<PAGE>
As filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 333-[ ]
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MOTOROLA, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 3663 36-1115800
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Identification No.)
Code Number)
</TABLE>
1303 East Algonquin Road
Schaumburg, Illinois 60196
(847) 576-5000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------
Carl F. Koenemann
Executive Vice President and Chief Financial Officer
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
(847) 576-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
With copies to:
Patricia A. Vlahakis, Esq. Charles I. Cogut, Esq.
Wachtell, Lipton, Rosen & Katz Mario A. Ponce, Esq.
51 West 52nd Street Simpson Thacher & Bartlett
New York, New York 10019-6150 425 Lexington Avenue
(212) 403-1000 New York, New York 10017
(212) 455-2000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective time of the merger of a wholly owned subsidiary
of the registrant with General Instrument Corporation, which shall occur as
soon as practicable after the effective date of this registration statement and
the satisfaction of all conditions to the closing of such merger.
---------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered(2) Per Share Offering Price(3) Fee
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<S> <C> <C> <C> <C>
Common stock, $3.00 par value
(and associated preferred stock 122,045,481
purchase rights)(1)............. shares N.A. N.A. $2,845,227
</TABLE>
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(1) Each share of Motorola common stock is accompanied by a right to purchase
Junior Participating Preferred Stock, Series B of the registrant. Prior to
the occurrence of certain events, none of which have occurred as of this
date, the rights will not be exercisable or evidenced separately from the
common stock.
(2) Represents the maximum number of shares of Motorola common stock that could
be issued based on the number of shares of General Instrument common stock
outstanding (173,591,700) plus the number of shares of General Instrument
common stock subject to warrants (27,715,963) and options (10,945,347)
multiplied by the exchange ratio of 0.575 shares of Motorola common stock
for each share of General Instrument common stock pursuant to the merger
described herein.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) based on the average of the high
and low sale prices of General Instrument common stock on the New York
Stock Exchange on October 1, 1999 of $48.219.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
Preliminary Copy--Subject to Completion--Dated October 8, 1999
The information in this proxy statement prospectus is not complete and may
be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This proxy
statement prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any State where the offer or
sale is not permitted.
[GIC Logo and Letterhead]
[ ], 1999
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders of
General Instrument Corporation which we will hold at 10:00 a.m., local time, on
[ ], at [ ], Pennsylvania.
Your Board of Directors has unanimously approved a merger with Motorola,
Inc. and unanimously recommends that you approve and adopt the merger and a
merger agreement that provides for the merger at the special meeting. Upon
completion of the merger, you will receive 0.575 shares of Motorola common
stock for each share of General Instrument common stock that you own. Motorola
shares are traded on the New York Stock Exchange under the symbol "MOT". The
market value of the Motorola shares that you will receive in the merger for
each General Instrument share would be $52.72 based upon Motorola's closing
stock price on October 7, 1999. We expect that the merger will be tax-free to
you for U.S. federal income tax purposes.
We believe that the merger represents an exciting strategic combination.
This transaction will capitalize on the tremendous value General Instrument has
built since we became an independent public company in July 1997, and at the
same time permit our stockholders to continue their investment in General
Instrument's future as part of a larger, more diverse and competitive company
with impressive technology, resources and vision.
It is important that your shares be represented and voted at the meeting,
whether or not you are able to attend personally. If you do not return your
proxy card or if you do not instruct your bank or broker how to vote any shares
held for you in "street name," the effect will be a vote against the merger.
You are therefore urged to complete, sign, date and return the enclosed proxy
card promptly in the accompanying envelope, which requires no postage if mailed
in the United States. You are, of course, welcome to attend the meeting and
vote in person, even if you have previously returned your proxy card.
This document provides you with detailed information about the merger. We
encourage you to read this entire document carefully. For risks in connection
with the merger, see "Risk Factors Relating to the Merger" beginning on page
15.
I look forward to your support.
Sincerely,
Edward D. Breen
Chairman of the Board and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Motorola shares to be issued in
the merger or determined if this document is accurate or adequate. Any
representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated [ ], 1999 and was first
mailed
to stockholders on or about [ ], 1999.
<PAGE>
Preliminary Copy--Subject to Completion--Dated October 8, 1999
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held [ ], 1999
A special meeting of stockholders of General Instrument Corporation will be
held on [ , ], at 10:00 a.m., local time, at
[ , ], Pennsylvania.
The special meeting will be conducted:
1. To approve and adopt the merger of a wholly owned subsidiary of
Motorola, Inc. into General Instrument and the Agreement and Plan of
Merger dated as of September 14, 1999 by and among Motorola, Lucerne
Acquisition Corp. and General Instrument, pursuant to which, among
other things, each share of General Instrument common stock
outstanding immediately prior to the effective time of the merger
will be converted into 0.575 shares of Motorola common stock.
2. To transact such other business as may properly come before the
meeting.
A copy of the merger agreement is attached as Appendix A to the accompanying
document. Approval and adoption of the merger and the merger agreement require
the affirmative vote of a majority of the outstanding General Instrument
shares. We do not expect that any business other than the proposal described in
this notice will be considered at the meeting or any adjournment or
postponement thereof.
Stockholders of record as of the close of business on [ ], 1999 will
be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Your Board of Directors unanimously recommends that you vote "FOR" approval
and adoption of the merger and the merger agreement, as described in detail in
the accompanying proxy statement/prospectus.
By Order of the Board of Directors,
Robert A. Scott
Senior Vice President, General
Counsel and
Secretary
[ ], 1999
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and promptly return it in the accompanying envelope
which requires no postage if mailed in the United States. You may revoke your
proxy at any time before it is voted by delivery to General Instrument of a
subsequently executed proxy or a written notice of revocation or by voting in
person at the special meeting.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 3
The Companies............................................................. 3
The Special Meeting....................................................... 3
Record Date; Vote Required................................................ 3
Reasons for the Merger.................................................... 4
Recommendation of the General
Instrument Board......................................................... 4
Opinions of General Instrument's
Financial Advisors....................................................... 4
The Merger................................................................ 4
Management and Operations After
the Merger............................................................... 6
Effects of the Merger on the Rights of General Instrument Stockholders.... 7
Forward-Looking Statements................................................ 7
Summary Selected Financial Information.................................... 8
Motorola Selected Historical Consolidated Financial Data.................. 8
General Instrument Selected Historical Consolidated Financial Data........ 9
Unaudited Selected Pro Forma Combined Financial Data...................... 11
Comparative Per Share Data................................................ 12
Comparative Per Share Market Price and Dividend Information............... 14
RISK FACTORS RELATING TO THE MERGER....................................... 15
Motorola and General Instrument May Encounter Difficulties in Integrating
Operations and May Not Achieve Strategic Objectives, Cost Savings and
Other Benefits........................................................... 15
Value of Motorola Shares to Be Received in the Merger Will Fluctuate...... 15
THE SPECIAL MEETING....................................................... 17
Time and Place; Purposes.................................................. 17
Record Date............................................................... 17
Quorum.................................................................... 17
Vote Required............................................................. 17
Proxies................................................................... 18
Voting General Instrument 401(k) Stock.................................... 18
THE MERGER................................................................ 20
Structure of the Merger................................................... 20
Background................................................................ 20
Reasons for the Merger.................................................... 21
Information and Factors Considered by the General Instrument Board........ 23
</TABLE>
<TABLE>
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Page
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<S> <C>
Recommendation of the General
Instrument Board........................................................ 25
Opinions of Financial Advisors to
General Instrument...................................................... 25
Accounting Treatment..................................................... 33
Interests of Certain Persons in the Merger............................... 33
Material Federal Income Tax Consequences................................. 37
Regulatory Matters....................................................... 38
Appraisal Rights......................................................... 39
Federal Securities Laws Consequences..................................... 39
Management and Operations after
the Merger.............................................................. 40
Certain Other Matters.................................................... 40
THE MERGER AGREEMENT..................................................... 41
The Merger............................................................... 41
Conversion or Cancellation of General Instrument Common Stock in the
Merger.................................................................. 41
Listing of Motorola Common Stock......................................... 42
Representations and Warranties........................................... 42
Covenants and Agreements................................................. 44
No Solicitation Covenant................................................. 47
Additional Covenants and Agreements...................................... 49
Conditions............................................................... 50
Termination.............................................................. 52
Amendment; Waiver........................................................ 53
Voting Agreement......................................................... 53
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF MOTOROLA AND GENERAL
INSTRUMENT.............................................................. 55
DESCRIPTION OF MOTOROLA CAPITAL STOCK.................................... 63
Motorola Common Stock.................................................... 63
Motorola Preferred Stock................................................. 63
Motorola Rights Plan..................................................... 64
Transfer Agent and Registrar............................................. 65
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS OF MOTOROLA AND GENERAL
INSTRUMENT.............................................................. 66
EXPERTS.................................................................. 68
LEGAL AND TAX MATTERS.................................................... 68
SUBMISSION OF STOCKHOLDER PROPOSALS...................................... 68
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........................ 69
WHERE YOU CAN FIND MORE INFORMATION...................................... 70
</TABLE>
<TABLE>
<C> <S> <C>
Appendix A Agreement and Plan of Merger................................. A-1
Opinion of Merrill Lynch, Pierce, Fenner & Smith
Appendix B Incorporated................................................. B-1
Appendix C Opinion of CIBC World Markets Corp........................... C-1
</TABLE>
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposed transaction?
A: A wholly owned subsidiary of Motorola, Inc. will merge into General
Instrument Corporation. As a result, General Instrument will become a
wholly owned subsidiary of Motorola, and General Instrument stockholders
will exchange their General Instrument shares for Motorola shares.
Q: What will General Instrument stockholders receive in the merger?
A. Each General Instrument share will be exchanged for 0.575 Motorola shares.
You will receive cash payments in place of any fractional Motorola shares
you would have otherwise received. After giving effect to the merger, former
General Instrument stockholders will hold approximately 14% of the
outstanding Motorola shares.
Q: How do I vote?
A: You may vote by mailing a signed proxy card in the enclosed return envelope
as soon as possible so that those shares may be represented at the special
meeting. You may also attend the special meeting and vote in person.
Q: Can I change my vote?
A: Yes. You may change your vote by delivering a later-dated, signed proxy
card to General Instrument's secretary before the special meeting, or by
attending the special meeting and voting in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares. Without instructions, your
shares will not be voted on the merger.
Q: Is the merger taxable?
A: Motorola and General Instrument each expect the merger to be tax free. We
have structured the merger so that our tax advisors will be able to deliver
opinions that Motorola, Motorola's wholly owned subsidiary formed for the
purpose of the merger, General Instrument and the General Instrument
stockholders will not recognize any gain or loss for U.S. federal income
tax purposes in the merger, except with respect to any cash that General
Instrument stockholders will receive instead of fractional Motorola shares.
Receipt of these opinions is a condition to completion of the merger.
We describe the material U.S. federal income tax consequences of the
transactions in more detail on page 37. The tax consequences to you will
depend on the facts of your own situation. Please consult your tax advisors
for a full understanding of the tax consequences to you of the merger.
Q: Am I entitled to appraisal rights?
A: No. You will not be entitled to appraisal rights in connection with the
merger.
Q: When do you expect to complete the merger?
A: We expect to complete the merger early in the first quarter of 2000.
Because the merger is subject to governmental approvals, however, we cannot
predict the exact timing.
Q: Should I send in my General Instrument stock certificates now?
A: No. After we complete the merger, Motorola will send instructions to former
General Instrument stockholders whose shares were converted in the merger.
These instructions will explain how to exchange your General Instrument
share certificates for Motorola share certificates and, if applicable, cash
in lieu of any fractional share.
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Q: Whom can I call with questions?
A: If you have any questions about the merger or any related transactions,
please call General Instrument at (800) 523-6678 or Motorola at (800) 262-
8509.
If you would like copies of any of the documents we refer to in this proxy
statement/prospectus, you should call General Instrument at (800) 523-6678
if the documents relate to General Instrument or Motorola at (800) 262-8509
if the documents relate to Motorola.
2
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To better understand the merger, and for a more complete
description of the legal terms of these transactions, you should read this
entire document carefully, as well as those additional documents to which we
refer you. See "Where You Can Find More Information" on page 70.
The Companies
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Tel: (847) 576-5000
website: www.motorola.com
Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:
. Software-enhanced wireless telephone, two-way radio, messaging and
satellite communications products and systems, as well as networking and
Internet-access products, for consumers, network operators, and
commercial, government and industrial customers.
. Embedded semiconductor solutions, primarily for customers in the
networking and computing, transportation, and wireless communications
industries.
. Embedded electronic systems, primarily for the automotive,
communications, imaging, manufacturing systems and computer industries as
well as portable energy systems.
Motorola is a corporation organized under the laws of the State of Delaware.
In 1998, Motorola's sales were approximately $29.4 billion.
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Tel: (215) 323-1000
website: www.gi.com
General Instrument is a leading worldwide provider of integrated and
interactive broadband access solutions, advancing the convergence of the
Internet, telecommunications and video entertainment industries.
. General Instrument is the world's leading supplier of digital and analog
systems and set-top terminals for wired and wireless cable television
systems.
. General Instrument is a leading provider of hybrid fiber/coaxial network
transmission systems used by cable television operators.
. General Instrument is a provider of digital satellite television systems
for programmers, direct-to-home satellite network providers and private
networks, and provides high definition digital broadcast products for the
cable and broadcast industries.
. Through Next Level Communications, in which General Instrument has a
majority ownership interest, General Instrument provides broadband
communications systems that enable telephone companies and other emerging
communications service providers to deliver voice, data and video
services over the existing copper wire telephone infrastructure.
General Instrument is a corporation organized under the laws of the State of
Delaware. In 1998, General Instrument's sales were approximately $2.0 billion.
The Special Meeting (see page 17)
The special meeting will be held on [ ], at [ ] a.m., local time,
at , , Pennsylvania. At the special meeting, General
Instrument stockholders will be asked:
. to approve and adopt the merger agreement and the merger; and
. to act on other matters that may be properly submitted to a vote at the
General Instrument special meeting.
Record Date; Vote Required (see page 17)
You can vote at the special meeting if you owned General Instrument shares
at the close of
3
<PAGE>
business on [ ], 1999. On that date, there were [ ] General
Instrument shares outstanding and entitled to vote. You can cast one vote for
each General Instrument share you owned on that date. Approval and adoption of
the merger agreement and the merger require the favorable vote of the holders
of a majority of the outstanding General Instrument shares.
Reasons for the Merger (see page 21)
Motorola and General Instrument believe that the merger will enhance the
combined company's ability to lead the convergence of video, voice and data
over communications networks and enable the combined company to offer end-to-
end solutions to customers. Motorola and General Instrument also believe that
the merger will enable the combined company to become a leader in the next
generation of telecommunications networks and allow General Instrument to
leverage Motorola's global presence and strengthen relationships with key
customers.
Recommendation of the General Instrument Board (see page 25)
The General Instrument Board has unanimously approved the merger and has
unanimously approved and adopted the merger agreement and the transactions
contemplated in the merger agreement and recommends that General Instrument
stockholders vote "FOR" approval and adoption of the merger and the merger
agreement.
Opinions of General Instrument's Financial Advisors (see page 25)
Merrill Lynch, Pierce, Fenner & Smith Incorporated and CIBC World Markets
Corp., General Instrument's financial advisors, have rendered separate written
opinions, each dated September 14, 1999, to the General Instrument Board that,
as of the date of the opinions, the exchange ratio in the merger was fair, from
a financial point of view, to the holders of General Instrument shares. The
full text of the written opinions of Merrill Lynch and CIBC World Markets are
attached to this document as Appendices B and C. We encourage you to read the
opinions carefully in their entirety to understand the procedures followed,
assumptions made, matters considered and limitations on the review undertaken
by each of Merrill Lynch and CIBC World Markets in providing their opinions.
The opinions of Merrill Lynch and CIBC World Markets are directed to the
General Instrument Board and do not constitute recommendations to any
stockholder with respect to any matter relating to the merger.
The Merger (see page 20)
We propose that a wholly owned subsidiary of Motorola formed for the purpose
of the merger merge with and into General Instrument. As a result, General
Instrument will become a wholly owned subsidiary of Motorola.
We have attached the merger agreement, which is the legal document that
governs the merger, as Appendix A. We encourage you to read this document. We
have also filed other related agreements as exhibits to Motorola's registration
statement. Please see the section titled "Where You Can Find More Information"
on page 70 for instructions on how to obtain copies of these exhibits.
What you will receive in the merger (see page 41)
Each of your General Instrument shares will be exchanged for 0.575 Motorola
shares. Because the number of Motorola shares that you will receive in the
merger is fixed, the value of the Motorola shares you will receive in the
merger will fluctuate as the price of Motorola common stock changes.
You will have to surrender your General Instrument common stock certificates
to receive Motorola common stock certificates. However, please do not send any
General Instrument common stock certificates until you receive written
instructions after we complete the merger.
Conditions (see page 50)
We will complete the merger only if certain conditions are satisfied or
waived, including the following:
. approval by the General Instrument stockholders;
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. clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended;
. receipt of opinions of independent accountants of Motorola and General
Instrument to the effect that no conditions exist that would preclude
each party's ability to be a party to a business combination with the
other party to be accounted for as a pooling of interests;
. receipt of opinions of tax advisors that the merger will be non-taxable
for U.S. federal income tax purposes; and
. the absence of a material adverse effect on General Instrument or
Motorola.
Termination (see page 52)
Either Motorola or General Instrument may terminate the merger agreement if:
. the merger is not completed by March 31, 2000;
. a final and nonappealable order is entered enjoining or prohibiting the
completion of the merger;
. the merger agreement fails to receive General Instrument stockholder
approval after a vote; or
. the other party materially breaches its representations or agreements in
certain circumstances and the breaching party fails to cure the breach
within 30 days of receiving written notice of such breach.
Motorola and General Instrument may also mutually agree to terminate the
merger agreement without completing the merger.
Termination Fees (see page 52)
General Instrument must pay Motorola a fee of $300 million in cash as
follows:
. if all of the following circumstances occur:
--Motorola or General Instrument terminates the merger agreement because
General Instrument stockholders fail to adopt the merger agreement or
because the merger is not completed before March 31, 2000 where General
Instrument stockholders have not adopted the merger agreement;
--an acquisition proposal has been publicly announced prior to the General
Instrument vote, if any;
--General Instrument does not withdraw or modify in a manner adverse to
Motorola its recommendation of the merger; and
--General Instrument enters into a definitive acquisition agreement within
nine months of termination of the merger agreement;
in which case the $300 million fee is payable within five days of entering
into the definitive acquisition agreement; or
. if Motorola terminates the merger agreement because:
--General Instrument has materially breached its agreements regarding
preparation of this proxy statement/prospectus, calling its stockholders'
meeting or the non-solicitation of alternative proposals; or
--the General Instrument stockholders fail to adopt the merger agreement
or the merger is not completed before March 31, 2000 where the General
Instrument stockholders have not adopted the merger agreement and General
Instrument withdrew, or modified in a manner adverse to Motorola, its
approval or recommendation of the merger;
in which case the $300 million fee is due within two days of termination.
Regulatory Matters (see page 38)
Motorola and General Instrument must comply with certain filings and take
other actions necessary to obtain approvals from U.S. and foreign
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governmental authorities in connection with the proposed transactions,
including antitrust authorities. Motorola and General Instrument have agreed to
use reasonable best efforts to obtain any governmental consents and approvals
required in connection with the merger, but Motorola is not required to agree
to any conditions, divestitures or expenditures of money to a third party in
exchange for any consent that, in any such case, would be materially adverse to
Motorola and General Instrument, taken as a whole.
