent by registered or certified mail, postage prepaid, return
receipt requested, and in each case addressed as follows:
If to Service Provider, to: NextLevel Systems, Inc.
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: General Counsel
If to Recipient, to: General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747-3113
Attn: General Counsel
or such other address as shall be furnished by any of the Parties in a Notice.
Any Notice shall be deemed given upon receipt.
Section 4.09. Counterparts. This Agreement may be executed with
counterpart signature pages or in one or more counterparts, all of which shall
be one and the same Agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to all the
parties hereto.
Section 4.10. Interpretation. The parties intend that the
Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986,
as amended, so that no gain or loss shall be recognized for Federal income tax
purposes as a result of the transaction, and all provisions of this Agreement
shall be so interpreted.
Section 4.11. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance is determined by a court
of competent
7
<PAGE>
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transaction
contemplated hereby is not affected in any manner adverse to any party.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
General Semiconductor, Inc.
By: /s/ Ronald A. Ostertag
-----------------------
Name: Ronald A. Ostertag
Title: Chairman, CEO & President
NEXTLEVEL SYSTEMS, INC.
By: /s/ Keith A. Zar
----------------
Name: Keith A. Zar
Title: Vice President and General
Counsel
9
<PAGE>
EXHIBIT 10.7
_______________________________________________________________________________
_______________________________________________________________________________
CREDIT AGREEMENT
among
GENERAL SEMICONDUCTOR, INC.,
CERTAIN BANKS,
THE CHASE MANHATTAN BANK,
as Administrative Agent, and
THE CHASE MANHATTAN BANK,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
BANK OF MONTREAL,
THE BANK OF NOVA SCOTIA,
CIBC INC.,
CREDIT LYONNAIS NEW YORK BRANCH,
FLEET NATIONAL BANK
and
WACHOVIA BANK, N.A.
as Co-Agents
Dated as of July 23, 1997
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS...................................................... 2
1.1 Defined Terms...................................................... 2
1.2 Other Definitional Provisions...................................... 22
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS............................................... 22
2.1 Revolving Credit Commitments....................................... 22
2.2 Proceeds of Revolving Credit Loans................................. 23
2.3 Issuance of Letters of Credit...................................... 23
2.4 Participating Interests............................................ 24
2.5 Procedure for Opening Letters of Credit............................ 24
2.6 Payments in Respect of Letters of Credit........................... 24
2.7 The Bid Loans...................................................... 25
2.8 Procedure for Bid Loan Borrowing................................... 25
2.9 Bid Loan Payments.................................................. 28
2.10 Swing Line Commitment.............................................. 29
2.11 Participations..................................................... 31
SECTION 3. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT...................................... 31
3.1 Procedure for Borrowing............................................ 31
3.2 Conversion Options................................................. 31
3.3 Changes of Commitment Amounts...................................... 32
3.4 Optional Prepayments............................................... 33
3.5 Mandatory Prepayments.............................................. 33
3.6 Interest Rates and Payment Dates................................... 35
3.7 Computation of Interest and Fees................................... 35
3.8 Facility Fees...................................................... 36
3.9 Certain Fees....................................................... 36
3.10 Letter of Credit Fees.............................................. 36
3.11 Letter of Credit Reserves.......................................... 37
3.12 Further Assurances................................................. 38
3.13 Obligations Absolute............................................... 38
3.14 Assignments........................................................ 39
3.15 Participations..................................................... 39
3.16 Inability to Determine Interest Rate............................... 39
3.17 Pro Rata Treatment and Payments.................................... 39
3.18 Illegality......................................................... 42
3.19 Requirements of Law................................................ 43
3.20 Indemnity.......................................................... 44
3.21 Repayment of Loans, Evidence of Debt............................... 44
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PAGE
3.22 Mitigation Obligations; Replacement of Banks....................... 45
SECTION 4. REPRESENTATIONS AND WARRANTIES................................... 47
4.1 Financial Condition................................................ 47
4.2 No Material Change................................................. 48
4.3 Corporate Existence; Compliance with Law........................... 48
4.4 Corporate Power; Authorization..................................... 49
4.5 Enforceable Obligations............................................ 49
4.6 No Legal Bar....................................................... 49
4.7 No Material Litigation............................................. 49
4.8 Investment Company Act............................................. 50
4.9 Federal Regulation................................................. 50
4.10 No Default......................................................... 50
4.11 No Burdensome Restrictions......................................... 50
4.12 Taxes.............................................................. 50
4.13 Subsidiaries....................................................... 51
4.14 Ownership of Property; Liens....................................... 51
4.15 ERISA.............................................................. 51
4.16 Accuracy of Disclosure............................................. 52
4.17 Environmental Matters.............................................. 52
4.18 Collateral Documents............................................... 53
4.19 Intellectual Property.............................................. 53
SECTION 5. CONDITIONS PRECEDENT............................................. 53
5.1 Conditions to Effectiveness of this Agreement...................... 53
5.2 Conditions to Initial Loans and Letters of Credit.................. 56
5.3 Conditions to All Loans and Letters of Credit...................... 57
SECTION 6. AFFIRMATIVE COVENANTS............................................ 57
6.1 Financial Statements............................................... 58
6.2 Certificates; Other Information.................................... 59
6.3 Payment of Obligations............................................. 60
6.4 Conduct of Business and Maintenance of Existence................... 60
6.5 Maintenance of Property; Insurance................................. 61
6.6 Inspection of Property; Books and Records; Discussions............. 61
6.7 Notices............................................................ 61
6.8 Additional Subsidiary Guarantors; Stock Pledge..................... 63
6.9 Environmental Laws................................................. 64
SECTION 7. NEGATIVE COVENANTS............................................... 64
7.1 Amendments of Spin-Off Documents................................... 64
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PAGE
7.2 Limitation on Liens................................................ 64
7.3 Limitation on Guarantee Obligations................................ 66
7.4 Prohibition of Fundamental Changes................................. 66
7.5 Limitation on Sale of Assets....................................... 66
7.6 Limitation on Investments, Loans and Advances...................... 67
7.7 Maintenance of Consolidated Net Worth.............................. 68
7.8 Maintenance of Interest Coverage................................... 68
7.9 Maintenance of Leverage Ratio...................................... 68
7.10 Limitation on Dividends and Stock Repurchases...................... 68
7.11 Transactions with Affiliates....................................... 69
7.12 Foreign Exchange Contracts......................................... 69
7.13 Fiscal Year........................................................ 69
7.14 Limitation on Indebtedness......................................... 69
7.15 Limitation on Capital Expenditures................................. 70
7.16 Limitation on Leases............................................... 70
7.17 Limitation on Sales and Leasebacks................................. 70
7.18 Limitation on Negative Pledge Clauses; Payment Restrictions........ 70
SECTION 8. EVENTS OF DEFAULT................................................ 71
SECTION 9. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS............................................. 74
9.1 Appointment........................................................ 74
9.2 Delegation of Duties............................................... 74
9.3 Exculpatory Provisions............................................. 74
9.4 Reliance by Co-Agents and Administrative Agent..................... 75
9.5 Notice of Default.................................................. 75
9.6 Non-Reliance on Co-Agents, Administrative Agent and Other Banks.... 75
9.7 Indemnification.................................................... 76
9.8 Co-Agents and Administrative Agent in their Individual Capacities.. 76
9.9 Successor Co-Agent or Administrative Agent......................... 76
9.10 An Issuing Bank as Issuer of Letters of Credit..................... 77
SECTION 10. MISCELLANEOUS................................................... 77
10.1 Amendments and Waivers............................................. 77
10.2 Notices............................................................ 78
10.3 No Waiver; Cumulative Remedies..................................... 80
10.4 Survival of Representations and Warranties......................... 80
10.5 Payment of Expenses and Taxes...................................... 80
10.6 Successors and Assigns; Participations; Purchasing Banks........... 82
10.7 Adjustments; Set-off............................................... 85
10.8 Judgment........................................................... 86
10.9 Counterparts....................................................... 86
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PAGE
10.10 Integration................................................... 87
10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS.......................... 87
10.12 SUBMISSION TO JURISDICTION; WAIVERS........................... 87
10.13 Acknowledgements.............................................. 88
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SCHEDULES:
Schedule I Lists of Addresses for Notices; Lending Offices; Commitment
Amounts
Schedule II Domestic Subsidiaries
Schedule III Foreign Subsidiaries
Schedule IV Consents
Schedule V Guarantee Obligations
Schedule VI Permitted Foreign Investments
Schedule VII Pledged Foreign Stock
Schedule VIII Existing Investments
EXHIBITS:
Exhibit A Bid Loan Confirmation
Exhibit B Bid Loan Offer
Exhibit C Bid Loan Request
Exhibit D Subsidiary Guarantee
Exhibit E Company Pledge Agreement
Exhibit F Subsidiary Pledge Agreement
Exhibit G-1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
Exhibit G-2 Opinion of Keith A. Zar, Esq.
Exhibit H Company Closing Certificate
Exhibit I L/C Participation Certificate
Exhibit J Swing Line Loan Participation Certificate
Exhibit K Assignment and Acceptance
Exhibit L Exemption Certificate
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CREDIT AGREEMENT, dated as of July 23, 1997, among GENERAL
SEMICONDUCTOR, INC., a Delaware corporation (the "COMPANY"), the several lenders
from time to time parties hereto (the "BANKS"), THE CHASE MANHATTAN BANK, a New
York banking corporation, as administrative agent for the Banks (in such
capacity, the "ADMINISTRATIVE AGENT"), and The Chase Manhattan Bank ("CHASE"),
Bank of America National Trust and Savings Association, Bank of Montreal, The
Bank of Nova Scotia, CIBC Inc., Credit Lyonnais New York Branch, Fleet National
Bank and Wachovia Bank, N.A. as co-agents for the Banks (in such capacity,
collectively, the "CO-AGENTS"; each, individually, a "CO-AGENT").
W I T N E S S E T H:
1. Pursuant to the Distribution Agreement dated as of June 12, 1997
(as amended, modified or supplemented from time to time in accordance with
subsection 7.1, the "DISTRIBUTION AGREEMENT") among General Instrument
Corporation, a Delaware corporation ("GI Holdings"), NextLevel Systems, Inc., a
Delaware corporation ("NEXTLEVEL") which is an indirect wholly-owned Subsidiary
(such term and the other capitalized terms used in these recitals having the
meaning set forth in this Agreement unless the context otherwise requires) of
the Company, and CommScope, Inc., a Delaware corporation ("COMMSCOPE") which is
an indirect wholly-owned Subsidiary of the Company, the Company has agreed to
separate and divide the existing businesses of the Company so that (a) the
business (the "COMMUNICATIONS BUSINESS") of the manufacture and sale of
broadband communications products used in the cable television, satellite and
telecommunications industries shall be owned directly and indirectly by
NextLevel, (b) the business (the "CABLE MANUFACTURING BUSINESS") of the
manufacture and sale of coaxial, fiber optic and other electronic cable used in
the cable television, satellite and other industries shall be owned directly and
indirectly by CommScope, and (c) the business (the "POWER SEMICONDUCTOR
BUSINESS") of the manufacture and sale of discrete power rectifiers and
transient voltage suppression components used in telecommunications, automotive
and consumer electronic products shall be directly and indirectly owned by GI
Holdings which will be merged with General Instrument Corporation of Delaware, a
Delaware corporation ("GI Delaware"), with GI Holdings as the surviving
corporation, and be renamed "General Semiconductor, Inc." ("General
Semiconductor") immediately following the separation and division described
above and prior to the distribution described in the succeeding paragraph.
2. Following the separation and division described in the preceding
paragraph (a) the Company shall distribute, as a dividend to the holders of the
shares of its common stock, all of the capital stock of NextLevel, which, at the
time of the distribution, will own all of the capital stock of CommScope, and
promptly thereafter (b) NextLevel shall distribute, as a dividend to the holders
of the shares of its common stock, all of the capital stock of CommScope (the
transactions described in paragraph 1 above and this paragraph 2, as more
particularly described in the S-4 Filing (as defined below), the "SPINOFF".)
3. Pursuant to the Distribution Agreement and in connection with the
Spin-Off, certain pre-existing indebtedness of the Company, NextLevel and
CommScope and their respective Subsidiaries will be paid in full and cancelled
and certain other transactions will be consummated (the Spin-Off and the other
transactions to be performed pursuant to and in
<PAGE>
2
connection with the Spin-Off, the "SPIN-OFF TRANSACTIONS").
4. The Company has requested that the Banks, the Administrative Agent
and the Co-Agents enter this Agreement in order to make available to the Company
the $350,000,000 credit facilities described herein on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company, the Banks, the Administrative Agent and the
Co-Agents hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the terms defined in
the preamble hereto shall have the meanings set forth therein, and the following
terms have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by Chase as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Chase in connection
with extensions of credit to debtors); "BASE CD RATE" shall mean the sum of
(a) the product of (i) the Three-Month Secondary CD Rate and (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will,
under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York
City received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base
CD Rate or the Federal Funds Effective Rate, or both, for
<PAGE>
3
any reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms hereof, the
ABR shall be determined without regard to clause (b) or (c), or both, of
the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the ABR due to a change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR LOANS": Loans whose interest rate is based on the ABR.
"ABSOLUTE RATE BID LOAN": any Bid Loan bearing interest at an
absolute fixed rate.
"ABSOLUTE RATE BID LOAN REQUEST": any Bid Loan Request requesting the
Bid Loan Lenders to offer to make Bid Loans at an absolute fixed rate for
the term of the Bid Loan.
"ADMINISTRATIVE AGENT": as defined in the preamble hereto.
"AFFILIATE": of any Person (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect,
either to (i) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person, or (ii) direct or cause
the direction of the management and policies of such Person whether by
contract or otherwise. Notwithstanding the foregoing, NextLevel, CommScope
and their respective Subsidiaries shall be deemed to be Affiliates of the
Company and its Subsidiaries for any period during which NextLevel and
CommScope are Subsidiaries of the Company or GI Delaware.
"AGGREGATE EXTENSIONS OF CREDIT": at any particular time, the sum of
(a) the aggregate then outstanding principal amount of the Revolving Credit
Loans, (b) the aggregate then outstanding principal amount of the Bid
Loans, (c) the aggregate amount then available to be drawn under all
outstanding Letters of Credit, (d) the aggregate amount of Revolving L/C
Obligations and (e) the aggregate then outstanding principal amount of the
Swing Line Loans.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
modified from time to time.
"AGREEMENT CURRENCY": as defined in subsection 10.8(b).
"APPLICABLE INDEX RATE": in respect of any Bid Loan requested
pursuant to an Index Rate Bid Loan Request, the applicable Eurodollar Rate.
<PAGE>
4
"APPLICABLE MARGIN": for each Eurodollar Loan, the Facility Fee and
the Standby L/C fees, the rate per annum determined from time to time based
upon the Leverage Ratio determined as of the last day of the most recent
fiscal quarter for which the Company has delivered financial statements
pursuant to subsections 6.1(a) and (b) and the related certificate of the
chief financial officer of the Company referred to in subsection 6.2 as set
forth under the relevant column heading below opposite such Leverage Ratio:
(in basis points)
STANDBY
EURODOLLAR LOAN -------
LEVERAGE RATIO APPLICABLE MARGIN FACILITY FEE L/C FEE
-------------- ----------------- ------------ -------
Less than 1.5 to 1.0 36.25 18.75 36.25
Less than 2.0 to 1.0 but 42.50 20.00 42.50
greater than or equal to
1.5 to 1.0
Less than 2.25 to 1.0 but 52.50 22.50 52.50
greater than or equal to
2.0 to 1.0
Less than 2.75 to 1.0 but 60.00 25.00 60.00
greater than or equal to
2.25 to 1.0
Less than 3.0 to 1.0 but 70.00 30.00 70.00
greater than or equal to
2.75 to 1.0
Less than 3.5 to 1.0 but 112.50 37.50 112.50
greater than or equal to
3.0 to 1.0
Greater than or equal to 137.50 37.50 137.50
3.5 to 1.0
For the purpose of this Agreement, any change in the Eurodollar Loan
Applicable Margin, the Facility Fee and the Standby L/C fees shall become
effective on the day following the delivery to the Administrative Agent by
the Company of the financial statements referred to in subsections 6.1(a)
and (b) and the related certificate of the chief financial officer of the
Company referred to in subsection 6.2 indicating the Leverage Ratio as of
the last day of such period. If the Company shall fail to deliver the
financial statements referred to in subsections 6.1(a) and (b) and the
related certificate of the chief financial officer of the Company referred
to in subsection 6.2 indicating the Leverage Ratio as of such last day,
then the Applicable Margin, Facility Fee and Standby L/C fee shall
automatically, and without further act of the Administrative Agent, the
Co-Agents or any Bank, equal the highest Applicable Margin, Facility Fee
and Standby L/C fee set forth above. Notwithstanding the foregoing, for
the period from the Closing Date through January 25, 1998, the Applicable
Margin shall be calculated as if the Leverage Ratio was less than 2.75 to
1.0 but greater than or equal to 2.25 to 1.0.
<PAGE>
5
"ASSET SALE": any sale, sale-leaseback, assignment, conveyance,
transfer or other disposition (including as a result of casualty or
condemnation) by the Company or any Subsidiary thereof of any of its
property or assets, including the stock of any Subsidiary of the Company
(except sales, sale-leasebacks, assignments, conveyances, transfers and
other dispositions permitted by clauses (a), (b), and (c) of subsection
7.5).
"ASSIGNEE": as defined in subsection 10.6(c).
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance
substantially in the form of Exhibit K hereto.
"AVAILABLE REVOLVING CREDIT COMMITMENTS": as to all the Banks, at a
particular time, an amount equal to the excess, if any, of (a) the
Revolving Credit Commitments at such time less (b) the sum of (i) the
Aggregate Extensions of Credit and, (ii) for so long as the Company remains
liable for the payment of the Taiwan Mortgage Indebtedness, the outstanding
amount of the Taiwan Mortgage Indebtedness (except to the extent the
Aggregate Extensions of Credit have been drawn for the purpose of repaying
the Taiwan Mortgage Indebtedness and are so used promptly after such
drawing).
"BANKS": as defined in the preamble hereto.
"BENEFITTED BANK": as defined in subsection 10.7 hereof.
"BID LOAN": each Bid Loan made pursuant to subsection 2.7.
"BID LOAN COMMITMENT PERIOD": the period from and including the
Closing Date until the date which is 15 days prior to the Revolving Credit
Termination Date.
"BID LOAN CONFIRMATION": each confirmation by the Company of its
acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be
substantially in the form of Exhibit A and shall be delivered to the
Administrative Agent in writing, by telex or by facsimile transmission.
"BID LOAN INTEREST PAYMENT DATE": as to each Bid Loan, each interest
payment date specified by the Company for such Bid Loan in the related Bid
Loan Request.
"BID LOAN LENDERS": Banks from time to time designated by the Company
as Bid Loan Lenders as provided in subsection 2.7.
"BID LOAN MATURITY DATE": as to any Bid Loan, the date specified by
the Company pursuant to subsection 2.8(d)(2) in its acceptance of the
related Bid Loan Offer.
"BID LOAN OFFER": each offer by a Bid Loan Lender to make Bid Loans
pursuant to a Bid Loan Request, which Bid Loan Offer shall contain the
information specified in Exhibit B and shall be delivered to the
Administrative Agent by telephone, immediately confirmed by telex or
facsimile transmission.
"BID LOAN REQUEST": each request by the Company for Bid Loan Lenders
to
<PAGE>
6
submit bids to make Bid Loans, which request shall contain the information
in respect of such requested Bid Loans specified in Exhibit C and shall be
delivered to the Administrative Agent in writing, by telex or facsimile
transmission, or by telephone, immediately confirmed by telex or facsimile
transmission.
"BOARD": the Board of Governors of the Federal Reserve System of the
United States.
"BORROWING DATE": any Business Day specified in a notice pursuant to
(a) subsection 2.8, 2.10 or 3.1 as a date on which the Company requests Bid
Loan Lenders to make Bid Loans, a Swing Line Bank to make Swing Line Loans
or the Banks to make Revolving Credit Loans, respectively, hereunder or (b)
subsection 2.5 as a date on which the Company requests an Issuing Bank to
issue a Letter of Credit hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close, except that, when used in connection with a Eurodollar Loan,
"Business Day" shall mean any Business Day on which dealings in Dollars
between banks may be carried on in London, England and New York City.
"CABLE MANUFACTURING BUSINESS": as defined in the recitals hereto.
"CASH EQUIVALENTS": (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from
the date of acquisition, (ii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any Bank or with any
domestic commercial bank having capital and surplus in excess of
$300,000,000, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (i)
and (ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper
issued by any Bank, the parent corporation of any Bank or any Subsidiary of
such Bank's parent corporation, and commercial paper rated A-1 or the
equivalent thereof by Standard & Poor's Corporation or P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within six months after the date of acquisition thereof.
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
net annual assessment rate (rounded upward to the nearest 1/100th of 1%)
determined by the Administrative Agent to be payable on such day to the
Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's
insuring time deposits made in Dollars at the offices of Chase in the
United States.
"CD RESERVE PERCENTAGE": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board (or any successor), for determining the maximum
reserve requirement for a Depositary Institution (as defined in Regulation
D of the Board) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
<PAGE>
7
"CHANGE IN LAW": with respect to any Bank, the adoption of any law,
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or any change therein or in the interpretation or application
thereof by any Governmental Authority, including, without limitation, the
issuance of any final rule, regulation or guideline by any regulatory
agency having jurisdiction over such Bank.
"CHASE": as defined in the preamble hereto.
"CLASS": as to any Loan, its nature as a Revolving Credit Loan, Bid
Loan or Swing Line Loan.
"CLOSING DATE": as defined in subsection 5.2.
"CO-AGENTS": as defined in the preamble hereto.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COMMERCIAL L/C": a commercial documentary Letter of Credit under
which the relevant Issuing Bank agrees to make payments in Dollars for the
account of the Company, on behalf of the Company or any Subsidiary thereof,
in respect of obligations of the Company or any Subsidiary thereof in
connection with the importation or exportation of goods in the ordinary
course of business.
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments and the Swing Line Commitment; individually, a "COMMITMENT".
"COMMITMENT PERCENTAGE" or "REVOLVING CREDIT COMMITMENT PERCENTAGE":
as to any Bank at any time, the percentage which such Bank's Revolving
Credit Commitment constitutes of all Revolving Credit Commitments.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"COMMSCOPE": as defined in the recitals hereto.
"COMMUNICATIONS BUSINESS": as defined in the recitals hereto.
"COMPANY": as defined in the preamble hereto.
"COMPANY PLEDGE AGREEMENT": the Pledge Agreement, substantially in
the form of Exhibit E hereto, made by the Company in favor of the
Administrative Agent, for the ratable benefit of the Banks, as the same may
be amended, supplemented or otherwise modified from time to time.
"CONSOLIDATED EBITDA": for any period, the Consolidated Net Income
((i)
<PAGE>
8
including earnings and losses from discontinued operations, excluding those
attributable to NextLevel and Commscope, and (ii) excluding (x)
extraordinary non-cash gains and losses and (y) charges in connection with
the redemption or conversion to common stock of the Company's outstanding
5% Convertible Junior Subordinated Notes) of the Company and its
Subsidiaries for such period, PLUS to the extent reflected as a charge in
the statement of consolidated net income for such period, the sum of
(a) interest expense (net of interest income), amortization and write offs
of debt discount and debt issuance costs and commissions, discounts and
other fees and charges associated with Letters of Credit, (b) taxes
measured by income, (c) depreciation and amortization expenses and (d)
non-cash compensation expenses arising from the sale of stock, the granting
of stock options, the granting of stock appreciation rights and similar
arrangements; PROVIDED, that, (i) Consolidated EBITDA for the period of
four consecutive quarters ending September 30, 1997 shall be equal to the
product of (A) Consolidated EBITDA for the fiscal quarter ending
September 30, 1997 times (B) 4, (ii) Consolidated EBITDA for the period of
four consecutive fiscal quarters ending December 31, 1997 shall be equal to
the product of (A) Consolidated EBITDA for the two consecutive fiscal
quarters ending December 31, 1997 times (B) 2, and (iii) Consolidated
EBITDA for the period of four consecutive fiscal quarters March 31, 1998
shall be equal to the product of (A) Consolidated EBITDA for the three
consecutive fiscal quarters ending March 31, 1998 times (B) 4/3.
"CONSOLIDATED INTEREST EXPENSE": for any period the amount of
interest expense both expensed and capitalized (excluding amortization and
write offs of debt discount and debt issuance costs), net of interest
income, of the Company and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP, for such period PROVIDED, THAT, (i)
Consolidated Interest Expense for the period of four consecutive fiscal
quarters ending September 30, 1997 shall be equal to the product of (A)
Consolidated Interest Expense for the fiscal quarter ending September 30,
1997 times (B) 4, (ii) Consolidated Interest Expense for the period of four
consecutive fiscal quarter ending December 31, 1997 shall be equal to the
product of (A) Consolidated Interest Expense for the two consecutive fiscal
quarters ending December 31, 1997 times (B) 2, and (iii) Consolidated
Interest Expense for the period of four consecutive fiscal quarters ending
March 31, 1998 shall be equal to the product (A) Consolidated Interest
Expense for the three consecutive fiscal quarters ending March 31, 1998
times (B) 4/3.
"CONSOLIDATED LEASE EXPENSE": for any period, the amount of lease
expense of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period with respect to Lease
Obligations.
"CONSOLIDATED NET INCOME": for any period, the net income or net loss
of the Company and its Subsidiaries for such period, determined in
accordance with GAAP on a consolidated basis, excluding any pre-tax charges
related to costs incurred in connection with the Spin-Off not exceeding
$20,000,000 in the aggregate for the period from July 1, 1997 to December
31, 1997, as reflected in the financial statements furnished to the
Administrative Agent in accordance with subsections 6.1(a) and (b) hereof.
"CONSOLIDATED NET WORTH": as of any date of determination, all items
which in conformity with GAAP would be included under shareholders' equity
on a consolidated
<PAGE>
9
balance sheet of the Company and its Subsidiaries at such date, PROVIDED,
that such amount shall be increased, on a cumulative basis from June 30,
1997, for (i) amortization and write-offs of debt discount and debt
issuance costs, (ii) any amount reflected as a charge in the Company's
consolidated income statements for non-cash compensation arising from the
sale of stock, the granting of stock options, the granting of stock
appreciation rights and similar arrangements and (iii) pre-tax charges
related to costs incurred in connection with the Spin-Off not exceeding
$20,000,000 in the aggregate for the period from July 1, 1997 to December
31, 1997.
"CONSOLIDATED TOTAL INDEBTEDNESS": as of any date of determination,
all Indebtedness of the Company and its Subsidiaries, which would be
reflected as debt on a consolidated balance sheet of the Company prepared
in accordance with GAAP, excluding to the extent otherwise included the
Taiwan Mortgage Indebtedness.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"CREDIT DOCUMENTS": the collective reference to this Agreement, any
Registered Form Notes, the Pledge Agreements, the Subsidiary Guarantees and
any security agreement or guarantee executed and delivered pursuant to the
terms of subsection 6.8.
"CREDIT PARTIES": the collective reference to the Company and each
Subsidiary which is a party, or which at any time becomes a party, to a
Credit Document.
"DEFAULT": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"DISTRIBUTION AGREEMENT": as defined in the recitals hereto.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"DOMESTIC LENDING OFFICE": initially the office of each Bank
designated as such in Schedule I; thereafter, one or more other offices of
such Bank, as designated from time to time in a notice from such Bank to
the Administrative Agent.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Company other than a
Foreign Subsidiary.
"DSC LITIGATION": the case entitled DSC COMMUNICATIONS CORPORATION
AND DSC TECHNOLOGIES CORPORATION V. NEXT LEVEL COMMUNICATIONS, THOMAS R.
EAMES AND PETER W. KEELER, Case No. 4:95cv96 in the United States District
Court for the Eastern District of Texas, Sherman Division for which the
final judgment was entered on June 11, 1996.
"EFFECTIVE DATE": as defined in subsection 5.1.
"ENVIRONMENTAL LAWS": any and all Federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any
<PAGE>
10
Governmental Authority regulating, relating to or imposing liability or
standards of conduct concerning environmental protection matters, including
without limitation, Hazardous Materials, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined by
the Administrative Agent to be the arithmetic mean (rounded to the nearest
1/100th of 1%) of the offered rates for deposits in Dollars with a term
comparable to such Interest Period that appears on the Telerate British
Bankers Assoc. Interest Settlement Rates Page (as defined below) at
approximately 11:00 A.M., London time, on the second full Business Day
preceding the first day of such Interest Period; PROVIDED, HOWEVER, that if
there shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with
respect to each day during each Interest Period pertaining to a Eurodollar
Loan, the rate per annum equal to the rate at which Chase is offered
deposits in Dollars at approximately 11:00 A.M., London time, two Business
Days prior to the first day of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of Dollars are then being conducted for delivery on
the first day of such Interest Period for the number of days comprised
therein and in an amount comparable to the amount of its Eurodollar Loan to
be outstanding during such Interest Period. "TELERATE BRITISH BANKERS
ASSOC. INTEREST SETTLEMENT RATES PAGE" shall mean the display designated as
Page 3750 on the Telerate System Incorporated Service (or such other page
as may replace such page on such service for the purpose of displaying the
rates at which Dollar deposits are offered by leading banks in the London
interbank deposit market).
"EURODOLLAR LENDING OFFICE": initially, the office of each Bank
designated as such in Schedule I; thereafter, one or more other offices of
such Bank, if any, which shall be making or maintaining Eurodollar Loans as
designated as such from time to time in a notice from such Bank to the
Administrative Agent.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
EURODOLLAR BASE RATE
-----------------------------------
1.00 - Eurodollar Reserve Requirements
"EURODOLLAR RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with
<PAGE>
11
reserve requirements prescribed for eurodollar funding (currently referred
to as "Eurodollar Liabilities" in Regulation D of the Board) maintained by
a member bank of the Federal Reserve System.
"EVENT OF DEFAULT": any of the events specified in Section 8,
PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.
"EXCLUDED LITIGATION": the DSC Litigation and any other litigation
specifically described and identified in the S-4 Filing, in each case only
to the extent that the responsibility for the DSC Litigation or such other
litigation, as the case may be, is borne by the party to whom the
Distribution Agreement has allocated responsibility therefor.
"EXISTING GI DELAWARE CREDIT AGREEMENT": The Third Amended and
Restated Credit Agreement dated as of August 12, 1996, as amended, to which
GI Delaware is a party and for which Chase acts as administrative agent.
"EXTENSIONS OF CREDIT": the collective reference to the making of any
Loans and the issuance of any Letters of Credit.
"FL AFFILIATE": any of FL & Co., the partners of FL & Co. on the
Closing Date, any subordinated debt and equity partnership controlled by FL
& Co., any equity partnership controlled by FL & Co., any Affiliate of FL &
Co., any directors, executive officers or other employees or other members
of the management of the Company or any Subsidiary thereof (or any
"associate" (as defined in Rule 405 under the Securities Act of 1933, as
amended) of any thereof or employee benefit plan beneficially owned by any
thereof), the Company or any Subsidiary thereof on the Closing Date, or any
combination of the foregoing.
"FL & CO.": Forstmann Little & Co., a New York partnership.
"FACILITY FEE": the facility fee payable by the Company pursuant to
subsection 3.8.
"FOREIGN SUBSIDIARY": any Subsidiary of the Company (a) which is
organized under the laws of any jurisdiction outside the United States
(within the meaning of Section 7701(a)(9) of the Code), or (b) whose
principal assets consist of capital stock or other equity interests of one
or more Persons which conduct the major portion of their business outside
the United States (within the meaning of Section 7701(a)(9) of the Code).
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GENERAL SEMICONDUCTOR": as defined in the recitals hereto.
"GI DELAWARE": as defined in the recitals hereto.
"GITL": General Instrument of Taiwan, Ltd.
<PAGE>
12
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE OBLIGATION" as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of any such primary obligation against
loss in respect thereof; PROVIDED, HOWEVER, that the term Guarantee
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated
or determinable amount (based on the maximum reasonably anticipated net
liability in respect thereof as determined by the Company in good faith) of
the primary obligation or portion thereof in respect of which such
Guarantee Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated net liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by the Company in
good faith; PROVIDED, HOWEVER, that the amount of any Guarantee Obligation
associated with the Company's vendor financing programs shall be deemed to
be the amount estimated by the Company to be its liability in connection
therewith and for which the Company has estimated reserves in accordance
with GAAP.
"HAZARDOUS MATERIALS": any substance (a) which is or becomes defined
as a "hazardous waste," "hazardous substance," pollutant or contaminant
under any federal, state or local statute, regulation, rule or ordinance or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section
9601 et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.); and (b) without limitation, which is or contains
petroleum products (including crude oil or any fraction thereof), PCBs,
asbestos, urea formaldehyde foam insulation, radon gas or infectious or
radioactive materials.
"INDEBTEDNESS": of any Person, at any particular date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade payables or
liabilities and deferred payment for services to employees or former
employees incurred in the ordinary course of business and payable in
accordance with customary practices), (b) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (c) all liabilities (other than Lease Obligations)
secured by any Lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof, (d) lease
<PAGE>
13
obligations of such Person which, in accordance with GAAP, should be
capitalized and (e) all indebtedness of such Person arising under
acceptance facilities; but excluding (y) customer deposits and interest
payable thereon in the ordinary course of business and (z) trade and other
accounts and accrued expenses payable in the ordinary course of business in
accordance with customary trade terms and in the case of both clauses (y)
and (z) above, which are not overdue for a period of more than 90 days or,
if overdue for more than 90 days, as to which a dispute exists and adequate
reserves in conformity with GAAP have been established on the books of such
Person.
"INDEMNIFIED TAXES": as defined in subsection 3.22(a).
"INDEMNITEE": as defined in subsection 3.22.
"INDEX RATE BID LOAN": any Bid Loan bearing interest based on the
Applicable Index Rate.
"INDEX RATE BID LOAN REQUEST": any Bid Loan Request requesting the
Bid Loan Lenders to offer to make Bid Loans at an interest rate equal to
the Applicable Index Rate plus (or minus) a margin.
"INSOLVENCY": with respect to a Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"INTEREST COVERAGE RATIO": as at the last day of any fiscal quarter
of the Company, the ratio of (a) Consolidated EBITDA for the period of four
fiscal quarters ending on such day on a consolidated basis of the Company
and its Subsidiaries, to (b) Consolidated Interest Expense for the period
of four fiscal quarters ending on such day on a consolidated basis of the
Company and its Subsidiaries.