The waiting period during which the U.S. regulatory authorities review the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, will expire on November [ ], 1999 unless earlier terminated or
extended by a request for additional information or documentary materials. We
expect to obtain all material required governmental approvals and, if all other
conditions to the merger are satisfied, complete the merger early in the first
quarter of 2000. We cannot be certain, however, that Motorola and General
Instrument will obtain all required governmental approvals, or that we will
obtain these approvals without conditions that would be detrimental to Motorola
or General Instrument.
Accounting Treatment (see page 33)
We expect the merger to qualify as a "pooling of interests." This means
that, for accounting and financial reporting purposes, we will treat our
companies as if they had always been combined. We will not be required to
complete the merger unless we receive opinions from our respective independent
accountants to the effect that they concur with our conclusion that no
conditions exist that would preclude our ability to be a party to a business
combination with the other party to be accounted for as a pooling of interests.
NYSE Listing
Motorola will list the Motorola shares to be issued in the merger on the New
York Stock Exchange.
Ownership of Shares after the Merger
After giving effect to the merger, the former holders of General Instrument
common stock will hold about 14% of the outstanding Motorola common stock based
upon the figures for outstanding stock as of October 6, 1999.
Voting Agreement (see page 53)
Liberty Media Corporation, a subsidiary of AT&T Corp., has agreed to vote
the General Instrument shares it owns or has the right to vote in favor of the
merger. As of October 6, 1999, Liberty Media owned 31,356,000 General
Instrument shares, representing approximately 18.1% of the outstanding General
Instrument shares entitled to vote on the merger.
In addition, Liberty Media owned warrants to purchase an additional
21,356,000 General Instrument shares as of October 6, 1999, none of which
shares have voting rights until the warrants are exercised. Warrants to
purchase 4,928,000 General Instrument shares were exercisable as of that date.
Liberty Media is not obligated to exercise any warrants, but has agreed to vote
any General Instrument shares that may be issued upon exercise of such warrants
in favor of the merger.
Interests of Officers and Directors (see page 33)
When considering the merger agreement, General Instrument's Board of
Directors was aware that certain of the officers and directors of General
Instrument may have interests and arrangements that may be different from your
interests as stockholders. These include rights under certain stock-based
employee benefits awards and severance agreements, as well as arrangements with
Motorola regarding employment following the merger.
Management and Operations after the Merger
After the merger, Motorola plans to form a new business group consisting of
the people, assets and operations of General Instrument combined with the
Multimedia Group business from Motorola's Internet and Networking Group. The
new business group will be a part of Motorola's Communications Enterprise unit
and will focus on integrated and interactive broadband access solutions.
Motorola expects that Edward D. Breen, Chairman and Chief Executive Officer of
General Instrument, will lead the business group and that other members of
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current General Instrument management will work in the new business group after
the merger. The headquarters of the new business group is expected to be the
current General Instrument headquarters in Horsham, Pennsylvania.
Effects of the Merger on the Rights of General Instrument Stockholders (see
page 66)
The rights of General Instrument stockholders who receive Motorola shares in
the merger will continue to be governed by Delaware law, but will also be
governed by Motorola's Restated Certificate of Incorporation and Motorola's By-
laws. The rights of General Instrument stockholders under Motorola's Restated
Certificate of Incorporation and By-laws will differ in certain respects from
the rights under General Instrument's Certificate of Incorporation and By-laws.
Forward-Looking Statements (see page 69)
Motorola and General Instrument have made forward-looking statements in this
document and in the documents to which we have referred you. These statements
are subject to risks and uncertainties, and therefore may not prove to be
correct. Forward-looking statements include assumptions as to how Motorola may
perform after the merger, and, accordingly, it is uncertain whether any of the
events anticipated by the forward-looking statements will transpire or occur,
or, if any of them do so, what impact they will have on the results of
operations and financial condition of Motorola or the price of its stock. See
page 69 for further details.
When we use words like "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. For those statements,
Motorola and General Instrument claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
7
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Summary Selected Financial Information
Motorola Selected Historical Consolidated Financial Data
The selected historical consolidated financial data of Motorola as of
December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and
1996 has been derived from consolidated financial statements of Motorola which
have been audited by KPMG LLP, independent auditors, and incorporated by
reference into this proxy statement/prospectus. The selected historical
consolidated financial data of Motorola as of December 31, 1996, 1995 and 1994
and for the years ended December 31, 1995 and 1994 has been derived from
audited consolidated financial statements previously filed with the Securities
and Exchange Commission, but not incorporated by reference in this proxy
statement/prospectus. The selected historical consolidated financial data as of
and for the six months ended July 3, 1999 and June 27, 1998, have been derived
from unaudited consolidated financial statements filed with the SEC and
incorporated by reference herein and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of Motorola's financial position and results of operations as
of and for such periods. Operating results for the six months ended July 3,
1999, are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1999. Certain amounts in the Motorola
selected historical consolidated financial data for the periods prior to July
3, 1999 have been conformed to the 1999 presentation. This information is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements, the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
Motorola incorporated by reference in this proxy statement/prospectus.
<TABLE>
<CAPTION>
Six Months Ended
---------------- Year Ended December 31,
July 3, June 27, ----------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- -------- ------- ------- ------- ------- -------
(unaudited)
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of
Operations Data:
Net sales............... $14,745 $13,909 $29,398 $29,794 $27,973 $27,037 $22,245
------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Manufacturing and other
costs of sales........ 8,641 8,445 18,043 17,283 16,610 15,361 11,901
Selling, general and
administrative
expenses.............. 2,803 2,550 5,443 5,160 4,701 4,629 4,380
Restructuring and other
charges............... -- 1,980 1,980 327 -- -- --
Research & development
expenditures.......... 1,555 1,425 2,893 2,748 2,394 2,197 1,860
Depreciation expense... 1,114 1,058 2,197 2,329 2,308 1,919 1,525
Interest expense, net.. 93 91 216 131 185 149 142
------- ------- ------- ------- ------- ------- -------
Total costs and
expenses.............. $14,206 $15,549 $30,772 $27,978 $26,198 $24,255 $19,808
------- ------- ------- ------- ------- ------- -------
Net gain on Nextel asset
exchange............... -- -- -- -- -- 443 --
Earnings (loss) before
income taxes........... 539 (1,640) (1,374) 1,816 1,775 3,225 2,437
Income tax provision
(benefit).............. 162 (492) (412) 636 621 1,177 877
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)..... $ 377 $(1,148) $ (962) $ 1,180 $ 1,154 $ 2,048 $ 1,560
======= ======= ======= ======= ======= ======= =======
Per Share Data:
Net earnings (loss) per
common share
Basic.................. $ 0.63 $ (1.92) $ (1.61) $ 1.98 $ 1.95 $ 3.47 $ 2.76
======= ======= ======= ======= ======= ======= =======
Diluted................ $ 0.61 $ (1.92) $ (1.61) $ 1.94 $ 1.90 $ 3.37 $ 2.66
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding
Basic.................. 603.4 597.6 598.6 595.5 592.5 589.7 565.0
======= ======= ======= ======= ======= ======= =======
Diluted................ 619.8 597.6 598.6 612.2 609.0 609.7 591.7
======= ======= ======= ======= ======= ======= =======
Dividends paid per
share.................. $ 0.24 $ 0.24 $ 0.48 $ 0.48 $ 0.46 $ 0.40 $ 0.31
======= ======= ======= ======= ======= ======= =======
<CAPTION>
December 31,
July 3, June 27, ----------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- -------- ------- ------- ------- ------- -------
(unaudited)
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated: Balance
Sheet Data:
Total assets............ $31,747 $28,672 $28,728 $27,278 $24,076 $22,738 $17,495
Working capital......... 4,332 2,223 2,091 4,181 3,324 2,717 3,008
Long-term debt.......... 3,119 2,129 2,633 2,144 1,931 1,949 1,127
Total debt.............. 4,996 5,102 5,542 3,426 3,313 3,554 2,043
Total stockholders'
equity................. 13,678 12,072 12,222 13,272 11,795 10,985 9,055
</TABLE>
8
<PAGE>
General Instrument Selected Historical Consolidated Financial Data
The selected historical consolidated financial data of General Instrument as
of December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997
and 1996, has been derived from consolidated financial statements of General
Instrument which have been audited by Deloitte & Touche LLP, independent
auditors, and incorporated by reference into this proxy statement/prospectus.
The selected historical consolidated financial data of General Instrument as of
December 31, 1996, 1995 and 1994 and for the years ended December 31, 1995 and
1994 has been derived from audited consolidated financial statements previously
filed with the SEC, but not incorporated by reference herein. The selected
consolidated financial data as of and for the six months ended June 30, 1999
and 1998, have been derived from unaudited consolidated financial statements
filed with the SEC and incorporated by reference herein and, in the opinion of
management, contain all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of General Instrument's
financial position and results of operations as of and for such periods.
Operating results for the six months ended June 30, 1999, are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1999. This information is qualified in its entirety by, and should
be read in conjunction with, the consolidated financial statements, the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for General Instrument incorporated by reference in this
proxy statement/prospectus.
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
----------------- -------------------------------------------------
June 30, June 30,
1999 1998 1998(b) 1997(c) 1996(d) 1995(e) 1994(f)
-------- -------- ------- ------- ------- ------- -------
(unaudited)
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales............... $1,046 $ 905 $1,988 $1,764 $ 1,756 $1,533 $1,275
Cost of sales........... 750 671 1,431 1,336 1,350 1,080 878
------ ------ ------ ------ ------- ------ ------
Gross profit............ 296 234 557 428 406 453 397
------ ------ ------ ------ ------- ------ ------
Operating expenses:
Selling, general and
administrative
expenses.............. 91 102 194 215 175 139 102
Research &
development........... 83 158 245 208 198 138 105
Purchased in-process
technology............ -- -- -- -- -- 140 --
Goodwill amortization.. 7 7 14 15 14 14 15
NLC litigation costs... -- -- -- -- 141 -- --
------ ------ ------ ------ ------- ------ ------
Total operating
expenses............. $ 181 $ 267 $ 453 $ 438 $ 528 $ 431 $ 222
------ ------ ------ ------ ------- ------ ------
Operating income
(loss)................. 115 (33) 104 (10) (122) 22 175
Other income (expense),
net.................... (1) (10) (11) 5 (1) (1) 1
Interest income
(expense), net......... 8 (1) 1 (5) (26) (23) (27)
------ ------ ------ ------ ------- ------ ------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............. 122 (44) 94 (10) (149) (2) 149
Cumulative effect of
changes in accounting
principles............. -- -- -- -- -- -- (1)
(Provision) benefit for
income taxes........... (45) 14 (39) (6) 53 6 (27)
------ ------ ------ ------ ------- ------ ------
Net income (loss)....... $ 77 $ (30) $ 55 $ (16) $ (96) $ 4 $ 121
====== ====== ====== ====== ======= ====== ======
Per Share Data:
Net earnings (loss) per
common share
Basic.................. $ 0.44 $(0.20) $ 0.35
====== ====== ======
Diluted................ $ 0.41 $(0.20) $ 0.33
====== ====== ======
Pro forma loss per
share--basic and
diluted................ $(0.11)(a) $ (0.65)(a)
====== =======
Weighted average common
shares outstanding
Basic.................. 174.1 150.5 159.5 147.5(a) 147.3(a)
====== ====== ====== ====== =======
Diluted................ 188.9 150.5 169.0 147.5(a) 147.3(a)
====== ====== ====== ====== =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
December 31,
June 30, June 30, ----------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------ ------ ------ ------ ------
(unaudited)
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Total assets............. $2,355 $1,693 $2,188 $1,675 $1,630 $1,354 $1,199
Working capital.......... 666 453 437 436 372 221 69
Other non-current
liabilities............. 66 63 68 66 188 75 78
Stockholders' equity..... 1,883 1,250 1,650 1,215 1,051 926 764
</TABLE>
- --------
(a) General Instrument was formerly the Communications Business of a company
then known as General Instrument Corporation (the "Distributing Company").
On July 28, 1997, approximately 147.3 million shares of General Instrument
common stock were distributed to the Distributing Company's stockholders.
Additionally, on July 28, 1997, approximately 49.1 million shares of common
stock of CommScope, Inc., a wholly owned subsidiary of the Distributing
Company, were distributed to General Instrument stockholders (the General
Instrument distribution, together with the CommScope distribution, the
"Distributions"). Prior to the Distributions, General Instrument did not
have its own capital structure; accordingly pro forma per share information
has been presented for the years ended December 31, 1997 and 1996. The pro
forma loss per share was calculated by dividing the net loss by the pro
forma weighted-average number of shares outstanding. The pro forma
weighted-average number of shares outstanding used for 1996 equaled the
number of common shares issued on the date of the Distributions, and for
1997, included the number of common shares issued on the date of the
Distributions plus the actual share activity during the period subsequent
to the Distributions.
(b) Includes charges of $124 million ($79 million net-of-tax) reflecting
restructuring and other charges primarily including costs related to the
closure of various facilities, including the General Instrument's satellite
TV manufacturing facility in Puerto Rico, severance and other employee
separation costs, the write-down of fixed assets to their estimated fair
values and inventory to its lower of cost or market, as well as a $75
million charge to fully reserve for the research and development advance
made to Next Level Communications L.P.
(c) Includes charges of $110 million ($79 million net-of-tax) reflecting
restructuring and other charges primarily including costs related to the
closure of various facilities, including the General Instrument's satellite
TV manufacturing facility in Puerto Rico, severance and other employee
separation costs, the write-down of inventory to its lower of cost or
market, the write-down of fixed assets to their estimated fair values and
costs related to dividing the Distributing Company's Taiwan operations
between General Instrument and General Semiconductor, Inc.
(d) Includes charges of $226 million ($145 million net-of-tax) reflecting
litigation costs, restructuring charges and other charges of Next Level
Communications, a wholly-owned subsidiary of General Instrument, primarily
related to the transition of the General Instrument's next-generation
digital products and the write-down of inventory to its lower of cost or
market.
(e) Includes a charge of $140 million ($90 million net-of-tax) for purchased
in-process technology in connection with the acquisition of Next Level
Communications, a wholly-owned subsidiary of General Instrument.
(f) Includes an income tax benefit of $31 million, as a result of a reduction
in a valuation allowance related to domestic deferred income tax assets.
10
<PAGE>
Unaudited Selected Pro Forma Combined Financial Data
In the table below, we provide you with unaudited selected pro forma
combined financial data that combines the historical consolidated balance
sheets and statements of operations of Motorola and General Instrument,
including their subsidiaries, giving effect to the merger. The unaudited pro
forma combined statements of operations for the six months ended July 3, 1999
and June 27, 1998 and the fiscal years ended December 31, 1998, 1997 and 1996
give effect to the merger as if it had occurred on January 1, 1996. The
unaudited pro forma combined balance sheet as of July 3, 1999 gives effect to
the merger as if it had occurred on July 3, 1999.
The unaudited pro forma combined financial data are qualified in their
entirety by reference to, and should be read in conjunction with, the unaudited
pro forma combined financial statements and notes thereto that are included
elsewhere in this proxy statement/prospectus. The unaudited pro forma combined
financial data give effect to the merger applying the pooling-of-interests
method of accounting. The pro forma combined financial data is provided for
illustrative purposes only and is not necessarily indicative of the results
that would have occurred if the merger had been in effect during the periods
presented or which may be attained in the future.
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
---------------------- ------------------------
June 27,
July 3, 1999 1998 1998 1997 1996
------------- -------- ------- ------- -------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Pro Forma Combined Operating
Results:
Net sales...................... $15,766 $14,791 $31,336 $31,495 $29,657
------- ------- ------- ------- -------
Costs and expenses:
Manufacturing and other costs
of sales..................... 9,349 9,079 19,392 18,529 17,854
Selling, general and
administrative expenses...... 2,899 2,665 5,656 5,373 5,027
Restructuring and other
charges...................... -- 1,980 1,980 327 --
Research & development
expenditures................. 1,629 1,575 3,118 2,930 2,572
Depreciation expense.......... 1,143 1,084 2,255 2,394 2,367
Interest expense, net......... 85 92 215 136 211
------- ------- ------- ------- -------
Total costs and expenses..... $15,105 $16,475 $32,616 $29,689 $28,031
------- ------- ------- ------- -------
Earnings (loss) before income
taxes......................... 661 (1,684) (1,280) 1,806 1,626
Income tax provision
(benefit)..................... 207 (506) (373) 642 568
------- ------- ------- ------- -------
Net earnings (loss)............ $ 454 $(1,178) $ (907) $ 1,164 $ 1,058
------- ------- ------- ------- -------
Pro Forma Combined Per Share
Data:
Net earnings (loss) per common
share
Basic......................... $ 0.65 $ (1.72) $ (1.31) $ 1.71 $ 1.56
======= ======= ======= ======= =======
Diluted....................... $ 0.62 $ (1.72) $ (1.31) $ 1.67 $ 1.52
======= ======= ======= ======= =======
Weighted average common shares
outstanding
Basic......................... 703.5 684.1 690.3 680.3 677.2
======= ======= ======= ======= =======
Diluted....................... 728.4 684.1 690.3 697.6 694.3
======= ======= ======= ======= =======
Dividends paid per share....... $ 0.24 $ 0.24 $ 0.48 $ 0.48 $ 0.46
======= ======= ======= ======= =======
<CAPTION>
July 3, 1999
-------------
(in millions)
<S> <C> <C> <C> <C> <C>
Pro Forma Combined Balance
Sheet Data:
Total assets................... $34,132
Working capital................ 4,933
Long-term debt and redeemable
preferred securities.......... 3,603
Total debt and redeemable
preferred securities.......... 5,480
Total stockholders' equity..... 15,524
</TABLE>
11
<PAGE>
Comparative Per Share Data
The following table sets forth certain historical per share data of Motorola
and General Instrument and combined per share data on an unaudited pro forma
basis after giving effect to the merger on a pooling of interests basis of
accounting for the six month period ended July 3, 1999 and for the years ended
December 31, 1998, 1997 and 1996. You should also read the selected historical
consolidated financial data and the unaudited selected pro forma combined
financial data included elsewhere in this proxy statement/prospectus. The pro
forma financial data does not necessarily indicate the operating results that
would have been achieved had the merger been completed as of the beginning of
the periods presented and should not be construed as representative of future
operations.