"INTEREST PAYMENT DATE": (a) as to ABR Loans, the last day of each
March, June, September and December, commencing on the first such day to
occur after any ABR Loans are made or any Eurodollar Loans are converted to
ABR Loans, (b) as to any Eurodollar Loan in respect of which the Company
has selected an Interest Period of one, two or three months, the last day
of such Interest Period, (c) as to any Eurodollar Loan in respect of which
the Company has selected an Interest Period of six months, the day which is
three months after the date on which such Eurodollar Loan is made or an ABR
Loan is converted to such a Eurodollar Loan, and the last day of such
Interest Period, (d) as to any other Eurodollar Loan, each day on which
principal of such Eurodollar Loan is payable and (e) in the case of the
Revolving Credit Loans, on the Revolving Credit Termination Date.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(a) initially, the period commencing on, as the case may be, the
Borrowing Date or conversion date with respect to such Eurodollar Loan
and ending one, two, three or six months thereafter as selected by the
Company in its notice of borrowing as provided in subsection 2.10, 3.1
or its notice of conversion as provided in subsection 3.2; and
<PAGE>
14
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter as selected by the
Company by irrevocable notice to the Administrative Agent not less
than three Business Days prior to the last day of the then current
Interest Period with respect to such Eurodollar Loan;
PROVIDED that the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day;
(B) any Interest Period that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date, or if the Revolving Credit Termination Date shall
not be a Business Day, on the next preceding Business Day;
(C) if the Company shall fail to give notice as provided above
in clause (b), it shall be deemed to have selected a conversion of a
Eurodollar Loan into an ABR Loan (which conversion shall occur
automatically and without need for compliance with the conditions for
conversion set forth in subsection 3.2);
(D) any Interest Period that begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(E) the Company shall select Interest Periods so as not to
require a prepayment (to the extent practicable) or a scheduled
payment of a Eurodollar Loan during an Interest Period for such
Eurodollar Loan.
"ISSUING BANK": Chase and any other financial institution which is a
Co-Agent, as selected by the Company, with the approval of the
Administrative Agent and such Co-Agent, in accordance with subsection 2.5.
"JUDGMENT CURRENCY": as defined in subsection 10.9(b).
"L/C APPLICATION": a letter of credit application in the relevant
Issuing Bank's then customary form for the type of letter of credit
requested.
"L/C PARTICIPATING INTEREST": an undivided participating interest in
the face amount of each issued and outstanding Letter of Credit and the L/C
Application relating thereto.
<PAGE>
15
"L/C PARTICIPATION CERTIFICATE": a certificate in substantially the
form of Exhibit I hereto.
"LEASE OBLIGATIONS": of the Company and its Subsidiaries, as of the
date of any determination thereof, the rental commitments of the Company
and its Subsidiaries determined on a consolidated basis, if any, under
leases for real and/or personal property (net of rental commitments from
sub-leases thereof), excluding however, obligations under leases which are
classified as Indebtedness under clause (d) of the definition of
Indebtedness.
"LETTER OF CREDIT": a letter of credit issued by an Issuing Bank
pursuant to the terms of subsection 2.3.
"LEVERAGE RATIO": as of the last day of any fiscal quarter, the ratio
of Consolidated Total Indebtedness on a consolidated basis for the Company
and its Subsidiaries on such day to Consolidated EBITDA for the period of
four consecutive fiscal quarters of the Company ending on such day.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of any effective financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction in respect of any of the
foregoing, except for the filing of financing statements in connection with
Lease Obligations incurred by the Company or its Subsidiaries to the extent
that such financing statements relate to the property subject to such Lease
Obligations).
"LOANS": the collective reference to the Revolving Credit Loans, the
Swing Line Loans and the Bid Loans; individually, a "LOAN".
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MATERIAL SUBSIDIARIES": any Subsidiary of the Company which at any
time has a total asset book value (including the total asset book values of
any Subsidiaries), or for which the Company or any of its Subsidiaries
shall have paid consideration (including the assumption of Indebtedness) in
connection with the acquisition of the stock or the assets of such
Subsidiary, in excess of $50,000,000, other than Foreign Subsidiaries or
other Subsidiaries if more than 75% of the assets of such Subsidiaries are
securities of foreign companies (such determination to be made on the basis
of fair market value). A Subsidiary which is a Material Subsidiary shall
continue to be a Material Subsidiary notwithstanding that its total asset
book value may fall to less than $50,000,000.
<PAGE>
16
"MONEY MARKET RATE": for any day, with respect to any Money Market
Rate Loan, the rate per annum quoted by a Swing Line Bank to the Company in
accordance with subsection 2.10(a) as the rate at which such Swing Line
Bank is willing to make such Loan.
"MONEY MARKET RATE LOANS": Swing Line Loans the rate of interest
applicable to which is based upon the Money Market Rate.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET PROCEEDS": the aggregate cash proceeds received by the Company
or any Subsidiary of the Company in respect of any Asset Sale, incurrence
of Indebtedness or issuance of equity (other than cash proceeds received by
a Subsidiary of the Company in respect of an issuance of equity by such
Subsidiary which are used or reserved for use by such Subsidiary in
connection with the business of such Subsidiary), and any cash payments
received in respect of promissory notes or other non-cash consideration
delivered to the Company or such Subsidiary in respect of an Asset Sale or
issuance of equity (other than cash proceeds received by a Subsidiary of
the Company in respect of promissory notes or other non-cash consideration
delivered to the Company or such Subsidiary in respect of an issuance of
equity by such Subsidiary which are used or reserved for use by such
Subsidiary in connection with the business of such Subsidiary), net of
(without duplication) (i) the reasonable expenses (including legal fees and
brokers' and underwriters' commissions paid to third parties which are not
Affiliates or Subsidiaries of the Company) incurred in effecting such Asset
Sale, incurrence of Indebtedness or issuance of equity, (ii) any taxes
reasonably attributable to such Asset Sale and, in case of an Asset Sale in
a foreign jurisdiction, the repatriation of the proceeds of such Asset Sale
reasonably estimated by the Company or such Subsidiary to be actually
payable, (iii) any Indebtedness or Contractual Obligation (other than the
Loans and other Obligations) required to be paid or retained in connection
with such Asset Sale and (iv) the aggregate amount of reserves required in
the Company's reasonable judgment to be maintained on the books of the
Company in order to pay contingent liabilities with respect to such Asset
Sale, PROVIDED that amounts deducted from aggregate proceeds pursuant to
clause (iv) and not actually paid by the Company or any of its Subsidiaries
in liquidation of such contingent liabilities shall be deemed to be Net
Proceeds and shall be prepaid in accordance with subsection 3.5 at such
time as such contingent liabilities shall cease to be obligations of the
Company or any of its Subsidiaries.
"NEXTLEVEL": as defined in the recitals hereto.
"NON-U.S. BANK": as defined in subsection 3.17(e).
"OBLIGATIONS": the unpaid principal of and interest on the Loans and
all other obligations and liabilities of the Company to the Administrative
Agent, the Co-Agents or the Banks, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the other
Credit Documents, any Letter of Credit or L/C Application, any agreements
between the Company and any Bank or any Affiliate of a Bank relating to
<PAGE>
17
interest rate, currency or similar swap and hedging arrangements or any
other document made, delivered or given in connection therewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent, the Co-Agents or any
Bank) or otherwise.
"OTHER TAXES": as defined in subsection 3.22(b).
"PARTICIPANT": as defined in subsection 10.6(b).
"PARTICIPATING BANK": any Bank (other than the Issuing Bank with
respect to such Letter of Credit) with respect to its L/C Participating
Interest in each Letter of Credit.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PLAN": any pension plan which is covered by Title IV of ERISA and in
respect of which the Company or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to the Company Pledge
Agreement and the Subsidiary Pledge Agreements; individually, a "PLEDGE
AGREEMENT".
"PLEDGED STOCK": as defined in the respective Pledge Agreements.
"POWER SEMICONDUCTOR BUSINESS": as defined in the recitals hereto.
"PROPERTIES": as defined in subsection 4.17.
"REFUNDED SWING LINE LOANS": as defined in subsection 2.10(b).
"REFUNDING DATE": as defined in subsection 2.10(c).
"REGISTER": as defined in subsection 10.6.
"REGISTERED FORM NOTE": as defined in subsection 3.21(e).
"REGULATION G": Regulation G of the Board, as from time to time in
effect.
"REGULATION U": Regulation U of the Board, as from time to time in
effect.
"RELATED DOCUMENT": any agreement, certificate, document or
instrument relating to a Letter of Credit.
<PAGE>
18
"RELEASE BANKS": at a particular time Banks that hold Revolving
Credit Commitments in an aggregate principal amount equal to at least 75%
of the aggregate Revolving Credit Commitments.
"REORGANIZATION": with respect to a Multiemployer Plan, the condition
that such Plan is in reorganization as such term is used in Section 4241 of
ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder.
"REQUIRED BANKS": at a particular time Banks that hold Revolving
Credit Commitments in an aggregate principal amount equal to at least 51%
of the aggregate Revolving Credit Commitments, PROVIDED, however, that for
the purposes of clause (y)(ii) of Section 8, Required Banks shall mean
Banks that hold at least 51% of (a) the aggregate then outstanding
principal amount of the Revolving Credit Loans, (b) the aggregate
outstanding principal amount of Bid Loans, as of the most recent date of
calculation of such amount pursuant to subsection 3.5(b), (c) the L/C
Participating Interests in the aggregate amount then available to be drawn
under all outstanding Letters of Credit and (d) the aggregate then
outstanding principal amount of Revolving L/C Obligations.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation (including, without
limitation, Environmental Laws) or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer or the chief
operating officer of the Company or, with respect to financial matters, the
chief financial officer or controller of the Company.
"RESTRICTED PAYMENT": as defined in subsection 7.10.
"REVOLVING CREDIT COMMITMENT": as to any Bank, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 2.1, and
to purchase its L/C Participating Interest in any Letter of Credit, in an
aggregate amount on the Closing Date not to exceed at any time the amount
set forth opposite such Bank's name in Schedule I under the heading
"Revolving Credit" and in an aggregate amount not to exceed at any time the
amount equal to such Bank's Revolving Credit Commitment Percentage of the
aggregate Revolving Credit Commitments, as the aggregate Revolving Credit
Commitments may be reduced from time to time pursuant to this Agreement;
collectively, as to all the Banks, the "REVOLVING CREDIT COMMITMENTS".
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the Closing Date to but not including the Revolving Credit Termination
Date.
"REVOLVING CREDIT LOAN" and "REVOLVING CREDIT LOANS": as defined in
subsection 2.1(a).
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19
"REVOLVING CREDIT TERMINATION DATE": the earlier of (i) December 31,
2002 and (ii) any other date on which the Revolving Credit Commitments
shall terminate hereunder.
"REVOLVING L/C OBLIGATIONS": the obligations of the Company to
reimburse the relevant Issuing Bank for any payments made by the relevant
Issuing Bank under any Letter of Credit that have not been reimbursed by
the Company pursuant to subsection 2.7.
"S-4 FILING": Amendment No. 4 to the Joint Registration Statement on
Form S-4 filed by Next Level and CommScope with the Securities and Exchange
Commission on June 13, 1997 with respect to the Spin-Off.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SPIN-OFF": as defined in the recitals hereto.
"SPIN-OFF DOCUMENTS": the collective reference to (i) the
Distribution Agreement, and (ii) the Ancillary Agreements (as defined in
the Distribution Agreement as in effect on the date hereof), as the same
may be amended, modified or supplemented from time to time.
"SPIN-OFF TRANSACTIONS": as defined in the recitals hereto.
"STANDBY L/C": an irrevocable Letter of Credit under which the
relevant Issuing Bank agrees to make payments in Dollars for the account of
the Company, on behalf of the Company or any Subsidiary thereof, in respect
of obligations of the Company or a Subsidiary thereof, including, without
limitation, obligations to government entities and incurred pursuant to
contracts made or performance undertaken, or to be undertaken, or like
matters relating to contracts to which the Company or a Subsidiary thereof
is or proposes to become a party in the ordinary course of the Company's or
such Subsidiary's business, including, without limitation, for insurance
purposes or in respect of advance payments or as bid or performance bonds.
"SUBSIDIARY": as to any Person, any corporation, partnership or other
entity of which shares of stock of each class or other equity interests
having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation, partnership or other
entity are at the time owned by such Person or by one or more Subsidiaries
of such Person or by such Person and one or more Subsidiaries of such
Person; PROVIDED, however, that NextLevel and its direct or indirect
Subsidiaries, including but not limited to CommScope and its direct and
indirect Subsidiaries, shall be deemed not to be a Subsidiary of the
Company hereunder for all purposes, including, but not limited to,
financial reporting purposes. A Subsidiary shall be deemed wholly-owned by
a Person who owns all of the voting shares of such Subsidiary except for
directors' qualifying or similar shares.
<PAGE>
20
"SUBSIDIARY GUARANTEE": the Subsidiary Guarantee to be executed by
each Subsidiary Guarantor in favor of the Administrative Agent, for the
ratable benefit of the Banks, substantially in the form of Exhibit D
hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"SUBSIDIARY GUARANTOR": any Subsidiary which enters into a Subsidiary
Guarantee pursuant to subsection 6.8.
"SUBSIDIARY PLEDGE AGREEMENTS": the Subsidiary Pledge Agreement to be
executed by each Subsidiary Pledgor in favor of the Administrative Agent,
for the ratable benefit of the Banks, substantially in the form of Exhibit
F hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
"SUBSIDIARY PLEDGOR": any Subsidiary which enters into a Pledge
Agreement pursuant to subsection 6.8.
"SWING LINE BANK": Chase and each Bank then acting as a Co-Agent
hereunder selected by the Company which has agreed to make Swing Line Loans
to the Company.
"SWING LINE COMMITMENT": each Swing Line Bank's obligation to make
Swing Line Loans pursuant to subsection 2.10.
"SWING LINE LOAN" and "SWING LINE LOANS": as defined in subsection
2.10(a).
"SWING LINE LOAN PARTICIPATION CERTIFICATE": a certificate in
substantially the form of Exhibit J hereto.
"TAIWAN MORTGAGE INDEBTEDNESS": the Indebtedness of the Company
and/or GITL in an aggregate principal amount not to exceed $60,000,000
(without duplication) at any time secured solely, directly or indirectly,
by a mortgage on the Taiwan Mortgaged Real Property, and any refinancing
thereof.
"TAIWAN MORTGAGED REAL PROPERTY": the real estate owned by GITL,
including the 10.2 acres of land and buildings thereon located at 233 Pao
Chiao Road, Hsintien, Taipei, Taiwan.
"TAXES": any tax, assessment, or other charge or levy and any
liabilities with respect thereto, including any penalties, additions to
tax, fines or interest thereon, imposed by or on behalf of any Governmental
Authority or any taxing authority thereof.
"TYPE": as to any Loan, its nature as an ABR Loan, a Eurodollar Loan
or a Money Market Rate Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500 (or any successor publication), as the same may be amended from time to
time.
<PAGE>
21
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any other Credit Document or any certificate or other document made
or delivered pursuant hereto.
(b) As used herein, any other Credit Document and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Company and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
(e) Reference herein to the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole shall refer to the Company and its Subsidiaries taken as a
whole from time to time after giving effect to the Spin-Off and all transactions
contemplated thereby, including the financing thereof.
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Bank agrees to extend credit to the Company from time to
time on any Borrowing Date during the Revolving Credit Commitment Period (i) by
purchasing an L/C Participating Interest in each Letter of Credit issued by an
Issuing Bank and (ii) by making loans in Dollars (individually, a "REVOLVING
CREDIT LOAN", and collectively the "REVOLVING CREDIT LOANS") to the Company from
time to time. Notwithstanding the foregoing, in no event shall any Revolving
Credit Loan or Swing Line Loan be made, or any Letter of Credit be issued, if,
after giving effect to such making or issuance and the use of proceeds thereof
as irrevocably directed by the Company, the Aggregate Extensions of Credit would
exceed the aggregate Revolving Credit Commitments. During the Revolving Credit
Commitment Period, the Company may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans or Swing Line Loans in whole or
in part, and reborrowing, all in accordance with the terms and conditions
hereof, and/or by having the Issuing Banks issue Letters of Credit, having such
Letters of Credit expire undrawn upon or if drawn upon, reimbursing the relevant
Issuing Bank for such drawing, and having the Issuing Banks issue new Letters of
Credit.
(b) Each borrowing of Revolving Credit Loans pursuant to the Revolving
Credit Commitments shall be in an aggregate principal amount of the lesser of
(i) $3,000,000, or a whole multiple of $1,000,000 in excess thereof, and (ii)
the Available Revolving Credit Commitments, except that any borrowing of a
Revolving Credit Loan to be used solely to pay a like amount of Swing Line Loans
may be in the aggregate principal amount of such Swing Line Loans.
<PAGE>
22
2.2 PROCEEDS OF REVOLVING CREDIT LOANS. The Company shall use the
proceeds of Revolving Credit Loans solely for the purposes of (a) financing the
payment of fees and expenses incurred in connection with this Agreement and the
Spin-Off, (b) making payments to the Issuing Banks to reimburse the Issuing
Banks for drawings made under the Letters of Credit, (c) repaying Swing Line
Loans, Bid Loans and Revolving Credit Loans after the Closing Date,
(d) financing general working capital needs of the Company or any of its
Subsidiaries and (e) other general corporate purposes of the Company or any of
its Subsidiaries, including, without limitation, supporting payment of
commercial paper issued by the Company in the United States commercial paper
market, financing acquisitions, refinancing indebtedness of the Company or its
Subsidiaries, payment of dividends, and repurchases of debt and equity
securities issued by the Company, all in accordance with the terms and
conditions hereof.
2.3 ISSUANCE OF LETTERS OF CREDIT. (a) The Company may from time to
time request an Issuing Bank to issue a Letter of Credit, which may be either a
Standby L/C or a Commercial L/C, by delivering to the Administrative Agent at
its address specified in subsection 10.2 and such Issuing Bank an L/C
Application completed to the satisfaction of such Issuing Bank, together with
the proposed form of such Letter of Credit (which shall comply with the
applicable requirements of paragraph (b) below) and such other certificates,
documents and other papers and information as such Issuing Bank may reasonably
request; PROVIDED that if such Issuing Bank informs the Company that it is for
any reason unable to open such Letter of Credit, the Company may request another
Issuing Bank or, if all Issuing Banks are unable to do so, any Bank to open such
Letter of Credit upon the same terms offered to the initial proposed Issuing
Bank and each reference to an Issuing Bank for purposes of the Credit Documents
shall be deemed to be a reference to such Bank and PROVIDED FURTHER that no
Issuing Bank shall issue any Letter of Credit if, after giving effect to such
issuance, the sum of (i) the aggregate amount then available to be drawn under
all outstanding Letters of Credit and (ii) the aggregate amount of Revolving L/C
Obligations would exceed $50,000,000.
(b) Each Letter of Credit issued hereunder shall, among other things,
(i) be denominated in Dollars, (ii) be in such form requested by the Company as
shall be acceptable to the relevant Issuing Bank in its sole discretion and
(iii) have an expiry date occurring not later than the earlier of (x) 365 days
after the date of issuance of such Letter of Credit and (y) the date five
Business Days prior to the Revolving Credit Termination Date; PROVIDED that
unless the Issuing Bank notifies the Company not less than 30 days prior to the
expiry of such Letter of Credit that the Issuing Bank is not willing to extend
it, any Letter of Credit which has an expiry date of 365 days after its date of
issuance may by its terms be automatically extended for periods of one year from
the current or any future expiration date thereof (but not to any date which is
later than five Business Days prior to the Revolving Credit Termination Date).
Each L/C Application and each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
2.4 PARTICIPATING INTERESTS. Effective in the case of each Letter of
Credit opened by an Issuing Bank as of the date of the opening thereof, such
Issuing Bank agrees to allot and does allot, to itself and each other Bank, and
each Bank severally and irrevocably agrees to take and does take in such Letter
of Credit and the related L/C Application, an L/C Participating Interest in a
percentage equal to such Bank's Revolving Credit Commitment Percentage.
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23
2.5 PROCEDURE FOR OPENING LETTERS OF CREDIT. Upon receipt of any L/C
Application from the Company in respect of a Letter of Credit, the
Administrative Agent will promptly notify each Bank thereof. The relevant
Issuing Bank will process such L/C Application, and the other certificates,
documents and other papers delivered to such Issuing Bank in connection
therewith, upon receipt thereof in accordance with its customary procedures and,
subject to the terms and conditions hereof, shall promptly open such Letter of
Credit by issuing the original of such Letter of Credit to the beneficiary
thereof and by furnishing a copy thereof to the Company and each of the other
Banks, PROVIDED that no such Letter of Credit shall be issued if subsection 2.1
would be violated thereby.
2.6 PAYMENTS IN RESPECT OF LETTERS OF CREDIT. (a) The Company agrees
forthwith upon demand by the relevant Issuing Bank and otherwise in accordance
with the terms of the L/C Application relating thereto (i) to reimburse such
Issuing Bank, through the Administrative Agent, for any payment made by such
Issuing Bank under any Letter of Credit on the next Business Day of such payment
by such Issuing Bank and (ii) to pay interest on any unreimbursed portion of any
such payment from the date of such payment until reimbursement in full thereof
at a rate per annum equal to (A) prior to the date which is one Business Day
after the day on which such Issuing Bank demands reimbursement from the Company
for such payment, the ABR and (B) on such date and thereafter, the ABR plus 2%.
(b) In the event that an Issuing Bank makes a payment under any Letter
of Credit and is not reimbursed in full therefor forthwith upon demand of such
Issuing Bank, and otherwise in accordance with the terms of the L/C Application
relating to such Letter of Credit, such Issuing Bank will promptly notify each
other Bank through the Administrative Agent. Forthwith upon its receipt of any
such notice, each other Bank will transfer to such Issuing Bank, through the
Administrative Agent, in immediately available funds, an amount equal to such
other Bank's PRO RATA share of the Revolving L/C Obligation arising from such
unreimbursed payment. Upon its receipt from such other Bank of such amount, the
Administrative Agent will complete, execute and deliver to such other Bank an
L/C Participation Certificate dated the date of such receipt and in such amount.
(c) Whenever, at any time after an Issuing Bank has made a payment
under any Letter of Credit and has received from any other Bank such other
Bank's PRO RATA share of the Revolving L/C Obligation arising therefrom, such
Issuing Bank receives any reimbursement on account of such Revolving L/C
Obligation or any payment of interest on account thereof (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Bank's participating interest was outstanding and funded), such
Issuing Bank will promptly distribute to such other Bank, through the
Administrative Agent, such other Bank's PRO RATA share thereof in like funds as
received; PROVIDED, that in the event that the receipt by such Issuing Bank of
such reimbursement or such payment of interest (as the case may be) is required
to be returned, such other Bank will return to such Issuing Bank, through the
Administrative Agent, any portion thereof previously distributed by such Issuing
Bank to it in like funds as such reimbursement or payment is required to be
returned by such Issuing Bank.
2.7 THE BID LOANS. Subject to the terms and conditions of this
Agreement, the Company may borrow Bid Loans from time to time during the Bid
Loan Commitment Period on any Business Day (in the case of Bid Loans made
pursuant to an Absolute Rate Bid Loan Request) or any Business Day (in the case
of Bid Loans made pursuant to an Index Rate Bid
<PAGE>
24
Loan Request). The Company shall designate Banks from time to time as Bid Loan
Lenders by written notice to the Administrative Agent. The Administrative Agent
shall transmit each such notice of designation promptly to each designated Bid
Loan Lender. Each Bid Loan shall bear interest at rates, be payable on the
dates, be made in Dollars, and shall mature on the date, agreed between the
Company and the relevant Bid Loan Lender at the time such Bid Loan is made;
PROVIDED, that the maturity date for each Bid Loan (i) shall be not less than 15
days nor more than 180 days after the Borrowing Date therefor with respect to an
Absolute Rate Bid Loan and (ii) shall be on the last day of an Interest Period
with respect to an Index Rate Bid Loan (and, in each case, in any event shall be
not later than the Revolving Credit Termination Date). Within the limits and on
the conditions hereinafter set forth with respect to Bid Loans, the Company from
time to time may borrow, repay and reborrow Bid Loans; PROVIDED that no Bid Loan
shall be made if, after giving effect to the making of such Loan and the
simultaneous application of the proceeds thereof, the Aggregate Extensions of
Credit would exceed the aggregate amount of the Revolving Credit Commitments.
2.8 PROCEDURE FOR BID LOAN BORROWING. (a) The Company shall request
Bid Loans by delivering a Bid Loan Request to the Administrative Agent, not
later than 12:00 Noon (New York City time) four Business Days prior to the
proposed Borrowing Date (in the case of an Index Rate Bid Loan Request), and not
later than 10:00 A.M. (New York City time) one Business Day prior to the
proposed Borrowing Date (in the case of an Absolute Rate Bid Loan Request).
Each Bid Loan Request may solicit bids for Bid Loans in an aggregate principal
amount equal to $10,000,000 or an integral multiple of $5,000,000 in excess
thereof and having not more than four alternative maturity dates. The
Administrative Agent shall notify each Bid Loan Lender promptly by telex or
facsimile transmission of the contents of each Bid Loan Request received by the
Administrative Agent.
(b) In the case of an Index Rate Bid Loan Request, upon receipt of
notice from the Administrative Agent of the contents of such Bid Loan Request,
each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to
make one or more Bid Loans at the Applicable Index Rate plus or minus a margin
determined by such Bid Loan Lender in its sole discretion for each such Bid
Loan. Any such irrevocable offer shall be made by delivering a Bid Loan Offer
to the Administrative Agent, before 10:00 A.M. (New York City time) on the day
that is three Business Days before the proposed Borrowing Date, setting forth:
(1) the maximum amount of such Bid Loans for each maturity date and
the aggregate maximum amount of such Bid Loans for all maturity dates which
such Bank would be willing to make (which amounts may, subject to
subsection 2.7, exceed such Bid Loan Lender's Revolving Credit Commitment);
and
(2) the margin above or below the Applicable Index Rate at which such
Bid Loan Lender is willing to make each such Bid Loan.
The Administrative Agent shall advise the Company promptly but no later than
10:30 A.M. (New York City time) on the date which is three Business Days before
the proposed Borrowing Date of the contents of each such Bid Loan Offer received
by it. If the Administrative Agent, in its capacity as a Bid Loan Lender, shall
elect, in its sole discretion, to make any such Bid Loan Offer, it shall advise
the Company of the contents of its Bid Loan Offer before 9:45 A.M. (New York
City time) on the date which is three Business Days before the proposed
Borrowing Date.
<PAGE>
25
(c) In the case of an Absolute Rate Bid Loan Request, upon receipt of
notice from the Administrative Agent of the contents of such Bid Loan Request,
each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to
make one or more Bid Loans at a rate of interest determined by such Bid Loan
Lender in its sole discretion for each such Bid Loan. Any such irrevocable
offer shall be made by delivering a Bid Loan Offer to the Administrative Agent
before 10:00 A.M. (New York City time) on the proposed Borrowing Date, setting
forth:
(1) the maximum amount of such Bid Loans for each maturity date, and
the aggregate maximum amount of such Bid Loans for all maturity dates,
which such Bid Loan Lender would be willing to make (which amounts may,
subject to subsection 2.7, exceed such Bid Loan Lender's Revolving Credit
Commitment); and
(2) the fixed rate of interest at which such Bid Loan Lender is
willing to make each such Bid Loan.
The Administrative Agent shall advise the Company promptly but in no event later
than 10:30 A.M. (New York City time) on the proposed Borrowing Date of the
contents of each such Bid Loan Offer received by it. If the Administrative
Agent, in its capacity as a Bid Loan Lender, shall elect, in its sole
discretion, to make any such Bid Loan Offer, it shall advise the Company of the
contents of its Bid Loan Offer before 9:45 A.M. (New York City time) on the
proposed Borrowing Date.
(d) Before 12:00 noon (New York City time) three Business Days before
the proposed Borrowing Date (in the case of Bid Loans requested by an Index Rate
Bid Loan Request) and before 11:00 A.M. (New York City time) on the proposed
Borrowing Date (in the case of Bid Loans requested by an Absolute Rate Bid Loan
Request), the Company, in its absolute discretion, shall:
(1) cancel such Bid Loan Request by giving the Administrative
Agent telephone notice to that effect, or
(2) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Bid Loan Confirmation in writing or by telex or fax transmission)(1)
subject to the provisions of subsection 2.8(e), accept one or more of
the offers made by any Bid Loan Lender or Bid Loan Lenders pursuant to
subsection 2.8(b) or subsection 2.8(c), as the case may be, of the
amount of Bid Loans for each relevant maturity date and (2) reject any
remaining offers made by Bid Loan Lenders pursuant to subsection
2.8(b) or subsection 2.8(c), as the case may be.
If the Company fails to give any such notice prior to such time, such Bid Loan
Request shall be deemed to have been canceled.
(e) The Company's acceptance of Bid Loans in response to any Bid Loan
Request shall be subject to the following limitations:
(1) the principal amount of Bid Loans accepted for each maturity date
specified
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26
by any Bid Loan Lender in its Bid Loan Offer shall not exceed the maximum
amount for such maturity date specified in such Bid Loan Offer;
(2) the aggregate principal amount of Bid Loans accepted for all
maturity dates specified by any Bid Loan Lender in its Bid Loan Offer shall
not exceed the aggregate maximum amount specified in such Bid Loan Offer
for all such maturity dates;
(3) the Company may not accept offers for Bid Loans for any maturity
date in an aggregate principal amount in excess of the maximum principal
amount of Bid Loans requested in the related Bid Loan Request for such
maturity date; AND
(4) if the Company accepts any of such offers, it must accept offers
based solely upon pricing for such relevant maturity date and upon no other
criteria whatsoever and if two or more Bid Loan Lenders submit offers for
any maturity date at identical pricing and the Company accepts any of such
offers but does not wish to (or by reason of the limitations set forth in
subsection 2.7 or in clause 2.8(e)(3) cannot) borrow the total amount
offered by such Bid Loan Lenders with such identical pricing, the Company
shall accept offers from all of such Bid Loan Lenders in amounts allocated
among them PRO RATA according to the amounts offered by such Bid Loan
Lenders (or as nearly PRO RATA as shall be practicable after giving effect
to the requirement that Bid Loans made by a Bid Loan Lender on a Borrowing
Date for each relevant maturity date shall be in a principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof).
(f) If the Company notifies the Administrative Agent that a Bid Loan
Request is cancelled pursuant to subsection 2.8(d)(1), the Administrative Agent
shall give prompt telephone notice thereof to the Bid Loan Lenders.
(g) If the Company accepts pursuant to subsection 2.8(d)(2) one or
more of the offers made by any Bid Loan Lender or Bid Loan Lenders, the
Administrative Agent promptly shall notify each Bid Loan Lender which has made
such a Bid Loan Offer of (i) the aggregate amount of such Bid Loans to be made
on such Borrowing Date for each maturity date and (ii) the acceptance or
rejection of any offers to make such Bid Loans made by such Bid Loan Lender.
Before 12:00 Noon (New York City time) on the Borrowing Date specified in the
applicable Bid Loan Request, each Bid Loan Lender whose Bid Loan Offer has been
accepted shall make available to the Administrative Agent at its office set
forth in subsection 10.2 the amount of Bid Loans to be made by such Bid Loan
Lender, in immediately available funds. The Administrative Agent will make such
funds available to the Company as soon as practicable on such date at the
Administrative Agent's aforesaid address. As soon as practicable after each
Borrowing Date, the Administrative Agent shall notify each Bank of the aggregate
amount of Bid Loans advanced on such Borrowing Date and the respective maturity
dates thereof.
(h) Unless otherwise agreed by the Bid Loan Lender making a Bid Loan,
such Bid Loan may not be optionally prepaid prior to the scheduled maturity date
thereof.
2.9 BID LOAN PAYMENTS. (a) The Company shall repay to the
Administrative Agent for the account of each Bid Loan Lender which has made a
Bid Loan (or the Bid Loan Assignee in respect thereof, as the case may be) on
the applicable Bid Loan Maturity Date the then unpaid principal amount of such
Bid Loan. The Company shall not have the right to prepay
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27
any principal amount of any Bid Loan except with the consent of the relevant Bid
Loan Lender.
(b) The Company shall pay interest on the unpaid principal amount of
each Bid Loan from the Borrowing Date to the applicable Bid Loan Maturity Date
at the rate of interest specified in the Bid Loan Offer accepted by the Company
in connection with such Bid Loan (calculated on the basis of a 360-day year for
actual days elapsed), payable on each applicable Bid Loan Interest Payment Date.
(c) If all or a portion of the principal amount of any Bid Loan shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue principal amount shall, without limiting any rights of
any Bank under this Agreement, bear interest from the date on which such payment
was due at a rate per annum which is 2% above the rate which would otherwise be
applicable to such Bid Loan until the stated maturity date of such Bid Loan, and
for each day thereafter at a rate per annum which is 2% above the ABR, in each
case until paid in full (as well after as before judgment).
2.10 SWING LINE COMMITMENT. (a) Subject to the terms and conditions
hereof, each Swing Line Bank agrees to make swing line loans (individually, a
"SWING LINE LOAN"; collectively, the "SWING LINE LOANS") to the Company from
time to time during the Revolving Credit Commitment Period in Dollars in an
aggregate principal amount (when added together with all other Swing Line Loans)
at any one time outstanding not to exceed $30,000,000, PROVIDED that at no time
may the Aggregate Extensions of Credit exceed the Revolving Credit Commitments.
Amounts borrowed by the Company under this subsection may be repaid and, through
but excluding the Revolving Credit Termination Date, reborrowed.
The Swing Line Loans may from time to time be (i) ABR Loans, (ii)
Money Market Rate Loans or (iii) a combination thereof, as determined by the
Company and notified to the Administrative Agent and the applicable Swing Line
Bank in accordance herewith, and shall not be entitled to be converted into
Eurodollar Loans. The Company may, on any Borrowing Date for Swing Line Loans
and prior to the time that an irrevocable notice requesting such Swing Line
Loans must be made pursuant to this subsection 2.10(a), request a quote of the
Money Market Rate which would be applicable for such Swing Line Loans from a
Swing Line Bank, specifying the amount of the proposed Money Market Rate Loans
and the maturity date thereof (which shall be no less than one and no more than
30 days following such Borrowing Date). Upon receipt of such quote, the Company
shall promptly (but not later than the time that an irrevocable notice
requesting such Swing Line Loans must be made pursuant to this subsection
2.10(a)) notify the Administrative Agent and the applicable Swing Line Bank
whether it requests such Swing Line Bank to make Money Market Rate Loans at such
Money Market Rate. The Company shall give the Administrative Agent and the
applicable Swing Line Bank irrevocable notice (which notice must be received by
the Administrative Agent and the applicable Swing Line Bank prior to 12:00 Noon,
New York City time) on the requested Borrowing Date specifying the amount of
each requested Swing Line Loan, which shall be in minimum amount of (i) in the
case of Swing Line Loans which are ABR Loans, $500,000 or a whole multiple
thereof and (ii) in the case of Swing Line Loans which are Money Market Rate
Loans, $2,000,000 or a whole multiple of $1,000,000 in excess thereof.
The proceeds of each Swing Line Loan will be made available by the
applicable Swing Line Bank to the Company by crediting the specified account of
the Company with such
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28
proceeds in the manner from time to time agreed by the Company and the
applicable Swing Line Bank. The proceeds of Swing Line Loans may be used solely
for the purposes referred to in subsection 2.2.
(b) Each Swing Line Bank (i) at any time in its sole and absolute
discretion may, (ii) if any Event of Default has occurred and is continuing,
shall and (iii) on the thirtieth day (or if such day is not a Business Day, the
next Business Day) after the Borrowing Date with respect to any Swing Line Loans
shall, on behalf of the Company (which hereby irrevocably directs each Swing
Line Bank to act on its behalf), request each Bank, including such Swing Line
Bank, to make a Revolving Credit Loan in Dollars to the Company (which shall be
initially an ABR Loan) in an amount equal to such Bank's Revolving Credit
Commitment Percentage of such Swing Line Loans (the "REFUNDED SWING LINE LOANS")
outstanding on the date such notice is given. Unless any of the events
described in paragraph (f) of Section 8 shall have occurred (in which event the
procedures of paragraph (c) of this subsection shall apply) each Bank shall make
the proceeds of its Revolving Credit Loan available to the Administrative Agent
for the account of the applicable Swing Line Bank at the office of the
Administrative Agent located at 270 Park Avenue, New York, New York 10017 prior
to 12:00 Noon (New York City time) in funds immediately available on the
Business Day next succeeding the date such notice is given. The proceeds of
such Revolving Credit Loans shall be immediately applied to repay the Refunded
Swing Line Loans.
(c) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of this subsection one of the events described in paragraph (f) of
Section 8 shall have occurred, each Bank will, on the date such Loan would
otherwise have been made (the "REFUNDING DATE"), purchase an undivided
participating interest in the Refunded Swing Line Loans in Dollars equal to its
Revolving Credit Commitment Percentage of such Refunded Swing Line Loans. On
the Refunding Date each Bank will immediately transfer to the Administrative
Agent, for the account of the applicable Swing Line Bank, in immediately
available funds, the amount of its participation in Dollars and upon receipt
thereof the Administrative Agent and the applicable Swing Line Bank will deliver
to such Bank a Swing Line Loan Participation Certificate dated the date of
receipt of such funds and in such amount.
(d) Whenever, at any time after the Administrative Agent or a Swing
Line Bank has received from any Bank such Bank's participating interest in a
Swing Line Loan, the Administrative Agent or such Swing Line Bank, as the case
may be, receives any payment on account thereof, the Administrative Agent or
such Swing Line Bank, as the case may be, will promptly distribute to such Bank
its participating interest in such amount (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Bank's
participating interest was outstanding and funded) in like funds as received;
PROVIDED, HOWEVER, that in the event that such payment received by the
Administrative Agent or such Swing Line Bank, as the case may be, is required to
be returned, such Bank will return to the Administrative Agent or such Swing
Line Bank, as the case may be, any portion thereof previously distributed by the
Administrative Agent or such Swing Line Bank, as the case may be, to it in like
funds as such payment is required to be returned by the Administrative Agent or
such Swing line Bank, as the case may be.
(e) Each Bank's obligation to make Revolving Credit Loans pursuant to
subsection 2.10(b) shall be absolute and unconditional and shall not be affected
by any
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29
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against any other
Bank or the Company, or the Company may have against any Bank or any other
Person, as the case may be, for any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default; (iii) any adverse change in the
condition (financial or otherwise) of the Company or any of its Subsidiaries;
(iv) any breach of this Agreement by the Company or any other Bank (not
including any Swing Line Bank); or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
2.11 PARTICIPATIONS. Each Bank's obligation to purchase participating
interests pursuant to subsections 2.4 and 2.10(c) is absolute and unconditional
as set forth in subsection 3.15.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
3.1 PROCEDURE FOR BORROWING. (a) Except with respect to Swing Line
Loans, for which borrowing procedures are set forth in subsection 2.10, the
Company may borrow under the Commitments on any Business Day, if the borrowing
is of Eurodollar Loans, or on any Business Day, if the borrowing is of ABR
Loans, PROVIDED that, with respect to the borrowings, if any, to take place on
the Closing Date, the Company shall give the Administrative Agent irrevocable
notice (which notice must be received by the Administrative Agent prior to 10:00
A.M., New York City time, on the Closing Date), and with respect to any
subsequent borrowings, the Company shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 12:00 Noon, New York City time, (i) three Business Days prior to the
requested Borrowing Date if all or any part of the Loans are to be Eurodollar
Loans and (ii) one Business Day prior to the requested Borrowing Date if the
borrowing is to be solely of ABR Loans) specifying (A) the amount of the
borrowing, (B) whether such Loans are initially to be Eurodollar Loans or ABR
Loans, or a combination thereof, and (C) if the borrowing is to be entirely or
partly Eurodollar Loans, the length of the Interest Period for such Eurodollar
Loans. Upon receipt of such notice the Administrative Agent shall promptly
notify each Bank (which notice shall in any event be delivered to each Bank by
4:00 P.M., New York City time, on such date). Not later than 12:00 Noon, New
York City time, on the Borrowing Date specified in such notice, each Bank shall
make available to the Administrative Agent at the office of the Administrative
Agent specified in subsection 10.2 (or at such other location as the
Administrative Agent may direct) an amount in immediately available funds equal
to the amount of the Loan to be made by such Bank. Loan proceeds received by
the Administrative Agent hereunder shall promptly be made available to the
Company by the Administrative Agent's crediting the account of the Company, at
the office of the Administrative Agent specified in subsection 10.2, with the
aggregate amount actually received by the Administrative Agent from the Banks
and in like funds as received by the Administrative Agent.
(b) Any borrowing of Eurodollar Loans hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (i) the aggregate principal amount of all Eurodollar Loans having the
same Interest Period shall not be less than $5,000,000, or a whole multiple of
$1,000,000 in excess thereof, and (ii) no more than ten Interest Periods shall
be in effect at any one time.
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(c) Eurodollar Loans shall be made by each Bank at its Eurodollar
Lending Office and ABR Loans shall be made by each Bank at its Domestic Lending
Office.
3.2 CONVERSION OPTIONS. The Company may elect from time to time to
convert Eurodollar Loans into ABR Loans by giving the Administrative Agent
irrevocable notice of such election, to be received by the Administrative Agent
prior to 12:00 Noon, New York City time, at least one Business Day prior to the
proposed conversion date, PROVIDED that any such conversion of Eurodollar Loans
shall only be made on the last day of an Interest Period with respect thereto.
The Company may elect from time to time to convert all or a portion of the ABR
Loans (other than Swing Line Loans) then outstanding to Eurodollar Loans by
giving the Administrative Agent irrevocable notice of such election, to be
received by the Administrative Agent prior to 12:00 Noon, New York City time, at
least three Business Days prior to the proposed conversion date, specifying the
Interest Period(s) selected therefor, and, if no Default or Event of Default has
occurred and is continuing, such conversion shall be made on the requested
conversion date or, if such requested conversion date is not a Business Day, on
the next succeeding Business Day. Upon receipt of any notice pursuant to this
subsection 3.2, the Administrative Agent shall promptly, but in any event by
4:00 P.M., New York City time, notify each Bank thereof. All or any part of the
outstanding Loans (other than Swing Line Loans and Bid Loans) may be converted
as provided herein, PROVIDED that partial conversions of Loans shall be in the
aggregate principal amount of $5,000,000, or a whole multiple of $1,000,000 in
excess thereof, and the aggregate principal amount of the resulting Eurodollar
Loans outstanding in respect of any one Interest Period shall be at least
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.
3.3 CHANGES OF COMMITMENT AMOUNTS. (a) The Company shall have the
right, upon not less than three Business Days' notice to the Administrative
Agent, to terminate or, from time to time, reduce the Revolving Credit
Commitments subject to the provisions of this subsection 3.3. To the extent, if
any, that the Aggregate Extensions of Credit exceeds the amount of the Revolving
Credit Commitments as then reduced, the Company shall be required to make a
prepayment equal to such excess amount, the proceeds of which shall be applied
FIRST, to payment of the Swing Line Loans which are not Eurodollar Loans then
outstanding, SECOND, to payment of the Revolving Credit Loans which are not
Eurodollar Loans then outstanding, THIRD, to payment of any Revolving L/C
Obligations then outstanding, and LAST, to cash collateralize any outstanding
Letters of Credit, Bid Loans and Revolving Credit Loans which are Eurodollar
Loans on terms reasonably satisfactory to the Administrative Agent. Any
termination of the Revolving Credit Commitments shall be accompanied by
prepayment in full of the Revolving Credit Loans which are not Eurodollar Loans,
Swing Line Loans and Revolving L/C Obligations then outstanding and by cash
collateralization of any outstanding Letter of Credit, Bid Loans and Revolving
Credit Loans which are Eurodollar Loans on terms reasonably satisfactory to the
Administrative Agent. Upon termination of the Revolving Credit Commitments, any
Letter of Credit, Bid Loan or Revolving Credit Loan which is a Eurodollar Loan
then outstanding which has been so cash collateralized shall no longer be
considered a "Letter of Credit", "Bid Loan" or "Eurodollar Loan", as the case
may be, as defined in subsection 1.1 and any L/C Participating Interests
heretofore granted by an Issuing Bank to the Banks in such Letter of Credit
shall be deemed terminated (subject to automatic reinstatement in the event that
such cash collateral is returned and such Issuing Bank is not fully reimbursed
for any such L/C Obligations) but the Letter of Credit fees payable under
subsection 3.10 shall continue to accrue to such Issuing Bank
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(or, in the event of any such automatic reinstatement, as provided in subsection
3.10) with respect to such Letter of Credit until the expiry thereof.
(b) Interest accrued on the amount of any partial prepayment pursuant
to this subsection 3.3 to the date of such partial prepayment shall be paid on
the Interest Payment Date next succeeding the date of such partial prepayment.
In the case of the termination of the Revolving Credit Commitments, interest
accrued on the amount of any prepayment relating thereto and any unpaid
commitment fee accrued hereunder shall be paid on the date of such termination.
Any such partial reduction of the Revolving Credit Commitments shall be in an
amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, and
shall reduce permanently the Revolving Credit Commitments then in effect.
3.4 OPTIONAL PREPAYMENTS. The Company may at any time and from time
to time prepay Loans (other than Bid Loans), in whole or in part, without
premium or penalty, upon at least one Business Days' irrevocable notice to the
Administrative Agent in the case of ABR Loans and two Business Days' irrevocable
notice to the Administrative Agent in the case of Eurodollar Loans and
specifying the date and amount of prepayment, subject to subsection 3.20. Upon
receipt of such notice the Administrative Agent shall promptly notify each Bank
thereof. If such notice is given, the Company shall make such prepayment, and
the payment amount specified in such notice shall be due and payable, on the
date specified therein. Accrued interest on the amount of any Loans paid in
full pursuant to this subsection 3.4 shall be paid on the date of such
prepayment. Accrued interest on the amount of any partial prepayment shall be
paid on the Interest Payment Date next succeeding the date of such partial
prepayment. Partial prepayments of Revolving Credit Loans shall be in an
aggregate principal amount equal to the lesser of (A) $2,500,000 or a whole
multiple of $1,000,000 in excess thereof and (B) the aggregate unpaid principal
amount of the Revolving Credit Loans, as the case may be.
3.5 MANDATORY PREPAYMENTS. (a) The Company shall, without notice or
demand, immediately prepay the Loans (other than Bid Loans and Eurodollar Loans
until the respective current Interest Periods expire) and, if necessary, cash
collateralize Bid Loans and Eurodollar Loans to the extent that the Aggregate
Extensions of Credit exceeds the aggregate Commitments of all the Banks then in
effect. The Company will implement and maintain internal accounting controls to
monitor the borrowings and repayments of Loans by the Company and the issuance
of and drawings under Letters of Credit, with the object of preventing any
request for an Extension of Credit that would result in the Aggregate Extensions
of Credit being in excess of the Revolving Credit Commitments. In the event
that at any time the Company determines that the Aggregate Extensions of Credit
exceeds the Revolving Credit Commitments, the Company will immediately make or
cause to be made such repayments or prepayments of Loans (other than Bid Loans
and Eurodollar Loans until the respective current Interest Periods therefor
expire) and, if necessary, cash collateralize Bid Loans and Eurodollar Loans as
shall be necessary to cause the Aggregate Extensions of Credit to no longer
exceed the Revolving Credit Commitments.
(b) The Administrative Agent will calculate the Aggregate Extensions
of Credit from time to time, and in any event not less frequently than once
during each calendar month. In making such calculations, the Administrative
Agent will rely on the information most recently received by it from the Banks
in respect of outstanding Swing Line Loans, from the Bid Loan Lenders in respect
of outstanding Bid Loans, and Issuing Banks in respect of Revolving L/C
Obligations and the aggregate amount available to be drawn under outstanding
Letters of Credit.
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Upon making each such calculation, the Administrative Agent will inform the
Company and the Banks of the results thereof.
(c) In the event that on any date the Administrative Agent calculates
that the Aggregate Extensions of Credit exceeds the aggregate amount of the
Revolving Credit Commitments, the Administrative Agent will give notice to such
effect to the Company. The Company will immediately make or cause to be made
such repayments or prepayments of Loans or, if necessary, cash collateralize Bid
Loans as shall be necessary to cause the Aggregate Extensions of Credit to no
longer exceed the Revolving Credit Commitments.
(d) Upon the Revolving Credit Termination Date the Company shall, with
respect to each then outstanding Letter of Credit, if any, either (i) cause such
Letter of Credit to be cancelled without such Letter of Credit being drawn upon
or (ii) collateralize the Revolving L/C Obligations with respect to such Letter
of Credit with a letter of credit issued by banks or a bank satisfactory to the
Administrative Agent, or with cash collateral, all on terms satisfactory to the
Administrative Agent.
(e)(i) Subject to the provisions of subsection 7.5, following the
consummation of any Asset Sale by the Company or any of its Subsidiaries, in the
case of cash proceeds, and following receipt of cash proceeds representing
payments under notes or other securities received in connection with any
non-cash consideration obtained in connection with such Asset Sale, 100% of the
Net Proceeds of such Asset Sale, other than any Net Proceeds which the Company
uses within one year of the consummation of an Asset Sale to purchase assets
similar to the assets disposed of in such Asset Sale shall permanently reduce
the Revolving Credit Commitments (but in no case below $200,000,000). In
connection with such reduction, if required pursuant to paragraph (a) or (c) of
this subsection 3.5, the Company shall apply up to 100% of such Net Proceeds to
the repayment and cash collateralization of the Loans (other than Bid Loans) as
provided by this subsection 3.5. Further, notwithstanding anything to the
contrary contained in this subsection 3.5(e), so long as no Default or Event of
Default has occurred or is continuing or would result therefrom, the Company may
elect not to reduce the Revolving Credit Commitments by up to $50,000,000 in the
aggregate of Net Proceeds from Asset Sales which the Company would otherwise be
required to apply to the reduction of the Revolving Credit Commitments and,
pursuant to subsection 3.5, the repayment or cash collateralization of the Loans
and Letters of Credit.
(ii) Concurrently with any Asset Sale consisting of the sale of all of
the shares of stock of any Subsidiary Guarantor, the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee shall automatically be
discharged and released without any further action by the Administrative Agent,
any Co-Agent or any Bank, PROVIDED that the Administrative Agent and the Banks
agree, upon the request of the Company, to execute and deliver any instrument or
other document in a form acceptable to the Administrative Agent which may
reasonably be required to evidence such discharge and release and in connection
with the sale or other disposition of the capital stock of a Subsidiary of the
Company, the Administrative Agent shall release to the pledgor thereof, without
representation, warranty or recovery, express or implied, the capital stock of
such Subsidiary held by it as Pledged Stock, if any, under the relevant Pledge
Agreement.
(f) Subject to the provisions of Section 7, promptly following the
incurrence of
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33
any Indebtedness by the Company or any of its Subsidiaries (other than
Indebtedness permitted by subsection 7.14) or the sale or issuance of any equity
by the Company or any of its Subsidiaries (other than capital stock of the
Company issued as consideration for acquisitions permitted by subsection 7.4 or
7.6 and the granting of stock options, stock appreciation rights and similar
arrangements to management of the Company in connection with their
compensation), 100% of the Net Proceeds of such Indebtedness or equity, shall
permanently reduce the Revolving Credit Commitments (but, so long as no Default
or Event of Default has occurred and is continuing, not below $200,000,000). In
connection with such reduction if required pursuant to paragraph (a) or (c) of
subsection 3.5, the Company shall apply up to 100% of such Net Proceeds to the
repayment and cash collateralization of the Loans (other than Bid Loans) as
provided for in subsection 3.5.
3.6 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto on
the unpaid principal amount thereof at a rate per annum equal to the applicable
Eurodollar Rate determined for such Interest Period plus the Applicable Margin.
(b) ABR Loans shall bear interest for the period from and including
the date thereof until maturity thereof on the unpaid principal amount thereof
at a rate per annum equal to the ABR, PROVIDED that at any time when the
Applicable Margin for Eurodollar Loans is greater than or equal to 112.50 basis
points, ABR Loans shall bear interest at a rate per annum equal to the ABR PLUS
12.5 basis points.
(c) Money Market Rate Loans shall bear interest for the period from
and including the date thereof until maturity thereof on the unpaid principal
amount thereof at a rate per annum equal to the Money Market Rate.
(d) If all or a portion of (i) the principal amount of any of the
Loans (other than Bid Loans) or (ii) any interest payable thereon shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall, without limiting the rights of the Banks under
Section 8, bear interest at a rate per annum which is (x) in the case of overdue
principal, 2% above the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this subsection or (y) in the case of overdue
interest, 2% above the rate described in paragraph (b) of this subsection, in
each case from the date of such nonpayment until such amount is paid in full (as
well after as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment
Date; PROVIDED that interest accruing pursuant to paragraph (d) of this
subsection shall be payable on demand by the Administrative Agent made at the
request of the Required Banks.
3.7 COMPUTATION OF INTEREST AND FEES. (a) Interest in respect of ABR
Loans at any time when the ABR Loan is calculated based on the Prime Rate and
all fees hereunder shall be calculated on the basis of a 365 or 366, as the case
may be, day year for the actual days elapsed. Interest in respect of Eurodollar
Loans and other ABR Loans shall be calculated on the basis of a 360 day year for
the actual days elapsed. The Administrative Agent shall as soon as practicable
notify the Company and the Banks of each determination of a Eurodollar Rate.
Any change in the interest rate on a Loan resulting from a change in the ABR
shall become effective as of the opening of business on the day on which such
change in the ABR becomes effective.
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The Administrative Agent shall as soon as practicable notify the Company and the
Banks of the effective date and the amount of each such change.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company and the Banks in the absence of manifest error. The Administrative
Agent shall, at the request of the Company, deliver to the Company a statement
showing the quotations used by the Administrative Agent in determining the
Eurodollar Rate.
3.8 FACILITY FEES. The Company, together with NextLevel and
CommScope, agrees to pay to the Administrative Agent, for the account of each
Bank, a facility fee from and including July 22, 1997 to, but excluding, the
Revolving Credit Termination Date on the amount of such Bank's Revolving Credit
Commitment (whether or not utilized) at the rate per annum for each day during
the period for which payment is made set forth in the definition of Applicable
Margin under the column captioned "Facility Fee". The Facility Fee provided for
in this subsection shall be payable quarterly in arrears on the last day of each
fiscal quarter, commencing September 30, 1997, and on the Revolving Credit
Termination Date with respect to the Revolving Credit Commitments.
3.9 CERTAIN FEES. (a) The Company, together with NextLevel and
CommScope, agrees to pay to the Administrative Agent for its own account certain
fees in the amounts, and on the dates, specified in the letter agreement dated
June 18, 1997 among GI Delaware, Chase and Chase Securities Inc.
3.10 LETTER OF CREDIT FEES. (a) (i) In lieu of any letter of credit
commissions and fees provided for in any L/C Application relating to Standby
L/Cs (other than standard administrative issuance, amendment and negotiation
fees), the Company agrees to pay the Administrative Agent, for the account of
the relevant Issuing Bank and the Participating Banks, with respect to each
Standby L/C, a Standby L/C fee on the amount available to be drawn under each
Standby L/C payable, in arrears, on the last day of each fiscal quarter of the
Company, at the rate per annum for each day during the period for which payment
is made set forth in the definition of "Applicable Margin" under the column
captioned "Standby L/C Fee". The Standby L/C Fee provided for in this
subsection shall be payable quarterly in arrears on the last day of each fiscal
quarter, commencing September 30, 1997, and on the Revolving Credit Termination
Date.
(ii) In addition, the Company shall pay to each Issuing Bank of a
Standby L/C, in arrears on such day, a fee of 1/8 of 1% per annum on the amount
available to be drawn on such Standby L/C solely for its own account as Issuing
Bank of such Standby L/C and not on account of its L/C Participating Interest
therein.
(b) In lieu of any letter of credit commissions and fees provided for
in any L/C Application relating to Commercial L/Cs (other than standard
administrative issuance, amendment and negotiation fees), the Company agrees to
pay the Administrative Agent, for the account of the relevant Issuing Bank and
the Participating Banks, with respect to each Commercial L/C, a Commercial L/C
fee of 3/8 of 1% (of which such Issuing Bank shall retain for its own account,
as the issuing bank and not on account of its L/C Participating Interest
therein, 1/8 of 1%) on the maximum face amount of each Commercial L/C payable on
the date
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35
such Commercial L/C is issued.
(c) In connection with any payment of fees pursuant to this
subsection 3.10, the Administrative Agent agrees to provide to the Company a
statement of any such fees so paid; PROVIDED that the failure by the
Administrative Agent to provide the Company with any such invoice shall not
relieve the Company of its obligation to pay such fees.
3.11 LETTER OF CREDIT RESERVES. (a) If any Change in Law after the
date of this Agreement shall either (i) impose, modify, deem or make applicable
any reserve, special deposit, assessment or similar requirement against letters
of credit issued by an Issuing Bank or (ii) impose on such Issuing Bank any
other condition regarding this Agreement or any Letter of Credit, and the result
of any event referred to in clause (i) or (ii) above shall be to increase the
cost to such Issuing Bank of issuing or maintaining any Letter of Credit (which
increase in cost shall be the result of such Issuing Bank's reasonable
allocation of the aggregate of such cost increases resulting from such events),
then, upon demand by such Issuing Bank, the Company shall immediately pay to
such Issuing Bank, from time to time as specified by such Issuing Bank,
additional amounts which shall be sufficient to compensate such Issuing Bank for
such increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the ABR. A
certificate submitted by such Issuing Bank to the Company concurrently with any
such demand by such Issuing Bank, shall be conclusive, absent manifest error, as
to the amount thereof.
(b) In the event that at any time after the date hereof any Change in
Law with respect to an Issuing Bank shall, in the opinion of such Issuing Bank,
require that any obligation under any Letter of Credit be treated as an asset or
otherwise be included for purposes of calculating the appropriate amount of
capital to be maintained by such Issuing Bank or any corporation controlling
such Issuing Bank, and such Change in Law shall have the effect of reducing the
rate of return on such Issuing Bank's or such corporation's capital, as the case
may be, as a consequence of such Issuing Bank's obligations under such Letter of
Credit to a level below that which such Issuing Bank or such corporation, as the
case may be, could have achieved but for such Change in Law (taking into account
such Issuing Bank's or such corporation's policies, as the case may be, with
respect to capital adequacy) by an amount deemed by such Issuing Bank to be
material, then from time to time following notice by such Issuing Bank to the
Company of such Change in Law, within 15 days after demand by such Issuing Bank,
the Company shall pay to such Issuing Bank such additional amount or amounts as
will compensate such Issuing Bank or such corporation, as the case may be, for
such reduction. If such Issuing Bank becomes entitled to claim any additional
amounts pursuant to this subsection 3.11(b), it shall promptly notify the
Company of the event by reason of which it has become so entitled. A
certificate submitted by such Issuing Bank to the Company concurrently with any
such demand by such Issuing Bank, shall be conclusive, absent manifest error, as
to the amount thereof.
(c) The Company agrees that the provisions of the foregoing paragraphs
(a) and (b) and the provisions of each L/C Application providing for
reimbursement or payment to an Issuing Bank in the event of the imposition or
implementation of, or increase in, any reserve, special deposit, capital
adequacy or similar requirement in respect of the Letter of Credit relating
thereto shall apply equally to each Participating Bank in respect of its L/C
Participating Interest in such Letter of Credit, as if the references in such
paragraphs and provisions referred to, where
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36
applicable, such Participating Bank or any corporation controlling such
Participating Bank.
(d) Notwithstanding any other provision of this subsection 3.11, no
Bank shall demand compensation for any increased cost or reduction referred to
in subsection 3.11 (a) or (b) if it shall not at the time be the general policy
or practice of such Bank to demand such compensation in similar circumstances
under comparable provisions of other credit agreements.
3.12 FURTHER ASSURANCES. The Company hereby agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by an Issuing Bank to effect more fully the
purposes of this Agreement and the issuance of Letters of Credit hereunder. The
Company further agrees to execute any and all instruments reasonably requested
by any Issuing Bank in connection with the obtaining and/or maintaining of any
insurance coverage applicable to any Letters of Credit.
3.13 OBLIGATIONS ABSOLUTE. The payment obligations of the Company
under this Agreement with respect to the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
(i) the existence of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries may have at any time against
any beneficiary, or any transferee, of any Letter of Credit (or any Persons
for whom any such beneficiary or any such transferee may be acting), any
Issuing Bank, the Administrative Agent, any Co-Agent or any Bank, or any
other Person, whether in connection with this Agreement, the Related
Documents, any Credit Documents, the transactions contemplated herein, or
any unrelated transaction;
(ii) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iii) payment by any Issuing Bank under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms
of such Letter of Credit, except where such payment constitutes gross
negligence or wilful misconduct on the part of any Issuing Bank; or
(iv) any other circumstances or happening whatsoever, whether or
not similar to any of the foregoing, except for any such circumstances or
happening constituting gross negligence or wilful misconduct on the part of
any Issuing Bank.
3.14 ASSIGNMENTS. No Participating Bank's participation in any Letter
of Credit or any of its rights or duties hereunder shall be subdivided, assigned
or transferred (other than in connection with a transfer of part or all of such
Participating Bank's Revolving Credit Commitment in accordance with subsection
10.6) without the prior written consent of the relevant Issuing Bank, which
consent will not be unreasonably withheld. Such consent may be given or
withheld without the consent or agreement of any other Participating Bank.
Notwithstanding the foregoing, a Participating Bank may subparticipate its L/C
Participating
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37
Interest without obtaining the prior written consent of the relevant Issuing
Bank.
3.15 PARTICIPATIONS. Each Bank's obligation to purchase participating
interests pursuant to subsections 2.4 and 2.10(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Bank may have against any Issuing Bank, the Company or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of a
Default or an Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Company; (iv) any breach of this Agreement by
the Company or any other Bank; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
3.16 INABILITY TO DETERMINE INTEREST RATE. In the event that the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Company) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Interest Period with respect
to (i) proposed Loans that the Company has requested be made as Eurodollar
Loans, (ii) any Eurodollar Loans that will result from the requested conversion
of all or part of ABR Loans into Eurodollar Loans or (iii) the continuation of
any Eurodollar Loan as such for an additional Interest Period, the
Administrative Agent shall forthwith give notice of such determination,
confirmed in writing, to the Company and the Banks at least one day prior to,
the requested Borrowing Date, the conversion date or the last day of such
Interest Period, as the case may be. If such notice is given (i) any requested
Eurodollar Loans shall be made as ABR Loans, (ii) any ABR Loans that were to
have been converted to Eurodollar Loans shall be continued as ABR Loans, and
(iii) any outstanding Eurodollar Loans shall be converted, on the last day of
the then current Interest Period applicable thereto, into ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made.
3.17 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of any Loans
(other than Swing Line Loans and Bid Loans) by the Company from the Banks, each
payment by the Company on account of any fee hereunder (other than as otherwise
set forth in subsections 3.9 and 3.10) and any reduction of the Revolving Credit
Commitments of the Banks hereunder shall be made PRO RATA according to the
relevant Commitment Percentages of the Banks. Each payment (including each
prepayment) by the Company on account of principal of and interest on the Loans
(other than Swing Line Loans and Bid Loans and other than as set forth in
subsections 3.18, 3.19 and 3.20) shall be made PRO RATA according to the
relevant Commitment Percentages of the Banks. All payments (including
prepayments) to be made by the Company on account of principal, interest and
fees shall be made without set-off or counterclaim and shall be made to the
Administrative Agent, for the account of the Banks, at the Administrative
Agent's office located at 270 Park Avenue, New York, New York 10017 in
immediately available funds. The Administrative Agent shall promptly distribute
such payments ratably to each Bank in like funds as received. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Bank prior to a Borrowing Date that such Bank will not make the
amount which would constitute
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38
its relevant Commitment Percentage of the borrowing on such date available to
the Administrative Agent, the Administrative Agent may assume that such Bank has
made such amount available to the Administrative Agent on such Borrowing Date in
accordance with subsection 3.1 and the Administrative Agent may, in reliance
upon such assumption, make available to the Company a corresponding amount. If
such amount is made available to the Administrative Agent by such Bank on a date
after such Borrowing Date, such Bank shall pay to the Administrative Agent on
demand an amount equal to the product of (i) the daily average Federal funds
rate during such period as quoted by the Administrative Agent, times (ii) the
amount of such Bank's relevant Commitment Percentage of such borrowing, times
(iii) a fraction the numerator of which is the number of days that elapse from
and including such Borrowing Date to the date on which such Bank's relevant
Commitment Percentage of such borrowing shall have become immediately available
to the Administrative Agent and the denominator of which is 360. A certificate
of the Administrative Agent submitted to any Bank with respect to any amounts
owing under this subsection 3.17(b) shall be conclusive, absent manifest error.
If such Bank's relevant Commitment Percentage of such borrowing is not in fact
made available to the Administrative Agent by such Bank within three Business
Days of such Borrowing Date, the Administrative Agent shall be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Company, without prejudice to any
rights which the Company or the Administrative Agent may have against such Bank
hereunder. Nothing contained in this subsection 3.17(b) shall relieve any Bank
which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(c) The failure of any Bank to make the Loan to be made by it on any
Borrowing Date shall not relieve any other Bank of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on such Borrowing Date.
(d) All payments and optional prepayments (other than prepayments as
set forth in subsection 3.19 with respect to increased costs) of Eurodollar
Loans hereunder shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Loans with the same Interest Period shall not be less than $5,000,000
or a whole multiple of $1,000,000 in excess thereof.
(e) Each Bank, Assignee and Participant that is not a citizen or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under the laws of the United States of
America, or any estate or trust that is subject to U.S. federal income taxation
regardless of the source of its income (a "NON-U.S. BANK") shall deliver to the
Company and the Administrative Agent, and if applicable, the assigning Bank (or,
in the case of a Participant, to the Bank from which the related participation
shall have been purchased) on or before the date on which it becomes a party to
this Agreement (or, in the case of a Participant, on or before the date on which
such Participant purchases the related participation) either:
(A) (x) two duly completed and signed original copies of either
Internal Revenue Service Form 1001 (relating to such Non-U.S. Bank and
entitling it to a complete exemption from withholding of United States
federal income taxes on all amounts to be received by such Non-U.S.
Bank pursuant to this Agreement
<PAGE>
39
and the other Credit Documents) or Form 4224 (relating to all amounts
to be received by such Non-U.S. Bank pursuant to this Agreement and
the other Credit Documents), or successor and related applicable
forms, as the case may be, and (y) two duly completed and signed
original copies of Internal Revenue Service Form W-8 or W-9, or
successor and related applicable forms, as the case may be; or
(B) in the case of a Non-U.S. Bank that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code and that does not comply
with the requirements of clause (A) hereof, (x) a statement in the
form of Exhibit L (or such other form of statement as shall be
reasonably requested by the Company from time to time) to the effect
that such Non-U.S. Bank is eligible for a complete exemption from
withholding of United States federal income taxes under Code Section
871(h) or 881(c), and (y) two duly completed and signed original
copies of Internal Revenue Service Form W-8 or successor and related
applicable form (it being understood and agreed that no Participant
and, without the prior written consent of the Company described in
clause (C) of the proviso to the first sentence of subsection 10.6(c),
no Assignee shall be entitled to deliver any forms or statements
pursuant to this clause (B), but rather shall be required to deliver
forms pursuant to clause (A) of this subsection 3.17(e)).
Further, each Non-U.S. Bank agrees (i) to deliver to the Company and the
Administrative Agent, and if applicable, the assigning Bank (or, in the case of
a Participant, to the Bank from which the related participation shall have been
purchased) two further duly completed and signed original copies of such Forms
1001, 4224, W-8 or W-9, as the case may be, or successor and related applicable
forms, on or before the date that any such form expires or becomes obsolete and
promptly after the occurrence of any event requiring a change from the most
recent form(s) previously delivered by it to the Company (or, in the case of a
Participant, to the Bank from which the related participation shall have been
purchased) in accordance with applicable U.S. laws and regulations, (ii) in the
case of a Non-U.S. Bank that delivers a statement in the form of Exhibit L (or
such other form of statement as shall have been requested by the Company), to
deliver to the Company and the Administrative Agent, and if applicable, the
assigning Bank, such statement on an annual basis on the anniversary of the date
on which such Non-U.S. Bank became a party to this Agreement and to deliver
promptly to the Company and the Administrative Agent, and if applicable, the
assigning Bank, such additional statements and forms as shall be reasonably
requested by the Company from time to time, and (iii) to notify promptly the
Company and the Administrative Agent (or, in the case of a Participant, the Bank
from which the related participation shall have been purchased) if it is no
longer able to deliver, or if it is required to withdraw or cancel, any form or
statement previously delivered by it pursuant to this subsection 3.17(e). Each
Non-U.S. Bank agrees to indemnify and hold harmless the Company from and against
any Taxes imposed by or on behalf of the United States or any taxing
jurisdiction thereof, penalties, additions to tax, fines, interest or other
liabilities, costs or losses (including, without limitation, reasonable
attorneys' fees and expenses) incurred or payable by the Company as a result of
the failure of the Company to comply with its obligations to deduct or withhold
any Taxes imposed by or on behalf of the United States or any taxing
jurisdiction thereof (including penalties, additions to tax, fines or interest
on such Taxes) from any payments made pursuant to this Agreement to such
Non-U.S. Bank or the Administrative Agent which failure resulted from the
Company's reliance on any form, statement, certificate or
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40
other information provided to it by such Non-U.S. Bank pursuant to clause (B) or
clause (ii) of this subsection 3.17(e). The Company hereby agrees that for so
long as a Non-U.S. Bank complies with this subsection 3.17(e), the Company shall
not withhold any amounts from any payments made pursuant to this Agreement to
such Non-U.S. Bank, unless the Company reasonably determines that it is required
by law to withhold or deduct any amounts from any payments made to such Non-U.S.