<TABLE>
<CAPTION>
Six Months Year Ended December
Ended 31,
July 3, ----------------------
1999 1998 1997 1996
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Historical--Motorola:
Net earnings (loss) per share
Basic.................................... $ 0.63 $(1.61) $ 1.98 $ 1.95
Diluted.................................. $ 0.61 $(1.61) $ 1.94 $ 1.90
Book value per common share (1) (at period
end)...................................... $22.53 $20.33 $22.21 $19.88
<CAPTION>
Six Months Year Ended December
Ended 31,
June 30, ----------------------
1999 1998 1997 1996
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Historical--General Instrument:
Net earnings (loss) per share
Basic (5)................................ $ 0.44 $ 0.35 $(0.11) $(0.65)
Diluted (5).............................. $ 0.41 $ 0.33 $(0.11) $(0.65)
Book value per common share (1) (at period
end)...................................... $10.87 $ 9.78 $ 8.19 N/A
<CAPTION>
Six Months Year Ended December
Ended 31,
July 3, ----------------------
1999 1998 1997 1996
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Pro Forma and Equivalent Pro Forma Combined
Net Earnings (Loss) Per Common Share
Pro forma combined net earnings (loss) per
Motorola
common share
Basic.................................... $ 0.65 $(1.31) $ 1.71 $ 1.56
Diluted.................................. $ 0.62 $(1.31) $ 1.67 $ 1.52
Equivalent pro forma combined net earnings
(loss) per General Instrument common share
(3)
Basic.................................... $ 0.37 $(0.75) $ 0.98 $ 0.90
Diluted.................................. $ 0.36 $(0.75) $ 0.96 $ 0.87
Pro forma combined weighted average common
shares outstanding (in millions)
Basic.................................... 703.5 690.3 680.3 677.2
Diluted.................................. 728.4 690.3 697.6 694.3
Pro Forma Combined Book Value Per Common
Share
(at Period End) (4):
Pro forma combined book value per Motorola
common share (2).......................... $21.95 $19.93
Equivalent pro forma combined book value
per
General Instrument common share (3)....... $12.62 $11.46
Pro forma combined common shares
outstanding at period end (in millions)... 707.2 698.1
</TABLE>
12
<PAGE>
- --------
(1) Historical book value per common share is computed by dividing total
stockholders' equity by the number of common shares outstanding at the end
of each period.
(2) Pro forma combined book value per common share is computed by dividing pro
forma stockholders' equity by the pro forma number of shares of common
stock outstanding of the combined company.
(3) The equivalent pro forma combined net earnings (loss) per share and
equivalent pro forma combined book value per General Instrument common
share are calculated by multiplying the respective pro forma combined
Motorola share amounts by the exchange ratio of 0.575 shares of Motorola
common stock for each share of General Instrument common stock.
(4) Adjusted to reflect pro forma adjustments. See "Notes to Unaudited Pro
Forma Combined Financial Statements" at page 62.
(5) Prior to the Distributions, General Instrument did not have its own capital
structure, and pro forma per share information has been presented for the
years ended December 31, 1997 and 1996. The pro forma weighted-average
number of shares outstanding used in the pro forma per share calculation
for 1996 equaled the number of common shares issued on the date of the
Distributions, and for 1997, included the number of common shares issued on
the date of the Distributions plus the actual share activity during the
periods subsequent to the Distributions. Further, since the computation of
diluted loss per share is anti-dilutive for the years ended December 31,
1997 and 1996, the amounts reported for pro forma basic and diluted loss
per share are the same.
13
<PAGE>
Comparative Per Share Market Price and Dividend Information
The following table sets forth the high and low sale prices for a Motorola
share and for a General Instrument share, and the dividends declared for the
periods indicated. The prices are as reported on the NYSE Composite Transaction
Tape, based on published financial sources. Because the General Instrument
shares have been publicly traded only since July 24, 1997, market prices of
General Instrument shares are not available before that time.
<TABLE>
<CAPTION>
Motorola General Instrument
Common Stock Common Stock
---------------------------- -----------------------------
Cash Cash
Dividend Dividend
High Low Per Share High Low Per Share
------- ------- --------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year 1996:
First Quarter......... $59 1/8 $44 3/4 $.12 -- -- --
Second Quarter........ 67 1/8 50 5/8 .12 -- -- --
Third Quarter......... 68 1/2 46 3/4 .12 -- -- --
Fourth Quarter........ 63 5/8 44 1/8 .12 -- -- --
Fiscal Year 1997:
First Quarter......... $69 3/4 $ 54 $.12 -- -- --
Second Quarter........ 78 15/16 54 7/8 .12 -- -- --
Third Quarter......... 90 1/2 66 .12 $21 1/2 $ 16 --
Fourth Quarter........ 75 3/16 54 1/8 .12 19 1/8 12 5/8 --
Fiscal Year 1998:
First Quarter......... $65 7/8 $ 52 $.12 $ 22 $16 7/16 --
Second Quarter........ 61 5/8 48 9/16 .12 28 3/4 19 3/4 --
Third Quarter......... 56 3/8 39 1/16 .12 29 1/2 16 11/16 --
Fourth Quarter........ 64 5/16 38 3/8 .12 36 15/16 17 1/2 --
Fiscal Year 1999:
First Quarter......... $77 3/8 $62 9/16 $.12 $ 41 $28 1/8 --
Second Quarter........ 96 11/16 72 5/8 .12 47 7/8 30 1/4 --
Third Quarter (through
October 7, 1999)..... 101 1/2 82 .12 54 7/16 40 3/8 --
</TABLE>
Motorola common stock is currently traded on the New York Stock Exchange
under the symbol "MOT." Motorola common stock is also listed and traded on the
Chicago, London and Tokyo stock exchanges. General Instrument common stock is
currently traded on the New York Stock Exchange under the symbol "GIC."
Because the exchange ratio in the merger is fixed and because the market
price of Motorola common stock is subject to fluctuation, the market value of
the Motorola shares that the General Instrument stockholders will receive in
the merger may increase or decrease before and after the special meeting. We
urge General Instrument stockholders to obtain current market quotations for
Motorola common stock. We cannot give any assurance as to the future prices or
markets for Motorola common stock.
On September 10, 1999, the last trading day prior to the date on which press
reports of a possible transaction were published, the closing sale price of a
Motorola share was $98 3/4, and the closing sale price of a General Instrument
share was $52 1/2. On September 14, 1999, the last trading day prior to the
public announcement of the merger agreement, the closing sale price of a
Motorola share was $93 3/16, and the closing sale price of a General Instrument
share was $50 1/2. On October 7, 1999, the most recent practicable date prior
to the printing of this proxy statement/prospectus, the closing price of a
Motorola share was $91 11/16, and the closing price of a General Instrument
share was $50 3/16. We urge you to obtain current market quotations prior to
making any decision with respect to the merger.
14
<PAGE>
RISK FACTORS RELATING TO THE MERGER
You should carefully consider the following important factors, in addition
to those discussed in the documents that we have filed with the SEC which we
have incorporated by reference in this proxy statement/prospectus, to determine
whether to vote for the proposals relating to the merger.
Motorola and General Instrument May Encounter Difficulties in Integrating
Operations and May Not Achieve Strategic Objectives, Cost Savings and Other
Benefits.
The merger will combine two companies that have previously operated
independently. We expect to realize strategic and other benefits as a result of
the merger, including, among other things, the integration of key technologies
necessary to bring converged voice, video and data networking to consumers and
the accelerated roll-out of advanced services over hybrid fiber coax networks.
We discuss these benefits and others in this document under "The Merger--
Reasons for the Merger." However, we cannot predict with certainty whether, or
to what extent, we will realize these benefits. The following are factors that
may prevent us from realizing these benefits:
. a substantial demand for interactive broadband access solutions
utilizing hybrid fiber coax networks may not continue to develop as much
or as rapidly as we expect;
. we may have to alter sales and marketing campaigns to gain marketplace
acceptance of the strategy of providing converged interactive voice,
video, data and Internet access solutions over cable networks, including
in particular our product solutions in this environment;
. development and deployment of next-generation network equipment may
require more technical support than Motorola and General Instrument
currently have employed or contracted;
. changes in technology may increase the number of competitors that
Motorola faces after the merger or may require significant capital
expenditures to provide competitive services;
. other manufacturers that compete with Motorola that currently market
networks compatible with General Instrument products may not continue to
do so; and
. an increase in the number of competitors serving these markets may make
it more difficult to attract and retain necessary personnel or to obtain
and retain customers;
Any of these factors could cause actual results to differ materially from
our expectations.
We also expect to realize certain cost savings and other financial and
operating benefits as a result of the merger. However, we cannot predict with
certainty whether these cost savings and benefits will occur, or the extent to
which they actually will be achieved. There are a large number of systems that
may be integrated, including management information, purchasing, accounting and
finance, sales, billing, payroll and benefits and regulatory compliance. The
integration of General Instrument and the multimedia group business of
Motorola's Internet and Networking Group will also require significant
attention from management. The diversion of management attention and any
difficulties associated with integrating General Instrument into Motorola could
have a material adverse effect on the revenues, the levels of expenses and the
operating results of Motorola after the merger and the value of Motorola
shares.
Value of Motorola Shares to Be Received in the Merger Will Fluctuate
The number of Motorola shares to be received in the merger for each General
Instrument share is fixed. Therefore, because the market price of Motorola
shares is subject to fluctuation, the value at the time of the merger of the
Motorola shares to be received by General Instrument stockholders will depend
on the market price of Motorola shares at that time. There can be no assurance
as to the value of Motorola shares at that time.
15
<PAGE>
The merger may occur at a date later than the date of the special meeting,
and there can be no assurance that the market price of Motorola shares on the
date of the special meeting will reflect the market price of Motorola shares at
the time of the merger. The market price of Motorola shares has been, and may
continue to be, volatile. In addition to conditions that affect the market for
stocks of high technology companies generally, factors such as new product
announcements by Motorola or its competitors, quarterly fluctuations in
Motorola's operating results and challenges associated with integration of
businesses may have a significant impact on the market price of Motorola
shares. These conditions could cause the price of Motorola shares to fluctuate
substantially over short periods. We discuss and refer to other factors
affecting the market price of Motorola shares under "Special Note Regarding
Forward-Looking Statements." For historical and current market prices of
Motorola shares, see "Summary--Comparative Per Share Market Price and Dividend
Information."
16
<PAGE>
THE SPECIAL MEETING
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from General Instrument stockholders for use at the
General Instrument special meeting. This proxy statement/prospectus is also
furnished to General Instrument stockholders as a prospectus in connection with
the issuance of Motorola shares in the merger. This proxy statement/prospectus
and accompanying form of proxy are first being mailed to General Instrument
stockholders on or about [ ], 1999.
Time and Place; Purposes
The special meeting will be held on [ ], at 10:00 a.m., at
, [ ], Pennsylvania. At that meeting, General Instrument
stockholders will be asked to vote on the proposal to approve and adopt the
merger and the merger agreement.
Record Date
General Instrument has established the close of business on [
], 1999, as the record date to determine General Instrument stockholders
entitled to vote at the special meeting. At the close of business on the record
date, [ ] General Instrument shares were outstanding and entitled to
vote at the special meeting, and were held by approximately [ ] record
holders. The General Instrument shares constitute the only outstanding class of
General Instrument voting securities. Each General Instrument share is entitled
to one vote on the merger and merger agreement. Votes may be cast at the
meeting in person or by proxy.
Quorum
The presence at the special meeting, either in person or by proxy, of a
majority of the General Instrument shares outstanding on the record date is
necessary to constitute a quorum to transact business at that meeting. If a
quorum is not present, it is expected that the special meeting will be
adjourned or postponed in order to solicit additional proxies.
Abstentions and "broker non-votes" will be counted for the purpose of
determining whether a quorum is present. Broker non-votes are shares held by
brokers or nominees on behalf of customers that are represented at the meeting
but with respect to which the broker or nominee has not been instructed how to
vote. Brokers holding General Instrument shares in street name for customers
are prohibited from voting those customers' shares regarding the merger and
merger agreement in the absence of specific instructions from those customers.
Vote Required
Approval and adoption of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the General Instrument shares
outstanding on the record date. Failure to vote, abstentions and broker non-
votes will not be deemed to be cast either "For" or "Against" the merger
agreement and the merger. However, because approval and adoption of the merger
agreement and the merger requires the affirmative vote of the holders of a
majority of the outstanding General Instrument shares, the failure to vote,
abstentions and broker non-votes will have the same effect as a vote "Against"
the merger and the merger agreement.
General Instrument's directors and executive officers owned, as of the
record date, [ ] General Instrument shares, which represented less
than 1% of the outstanding General Instrument shares. As a condition to
Motorola's willingness to enter into the merger agreement, Liberty Media
Corporation has agreed to vote its General Instrument shares "For" the merger
and the merger agreement. The voting agreement is described more fully under
"The Merger Agreement--The Voting Agreement." The number of General Instrument
shares Liberty Media owned as of the record date was [31,356,000] which
represented approximately [18.1]% of the
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outstanding General Instrument shares. At that time Liberty Media also held
warrants for an additional
[21,356,000] General Instrument shares, of which warrants for [4,928,000]
shares were vested. The General Instrument shares issuable pursuant to these
warrants cannot be voted unless Liberty Media elects to exercise the warrants.
Liberty Media has agreed to vote any General Instrument shares it receives
pursuant to the exercise of the warrants in favor of the merger.
Proxies
General Instrument shares represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be voted in accordance
with instructions indicated on the proxies. Except for the broker non-votes, if
no instructions are indicated, those proxies will be voted "For" approval and
adoption of the merger and the merger agreement, and as determined by the
General Instrument Board as to any other matter that may properly come before
the special meeting. In the event that a quorum is not present at the time the
special meeting is convened, or if for any other reason General Instrument
believes that additional time should be allowed for the solicitation of
proxies, General Instrument may postpone the meeting or may adjourn the meeting
with or without a vote of stockholders. If General Instrument proposes to
postpone or adjourn the special meeting by a vote of stockholders, the persons
named in the enclosed form of proxy will vote all General Instrument shares for
which they have voting authority in favor of a postponement or adjournment.
However, such persons will not vote any General Instrument shares for which
they have been instructed to vote against the merger and the merger agreement
in favor of that postponement or adjournment.
Any General Instrument stockholder who executes and returns a proxy may
revoke it at any time prior to the voting of the proxies by giving written
notice to the Secretary of General Instrument, by executing a later dated proxy
or by attending the special meeting and voting in person.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to General Instrument Corporation,
101 Tournament Drive, Horsham, Pennsylvania 10944, Attention: Secretary. A
proxy appointment will not be revoked by death or incapacity of the General
Instrument stockholder executing the proxy unless, before the shares are voted,
notice of such death or incapacity is filed with General Instrument's Secretary
or other person responsible for tabulating votes on General Instrument's
behalf.
Your attendance at the special meeting will not by itself constitute
revocation of your proxy--you must also vote in person at the special meeting.
If you instructed your broker to vote your General Instrument shares, you must
follow the broker's directions in order to change your vote.
General Instrument will pay the cost of soliciting proxies. In addition to
solicitation by mail, General Instrument's directors, officers and employees
may solicit proxies by telephone, fax, telegram or in person. Arrangements will
also be made with brokerage houses and other nominees and fiduciaries for
forwarding solicitation material to the beneficial owners of stock held of
record by those persons, and General Instrument will reimburse those
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses. General Instrument has retained Morrow & Co. to assist in the
solicitation of proxies for a fee not to exceed [ ], plus expenses.
Voting General Instrument 401(k) Stock
Participants in the General Instrument 401(k) plan will separately receive
voting instructions with respect to the General Instrument shares allocated to
their accounts. The plan provides that in voting these General Instrument
shares the participant shall consider the long-term interest of all current
participants. Each participant shall direct the special fiduciary under the
plan as to the manner of voting of the General Instrument shares. The special
fiduciary will instruct the trustee to vote all General Instrument shares for
which the special fiduciary received directions from participants in accordance
with such participants' directions; provided, however, that, if the special
fiduciary determines that the manner of voting is not proper or contrary to the
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provisions of the Employee Retirement Income Security Act of 1974, as amended,
the special fiduciary will disregard the direction of the participant and
assume responsibility for voting the General Instrument shares. The special
fiduciary shall direct the trustee to vote all General Instrument shares for
which the special fiduciary has not received timely voting instructions in the
special fiduciary's sole discretion. The trustee will vote these General
Instrument shares in accordance with directions received from the special
fiduciary.
After having been submitted to the trustee, a voting instruction form may be
revoked by the person giving it at any time before it is exercised, by
submitting either a written notice of revocation to the trustee or a voting
instruction form to the trustee having a later date.
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THE MERGER
Structure of the Merger
A wholly owned subsidiary of Motorola formed for the purpose of the merger
("Merger Sub") will merge with and into General Instrument, with General
Instrument being the surviving corporation in the merger and becoming a wholly
owned subsidiary of Motorola. In the merger, each share of common stock, par
value $0.01 per share, of General Instrument outstanding will be exchanged for
0.575 (the "Exchange Ratio") of a Motorola share. No fractional Motorola shares
will be issued in the merger, and cash equal to the value of any fraction of a
share will be paid in lieu thereof. All General Instrument shares held in the
treasury of General Instrument will be canceled.
The merger will become effective when a Certificate of Merger is filed with
the Secretary of State of Delaware or at such other time as will be specified
in the Certificate of Merger (the "Effective Time"). The Effective Time will
occur as soon as practicable after the last of the conditions in the merger
agreement has been satisfied or waived. We expect the merger to occur early in
the first quarter of 2000. Because the merger is subject to governmental
approvals, however, we cannot predict the exact timing.
Background
Motorola and General Instrument have for a number of years been leading
participants in the telecommunications and cable equipment industries and
suppliers to common customers. As such, the companies were familiar with each
other's business, products and technologies. As part of their growth strategies
in light of convergence in access and delivery of systems for high-speed data,
video and telephony services, each of Motorola and General Instrument has
considered opportunities for potential acquisitions, joint ventures and other
strategic alternatives.
In June of 1999, senior executives from Motorola and General Instrument met
to explore the desirability of an alliance or business combination in light of
industry developments and the companies' respective strategies. Thereafter,
management of each company formed small work teams to meet over the following
few weeks to pursue whether a common basis existed for an alliance or business
combination. During the following weeks, these teams, together with their
advisors, conducted due diligence investigations of the other's respective
businesses. As part of this process, in July 1999, senior representatives of
Motorola and General Instrument met to review the findings of their work teams
and to determine whether to continue to explore the possibility of an alliance
or business combination. In July 1999, representatives of General Instrument
and Motorola each contacted representatives of Liberty Media Corporation, the
largest stockholder of General Instrument, regarding a possible transaction
involving Motorola and General Instrument. Representatives of Liberty Media
were updated from time to time thereafter as to the status of discussions.
In early August 1999, at a regularly scheduled board meeting, Motorola
management reviewed with the Motorola Board the strategic rationale for a
possible transaction to enhance Motorola's integrated communications solutions
in broadband networks. While no specific transaction was presented for
approval, General Instrument was mentioned as a possible candidate for an
alliance or business combination and the Motorola Board was informed of the
preliminary discussions with General Instrument.
On August 5, 1999, at a regularly scheduled meeting of the General
Instrument Board, General Instrument management reviewed with the Board
companies which had expressed a current interest in a strategic relationship
with General Instrument. Motorola was discussed as a possible candidate for a
business combination, and the Board was briefed on the discussions held with
Motorola. The General Instrument Board indicated its approval to proceed with
discussions with Motorola and asked to be kept informed of further
developments.
Thereafter, in August 1999, representatives of Motorola and General
Instrument continued to exchange information and engaged in discussions
concerning the structure and terms of a possible stock-for-stock merger of
General Instrument with Motorola.
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During the week of September 6, 1999, Motorola executives briefed
individual members of the Motorola Board regarding discussions concerning the
possible transaction with General Instrument.