Bank pursuant to this Agreement. Notwithstanding any other provision of this
subsection 3.17(e), a Non-U.S. Bank shall not be required to deliver any form or
statement pursuant to the immediately preceding sentences in this subsection
3.17(e) that such Non-U.S. Bank is not legally able to deliver (it being
understood and agreed that the Company shall withhold or deduct such amounts
from any payments made to such Non-U.S. Bank that the Company reasonably
determines are required by law). If any Credit Party other than the Company
makes any payment to any Non-U.S. Bank under any Credit Document, the foregoing
provisions of this subsection 3.17(e) shall apply to such Non-U.S. Bank and such
Credit Party as if such Credit Party were the Company (but a Non-U.S. Bank shall
not be required to provide any form or make any statement to any such Credit
Party unless such Non-U.S. Bank has received a request to do so from such Credit
Party and has a reasonable time to comply with such request).
3.18 ILLEGALITY. Notwithstanding any other provisions herein, if any
Requirement of Law or any change therein or in the interpretation or application
thereof occurring after the date that any lender becomes a Bank party to this
Agreement, shall make it unlawful for such Bank to make or maintain Eurodollar
Loans as contemplated by this Agreement, the commitment of such Bank hereunder
to make Eurodollar Loans or to convert all or a portion of ABR Loans into
Eurodollar Loans shall forthwith be cancelled and such Bank's Loans then
outstanding as Eurodollar Loans, if any, shall, if required by law and if such
Bank so requests, be converted automatically on the date specified by such Bank
in such request to ABR Loans. To the extent that such affected Eurodollar Loans
are converted into ABR Loans, all payments of principal which would otherwise be
applied to such Eurodollar Loans shall be applied instead to such Bank's ABR
Loans, as the case may be. The Company hereby agrees promptly to pay any Bank,
upon its demand, any additional amounts necessary to compensate such Bank for
any costs incurred by such Bank in making any conversion in accordance with this
subsection 3.18 including, but not limited to, any interest or fees payable by
such Bank to lenders of funds obtained by it in order to make or maintain its
Eurodollar Loans hereunder (such Bank's notice of such costs, as certified to
the Company through the Administrative Agent, to be conclusive absent manifest
error).
3.19 REQUIREMENTS OF LAW. (a) In the event that, at any time after
the date hereof, the adoption of any Requirement of Law, or any change therein
or in the interpretation or application thereof or compliance by any Bank with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority:
(i) does or shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement or any Eurodollar Loans made by it, or
change the basis of taxation of payments to such Bank of principal,
commitment fee, interest or any other amount payable hereunder (except for
changes in the rate of tax on the overall net income of such Bank), it
being understood and agreed that, in the case of a Non-U.S. Bank that does
not comply with clause (A) of subsection 3.17(e), this clause (i) shall
apply only to the extent that it would have applied if
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41
such Non-U.S. Bank were able to comply with clause (A) of subsection
3.17(e);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
or deposits or other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds by, any office of
such Bank which are not otherwise included in the determination of the
Eurodollar Rate; or
(iii) does or shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank of
making, converting, renewing or maintaining advances or extensions of credit or
to reduce any amount receivable hereunder, in each case, in respect of its
Eurodollar Loans, then, in any such case, the Company shall promptly pay such
Bank, on demand, any additional amounts necessary to compensate such Bank for
such additional cost or reduced amount receivable which such Bank deems to be
material as determined by such Bank with respect to such Eurodollar Loans,
together with interest on each such amount from the date demanded until payment
in full thereof at a rate per annum equal to the ABR. The Loans referred to in
the last sentence of subsection 2.1(a) shall be entitled to the benefits of this
subsection 3.19.
(b) In the event that at any time after the date hereof, any Change in
Law with respect to any Bank shall, in the opinion of such Bank, require that
any Commitment of such Bank be treated as an asset or otherwise be included for
purposes of calculating the appropriate amount of capital to be maintained by
such Bank or any corporation controlling such Bank, and such Change in Law shall
have the effect of reducing the rate of return on such Bank's or such
corporation's capital, as the case may be, as a consequence of such Bank's
obligations hereunder to a level below that which such Bank or such corporation,
as the case may be, could have achieved but for such Change in Law (taking into
account such Bank's or such corporation's policies, as the case may be, with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time following notice by such Bank to the Company of such
Change in Law as provided in paragraph (c) of this subsection 3.19, within 15
days after demand by such Bank, the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such corporation,
as the case may be, for such reduction.
(c) A certificate submitted by such Bank, through the Administrative
Agent, to the Company shall be conclusive in the absence of manifest error. The
covenants contained in this subsection 3.19 shall survive the termination of
this Agreement and payment of the outstanding Loans.
(d) Notwithstanding any other provision of this subsection 3.19, no
Bank shall demand compensation for any increased cost or reduction referred to
above if it shall not at the time be the general policy or practice of such Bank
to demand such compensation in similar circumstances under comparable provisions
of other credit agreements.
3.20 INDEMNITY. The Company agrees to indemnify each Bank and to hold
such Bank harmless from any loss or expense which such Bank may sustain or incur
as a consequence of (a) default by the Company in payment of the principal
amount of or interest on any
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42
Eurodollar Loans or Absolute Rate Bid Loans of such Bank, including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Bank to lenders of funds obtained by it in order to make or maintain its
Eurodollar Loans or Absolute Rate Bid Loans hereunder, (b) default by the
Company in making a borrowing of Eurodollar Loans or Absolute Rate Bid Loans
after the Company has given a notice in accordance with subsection 2.10 or 3.1
or in making a conversion of ABR Loans to Eurodollar Loans after the Company has
given notice in accordance with subsection 3.2, (c) default by the Company in
making any prepayment of Eurodollar Loans or Absolute Rate Bid Loans after the
Company has given a notice in accordance with subsection 3.4 or (d) a payment or
prepayment of a Eurodollar Loan, Money Market Rate Loan or Absolute Rate Bid
Loan or conversion of any Eurodollar Loan into an ABR Loan, in either case on a
day which is not the last day of an Interest Period with respect thereto (or,
with respect to a Money Market Rate Loan, the maturity date thereof), including,
but not limited to, any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain its
Eurodollar Loans hereunder. This covenant shall survive termination of this
Agreement and payment of the outstanding Obligations.
3.21 REPAYMENT OF LOANS, EVIDENCE OF DEBT. (a) The Company hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Bank the then unpaid principal amount of each Revolving Credit Loan on
the Revolving Credit Termination Date, (ii) to the Administrative Agent for the
account of each Bid Loan Lender the then unpaid principal amount of each Bid
Loan on the Bid Loan Maturity Date applicable to such Bid Loan, and (iii) to the
Administrative Agent for the account of the applicable Swing Line Bank the then
unpaid principal amount of each Swing Line Loan on the Revolving Credit
Termination Date (or such other date as required by subsection 2.10(a)).
(b) Each Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Company to such Bank
resulting from each Loan made and each Letter of Credit issued by such Bank,
including the amounts of principal and interest payable and paid to such Bank
from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Extension of Credit made hereunder to the
Company, the Class and Type thereof, and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become due
and payable from the Company to each Bank hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder for the account of the Banks
and each Bank's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Bank or the Administrative Agent to maintain such accounts or any
error therein shall not in any manner affect the obligation of the Company to
repay the Loans in accordance with the terms of this Agreement.
(e) Any Bank may request that Loans made by it be evidenced by a
promissory note. In such event, the Company shall prepare, execute and deliver
to such Bank either (i) a promissory note payable to the order of such Bank or
(ii) if requested by such Bank, a promissory note payable to such Bank and its
registered assigns (a "REGISTERED FORM NOTE") and in each case in a form
approved by the Administrative Agent. Thereafter, the Loans evidenced
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43
by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 10.2) be represented by one or more promissory
notes in such form payable to the order of the payee named therein or, if such
promissory note is a Registered Form Note, to such payee and its registered
assigns. Registered Form Notes may not be exchanged for promissory notes that
are not Registered Form Notes. A Registered Form Note and the Obligation(s)
evidenced thereby may be assigned or otherwise transferred in whole or in part
only by registration of such assignment or transfer of such Registered Form Note
and the Obligation(s) evidenced thereby on the Register (and each Registered
Form Note shall expressly so provide). Any assignment or transfer of all or
part of such Obligation(s) and the Registered Form Note(s) evidencing the same
shall be registered on the Register only upon surrender for registration of
assignment or transfer of the Registered Form Note(s) evidencing such
Obligation(s), duly endorsed by (or accompanied by a written instrument of
assignment or transfer duly executed by) the holder thereof, and thereupon one
or more new Registered Form Note(s) in the same aggregate principal amount shall
be issued to the designated Assignee(s) and the old Registered Form Note shall
be returned to the Company marked "cancelled". No assignment of a Registered
Form Note and the Obligation(s) evidenced thereby shall be effective unless it
shall have been recorded in the Register by the Administrative Agent as provided
in this subsection 3.21(e).
3.22 MITIGATION OBLIGATIONS; REPLACEMENT OF BANKS. (a) If any Bank
requests compensation under subsection 3.11 or 3.19 or gives notice to the
Company pursuant to subsection 3.18, or if the Company withholds any amounts
from any payments made pursuant to this Agreement to any Non-U.S. Bank, then
such Bank or Non-U.S. Bank, as the case may be, shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Bank or Non-U.S. Bank, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to subsection 3.11 or 3.19, make it no longer unlawful for such Bank to make or
maintain Eurodollar Loans or eliminate the need to withhold any amounts from any
payments made pursuant to the Agreement, as the case may be, in the future and
(ii) would not subject such Bank to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Bank. The Company hereby agrees to pay
all reasonable costs and expenses incurred by any Bank in connection with any
such designation or assignment.
(b) If any Bank requests compensation under subsection 3.11 or 3.19
or gives notice to the Company pursuant to subsection 3.18, or if the Company
withholds any amounts from any payments made pursuant to this Agreement to any
Non-U.S. Bank, or if any Bank defaults in its obligation to fund Loans
hereunder, then the Company may, at its sole expense and effort, upon notice to
such Bank or Non-U.S. Bank, as the case may be, and the Administrative Agent,
either (i) reduce or terminate the Revolving Credit Commitment of such Bank or
Non-U.S. Bank (and pay all amounts owed to such Bank or Non-U.S. Bank under this
Agreement other than Bid Loans prior to the expiration of the Interest Periods
therefor, unless such Bank or Non-U.S. Bank agrees to such payment) or (ii)
require such Bank to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in subsection 10.6), all its
interests, rights and obligations under this Agreement (other than any
outstanding Bid Loans held by it) to an assignee that shall assume such
obligations (which assignee may be another Bank, if such Bank accepts such
assignment); PROVIDED that (A) the Company shall have received the prior written
consent of the Administrative Agent (and, if a Revolving Credit Commitment is
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44
being assigned, the Issuing Bank and the Swing Line Bank), which consent shall
not unreasonably be withheld, (B) such Bank shall have received payment of an
amount equal to the outstanding principal of its Loans (other than Bid Loans)
and participations in Letter of Credit and Swing Line Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Company (in the case of all other amounts) and (C) in the case of
any such assignment resulting from a claim for compensation under
subsection 3.11 or 3.19, a notice pursuant to subsection 3.18 or amounts
withheld from any payments made pursuant to this Agreement to any Non-U.S. Bank,
such assignment will result in a reduction in such compensation or withholding
or result in an assignment to a Bank which may make or maintain Eurodollar
Loans. A Bank shall not be required to make any such assignment and delegation
and the Company shall not be permitted to reduce or terminate the Revolving
Credit Commitments of a Bank if, prior thereto, as a result of an irrevocable
waiver by such Bank or otherwise, the circumstances entitling the Company to
require such assignment and delegation or make such reduction or termination
cease to apply.
(c) If any Bank becomes entitled to claim any additional amounts
pursuant to subsection 3.11 or 3.19, it shall promptly notify the Company,
through the Administrative Agent, of the event by reason of which it has become
so entitled. If any Bank has notified the Company through the Administrative
Agent of any increased costs pursuant to paragraph (a) of this subsection 3.22,
the Company at any time thereafter may, upon at least two Business Days' notice
to the Administrative Agent, prepay or convert into ABR Loans all (but not a
part) of the Eurodollar Loans then outstanding.
(d) The Company's indemnification obligations under subsection 3.20
shall apply to the transactions described in this subsection 3.22.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to
continue and make the Loans and to induce the Issuing Banks to issue, and the
Participating Banks to participate in, the Letters of Credit, the Company hereby
represents and warrants to each Bank, each Co-Agent and the Administrative
Agent, on and as of the Closing Date and, other than with respect to subsection
4.2, on the date of each Loan is made or Letter of Credit is issued thereafter,
that:
4.1 FINANCIAL CONDITION. (a) (i) The audited combined balance sheet
of the Power Semiconductor Business at each of December 31, 1995 and December
31, 1996 and the combined statements of operations, divisional net equity and
cash flows for each of the fiscal years ending December 31, 1994, December 31,
1995 and December 31, 1996, reported on by Deloitte & Touche LLP, and (ii) the
unaudited combined balance sheet of the Power Semiconductor Business at March
31, 1997 and the related combined statements of operations, divisional net
equity and cash flows for the fiscal quarter ending March 31, 1997, certified as
complete and correct and prepared in accordance with GAAP (subject to normal
year-end adjustments) by the chief financial officer of the Company, copies of
each of which have heretofore been furnished to each Bank, are complete and
correct and present fairly (except, with respect to interim statements, for
normal year-end adjustments) the combined financial position
<PAGE>
45
of the Power Semiconductor Business as at such dates, and the combined results
of operations and cash flows for the fiscal periods then ended and, in the case
of the statements referred to in the foregoing clause (ii), the portion of the
fiscal year through such date. All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except, with respect to
interim statements, for normal year-end adjustments and that such interim
statements may be condensed and exclude detailed footnote disclosure and except
as concurred in by such accountants or such chief financial officer, as the case
may be, and as disclosed therein).
(b) The unaudited PRO FORMA combined balance sheet of the Power
Semiconductor Business at March 31, 1997 (including the notes thereto) (the "PRO
FORMA BALANCE SHEET"), and the related combined statements of operations for the
fiscal year ending December 31, 1996 and the fiscal quarter ended March 31, 1997
(the "PRO FORMA STATEMENTS OF OPERATIONS"), copies of which have heretofore been
furnished to each Bank, have been prepared based upon the combined balance sheet
of the Power Semiconductor Business as of March 31, 1997 and the combined
statements of operations for the fiscal year ended December 31, 1996 and the
fiscal quarter ended March 31, 1997, respectively, assuming that the Spin-Off
occurred on January 1, 1996 and January 1, 1997, respectively, and do not
purport to represent what the financial position actually would have been had
the Spin-Off occurred on January 1, 1996 or January 1, 1997, as the case may be,
or to project the financial position of the Power Semiconductor Business for any
future date. The Pro Forma Balance Sheet presents fairly on a PRO FORMA basis
the combined financial position of the Power Semiconductor Business at March 31,
1997, and the Pro Forma Statements of Operations present fairly on a pro forma
basis the combined operating results of the Power Semiconductor Business for the
respective fiscal periods covered thereby, in each case assuming that the events
and assumptions specified in the preceding sentence had actually occurred or are
true, as the case may be, on March 31, 1997 or for the respective periods
covered by the Pro Forma Statements of Operations, as the case may be, (except
(i) for changes in such financial position which are not materially adverse to
the financial position of the Power Semiconductor Business, and (ii) as provided
in the notes thereto). The unaudited pro forma adjustments are based upon
currently available information and certain assumptions that the management of
the Power Semiconductor Business believes to be reasonable. As of the date of
the Pro Forma Balance Sheet, the Power Semiconductor Business had no material
obligation, contingent or otherwise, which was not reflected therein or in the
notes thereto and which would have a material adverse effect on the business,
financial condition, assets, liabilities, net assets, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole (other than the Excluded Litigation, as to which no representation is
made).
4.2 NO MATERIAL CHANGE. Since June 13, 1997 (a) there has been no
occurrence (other than the Excluded Litigation as to which no representation is
made in this subsection 4.2) which has had or reasonably could be expected to
have a material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole, and (b) other than as disclosed in any financial statements
delivered hereunder pursuant to subsection 6.1, neither the Company nor any of
its Subsidiaries has, since December 31, 1996, incurred any material obligation,
contingent or otherwise (other than in connection with the Excluded Litigation,
as to which no representation is made in this subsection 4.2), which has had a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as
<PAGE>
46
a whole.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit Party and
its Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (b) has
the corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged, except to the extent that the failure to possess such
corporate power and authority and such legal right would not, in the aggregate,
have a material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole and (d) is in compliance with all Requirements of Law, except
to the extent that the failure to comply therewith would not, in the aggregate,
have a material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole.
4.4 CORPORATE POWER; AUTHORIZATION. Each Credit Party has the
corporate power and authority and the legal right to make, deliver and perform
the Credit Documents to which it is a party and to pledge the Pledged Stock
pursuant to the Pledge Agreement to which it is a party; and the Company has the
corporate power and authority and legal right to borrow hereunder and to have
Letters of Credit issued for its account hereunder. Each Credit Party has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party, the pledge of the
Pledged Stock pursuant to the Pledge Agreement to which it is a party and, in
case of the Company, to authorize the borrowings hereunder and the issuance of
Letters of Credit for its account hereunder. No consent or authorization of, or
filing with, any Person (including, without limitation, any Governmental
Authority) is required in connection with the execution, delivery or performance
by any Credit Party, or the validity or enforceability against any Credit Party,
of any Credit Document to the extent that it is a party thereto, or the pledge
of the Pledged Stock pursuant to the Pledge Agreements, or the guarantee of the
Obligations pursuant to the Subsidiary Guarantees.
4.5 ENFORCEABLE OBLIGATIONS. Each of the Credit Documents has been
duly executed and delivered on behalf of each Credit Party which is a party
thereto and each of such Credit Documents constitutes the legal, valid and
binding obligation of such Credit Party, enforceable against such Credit Party
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
4.6 NO LEGAL BAR. The performance of each Credit Document, the pledge
of the Pledged Stock pursuant to the Pledge Agreements, the guarantee of the
Obligations pursuant to the Subsidiary Guarantees and the use of the proceeds of
the Loans and of drawings under the Letters of Credit will not violate any
Requirement of Law or any Contractual Obligation applicable to or binding upon
any Credit Party, any of its Subsidiaries or any of its properties or assets,
which violations, individually or in the aggregate, would have a material
adverse effect on
<PAGE>
47
the ability of such Credit Party to perform its obligations under the Credit
Documents to the extent that it is a party thereto, or which would give rise to
any liability on the part of the Administrative Agent, any Co-Agent or any Bank,
or which would have a material adverse effect on the business, financial
condition, properties, results of operations, value or prospects of the Company
and its Subsidiaries taken as a whole, and will not result in the creation or
imposition (or the obligation to create or impose) of any Lien on any of its or
their respective properties or assets pursuant to any Requirement of Law
applicable to it or them, as the case may be, or any of its or their Contractual
Obligations, except for Liens arising under the Pledge Agreements.
4.7 NO MATERIAL LITIGATION. No litigation, investigation known to the
Company or proceeding of or by any Governmental Authority or any other Person is
pending against any Credit Party or any of its Subsidiaries, (a) with respect to
the validity, binding effect or enforceability of any Credit Document or with
respect to the Loans made hereunder, the use of proceeds thereof or of any
drawings under a Letter of Credit and the other transactions contemplated hereby
or thereby, or (b) except for the Excluded Litigation (as to which no
representation is made in this subsection 4.7), which would have a material
adverse effect on the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole.
4.8 INVESTMENT COMPANY ACT. Neither any Credit Party nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
4.9 FEDERAL REGULATION. No part of the proceeds of any of the Loans
or any drawing under a Letter of Credit will be used for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation G,
T, U or X of the Board. Neither the Company nor any of its Subsidiaries is
engaged or will engage, principally or as one of its important activities, in
the business of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" within the respective meanings of each of the quoted terms
under said Regulation U.
4.10 NO DEFAULT. Neither the Company nor any of its Subsidiaries is
in default in the payment or performance of any of its or their Contractual
Obligations in any respect which would be materially adverse to the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
of its Subsidiaries is in default under any order, award or decree of any
Governmental Authority or arbitrator binding upon or affecting it or them or by
which any of its or their properties or assets may be bound or affected in any
respect which would be materially adverse to the business, financial condition,
properties, results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole, and no such order, award or decree would
materially adversely affect the ability of the Company and its Subsidiaries
taken as a whole to carry on their businesses as presently conducted or the
ability of any Credit Party to perform its obligations under any Credit
Document.
4.11 NO BURDENSOME RESTRICTIONS. Neither the Company nor any of its
Subsidiaries is a party to or is bound by any Contractual Obligation or subject
to any Requirement of Law or other corporate restriction which materially and
adversely affects the
<PAGE>
48
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole.
4.12 TAXES. Each of the Company and its Subsidiaries has filed or
caused to be filed or has timely requested an extension to file or has received
an approved extension to file all tax returns which, to the knowledge of the
Company, are required to have been filed, and has paid all taxes shown to be due
and payable on said returns or extension requests or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
those the amount or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided in the books of the Company or its Subsidiaries, as the
case may be), except any such filings or taxes, fees or charges, the making of
or the payment of which, or the failure to make or pay, would not materially
adversely affect the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole; and, to the knowledge of the Company, no claims are being asserted with
respect to any such taxes, fees or other charges (other than those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided in the books of the Company or its Subsidiaries, as the case may be),
except as to any such taxes, fees or other charges, the payment of which, or the
failure to pay, would not materially adversely affect the business, financial
condition, properties, results of operations, value or prospects of the Company
and its Subsidiaries taken as a whole.
4.13 SUBSIDIARIES. The Subsidiaries of the Company listed on Schedule
II constitute all of the Domestic Subsidiaries of the Company and the
Subsidiaries listed on Schedule III constitute all of the Foreign Subsidiaries
of the Company as of the Closing Date. The Company has no Material Subsidiaries
on the Closing Date.
4.14 OWNERSHIP OF PROPERTY; LIENS. The Company and each of its
Subsidiaries has good and marketable title to, or valid and subsisting leasehold
interests in, all its respective material real property, and good title to all
its respective material other property, and none of such property is subject,
except as permitted hereunder, to any Lien (including, without limitation,
Federal, state and other tax liens).
4.15 ERISA. No "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code) or "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or Reportable Event (other than a Reportable
Event with respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived or which has occurred by reason of the Spin-Off
Transactions) has occurred during the five years preceding each date on which
this representation is made or deemed made with respect to any Plan in any case
the consequences of which would be materially adverse to the business, financial
condition, properties, results of operations, value or prospects of the Company
and its Subsidiaries taken as a whole. The present value of all accrued
benefits under each Single Employer Plan maintained by the Company or a Commonly
Controlled Entity (based on those assumptions used to fund such Plan) did not,
as of the most recent annual valuation date in respect of each such Plan, exceed
the fair market value of the assets of the Plan (including for these purposes
accrued but unpaid contributions) allocable to such benefits by an amount that
would be materially adverse to the business, financial condition, properties,
results of operations, value or prospects of the
<PAGE>
49
Company and its Subsidiaries taken as a whole. The liability to which the
Company or any Commonly Controlled Entity would become subject under ERISA if
the Company or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date hereof would not be materially adverse to the business, financial
condition, properties, results of operations, value or prospects of the Company
and its Subsidiaries taken as a whole. To the Company's knowledge, no
Multiemployer Plan is either in Reorganization or Insolvent in any case the
consequences of which would be materially adverse to the business, financial
condition, properties, results of operations, value or prospects of the Company
and its Subsidiaries taken as a whole.
4.16 ACCURACY OF DISCLOSURE. All written information, other than
financial projections, which has been made available to the Administrative Agent
or the Banks by the Company or any of its representatives and all other
information which has been made available to the Administrative Agent or the
Banks by any officers of the Company and its Subsidiaries is complete and
correct in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading. The financial
projections that have been made available to the Administrative Agent and the
Banks by the Company or any of its representatives have been prepared in good
faith based upon reasonable assumptions.
4.17 ENVIRONMENTAL MATTERS. Except for matters reserved for on the
Company's Pro Forma Balance Sheet or any subsequent balance sheet delivered
pursuant to subsection 6.1, and otherwise except to the extent that the facts
and circumstances giving rise to any failure of any of the following
representations to be so true and correct would not have any reasonable
likelihood of having a material adverse effect on the business, operations,
property, condition (financial or otherwise) or prospects of the Company and its
Subsidiaries, taken as a whole:
(a) To the best knowledge of the Company, the facilities and
properties owned, leased or operated by the Company or any of its
Subsidiaries (the "PROPERTIES") do not contain, and have not previously
contained, any Materials of Environmental Concern in amounts or
concentrations that constitute or constituted a material violation of, or
reasonably could give rise to material liability under, Environmental Laws.
(b) To the best knowledge of the Company, the Properties and all
operations at the Properties are in compliance and at all times during the
last 5 years have been in compliance in all material respects with all
Environmental Laws, and there is no contamination at, under or about the
Properties which could interfere materially with the continued operation of
the Properties as a whole or the business of the Company and its
Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has received or is
aware of any claim or notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to the Properties
or the operations of the Company, nor does the Company have knowledge or
reason to believe that any such action is being contemplated, considered or
threatened.
(d) To the best knowledge of the Company, Materials of Environmental
Concern
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50
have not been transported or disposed of from the Properties in violation
of, or in a manner or to a location which could reasonably give rise to
liability under, Environmental Laws, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of at, on
or under any of the Properties in violation of, or in a manner that could
reasonably give rise to liability under, any applicable Environmental
Laws.
(e) There are no judicial proceedings or governmental or
administrative actions pending, or, to the best knowledge of the Company,
contemplated or threatened under any Environmental Laws to which the
Company is or will be named as a party with respect to the Properties, nor
are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Properties.
(f) To the best knowledge of the Company, there has been no release or
threat of release of Materials of Environmental Concern at or from the
Properties, or arising from or related to the operations of the Company in
connection with the Properties, in material violation of or in amounts or
in a manner that could give rise to material liability under Environmental
Laws.
4.18 COLLATERAL DOCUMENTS. Upon execution and delivery thereof by the
parties thereto, each of the Company Pledge Agreement and the Subsidiary Pledge
Agreement will be effective to create in favor of the Administrative Agent, for
the ratable benefit of the Banks, a legal, valid and enforceable security
interest in the Pledged Stock described therein and, when stock certificates
representing or constituting the Pledged Stock described therein are delivered
to the Administrative Agent, such security interest shall constitute a perfected
first lien on, and security interest in, all right, title and interest of the
pledgor party thereto in the Pledged Stock described therein.
4.19 INTELLECTUAL PROPERTY. The Company and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which would not have
any reasonable likelihood of having a material adverse effect on the business,
operations, property, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT. The effectiveness
of this Agreement is subject to the satisfaction, or waiver by each Bank (or, in
the case of the conditions specified in subsections 5.1(b), (c), (e) and (i),
waiver by the Administrative Agent), immediately prior to or concurrently with
the effectiveness of this Agreement, of the following conditions precedent on or
prior to August 31, 1997 (the date of effectiveness, the "EFFECTIVE DATE"):
(a) AGREEMENT; PLEDGE AGREEMENTS, PLEDGED STOCK. The Administrative
Agent shall have received (i) this Agreement, executed and delivered by a
duly authorized officer of each of the Company, the Banks, the Co-Agents
and the
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51
Administrative Agent, (ii) the Company Pledge Agreement executed and
delivered by a duly authorized officer of the Company, together with (A)
all stock certificates representing all of the Pledged Stock, which shall
consist of 100% of the issued and outstanding capital stock of each
Domestic Subsidiary of the Company which is a Material Subsidiary, 65% of
the issued and outstanding capital stock of each first-tier Foreign
Subsidiary of the Company listed on Schedule VII and (B) undated stock
powers for each certificate representing such Pledged Stock, duly executed
in blank and delivered by a duly authorized officer of the Company, and
(iii) with respect to the Pledge Agreement delivered pursuant to clause
(ii) above, the acknowledgement and consent of each issuer of the Pledged
Stock thereunder, in the form annexed to each such Pledge Agreement.
(b) LEGAL OPINIONS. The Administrative Agent shall have received,
addressed to the Administrative Agent, the Co-Agents and the Banks, (i) an
opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel to the
Company, dated the Effective Date, substantially in the form of Exhibit G-1
hereto with such changes thereto as may be approved by and otherwise in
form and substance satisfactory to the Administrative Agent and its
counsel, and (ii) an opinion of Keith A. Zar, Esq., Assistant General
Counsel to the Company, dated the Effective Date, substantially in the form
of Exhibit G-2 hereto with such changes thereto as may be approved by and
otherwise in form and substance satisfactory to the Administrative Agent
and its counsel. Such opinions shall also cover such other matters
incident to the transactions contemplated by this Agreement as the
Administrative Agent shall reasonably require.
(c) CLOSING CERTIFICATES. The Administrative Agent shall have
received a Closing Certificate of the Company, dated the Effective Date,
substantially in the form of Exhibit H hereto, with appropriate insertions
and attachments, satisfactory in form and substance to the Administrative
Agent and its counsel, executed by the President or any Vice President and
the Secretary or any Assistant Secretary of the Company.
(d) NO VIOLATION. The consummation of the transactions contemplated
hereby shall not contravene, violate or conflict with, nor involve any Bank
in a violation of, any Requirement of Law, except for violations not
involving any Bank and which would not have a material adverse effect on
the business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole.
(e) CONSENTS, AUTHORIZATIONS, AND FILINGS, ETC. The Administrative
Agent shall have received copies of all consents, authorizations and
filings, if any, required in connection with the execution, delivery and
performance by each Credit Party, and the validity and enforceability
against each Credit Party, of the Credit Documents to which it is a party,
and such consents, authorizations and filings shall be in full force and
effect, except such consents, authorizations and filings, including,
without limitation, the consents, authorizations and filings listed on
Schedule IV, the failure to obtain which would not have a material adverse
effect on the business, financial condition, properties, results of
operations, value or
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52
prospects of the Credit Parties and their Subsidiaries taken as a whole.
(f) NO LEGAL CONSTRAINTS. There shall be no inquiry, injunction,
restraining order, action, suit or proceeding pending or entered or any
statute or rule proposed, enacted or promulgated by any Governmental
Authority or any other Person, which, in the opinion of the Administrative
Agent (i) would have a material adverse effect on the making of the Loans
or the issuance of the Letters of Credit or the Spin-Off or (ii) other than
the Excluded Litigation, has or will have a material adverse effect on the
business, financial condition, properties, results of operations, value or
prospects of the Credit Parties and their Subsidiaries taken as a whole or
(iii) would give rise to any liability on the part of any Bank, the
Administrative Agent or any Co-Agent in connection with this Agreement, any
other Credit Document or the transactions contemplated hereby or thereby or
(iv) would bar the making of the Loans, the issuance of the Letters of
Credit or the use of the proceeds thereof in accordance with the terms of
this Agreement.
(g) ABSENCE OF CERTAIN LEGAL DEVELOPMENTS. There shall have been no
development in any action, suit or proceeding which, in any such case in
the opinion of the Administrative Agent, (i) would have a material adverse
effect on the making of the Loans or the issuance of the Letters of Credit
or (ii) (A) except for the Excluded Litigation, has or will have a material
adverse effect on the business, financial condition, properties, results of
operations, value or prospects of the Credit Parties and their Subsidiaries
taken as a whole or (B) would give rise to any liability on the part of any
Bank, the Administrative Agent or any Co-Agent in connection with this
Agreement, any other Credit Document or the transactions contemplated
hereby or thereby.
(h) EVENTS OF DEFAULT UNDER OTHER AGREEMENTS. There shall exist no
event of default (or condition which would constitute an event of default
with the giving of notice or the passage of time) under any capital stock,
financing agreements, lease agreements or other contracts of the Company or
its Subsidiaries which default would have a material adverse effect on
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole.
(i) RELATED AGREEMENTS. The Administrative Agent shall have received
each additional document, instrument or piece of information reasonably
requested by the Banks, including, without limitation, a copy of any debt
instrument, security agreement or other material contract to which any
Credit Party or their Subsidiaries may be a party.
(j) FINANCIAL STATEMENTS. The Administrative Agent shall have
received a copy of the financial statements referred to in subsection
4.1(a) and (b), with a photocopy thereof for each Bank, which shall be
satisfactory in form and substance to the Administrative Agent.
(k) BUSINESS PLAN. The Banks shall have received a satisfactory
business plan for the 1997 through 1999 fiscal years of the Company and a
reasonably
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53
satisfactory written analysis of the business and prospects of the Company
and its subsidiaries for the period from the Closing Date through the
Revolving Credit Termination Date. The Banks acknowledge that they have
received such business plan and analysis and that this condition is
satisfied.
(l) ADDITIONAL MATTERS. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Administrative Agent and its counsel.
5.2 CONDITIONS TO INITIAL LOANS AND LETTERS OF CREDIT. The obligation
of each Bank to make its initial Loans and the obligation of each Issuing Bank
to issue its initial Letter of Credit are subject to the satisfaction, or waiver
by each Bank, immediately prior to or concurrently with the making of such Loans
or the issuance of such Letter of Credit, as the case may be, of the following
conditions precedent on or prior to November 30, 1997 (the date of the initial
Extensions of Credit, the "CLOSING DATE"):
(a) EFFECTIVE DATE. The conditions set forth in subsection 5.1 shall
have been satisfied or waived in accordance with the terms hereof.
(b) SPIN-OFF. (i) The Spin-Off Transactions that are scheduled to
occur under the Spin-Off Documents on or prior to the Closing Date shall
have been consummated in all material respects, and the conditions
precedent scheduled to occur under the Spin-Off Documents on or prior to
the Closing Date shall have been consummated in all material respects, and
the S-4 Filing and the Spin-Off Documents shall not have been amended in
any material respect without the consent of the Administrative Agent.
(ii) The rulings received by GI Holdings from the Internal
Revenue Service, to the effect that the Spin-Off will be tax-free for
federal income tax purposes to the Company, NextLevel, CommScope and their
respective Subsidiaries and to the stockholders of the Company, shall be in
full force and effect.
(c) FEES. The Administrative Agent shall have received for the
account of the Banks, or for its own account, as the case may be, all fees
(including the fees referred to in subsection 3.9) payable to the Banks and
the Administrative Agent on or prior to the Closing Date.
(d) NEXTLEVEL AND COMMSCOPE DIVIDENDS. The Company shall have
received on the Closing Date cash dividends from NextLevel and CommScope in
such amounts so that, after giving effect thereto and to the application
thereof, the Consolidated Total Indebtedness (less cash) of the Company and
its Subsidiaries is approximately $275,000,000.
(e) TERMINATION OF EXISTING CREDIT FACILITIES. The Company shall have
terminated or been released from all of its existing credit facilities,
including the Existing GI Delaware Credit Agreement, other than the Taiwan
Mortgage Indebtedness.
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54
5.3 CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT. The obligation of
each Bank to make any Loan (other than any Revolving Credit Loan the proceeds of
which are to be used to repay Refunded Swing Line Loans or a Loan that does not
increase the aggregate outstanding principal amount of the Loans of any Bank)
and the obligation of each Issuing Bank to issue any Letter of Credit (other
than any Letter of Credit which is an extension, renewal or replacement of an
existing Letter of Credit and which does not increase the face amount thereof)
is subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date:
(a) REPRESENTATIONS AND WARRANTIES. If such Loan is made (and/or
Letter of Credit issued) on the Closing Date, each of the representations
and warranties made in or pursuant to Section 4, or which are contained in
any other Credit Document or any certificate, document or financial or
other statement furnished by or on behalf of the Company or any Subsidiary
thereof, at any time under or in connection herewith, shall be true and
correct in all material respects on and as of the Closing Date as if made
on and as of the Closing Date (unless stated to relate to a specific
earlier date, in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date). If
such Loan is made (and/or Letter of Credit issued) subsequent to the
Closing Date, each of the representations and warranties made in or
pursuant to Section 4 (excluding the representations made pursuant to
subsection 4.2 which shall be made only on the Closing Date) or which are
contained in any other Credit Document or in any certificate, document or
financial or other statement furnished by or on behalf of the Company or
any Subsidiary thereof shall be true and correct in all material respects
on and as of the date of such Loan (or Letter of Credit) as if made on and
as of such date (unless stated to relate to a specific earlier date, in
which case, such representations and warranties shall be true and correct
in all material respects as of such earlier date).
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect
to the Loan to be made or the Letter of Credit to be issued on such
Borrowing Date.
Each borrowing by the Company hereunder and the issuance of each
Letter of Credit by each Issuing Bank hereunder shall constitute a
representation and warranty by the Company as of the date of such borrowing or
issuance that the conditions in this subsection 6.3 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loan, or Revolving L/C Obligation remains outstanding and unpaid,
any amount remains available to be drawn under any Letter of Credit or any other
amount is owing to any Bank, any Co-Agent, any Issuing Bank, or the
Administrative Agent hereunder, it shall, and, in the case of the agreements
contained in subsections 6.3, 6.4, 6.5, 6.6 and 6.8 cause each of its
Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent (with
sufficient
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55
copies for each Bank):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of operations,
stockholders' equity and cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Deloitte & Touche
LLP or other independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such quarter,
the related unaudited consolidated statements of stockholders' equity and
cash flows of the Company and its consolidated Subsidiaries from the
beginning of such fiscal year through the end of such quarter and the
related unaudited consolidated statements of operations of the Company and
its consolidated Subsidiaries for such quarter, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event within 90 days after the
beginning of each fiscal year of the Company to which such budget relates,
a consolidated operating budget for the Company and its Subsidiaries taken
as a whole, in each case as adopted by the Board of Directors of the
Company.
All financial statements shall be complete and correct in all material respects
(subject, in the case of interim statements, to normal year-end audit
adjustments) and shall be prepared in reasonable detail (except that interim
statements may be condensed and may exclude detailed footnote disclosure to the
extent consistent with the rules and regulations of the Securities and Exchange
Commission relating to the presentation of financial information in Quarterly
Reports on Form 10-Q) and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
concurred in by such accountants or officer, as the case may be, and disclosed
therein and except that interim financial statements need not be restated for
changes in accounting principles which require retroactive application, and
operations which have been discontinued (as defined in Accounting Principles
Board Opinion No. 30) during the current year need not be shown in interim
financial statements as such either for the current period or comparable prior
period). In the event the Company changes its accounting methods because of
changes in GAAP, or any change in GAAP occurs which increases or diminishes the
protection and coverage afforded to the Banks under current GAAP accounting
methods, the Company or the Administrative Agent, as the case may be, may
request of the other parties to this Agreement an amendment of the financial
covenants contained in this Agreement to reflect such changes in GAAP and to
provide the Banks with protection and coverage equivalent to that existing prior
to such changes in accounting methods or GAAP, and each of the Company, the
Administrative Agent, the Co-Agents and the Banks agree to consider such request
in good faith.
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent (with
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56
sufficient copies for each Bank other than reports listed in subsection 6.2(c)
which shall be made available by the Administrative Agent to any Bank upon
request):
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 6.1(a), a letter from the independent
certified public accountants reporting on such financial statements (i)
stating that their audit examination has included a review of the terms of
subsections 7.3(b), 7.7, 7.8 and 7.9 of this Agreement and any definitions
set forth in this Agreement relating thereto, in each case as they relate
to accounting matters, and (ii) stating whether, in connection with their
audit examination, any condition or event that constitutes any Default or
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of their audit
examination;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of the chief
financial officer of the Company (i) stating that such officer has obtained
no knowledge of any Default or Event of Default except as specified in such
certificate; (ii) showing in detail as of the end of the related fiscal
period the figures and calculations supporting such statement in respect of
clause (b) of subsection 7.3, clause (j) of subsection 7.2, clause (f) of
subsection 7.14 and subsections 7.7, 7.8, and 7.9; (iii) showing in detail
as of the end of the related fiscal period the Leverage Ratio as of the end
of such fiscal period and the calculations supporting such statement and
stating the Applicable Margin payable as a result of such Leverage Ratio;
(iv) if not specified in the financial statements delivered pursuant to
subsection 6.1, specifying the aggregate amount of interest paid or accrued
by the Company and its Subsidiaries, and the aggregate amount of
depreciation, depletion and amortization charged on the books of the
Company and its Subsidiaries, during such accounting period; (v) listing
all Indebtedness for borrowed money (other than Indebtedness hereunder) in
each case incurred since the date of the previous consolidated balance
sheet of the Company delivered pursuant to subsection 6.1(a) or (b); and
(vi) setting forth the reserve for environmental matters as reflected in
the most recent consolidated balance sheet of the Company delivered
pursuant to subsections 6.1(a) and (b) and describing in reasonable detail
any significant changes in such reserve since the prior consolidated
balance sheet so delivered by the Company;
(c) promptly upon receipt thereof, copies of all final reports
submitted to the Company by independent certified public accountants in
connection with each annual, interim or special audit of the books of the
Company made by such accountants, including, without limitation, any final
comment letter submitted by such accountants to management in connection
with their annual audit;
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company or any of its Subsidiaries and all regular and
periodic reports and all final registration statements and final
prospectuses, if any, filed by the Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission or
any Governmental Authority succeeding to any of its functions;
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57
(e) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a management summary describing
and analyzing the performance of the Company and its Subsidiaries during
the periods covered by such financial statements to the extent not included
in the reports filed by the Company with the Securities and Exchange
Commission which are delivered to the Banks;
(f) promptly, such additional financial and other information as any
Bank may from time to time reasonably (unless a Default or Event of Default
has occurred and is continuing) request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
obligations and liabilities of whatever nature, except (a) when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company or any of its Subsidiaries, as the case may
be, (b) for delinquent obligations which do not have a material adverse effect
on the business, financial condition, properties, results of operations, value
or prospects of the Company and its Subsidiaries taken as a whole and (c) for
trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue for a period of
more than 90 days (or any longer period if longer payment terms are accepted in
the ordinary course of business) or, if overdue for more than 90 days (or such
longer period), as to which a dispute exists and adequate reserves in conformity
with GAAP have been established on the books of the Company and its
Subsidiaries, as the case may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it, and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except for rights,
privileges and franchises the loss of which would not in the aggregate have a
material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole, and except as otherwise permitted by subsections 7.4 and 7.5;
and comply with all applicable Requirements of Law except to the extent that the
failure to comply therewith would not, in the aggregate, have a material adverse
effect on the business, financial condition, properties, results of operations,
value or prospects of the Company and its Subsidiaries taken as a whole.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. (a) Keep all property useful
and necessary in its business in good working order and condition (ordinary wear
and tear excepted); and
(b) Maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and with only such
deductibles as are usually maintained by, and against at least such risks as are
usually insured against in the same general area by, companies engaged in the
same or a similar business; PROVIDED that the Company may implement programs of
self insurance in the ordinary course of business and in accordance with
industry standards for a company of similar size so long as reserves are
maintained in accordance with GAAP for the liabilities associated therewith.
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58
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and activities
in accordance with GAAP and all Requirements of Law; and permit representatives
of any Bank upon reasonable notice to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired upon reasonable
notice, and to discuss the business, operations, properties and financial and
other condition of the Company and its Subsidiaries with officers and employees
thereof and with their independent certified public accountants.
6.7 NOTICES. Promptly give notice to the Administrative Agent and
each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any instrument or other
agreement, guarantee or collateral document of the Company or any of its
Subsidiaries which default or event of default has not been waived and would
have a material adverse effect on the business, financial condition, properties,
results of operations, value or prospects of the Company and its Subsidiaries
taken as a whole, or (ii) litigation, investigation or proceeding which may
exist at any time between the Company or any of its Subsidiaries and any
Governmental Authority, or receipt of any notice of any environmental claim or
assessment against the Company or any of its Subsidiaries by any Governmental
Authority, which in any such case would have a material adverse effect on the
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole;
(c) of any litigation or proceeding affecting the Company or any of its
Subsidiaries (i) in which more than $15,000,000 of the amount claimed is not
covered by insurance or (ii) in which injunctive or similar relief is sought
which if obtained would have a material adverse effect on the business,
financial condition, properties, results of operations, value or prospects of
the Company and its Subsidiaries taken as a whole;
(d) of the following events, as soon as practicable after, and in any event
within 30 days after, the Company knows thereof: (i) the occurrence of any
Reportable Event with respect to any Single Employer Plan which Reportable Event
would have a material adverse effect on the business, financial condition,
properties, results of operations, value or prospects of the Company and its
Subsidiaries taken as a whole, or (ii) the institution of proceedings or the
taking of any other action by PBGC, the Company or any Commonly Controlled
Entity to terminate, withdraw from or partially withdraw from any Plan and, with
respect to a Multiemployer Plan, the Reorganization or Insolvency of such Plan,
in each of the foregoing cases which would have a material adverse effect on the
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole, and in addition
to such notice, deliver to the Administrative Agent and each Bank whichever of
the following may
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59
be applicable: (A) a certificate of the chief financial officer of the Company
setting forth details as to such Reportable Event and the action that the
Company or such Commonly Controlled Entity proposes to take with respect
thereto, together with a copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or (B) any notice delivered by PBGC evidencing
its intent to institute such proceedings or any notice to PBGC that such Plan is
to be terminated, as the case may be; and
(e) of a material adverse change known to the Company or any of its
Subsidiaries in the business, financial condition, properties, results of
operations, value or prospects of the Company and its Subsidiaries taken as a
whole; and
(f) of (i) any release or discharge by the Company or any Subsidiary of any
Materials of Environmental Concern required to be reported under Environmental
Laws to any Governmental Authority; (ii) any condition, circumstance, occurrence
or event that could result in a material liability under Environmental Laws or
could result in the imposition of any lien or other restriction on the title,
ownership or transferability of any Property; and (iii) any proposed action to
be taken by the Company or any Subsidiary that could subject the Company or any
Subsidiary to any material additional or different requirements or liabilities
under Environmental Law, to the extent and whenever the Company is or becomes
aware that any of the foregoing matters described in clause (i) through clause
(iii) has occurred and individually or in the aggregate result or are reasonably
likely to result in any increase in the Company's reserve for environmental
matters of more than $5,000,000 in excess of the reserve reflected on the most
recent financial statements delivered to the Banks pursuant to subsection 6.1.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of the chief executive officer or the chief financial officer of the Company
setting forth details of the occurrence referred to therein and (in the cases of
clauses (a) through (f)) stating what action the Company proposes to take with
respect thereto.
6.8 ADDITIONAL SUBSIDIARY GUARANTORS; STOCK PLEDGE. (a) If any
Subsidiary of the Company (whether presently existing or hereafter created or
acquired) shall become a Material Subsidiary, the Company shall cause such
Material Subsidiary to promptly thereafter execute and deliver a Subsidiary
Guarantee in favor of the Administrative Agent in substantially the form of
Exhibit D, each of which Subsidiary Guarantees shall be accompanied by such
resolutions, incumbency certificates and legal opinions as are reasonably
requested by the Administrative Agent and its counsel.
(b) If any Subsidiary of the Company (whether presently existing or
hereafter created or acquired) shall become a Material Subsidiary (PROVIDED that
any first tier Foreign Subsidiary which would otherwise satisfy the definition
of "Material Subsidiary" but for the fact that such Subsidiary is a Foreign
Subsidiary or more than 75% of the assets of such Subsidiary are securities of
foreign companies (such determination to be made on the basis of fair market
value) shall be deemed to be a "Material Subsidiary" for the purposes of this
paragraph (b) only), the Company shall cause such Material Subsidiary to
promptly pledge or cause to be pledged at all times 100% of the issued and
outstanding stock of such Material Subsidiary owned by it
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60
pursuant to a Pledge Agreement substantially in the form of Exhibit E or F, as
appropriate, each of which Pledge Agreements shall be accompanied by such
resolutions, incumbency certificates and legal opinions as are reasonably
requested by the Administrative Agent and its counsel; PROVIDED that if such
Material Subsidiary is (i) a Domestic Subsidiary more than 75% of the assets of
which are securities of foreign companies (such determination to be made on the
basis of fair market value) or (ii) a Foreign Subsidiary, only 65% of the stock
of such Material Subsidiary shall be required to be pledged pursuant to this
subsection 6.8(b).
(c) In the event that there shall be a Change in Law which eliminates
the adverse tax consequences to the Company or any of its Subsidiaries which
would have resulted on the date hereof from (A) the pledge of more than 65% of
stock of any Foreign Subsidiary which is a Material Subsidiary or any Domestic
Subsidiary which is a Material Subsidiary more than 75% of the assets of which
are securities of foreign companies (such determination to be made on the basis
of fair market value) or (B) the guarantee by a Subsidiary which would be a
Material Subsidiary but for the fact that 75% of the assets of such Subsidiary
are securities of foreign companies, of the Loans and the other obligations of
the Company hereunder, the Company shall promptly thereafter (i) pledge and
deliver, or shall cause to be pledged and delivered, to the Administrative Agent
such additional stock as can be so pledged without adverse tax consequences and
(ii) cause any such Subsidiary that has not previously executed and delivered a
Guarantee because of such adverse tax consequences to deliver a Guarantee to the
Administrative Agent to the extent any such guarantee can be so executed and
delivered without adverse tax consequences to the Company or any of its
Subsidiaries.
(d) Upon the request of the Administrative Agent, promptly perform or
cause to be performed any and all acts and execute or cause to be executed any
and all documents (including, without limitation, financing statements and
continuation statements) for filing under the provisions of any Requirement of
Law which are necessary or advisable to maintain in favor of the Administrative
Agent, for the benefit of the Banks, Liens on the Pledged Stock that are duly
perfected in accordance with all applicable Requirements of Law.
6.9 ENVIRONMENTAL LAWS. Except to the extent the failure of which
could not reasonably be expected to have a material adverse effect on the
business, financial condition, properties, results of operations, value or
prospects of the Company and its Subsidiaries taken as a whole, comply with all
applicable Environmental Laws and obtain and comply in all material respects
with, and maintain any and all, licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws including
conducting and completing all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws and
promptly comply in all material respects with all lawful orders and directives
of all Governmental Authorities regarding Environmental Laws, unless such order
or directive is being contested in good faith by the Company or a Subsidiary.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that from and after the Closing Date it
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly so long as the Commitments remain in effect or any Loan or Revolving
L/C Obligation remains outstanding and unpaid, any amount remains available to
be drawn under any Letter of Credit or any other amount is owing to
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61
any Bank, any Co-Agent, any Issuing Bank or the Administrative Agent hereunder:
7.1 AMENDMENTS OF SPIN-OFF DOCUMENTS. Amend, waive or terminate, or
permit any amendment, waiver or termination of, any Spin-Off Document that
materially adversely affects (a) the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company or any of its Subsidiaries to perform
their respective obligations under the Spin-Off Documents or (c) the rights and
remedies of the Banks.
7.2 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets, income or profits, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or such Subsidiary, as the case may be, in accordance
with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations which are not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) Liens or deposits to secure the performance of bids, tenders,
trade or government contracts (other than for borrowed money), leases,
licenses, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business;
(e) easements, right-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which do not
interfere with or adversely affect in any material respect the ordinary
conduct of the business of the Company and its Subsidiaries taken as a
whole;
(f) Liens in favor of the Banks pursuant to the Credit Documents and
bankers' liens arising by operation of law;
(g) Liens on assets of corporations which became or become
Subsidiaries of the Company, PROVIDED that such Liens exist at the time
such corporations became or become Subsidiaries and are not created in
anticipation thereof;
(h) Liens on the Taiwan Mortgaged Real Property securing the Taiwan
Mortgage Indebtedness;
(i) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Letters of Credit which are
Commercial L/Cs;
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(j) Liens not otherwise permitted by this subsection 7.2 securing any
Indebtedness permitted under this Agreement or obligations to Governmental
Authorities, PROVIDED that (i) the aggregate principal amount of
Indebtedness and the aggregate amount of obligations to Governmental
Authorities secured by such Liens permitted by this paragraph (j) shall at
no time exceed $50,000,000 and (ii) no such Liens shall encumber any
capital stock of the Company or any Subsidiary;
(k) any judgment or judicial attachment Lien with respect to any
judgment that does not constitute an Event of Default;
(l) license or leases in the ordinary course of business of patents,
copyrights, trademarks, trade names and other intellectual property owned
by the Company or any Subsidiary, which do not in the aggregate materially
detract from the value of its property or other assets or materially impair
the use thereof in the operation of its business, and rights to royalties,
fees and other compensation in respect of intellectual property licensed,
leased or used by the Company or any Subsidiary;
(m) Liens arising solely out of consignments of inventory and
work-in-process in the ordinary course of business; and
(n) Liens on fixed or capital assets acquired or improved by the
Company or any Subsidiary; PROVIDED that (i) such security interests secure
Indebtedness permitted by clause (e) of subsection 7.14, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or
within 180 days after such acquisition or the completion of such
improvements and the Indebtedness secured thereby does not exceed 100% of
the cost of acquiring or improving such fixed or capital assets and
(iii) such security interests shall not apply to any other property or
assets of the Company or any Subsidiary.
7.3 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) guarantees of obligations to third parties made in the ordinary
course of business in connection with relocation of employees of the
Company or any of its Subsidiaries;
(b) guarantees not otherwise permitted by this subsection 7.3 by the
Company and its Subsidiaries incurred in the ordinary course of business
for an aggregate amount not to exceed $50,000,000 at any one time;
(c) Guarantee Obligations existing on the Closing Date and described
in Schedule V;
(d) Guarantee Obligations in respect of foreign currency exchange
contracts permitted by subsection 7.12;
(e) Guarantee Obligations pursuant to the Subsidiary Guarantees;
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63
(f) guarantees by the Company of Indebtedness and other obligations of
its Subsidiaries and by Subsidiaries of Indebtedness and other obligations
of other Subsidiaries and the Company, in each case as permitted under this
Agreement; and
(g) indemnities and other similar Guarantee Obligation arising out of
the Spin-Off Documents.
7.4 PROHIBITION OF FUNDAMENTAL CHANGES. Enter into any transaction of
acquisition of, or merger or consolidation or amalgamation with, any other
Person (including any Subsidiary or Affiliate of the Company or any of its
Subsidiaries), or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any material change in the present method
of conducting business or engage in any type of business other than of the same
general type now conducted by it, except for the transactions otherwise
permitted pursuant to subsections 7.5 and 7.6.
7.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, tax benefits, receivables and leasehold
interests), whether now owned or hereafter acquired except (a) for the sale or
other disposition of any property that, in the reasonable judgment of the
Company, has become uneconomic, obsolete or worn out, and which is disposed of
in the ordinary course of business; (b) for sales of inventory and receivables
made in the ordinary course of business; (c) that any Subsidiary of the Company
may sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or a wholly-owned Subsidiary
of the Company and any Subsidiary of the Company may sell or otherwise dispose
of, or part with control of any or all of, the stock of any Subsidiary to a
wholly-owned Subsidiary of the Company or a Subsidiary of the Company may merge
with the Company (so long as the Company is the surviving corporation) or
another Subsidiary, PROVIDED that no such transaction may be effected if it
would result in the transfer of any assets of, or any stock of, a Subsidiary to
another Subsidiary whose capital stock has not been pledged to the
Administrative Agent or which has pledged a lesser percentage of its capital
stock to the Administrative Agent than was pledged by the transferor Subsidiary;
and (d) for the sale or other disposition by the Company or any of its
Subsidiaries of other assets consummated after the Closing Date, PROVIDED that
(i) such sale or other disposition shall be made for fair value on an
arm's-length basis and (ii) the aggregate fair market value of all such assets
sold or disposed of under this clause (d) (and the proceeds of which are not
reinvested within one year in similar assets) shall not exceed 20% of the
consolidated total assets of the Company and its Subsidiaries as of the Closing
Date; PROVIDED that in no event shall the Company or any of its Subsidiaries
sell any assets pursuant to this clause (d) if the revenue generated by such
assets would have exceeded 20% of the consolidated net revenue of the Company
and its Subsidiaries for the preceding fiscal year.
7.6 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment
in, any Person except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments by the Company in (i) Subsidiary Guarantors, (ii) any
Foreign
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Subsidiary set forth on Schedule VI, the stock of which or the stock of the
first-tier Foreign Subsidiary which is a direct or indirect parent of which
has been pledged in accordance with the terms of this Agreement, and, (iii)
to the extent not otherwise permitted by paragraph (c) below, Persons not
described in clauses (i) or (ii) above in an aggregate amount not to exceed
$75,000,000;
(c) acquisitions of the capital stock of, or assets constituting a
business unit of, another Person, the aggregate consideration for all such
acquisitions (including assumed debt) does not exceed $100,000,000 in any
fiscal year and $250,000,000 in the aggregate (plus, in each case, the
amount of non-mandatorily redeemable capital stock of the Company issued as
consideration for any such acquisition), PROVIDED that, after giving effect
to any such acquisition, the Company shall be in pro forma compliance with
subsections 7.7, 7.8 and 7.9 and no Default or Event or Default shall have
occurred and be continuing or shall result therefrom;
(d) the Company and its Subsidiaries may invest in, acquire and hold
Cash Equivalents;
(e) the Company or any of its Subsidiaries may make travel and
entertainment advances, relocation loans and payroll advances in the
ordinary course of business to officers and employees of the Company or any
such Subsidiary in an aggregate amount not to exceed $500,000 at any time
outstanding;
(f) investments of the Company existing on the Effective Date and
described in Schedule VIII;
(g) investments in obligations arising out of bankruptcy of customers
and suppliers; and
(h) investments arising out of non-cash consideration received in
connection with sales of assets as permitted by subsection 7.5.
7.7 MAINTENANCE OF CONSOLIDATED NET WORTH. Permit Consolidated Net
Worth at any time to be less than the sum (without duplication of any item) of
(i) $65,000,000 and (ii) 50% of the Consolidated Net Income of the Company, if
positive, for each fiscal quarter (commencing with the fiscal quarter beginning
on or about July 1, 1997).
7.8 MAINTENANCE OF INTEREST COVERAGE. Permit the Interest Coverage
Ratio on the last day of any fiscal quarter to be less than 3.75 to 1.0.
7.9 MAINTENANCE OF LEVERAGE RATIO. Permit, as of the last day of any
fiscal quarter ending on or before December 31, 1998, the Leverage Ratio to be
greater than 4.0 to 1.0 and, as of the last day of any fiscal quarter ending
after December 31, 1998, the Leverage Ratio to be greater than 3.5 to 1.0.
7.10 LIMITATION ON DIVIDENDS AND STOCK REPURCHASES. Declare any
dividends on any shares of any class of stock, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement or other acquisition of
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65
any shares of any class of stock (including the outstanding capital stock of the
Company), whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Company or any of its Subsidiaries (all of the
foregoing being referred to herein as "RESTRICTED PAYMENTS"); except that:
(a) Subsidiaries may pay dividends directly or indirectly to the
Company or the other Subsidiaries which are directly or indirectly
wholly-owned by the Company, and Foreign Subsidiaries may pay dividends
directly or indirectly to Foreign Subsidiaries which are directly or
indirectly wholly-owned by the Company;
(b) Subsidiaries may pay dividends directly or indirectly to the
Company or other Subsidiaries and each other owner of an equity interest in
such Subsidiary on a pro rata basis based on their relative ownership
interests, and Foreign Subsidiaries may pay dividends directly or
indirectly to Foreign Subsidiaries and each other owner of an equity
interest in such Foreign Subsidiary on a pro rata basis based on their
relative ownership interests;
(c) so long as after giving effect to such Restricted Payments, no
Default or Event of Default shall have occurred and be continuing or shall
result therefrom, the Company may make Restricted Payments in an aggregate
amount not to exceed the sum of (i) $25,000,000 PLUS (ii) 50% of positive
Consolidated Net Income from July 1, 1997; and
(d) so long as after giving effect to such Restricted Payments, no
Default or Event of Default shall have occurred and be continuing or shall
result therefrom, the Company may distribute to its shareholders the
capital stock of NextLevel in connection with the Spin-Off.
7.11 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate except (a) for transactions
which are otherwise permitted under this Agreement and which are in the ordinary
course of the Company's or a Subsidiary's business and which are upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than it
would obtain in a hypothetical comparable arm's length transaction with a Person
not an Affiliate, (b) as permitted under subsections 7.3(a) and (f), subsection
7.6 and subsection 7.10 or (c) any transactions entered into as part of the
Spin-Off Transactions.
7.12 FOREIGN EXCHANGE CONTRACTS. Enter into any foreign currency
exchange contracts other than in the ordinary course of business.
7.13 FISCAL YEAR. Permit the fiscal year of the Company to end on a
day other than December 31, unless the Company shall have given at least 45 days
prior written notice to the Administrative Agent.
7.14 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness (including any Indebtedness of any of its Subsidiaries),
except:
(a) Indebtedness of the Company under this Agreement and under any
Registered Form Notes;
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66
(b) the Taiwan Mortgage Indebtedness;
(c) (i) Indebtedness of the Company to any of its Subsidiaries and of
any wholly-owned domestic Subsidiary to the Company or any other
Subsidiary; and (ii) Indebtedness of any wholly-owned foreign Subsidiary to
the Company or any other Subsidiary to the extent permitted by subsection
7.6;
(d) Indebtedness consisting of reimbursement obligations under surety,
indemnity, performance, release and appeal bonds and guarantees thereof and
letters of credit required in the ordinary course of business or in
connection with the enforcement of rights or claims of the Company or its
Subsidiaries;
(e) Capital lease obligations, mortgage financings, purchase money
Indebtedness and industrial revenue bond issues in respect of real property
or equipment incurred by the Company prior to or within 180 days after a
capital expenditure in order to finance the purchase or improvement of
properties;
(f) Indebtedness consisting of foreign currency exchange contracts
permitted under subsection 7.12; and
(g) Indebtedness not otherwise permitted by the preceding clauses of
this subsection 7.15 not exceeding $50,000,000 in aggregate principal
amount at any one time outstanding.
7.15 LIMITATION ON CAPITAL EXPENDITURES. At any time when the
Leverage Ratio is greater than or equal to 1.50 to 1, make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
for lease, purchase, construction or use of any property which, in accordance
with GAAP, is or should be included in "capital expenditures" or similar items
in the Company's consolidated statement of cash flow except for expenditures by
the Company and its Subsidiaries in the ordinary course of business not
exceeding an aggregate of $75,000,000 during any fiscal year and $300,000,000
during the term of this Agreement (other than any such expenditures permitted
under subsection 7.6), in each case net of trade-ins and Net Proceeds from sales
of tangible capital assets, to the extent such proceeds are not required to be
applied to prepayments pursuant to subsection 3.5.
7.16 LIMITATION ON LEASES. Permit Consolidated Lease Expense for any
fiscal year of the Company to exceed $10,000,000.
7.17 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Company or any Subsidiary of
real or personal property, in an aggregate amount for all such property
exceeding $5,000,000, which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Company or such Subsidiary.
7.18 LIMITATION ON NEGATIVE PLEDGE CLAUSES; PAYMENT RESTRICTIONS.
Enter into with any Person any agreement, other than (a) this Agreement, (b) any
industrial revenue bonds,
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purchase money mortgages, development financing or financing leases permitted by
this Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby) or (c) any other Contractual
Obligation which prohibits the assignment of such Contractual Obligation or the
property which is the subject of such Contractual Obligation (in which case, any
prohibition or limitation shall only be effective against such Contractual
Obligation or the property which is the subject of such Contractual Obligation),
which prohibits or limits the ability of the Company or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, or prohibits or
limits the ability of the Company or any of its Subsidiaries to make payments to
the Company or any of its Subsidiaries.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to (i) pay any principal of any Loan when
due in accordance with the terms hereof or thereof or to reimburse an
Issuing Bank in accordance with subsection 2.6 or (ii) pay any interest on
any Loan or any other amount payable hereunder within five days after any
such interest or other amount becomes due in accordance with the terms
thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Credit
Party in any Credit Document or which is contained in any certificate,
guarantee, document or financial or other statement furnished under or in
connection with this Agreement shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Company shall default in the observance or performance of any
agreement contained in subsection 6.7(a) or Section 7 of this Agreement or
any Credit Party shall default in the observance or performance of any
agreement contained in Section 5 of any Pledge Agreement to which it is a
party or Section 2 of any Subsidiary Guarantee to which it is a party; or
(d) The Company or any other Credit Party shall default in the
observance or performance of any other agreement contained in any Credit
Document, and such default shall continue unremedied for a period of 30
days; or
(e) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Loans, the Revolving L/C Obligations and any intercompany debt) or in the
payment of any Guarantee Obligation, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
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Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity, any applicable
grace period having expired, or such Guarantee Obligation to become
payable, any applicable grace period having expired, PROVIDED that the
aggregate principal amount of all such Indebtedness and Guarantee
Obligations under clauses (i) and (ii) equals or exceeds $10,000,000; or
(f) (i) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Company or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Company or any of its Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Company or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Company or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan,
(iii) a Reportable Event (other than a Reportable Event with respect to
which the 30-day notice requirement under Section 4043 of ERISA has been
waived or which occurs by reason of the Spin-Off Transactions) shall occur
with respect to, or proceedings to have a trustee appointed shall commence
with respect to, or a trustee shall be appointed to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution
of proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Banks, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, and, in the case of a Reportable Event, such
Reportable Event shall continue unremedied for ten days after notice of
such Reportable Event is given and, in the case of the institution of
proceedings, such proceedings shall continue for ten days after
commencement thereof or (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA; and in each case in clauses (i) through (iv)
above, such event or condition, together with all other such events or
conditions relating to such Plans, if any, could subject the Company or any
of
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69
its Subsidiaries to any tax, penalty or other liabilities which in the
aggregate are material in relation to the business, financial condition,
properties, results of operations, value or prospects of the Company and
its Subsidiaries taken as a whole; or
(h) Except with respect to the Excluded Litigation, one or more final
judicial judgments or decrees shall be entered against the Company or any
of its Subsidiaries involving in the aggregate for all such Persons a
liability (not paid or fully covered by insurance) of $10,000,000 or more
and all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within the time required by the terms of
such judgment; or
(i) Any Pledge Agreement or any Guarantee shall cease, for any reason,
to be in full force and effect or any Credit Party shall so assert in
writing, or any Pledge Agreement shall cease to be effective to grant a
perfected Lien on the collateral described therein with the priority
purported to be created thereby (other than as a result of any action or
inaction of the part of the Administrative Agent or the Banks); or
(j) (i) Any Person or two or more Persons (except FL Affiliates)
acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated
under the Exchange Act) of more than 33% of the outstanding shares of
voting stock of the Company; or (ii) any Person or two or more Persons
(except FL Affiliates) acting in concert shall acquire the power to elect a
majority of the Board of Directors of the Company;
then, and in any such event, (x) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above, automatically (i) the Commitments
shall immediately terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement shall immediately
become due and payable, and (ii) all obligations of the Company in respect of
the Letters of Credit, although contingent and unmatured, shall become
immediately due and payable and the Issuing Banks' obligations to issue Letters
of Credit shall immediately terminate and (y) if such event is any other Event
of Default, so long as any such Event of Default shall be continuing, either or
both of the following actions may be taken: (i) with the consent of the
Required Banks, the Administrative Agent may, or upon the request of the
Required Banks, the Administrative Agent shall, by notice to the Company,
declare the Commitments and any Bank's obligations to issue Letters of Credit to
be terminated forthwith, whereupon the Commitments and such obligations shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Administrative Agent may, or upon the request of the Required Banks, the
Administrative Agent shall, by notice of default to the Company, (A) declare all
or a portion of the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement to be due and payable forthwith,
whereupon the same shall immediately become due and payable, and (B) declare all
or a portion of the obligations of the Company in respect of the Letters of
Credit, although contingent and unmatured, to be due and payable forthwith,
whereupon the same shall immediately become due and payable and/or demand that
the Company discharge any or all of the obligations supported by the Letters of
Credit by paying or prepaying any amount due or to become due in respect of such
obligations. All payments under this Section 8 on account of undrawn Letters of
Credit shall be made by the Company directly to a cash collateral account
established by the Administrative Agent for such purpose for application to the
Company's reimbursement obligations under subsection 2.6 as
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drafts are presented under the Letters of Credit, with the balance, if any, to
be applied to the Company's obligations under this Agreement as the
Administrative Agent shall determine with the approval of the Required Banks.
Except as expressly provided above in this Section 8, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE CO-AGENTS; THE ADMINISTRATIVE
AGENT; ISSUING BANKS
9.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints
Chase, Bank of America National Trust and Savings Association, Bank of Montreal,
The Bank of Nova Scotia, CIBC Inc., Credit Lyonnais New York Branch, Fleet
National Bank and Wachovia Bank, N.A. as the Co-Agents of such Bank under this
Agreement and acknowledges that no Co-Agent, in its capacity as such, shall have
any duties under the Credit Documents. Each Bank hereby irrevocably designates
and appoints Chase as the Administrative Agent under this Agreement and
irrevocably authorizes Chase as Administrative Agent for such Bank to take such
action on its behalf under the provisions of the Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of the Credit Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, neither the Co-Agents nor
the Administrative Agent shall have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Credit Documents or otherwise exist against
the Co-Agents or the Administrative Agent.
9.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement and each of the other Credit Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Without limiting the
foregoing, the Administrative Agent may appoint Chase Manhattan Bank Agency
Services Corporation as its agent to perform the functions of the Administrative
Agent hereunder relating to the advancing of funds to the Company and
distribution of funds to the Banks and to perform such other related functions
of the Administrative Agent hereunder as are reasonably incidental to such
functions. None of the Co-Agents nor the Administrative Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care, except as otherwise provided in subsection
9.3.