On September 7, 1999, senior management of Motorola and General Instrument
met, together with their financial advisors, to discuss the terms of a
possible business combination. On September 8, 1999, Motorola's legal advisors
provided a draft form of merger agreement and voting agreement to General
Instrument's legal advisors. On September 8 and 9, 1999, representatives from
Motorola and General Instrument met to continue their due diligence review of
each other's business and to discuss the structure and terms of a possible
stock-for-stock transaction between the parties. Over the succeeding days,
Motorola and General Instrument, together with their advisors, negotiated the
terms of the definitive merger agreement. During the same period, Motorola,
General Instrument and Liberty Media, together with their respective advisors,
negotiated the terms of the definitive voting agreement.
On September 11, 1999, a special telephonic meeting of the General
Instrument Board was convened. General Instrument's senior management reviewed
for the General Instrument Board the status of discussions with Motorola and
summarized the strategic reasons for the proposed transaction. General
Instrument's senior management also reported to the General Instrument Board
the due diligence that had been conducted by the senior management and
financial and legal advisors of General Instrument with respect to Motorola.
At this meeting, the General Instrument Board also reviewed the financial
aspects of the proposed transaction with its financial advisors, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and CIBC World Markets Corp.
Representatives of Simpson Thacher & Bartlett, General Instrument's outside
legal advisors, also advised the General Instrument Board of its legal duties
with respect to a potential strategic merger transaction with Motorola and
provided an overview of the principal issues of the draft merger agreement
proposed by Motorola. After discussion, the General Instrument Board directed
senior management and its advisors to continue discussions with Motorola and
to continue negotiations concerning a definitive agreement with respect to a
business combination.
On the evening of September 14, 1999, a special meeting of the General
Instrument Board was convened. Senior management of General Instrument
reported on the progress of General Instrument's discussions with Motorola and
made a presentation with respect to their recommendation that the General
Instrument Board approve the transaction with Motorola. The General Instrument
Board reviewed the financial aspects of the proposed transaction with Merrill
Lynch and CIBC World Markets. At the meeting, Merrill Lynch and CIBC World
Markets rendered their oral opinions, confirmed by subsequent separate written
opinions, that, as of the date of the opinions and based upon and subject to
the matters stated in the opinions, the exchange ratio was fair from a
financial point of view to the holders of General Instrument shares. General
Instrument's legal advisors reviewed for the General Instrument Board the
terms and provisions of the merger agreement, the voting agreement and related
agreements that had been negotiated with Motorola and its legal advisors. In
addition to discussing these terms, legal counsel advised the General
Instrument Board with respect to their fiduciary duties in connection with the
proposed strategic merger. The General Instrument Board was also informed of
the matters related to the transaction in which the members of the General
Instrument Board and senior management had an interest which could be said to
be different from or in addition to the interests of General Instrument
stockholders in general. See "-- Interests of Certain Persons in the Merger."
After discussion and consideration, the General Instrument Board voted
unanimously to approve the merger, the merger agreement, the voting agreement
and all of the related transactions and to recommend to the General Instrument
stockholders that they adopt the merger agreement.
On September 14, 1999, the Motorola Board approved the merger agreement and
the voting agreement.
Reasons for the Merger
Motorola and General Instrument believe that the merger will enable the
combined company, with its larger and more diversified portfolio of products
and resources, to more effectively compete and to achieve a number of key
strategic objectives:
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The merger will enhance the combined company's ability to lead the
convergence of video, voice and data services over communications networks by
significantly expanding its resources in the growing market for broadband
access solutions and enhancing the combined company's ability to provide end-
to-end solutions to customers.
. The market for broadband/cable access equipment is growing. Voice, data,
and video traditionally have been delivered as separate services on
separate networks. These networks are converging and cable operators are
expected to increasingly seek to offer consumers "bundled services"
including digital cable television, high-speed Internet access and
telephony over broadband fiber coaxial networks. As this convergence of
services continues, we believe that the equipment in the network will
also converge so that cable operators can offer more services to their
customers with greater simplicity and at lower costs. Operators' ability
to offer world-class service will depend on the infrastructure they
employ. In this environment, we expect to be able to make more
complementary network components and to offer end-to-end solutions--
equipment which transmits, regulates access to and delivers to the end-
user the "bundled" video, data and telephony services. Consolidation
among cable service operators in the United States has resulted in
equipment customers with the resources to market the converged services.
The most visible example of this trend is AT&T's completed acquisition
of TCI, one of the largest cable operators in the United States, and its
planned acquisition of Media One, another large cable operator. AT&T has
stated that it plans to provide data and telephony services over cable
networks in addition to video entertainment. International demand is
also expected to increase as international operators build or upgrade
networks to deliver the kind of enhanced broadband services being
developed domestically.
. The combination of General Instrument with Motorola will create a
supplier that is well positioned to meet the challenges of the growing
market. As the market for broadband cable access equipment grows,
telecommunications customers are expected to demand new and better
equipment in order to be able to market the mix of systems and
capabilities sought by the end user. Next generations of broadband
access equipment are expected not only to provide access to converged
services, but will also act as a "residential gateway" to applications
within the home, including multiple phone lines, personal computers,
televisions and other consumer devices. The merger will better enable
the combined company to meet the needs of its customers. General
Instrument is a leader in the design and development of systems and
equipment that enable cable operators to provide video entertainment
services, including interactive digital video, data and video services.
Motorola is a leader in cable modems and head-end equipment for data
services as well as the leader in equipment for voice telephony over
cable. The combination of Motorola's research and development expertise,
technology, financial resources, manufacturing capabilities,
semiconductor competencies, brand recognition and distribution
strengths, both domestically and internationally, with General
Instrument's broadband product portfolio and strong relationships with
cable operators, should better enable the combined company to meet the
challenges of providing end-to-end network solutions through next
generation cable network equipment, residential gateways and consumer
devices.
. The merger will enable the combined company to be a leader in the next
generation of telecommunications networks. As video, data and telephony
services are converging, so, too, telecommunications networks as a whole
are expected to converge as a result of deregulation, high quality
digital network availability and Internet growth. We believe that this
trend will yield a new telecommunications architecture, with
technologies based on Internet protocol, that will result in
dramatically lower costs and the rapid creation of new services for
consumers. The merger will enable General Instrument's broadband
portfolio to include Motorola's technological expertise in the wireless
networks area. Motorola has already announced its plan to "bring the
Internet to wireless" through a next generation architecture. We expect
that the merger will bring us closer to this goal. In addition, Motorola
and General Instrument are each involved in various complementary
product development alliances and joint ventures which we will continue
to pursue with our greater combined resources.
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The merger will allow General Instrument to leverage Motorola's global presence
and to strengthen relationships with key customers.
. By merging with Motorola, General Instrument will be able to offer to
its customers globally the benefits of Motorola's scale, financial and
manufacturing resources and brand recognition. Outside of the United
States and Canada, most households have not been connected to broadband
networks. As the international market for broadband cable access
equipment grows, General Instrument will benefit from Motorola's
international resources including worldwide sales, customer support and
research and development. Motorola's local manufacturing capabilities
will open up new markets for General Instrument's products with improved
costs and speed to market. Additionally, the Motorola brand name has
worldwide reach.
. The combination of General Instrument and Motorola will strengthen our
relationships with key customers. As the telecommunications industry
consolidates, providers are increasingly looking for end-to-end
suppliers that can expand product offerings, reduce costs and improve
quality and with the resources that can enable these telecommunications
providers to deliver world-class services. These customers increasingly
operate both broadband and wireless businesses, as well as traditional
wireline services. Many of these customers are already customers of
Motorola and General Instrument. Through the merger, we expect to be
able to offer to our customers globally the benefits of Motorola's
scale, financial resources and brand recognition.
The combined company would realize synergy opportunities resulting from the
merger.
. While, as outlined above, the principal objectives of the merger relate
to revenue growth, increased stockholder value and developing the
technologies to stay competitive in a changing telecommunications
market, the merger should also result in cost-savings
opportunities. These savings will result from efforts such as
consolidation of purchasing, manufacturing rationalization, and the
integration of sales, service and general administrative functions.
While Motorola expects the merger to be slightly dilutive to its
earnings per share through 2000 before including any potential
synergies, and to strengthen its earnings per share thereafter, Motorola
believes that sufficient opportunities for synergies, from revenue
growth and cost savings, exist to offset any dilution.
Information and Factors Considered by the General Instrument Board
In connection with the General Instrument Board's approval of the merger
agreement and the transactions contemplated thereby and its determination to
recommend that the General Instrument stockholders approve and adopt the merger
agreement and the merger, the General Instrument Board considered the following
material factors:
. the information and presentations by management of General Instrument
concerning General Instrument's and Motorola's respective businesses,
assets, management, competitive position and prospects;
. the financial condition, cash flows and results of operations of General
Instrument and Motorola, on both an historical and prospective basis;
. that the Exchange Ratio, based on the closing price of Motorola shares
on September 10, 1999 (the trading day immediately prior to date on
which the press reports regarding a transaction with Motorola were first
published), represented
--a 62% premium to the 12-month average General Instrument share price
through September 10, 1999;
--an 8.2% premium to the closing price of General Instrument shares on
September 10, 1999; and
--a 7.3% premium to the 52-week high closing price for General
Instrument shares through September 10, 1999;
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. the fact that the value, as of the Effective Time, of the Motorola
shares to be received by General Instrument stockholders may increase or
decrease as a result of fluctuations in the price of the Motorola shares
and that any such increase or decrease in value will not be limited by
any "collar" arrangement;
. the opinions of Merrill Lynch and CIBC World Markets to the effect that,
as of the date of the opinions and based upon and subject to the matters
and limitations set forth in the opinions, the Exchange Ratio was fair
from a financial point of view to the holders of General Instrument
shares, and the financial presentation made by Merrill Lynch and CIBC
World Markets to the General Instrument Board in connection with the
delivery of the opinions;
. the opportunity for the General Instrument stockholders to participate,
as holders of Motorola shares, in a larger, more diversified,
competitive company in the telecommunications equipment industry,
including participation in the value that may be generated through the
combination of the two companies;
. the fact that the markets, capital investment, research and development
expertise, personnel and other resources of General Instrument and
Motorola would allow the combined company to focus on new technology and
growth in markets;
. the strategic alternatives available to General Instrument in the
rapidly changing industry environment, including remaining an
independent company;
. the absence of any other firm proposal to engage in a business
combination involving General Instrument at the time of the General
Instrument Board meeting held to approve the merger agreement on
September 14, 1999 despite various contacts between third parties and
General Instrument's senior management and financial advisors;
. the General Instrument Board's belief, after reviewing the contacts
between third parties and General Instrument with senior management and
its advisors, that the likelihood of receiving a third party acquisition
proposal that was financially superior to the merger was fairly low;
. the ability, subject to specified conditions, (a) of General Instrument
to provide information to, and negotiate with, a third party which has
made an unsolicited superior acquisition proposal and (b) of the General
Instrument Board to withdraw its recommendation of the merger if such
superior acquisition proposal is made;
. the General Instrument Board's belief, after review of the termination
fee with its advisors, that the amount of the termination fee would not
meaningfully impair the possibility of a competing transaction;
. the limited number of instances in which a termination fee would be
payable by General Instrument;
. the terms of General Instrument's existing agreements and arrangements
regarding Next Level Communications and the intention of General
Instrument and, following the merger, Motorola to effect the initial
public offering of Next Level;
. the other terms and conditions of the merger agreement, including the
limited number of closing conditions which provides increased certainty
that the merger will be completed;
. the fact that the merger is intended to be a tax-free exchange to
General Instrument stockholders;
. the fact that the merger is intended to qualify for pooling-of-interests
accounting treatment;
. the willingness of Liberty Media to vote in favor of the merger and the
terms and conditions of the voting agreement;
. the impact of the merger on employees, including provisions of the
merger agreement intended to protect employee benefits and to encourage
the retention of officers and employees;
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. historical market prices and trading information with respect to the
General Instrument shares and the Motorola shares and General
Instrument's relative contribution to the combined enterprise; and
. current industry, economic and market conditions.
The discussion of the information and factors considered by the General
Instrument Board is not intended to be exhaustive. In view of the variety of
material factors considered in connection with its evaluation of the merger,
the General Instrument Board did not find it practicable to, and did not
quantify or otherwise assign relative weights to, the specific factors
considered in reaching its determination. In addition, the General Instrument
Board did not undertake to make any specific determination as to whether any
particular factor was favorable or unfavorable to General Instrument, but,
rather, conducted an overall analysis of the factors described above. In
considering these factors, individual members of the General Instrument Board
may have given different weights to different factors. The General Instrument
Board considered all these factors as a whole, and overall considered the
factors to be favorable to and to support its determination. For a discussion
of the interests of some members of General Instrument's management and the
General Instrument Board, see "--Interests of Certain Persons in the Merger."
Recommendation of the General Instrument Board
For the reasons discussed above, the General Instrument Board has determined
that the merger is advisable and fair to, and in the best interests of, General
Instrument and the General Instrument stockholders, has adopted the merger
agreement and approved the merger and the other transactions contemplated by
the merger agreement and recommends that the General Instrument stockholders
vote FOR the approval and adoption of the merger and the merger agreement.
Opinions of Financial Advisors to General Instrument
Merrill Lynch. General Instrument retained Merrill Lynch, Pierce, Fenner &
Smith Incorporated to act as a co-financial advisor, with CIBC World Markets
Corp., in connection with the merger. On September 14, 1999, Merrill Lynch
delivered to the General Instrument Board an oral opinion, subsequently
confirmed by delivery of a written opinion dated September 14, 1999, to the
effect that, as of that date, and based upon and subject to the factors and
assumptions set forth in the opinion, the Exchange Ratio was fair, from a
financial point of view, to the holders of General Instrument shares.
The full text of Merrill Lynch's opinion, dated September 14, 1999, which
sets forth the assumptions made, matters considered, and qualifications and
limitations on the review undertaken by Merrill Lynch, is attached as Appendix
B to this document and is incorporated into this document by reference. The
summary of Merrill Lynch's opinion set forth below is qualified in its entirety
by reference to the full text of the opinion. General Instrument stockholders
are urged to read the opinion carefully in its entirety.
Merrill Lynch's opinion was delivered to the General Instrument Board for
its information and is directed only to the fairness, from a financial point of
view, of the Exchange Ratio to the holders of General Instrument shares, does
not address any other aspect of the merger, including the merits of the
underlying decision by General Instrument to engage in the merger, and does not
constitute a recommendation to any General Instrument stockholder as to how the
stockholder should vote as to any matter relating to the merger.
In preparing its opinion to the General Instrument Board, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary set forth below does not purport to be a complete
description of the analyses underlying Merrill Lynch's opinion or the
presentation made by Merrill Lynch to the General Instrument Board. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not
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attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Merrill Lynch believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
factors, or focusing on information presented in tabular format, without
considering all of the analyses and factors or the narrative descriptions of
the analyses, would create a misleading or incomplete view of the process
underlying its opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, General Instrument or Motorola. Any estimates contained in the
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable
than suggested by such analyses. Additionally, estimates of the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which such businesses or securities might actually be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. In addition, as described above, Merrill Lynch's opinion was among
several factors taken into consideration by the General Instrument Board in
making its determination to approve the merger agreement and the merger.
Consequently, Merrill Lynch's analyses should not be viewed as determinative of
the decision of the General Instrument Board or General Instrument's management
with respect to the fairness of the Exchange Ratio set forth in the merger
agreement.
In arriving at its opinion, Merrill Lynch, among other things, did the
following:
(1) reviewed publicly available business and financial information
relating to General Instrument and Motorola that Merrill Lynch deemed
to be relevant;
(2) reviewed information, including financial forecasts, relating to the
business, earnings, cash flows, assets, liabilities and prospects of
General Instrument and Motorola furnished to Merrill Lynch by General
Instrument and Motorola;
(3) conducted discussions with members of senior management and
representatives of General Instrument and Motorola concerning the
matters described in clauses (1) and (2) above, as well as their
respective businesses and prospects before and after giving effect to
the merger;
(4) reviewed the market prices and valuation multiples for General
Instrument shares and Motorola shares and compared them with those of
other publicly traded companies that Merrill Lynch deemed to be
relevant;
(5) reviewed results of operations of General Instrument and Motorola and
compared them with those of other publicly traded companies that
Merrill Lynch deemed to be relevant;
(6) compared the proposed financial terms of the merger with the
financial terms of other transactions which Merrill Lynch deemed to
be relevant;
(7) participated in discussions and negotiations among representatives of
General Instrument and Motorola and their financial and legal
advisors;
(8) reviewed the potential pro forma impact of the merger;
(9) reviewed the merger agreement; and
(10) reviewed other financial studies and analyses and took into account
other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch or publicly
available, and has not assumed any responsibility for independently verifying
such
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information and Merrill Lynch has not undertaken an independent evaluation or
appraisal of any of the assets or liabilities of General Instrument or
Motorola. In addition, Merrill Lynch did not assume any obligation to conduct,
nor did it conduct, any physical inspection of the properties or facilities of
General Instrument or Motorola. With respect to the financial forecast
information furnished to or discussed with Merrill Lynch by General Instrument
or Motorola, Merrill Lynch assumed that they had been reasonably prepared and
reflect the best currently available estimates and judgments of the managements
of General Instrument or Motorola as to the expected future financial
performance of General Instrument or Motorola, as the case may be. Merrill
Lynch further assumed that the merger will be accounted for as a pooling of
interests under generally accepted accounting principles and that it will
qualify as a tax-free reorganization for United States federal income tax
purposes.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals, contractual or otherwise, for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the merger. Merrill Lynch did not express any opinion
as to the prices at which the Motorola shares will trade subsequent to the
merger. In connection with the preparation of its opinion, Merrill Lynch was
not authorized by General Instrument or the General Instrument Board to
solicit, nor did Merrill Lynch solicit, third-party indications of interest for
the acquisition of all or any part of General Instrument. Although Merrill
Lynch evaluated the fairness, from a financial point of view, of the Exchange
Ratio, Merrill Lynch was not requested to, and did not, recommend the specific
consideration payable in the merger, which consideration was determined through
negotiations between General Instrument and Motorola and approved by the
General Instrument Board. No other limitation was imposed on Merrill Lynch with
respect to the investigations made or procedures followed by Merrill Lynch in
rendering its opinion.
Pursuant to the terms of Merrill Lynch's engagement, General Instrument has
agreed to pay Merrill Lynch for its financial advisory services in connection
with the merger a fee of $18 million payable in cash upon the closing of the
merger. General Instrument also has agreed to reimburse Merrill Lynch for
reasonable out-of-pocket expenses incurred by Merrill Lynch in performing its
services, including the fees and expenses for legal counsel, and to indemnify
Merrill Lynch and related persons and entities against liabilities, including
liabilities under the federal securities laws, arising out of Merrill Lynch's
engagement.
General Instrument retained Merrill Lynch based upon Merrill Lynch's
experience and expertise. Merrill Lynch is an internationally recognized
investment banking and advisory firm. Merrill Lynch, as part of its investment
banking business, is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
Merrill Lynch and its affiliates have in the past provided financial
services to General Instrument and Motorola and may continue to do so and have
received, and may receive, compensation for the rendering of such services. In
the ordinary course of business, Merrill Lynch and its affiliates may actively
trade in the securities of General Instrument and Motorola for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
CIBC World Markets. The Board of General Instrument retained CIBC World
Markets to act as a co-financial advisor, with Merrill Lynch, in connection
with the merger and to render an opinion as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of General Instrument
shares. At a meeting of the Board of General Instrument on September 14, 1999
held to evaluate the proposed merger, CIBC World Markets delivered an oral
opinion, subsequently confirmed by delivery of a written opinion dated
September 14, 1999, the date of the merger agreement, to the effect that, as of
the date of the opinion and based on and subject to the matters stated in the
opinion, the Exchange Ratio was fair, from a financial point of view, to the
holders of General Instrument shares.
27
<PAGE>
The full text of CIBC World Markets' opinion, dated September 14, 1999,
which describes the assumptions made, procedures followed, matters considered
and limitations on the review undertaken, is attached as Appendix C to this
document and is incorporated into this document by reference. The CIBC World
Markets opinion is addressed to the General Instrument Board and relates only
to the fairness, from a financial point of view, of the Exchange Ratio to the
holders of General Instrument shares, does not address any other aspect of the
proposed merger or any related transaction and does not constitute a
recommendation to any stockholder as to how any stockholder should vote as to
any matter relating to the merger or any other matter. The description of the
CIBC World Markets opinion included in this document is qualified in its
entirety by reference to Appendix C. Holders of General Instrument shares are
urged to read the opinion carefully in its entirety.
In arriving at its opinion, CIBC World Markets, among other things:
(1) reviewed the merger agreement;
(2) reviewed audited financial statements of General Instrument for the
fiscal years ended December 31, 1997 and December 31, 1998, and
audited financial statements of Motorola for the fiscal years ended
December 31, 1997 and December 31, 1998;
(3) reviewed unaudited financial statements of General Instrument for the
six months ended June 30, 1999 and of Motorola for the six months
ended July 3, 1999;
(4) reviewed financial projections for General Instrument and Motorola
prepared by the managements of General Instrument and Motorola;
(5) reviewed the historical market prices and trading volume for General
Instrument shares and Motorola shares;
(6) held discussions with the senior management of General Instrument
with respect to the business, capital requirements and prospects for
future growth of General Instrument and Motorola;
(7) reviewed and analyzed certain publicly available financial data for
companies CIBC World Markets deemed comparable to General Instrument
and Motorola;
(8) performed a discounted cash flow analysis of General Instrument using
assumptions of future performance provided to CIBC World Markets by
the management of General Instrument;
(9) reviewed and analyzed certain publicly available information for
transactions that CIBC World Markets deemed comparable to the merger;
(10) reviewed public information concerning General Instrument and
Motorola; and
(11) performed other analyses and reviewed other information that CIBC
World Markets deemed appropriate.
In rendering its opinion, CIBC World Markets relied upon and assumed,
without independent verification or investigation, the accuracy and
completeness of all of the financial and other information provided to or
discussed with CIBC World Markets by General Instrument, Motorola, and their
respective employees, representatives and affiliates. With respect to forecasts
of future financial condition and operating results of General Instrument and
Motorola provided to or discussed with CIBC World Markets, CIBC World Markets
assumed, at the direction of the managements of General Instrument and
Motorola, without independent verification or investigation, that the forecasts
were reasonably prepared on bases reflecting the best available information,
estimates and judgments of the managements of General Instrument and Motorola.
CIBC World Markets was advised, and therefore assumed, that the merger will
be accounted for as a pooling of interest under generally accepted accounting
principles and that it will qualify as a tax-free reorganization for United
States federal income tax purposes. CIBC World Markets neither made nor
obtained any independent evaluation or appraisal of the assets or liabilities
of General Instrument and Motorola or such
28
<PAGE>
other affiliated entities. CIBC World Markets expressed no opinion as to the
underlying valuation, future performance or long-term viability of General
Instrument and Motorola, or the price at which Motorola shares would trade
subsequent to the announcement or consummation of the merger.
The CIBC World Markets opinion was necessarily based on the information
available to CIBC World Markets and general economic, financial and stock
market conditions and circumstances as they existed and could be evaluated by
CIBC World Markets as of the date of the opinion. No other limitation was
imposed on CIBC World Markets with respect to the investigations made or
procedures followed by CIBC World Markets in rendering its opinion. It should
be understood that, although subsequent developments may affect its opinion,
CIBC World Markets does not have any obligation to update, revise or reaffirm
the opinion.
In its analyses, CIBC World Markets considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of General Instrument and
Motorola. No company, transaction or business used in the CIBC World Markets
analyses as a comparison is identical to General Instrument or Motorola or the
proposed merger, nor is an evaluation of the results of the analyses entirely
mathematical; rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed. The estimates contained in
the CIBC World Markets analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by its analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, the CIBC World Markets analyses and estimates are inherently
subject to substantial uncertainty.
Although CIBC World Markets evaluated the fairness, from a financial point
of view, of the Exchange Ratio, CIBC World Markets was not requested to, and
did not, recommend the specific consideration payable in the merger, which
consideration was determined through negotiations between General Instrument
and Motorola and approved by the General Instrument Board. CIBC World Markets'
opinion and financial analyses were only one of many factors considered by the
General Instrument Board in its evaluation of the proposed merger and should
not be viewed as determinative of the views of the General Instrument Board or
management with respect to the merger or the Exchange Ratio set forth in the
merger agreement.
The summary set forth below is not a complete description of CIBC World
Markets' opinion to the General Instrument Board or the financial analyses
performed and factors considered by CIBC World Markets in connection with its
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances and, therefore, a fairness opinion is not readily
susceptible to summary description. CIBC World Markets believes that its
analyses and the summary set forth below must be considered as a whole and that
selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying CIBC World Markets' analyses and opinion.
As part of CIBC World Markets' investment banking business, CIBC World
Markets is regularly engaged in valuations of businesses and securities in
connection with acquisitions and mergers, underwritings, secondary
distributions of securities, private placements and valuations for other
purposes. In the ordinary course of business, CIBC World Markets and its
affiliates may actively trade securities of General Instrument and Motorola for
their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
Pursuant to the terms of the CIBC World Markets engagement, General
Instrument has agreed to pay CIBC World Markets an aggregate financial advisory
fee of $12 million. In addition, General Instrument has agreed to indemnify
CIBC World Markets and related parties, to the full extent of the law, from and
against certain liabilities and expenses, including liabilities under the
federal securities laws, incurred in connection with its engagement.
29
<PAGE>
Financial Analysis. The following is a summary of the material analyses
performed by Merrill Lynch and CIBC World Markets in connection with their
separate opinions to the General Instrument Board dated September 14, 1999.
Certain of the financial analyses summarized below include information
presented in tabular format. In order to fully understand Merrill Lynch's and
CIBC World Markets' financial analyses, the tables must be read together with
the text of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data set forth below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Merrill Lynch's and CIBC World
Markets' financial analyses.
Selected Companies Analysis.
General Instrument. Merrill Lynch and CIBC World Markets compared
financial, operating and stock market data of General Instrument to
corresponding data of the following publicly traded telecommunications and
cable supplier companies:
<TABLE>
<CAPTION>
Telecom Suppliers Cable Suppliers
----------------- ---------------
<S> <C>
.Lucent Technologies Inc. .ADC Telecommunications, Inc.
.Nortel Networks Corporation .Antec Corporation
.Newbridge Networks Corporation .C-Cube Microsystems, Inc.
.Tellabs, Inc. .Commscope, Inc.
.Scientific-Atlanta, Inc.
</TABLE>
Merrill Lynch and CIBC World Markets reviewed equity value as multiples of
estimated earnings per share for calendar years 1999 and 2000 and book equity,
enterprise value as multiples of estimated calendar years 1999 and 2000 sales,
earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, and earnings before interest and taxes, commonly
referred to as EBIT, and the estimated calendar years 1999 and 2000 price to
earnings ratio as multiples of the estimated five-year median earnings growth
rate. All multiples were based on closing stock prices on September 10, 1999.
Estimated financial data for the selected companies was based on publicly
available research analysts' estimates and estimated financial data for General
Instrument was based on estimates of General Instrument's management. Merrill
Lynch and CIBC World Markets then applied a range of selected multiples for the
selected companies to corresponding data of General Instrument. This analysis
indicated an implied equity reference range for General Instrument of
approximately $35.00 to $43.00 per share.
Motorola. Merrill Lynch and CIBC World Markets also compared financial,
operating and stock market data of Motorola to corresponding data of the
following publicly traded telecommunications companies:
. Alcatel
. Ericsson LM Tel. Co. Ad.
. Harris Corporation
. Lucent Technologies Inc.
. Nokia Corp.
. Nortel Networks Corporation
. Qualcomm Inc.
. Texas Instruments Inc.
Merrill Lynch and CIBC World Markets reviewed equity value as multiples of
estimated earnings per share for calendar years 1999 and 2000 and book equity,
enterprise value as multiples of estimated calendar years 1999 and 2000, sales,
EBITDA and EBIT and the estimated calendar years 1999 and 2000 price to
earnings ratios as multiples of the estimated five-year median earnings growth
rate. All multiples were based on closing stock prices on September 10, 1999.
Estimated financial data for the selected companies and Motorola was based on
publicly available research analysts' estimates. Merrill Lynch and CIBC World
Markets then
30
<PAGE>
applied a range of selected multiples for the selected companies to
corresponding financial data of Motorola. This analysis indicated an implied
equity reference range for Motorola of approximately $95.00 to $115.00 per
share.
None of the selected companies is identical to General Instrument or
Motorola. Accordingly, an analysis of the results of the Selected Companies
Analysis involves complex considerations of the selected companies and other
factors that could affect the public trading value of General Instrument,
Motorola and the selected companies.
Selected Merger and Acquisition Analysis. Using publicly available
information, Merrill Lynch and CIBC World Markets analyzed the implied purchase
prices and transaction multiples paid in the following merger and acquisition
transactions in the telecommunications equipment industry:
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
Alcatel Xylan Corporation
General Electric Co. PLC Reltec Corporation
Lucent Technologies Inc. Ascend Communications, Inc.
ADC Telecommunications, Inc. Teledata Communications Ltd.
Ericsson LM Tel. Co. Ad. Advanced Computer Communications Corporation
Reltec Corporation Positron Fiber Systems Corporation
Cisco Systems, Inc. Summa Four, Inc.
Northern Telecom Ltd. Bay Networks, Inc.
Alcatel Alsthom DSC Communications Corporation
Tellabs, Inc. Coherent Communications Systems Corporation
Ascend Communications, Inc. Cascade Communications Corporation
3Com Corporation U.S. Robotics Corporation
Bay Networks, Inc. Penril DataComm Networks, Inc.'s DSP Modem Business
Cisco Systems, Inc. StrataCom, Inc.
FORE Systems, Inc. ALANTEC Corp.
Bay Networks, Inc. Xylogics, Inc.
3Com Corporation Chipcom Corp.
</TABLE>
Merrill Lynch and CIBC World Markets compared the equity purchase prices in
the selected transactions as multiples of latest 12 months net income, cash
flows and book value, and the transaction values implied by the purchase prices
as multiples of latest 12 months sales, EBITDA and EBIT. All multiples were
based on financial information available at the time the relevant transaction
was announced. Merrill Lynch and CIBC World Markets then applied a range of
selected multiples for the selected transactions to corresponding financial
data of General Instrument. This analysis indicated an implied equity reference
range for General Instrument of approximately $48.00 to $54.00 per share.
No company or transaction used in the above analysis is identical to General
Instrument, Motorola or the proposed merger. Accordingly, an analysis of the
results of the Selected Merger and Acquisition Analysis involves complex
considerations of the companies involved and the transactions and other factors
that could affect the acquisition value of the companies and General
Instrument.
Discounted Cash Flow Analysis. Merrill Lynch and CIBC World Markets
estimated the present value of the stand-alone, unlevered, after-tax free cash
flows that General Instrument could produce over the fiscal years 2000 through
2004 based on two scenarios. The first scenario, the management case, was based
on estimates of the management of General Instrument. The second scenario, the
research analyst case, was based on publicly available research analyst
estimates. Ranges of estimated terminal values were calculated using terminal
multiples of estimated fiscal year 2004 EBITDA of 12.0x to 16.0x, adjusted for
net debt and equity investments. The free cash flows and terminal values were
then discounted to present value using discount rates of 15% to 19%. This
analysis indicated an implied equity reference range for General Instrument of
approximately $50.00 to $58.00 per share, using the management case estimates,
and $42.00 to $48.00 per share, using the research analyst case estimates.
31
<PAGE>
Pro Forma Merger Analysis. Merrill Lynch and CIBC World Markets analyzed the
potential pro forma effect of the merger on Motorola's estimated earnings per
share in fiscal years 1999 and 2000, based on estimates provided by General
Instrument's and Motorola's managements and publicly available research analyst
estimates. Based on the Exchange Ratio of 0.575 in the merger, this analysis
indicated that, without synergies, the proposed merger would be dilutive to
Motorola's earnings per share in fiscal years 1999 and 2000. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Contribution Analysis. Using estimated financial data for General Instrument
and Motorola, Merrill Lynch and CIBC World Markets analyzed the relative
contributions of General Instrument and Motorola to the estimated fiscal years
1999 and 2000 revenue, EBITDA, EBIT and net income of the combined company, as
well as the combined company's assets and book value. This analysis indicated
the following:
<TABLE>
<CAPTION>
General Instrument Motorola
------------------ --------
<S> <C> <C>
Revenue
1999....................................... 6.6% 93.4%
2000....................................... 6.8% 93.2%
EBITDA
1999....................................... 8.0% 92.0%
2000....................................... 7.8% 92.2%
EBIT
1999....................................... 12.5% 87.5%
2000....................................... 11.4% 88.6%
Net Income
1999....................................... 12.7% 87.3%
2000....................................... 12.0% 88.0%
Assets....................................... 6.9% 93.1%
Book Value................................... 12.1% 87.9%
</TABLE>
Based on the Exchange Ratio of 0.575, current stockholders of General
Instrument would own approximately 15.6% of the combined company's equity value
following the merger. General Instrument's and Motorola's relative
contributions to the combined company also indicated, among other things, an
implied exchange ratio range of approximately 0.264 to 0.486 and an implied
equity reference range for General Instrument of approximately $26.07 to $47.98
per share. General Instrument's stock price on September 10, 1999 represented a
premium of between approximately 9.4% and 101.3% to the implied equity
reference range, and the per share price implied by the Exchange Ratio on that
date, $56.78, represented a premium of between 18.3% and 117.8% to the implied
equity reference range.
Other Factors. In the course of preparing their opinions, Merrill Lynch and
CIBC World Markets also reviewed and considered other information and data,
including the following:
. the trading characteristics of General Instrument and Motorola;
. historical market prices and trading volumes for General Instrument
shares and Motorola shares;
. the relationship between movements in General Instrument shares and
Motorola shares, movements in General Instrument shares and movements in
the Telecommunications Equipment Composite Index, the Cable Equipment
Composite Index and the S&P 500 Index and the relationship between
movements in Motorola shares and movements in the Telecommunications
Composite Index and the S&P 500 Index; and
. historical and projected financial data for General Instrument and
Motorola.
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<PAGE>
Accounting Treatment
Motorola and General Instrument anticipate that the merger will be accounted
for as a pooling-of-interests transaction under generally accepted accounting
principles. Under this method of accounting, Motorola stockholders and General
Instrument stockholders will be deemed to have combined their existing common
stock interests by virtue of the exchange of General Instrument shares for
Motorola shares in the merger. Accordingly, the book value of the assets,
liabilities and stockholders' equity of each of Motorola and General
Instrument, as reported on their respective consolidated balance sheets, will
be carried over to the consolidated balance sheet of Motorola after the merger,
and no goodwill will be created. After the merger, Motorola will be able to
include in its consolidated income the consolidated income of both companies
for the entire fiscal year in which the merger occurs and prior years will be
restated to reflect the combination of General Instrument and Motorola.
However, after the merger Motorola must treat certain expenses incurred to
effect the merger as current charges against income, rather than adjustments to
its balance sheet after the merger.
It is a condition to completion of the merger that each of Motorola and
General Instrument receives an opinion from its respective independent
accountants, KPMG LLP and Deloitte & Touche LLP, dated as of the date the
Motorola registration statement becomes effective and the Effective Time, that
it concurs with its client's conclusion that no conditions exist that would
preclude its client's ability to be a party to a business combination with the
other party to be accounted for as a pooling of interests. See "The Merger
Agreement--Conditions."
The parties have prepared the unaudited pro forma financial information
contained in this proxy statement/prospectus using the pooling of interests
accounting method to account for the merger. See "Summary--Comparative Per
Share Data" and "Unaudited Selected Pro Forma Combined Financial Data ."
The pro forma financial statements reflect the inclusion of Next Level
Communications L.P. within General Instrument accounted for under the equity
method. Following the merger, if the initial public offering with respect to
Next Level Communications, Inc. is completed, Next Level would become a
consolidated subsidiary of Motorola, because Motorola will have voting control
of Next Level Communications. The effect of this consolidation on the combined
pro forma financial statements would not have been significant.
Interests of Certain Persons in the Merger
Members of General Instrument's management and the General Instrument Board
may be deemed to have interests in the merger that are different from, or in
addition to, the interests of General Instrument stockholders generally. The
General Instrument Board was aware of these interests and considered them,
among other matters, in approving the merger agreement and the transactions
contemplated thereby. These interests are described below.
General Instrument Stock Ownership and Option Holdings
As of [ ], 1999, directors and executive officers of General Instrument
beneficially owned an aggregate of [ ] shares of General Instrument common
stock, including options to purchase General Instrument shares exercisable
within 60 days.
General Instrument's Long-Term Incentive Plans provide that, upon a change
of control, all stock options will become immediately exercisable. The approval
of the merger by General Instrument stockholders will constitute a change of
control under these plans. Accordingly, if approval is obtained, substantially
all General Instrument stock options, whether or not currently exercisable,
will become immediately exercisable whether or not the merger is actually
completed.
33
<PAGE>
The following table indicates, for the five most highly compensated officers
and all current executive officers and directors as a group, the number and
value of options for which exercisability will accelerate, based upon the
General Instrument closing price on October 6, 1999.
<TABLE>
<CAPTION>
Number of Options
Which Will Become
Exercisable Upon
Approval of the Value of
Merger Such Options
----------------- --------------
<S> <C> <C>
Edward D. Breen........................... 479,351 $15,993,780.55
Robert D. Cromack......................... 62,033 $ 1,933,628.59
Eric M. Pillmore.......................... 79,770 $ 2,556,723.88
Geoffrey S. Roman......................... 73,657 $ 2,356,776.43
Richard C. Smith.......................... 72,853 $ 2,335,755.33
--------- --------------
All current directors and executive
officers as a group...................... 1,300,122 $41,377,105.81
</TABLE>
General Instrument CEO Employment Agreement
General Instrument is a party to a three-year employment agreement with its
Chief Executive Officer, Edward D. Breen. The term is automatically extended
daily, so that at all times the employment agreement has a three-year term. The
approval of the merger by General Instrument stockholders will constitute a
change of control under the employment agreement.
During the term of the employment agreement, Mr. Breen will serve as Chief
Executive Officer of General Instrument, and his base compensation will be at
least $600,000 per year. Mr. Breen will participate in short-term and long-term
incentive plans at levels commensurate with the benefits provided to other
senior executives, with adjustments appropriate for the Chief Executive
Officer. Mr. Breen's target annual bonus will be at least 84% of salary. Mr.
Breen will participate in General Instrument's welfare and retirement plans,
and he will be provided with at least $7,500,000 of life insurance coverage.