9.3 EXCULPATORY PROVISIONS. Neither the Co-Agents nor the
Administrative Agent nor any of their officers, directors, employees, agents,
attorneys-in-fact, Affiliates or Subsidiaries shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Credit Documents (except for its or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to any of
the Banks for any recitals, statements, representations or warranties made by
any Credit Party or any officer thereof contained in the Credit Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by any Co-Agent or the Administrative Agent under or in
connection with, the Credit Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Credit Documents or for any
failure of any Credit Party to perform its obligations thereunder. None of the
Co-Agents or the Administrative Agent shall be
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under any obligation to any Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, any
Credit Document, or to inspect the properties, books or records of any Credit
Party.
9.4 RELIANCE BY CO-AGENTS AND ADMINISTRATIVE AGENT. Each of the
Co-Agents and the Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by such Co-Agent or the Administrative Agent. Each of the Co-Agents
and the Administrative Agent may deem and treat the payee of any promissory note
issued under or in connection with this Agreement as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with such Co-Agent or the Administrative Agent. Each of
the Co-Agents and the Administrative Agent shall be fully justified in failing
or refusing to take any action under any Credit Document unless it shall first
receive such advice or concurrence of the Required Banks (or, where unanimous
consent of the Banks is expressly required hereunder, such Banks) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Each of the Co-Agents and the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under any Credit Document in accordance with a request
of the Required Banks (or the Release Banks with respect to matters requiring
the consent of the Release Banks), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Banks.
9.5 NOTICE OF DEFAULT. None of the Co-Agents or the Administrative
Agent shall be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless such Co-Agent or the Administrative
Agent has received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall promptly give notice
thereof to the Banks. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Banks; PROVIDED that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks.
9.6 NON-RELIANCE ON CO-AGENTS, ADMINISTRATIVE AGENT AND OTHER BANKS.
Each Bank expressly acknowledges that none of the Co-Agents or the
Administrative Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates has made any
representations or warranties to it and that no act by any Co-Agent or the
Administrative Agent hereafter taken, including any review of the affairs of the
Credit Parties, shall be deemed to constitute any representation or warranty by
any Co-Agent or the Administrative Agent to any Bank. Each Bank represents to
each Co-Agent and to the Administrative Agent that it has, independently and
without reliance upon any Co-Agent or the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
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property, financial and other condition and creditworthiness of the Credit
Parties and made its own decision to make its Loans hereunder, issue and
participate in the Letters of Credit and enter into this Agreement. Each Bank
also represents that it will, independently and without reliance upon any
Co-Agent or the Administrative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under the Credit Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition and creditworthiness of the Credit Parties. Except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Administrative Agent hereunder, none of the Co-Agents and the
Administrative Agent shall have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, financial
condition, assets, liabilities, net assets, properties, results of operations,
value, prospects and other condition or creditworthiness of the Credit Parties
which may come into the possession of any Co-Agent or the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact,
Affiliates or Subsidiaries.
9.7 INDEMNIFICATION. The Banks severally agree to indemnify each of
the Co-Agents and the Administrative Agent in its capacity as such (to the
extent not reimbursed by the Credit Parties and without limiting the obligation
of the Credit Parties to do so), ratably according to the respective amounts of
their Commitments Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the Loans) be
imposed on, incurred by or asserted against any Co-Agent or the Administrative
Agent in any way relating to or arising out of the Credit Documents or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted by any Co-Agent or the Administrative
Agent under or in connection with any of the foregoing; PROVIDED that no Bank
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from any Co-Agent's or the Administrative Agent's
gross negligence or willful misconduct. The agreements contained in this
subsection 9.7 shall survive the payment of the Loans and all other amounts
payable hereunder.
9.8 CO-AGENTS AND ADMINISTRATIVE AGENT IN THEIR INDIVIDUAL CAPACITIES.
Each of the Co-Agents and the Administrative Agent and their respective
Affiliates and Subsidiaries may make loans to, accept deposits from and
generally engage in any kind of business with the Credit Parties as though such
Co-Agent or Administrative Agent were not a Co-Agent or the Administrative Agent
hereunder, as the case may be. With respect to its Loans made or renewed by it
and any Letter of Credit issued by or participated in by it, each of the
Co-Agents and the Administrative Agent shall have the same rights and powers,
duties and liabilities under the Credit Documents as any Bank and may exercise
the same as though it were not a Co-Agent or the Administrative Agent, as the
case may be, and the terms "Bank" and "Banks" shall include each of the
Co-Agents and the Administrative Agent in their individual capacities.
9.9 SUCCESSOR CO-AGENT OR ADMINISTRATIVE AGENT. Each Co-Agent and the
Administrative Agent may resign as Co-Agent or Administrative Agent, as the case
may be, upon 30 days' notice to the Banks. The resignation of any Co-Agent
shall be effective without any further act or deed on the part of such former
Co-Agent. If the Administrative Agent shall
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73
resign as Administrative Agent under the Credit Documents, then the Required
Banks shall appoint from among the Banks a successor agent for the Banks which
successor agent shall be approved by the Company (which approval shall not be
unreasonably withheld) and upon its acceptance thereof, such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent and
the term "Administrative Agent" shall mean such successor agent effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After any retiring Co-Agent's or Administrative Agent's
resignation hereunder as Co-Agent or Administrative Agent, as the case may be,
the provisions of this Section 9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Co-Agent or Administrative
Agent, as the case may be, under the Credit Documents.
9.10 AN ISSUING BANK AS ISSUER OF LETTERS OF CREDIT. Each Bank and
each Co-Agent hereby acknowledge that the provisions of this Section 9 shall
apply to any Issuing Bank, in its capacity as issuer of any Letter of Credit, in
the same manner as such provisions are expressly stated to apply to the
Administrative Agent.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. No Credit Document nor any terms thereof
may be amended, supplemented or modified except in accordance with the
provisions of this subsection 10.1. With the written consent of the Required
Banks, the Administrative Agent and the respective Credit Parties may, from time
to time, enter into written amendments, supplements or modifications to any
Credit Document for the purpose of adding any provisions to such Credit Document
to which they are parties or changing in any manner the rights of the Banks or
of any such Credit Party or any other Person thereunder or waiving, on such
terms and conditions as the Administrative Agent may specify in such instrument,
any of the requirements of any such Credit Document or any Default or Event of
Default and its consequences; PROVIDED, HOWEVER, that:
(a) no such waiver and no such amendment, supplement or modification
shall directly or indirectly release any Subsidiary Guarantor from its
obligations under the Subsidiary Guarantee or release the Company or any
Subsidiary from its obligations under its respective Pledge Agreement, in
each case, without the written consent of the Release Banks, except as
otherwise provided; and
(b) no such waiver and no such amendment, supplement or modification
shall (x) extend the scheduled maturity of any Loan (other than a Bid Loan)
or extend the expiry date of any Letter of Credit beyond the Revolving
Credit Termination Date, or reduce the rate or extend the time of payment
of interest thereon, or change the method of calculating interest thereon,
or reduce or extend the time of payments of any fee payable to the Banks
hereunder, or reduce the principal amount thereof, or increase the amount
of any Bank's Commitments, without the written consent of each Bank
affected thereby, or (y) amend, modify or waive any provision of this
subsection 10.1 or reduce the percentages specified in the definition of
Required Banks or Release Banks, or change the percentage of the Banks
required to waive a condition precedent under Section 5 or consent to the
assignment or transfer by any Credit Party of any of its rights and
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74
obligations under any Credit Document, in each case, without the written
consent of each Bank, PROVIDED that with respect to any Bid Loan, no such
waiver and no such amendment, supplement or modification shall be made
without the written consent of each Bank holding such Bid Loan.
Any such waiver and any such amendment, supplement or modification described in
this subsection 10.1 shall apply equally to each of the Banks and shall be
binding upon each Credit Party, the Banks, the Co-Agents, the Administrative
Agent. No waiver, amendment, supplement or modification of any Letter of Credit
shall extend the expiry date thereof without the written consent of the
Participating Banks. In the case of any waiver, the Company, the Banks, the
Co-Agents and the Administrative Agent shall be restored to their former
position and rights hereunder and under the outstanding Notes, and any Default
or Event of Default waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or three Business
Days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when sent, confirmation of receipt received, or, in the case of
telex notice, when sent, answerback received, addressed as follows in the case
of each Credit Party and the Administrative Agent, and as set forth in Schedule
I in the case of any Bank, or to such other address as may be hereafter notified
by the respective parties hereto:
The Company: General Semiconductor, Inc.
10 Melville Park Road
Melville, NY 11747
Attention: Treasurer and General Counsel
Telecopy: (516) 847-3152
With a copy to: Fried, Frank, Harris,
Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: F. William Reindel, Esq.
Telecopy: (212) 859-8587
The Administrative
Agent: The Chase Manhattan Bank
c/o Chase Securities Inc.
10 South LaSalle Street
Suite 2300
Chicago, Illinois 60603
Attention: Leonard Essex
Telecopy: (312) 807-4077
The Co-Agents: The Chase Manhattan Bank
c/o Chase Securities Inc.
<PAGE>
75
10 South LaSalle Street
Suite 2300
Chicago, Illinois 60603
Attention: Leonard Essex
Telecopy: (312) 807-4077
Bank of America National Trust
and Savings Association
555 California Street
41st Floor
San Francisco, California 94104
Attention: Douglas C. Watson
Telecopy: (415) 622-2514
Bank of Montreal
430 Park Avenue
Suite 1400
New York, New York 10022
Attention: Thomas J. Moore
Telecopy: (212) 605-1454
The Bank of Nova Scotia
One Liberty Plaza
26th Floor
New York, New York 10006
Attention: Daniel Foote
Telecopy: (212) 225-5090
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Cyd Petre
Telecopy: (212) 856-3991
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attention: Nicolas Chapin
Telecopy: (212) 459-3179
Fleet National Bank
75 State Street
MA BO F04M
Boston, Massachusetts 02109
Attention: Frank Benesh
Telecopy: (617) 346-0568
Wachovia Bank, N.A.
<PAGE>
76
191 Peachtree Street, MC 370
Atlanta, Georgia 30303
Attention: Jane C. Deaver
Telecopy: (404) 332-6898
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Banks pursuant to subsections 2.3, 2.8, 2.10, 3.1, 3.2, 3.3 and 3.4 shall
not be effective until received and PROVIDED FURTHER that the failure to provide
the copies of notices to the Company provided for in this subsection 10.2 shall
not result in any liability to the Administrative Agent, any Co-Agent or any
Bank.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent, any Co-Agent or
any Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Letters of Credit.
10.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees:
(a) to pay or reimburse the Administrative Agent for all of its
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, the Credit Documents and any other documents prepared in
connection herewith, and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent;
(b) to pay or reimburse each Bank, each Co-Agent and the
Administrative Agent for all their costs and expenses incurred in
connection with, and to pay, indemnify, and hold the Administrative Agent,
each Co-Agent and each Bank harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
arising out of or in connection with, the enforcement or preservation of
any rights under any Credit Document and any such other documents,
including, without limitation, reasonable fees and disbursements of counsel
to the Administrative Agent, each Co-Agent and each Bank incurred in
connection with the foregoing and in connection with advising the
Administrative Agent with respect to its rights and responsibilities under
this Agreement and the documentation relating thereto;
(c) to pay, indemnify, and to hold the Administrative Agent, each
Co-Agent and each Bank harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other similar
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77
taxes (other than withholding taxes), if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, any Credit
Document and any such other documents; and
(d) to pay, indemnify, and hold the Administrative Agent, each
Co-Agent and each Bank and their respective officers, directors, employees
and agents harmless from and against any and all other liabilities,
obligations, losses, damages (including punitive damages), penalties,
fines, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including, without limitation, reasonable
experts' and consultants' fees and reasonable fees and disbursements of
counsel and third party claims for personal injury or real or personal
property damage) which may be incurred by or asserted against the
Administrative Agent, any Co-Agent or the Banks (x) arising out of or in
connection with any investigation, litigation or proceeding related to this
Agreement, the other Credit Documents, the proceeds of the Loans, or any of
the other transactions contemplated hereby, whether or not the
Administrative Agent, any Co-Agent or any of the Banks is a party thereto,
(y) with respect to any environmental matters, any actual or alleged
environmental compliance expenses and any actual or alleged remediation
expenses in connection with the presence, suspected presence, release or
suspected release of any Hazardous Materials in or into the air, soil,
groundwater, surface water or improvements at, on, about, under, or within
the any parcel of real property currently or previously owned or operated
by the Company or any Subsidiary, or any portion thereof, or elsewhere in
connection with the transportation of Hazardous Materials to or from any
parcel of real property currently or previously owned or operated by the
Company or any Subsidiary or (z) without limiting the generality of the
foregoing, by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to make payments under, Letters of
Credit (it being agreed that nothing in this subsection 10.5(d)(z) is
intended to limit the Company's obligations pursuant to subsection 2.6);
(all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"), PROVIDED that
the Company shall have no obligation hereunder with respect to indemnified
liabilities of the Administrative Agent, any Co-Agent or any Bank or any of
their respective officers, directors, employees or agents arising from (i) the
gross negligence or willful misconduct of such Administrative Agent, Co-Agent or
Bank or their respective directors, officers, employees or agents or (ii) legal
proceedings commenced against the Administrative Agent, any Co-Agent or any Bank
by any security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such or
(iii) legal proceedings commenced against the Administrative Agent, any Co-Agent
or any such Bank by any Transferee (as defined in subsection 10.6). The
agreements in this subsection 10.5 shall survive repayment of the Loans and all
other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. (a)
This Agreement shall be binding upon and inure to the benefit of the Company,
the Banks, the Co-Agents and the Administrative Agent, and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Bank.
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78
(b) Any Bank may, in the ordinary course of its commercial banking or
lending business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("PARTICIPANTS") participating interests in any
Loan owing to such Bank, any participating interest of such Bank in the Letters
of Credit, any Commitment of such Bank or any other interest of such Bank
hereunder and under the other Credit Documents, PROVIDED, HOWEVER, that no Bank
shall sell any such participating interest to any Participant which is a
Non-U.S. Bank that is unable to deliver to such Bank either an Internal Revenue
Service Form 4224 or Form 1001 pursuant to clause (A) of subsection 3.17(e)
hereof. In the event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof for all purposes under this Agreement
and the other Credit Documents and the Company and the Administrative Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement and the other Credit
Documents. The Company agrees that if amounts outstanding under this Agreement
are due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement;
PROVIDED that such Participant shall only be entitled to such right of setoff if
it shall have agreed in the agreement pursuant to which it shall have acquired
its participating interest to share with the Banks the proceeds thereof, as
provided in subsection 10.7. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 3.11, 3.18, 3.19 and 3.20 with
respect to its participation in the Letters of Credit and in the Commitments and
the Loans outstanding from time to time; PROVIDED that no Participant shall be
entitled to receive any greater amount pursuant to such subsections than the
transferor Bank would have been entitled to receive in respect of the amount of
the participation transferred by such transferor Bank to such Participant had no
such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking or
lending business and in accordance with applicable law, at any time sell to any
Bank or any Affiliate thereof (including any Affiliate or Subsidiary of such
transferor Bank) and, with the consent of the Company and the Administrative
Agent, the Issuing Bank, if applicable, and the Swing Line Bank, if applicable
(which in each case shall not be unreasonably withheld), sell to one or more
additional banks or financial institutions (an "ASSIGNEE"), all or any part of
its rights and obligations under this Agreement and the other Credit Documents
and with respect to the Letters of Credit, pursuant to an Assignment and
Acceptance executed by such Assignee, such assigning Bank (and, in the case of
an Assignee that is not then a Bank or an affiliate thereof, by the Company and
the Administrative Agent), and delivered to the Administrative Agent for its
acceptance and recording in the Register (as defined below); PROVIDED that (A)
each such sale pursuant to this subsection 10.6(c) (I) to a Person which is not
then a Bank or an Affiliate of a Bank shall be of Commitments and/or Loans of
$10,000,000 (or if such assigning Bank has Commitments and Loans in an amount
less than $10,000,000 in the aggregate, such lesser amount) or more and (II) to
a Person which is then a Bank or an Affiliate of a Bank may be in any amount,
(B) in the event of a sale of less than all of such rights and obligations,
such Bank after such sale shall retain Commitments and/or Loans (without
duplication) aggregating $10,000,000; and PROVIDED FURTHER that the foregoing
shall not prohibit a Bank from selling participating interests in accordance
with subsection 10.6(b) in all or any portion of its
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79
Commitments and/or Loans (without duplication) and (C) each Assignee which is a
Non-U.S. Bank shall comply with the provisions of clause (A) of subsection
3.17(e) hereof, or, with the prior written consent of the Company which may be
withheld in its sole discretion, with or without cause, the provisions of clause
(B) of subsection 3.17(e) hereof (and, in either case, with all of the other
provisions of subsection 3.17(e) hereof), and PROVIDED, FURTHER, that no Bank
shall assign any Bid Loans pursuant to this subsection 10.6(c) except in
connection with the assignment of all of its Loans and Commitments under this
Agreement. If at any time any Co-Agent shall own less than 5% of the
Commitments and/or the Loans (without duplication), then such Co-Agent shall, at
the Company's request after consultation with the Administrative Agent, no
longer be entitled to the benefits of the title "Co-Agent" under this Agreement
and shall promptly resign as a Co-Agent; PROVIDED that nothing contained in this
sentence shall be construed or interpreted as impairing any right of a resigning
Co-Agent in its capacity as a Bank under this Agreement; and PROVIDED FURTHER
that the foregoing shall not prohibit a Co-Agent from selling participating
interests in accordance with subsection 10.6(b) in all or any portion of its
Commitments and/or Loans. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Bank hereunder with the Commitments as set forth therein,
and (y) the assigning Bank thereunder shall, to the extent of the interest
transferred, as reflected in such Assignment and Acceptance, be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such assigning Bank shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement and Schedule I hereto to the extent, and only to the extent, necessary
to reflect the addition of such Assignee and the resulting adjustment of
Commitment Percentages arising from the purchase by such Assignee of all or a
portion of the rights and obligations of such assigning Bank under this
Agreement.
(d) The Administrative Agent acting on behalf of and as agent for the
Company, shall maintain at its address referred to in subsection 10.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "REGISTER")
for the recordation of the names and addresses of the Banks and the registered
owners of the Obligations evidenced by the Registered Form Notes and the
Commitments of, the principal amount of any Loans owing to, and, if such Bank
has any Revolving Credit Commitment, the L/C Participating Interests of, each
Bank from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Company, the Administrative Agent and the
Banks shall treat each Person whose name is recorded in the Register as the
owner of the Loans, Registered Form Notes or L/C Participating Interests
recorded therein for all purposes of this Agreement. Any assignment of a Loan,
Registered Form Notes or other obligation hereunder shall be effective only upon
appropriate entries with respect thereto being made in the Register. Any
assignment or transfer of an obligation hereunder evidenced by a promissory note
shall be registered in the Register only upon the surrender of such note for
registration of such assignment or transfer, and thereupon one or more new notes
shall be issued to the Assignee and the old note shall be returned by the
Administrative Agent to the Company, marked "cancelled". The Register shall be
available for inspection by the Company or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning
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80
Bank and an Assignee (and, in the case of an Assignee that is not then a Bank or
an Affiliate thereof, by the Company and the Administrative Agent), together
with payment to the Administrative Agent of a registration and processing fee of
$4,000 if the Assignee is not a Bank or an Affiliate thereof prior to the
execution of such Assignment and Acceptance and $1,000 otherwise, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto, record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Banks and the Company.
(f) The Company authorizes each Bank to disclose to any Participant or
Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Bank's possession concerning the Company and its
Subsidiaries and Affiliates which has been delivered to such Bank by or on
behalf of the Company pursuant to this Agreement or which has been delivered to
such Bank by or on behalf of the Company in connection with such Bank's credit
evaluation of the Company and its Subsidiaries and Affiliates prior to becoming
a party to this Agreement.
(g) If, pursuant to this subsection 10.6, any interest in this
Agreement is transferred to any Transferee which would be a Non-U.S. Bank upon
the effectiveness of such transfer, the assigning Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, (i) to
represent to the assigning Bank (for the benefit of the assigning Bank, the
Administrative Agent and the Company) that under applicable law and treaties no
United States federal income taxes or United States backup withholding taxes
will be required to be withheld by the Administrative Agent, the Company or the
assigning Bank with respect to any payments to be made to such Transferee in
respect of the Loans or L/C Participating Interests, (ii) to furnish to the
assigning Bank (and, in the case of any Assignee registered in the Register, the
Administrative Agent and the Company) such Internal Revenue Service Forms
required to be furnished pursuant to subsection 3.17(e) and (iii) to agree (for
the benefit of the assigning Bank, the Administrative Agent and the Company) to
be bound by the provisions of subsections 3.17(e).
(h) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans relate
only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Bank of any Loan to any Federal Reserve Bank in
accordance with applicable law; provided that any transfer of Loans upon, or in
lieu of, enforcement of or the exercise of remedies under any such pledge shall
be treated as an assignment thereof which shall not be made without compliance
with the requirements of this subsection 10.6.
10.7 ADJUSTMENTS; SET-OFF. (a) If any Bank (a "BENEFITTED BANK")
shall at any time receive any payment of all or part of any of its Revolving
Credit Loans (other than payment of Swing Line Loans or Bid Loans) or L/C
Participating Interests, as the case may be, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in clause (f) of
Section 8, or otherwise) in a greater proportion than any such payment to and
collateral received by any other Bank, if any, in respect of such other Bank's
Revolving Credit Loans or L/C Participating Interests, as the case may be, or
interest thereon, such benefitted Bank shall purchase for cash
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81
from the other Banks such portion of each such other Bank's Revolving Credit
Loans or L/C Participating Interests, as the case may be, or shall provide such
other Banks with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Bank to share the excess payment
or benefits of such collateral or proceeds ratably in accordance with their
Commitment Percentages with each of the Banks; PROVIDED, HOWEVER, that if all or
any portion of such excess payment or benefits is thereafter recovered from such
benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Company agrees that each Bank so purchasing a portion of another Bank's Loans
and/or L/C Participating Interests may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Bank were the direct holder of such portion. The
Administrative Agent shall promptly give the Company notice of any set-off,
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off.
(b) Upon the occurrence of an Event of Default specified in subsection
8(a) or 8(f), the Administrative Agent, each Bank and each Co-Agent are hereby
irrevocably authorized at any time and from time to time without notice to the
Company, any such notice being hereby waived by the Company, to set off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the
Administrative Agent, such Bank or such Co-Agent or any Affiliate thereof to or
for the credit or the account of the Company, or any part thereof in such
amounts as the Administrative Agent, such Bank or such Co-Agent may elect, on
account of the liabilities of the Company hereunder and under the other Credit
Documents and claims of every nature and description of the Administrative
Agent, such Bank or such Co-Agent against the Company, in any currency, whether
arising hereunder, under any other Credit Document, as the Administrative Agent,
such Bank or such Co-Agent may elect, whether or not the Administrative Agent,
such Bank or such Co-Agent has made any demand for payment and although such
liabilities and claims may be contingent or unmatured. The Administrative
Agent, each Bank and each Co-Agent shall notify the Company promptly of any such
setoff made by it and the application made by it of the proceeds thereof,
PROVIDED that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Administrative Agent, each Bank
and each Co-Agent under this paragraph are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Administrative Agent, such Bank or such Co-Agent may have.
10.8 JUDGMENT. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency on the Business Day
preceding the day on which final judgment is given.
(b) The obligation of the Company in respect of any sum due to any
Bank or the Administrative Agent hereunder shall, notwithstanding any judgment
in a currency (the "JUDGMENT CURRENCY") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement or
the other Credit Documents (the "AGREEMENT CURRENCY"), be discharged only to the
extent that on the Business Day following receipt by such
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82
Bank or the Administrative Agent (as the case may be) of any sum adjudged to be
so due in the Judgment Currency such Bank or the Administrative Agent (as the
case may be) may in accordance with normal banking procedures purchase the
Agreement Currency with the Judgment Currency; if the amount of the Agreement
Currency so purchased is less than the sum originally due to such Bank or the
Administrative Agent (as the case may be) in the Agreement Currency, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Bank or the Administrative Agent (as the case may be) against
such loss, and if the amount of the Agreement Currency so purchased exceeds the
sum originally due to any Bank or the Administrative Agent (as the case may be),
such Bank or the Administrative Agent (as the case may be) agrees to remit to
the Company such excess.
10.9 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Administrative Agent. This Agreement
shall become effective with respect to the Company, the Co-Agents, the
Administrative Agent and the Banks when the Administrative Agent shall have
received copies of this Agreement executed by the Company, the Co-Agents and the
Banks, or, in the case of any Bank, shall have received telephonic confirmation
from such Bank stating that such Bank has executed counterparts of this
Agreement or the signature pages hereto and sent the same to the Administrative
Agent and the other conditions set forth in subsection 5.1 shall have been
satisfied or waived in accordance with the terms thereof.
10.10 INTEGRATION. This Agreement and the other Credit Documents
represent the entire agreement of the Credit Parties, the Administrative Agent,
the Co-Agents and the Banks with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent, any Co-Agent or any Bank relative to the subject
matter hereof or thereof not expressly set forth or referred to herein or in the
other Credit Documents.
10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. THIS AGREEMENT IS SOLELY FOR THE BENEFIT OF THE PARTIES HERETO AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS, AND, EXCEPT AS SET FORTH IN SUBSECTION 10.6,
NO OTHER PERSONS SHALL HAVE ANY RIGHT, BENEFIT, PRIORITY OR INTEREST UNDER, OR
BECAUSE OF THE EXISTENCE OF, THIS AGREEMENT.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OF THE OTHER
CREDIT DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
<PAGE>
83
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY
BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW
OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN
SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE
ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(iv) AGREES THAT NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.
(b) EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (A) ABOVE.
10.13 ACKNOWLEDGEMENTS. The Company hereby acknowledges that:
(a) none of the Administrative Agent, any Co-Agent or any Bank has
any fiduciary relationship to any Credit Party, and the relationship
between the Administrative Agent, the Co-Agents and the Banks, on the one
hand, and the Credit Parties, on the other hand, is solely that of creditor
and debtor; and
(b) no joint venture exists among the Banks or among any Credit
Parties and the Banks.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
GENERAL SEMICONDUCTOR, INC.
By: /s/ ANDREW M. CAGGIA
-----------------------------
Title: Senior Vice President,
Chief Financial Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent, as a
Co-Agent and as a Bank
By: /s/ Laurie B. Perper
------------------------------
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent and
as a Bank
By: /s/
-------------------------
Title:
By: /s/
-------------------------
Title:
BANK OF MONTREAL, as a Co-Agent and as a
Bank
By: /s/
-------------------------
Title:
THE BANK OF NOVA SCOTIA, as a Co-Agent
and as a Bank
By: /s/
-------------------------
Title:
CIBC INC., as a Co-Agent and as a Bank
By: /s/
-------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as a
Co-Agent and as a Bank
By: /s/
-------------------------
Title:
<PAGE>
FLEET NATIONAL BANK, as a Co-Agent and
as a Bank
By: /s/
-------------------------
Title:
WACHOVIA BANK, N.A., as a Co-Agent and
as a Bank
By: /s/
-------------------------
Title:
THE BANK OF NEW YORK
By: /s/
-------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/
-------------------------
Title:
BANKBOSTON, N.A.
By: /s/
-------------------------
Title:
BANQUE NATIONALE DE PARIS
By: /s/
-------------------------
Title:
By: /s/
-------------------------
Title:
<PAGE>
BANQUE PARIBAS
By: /s/
-------------------------
Title:
By: /s/
-------------------------
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/
-------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/
-------------------------
Title:
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /s/
-------------------------
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By: /s/
-------------------------
Title:
THE SUMITOMO BANK, LTD., CHICAGO BRANCH
By: /s/
-------------------------
Title:
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED
GENERAL SEMICONDUCTOR, INC.
1993 LONG-TERM INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
1. Establishment, Purpose, Effective Date, Termination of the FLGI
Holding Corp. Stock Option Plan, and Name Change............................1
(a) Establishment............................................................1
(b) Purpose..................................................................1
(c) Effective Date...........................................................1
(d) Termination of the FLGI Holding Corp. Stock Option Plan..................1
(e) Name Change..............................................................1
2. Definitions.................................................................1
3. Scope of the Plan...........................................................6
(a) Number of Shares Available Under the Plan................................6
(b) Reduction in the Available Shares in Connection with Award Grants........7
(c) Effect of the Expiration or Termination of Awards........................7
(d) Maximum Number of Options and Stock Appreciation Rights to any
Individual Grantee...........................................................8
4. Administration..............................................................8
(a) Committee Administration.................................................8
(b) Board Reservation and Delegation.........................................8
(c) Committee Authority......................................................8
(d) Committee Determinations Final...........................................9
5. Eligibility.................................................................9
6. Conditions to Grants........................................................9
(a) General Conditions.......................................................9
(b) Grant of Options and Option Price.......................................10
(c) Grant of Incentive Stock Options........................................10
(d) Grant of Shares of Restricted Stock.....................................12
(i)
<PAGE>
(e) Grant of Stock Appreciation Rights......................................14
(f) Grant of Performance Units and Performance Shares.......................14
(g) Grant of Phantom Stock..................................................15
(h) Grant of Director's Shares..............................................15
(i) Tandem Awards...........................................................15
7. Non-transferability........................................................15
8. Exercise...................................................................15
(a) Exercise of Options......................................................15
(b) Exercise of Stock Appreciation Rights....................................16
(c) Exercise of Performance Units............................................17
(d) Payment of Performance Shares............................................18
(e) Payment of Phantom Stock Awards..........................................19
(f) Exercise, Cancellation, Expiration or Forfeiture of Tandem Awards........19
9. Effect of Certain Transactions. 19
10. Mandatory Withholding Taxes...............................................19
11. Termination of Employment.................................................20
12. Securities Law Matters....................................................20
13. No Funding Required.......................................................20
14. No Employment Rights......................................................20
15. Rights as a Stockholder...................................................20
16. Nature of Payments........................................................21
17. Non-Uniform Determinations................................................21
18. Adjustments...............................................................21
19. Amendment of the Plan.....................................................22
20. Termination of the Plan...................................................22
(ii)
<PAGE>
21. No Illegal Transactions...................................................22
22. Governing Law.............................................................22
23. Severability..............................................................22
(iii)
<PAGE>
1. ESTABLISHMENT, PURPOSE, EFFECTIVE DATE, TERMINATION OF THE FLGI
HOLDING CORP. STOCK OPTION PLAN, AND NAME CHANGE.
(a) ESTABLISHMENT . The Company hereby establishes the General
Instrument Corporation 1993 Long-Term Incentive Plan (as set forth herein and
from time to time amended, the "Plan").
(b) PURPOSE . The primary purpose of the Plan is to provide a means by
which key employees and directors of the Company and its Subsidiaries can
acquire and maintain stock ownership, thereby strengthening their commitment to
the success of the Company and its Subsidiaries and their desire to remain
employed by the Company and its Subsidiaries, focusing their attention on
managing the Company as an equity owner, and aligning their interests with those
of the Company's stockholders. The Plan also is intended to attract and retain
key employees and to provide such employees with additional incentive and reward
opportunities designed to encourage them to enhance the profitable growth of the
Company and its Subsidiaries.
(c) EFFECTIVE DATE . The Plan shall become effective upon its adoption by
the Board, subject to the approval of the holders of a majority of the shares of
Stock of the Company present or represented by proxy at the annual meeting of
stockholders held in 1993.
(d) TERMINATION OF THE FLGI HOLDING CORP. STOCK OPTION PLAN .
Effective upon stockholder approval of this Plan, the FLGI Holding Corp. Stock
Option Plan shall terminate and the shares of Stock allotted for stock option
grants under that plan, which are not the subject of outstanding options granted
under that plan, shall not be available for the granting of any further options
or other awards under that plan or any other employee or director plan or
arrangement of the Company. The options outstanding under the FLGI Holding
Corp. Stock Option Plan shall remain outstanding and exercisable in accordance
with their respective terms.
(e) NAME CHANGE . The name of the Plan, effective as of the date of
the distribution of shares of common stock of NextLevel Systems, Inc. to
shareholders of the Company (the "Distribution Date"), shall be the Amended and
Restated General Semiconductor, Inc. 1993 Long-Term Incentive Plan.
2. DEFINITIONS.
As used in the Plan, terms defined parenthetically immediately after their
use shall have the respective meanings provided by such definitions and the
terms set forth below shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Award" means Options, shares of restricted Stock, stock
appreciation rights, performance units, or performance shares or
Director's Shares granted under the Plan.
<PAGE>
(b) "Award Agreement" means the written agreement by which an Award
is evidenced.
(c) "Beneficial Owner," "Beneficially Owned" and "Beneficially
Owning" shall have the meanings applicable under Rule 13d-3
promulgated under the 1934 Act.
(d) "Board" means the board of directors of the Company.
(e) "Change in Capitalization" means any increase or reduction in the
number of shares of Stock, or any change in the shares of Stock
or exchange of shares of Stock for a different number or kind of
shares or other securities by reason of a stock dividend,
extraordinary dividend, stock split, reverse stock split, share
combination, reclassification, recapitalization, merger,
consolidation, spin-off, split-up, reorganization, issuance of
warrants or rights, liquidation, exchange of shares, repurchase
of shares, change in corporate structure, or similar event, of or
by the Company.
(f) "Change of Control" means any of the following:
(i) the acquisition by any Person, other than Instrument
Partners or Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership-IV or any of their affiliates
(collectively, the "Forstmann Little Companies") of Beneficial
Ownership of Voting Securities which, when added to the Voting
Securities then Beneficially Owned by such Person, would result in
such Person Beneficially Owning (A) 33% or more of the combined Voting
Power of the Company's then outstanding Voting Securities and (B) a
number of Voting Securities greater than the aggregate number of
Voting Securities then Beneficially Owned by the Forstmann Little
Companies; PROVIDED, HOWEVER, that for purposes of this paragraph (i),
a Person shall not be deemed to have made an acquisition of Voting
Securities if such Person: (1) acquires Voting Securities as a result
of a stock split, stock dividend or other corporate restructuring in
which all stockholders of the class of such Voting Securities are
treated on a pro rata basis; (2) acquires the Voting Securities
directly from the Company; (3) becomes the Beneficial Owner of 33% or
more of the combined Voting Power of the Company's then outstanding
Voting Securities solely as a result of the acquisition of Voting
Securities by the Company or any Subsidiary which, by reducing the
number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Person, provided that if
(x) a Person would own at least such percentage as a result of the
acquisition by the Company or any Subsidiary and (y) after such
acquisition by the Company or any Subsidiary, such Person acquires
Voting Securities, then an acquisition of Voting Securities shall have
occurred; (4) is the Company or any corporation or other Person of
which a majority of its voting power or its equity securities or
equity interest is owned directly or indirectly by the Company (a
"Controlled Entity"); or (5) acquires
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<PAGE>
Voting Securities in connection with a "Non-Control Transaction" (as
defined in paragraph (iii) below); or
(ii) the individuals who, as of the Effective Date, are members
of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; PROVIDED, HOWEVER, that
if either the election of any new director or the nomination for
election of any new director by the Company's stockholders was
approved by a vote of at least two-thirds of the Incumbent Board prior
to such election or nomination, such new director shall be considered
as a member of the Incumbent Board; PROVIDED FURTHER, HOWEVER, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated
under the 1934 Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
(a "Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(iii) approval by stockholders of the Company of:
(A) a merger, consolidation or reorganization
involving the Company (a "Business Combination"), unless
(1) the stockholders of the Company, immediately
before the Business Combination, own, directly or
indirectly immediately following the Business
Combination, at least a majority of the combined voting
power of the outstanding voting securities of the
corporation resulting from the Business Combination
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before the Business Combination, and
(2) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for the Business Combination
constitute at least a majority of the members of the
Board of Directors of the Surviving Corporation, and
(3) no Person (other than the Company or any
Controlled Entity, a trustee or other fiduciary holding
securities under one or more employee benefit plans or
arrangements (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or
any Controlled Entity, or any Person who, immediately
prior to the Business Combination, had Beneficial
Ownership of 33% or more of the then outstanding Voting
Securities) has Beneficial Ownership of 33% or more of
the combined voting power of the Surviving
Corporation's then
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<PAGE>
outstanding voting securities (a Business Combination
satisfying the conditions of clauses (1), (2) and (3)
of this subparagraph (A) shall be referred to as a
"Non-Control Transaction");
(B) a complete liquidation or dissolution of the
Company; or
(C) the sale or other disposition of all or
substantially all of the assets of the Company
(other than a transfer to a Controlled Entity).
Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because 33% or more of the then outstanding Voting Securities is
Beneficially Owned by (x) a trustee or other fiduciary holding securities under
one or more employee benefit plans or arrangements (or any trust forming a part
thereof) maintained by the Company or any Controlled Entity or (y) any
corporation which, immediately prior to its acquisition of such interest, is
owned directly or indirectly by the stockholders of the Company in the same
proportion as their ownership of stock in the Company immediately prior to such
acquisition.
(g) "Committee" means the committee of the Board appointed pursuant
to Article 4.
(h) "Company" means General Instrument Corporation, a Delaware
corporation, and effective as of the Distribution Date, General
Semiconductor, Inc.
(i) "Director's Shares" means the shares of Stock awarded to a
nonemployee director of the Company pursuant to Article 6(h).
(j) "Disability" means a mental or physical condition which, in the
opinion of the Committee, renders a Grantee unable or incompetent
to carry out the job responsibilities which such Grantee held or
the duties to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be permanent or
for an indefinite duration.
(k) "Effective Date" means the date that the Plan is adopted by the
Board.
(l) "Fair Market Value" of any security of the Company or any other
issuer means, as of any applicable date:
(i) if the security is listed for trading on the New York
Stock Exchange, the closing price, regular way, of the security as
reported on the New York Stock Exchange Composite Tape, or if no such
reported sale of the security shall have occurred on such date, on the
next preceding date on which there was such a reported sale, or
(ii) if the security is not so listed, but is listed on
another national securities exchange or authorized for quotation on
the National Association of
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<PAGE>
Securities Dealers Inc.'s NASDAQ National Market System
("NASDAQ/NMS"), the closing price, regular way, of the security on
such exchange or NASDAQ/NMS, as the case may be, or if no such
reported sale of the security shall have occurred on such date, on the
next preceding date on which there was such a reported sale, or
(iii) if the security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the
average of the closing bid and asked prices as reported by the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or, if no such prices shall have been so reported for such
date, on the next preceding date for which such prices were so
reported, or
(iv) if the security is not listed for trading on a national
securities exchange or is not authorized for quotation on NASDAQ/NMS
or NASDAQ, the fair market value of the security as determined in good
faith by the Committee.
(m) "Grant Date" means the date of grant of an Award determined in
accordance with Article 6.
(n) "Grantee" means an individual who has been granted an Award.
(o) "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Internal Revenue Code and
designated by the Committee as an Incentive Stock Option.
(p) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, and regulations and rulings thereunder. References
to a particular Section of the Internal Revenue Code shall
include references to successor provisions.
(q) "Measuring Period" has the meaning specified in Article
6(f)(ii)(B).
(r) "Minimum Consideration" means the $.0l par value per share of
Stock or such larger amount determined pursuant to resolution of
the Board to be capital within the meaning of Section 154 of the
Delaware General Corporation Law.
(s) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(t) "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option or other type of statutory stock option
under the Internal Revenue Code.
(u) "Option" means an option to purchase Stock granted under the
Plan.
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<PAGE>
(v) "Option Price" means the per share purchase price of (i) Stock
subject to an Option or (ii) restricted Stock subject to an
Option.
(w) "Performance Percentage" has the meaning specified in Article
6(f)(ii)(C).
(x) "Person" means a person within the meaning of Sections 13(d) and
14(d) of the 1934 Act.
(y) "Plan" has the meaning set forth in Article 1(a).
(z) "SEC" means the Securities and Exchange Commission.
(aa) "Section 16 Grantee" means a person subject to potential
liability with respect to equity securities of the Company under
Section 16(b) of the 1934 Act.
(bb) "Stock" means common stock, par value $.01 per share, of the
Company.
(cc) "Subsidiary" means a corporation as defined in Section 424(f) of
the Internal Revenue Code, with the Company being treated as the
employer corporation for purposes of this definition.
(dd) "10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Internal Revenue
Code) possessing more than 10% of the Voting Power of the
Company.
(ee) "Termination of Employment" occurs the first day on which an
individual is for any reason no longer employed by the Company or
any of its Subsidiaries, or with respect to an individual who is
an employee of a Subsidiary, the first day on which the Company
no longer owns Voting Securities possessing at least 50% of the
Voting Power of such Subsidiary.
(ff) "Voting Power" means the combined voting power of the then
outstanding Voting Securities.
(gg) "Voting Securities" means, with respect to the Company or any
Subsidiary, any securities issued by the Company or such
Subsidiary, respectively, which generally entitle the holder
thereof to vote for the election of directors of the Company.
3. SCOPE OF THE PLAN.
(a) NUMBER OF SHARES AVAILABLE UNDER THE PLAN. The maximum number of
shares of Stock that may be made the subject of Awards granted under the Plan is
16,880,000 (or the number and kind of shares of Stock or other securities to
which such shares of Stock are adjusted upon a Change in Capitalization pursuant
to Article 18); PROVIDED, HOWEVER, that, in the aggregate, not more than
one-third of the number of allotted shares may be made the subject of
-6-
<PAGE>
restricted Stock and phantom stock Awards under the Plan. The Company shall
reserve for the purpose of the Plan, out of its authorized but unissued shares
of Stock or out of shares held in the Company's treasury, or partly out of each,
such number of shares as shall be determined by the Board. The Board shall have
the authority to cause the Company to purchase from time to time shares of Stock
to be held as treasury shares and used for or in connection with Awards.
(b) REDUCTION IN THE AVAILABLE SHARES IN CONNECTION WITH AWARD
GRANTS. Upon the grant of an Award, the number of shares of Stock available
under Article 3(a) for the granting of further Awards shall be reduced as
follows:
(i) PERFORMANCE UNITS DENOMINATED IN DOLLARS. In connection
with the granting of each performance unit denominated in dollars, the
number of shares of Stock available under Article 3(a) for the
granting of further Awards shall be reduced by the quotient of (x) the
dollar amount represented by the performance unit divided by (y) the
Fair Market Value of a share of Stock on the date immediately
preceding the Grant Date of the performance unit.
(ii) OTHER AWARDS. In connection with the granting of each
Award, other than a performance unit denominated in dollars, the
number of shares of Stock available under Article 3(a) for the
granting of further Awards shall be reduced by a number of shares
equal to the number of shares of Stock in respect of which the Award
is granted or denominated.
Notwithstanding the foregoing, where two or more Awards are granted with
respect to the same shares of Stock, such shares shall be taken into account
only once for purposes of this Article 3(b).
(c) EFFECT OF THE EXPIRATION OR TERMINATION OF AWARDS . If and to
the extent an Award expires, terminates or is cancelled or forfeited for any
reason without having been exercised in full (including, without limitation, a
cancellation of an Option pursuant to Article 4(c)(vi)), the shares of Stock
associated with the expired, terminated, cancelled or forfeited portion of the
Award (to the extent the number of shares available for the granting of Awards
was reduced pursuant to Article 3(b)) shall again become available for Awards
under the Plan.
Notwithstanding anything contained in this Article 3, the number of shares
of Stock available for Awards at any time under the Plan shall be reduced to
such lesser amount as may be required pursuant to the methods of calculation
necessary so that the exemptions provided pursuant to Rule 16b-3 under the 1934
Act will continue to be available for transactions involving all current and
future Awards. In addition, during the period that any Awards remain
outstanding under the Plan, the Committee may make good faith adjustments with
respect to the number of shares of Stock attributable to such Awards for
purposes of calculating the maximum number of shares available for the granting
of future Awards under the Plan, provided that following such adjustments the
exemptions provided pursuant to Rule 16b-3 under the 1934 Act will continue to
be available for transactions involving all current and future Awards.
-7-
<PAGE>
(d) MAXIMUM NUMBER OF OPTIONS AND STOCK APPRECIATION RIGHTS TO ANY
INDIVIDUAL GRANTEE . No individual Grantee may be granted Options and stock
appreciation rights in respect of more than one-fifth of the maximum number of
shares of Stock that may be made the subject of Awards under the Plan as set
forth in Article 3(a).
4. ADMINISTRATION.
(a) COMMITTEE ADMINISTRATION. Subject to Article 4(b), the Plan
shall be administered by the Committee, which shall consist of not less than two
"non-employee directors" within the meaning of Rule 16b-3, and to the extent
necessary for any Award intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code to so qualify, each member of
the Committee shall be an "outside director" within the meaning of Section
162(m) of the Internal Revenue Code.
(b) BOARD RESERVATION AND DELEGATION. The Board may, in its
discretion, reserve to itself or exercise any or all of the authority and
responsibility of the Committee hereunder. It may also delegate to another
committee of the Board any or all of the authority and responsibility of the
Committee with respect to Awards to Grantees who are not Section 16 Grantees at
the time any such delegated authority or responsibility is exercised. Such
other committee may consist of one or more directors who may, but need not be,
officers or employees of the Company or of any of its Subsidiaries. To the
extent that the Board has reserved to itself, or exercised the authority and
responsibility of the Committee, or delegated the authority and responsibility
of the Committee to such other committee, all references to the Committee in the
Plan shall be to the Board or to such other committee.
(c) COMMITTEE AUTHORITY. The Committee shall have full and final
authority, in its discretion, but subject to the express provisions of the Plan,
as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted, and (B)
whether or not specific Awards shall be identified with other specific
Awards, and if so, whether they shall be exercisable cumulatively
with, or alternatively to, such other specific Awards,
(iii) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan,
(iv) to prescribe, amend, and rescind rules and regulations
relating to the Plan, including, without limitation, rules with
respect to the exercisability and nonforfeitability of Awards upon the
Termination of Employment of a Grantee,
(v) to determine the terms and provisions of the Award
Agreements, which need not be identical and, with the consent of the
Grantee, to modify any such Award Agreement at any time,
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<PAGE>
(vi) to cancel, with the consent of the Grantee, outstanding
Awards,
(vii) to accelerate the exercisability of, and to accelerate or
waive any or all of the restrictions and conditions applicable to, any
Award,
(viii) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are necessary and
advisable to fulfill the purposes of the Plan,
(ix) to authorize any action of or make any determination by
the Company as the Committee shall deem necessary or advisable for
carrying out the purposes of the Plan, and
(x) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Committee may, before or concurrently with the grant thereof, deem
appropriate, including, without limitation, requiring simultaneous
exercise of related identified Awards, and limiting the percentage of
Awards which may from time to time be exercised by a Grantee.
(d) COMMITTEE DETERMINATIONS FINAL. The determination of the
Committee on all matters relating to the Plan or any Award Agreement shall be
conclusive and final. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award.
5. ELIGIBILITY.
Awards may be granted to any employee of the Company or any of its
Subsidiaries. In selecting the individuals to whom Awards may be granted, as
well as in determining the number of shares of Stock subject to, and the other
terms and conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of the
Plan. In addition, Nonqualified Stock Options will be granted to nonemployee
directors of the Company as set forth in Article 6(b)(ii), and Director's Shares
will be issued to nonemployee directors of the Company pursuant to Article 6(h).
6. CONDITIONS TO GRANTS.
(a) GENERAL CONDITIONS.
(i) THE GRANT DATE OF AN AWARD SHALL BE THE DATE ON WHICH THE
COMMITTEE GRANTS THE AWARD OR SUCH LATER DATE AS SPECIFIED IN ADVANCE
BY THE COMMITTEE.
(ii) THE TERM OF EACH AWARD (SUBJECT TO ARTICLE 6(C) WITH
RESPECT TO INCENTIVE STOCK OPTIONS) SHALL BE A PERIOD OF NOT MORE THAN
TEN YEARS FROM THE
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GRANT DATE, AND SHALL BE SUBJECT TO EARLIER TERMINATION AS PROVIDED
HEREIN OR IN THE APPLICABLE AWARD AGREEMENT.
(iii) A GRANTEE MAY, IF OTHERWISE ELIGIBLE, BE GRANTED
ADDITIONAL AWARDS IN ANY COMBINATION.
(iv) THE COMMITTEE MAY GRANT AWARDS WITH TERMS AND CONDITIONS
WHICH DIFFER AMONG THE GRANTEES THEREOF. TO THE EXTENT NOT SET FORTH
IN THE PLAN, THE TERMS AND CONDITIONS OF EACH AWARD SHALL BE SET FORTH
IN AN AWARD AGREEMENT.
(b) GRANT OF OPTIONS AND OPTION PRICE. The Committee may, in its
discretion, and shall as provided in Article 6(b)(ii), grant Options as follows:
(i) EMPLOYEE OPTIONS. Options to acquire unrestricted Stock
or restricted Stock may be granted to any employee eligible under
Article 5 to receive Awards. No later than the Grant Date of any
Option, the Committee shall determine the Option Price which shall not
be less than 100% of the Fair Market Value of the Stock on the Grant
Date.
(ii) NONEMPLOYEE DIRECTOR OPTIONS. Nonqualified Stock Options
with respect to 20,000 shares of unrestricted Stock shall be granted
to each nonemployee director of the Company (other than a nonemployee
director who is a general partner of any of the Forstmann Little
Companies or any of their affiliates) upon his or her initial election
to the Board and every three years thereafter on the anniversary of
such nonemployee director's initial election to the Board as long as
such nonemployee director is then still serving on the Board, at an
Option Price equal to 100% of the Fair Market Value of the Stock on
the Grant Date; PROVIDED, HOWEVER, that the Grant Date of the first
grants of Nonqualified Stock Options to nonemployee directors after
the Distribution Date shall be the fifth trading day after the
Distribution Date. Each Nonqualified Stock Option granted to a
nonemployee director will become exercisable with respect to one-third
of the underlying shares on each of the first, second and third
anniversaries of the Grant Date, and will have a term of ten years.
If a nonemployee director ceases to serve as a director of the Company
for any reason, any Nonqualified Stock Option granted to such
nonemployee director shall be exercisable during its remaining term,
to the extent that such Nonqualified Stock Option was exercisable on
the date such nonemployee director ceased to be a director.
(c) GRANT OF INCENTIVE STOCK OPTIONS . At the time of the grant of
any Option, the Committee may designate that such Option shall be an Incentive
Stock Option. Any Option designated as an Incentive Stock Option:
(i) shall have an Option Price of (A) not less than 100% of
the Fair Market Value of the Stock on the Grant Date or (B) in the
case of a 10% Owner, not less than 110% of the Fair Market Value of
the Stock on the Grant Date;
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(ii) shall have a term of not more than ten years (five years,
in the case of a 10% Owner) from the Grant Date, and shall be subject
to earlier termination as provided herein or in the applicable Award
Agreement;
(iii) shall not have an aggregate Fair Market Value (determined
for each Incentive Stock Option at its Grant Date) of Stock with
respect to which Incentive Stock Options are exercisable for the first
time by such Grantee during any calendar year (under the Plan and any
other employee stock option plan of the Grantee's employer or any
parent or subsidiary thereof ("Other Plans")), determined in
accordance with the provisions of Section 422 of the Internal Revenue
Code, which exceeds $100,000 (the "$100,000 Limit");
(iv) shall, if, with respect to any grant, the aggregate Fair
Market Value of Stock (determined on the Grant Date) of all Incentive
Stock Options previously granted under the Plan and any Other Plans
("Prior Grants") and any Incentive Stock Options under such grant (the
"Current Grant") which are exercisable for the first time during any
calendar year would exceed the $100,000 Limit, be exercisable as
follows:
(A) the portion of the Current Grant exercisable for the
first time by the Grantee during any calendar year which would
be, when added to any portions of any Prior Grants exercisable
for the first time by the Grantee during such calendar year with
respect to Stock which would have an aggregate Fair Market Value
(determined as of the respective Grant Date for such Options) in
excess of the $100,000 Limit shall, notwithstanding the terms of
the Current Grant, be exercisable for the first time by the
Grantee in the first subsequent calendar year or years in which
it could be exercisable for the first time by the Grantee when
added to all Prior Grants without exceeding the $100,000 Limit;
and
(B) if, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the
provisions of Article 6(c)(iv)(A) during any calendar year
commencing with the calendar year in which it is first
exercisable through and including the last calendar year in which
it may by its terms be exercised, such portion of the Current
Grant shall not be an Incentive Stock Option, but shall be
exercisable as a separate Nonqualified Stock Option at such date
or dates as are provided in the Current Grant;
(v) shall be granted within ten years from the earlier of the
date the Plan is adopted by the Board or the date the Plan is approved
by the stockholders of the Company; and
(vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the
Incentive Stock Option under the circumstances described in Section
421(b) of the Internal
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Revenue Code (relating to certain disqualifying dispositions), within
ten days of such disposition.
(d) GRANT OF SHARES OF RESTRICTED STOCK .
(i) The Committee may, in its discretion, grant shares of
restricted Stock to any employee eligible under Article 5 to receive
Awards.
(ii) Before the grant of any shares of restricted Stock, the
Committee shall determine, in its discretion:
(A) whether the certificates for such shares shall be
delivered to the Grantee or held (together with a stock power
executed in blank by the Grantee) in escrow by the Secretary of
the Company until such shares become nonforfeitable or are
forfeited,
(B) the per share purchase price of such shares, which may
be zero, PROVIDED, HOWEVER, that the per share purchase price of
all such shares (other than treasury shares) shall not be less
than the Minimum Consideration for each such share;
(C) the restrictions applicable to such grant; and
(D) whether the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on such shares by the
Company shall be deferred until the lapsing of the restrictions
imposed upon such shares and shall be held by the Company for the
account of the Grantee, whether such dividends shall be
reinvested in additional shares of restricted Stock (to the
extent shares are available under Article 3) subject to the same
restrictions and other terms as apply to the shares with respect
to which such dividends are issued or otherwise reinvested in
Stock or held in escrow, whether interest will be credited to the
account of the Grantee with respect to any dividends which are
not reinvested in restricted or unrestricted Stock, and whether
any Stock dividends issued with respect to the restricted Stock
to be granted shall be treated as additional shares of restricted
Stock.
(iii) Payment of the purchase price (if greater than zero) for
shares of restricted Stock shall be made in full by the Grantee before
the delivery of such shares and, in any event, no later than ten days
after the Grant Date for such shares. Such payment may be made, as
determined by the Committee in its discretion, in any one or any
combination of the following:
(A) cash, or
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(B) with the prior approval of the Committee, shares of
restricted or unrestricted Stock owned by the Grantee prior to
such grant and valued at its Fair Market Value on the business
day immediately preceding the date of payment;
PROVIDED, HOWEVER, that, in the case of payment in shares of
restricted or unrestricted Stock, if the purchase price for restricted
Stock ("New Restricted Stock") is paid with shares of restricted Stock
("Old Restricted Stock"), the restrictions applicable to the New
Restricted Stock shall be the same as if the Grantee had paid for the
New Restricted Stock in cash unless, in the judgment of the Committee,
the Old Restricted Stock was subject to a greater risk of forfeiture,
in which case a number of shares of New Restricted Stock equal to the
number of shares of Old Restricted Stock tendered in payment for New
Restricted Stock shall be subject to the same restrictions as the Old
Restricted Stock, determined immediately before such payment.
(iv) The Committee may, but need not, provide that all or any
portion of a Grantee's Award of restricted Stock shall be forfeited
(A) except as otherwise specified in the Award Agreement,
upon the Grantee's Termination of Employment within a specified
time period after the Grant Date, or
(B) if the Company or the Grantee does not achieve
specified performance goals within a specified time period after
the Grant Date and before the Grantee's Termination of
Employment, or
(C) upon failure to satisfy such other restrictions as the
Committee may specify in the Award Agreement.
(v) If a share of restricted Stock is forfeited, then
(A) the Grantee shall be deemed to have resold such share
of restricted Stock to the Company at the lesser of (1) the
purchase price paid by the Grantee (such purchase price shall be
deemed to be zero dollars ($0) if no purchase price was paid) or
(2) the Fair Market Value of a share of Stock on the date of such
forfeiture;
(B) the Company shall pay to the Grantee the amount
determined under clause (A) of this sentence, if not zero, as
soon as is administratively practicable, but in any case within
90 days after forfeiture; and
(C) such share of restricted Stock shall cease to be
outstanding, and shall no longer confer on the Grantee thereof
any rights as a stockholder of the Company, from and after the
date of the Company's
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tender of the payment specified in clause (B) of this sentence,
whether or not such tender is accepted by the Grantee, or the
date the restricted Stock is forfeited if no purchase price was
paid for the restricted Stock.
(vi) Any share of restricted Stock shall bear an appropriate
legend specifying that such share is non-transferable and subject to
the restrictions set forth in the Plan and the Award Agreement. If
any shares of restricted Stock become nonforfeitable, the Company
shall cause certificates for such shares to be issued or reissued
without such legend and delivered to the Grantee or, at the request of
the Grantee, shall cause such shares to be credited to a brokerage
account specified by the Grantee.
(e) GRANT OF STOCK APPRECIATION RIGHTS . The Committee may grant
stock appreciation rights to any employee eligible under Article 5 to receive
Awards. When granted, stock appreciation rights may, but need not, be
identified with shares of Stock subject to a specific Option awarded to the
Grantee (including any Option granted on or before the Grant Date of the stock
appreciation rights) in a number equal to or different from the number of stock
appreciation rights so granted. If stock appreciation rights are identified
with shares of Stock subject to an Option then, unless otherwise provided in the
applicable Award Agreement, the Grantee's associated stock appreciation rights
shall terminate upon the exercise, expiration, termination, forfeiture, or
cancellation of such Option.
(f) GRANT OF PERFORMANCE UNITS AND PERFORMANCE SHARES .
(i) The Committee may, in its discretion, grant performance
units or performance shares to any employee eligible under Article 5
to receive Awards.
(ii) Before the grant of any performance unit or performance
share, the Committee shall:
(A) determine performance goals applicable to such grant,
(B) designate a period, of not less than one year nor more
than five years, for the measurement of the extent to which
performance goals are attained (the "Measuring Period"), and
(C) assign a "Performance Percentage" to each level of
attainment of performance goals during the Measuring Period, with
the percentage applicable to minimum attainment being zero
percent (0%) and the percentage applicable to optimum attainment
to be determined by the Committee from time to time.
(iii) In establishing performance goals, the Committee may
consider such performance factor or factors as it deems appropriate,
including, without limitation, net income, growth in net income,
earnings per share, growth of earnings per share, return on equity, or
return on capital. The Committee may, at
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any time, in its discretion, modify performance goals in order to
facilitate their attainment for any reason, including, but not limited
to, recognition of unusual or nonrecurring events affecting the
Company or a Subsidiary, or changes in applicable laws, regulations or
accounting principles. If a Grantee is promoted, demoted or
transferred to a different business unit of the Company during a
performance period, the Committee may adjust or eliminate the
performance goals as it deems appropriate.
(g) GRANT OF PHANTOM STOCK . The Committee may, in its discretion,
grant shares of phantom stock to any employee who is eligible under Article 5 to
receive Awards and is employed outside the United States. Such phantom stock
shall be subject to the terms and conditions established by the Committee and
set forth in the applicable Award Agreement.
(h) GRANT OF DIRECTOR'S SHARES . There shall be granted
Director's Shares with respect to 1,000 shares of Stock to each nonemployee
director of the Company (other than a nonemployee director who is a general
partner of any of the Forstmann Little Companies or any of their affiliates)
upon his or her initial election to the Board. Director's Shares shall be fully
vested and transferable upon issuance.
(i) TANDEM AWARDS . The Committee may grant and identify any Award
with any other Award granted under the Plan ("Tandem Award"), on terms and
conditions determined by the Committee.
7. NON-TRANSFERABILITY.
Unless set forth in the applicable Award Agreement, no Award (other than an
Award of restricted Stock) granted hereunder shall by its terms be assignable or
transferable except by will or the laws of descent and distribution or pursuant
to a domestic relations order (within the meaning of Rule 16a-12 promulgated
under the Exchange Act). An Option may be exercised, during the lifetime of a
Grantee only by the Grantee or his or her guardian or legal representatives.
The terms of an Award shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Grantee.
Each share of restricted Stock shall be non-transferable until such share
becomes nonforfeitable.
8. EXERCISE.
(a) EXERCISE OF OPTIONS . Subject to Articles 4(c)(vii), 11 and 12
and such terms and conditions as the Committee may impose, each Option shall be
exercisable in one or more installments commencing not earlier than the first
anniversary of the Grant Date of such Option; PROVIDED, HOWEVER, that all
Options held by each Grantee shall become fully (100%) exercisable upon the
occurrence of a Change of Control regardless of whether the acceleration of the
exercisability of such Options would cause such Options to lose their
eligibility for treatment as Incentive Stock Options. Notwithstanding the
foregoing, Options may not be exercised by a Grantee for twelve months following
a hardship distribution to the Grantee, to the extent such exercise is
prohibited under Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4). Each
Option shall be exercised by delivery to the Company of written notice of intent
to purchase a specific number
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of shares of Stock or restricted Stock subject to the Option. The Option Price
of any shares of Stock or restricted Stock as to which an Option shall be
exercised shall be paid in full at the time of the exercise. Payment may be
made, as determined by the Committee in its discretion, with respect to Options
granted to eligible employees and in all cases with respect to Options granted
to nonemployee directors pursuant to Article 6(b)(ii), in any one or any
combination of the following:
(i) cash,
(ii) shares of restricted or unrestricted Stock owned by the
Grantee prior to the exercise of the Option and valued at its Fair
Market Value on the last business day immediately preceding the date
of exercise, or
(iii) through simultaneous sale through a broker of shares of
unrestricted Stock acquired on exercise, as permitted under Regulation
T of the Federal Reserve Board.
If restricted Stock ("Tendered Restricted Stock") is used to pay the Option
Price for Stock, then a number of shares of Stock acquired on exercise of the
Option equal to the number of shares of Tendered Restricted Stock shall be
subject to the same restrictions as the Tendered Restricted Stock, determined as
of the date of exercise of the Option. If the Option Price for restricted Stock
is paid with Tendered Restricted Stock, and if the Committee determines that the
restricted Stock acquired on exercise of the Option shall be subject to
restrictions ("Greater Restrictions") that cause it to have a greater risk of
forfeiture than the Tendered Restricted Stock, then notwithstanding the
preceding sentence, all the restricted Stock acquired on exercise of the Option
shall be subject to such Greater Restrictions.
Shares of unrestricted Stock acquired by a Grantee on exercise of an Option
shall be delivered to the Grantee or, at the request of the Grantee, shall be
credited directly to a brokerage account specified by the Grantee.
(b) EXERCISE OF STOCK APPRECIATION RIGHTS . Subject to Articles
4(c)(vii), 11 and 12 and such terms and conditions as the Committee may impose,
each stock appreciation right shall be exercisable not earlier than the first
anniversary of the Grant Date of such stock appreciation right and, if such
stock appreciation right is identified with an Option, to the extent such Option
may be exercised, unless otherwise provided by the Committee. Stock
appreciation rights shall be exercised by delivery to the Company of written
notice of intent to exercise a specific number of stock appreciation rights.
Unless otherwise provided in the applicable Award Agreement, the exercise
of stock appreciation rights which are identified with shares subject to an
Option shall result in the forfeiture of such Option to the extent of such
exercise.
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The benefit for each stock appreciation right exercised shall be equal to
the excess, if any, of
(i) the Fair Market Value of a share of Stock on the date of
such exercise, over
(ii) an amount equal to
(A) in the case of a stock appreciation right identified
with a share of Stock subject to an Option, the Option Price of
such Option, unless the Committee in the grant of the stock
appreciation right specified a higher amount, or
(B) in the case of any other stock appreciation right, the
Fair Market Value of a share of Stock on the Grant Date of such
stock appreciation right, unless the Committee in the grant of
the stock appreciation right specified a higher amount;
provided that the Committee, in its discretion, may provide that the benefit for
any stock appreciation right shall not exceed a maximum amount (I.E., a cap) set
by Committee, which cap may be expressed as (i) a percentage of the excess
amount described above (not to exceed 100%), (ii) a percentage of the Fair
Market Value of a share of Stock on the Grant Date of the stock appreciation
right, or (iii) a fixed dollar amount. The benefit upon the exercise of a stock
appreciation right shall be payable in cash, except that the Committee, with
respect to any particular exercise, may, in its discretion, pay benefits wholly
or partly in Stock delivered to the Grantee or credited to a brokerage account
specified by the Grantee.
(c) EXERCISE OF PERFORMANCE UNITS .
(i) Subject to Articles 4(c)(vii), 11 and 12 and such terms
and conditions as the Committee may impose, and unless otherwise
provided in the applicable Award Agreement, if, with respect to any
performance unit, the minimum performance goals have been achieved
during the applicable Measuring Period, then such performance unit
shall be deemed exercised on the date on which it first becomes
exercisable.
(ii) The benefit for each performance unit exercised shall be
an amount equal to the product of
(A) the Unit Value (as defined below), multiplied by
(B) the Performance Percentage attained during the
Measuring Period for such performance unit.
(iii) The Unit Value shall be, as specified by the Committee,
(A) a dollar amount,
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(B) an amount equal to the Fair Market Value of a
share of Stock on the Grant Date,
(C) an amount equal to the Fair Market Value of a
share of Stock on the exercise date of the performance unit,
plus, if so provided in the Award Agreement, an amount
("Dividend Equivalent Amount") equal to the Fair Market
Value of the number of shares of Stock that would have been
purchased if each dividend paid on a share of Stock on or
after the Grant Date and on or before the exercise date were
invested in shares of Stock at a purchase price equal to its
Fair Market Value on the respective dividend payment date,
or
(D) an amount equal to the Fair Market Value of a
share of Stock on the exercise date of the performance unit
(plus, if so specified in the Award Agreement, a Dividend
Equivalent Amount), reduced by the Fair Market Value of a
share of Stock on the Grant Date of the performance unit.
(iv) The benefit upon the exercise of a performance unit shall be
payable as soon as is administratively practicable (but in any event
within 90 days) after the later of (A) the date the Grantee is deemed
to exercise such performance unit, or (B) the date (or dates in the
event of installment payments) as provided in the applicable Award
Agreement. Such benefit shall be payable in cash, except that the
Committee, with respect to any particular exercise, may, in its
discretion, pay benefits wholly or partly in Stock delivered to the
Grantee or credited to a brokerage account specified by the Grantee.
The number of shares of Stock payable in lieu of cash shall be
determined by valuing the Stock at its Fair Market Value on the
business day next preceding the date such benefit is to be paid.
(d) PAYMENT OF PERFORMANCE SHARES . Subject to Articles 4(c)(vii),
11 and 12 and such terms and conditions as the Committee may impose, and unless
otherwise provided in the applicable Award Agreement, if the minimum performance
goals specified by the Committee with respect to an Award of performance shares
have been achieved during the applicable Measuring Period, then the Company
shall pay to the Grantee of such Award (or, at the request of the Grantee,
deliver to a brokerage account specified by the Grantee) shares of Stock equal
in number to the product of the number of performance shares specified in the
applicable Award Agreement multiplied by the Performance Percentage achieved
during such Measuring Period, except to the extent that the Committee in its
discretion determines that cash be paid in lieu of some or all of such shares of
Stock. The amount of cash payable in lieu of a share of Stock shall be
determined by valuing such share at its Fair Market Value on the business day
next preceding the date such cash is to be paid. Payments pursuant to this
Article 8(d) shall be made as soon as administratively practicable (but in any
event within 90 days) after the end of the applicable Measuring Period. Any
performance shares with respect to which the performance goals have not been
achieved by the end of the applicable Measuring Period shall expire.
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(e) PAYMENT OF PHANTOM STOCK AWARDS . Upon the vesting of a
phantom stock Award, the Grantee shall be entitled to receive a cash payment in
respect of each share of phantom stock which shall be equal to the Fair Market
Value of a share of Stock as of the date the phantom stock Award was granted, or
such other date as determined by the Committee at the time the phantom stock
Award was granted. The Committee may, at the time a phantom stock Award is
granted, provide a limitation on the amount payable in respect of each share of
phantom stock.
(f) EXERCISE, CANCELLATION, EXPIRATION OR FORFEITURE OF TANDEM AWARDS
. Upon the exercise, cancellation, expiration, forfeiture or payment in
respect of any Award which is identified with any Tandem Award pursuant to
Article 6(i), the Tandem Award shall automatically terminate to the extent of
the number of shares in respect of which the Award is so exercised, cancelled,
expired, forfeited or paid, unless otherwise provided by the Committee at the
time of grant of the Tandem Award or thereafter.
9. EFFECT OF CERTAIN TRANSACTIONS.
With respect to any Award which relates to Stock, in the event of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation of
the Company (a "Transaction"), the Plan and the Awards issued hereunder shall
continue in effect in accordance with their respective terms and each Grantee
shall be entitled to receive in respect of each share of Stock subject to any
outstanding Awards, upon the vesting, payment or exercise of the Award (as the
case may be), the same number and kind of stock, securities, cash, property, or
other consideration that each holder of a share of Stock was entitled to receive
in the Transaction in respect of a share of Stock.
10. MANDATORY WITHHOLDING TAXES.
The Company shall have the right to deduct from any distribution of cash to
any Grantee an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld (the "Withholding Taxes")
with respect to any Award. If a Grantee is to experience a taxable event in
connection with the receipt of shares pursuant to an Option exercise or the
vesting or payment of another type of Award (a "Taxable Event"), the Grantee
shall pay the Withholding Taxes to the Company prior to the issuance, or release
from escrow, of such shares or payment of such Award. Payment of the applicable
Withholding Taxes may be made, as determined by the Committee in its discretion,
in any one or any combination of (i) cash, (ii) shares of restricted or
unrestricted Stock owned by the Grantee prior to the Taxable Event and valued at
its Fair Market Value on the business day immediately preceding the date of
exercise, or (iii) by making a Tax Election (as described below). For purposes
of this Article 10, a Grantee may make a written election, which may be accepted
or rejected at the discretion of the Committee (the "Tax Election"), to have
withheld a portion of the shares then issuable to him or her having an aggregate
Fair Market Value, on the date preceding the date of such issuance, equal to the
Withholding Taxes.