If General Instrument terminates Mr. Breen's employment without cause during
the term of the employment agreement, or in the event of his termination for
good reason, Mr. Breen will receive severance compensation consisting of
continued salary and target bonus for a period of three years after termination
and continued coverage (or cash in lieu of coverage) in retirement and welfare
plans for three years, as well as outplacement assistance and $15,000 annually
for tax and financial planning services. If Mr. Breen's termination occurs
during the first three years of the employment agreement and before a change of
control, Mr. Breen will receive a supplemental severance payment of $9,000,000.
The approval of the merger by General Instrument stockholders will
constitute a change of control for purposes of Mr. Breen's employment
agreement.
Stock options granted to Mr. Breen after the date of the employment
agreement are required to provide for full vesting if Mr. Breen's employment is
terminated by General Instrument other than for cause or if he terminates for
good reason, death or disability. These stock options must also provide for
continuation of the exercise period for at least one year after termination of
employment (but not after expiration of the option term) if Mr. Breen's
employment terminates for any reason other than cause.
If Mr. Breen becomes disabled, he will receive severance compensation
consisting of continued salary and target bonus for a period of three years,
reduced by disability benefits under General Instrument's plans, and continued
coverage (or cash in lieu of coverage) in retirement and welfare plans for
three years, as well as the supplemental payment described above, if
applicable.
The employment agreement provides for a gross-up payment by General
Instrument in the event that Mr. Breen receives payments under the employment
agreement or otherwise that are subject to the excise tax under
34
<PAGE>
Section 4999 of the Code. The gross-up payment will be an additional amount so
that Mr. Breen is made whole on an after-tax basis for the effect of the excise
tax.
Motorola intends to enter into employment arrangements with Mr. Breen, which
would amend his existing agreement, as described below.
General Instrument Severance Protection Agreements
General Instrument has severance protection agreements with its executive
officers, other than Mr. Breen. The severance agreements have a two-year term
that is automatically extended for one year upon the first anniversary of the
agreement and every anniversary thereafter unless notification is given to
either General Instrument or the executive. However, the term of the severance
agreements will not expire before two years after a change of control. The
approval of the merger by General Instrument stockholders will constitute a
change of control under the severance agreements.
The severance agreements provide severance pay and other benefits in the
event of a termination of employment within 24 months after a change of control
of General Instrument for any reason other than (1) by General Instrument for
cause or disability, (2) by reason of the executive's death or (3) by the
executive without good reason. The severance pay will equal one and one-half
times the sum of the executive's base salary and the executive's target bonus
for the fiscal year preceding the year of termination, provided that such
amount may be increased by up to one-half times such sum if the executive
officer has not become employed within 18 months following such termination.
The executive's benefits will be continued for 18 months or the cash equivalent
will be paid.
Under the severance agreements, the executive will also receive a pro rata
target bonus (calculated up to the executive's termination date), outplacement,
tax and financial planning assistance, reimbursement for such services and
reimbursement for relocation under certain circumstances. If the executive's
employment is terminated without cause (1) within six months prior to a change
of control or (2) prior to the date of a change of control but (A) at the
request of a third party who effectuates a change of control or (B) otherwise
in connection with, or in anticipation of, a threatened change of control which
actually occurs, the termination will be deemed to have occurred after the
change of control.
In the case of a termination by General Instrument for disability or because
of the executive's death following a change of control, the executive or his
estate, as the case may be, will receive a pro rata target bonus in addition to
accrued compensation.
The severance agreements provide for a gross-up payment by General
Instrument in the event that the executive receives payments under the
agreement or otherwise that are subject to the excise tax under Section 4999 of
the Code. The gross-up payment will be an additional amount so that the
executive is made whole on an after-tax basis for the effect of the excise tax.
Motorola intends to enter into employment arrangements with General
Instrument executives covered by severance agreements, which would amend the
existing agreements, as described below.
Other General Instrument Change of Control Arrangements
The approval of the merger by General Instrument stockholders will also
constitute a change of control under other General Instrument benefit plans. In
the event of a change of control, participants in the Supplemental Executive
Retirement Plan become entitled to receive the present value actuarial
equivalent of their supplemental benefit in a lump sum and participants in the
Deferred Compensation Plan become entitled to receive their entire account
balance in a lump sum. The merger agreement provides that, if the participant
elects, the sums payable under these plans may be deferred into Motorola's
deferred compensation plan.
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<PAGE>
Under the terms of the Annual Incentive Plan, within 60 days after a change
of control, General Instrument will pay to each participant in the plan
immediately prior to such change of control a pro rata portion of the bonus
award he or she would have earned if the performance targets had been met at
the 100% level. If the merger is completed in 1999, the merger agreement
provides that the amount paid will be the greater of the amount based on
assuming 1999 performance targets had been met at the 100% level and the amount
based on actual performance to the date of the merger, excluding any special
transaction related expenses. If the merger is completed in 2000, the amount
for 1999, if not already paid out, will be paid pursuant to past practice and
the terms of the plan and an amount for the period between January 1, 2000 and
the merger will be paid according to the terms of the plan. In addition, the
merger agreement provides that any discretionary factors will be determined by
General Instrument's Chief Executive Officer and the General Instrument Board.
Proposed Agreements with General Instrument Executives
Motorola intends to implement a retention program for General Instrument
executives who will become employees of Motorola to provide them incentives to
remain with Motorola and to achieve high performance results. These
arrangements would be made in connection with amendments to the agreements
described above under "General Instrument CEO Employment Agreement," in the
case of Mr. Breen, and under "--General Instrument Severance Protection
Agreements," in the case of all others. These amendments would provide that (1)
the new duties, terms and conditions of employment with Motorola would not
constitute "good reason" to terminate employment and receive the benefits
provided under the severance agreements and (2) in the event of a termination
of employment within 24 months after the merger for any reason other than (a)
by Motorola for cause or disability, (b) by reason of the executive's death or
(c) by the executive without good reason, the executive would be entitled to
receive the severance benefits provided therein.
It is contemplated that certain General Instrument executives and other key
senior employees, including all executives named under "--General Instrument
Stock Ownership and Option Holdings" and all executives who currently are
parties to severance agreements who sign the foregoing amendments, would be
eligible to participate in the retention program. The retention program would
have three components: Motorola stock options, cash retention bonuses and
restricted Motorola share grants. Each participant would receive two grants of
Motorola stock options. Motorola plans to make one grant at or after the merger
in the quarter in which the merger is completed and the other grant at the next
annual cycle grant of Motorola stock options following such quarter. All
Motorola stock options would be subject to a four-year vesting schedule (i.e.,
vesting ratably in each of the four years) in accordance with the Motorola
Incentive Plan of 1998. In addition, certain of the participants would receive
a cash retention bonus if their employment continues for two years from the
completion date of the merger. Finally, certain of the participants would be
granted restricted Motorola shares at or after the merger in the quarter in
which the merger is completed which would vest if their employment continues
through the second anniversary of the merger. It is contemplated that this
program would involve the following approximate aggregate amounts:
. 2,095,000 Motorola stock options (1,665,000 granted at or after the
merger in the quarter in which the merger is completed and 430,000
granted at the next annual cycle grant of Motorola stock options
following such quarter);
. $15 million in cash retention bonuses; and
. 100,000 restricted Motorola shares which would vest on the second
anniversary of the merger.
Of the foregoing amounts, and subject to the terms and conditions described in
the previous paragraph, Motorola has agreed to provide Mr. Breen with 325,000
Motorola stock options (225,000 at or after the merger in the quarter in which
the merger is completed and 100,000 at the next annual cycle grant of Motorola
stock options following such quarter); a cash retention bonus equal to his
total compensation; and 25,000 restricted Motorola shares.
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Mr. Pillmore is expected to receive 120,000 Motorola stock options (100,000 at
or after the merger in the quarter in which the merger is completed and 20,000
at the next annual cycle grant of Motorola stock options following such
quarter); a cash retention bonus equal to his total compensation; and 7,500
restricted Motorola shares. Messrs. Cromack, Roman and Smith would each receive
80,000 Motorola stock options (65,000 at or after the merger in the quarter in
which the merger is completed and 15,000 at the next annual cycle grant of
Motorola stock options following such quarter); a cash retention bonus equal to
such person's total compensation; and 7,500 restricted Motorola shares. Total
compensation for such purpose would be the sum of annualized base salary plus
target bonus. Executives who are terminated prior to the second anniversary of
the merger would not receive any then-unvested portion of the stock option
grant component or any portion of the cash retention bonus component or the
restricted share grant.
In addition, it is expected that certain General Instrument executives to be
identified would become elected officers of Motorola and would be eligible to
participate in the benefit and perquisite programs of Motorola generally
applicable to elected officers of the same level.
Director and Officer Indemnification and Insurance
The merger agreement provides that General Instrument will maintain the
current provisions regarding indemnification of officers, directors and
employees currently contained in its certificate of incorporation and by-laws
for a period of six years after the merger and will indemnify such individuals
to the fullest extent permitted by law against all claims, damages, costs,
expenses and liabilities arising out of acts or omissions occurring prior to
the merger. Under the merger agreement, General Instrument will also use its
best efforts to provide the same directors' and officers' liability insurance
protection as that provided by its current insurance policies to the extent the
cost of providing such protection does not exceed 200% of the current amount
expended by General Instrument.
See also the matters described under "The Merger Agreement--Additional
Covenants and Agreements--Employee Benefits Matters."
Material Federal Income Tax Consequences
The following summary discusses the material federal income tax consequences
of the merger. The summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury regulations under the Code and
administrative rulings and judicial authority as of the date hereof. All of the
foregoing are subject to change, possibly with retroactive effect, and any such
change could affect the continuing validity of this discussion. This discussion
assumes that holders of General Instrument shares hold such shares as capital
assets. Further, the discussion does not address the tax consequences that may
be relevant to a particular stockholder subject to special treatment under
certain federal income tax laws, such as dealers in securities, traders in
securities that elect to use a mark-to-market method of accounting, non-United
States persons, tax-exempt organizations, stockholders who acquired General
Instrument shares through the exercise of options, grants of performance shares
under General Instrument's equity-based compensation plans or otherwise as
compensation or through a tax-qualified retirement plan, or holders that hold
General Instrument shares as part of a hedge, straddle, constructive sale or
conversion transaction. This discussion does not address any consequences
arising under the laws of any state, locality or foreign jurisdiction or under
federal laws other than federal income tax laws.
General
It is intended that the merger will constitute a "reorganization" pursuant
to Section 368(a) of the Code. The respective obligations of the parties to
complete the merger are conditioned on the receipt by Motorola of an opinion of
KPMG LLP, and the receipt by General Instrument of an opinion of Simpson
Thacher & Bartlett, each dated the date of the Effective Time, that:
. the merger will be treated as a reorganization qualifying under the
provisions of Section 368(a) of the Code and each of Motorola, Merger
Sub and General Instrument will be a party to the reorganization;
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. no gain or loss will be recognized by Motorola, Merger Sub or General
Instrument as a result of the merger; and
. no gain or loss will be recognized by the General Instrument
stockholders who exchange their General Instrument shares solely for
Motorola shares pursuant to the merger (except with respect to cash
received in lieu of a fractional Motorola share).
See "The Merger Agreement--Conditions." Such opinions will be based upon,
among other things, representations of Motorola, General Instrument and/or
officers and principal stockholders of Motorola and General Instrument
customarily given in transactions of this type.
Consequences to Holders of General Instrument Shares
As a "reorganization," the merger would have the following consequences for
holders of General Instrument shares. No gain or loss would be recognized by a
holder of General Instrument shares as a result of the surrender of General
Instrument shares solely in exchange for Motorola shares pursuant to the
merger, except as discussed below with respect to cash received in lieu of
fractional Motorola shares. The aggregate tax basis of the Motorola shares
received in the merger would be the same as the aggregate tax basis of the
General Instrument shares surrendered in exchange for such Motorola shares. The
holding period of the Motorola shares received would include the holding period
of General Instrument shares surrendered in exchange for such Motorola shares.
If a holder of General Instrument shares receives cash in lieu of a fractional
Motorola share in the merger, in general, the holder would recognize capital
gain or loss equal to the cash amount received for the fractional Motorola
share reduced by the portion of the holder's tax basis in General Instrument
shares surrendered that is allocable to the fractional Motorola share interest.
The capital gain or loss would be long-term capital gain or loss if the
holder's holding period in the fractional Motorola share interest for federal
income tax purposes is more than one year. Long-term capital gain of a non-
corporate U.S. holder is generally subject to a maximum tax rate of 20%. The
deductibility of capital losses is subject to limitation for both corporate and
non-corporate U.S. holders.
Consequences to Holders of Motorola Shares
Based on the advice of its tax advisors, Motorola expects that there will be
no federal income tax consequences of the merger to Motorola stockholders with
respect to their Motorola shares. Thus, Motorola stockholders will recognize no
gain or loss with respect to their Motorola shares as a result of the merger,
and a Motorola stockholder's tax basis and holding period in such stockholder's
Motorola shares will not change as a result of the merger.
The preceding discussion does not purport to be a complete analysis or
discussion of all potential tax effects relevant to the merger. General
Instrument stockholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the merger, including tax return reporting
requirements, the applicability and effect of federal, state, local and other
applicable tax laws and the effect of any proposed changes in the tax laws.
Regulatory Matters
Motorola and General Instrument must comply with the notification and
waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder (the
"HSR Act"). The HSR Act provides for an initial 30-calendar-day waiting period
following the filing with the U.S. Federal Trade Commission and the Antitrust
Division of the U.S. Department of Justice of certain Notification and Report
Forms by the parties to the merger. The HSR Act further provides that, if,
within the initial 30-calendar-day waiting period, the FTC or the Antitrust
Division issues a request for
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additional information or documents, the waiting period will be extended until
11:59 p.m. on the 20th day after the date of substantial compliance by the
filing parties with such request. Only one such extension of the initial
waiting period is permitted under the HSR Act; however, the filing parties may
voluntarily extend the waiting period.
The statutory waiting period for Motorola and General Instrument is expected
to expire on November [ ], 1999, unless earlier terminated or extended by a
request for additional information or documentation materials.
Completion of the transactions may also require other regulatory approvals,
including approvals of foreign regulatory authorities. Under the laws of
certain foreign nations, the merger may not be completed unless certain filings
are made with these nations' antitrust regulatory authorities and these
authorities approve or clear the merger. In particular, the parties will be
required to make filings with the antitrust authorities under the applicable
laws of Canada and Germany. Motorola and General Instrument are not aware of
any other foreign governmental approvals or actions that may be required for
completion of the merger. However, Motorola and General Instrument conduct
operations in a number of foreign countries, some of which have voluntary
and/or post-merger notification systems. Should any other approval or action be
required, Motorola and General Instrument currently contemplate that such
approval or action would be sought. The failure to make any such filings or to
obtain any such approvals is not anticipated to have a material effect on the
merger or the combined company.
Motorola and General Instrument believe that they will obtain all material
required regulatory approvals prior to the special meeting. However, it is not
certain that all such approvals will be received by such time and governmental
authorities may impose unfavorable conditions for granting the required
approvals.
At any time before or after the merger and notwithstanding expiration of the
waiting period, the FTC, the Antitrust Division and state and foreign antitrust
authorities could take action under the antitrust laws to challenge the merger,
including seeking to enjoin the completion of the merger, seeking the
divestiture by Motorola of all or part of the stock or assets of General
Instrument or of other business conducted by Motorola, or seeking to subject
Motorola or General Instrument to certain operating conditions. Private parties
may also seek to take legal action under the antitrust laws, if circumstances
permit. There can be no assurance that a challenge to the merger will not be
made or that, if such a challenge is made, Motorola will prevail. The
obligations of Motorola and General Instrument to complete the merger are
subject to the condition that there be no decree, order or injunction of a
court of competent jurisdiction that prohibits the completion of the merger.
Appraisal Rights
Under the Delaware General Corporation Law, appraisal rights will not be
available to stockholders of General Instrument in connection with the merger.
Federal Securities Laws Consequences
The Motorola shares to be issued to General Instrument stockholders in the
merger will have been registered under the Securities Act of 1933, as amended.
Upon issuance, these shares may be traded freely and without restriction by
those stockholders not deemed to be affiliates of General Instrument as that
term is defined under the Securities Act. An "affiliate" of General Instrument,
as defined by the rules promulgated under the Securities Act, is a person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with General Instrument. Any
subsequent transfer by an affiliate of General Instrument must be one permitted
by the resale provisions of Rule 145 promulgated under the Securities Act (or
Rule 144 promulgated under the Securities Act, in the case of such persons who
become affiliates of Motorola) or as otherwise permitted under the Securities
Act. These restrictions are expected to
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apply to the directors, executive officers and holders of 10% or more of the
General Instrument shares (as well as to certain other related individuals or
entities).
SEC guidelines regarding qualifying for the pooling-of-interests method of
accounting also limit sales of shares of the acquiring company and acquired
company by affiliates of either company in a business combination such as the
merger. These guidelines indicate that the pooling-of-interests method of
accounting will generally not be challenged on the basis of sales by such
affiliates if these persons do not dispose of or reduce their risk with respect
to any of the shares of the corporation they own or any shares of the
corporation they will receive in connection with a merger during the period
beginning thirty days prior to the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published (the "Pooling Restriction Period").
The obligations of each of Motorola and General Instrument to complete the
merger are conditioned upon the other party's having caused each of its
affiliates to deliver to Motorola or General Instrument, as applicable, a
written agreement that such person will not dispose of any Motorola shares in
violation of the Securities Act or the rules and regulations promulgated under
the Securities Act, or dispose of or reduce his risk with respect to any
Motorola shares or General Instrument shares during the Pooling Restriction
Period.
This proxy statement/prospectus does not cover resales of Motorola shares to
be received by the stockholders of General Instrument in the merger, and no
person is authorized to make any use of this proxy statement/prospectus in
connection with any such resale.
Management and Operations after the Merger
After the merger, Motorola plans to form a new business group consisting of
the people, assets and operations of General Instrument combined with the
multimedia group business from Motorola's Internet and Networking Group. The
new business group will be a part of Motorola's Communications Enterprise unit
and will focus on integrated and interactive broadband access solutions.
Motorola expects that Edward D. Breen, Chairman and Chief Executive Officer of
General Instrument, will lead the business group and that other members of
current General Instrument management will work in the new business group after
the merger. The headquarters of the new business group is expected to be the
current General Instrument headquarters in Horsham, Pennsylvania.
See also the matters described under "The Merger Agreement--Additional
Covenants and Agreements--Employee Benefit Matters."
Certain Other Matters
On September 21, 1999, a purported stockholder class action suit was filed
in the Delaware Chancery Court against General Instrument, the members of the
General Instrument Board and Motorola. The complaint alleges, among other
things, that the defendants have breached their fiduciary duties in connection
with the merger by failing to maximize stockholder value. The complaint seeks,
among other things, a court order enjoining the merger and compensatory damages
for the purported stockholder class. General Instrument and Motorola believe
that the complaint is without merit.
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THE MERGER AGREEMENT
The following is a description of the material terms of the merger agreement
but does not purport to describe all the terms of the merger agreement. The
full text of the merger agreement is attached as Appendix A to this proxy
statement/prospectus and is incorporated herein by reference. General
Instrument stockholders are urged to read the merger agreement in its entirety.
The Merger
Subject to the terms and conditions of the merger agreement, Merger Sub will
merge with and into General Instrument at the Effective Time. The separate
corporate existence of Merger Sub will cease. General Instrument will be the
surviving corporation in the merger and will continue its corporate existence
as a subsidiary of Motorola and will continue to be governed by the laws of the
State of Delaware.