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11. TERMINATION OF EMPLOYMENT.
The Award Agreement pertaining to each Award (other than Options granted to
nonemployee directors pursuant to Article 6(b)(ii)) shall set forth the terms
and conditions applicable to such Award upon a Termination of Employment of the
Grantee by the Company, a Subsidiary or an operating division or unit, as the
Committee may, in its discretion, determine at the time the Award is granted or
thereafter.
12. SECURITIES LAW MATTERS.
(a) If the Committee deems it necessary to comply with the Securities
Act OF 1933, the Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or delivery of
benefits pursuant to, any Award would violate any applicable provision of (i)
federal or state securities law or (ii) the listing requirements of any national
securities exchange on which are listed any of the Company's equity securities,
then the Committee may postpone any such exercise, nonforfeitability or
delivery, as the case may be, but the Company shall use its best efforts to
cause such exercise, nonforfeitability or delivery to comply with all such
provisions at the earliest practicable date.
(c) Notwithstanding any provision of the Plan or any Award Agreement
to the contrary, no shares of Stock shall be issued to any Grantee in respect of
any Award prior to the time a registration statement under the Securities Act of
1933 is effective with respect to such shares.
13. NO FUNDING REQUIRED.
Benefits payable under the Plan to Any Person Shall Be Paid Directly by the
Company. The Company shall not be required to fund, or otherwise segregate
assets to be used for payment of, benefits under the Plan.
14. NO EMPLOYMENT RIGHTS.
Neither the establishment of the Plan, nor the granting of any Award shall
be construed to (a) give any Grantee the right to remain employed by the Company
or any of its Subsidiaries or to any benefits not specifically provided by the
Plan or (b) in any manner modify the right of the Company or any of its
Subsidiaries to modify, amend, or terminate any of its employee benefit plans.
15. RIGHTS AS A STOCKHOLDER.
A Grantee shall not, by reason of any Award (other than restricted Stock),
have any right as a stockholder of the Company with respect to the shares of
Stock which may be deliverable
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upon exercise or payment of such Award until such shares have been delivered to
him. Shares of restricted Stock held by a Grantee or held in escrow by the
Secretary of the Company shall confer on the Grantee all rights of a stockholder
of the Company, except as otherwise provided in the Plan.
16. NATURE OF PAYMENTS.
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and shall
not be taken into account in computing the amount of salary or compensation of
the Grantee for the purposes of determining any pension, retirement, death or
other benefits under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company or any of its
Subsidiaries or (b) any agreement between the Company or any Subsidiary, on the
one hand, and the Grantee, on the other hand, except as such plan or agreement
shall otherwise expressly provide.
17. NON-UNIFORM DETERMINATIONS.
Neither the Committee's nor the Board's determinations under the Plan need
be uniform and may be made by the Committee or the Board selectively among
persons who receive, or are eligible to receive, Awards (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, to enter into non-uniform and
selective Award Agreements as to (a) the identity of the Grantees, (b) the terms
and provisions of Awards, and (c) the treatment of Terminations of Employment.
18. ADJUSTMENTS.
In the event of Change in Capitalization, the Committee shall, in its sole
discretion, make equitable adjustment of
(a) the aggregate number and class of shares of Stock or other
stock or securities available under Article 3,
(b) the number and class of shares of Stock or other stock or
securities covered by an Award and to be covered by Options
granted to nonemployee directors pursuant to Article
6(b)(ii),
(c) the Option Price applicable to outstanding Options,
(d) the terms of performance unit and performance share grants,
and
(e) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of stock
appreciation rights, performance units, performance shares
or phantom stock.
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<PAGE>
19. AMENDMENT OF THE PLAN.
The Board may from time to time in its discretion amend or modify the Plan
without the approval of the stockholders of the Company, except as such
stockholder approval may be required (a) to retain Incentive Stock Option
treatment under Section 422 of the Internal Revenue Code, (b) to permit
transactions in Stock pursuant to the Plan to be exempt from potential liability
under Section 16(b) of the 1934 Act or (c) under the listing requirements of any
securities exchange on which any of the Company's equity securities are listed;
provided, however, that the provisions of Article 6(b)(ii) may not be amended
more than once every six months if any such amendment would cause the Options
granted or to be granted thereunder to be deemed not to be granted under a
"formula plan" for purposes of Rule 16b-3.
20. TERMINATION OF THE PLAN.
The Plan shall terminate on the tenth (10th) anniversary of the Effective
Date or at such earlier time as the Board may determine. Any termination,
whether in whole or in part, shall not affect any Award then outstanding under
the Plan.
21. NO ILLEGAL TRANSACTIONS.
The Plan and all Awards granted pursuant to it are subject to all laws and
regulations of any governmental authority which may be applicable thereto; and
notwithstanding any provision of the Plan or any Award, Grantees shall not be
entitled to exercise Awards or receive the benefits thereof and the Company
shall not be obligated to deliver any Stock or pay any benefits to a Grantee if
such exercise, delivery, receipt or payment of benefits would constitute a
violation by the Grantee or the Company of any provision of any such law or
regulation.
22. GOVERNING LAW.
Except where preempted by federal law, the law of the State of Delaware
shall be controlling in all matters relating to the Plan, without giving effect
to the conflicts of law principles thereof.
23. SEVERABILITY.
If all or any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of the Plan not declared to be unlawful or
invalid. Any Article or part of an Article so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such Article or part of an Article to the fullest extent possible
while remaining lawful and valid.
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<PAGE>
EXHIBIT 10.9
FORM OF
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of , by and
between General Semiconductor, Inc., a Delaware corporation (the "Company"), and
the director and/or officer of the Company whose name appears on the signature
page of this Agreement ("Indemnitee").
RECITALS
A. Highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or officers or in other capacities
unless they are provided with reasonable protection through insurance or
indemnification against risks of claims and actions against them arising out of
their service to and activities on behalf of the corporations.
B. The Board of Directors of the Company (the "Board") has determined
that the Company should act to assure its directors and officers that there will
be increased certainty of such protection in the future.
C. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified.
D. Indemnitee is willing to serve, to continue to serve and to take on
additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified.
E. In consideration of the benefits received and to be received by the
Company in connection with actions taken and to be taken by the Board and by the
officers of the Company, the Company has determined that it is in the best
interest of the Company for the reasons set forth above to be a party to this
Agreement and to provide indemnification to the directors and officers of the
Company in connection with their service to and activities on behalf of the
Company and its subsidiaries.
F. The Company acknowledges that for purposes of this Agreement the
directors and officers of the Company who enter into this Agreement are serving
in such capacities at the request of the Company.
G. The Company further acknowledges that such directors and officers are
willing to serve, to continue to serve and to take on additional service for or
on behalf of the Company, thereby benefiting the Company and its subsidiaries,
on the condition that the Company enter into, and provide indemnification
pursuant to, this Agreement.
<PAGE>
AGREEMENT
In consideration of the premises and the covenants contained herein,
the Company and Indemnitee do hereby covenant and agree as follows:
1. DEFINITIONS.
(a) For purposes of this Agreement:
(i) "Affiliate" shall mean any corporation, partnership,
joint venture, trust or other enterprise in respect of which Indemnitee is or
was or will be serving as a director or officer directly or indirectly at the
request of the Company, and including, but not limited to, service with respect
to an employee benefit plan.
(ii) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.
(iii) "Expenses" shall include all attorneys' fees and
costs, retainers, court costs, transcripts, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees and all other disbursements or expenses
incurred in connection with asserting or defending claims.
(iv) "fines" shall include any excise taxes assessed on
Indemnitee with respect to any employee benefit plan.
(v) "Independent Counsel" shall mean a law firm or lawyer
that neither is presently nor in the past year has been retained to represent:
(i) the Company or Indemnitee in any matter material to any such party or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder in any matter material to such other party. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any firm or person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing any of the Company or
Indemnitee in an action to determine Indemnitee's right to indemnification under
this Agreement. All Expenses of the Independent Counsel incurred in connection
with acting pursuant to this Agreement shall be borne by the Company.
(vi) "Losses" shall mean all expenses, liabilities, losses
and claims (including attorneys' fees, judgments, fines, excise taxes under the
Employee Retirement Income Security Act of 1974, as amended from time to time,
penalties and amounts to be paid in settlement) incurred in connection with any
Proceeding.
(vii) "Proceeding" shall include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative.
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<PAGE>
(b) For purposes of this Agreement, a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement; the term "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and references to the "Company" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify Indemnitee in its capacity as a director, officer, or employee or
agent, so that Indemnitee shall stand in the same position under this Agreement
with respect to the resulting or surviving corporation as Indemnitee would have
with respect to such constituent corporation if its separate existence had
continued.
2. SERVICE BY INDEMNITEE. Indemnitee agrees to begin or continue to
serve the Company or any Affiliate as a director and/or officer.
Notwithstanding anything contained herein, this Agreement shall not create a
contract of employment between the Company and Indemnitee, and the termination
of Indemnitee's relationship with the Company or an Affiliate by either party
hereto shall not be restricted by this Agreement.
3. INDEMNIFICATION. The Company agrees to indemnify Indemnitee for,
and hold Indemnitee harmless from and against, any Losses or Expenses at any
time incurred by or assessed against Indemnitee arising out of or in connection
with the service of Indemnitee as a director or officer of the Company or of an
Affiliate (collectively referred to as an "Officer or Director of the Company")
to the fullest extent permitted by the laws of the State of Delaware in effect
on the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification. Without diminishing the
scope of the indemnification provided by this Section 3, the rights of
indemnification of Indemnitee provided hereunder shall include but shall not be
limited to those rights set forth hereinafter.
4. ACTION OR PROCEEDING OTHER THAN AN ACTION BY OR IN THE RIGHT OF
THE COMPANY. Indemnitee shall be entitled to the indemnification rights
provided herein if Indemnitee is a person who was or is made a party or is
threatened to be made a party to or is involved (including, without limitation,
as a witness) in any Proceeding, other than an action by or in the right of the
Company, as the case may be, by reason of (a) the fact that Indemnitee is or was
an Officer or Director of the Company or any other entity which Indemnitee is or
was or will be serving at the request of the Company, as the case may be, or
(b) anything done or not done by Indemnitee in any such capacity.
5. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be
entitled to the indemnification rights provided herein if Indemnitee is a person
who was or is a party or is threatened to be made a party to or is involved
(including, without limitation, as a witness) in any Proceeding brought by or in
the right of the Company to procure a judgment in its favor by reason of (a) the
fact that Indemnitee is or was an Officer or Director of the Company or any
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<PAGE>
Affiliate, or (b) anything done or not done by Indemnitee in any such capacity.
Pursuant to this Section, Indemnitee shall be indemnified against Losses or
Expenses incurred or suffered by Indemnitee or on Indemnitee's behalf in
connection with the defense or settlement of any Proceeding if Indemnitee acted
in good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the foregoing
provisions of this Section, no such indemnification shall be made in respect of
any claim, issue or matter as to which Delaware law expressly prohibits such
indemnification by reason of an adjudication of liability of Indemnitee to the
Company unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such Losses and Expenses which the Court of Chancery or such other
court shall deem proper.
6. INDEMNIFICATION FOR LOSSES AND EXPENSES OF PARTY WHO IS WHOLLY OR
PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been wholly successful on the merits or otherwise
in any Proceeding referred to in Section 3, 4 or 5 hereof on any claim, issue or
matter therein, Indemnitee shall be indemnified against all Losses and Expenses
incurred by Indemnitee or on Indemnitee's behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company agrees to indemnify Indemnitee to the
maximum extent permitted by law against all Losses and Expenses incurred by
Indemnitee in connection with each successfully resolved claim, issue or matter.
In any review or Proceeding to determine the extent of indemnification, the
Company shall bear the burden of proving any lack of success and which amounts
sought in indemnity are allocable to claims, issues or matters which were not
successfully resolved. For purposes of this Section and without limitation, the
termination of any such claim, issue or matter by dismissal with or without
prejudice shall be deemed to be a successful resolution as to such claim, issue
or matter.
7. PAYMENT FOR EXPENSES OF A WITNESS. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of the
fact that Indemnitee is or was an Officer or Director of the Company or any
Affiliate, as the case may be, a witness in any Proceeding, the Company agrees
to pay to Indemnitee all Expenses actually and reasonably incurred by Indemnitee
or on Indemnitee's behalf in connection therewith.
8. ADVANCEMENT OF EXPENSES AND COSTS. All Expenses incurred by or
on behalf of Indemnitee (or reasonably expected by Indemnitee to be incurred by
Indemnitee within three months) in connection with any Proceeding shall be paid
by the Company in advance of the final disposition of such Proceeding within
twenty days after the receipt by the Company of a statement or statements from
Indemnitee requesting from time to time such advance or advances, whether or not
a determination to indemnify has been made under Section 9. Indemnitee's
entitlement to such advancement of Expenses shall include those incurred in
connection with any Proceeding by Indemnitee seeking an adjudication or award in
arbitration pursuant to this Agreement. The financial ability of Indemnitee to
repay an advance shall not be a prerequisite to the making of such advance.
Such statement or statements shall reasonably evidence such
-4-
<PAGE>
Expenses incurred (or reasonably expected to be incurred) by Indemnitee in
connection therewith and shall include or be accompanied by a written
undertaking by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified
therefor pursuant to the terms of this Agreement.
9. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) When seeking indemnification under this Agreement (which
shall not include in any case the right of Indemnitee to receive payments
pursuant to Section 7 and Section 8 hereof, which shall not be subject to this
Section 9), Indemnitee shall submit a written request for indemnification to the
Company. Determination of Indemnitee's entitlement to indemnification shall be
made promptly, but in no event later than 60 days after receipt by the Company
of Indemnitee's written request for indemnification. The Secretary of the
Company shall, promptly upon receipt of Indemnitee's request for
indemnification, advise the Board that Indemnitee has made such request for
indemnification.
(b) The entitlement of Indemnitee to indemnification under this
Agreement shall be determined in the specific case (1) by the Board of Directors
by a majority vote of the Disinterested Directors, even though less than a
quorum, or (2) if there are no Disinterested Directors, or if such Disinterested
Directors so direct, by Independent Counsel, or (3) by the stockholders.
(c) In the event the determination of entitlement is to be made
by Independent Counsel, such Independent Counsel shall be selected by the Board
and approved by Indemnitee. Upon failure of the Board to so select such
Independent Counsel or upon failure of Indemnitee to so approve, such
Independent Counsel shall be selected by the American Arbitration Association of
New York, New York or such other person as such Association shall designate to
make such selection.
(d) If the determination made pursuant to Section 9(b) is that
Indemnitee is not entitled to indemnification to the full extent of Indemnitee's
request, Indemnitee shall have the right to seek entitlement to indemnification
in accordance with the procedures set forth in Section 10 hereof.
(e) If the person or persons empowered pursuant to Section 9(b)
to make a determination with respect to entitlement to indemnification shall
have failed to make the requested determination within sixty days after receipt
by the Company of such request, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
absolutely entitled to such indemnification, absent (i) misrepresentation by
Indemnitee of a material fact in the request for indemnification or (ii) a final
judicial determination that all or any part of such indemnification is expressly
prohibited by law.
(f) The termination of any Proceeding by judgment, order,
settlement or conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, adversely affect the rights of Indemnitee to
indemnification hereunder except as may be specifically provided herein, or
create a presumption that Indemnitee did not act in good faith and in a
-5-
<PAGE>
manner which Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, as the case may be, or create a presumption that (with
respect to any criminal action or proceeding) Indemnitee had reasonable cause to
believe that Indemnitee's conduct was unlawful.
(g) For purposes of any determination of good faith hereunder,
Indemnitee shall be deemed to have acted in good faith if in taking such action
Indemnitee relied on the records or books of account of the Company or an
Affiliate, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or an Affiliate in the course of their
duties, or on the advice of legal counsel for the Company or an Affiliate or on
information or records given or reports made to the Company or an Affiliate by
an independent certified public accountant or by an appraiser or other expert
selected with reasonable care to the Company or an Affiliate. The Company shall
have the burden of establishing the absence of good faith. The provisions of
this Section 9(g) shall not be deemed to be exclusive or to limit in any way the
other circumstances in which Indemnitee may be deemed to have met the applicable
standard of conduct set forth in this Agreement.
(h) The knowledge and/or actions, or failure to act, of any
other director, officer, agent or employee of the Company or an Affiliate shall
not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
10. REMEDIES IN CASES OF DETERMINATION NOT TO INDEMNIFY OR TO ADVANCE
EXPENSES.
(a) In the event that (i) a determination is made that
Indemnitee is not entitled to indemnification hereunder, (ii) advances are not
made pursuant to Section 8 hereof or (iii) payment has not been timely made
following a determination of entitlement to indemnification pursuant to Section
9 hereof, Indemnitee shall be entitled to seek a final adjudication either
through an arbitration proceeding or in an appropriate court of the State of
Delaware or any other court of competent jurisdiction of Indemnitee's
entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance
with the procedures set forth in Section 9 hereof, in whole or in part, that
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in Section 10(a) shall be DE NOVO and Indemnitee shall
not be prejudiced by reason of any such prior determination that Indemnitee is
not entitled to indemnification, and the Company shall bear the burdens of proof
specified in Sections 6 and 9 hereof in such proceeding.
(c) If a determination is made or deemed to have been made
pursuant to the terms of Section 9 or 10 hereof that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration in the absence of (i) a misrepresentation of
a material fact by Indemnitee or (ii) a final judicial determination that all or
any part of such indemnification is expressly prohibited by law.
(d) To the extent deemed appropriate by the court, interest
shall be paid by the Company to Indemnitee at a reasonable interest rate for
amounts which the Company
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<PAGE>
indemnifies or is obliged to indemnify Indemnitee for the period commencing with
the date on which Indemnitee requested indemnification (or reimbursement or
advancement of any Expenses) and ending with the date on which such payment is
made to Indemnitee by the Company.
11. EXPENSES INCURRED BY INDEMNITEE TO ENFORCE THIS AGREEMENT. All
Expenses incurred by Indemnitee in connection with the preparation and
submission of Indemnitee's request for indemnification hereunder shall be borne
by the Company. In the event that Indemnitee is a party to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at issue
or seeks an adjudication to enforce Indemnitee's rights under, or to recover
damages for breach of, this Agreement, Indemnitee, if Indemnitee prevails in
whole in such action, shall be entitled to recover from the Company, and shall
be indemnified by the Company against, any Expenses incurred by Indemnitee. If
it is determined that Indemnitee is entitled to indemnification for part (but
not all) of the indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably prorated among
the claims, issues or matters for which Indemnitee is entitled to
indemnification and for claims, issues or matters for which Indemnitee is not so
entitled.
12. NON-EXCLUSIVITY. The rights of indemnification and to receive
advances as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under any law,
certificate of incorporation, by-law, other agreement, vote of stockholders or
resolution of directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. To the
extent Indemnitee would be prejudiced thereby, no amendment, alteration,
rescission or replacement of this Agreement or any provision hereof shall be
effective as to Indemnitee with respect to any action taken or omitted by such
Indemnitee in Indemnitee's position with the Company or an Affiliate or any
other entity which Indemnitee is or was serving at the request of the Company
prior to such amendment, alteration, rescission or replacement.
13. DURATION OF AGREEMENT. This Agreement shall apply to any claim
asserted and any Losses and Expenses incurred in connection with any claim
asserted on or after the effective date of this Agreement and shall continue
until and terminate upon the later of: (a) ten years after Indemnitee has
ceased to occupy any of the positions or have any of the relationships described
in Section 3, 4 or 5 hereof; or (b) one year after the final termination of all
pending or threatened Proceedings of the kind described herein with respect to
Indemnitee. This Agreement shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of Indemnitee and Indemnitee's
spouse, assigns, heirs, devisee, executors, administrators or other legal
representatives.
14. MAINTENANCE OF D&O INSURANCE.
(a) The Company hereby covenants and agrees with Indemnitee
that, so long as Indemnitee shall continue to serve as an Officer or Director of
the Company and thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed Proceeding, whether civil,
criminal or investigative, by reason of the fact that
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<PAGE>
Indemnitee was an Officer or Director of the Company or any other entity which
Indemnitee was serving at the request of the Company, the Company shall maintain
in full force and effect (i) the directors' and officers' liability insurance
issued by the insurer and having the policy amount and deductible as currently
in effect with respect to directors and officers of the Company or any of its
subsidiaries and (ii) any replacement or substitute policies issued by one or
more reputable insurers providing in all respects coverage at least comparable
to and in the same amount as that currently provided under such existing policy
(collectively, "D&O Insurance").
(b) In all policies of D&O Insurance, Indemnitee shall be named
as an insured in such a manner as to provide Indemnitee the same rights and
benefits, subject to the same limitations, as are accorded to the Company's
directors or officers most favorably insured by such policy.
(c) Notwithstanding anything to the contrary set forth in (a)
above, the Company shall have no obligation to maintain D&O Insurance if the
Company determines in good faith that such insurance is not reasonably
available, the premium cost for such insurance is disproportionate to the amount
of coverage provided or the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit.
15. SEVERABILITY. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions hereof shall not be affected
thereby, and the illegal or unenforceable portions hereof shall be and hereby
are redrafted to conform with applicable law, while leaving the remaining
portions hereof intact.
16. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
17. HEADINGS. Section headings are for convenience only and do not
control or affect meaning or interpretation of any terms or provisions hereof.
18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by each
of the parties hereto.
19. NO DUPLICATIVE PAYMENT. The Company shall not be liable under
this Agreement to make any payment of amounts otherwise indemnifiable hereunder
if and to the extent that Indemnitee has otherwise actually received such
payment (net of Expenses incurred in collecting such payment) under any
insurance policy, contract, agreement or otherwise.
20. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed,
enclosed in a registered or certified postpaid envelope, in any general or
branch office of the United States Postal Service, or sent by Federal Express or
other similar overnight courier service, addressed to the address of the parties
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<PAGE>
stated below or to such changed address as such party may have fixed by notice
or, if given by telecopier, when such telecopy is transmitted and the
appropriate answer back is received.
(a) If to Indemnitee, to the address appearing on the signature page
hereof.
(b) If to the Company to:
General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747
Attention: General Counsel
21. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of Delaware without regard to its conflicts of law rules.
22. ENTIRE AGREEMENT. Subject to the provisions of Section 12
hereof, this Agreement constitutes the entire understanding between the parties
and supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter hereof. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GENERAL SEMICONDUCTOR, INC.
By:____________________________________
Name:
Title:
INDEMNITEE
By: __________________________________
Name:__________________________________
Address: ______________________________
City and State:________________________
Telecopier Number:_____________________
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EXHIBIT 11
GENERAL SEMICONDUCTOR, INC.
EXHIBIT 11 - CALCULATION OF EARNINGS (LOSS) PER SHARE
(in Thousands Except Per Share Amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY:
Income (loss) from continuing operations $ (9,416) $ 14,601 $ (8,709) $ 26,818
Income (loss) from discontinued operations - net 1,234 (72,690) 18,210 (53,742)
-------- -------- -------- --------
Net income (loss) $ (8,182) $(58,089) $ 9,501 $(26,924)
======== ======== ======== ========
Weighted average common shares outstanding 34,267 31,797 34,248 31,626
Incremental shares under stock option plans 166 305 146 223
-------- -------- -------- --------
Weighted average common and common equivalent
shares outstanding 34,433 32,102 34,394 31,849
======== ======== ======== ========
Primary earnings (loss) per share:
Continuing operations $ (0.27) $ 0.45 $ (0.25) $ 0.84
Discontinued operations 0.03 (2.26) 0.53 (1.69)
-------- -------- -------- --------
$ (0.24) $ (1.81) $ 0.28 $ (0.85)
======== ======== ======== ========
FULLY DILUTED:
Income (loss) from continuing operations $ (9,416) $ 14,601 $ (8,709) $ 26,818
Interest and amortization of debt issuance costs related to the
Convertible Junior Subordinated Notes, net of income tax effects 381 901 829 1,785
-------- -------- -------- --------
Adjusted income (loss) from continuing operations $ (9,035) $ 15,502 $ (7,880) $ 28,603
======== ======== ======== ========
Income (loss) from discontinued operations - net $ 1,234 $(72,690) $ 18,210 $(53,742)
Interest and amortization of debt issuance costs related to the
Convertible Junior Subordinated Notes, net of income tax effects 1,500 3,119 2,933 6,309
-------- -------- -------- --------
Adjusted income (loss) from discontinued operations - net $ 2,734 $(69,571) $ 21,143 $(47,433)
======== ======== ======== ========
Weighted average common shares outstanding 34,267 31,797 34,248 31,626
Incremental shares under stock option plans 242 305 239 269
Incremental shares attributable to Convertible
Junior Subordinated Notes 2,399 4,882 2,399 5,043
-------- -------- -------- --------
Adjusted weighted average shares outstanding 36,908 36,984 36,886 36,938
======== ======== ======== ========
Fully Diluted earnings (loss) per share:
Continuing operations $ (0.24) $ 0.42 $ (0.21) $ 0.77
Discontinued operations 0.07 (1.88) 0.57 (1.28)
-------- -------- -------- --------
$ (0.17) $ (1.46) $ 0.36 $ (0.51)
======== ======== ======== ========
</TABLE>
Note: The computations of primary and fully diluted earnings (loss) per share
assume incremental shares under stock option plans using the treasury
stock method
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,350
<SECURITIES> 0
<RECEIVABLES> 50,491
<ALLOWANCES> 905
<INVENTORY> 29,492
<CURRENT-ASSETS> 135,952
<PP&E> 204,616
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,060,214
<CURRENT-LIABILITIES> 85,733
<BONDS> 0
0
0
<COMMON> 345
<OTHER-SE> 1,216,979
<TOTAL-LIABILITY-AND-EQUITY> 2,060,214
<SALES> 180,880
<TOTAL-REVENUES> 180,880
<CGS> 154,539
<TOTAL-COSTS> 182,937
<OTHER-EXPENSES> (11)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,340
<INCOME-PRETAX> (7,386)
<INCOME-TAX> 1,323
<INCOME-CONTINUING> (8,709)
<DISCONTINUED> 18,210
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,501
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.00
</TABLE>
<PAGE>
EXHIBIT 99
GENERAL SEMICONDUCTOR, INC. (THE "COMPANY")
EXHIBIT 99 - FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. The Company's Form 10-K, the Company's
Annual Report to Stockholders, any other Form 10-Q or Form 8-K of the Company,
or any other oral or written statements made by or on behalf of the Company, may
include forward-looking statements which reflect the Company's current views
with respect to future events and financial performance. These forward-looking
statements are identified by their use of such terms and phrases as "intends,"
"intend," "intended," "goal," "estimate," "estimates," "expects," "expect,"
"expected," "project," "projects," "projected," "projections," "plans,"
"anticipates," "anticipated," "should," "designed to," "foreseeable future,"
"believe," "believes" and "scheduled" and similar expressions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
The actual results of the Company may differ significantly from the results
discussed in forward-looking statements. Factors that might cause such a
difference include, but are not limited to, (a) the general political, economic
and competitive conditions in the United States, Taiwan (Republic of China),
Ireland and the People's Republic of China, and other markets where the Company
operates; (b) changes in capital availability or costs, such as changes in
interest rates, market perceptions of the industry in which the Company
operates, or security ratings; (c) uncertainties relating to customer plans and
commitments; (d) employee workforce factors; (e) authoritative generally
accepted accounting principles or policy changes from such standard-setting
bodies as the Financial Accounting Standards Board and the Securities and
Exchange Commission and the factors set forth below.
FACTORS RELATING TO THE DISTRIBUTION
GI (i) transferred all the assets and liabilities relating to the
manufacture and sale of broadband communications products used in the cable
television, satellite, and telecommunications industries (the "Communications
Business") to its wholly-owned subsidiary NextLevel Systems, Inc. ("NextLevel
Systems") and all the assets and liabilities relating to the manufacture and
sale of coaxial, fiber optic and other electric cable used in the cable
television, satellite and other industries (the "Cable Manufacturing Business")
to its wholly-owned subsidiary CommScope, Inc. ("CommScope") and (ii) then
distributed all of the ordinary shares of capital stock of each of NextLevel
Systems and CommScope to its shareholders on a pro rata basis as a dividend (the
"Distribution"), in a transaction that was consummated on July 28, 1997. The
Company retained all the assets and liabilities relating to the manufacture and
sale of discrete power rectifiers and transient voltage suppression components
used in telecommunications, automotive and consumer electronics products. The
Company prior to the Distribution is referred to as "GI".
<PAGE>
The Company has no recent operating history as a separate entity and is a
smaller and less diversified company than GI was prior to the Distribution. The
ability of the Company to satisfy its obligations and maintain profitability
will be solely dependent upon its own future performance, and the Company will
no longer be able to rely on the capital resources and cash flows of the
businesses of NextLevel Systems or CommScope. The future performance and cash
flows of the Company will be subject to prevailing economic conditions and to
financial, business and other factors affecting the business operations of the
Company, including factors beyond its control.
The division of GI may result in some temporary dislocation and
inefficiencies to the business operations, as well as the organization and
personnel structure, of the Company, and will also result in the duplication of
certain personnel, administrative and other expenses required for the operation
of independent companies. The management of the Company has not previously
operated its business as a separate public company so there can be no assurance
that the transition will not alter or disrupt, at least temporarily, the
management and operations of the Company's business.
The Distribution Agreement dated as of June 12, 1997, among GI, NextLevel
Systems and CommScope (the "Distribution Agreement") and certain other
agreements executed in connection with the Distribution (collectively, the
"Ancillary Agreements") allocate among the Company, NextLevel Systems, and
CommScope and their respective subsidiaries responsibility for various
indebtedness, liabilities and obligations. It is possible that a court would
disregard this contractual allocation of indebtedness, liabilities and
obligations among the parties and require the Company or its subsidiaries to
assume responsibility for obligations allocated to another party, particularly
if such other party were to refuse or was unable to pay or perform any of its
allocated obligations.
Pursuant to the Distribution Agreement and certain of the Ancillary
Agreements, the Company has agreed to indemnify the other parties (and certain
related persons) from and after consummation of the Distribution with respect to
certain indebtedness, liabilities and obligations, which indemnification
obligations could be significant.
Although GI has received a favorable ruling from the Internal Revenue
Service, if the Distribution were not to qualify as a tax free spin-off under
Section 355 of the Internal Revenue Code of 1986, as amended, then, in general,
a corporate tax would be payable by the consolidated group of which the Company
was the common parent based upon the difference between the fair market value of
the stock distributed and the distributing corporation's adjusted basis in such
stock. The corporate level tax would be payable by the Company and could
substantially exceed the net worth of the Company. However, under certain
circumstances, NextLevel Systems and CommScope have agreed to indemnify the
Company for such tax liability. In addition, under the consolidated return
rules, each member of the consolidated group (including NextLevel Systems and
CommScope) is severally liable for such tax liability.
-2-
<PAGE>
LEVERAGE; CERTAIN RESTRICTIONS UNDER CREDIT FACILITIES
The Company is substantially more leveraged than GI was prior to the
Distribution. The degree to which the Company is leveraged could have important
consequences, including the following: (i) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
product development, acquisitions, general corporate purposes or other purposes
may be impaired; (ii) a portion of the Company's and its subsidiaries' cash flow
from operations must be dedicated to the payment of the principal of and
interest on its indebtedness; (iii) the Credit Agreement, dated as of July 23,
1997, among the Company, certain banks, and The Chase Manhattan Bank, as
Administrative Agent contains certain restrictive financial and operating
covenants, including, among others, requirements that the Company satisfy
certain financial ratios; (iv) a significant portion of the Company's borrowings
will be at floating rates of interest, causing the Company to be vulnerable to
increases in interest rates; (v) the Company's degree of leverage may make it
more vulnerable to a downturn in general economic conditions; and (vi) the
Company's degree of leverage may limit its flexibility in responding to changing
business and economic conditions.
In addition, in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, a court may be asked to void the
Distribution (in whole or in part) as a fraudulent conveyance and to require
that the stockholders return the special dividend (in whole or in part) to the
Company or require the Company to fund certain liabilities of NextLevel Systems
and CommScope for the benefit of creditors.
COMPETITION
The Company is subject to competition from a substantial number of foreign
and domestic companies, some of which have greater financial, engineering,
manufacturing and other resources than the Company. The Company's competitors
can be expected to continue to improve the design and performance of their
products and to introduce new products with competitive price and performance
characteristics. Although the Company believes that it enjoys certain
technological and other advantages over its competitors, realizing and
maintaining such advantages will require continued investment by the Company in
engineering, research and development, marketing and customer service and
support. There can be no assurance that the Company will have sufficient
resources to continue to make such investments or that the Company will be
successful in maintaining such advantages.
INTERNATIONAL OPERATIONS; FOREIGN CURRENCY RISKS
A significant portion of the Company's products are manufactured or
assembled in Taiwan (Republic of China) and Ireland and other countries outside
the United States. These foreign operations are subject to the usual risks
inherent in situating operations abroad, including risks with respect to
currency exchange rates, economic and political destabilization, restrictive
actions by foreign governments, nationalizations, the laws and policies of the
United States affecting trade, foreign investment and loans, and foreign tax
laws. The Company's cost-competitive status relative to other competitors could
be adversely affected if the New
-3-
<PAGE>
Taiwan dollar or another relevant currency appreciates relative to the U.S.
dollar. In addition, a substantial portion of the annual sales of the Company's
business are outside of the United States.
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. Complying with
current laws and regulations has not had a material adverse effect on the
Company's financial condition. The Company is involved in remediation programs,
principally with respect to former manufacturing sites, which are proceeding in
connection 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 nine hazardous waste sites located in six
states.
The Company has engaged independent consultants to assist management in
evaluating potential liabilities related to environmental matters. The
Company's management assesses the input from these independent consultants along
with other information known to the Company in its effort to continually monitor
these potential liabilities. Management assesses its environmental exposure on
a site-by-site basis, including those sites where the Company has been named a
"potentially responsible party." Such assessments include the Company's share
of remediation costs, information known to the Company concerning the size of
the hazardous waste sites, their years of operation and the number of past users
and their financial viability. Although the Company estimates, based on
assessments and evaluations made by management, that its exposure with respect
to these environmental matters could be as high as $56.9 million, the Company
believes that the reserve for environmental matters of $36.4 million at June 30,
1997 is reasonable and adequate. However, there can be no assurance that the
ultimate resolution of these matters will approximate the amount reserved.
In connection with the Distribution, the Company retained the obligations
with respect to environmental matters relating to the Company's discontinued
operations and its status as a "potentially responsible party." 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 financial
statements of the Company. The Company's present and past facilities have been
in operation for many years, and over that time in the course of those
operations, such facilities have used substances which are or might be
considered hazardous, and the Company has generated and disposed of wastes which
are or might be considered hazardous. Therefore, it is possible that additional
environmental issues may arise in the future which the Company cannot now
predict.
-4-