Effective Time. The merger agreement provides that the merger will become
effective at the Effective Time. General Instrument, Merger Sub and Motorola
will complete the merger by filing a certificate of merger with the Secretary
of State of the State of Delaware no later than the third business day
following the satisfaction or waiver of the conditions to the merger.
Certificate of Incorporation and By-Laws. The merger agreement provides that
at the Effective Time the certificate of incorporation and by-laws of the
surviving corporation will be amended in their entirety to contain the
provisions set forth in the certificate of incorporation and by-laws of Merger
Sub.
Directors and Officers. The merger agreement provides that the directors of
Merger Sub immediately prior to the Effective Time will be the initial
directors of the surviving corporation, and that the officers of General
Instrument immediately prior to the Effective Time will be the initial officers
of the surviving corporation.
Conversion or Cancellation of General Instrument Common Stock in the Merger
Conversion of Shares. The merger agreement provides that, at the Effective
Time and without any action on the part of the stockholders, each General
Instrument share and each option and warrant to purchase General Instrument
shares shall be treated as follows (subject to the treatment of fractional
Motorola shares described below):
. Each General Instrument share issued and outstanding immediately prior
to the Effective Time will be exchanged for 0.575 Motorola shares.
. Each unexercised and unexpired option to purchase General Instrument
shares issued pursuant to General Instrument's Amended and Restated 1997
Long-Term Incentive Plan and 1999 Long-Term Incentive Plan will be
assumed by Motorola and will constitute solely an option to acquire, on
the same terms and conditions as were applicable under such assumed
option, that number of Motorola shares equal to the product of the
Exchange Ratio and the number of General Instrument shares subject to
such option, at an exercise price per Motorola share equal to the
exercise price per share of such option immediately prior to the
Effective Time divided by the Exchange Ratio, rounded down to the
nearest whole cent. If the foregoing calculation results in an assumed
option being exercisable for a fraction of a Motorola share, then the
number of Motorola shares subject to such option will be rounded to the
nearest whole number of shares, with no cash being payable for such
fractional Motorola share.
. Each outstanding warrant to purchase General Instrument shares issued
pursuant to a warrant agreement will be assumed by Motorola and will
constitute solely an option to acquire, on the same terms and conditions
as were applicable to such warrant under the applicable warrant
agreement, that number of Motorola shares which the holder would have
been entitled to receive if the holder
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exercised the warrant immediately prior to the merger. Motorola will
also enter into a supplemental agreement with each holder of warrants
whereby Motorola assumes the performance and observance of the covenants
and conditions of the applicable warrant agreement that General
Instrument currently performs and observes.
. Each General Instrument share held in the treasury of General Instrument
will be canceled and extinguished without any conversion or payment made
with respect to such shares.
Fractional Shares. No fractional Motorola shares will be issued in the
merger. In lieu of any fractional Motorola shares, each holder of General
Instrument shares who would otherwise have been entitled to a fraction of a
Motorola share pursuant to the merger agreement will be paid an amount in
cash, without interest, equal to such holder's proportionate interest in the
net proceeds from the sale or sales in the open market of the aggregate
fractional Motorola shares, if any, that would have been issued in the merger.
Harris Trust and Savings Bank or another bank or trust company (the "Exchange
Agent") will sell such aggregate fractional shares at the prevailing prices on
the NYSE. These sales will be executed through one or more member firms of the
NYSE and will be executed in round lots to the extent practicable. General
Instrument will pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of fractional shares.
Exchange of Certificates in the Merger. Promptly after the Effective Time,
Motorola will instruct the Exchange Agent to mail to each holder of record of
certificates that immediately prior to the Effective Time represented
outstanding General Instrument shares (the "Certificates") both a letter of
transmittal and instructions for use in effecting the surrender of
Certificates. The letter of transmittal and instructions are for use by each
holder of record in surrendering the Certificates in exchange for certificates
representing that number of Motorola shares and cash for any fractional shares
thereof to which such holder would otherwise be entitled. We request that you
not surrender your Certificates for exchange until you receive the letter of
transmittal and instructions. At and after the Effective Time and until so
surrendered, the Certificates will represent only the right to receive the
consideration described above. No dividends or other distributions declared or
made after the Effective Time with respect to Motorola shares will be paid to
the holder of record of any unsurrendered Certificate. However, the holder of
record will be paid, without interest, (1) upon surrender of such Certificate,
any dividends or distributions with a record date after the Effective Time but
a payment prior to surrender of such Certificate and (2) at the appropriate
payment date, any dividends or distributions with a record date after the
Effective Time but prior to surrender of such Certificate and a payment after
the surrender of such Certificate. No transfers of General Instrument shares
shall be made after the Effective Time.
Listing of Motorola Common Stock
In the merger agreement, Motorola has agreed to promptly prepare and submit
to the NYSE and any other applicable exchange a listing application covering
the Motorola shares to be issued in the merger and shall use reasonable best
efforts to cause such shares to be approved for listing on such exchange,
subject to official notice of issuance, prior to the Effective Time. Approval
for listing on the NYSE of the Motorola shares issuable to the General
Instrument stockholders in the Merger, subject only to official notice of
issuance, is a condition to the obligations of Motorola, Merger Sub and
General Instrument to complete the merger.
Representations and Warranties
Representations and Warranties by General Instrument. The merger agreement
includes customary representations and warranties by General Instrument to
Motorola, including representations and warranties as to:
. corporate organization, standing and power of General Instrument and its
subsidiaries;
. compliance with the certificate of incorporation and by-laws of General
Instrument;
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. capitalization of General Instrument;
. power and authority of General Instrument to execute and deliver the
merger agreement and to perform its obligations under, and to complete
the transactions contemplated by, the merger agreement, including
approval of the General Instrument Board, subject to stockholder
approval;
. no conflict with organization documents, laws and orders and required
consents and authorizations of governmental entities and third parties;
. amendment of the Rights Agreement, dated as of June 12, 1997, between
General Instrument and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, as amended, so that the merger will not trigger the rights
under the General Instrument rights plan and that the General Instrument
rights plan will terminate immediately prior to the Effective Time;
. possession and validity of necessary government permits and compliance
with applicable laws;
. General Instrument's financial statements and reports filed with the
SEC;
. prior spin-off transactions involving General Instrument;
. conduct by General Instrument and its subsidiaries of business in the
ordinary course and consistent with past practice since December 31,
1998 and the absence of any event or development which would reasonably
be expected to have a material adverse effect on General Instrument or
prevent or materially delay General Instrument's performance under the
merger agreement;
. General Instrument's employee benefit plans;
. accounting and tax matters;
. contracts, leases, agreements, or understandings of General Instrument;
. pending or threatened litigation;
. environmental matters;
. intellectual property matters;
. insurance matters;
. opinions delivered by General Instrument's financial advisors;
. required vote of General Instrument stockholders;
. brokers and finders employed by General Instrument; and
. year 2000 compliance.
Representations and Warranties by Motorola and Merger Sub. The merger
agreement also contains customary representations and warranties by Motorola
and Merger Sub including as to:
. corporate organization, standing, and power of Motorola and its
subsidiaries;
. capitalization of Motorola;
. power and authority of Motorola to execute and deliver the merger
agreement and to perform its obligations under, and to complete the
transactions contemplated by, the merger agreement, including approval
of the Motorola Board; authorization and validity of the Motorola shares
to be issued pursuant to the merger agreement;
. no conflict with organization documents, laws and orders and required
consents and authorizations of governmental entities and third parties;
. Motorola's financial statements and reports filed with the SEC;
. conduct by Motorola and its subsidiaries of business in the ordinary
course and consistent with past practice since December 31, 1998 and the
absence of any event or development which would reasonably be expected
to have a material adverse effect on Motorola or prevent or materially
delay Motorola's performance under the merger agreement;
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. tax and accounting matters;
. ownership, activities and assets of Merger Sub; and
. brokers and finders employed by Motorola.
Covenants and Agreements
Conduct of Business of General Instrument Pending the Merger. The merger
agreement generally provides, with certain exceptions, that, prior to the
Effective Time, General Instrument agrees to conduct its and its subsidiaries'
business in the ordinary course consistent with past practice and to use its
reasonable best efforts to keep available the services of its current officers,
consultants and key employees of General Instrument and its subsidiaries and to
preserve their current relationships with customers, suppliers and others
having significant business relations as is reasonably necessary in order to
preserve substantially intact its business organization. General Instrument has
agreed that it will not (unless required by applicable laws or stock exchange
regulations), and will not permit any of its subsidiaries to, between the date
of the merger agreement and the Effective Time, directly or indirectly, do, or
agree to do, any of the following without the prior written consent of
Motorola:
Amendments to organizational documents
. amend or otherwise change its certificate of incorporation or by-laws or
equivalent organizational documents;
Capital stock; assets
. issue, deliver, sell, dispose of, pledge or otherwise encumber any
additional shares of its capital stock of, or other equity interests in,
General Instrument or any of its subsidiaries of any class, or any
securities or rights convertible into, or exchangeable for, any shares
of its capital stock or other equity interests or such convertible or
exchangeable securities, or any other ownership interest of General
Instrument or any of its subsidiaries, other than the issuance of
General Instrument common stock upon the exercise of options or warrants
in accordance with their terms;
. except in the ordinary course of business consistent with past practice,
sell, pledge, dispose of, transfer, lease, license, guarantee or
encumber any material property or assets of General Instrument or any of
its subsidiaries, or authorize any of the foregoing;
Dividends
. declare, set aside, make or pay any dividend, or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
its capital stock (other than dividends paid by wholly owned
subsidiaries of General Instrument to General Instrument or other wholly
owned subsidiaries) or enter into any agreement with respect to the
foregoing;
Adjustment to and purchase of capital stock
. reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock;
Acquisitions and dispositions; indebtedness; alterations to certain material
contracts
. acquire any interest in any corporation or other business organization,
person or any division thereof (other than a wholly owned subsidiary of
General Instrument) or any assets, other than acquisitions of assets in
the ordinary course of business consistent with past practice and any
other acquisitions for consideration that is individually not in excess
of $10,000,000, or in the aggregate not in excess of $40,000,000;
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. incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or otherwise become responsible for the obligations
of any person (other than a wholly owned subsidiary of General
Instrument) for borrowed money, except in the ordinary course of
business or other indebtedness for borrowed money with a maturity of not
more than one year in a principal amount, in the aggregate, not in
excess of $5,000,000;
. terminate, cancel or request any material change in, or agree to any
material change in, certain material contracts of General Instrument
other than in the ordinary course of business consistent with past
practice;
. make or authorize any capital expenditure in excess of General
Instrument's budget, other than capital expenditures that are not, in
the aggregate, in excess of $10,000,000 for General Instrument and its
subsidiaries, taken as a whole;
. enter into or amend any contract, agreement, commitment or arrangement
that, if fully performed, would not be permitted under this section;
Compensation
. except as may be required by certain contractual commitments or
corporate policies with respect to severance or termination pay:
--increase the compensation payable or to become payable to its
officers or employees except in certain specified circumstances;
--grant any rights to severance or termination pay to, or enter into
any employment or severance agreement with, any director, officer or
other employee of General Instrument or any of its subsidiaries;
--establish, adopt, enter into or amend any collective bargaining
agreement or employee benefit arrangement; or
--take any affirmative action to accelerate the vesting of any stock-
based compensation;
Accounting and tax
. take any action that would prevent or impede the merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368 of the Code;
. make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
. make any change in accounting policies or procedures, other than in the
ordinary course of business consistent with past practice or except as
required by GAAP or a governmental entity;
. write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $5,000,000 except for
depreciation and amortization in accordance with GAAP consistently
applied;
Claims
. waive, release, assign, settle or compromise any material claims, or any
material litigation or arbitration;
General Instrument rights plan; state takeover laws; confidentiality
agreements
. amend or modify, or propose to amend or modify, or otherwise take any
action under the General Instrument rights plan;
. take any action to exempt or make not subject to:
--Delaware or other state takeover law or state law that purports to
limit or restrict business combinations or the ability to acquire or
vote shares; or
--the General Instrument rights plan
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any person or entity (other than Motorola and its subsidiaries) or any
action taken by such person or entity, which person, entity or action
would have otherwise been subject to, and not exempt from, the
restrictive provisions of such takeover law or the General Instrument
rights plan;
. modify, terminate or waive any material rights under any confidentiality
or standstill agreements;
Conditions
. take any action that is intended or would reasonably be expected to
result in any of the conditions to the merger not being satisfied,
except, in every case, as may be required by applicable law; or
General
. authorize or enter into any agreement or otherwise make any commitment
with respect to the foregoing.
Conduct of Business of Motorola Pending the Merger. The merger agreement
generally provides, with certain exceptions, that Motorola will not (unless
required by applicable laws or regulations), and will not permit any of its
subsidiaries (unless required by applicable laws or regulations) to, between
the date of the merger agreement and the Effective Time, directly or
indirectly, do, or agree to do any of the following without the prior written
consent of General Instrument:
Amendments to organizational documents
. amend or otherwise change the Motorola certificate of incorporation or
the Motorola by-laws, or equivalent organizational documents in a manner
that adversely affects the rights of holders of Motorola common stock;
Dividends
. declare, set aside, make or pay any dividend, or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
Motorola's capital stock (other than regular quarterly cash dividends);
Accounting and tax
. make any change in accounting policies or procedures, other than in the
ordinary course of business consistent with past practice or except as
required by GAAP or governmental entities;
. take any action that would prevent or impede the merger from qualifying
for pooling of interests accounting treatment and as a reorganization
under the Code;
Conditions
. take any action that is intended or would reasonably be expected to
result in any of the conditions to the merger not being satisfied,
except, in every case, as may be required by applicable law; or
General
. authorize or enter into any agreement or otherwise make any commitment
with respect to the foregoing.
Covenant Regarding Cooperation. In the merger agreement, General Instrument
and Motorola also agreed to coordinate and cooperate in connection with:
. the preparation of the Motorola registration statement and the proxy
statement/prospectus;
. determining whether any actions, filings, approvals or waivers are
required with regard to governmental entities or third parties; and
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. seeking any such actions or approvals or making any such filings,
furnishing the information required in connection with such actions,
approvals, filings and waivers and with the Motorola registration
statement and the proxy statement/prospectus, and timely seeking to
obtain any such actions, consent, approvals or waivers.
Next Level Communications. Motorola and General Instrument also agreed in
the merger agreement that General Instrument may proceed to effect the initial
public offering (the "IPO") and other associated transactions by Next Level
Communications, Inc., a Delaware corporation. Next Level Communications, Inc.
is a newly formed corporation into which Next Level Communications L.P. will
merge just prior to the IPO. General Instrument currently has a 90.4% limited
partnership interest in Next Level Communications L.P. Motorola's agreement
permitting the IPO to proceed is subject to the following conditions:
. General Instrument will own, following the IPO, at least 65-70% of the
fully diluted equity of Next Level Communications, Inc., except in
certain circumstances;
. no action will be taken by General Instrument in connection with the IPO
that would prevent the merger from qualifying for pooling of interests
accounting treatment or would prevent the merger from qualifying under
Section 368(a) of the Code;
. no change will be made by General Instrument to any material term or
condition of the IPO without the consent of Motorola; and
. prior to the effectiveness of the IPO, the certificate of incorporation
and by-laws of Next Level, along with a certain voting trust agreement
relating to governance of Next Level, will be amended such that, at the
Effective Time, the voting trust will terminate, Next Level will have
one class of common stock with one vote per share and General Instrument
will be able to exercise voting control of Next Level, including to
elect a majority of the board of directors of Next Level.
So long as General Instrument complies with these terms, there shall be no
breach of any representation, warranty or covenant in the merger agreement by
virtue of the IPO.
Motorola and General Instrument also agreed with General Instrument's
partner in Next Level Communications L.P. that (1) General Instrument and, if
the merger is completed, Motorola will use its best efforts to effect the IPO
as soon as practicable, (2) until the merger, in the event of a breach by
General Instrument of the agreement among such parties that results in the
failure to effect the IPO, and in the event as a result thereof a consent to
the merger is required but not obtained, Motorola would be permitted not to
complete the merger, and (3) following the merger, if the IPO is not effected
by April 30, 2000 as a result of General Instrument's or Motorola's breach of
such agreement, such partner will be able to require Motorola to purchase its
interest in Next Level Communications L.P. or Next Level Communications, Inc.
at an appraised value.
No Solicitation Covenant
The merger agreement provides that neither General Instrument nor any of its
subsidiaries, representatives or affiliates will, directly or indirectly, take
any action to:
. encourage (including by way of furnishing nonpublic information),
solicit, initiate or facilitate any Acquisition Proposal;
. enter into any agreement with respect to any Acquisition Proposal; or
. participate in any way in discussions or negotiations with, or furnish
any information to, any person in connection with, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or could reasonably be expected to lead to, any Acquisition
Proposal.
However, if, at any time prior to the approval of the merger by General
Instrument stockholders, the General Instrument Board determines in good faith,
based on the advice of outside counsel, that it is necessary to do so to
discharge properly its fiduciary duties to its stockholders, General Instrument
may, in response to a
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<PAGE>
Superior Proposal and subject to such party's compliance with the notification
requirements as described in the next paragraph:
. furnish information with respect to General Instrument and its
subsidiaries to the person making such Superior Proposal pursuant to a
customary confidentiality agreement, the benefits of the terms of which
are no more favorable to the other party to such confidentiality
agreement than those in place with Motorola; and
. participate in discussions with respect to this Superior Proposal.
General Instrument's legal and financial advisors will be able to make
inquiries, and engage in discussions, with any party that has made an
Acquisition Proposal in order to elicit information to allow the General
Instrument Board to determine in good faith if such Acquisition Proposal is a
Superior Proposal.
The merger agreement provides that General Instrument will as promptly as
practicable communicate to Motorola any inquiry received by it relating to any
potential Acquisition Proposal and the material terms of any proposal or
inquiry, including the identity of the person and its affiliates making the
same, that it may receive in respect of the proposed transaction, or of any
such information requested from it or of any such negotiations or discussions
being sought to be initiated with it. General Instrument will keep Motorola
fully informed on a prompt basis with respect to any developments with respect
to the foregoing.
"Acquisition Proposal" means any offer or proposal concerning any:
. merger, consolidation, business combination, or similar transaction
involving General Instrument;
. sale, lease or other disposition, directly or indirectly by merger,
consolidation, business combination, share exchange, joint venture, or
otherwise, of assets of General Instrument or its subsidiaries
representing 20% or more of the consolidated assets of General
Instrument and its subsidiaries;
. issuance, sale, or other disposition, including by way of merger,
consolidation, business combination, share exchange, joint venture, or
any similar transaction, of securities or options, rights or warrants to
purchase, or securities convertible into or exchangeable for, such
securities representing 20% or more of the voting power of General
Instrument; or
. transaction in which any person shall acquire beneficial ownership or
the right to acquire beneficial ownership or any group shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the outstanding voting capital stock of
General Instrument.
"Superior Proposal" means a bona fide Acquisition Proposal made by a third
party which General Instrument, its subsidiaries, representatives or other
affiliates did not solicit and which, in the good faith judgment of the General
Instrument Board, taking into account, to the extent deemed appropriate by the
General Instrument Board, the various legal, financial and regulatory aspects
of the proposal and the person making such proposal, if accepted, is reasonably
likely to be completed, and, if completed, is reasonably likely to result in a
transaction that is more favorable to the General Instrument stockholders (in
their capacity as stockholders), from a financial point of view, than the
transactions contemplated by the merger agreement.
The merger agreement further provides that neither the General Instrument
Board nor any committee thereof shall:
. withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Motorola, the approval or recommendation by the
General Instrument Board or such committee of the adoption and approval
of the merger and the matters to be considered at the General Instrument
special meeting;
. other than the merger, approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal; or
. other than the merger, cause General Instrument to enter into any letter
of intent, agreement in principle, acquisition agreement or other
similar acquisition agreement related to any Acquisition Proposal.
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<PAGE>
However, nothing contained in this non-solicitation covenant will prohibit
General Instrument (1) from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Securities Exchange Act of 1934, as amended, or from making any disclosure to
the General Instrument stockholders if, in the good faith judgment of the
General Instrument Board, based on the advice of outside counsel, failure to so
disclose would result in a violation of applicable law, or (2) in the event
that a Superior Proposal is made, from withdrawing or modifying its
recommendation of the merger no earlier than two business days following
written notice to Motorola of its intention to do so, so long as General
Instrument continues to comply with all other provisions of the merger
agreement, including, without limitation, the agreement to submit the merger
agreement and the merger to a vote of the General Instrument stockholders.
The merger agreement further provides that, as of September 14, 1999,
General Instrument will cease immediately and cause to be terminated any and
all existing discussions or negotiations with any parties with respect to an
Acquisition Proposal and promptly request that all confidential information
furnished on behalf of General Instrument be returned.
Additional Covenants and Agreements
Proxy Statement and Registration Statement. The merger agreement provides
that General Instrument will prepare, file and mail a proxy statement relating
to the General Instrument special meeting which, subject to the above provision
under "--No Solicitation Covenant," will include the recommendation of the
General Instrument Board to vote in favor of the merger.
Stockholders' Meeting. In the merger agreement, General Instrument agreed to
call and hold its special meeting relating to the required stockholder approval
of the merger as promptly as possible and to use its best efforts to hold such
meeting as soon as practicable after the Motorola registration statement
becomes effective. General Instrument further agreed to hold the special
meeting even if General Instrument's approval or recommendation of the merger
agreement is withdrawn or modified in any adverse manner as permitted by the
merger agreement.
Appropriate Action; Consents and Filings. The merger agreement provides that
General Instrument and Motorola will use their reasonable best efforts to:
. take, or cause to be taken, all appropriate action and do, or cause to
be done, all things necessary, proper or advisable under applicable law
or otherwise to complete the transactions contemplated by the merger
agreement as promptly as practicable;
. obtain any consents, licenses, approvals or other items from any
governmental entity that are required to be obtained, or to avoid any
action or proceeding by any governmental entity, in connection with the
merger agreement and the completion of the transactions contemplated by
the merger agreement; and
. make all necessary filings with respect to the merger agreement and the
merger required under applicable law.
Regardless of the agreements described in the preceding sentence, Motorola
is not obligated under the merger agreement to agree to the imposition of
conditions, the requirement of divestiture, or the requirement of expenditure
of money by Motorola or General Instrument to a third party in exchange for any
such consent that, in any case, would be materially adverse to Motorola and
General Instrument, taken as a whole.
Employee Benefit Matters. The merger agreement provides that, for the year
2000, the base salaries of General Instrument officers will be adjusted based
on annual salary review effective January 1, 2000 consistent with General
Instrument's salary review guidelines and the base salaries of other General
Instrument employees will be adjusted according to General Instrument practice
and guidelines. General Instrument's annual bonus
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<PAGE>
program will apply for General Instrument employees for the year 2000, with
individual bonus targets consistent with current General Instrument guidelines.
After the year 2000, Motorola's annual bonus program will apply with individual
bonus targets consistent with Motorola guidelines.
The merger agreement provides that General Instrument executive officers who
enter into the proposed agreements described under "The Merger--Interests of
Certain Persons in the Merger--Proposed Agreements with General Instrument
Executives" will be eligible to receive, in addition to the equity incentives
provided in those agreements, future Motorola option grants in the year 2001
and thereafter consistent with Motorola practice. Other eligible General
Instrument employees (other than executives with existing severance agreements)
will receive a grant of Motorola stock options in connection with the merger
consistent with Motorola practice and will be eligible to receive future option
grants in the year 2000 and thereafter consistent with Motorola practice.
The merger agreement further provides that, except for the benefits
described above and under "The Merger--Interests of Certain Persons in the
Merger--Proposed Agreements with General Instrument Executives," General
Instrument officers and employees will be eligible to participate in all
incentive, benefit and perquisite plans and programs of Motorola on a basis no
less favorable, in the aggregate, than that for comparable Motorola officers
and employees.
Pooling. The merger agreement provides that until the Effective Time, none
of Motorola, Merger Sub or General Instrument, or any of their subsidiaries or
affiliates over which they exercise control, will knowingly take any action, or
knowingly fail to take any action, that would reasonably be expected to
jeopardize the treatment of the merger as a pooling of interests for accounting
purposes. Motorola, Merger Sub and General Instrument further agree to take all
reasonable actions necessary to cause the merger to be characterized as a
pooling of interests if any of them take any action that will jeopardize such
characterization prior to the Effective Time.
Plan of Reorganization. The merger agreement provides that each of Motorola,
Merger Sub and General Instrument will use its reasonable best efforts to cause
the merger to qualify, and will not knowingly take any action or cause any
action to be taken that could reasonably be expected to prevent the merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code. After the Effective Time, Motorola, the surviving corporation in the
merger and their affiliates will not knowingly take any action or knowingly
cause any action to be taken that could reasonably be expected to cause the
merger to fail to qualify as a reorganization under Section 368(a) of the Code.
Conditions
The merger agreement generally provides that the obligations of each party
to complete the transactions contemplated in the merger agreement are subject
to customary conditions, including the following:
Effectiveness of the Motorola Registration Statement. Declaration of
effectiveness of the Motorola registration statement and the absence of any
stop order suspending the effectiveness of the Motorola registration statement
and of any initiated or, to the knowledge of the parties, threatened
proceedings for that purpose by the SEC.
Stockholder Approval. Adoption and approval of the merger agreement and the
merger by the requisite vote of the General Instrument stockholders.
No Order. Absence of any governmental entity, state or federal court of
competent jurisdiction or arbitrator having enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
judgment, injunction or arbitration award or finding or other order (whether
temporary, preliminary or permanent) which is in effect and which prevents or
prohibits the completion of the merger and any other transaction contemplated
by the merger agreement.
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Consents and Approvals. Receipt of certain consents, approvals and
authorizations of governmental entities and other persons necessary to complete
the merger (in each case, without the imposition of conditions, the requirement
of divestiture or the expenditure of money by Motorola or General Instrument to
a third party in exchange for any such consent that, in any such case, would be
materially adverse to Motorola, General Instrument and their subsidiaries,
taken as a whole) unless the failure to obtain such consents would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on General Instrument or on Motorola after the Effective Time.
HSR Act. Expiration or termination of the applicable waiting period,
together with any extension of the waiting period, under the HSR Act.
NYSE. Approval of Motorola common stock issuable to General Instrument
stockholders in the merger for listing on the NYSE, subject only to official
notice of issuance.
Representations and Warranties. The representations and warranties of the
other party contained in the merger agreement being true and correct in all
material respects, unless such representations and warranties expressly include
a standard of materiality, in which case the statement will be true and correct
in all respects, as of the Effective Time as though made on the Effective Time.
Representations and warranties which address matters of a particular date must
be true and correct in all material respects, unless such representations and
warranties expressly include a standard of materiality, in which case the
statement will be true and correct in all respects, as of such date.
Agreements and Covenants. The other party shall have performed or complied
in all material respects with all agreements and covenants contained in the
merger agreement.
Tax Opinions. Receipt by each of Motorola and General Instrument of an
opinion from its tax advisor or counsel, respectively, to the effect that:
. the merger will be treated for U.S. federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the
Code;
. each of Motorola, Merger Sub and General Instrument will be a party to
the reorganization;
. no gain or loss will be recognized by Motorola, Merger Sub or General
Instrument as a result of the merger; and
. no gain or loss will be recognized by the stockholders of General
Instrument who exchange their General Instrument shares solely for
Motorola shares pursuant to the merger (except with respect to cash
received in lieu of a fractional Motorola share interest).
Accountant Letters. Receipt by each of Motorola and General Instrument of
"cold comfort" letters from the independent accountant of the other party dated
the date on which the Motorola registration statement became effective and a
date within two business days before the Effective Time, in form and substance
reasonably satisfactory to such party and reasonably customary in scope and
substance for comfort letters delivered by independent public accountants.
Pooling Opinion. Receipt by each of Motorola and General Instrument of a
report from its independent accountant, dated as of the date the Motorola
registration statement became effective and the Effective Time, to the effect
that they concur with their client's conclusion that no conditions exist that
would preclude their client's ability to be a party to a business combination
with the other party to be accounted for as a pooling of interests.
Each of the foregoing conditions is waivable by Motorola or General
Instrument, as the case may be, to the extent legally permissible. Motorola and
General Instrument committed to Liberty Media in the voting agreement not to
waive the condition to completion of the merger relating to delivery of tax
opinions. See "--Voting Agreement" and "--Conditions--Tax Opinions."
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Additionally, Motorola's obligation to effect the merger and the other
transactions contemplated by the merger agreement is conditioned upon there
having occurred since September 14, 1999 no material adverse effect with
respect to General Instrument or any event or development that would,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on General Instrument.
Termination
The merger agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption of the merger agreement and
the merger by the General Instrument stockholders:
. by mutual consent of Motorola and General Instrument;
. by either Motorola or General Instrument if:
--the company seeking to terminate under this provision is not itself
in material breach of any representation, warranty, covenant or other
agreement contained in the merger agreement;
--there has been a breach by the other company of any of its
representations, warranties, covenants or agreements contained in the
merger agreement or any of its representations and warranties becomes
untrue;
--such breach or condition would prevent the satisfaction of the
closing condition described under "--Representations and Warranties";
and
--such breach or condition has not been promptly cured within 30 days
following receipt by such company of written notice of its breach;
. by either Motorola or General Instrument if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction, any arbitrator or any governmental entity preventing or
prohibiting the completion of the merger shall have become final and
nonappealable, so long as the party seeking termination is not in breach
of its obligation to use its reasonable best efforts to take appropriate
action, obtain the necessary consents and make all necessary filings in
connection with the merger agreement and the merger (see "--Additional
Covenants and Agreements--Appropriate Action; Consents and Filings");
. by either Motorola or General Instrument if the merger has not been
completed before March 31, 2000 unless the failure to complete the
merger by such date shall be due to the failure of the party seeking to
terminate the merger agreement to perform or observe in all material
respects the covenants and agreements of such party set forth in the
merger agreement; or
. by either Motorola or General Instrument if the merger agreement fails
to receive the requisite vote for approval and adoption by the General
Instrument stockholders at the special meeting or any adjournment or
postponement of that meeting.
Effect of Termination. The merger agreement provides that, in the event of
the termination of the merger agreement by either General Instrument or
Motorola, the merger agreement will become void and there will be no liability
under the merger agreement on the part of Motorola or General Instrument, other
than with respect to the termination fee and the agreement to share certain
fees and expenses and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in the merger agreement.
Termination Fee. In the merger agreement, Motorola and General Instrument
agreed that General Instrument will pay to Motorola the sum of $300 million
solely as follows:
. if all of the following occur:
--General Instrument or Motorola terminates the merger agreement due to
the failure to complete the merger before March 31, 2000 where the
General Instrument stockholders have failed to adopt the
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merger agreement or due to the failure to obtain the requisite vote
from the General Instrument stockholders;
--at any time after the date of the merger agreement and prior to the
General Instrument special meeting, if any, an Acquisition Proposal
has been publicly announced;
--General Instrument has not, at any time prior to the General
Instrument special meeting, withdrawn, or modified or changed in a
manner adverse to Motorola, its approval or recommendation of the
merger; and
--within nine months of the termination of the merger agreement, General
Instrument enters into a definitive acquisition agreement;
in which case the $300 million fee is payable within five days of entering
into the acquisition agreement; or
. if Motorola terminates the merger agreement because:
--General Instrument has breached its covenants regarding the proxy
statement and Motorola registration statement, the General Instrument
special meeting or the non-solicitation of Acquisition Proposals (see
"--Proxy Statement and Registration Statement"; "The Merger--Special
Meeting"; "--No Solicitation Covenant"); or
--the merger is not completed before March 31, 2000 where the General
Instrument stockholders have failed to adopt the merger agreement or
due to the failure to obtain the requisite vote from the General
Instrument stockholders and General Instrument has withdrawn, or
modified or changed in any manner adverse to Motorola, its approval or
recommendation of the merger;
in which case the $300 million fee is due within two days of termination.
Amendment; Waiver
The merger agreement may be amended by the parties to the merger agreement
by action taken by or on behalf of their respective Boards at any time prior
to the Effective Time. After approval of the merger by the General Instrument
stockholders, no amendment may be made without further stockholder approval
which, by law or in accordance with the rules of any relevant stock exchange,
requires further approval by such stockholders. The merger agreement may not
be amended except by an instrument in writing signed by the parties to the
merger agreement.
The merger agreement provides that Motorola, Merger Sub or General
Instrument may: (1) extend the time for the performance of any of the
obligations or other acts of the other parties to the merger agreement, (2)
waive any inaccuracies in the representations and warranties of the other
party contained in the merger agreement or in any document delivered pursuant
to the merger agreement, and (3) waive compliance by the other party with any
of the agreements or conditions contained in the merger agreement. However,
after the General Instrument stockholder approval of the merger, there may not
be, without further approval of the General Instrument stockholders, any
extension or waiver of merger agreement or any portion of the merger agreement
which reduces the amount or changes the form of the consideration to be issued
to General Instrument stockholders other than as contemplated by the merger
agreement. Any such extension or waiver will be valid only if it is set forth
in a written instrument signed by the party or parties to be bound thereby.
Such extension or waiver or failure to insist on strict compliance with an
obligation, agreement or condition will not operate as a waiver of, or bar any
claim with respect to, any subsequent or other failure.
Voting Agreement
On September 14, 1999, in connection with the merger agreement, Liberty
Media Corporation, Motorola and General Instrument entered into a voting
agreement. Pursuant to the voting agreement, Liberty Media agreed to vote all
of the General Instrument shares that it will beneficially own at the record
date of the General Instrument special meeting for the approval and adoption
of the merger agreement, the merger and other transactions contemplated by the
merger agreement, but it shall not be required to exercise any warrants. As of
the date of the voting agreement, Liberty Media represented that it held
31,356,000 General Instrument
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shares, representing approximately 18.1% of the outstanding voting power as of
such date, and held warrants for an additional 21,356,000 General Instrument
shares, of which warrants to purchase 4,928,000 General Instrument shares were
vested as of that date.
In the voting agreement, Liberty Media agreed to use commercially reasonable
efforts to cooperate fully with Motorola and General Instrument in connection
with the merger agreement and the transactions contemplated in the merger
agreement. Liberty Media also agreed to not initiate or solicit any
discussions, inquiries or proposals with any third party that constitute or may
reasonably be expected to lead to an Acquisition Proposal or an acquisition
agreement.
The voting agreement also provides that Liberty Media will not, and will not
agree to, sell or otherwise transfer or dispose of any of its General
Instrument shares, or any interest in those shares, or warrants or any General
Instrument shares obtained upon the exercise of the warrants, or any other
securities convertible into or exchangeable for those shares or any voting
rights with respect thereto other than (1) pursuant to the merger, (2) with the
prior written consent of Motorola and General Instrument or (3) not later than
30 days prior to the merger, and in such case only if Motorola receives a valid
and irrevocable proxy coupled with an interest allowing Motorola to vote those
shares in favor of the merger agreement, the merger and the other transactions
contemplated by the merger agreement. Liberty Media may pledge or grant a
security interest in or may acquire or dispose of derivative securities
relating to the General Instrument common stock, subject to certain
restrictions.
The voting agreement also grants Liberty Media certain registration rights
with respect to Motorola shares in lieu of any registration rights that it may
have had with respect to General Instrument shares and the warrants.
The voting agreement is terminable at the option of either party at any time
after the earliest of (1) the termination of the merger agreement, (2) the day
following the Effective Time (except that the registration rights will
continue), (3) immediately following the first General Instrument special
meeting at which approval and adoption of the merger agreement and the merger
are submitted to the General Instrument stockholders and are not approved and
adopted, after a vote, by the requisite percentage of the General Instrument
stockholders, and (4) the effectiveness of any amendment or modification to, or
waiver under, the merger agreement which would have an adverse effect upon
Liberty Media's rights upon or the consideration payable in the merger, unless
consented to in writing by Liberty Media. In the voting agreement, Motorola and
General Instrument have committed to Liberty Media not to waive the condition
to completion of the merger relating to the delivery of tax opinions described
under "--Conditions--Tax Opinions" without Liberty Media's consent.
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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
OF MOTOROLA AND GENERAL INSTRUMENT
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of operations of Motorola
and General Instrument, including their respective subsidiaries, after giving
effect to the merger. The unaudited pro forma combined balance sheet as of July
3, 1999 with respect to Motorola and June 30, 1999 with respect to General
Instrument, set forth below, gives effect to the merger as if it had occurred
on July 3, 1999. The unaudited pro forma combined statements of operations for
each of the years ended December 31, 1998, 1997, and 1996 and six months ended
July 3, 1999 and June 27, 1998 with respect to Motorola and the years ended
December 31, 1998, 1997, and 1996 and six months ended June 30, 1999 and 1998
with respect to General Instrument give effect to the merger as if it had
occurred on January 1, 1996. These statements are prepared on the basis of
accounting for the merger as a pooling of interests and are based on the
assumptions set forth in the notes to these unaudited pro forma combined
financial statements.
The following unaudited pro forma financial information has been prepared
from, and should be read in conjunction with, the audited historical
consolidated financial statements and related notes thereto of Motorola and
General Instrument, incorporated by reference in this proxy
statement/prospectus. The following information is not necessarily indicative
of the financial position or operating results that would have occurred had the
merger been completed on the date described above, or at the beginning of the
period for which the merger is being given effect, nor is it necessarily
indicative of future financial position or operating results. See "Where You
Can Find More Information."
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Unaudited Pro Forma Combined Balance Sheet
July 3, 1999
(in millions)
<TABLE>
<CAPTION>
General
Motorola Instrument
July 3, June 30, Pro Forma Motorola
1999 1999 Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents.......... $ 2,358 $ 365 $-- $ 2,723
Short-term investments............. 291 86 -- 377
Accounts receivable, net........... 5,338 298 (4)(b) 5,632
Inventories........................ 3,765 235 -- 4,000
Deferred income taxes.............. 2,519 58 -- 2,577
Other current assets............... 787 22 -- 809
------- ------ ---- -------
Total current assets............. $15,058 $1,064 $ (4) $16,118
------- ------ ---- -------
Property, plant and equipment,
net............................... 9,613 234 -- 9,847
Other assets....................... 7,076 1,091 -- 8,167
------- ------ ---- -------
Total assets..................... $31,747 $2,389 $ (4) $34,132
======= ====== ==== =======
Liabilities and Stockholders'
Equity
Notes payable and current portion
of
long-term debt.................... $ 1,877 $ -- $-- $ 1,877
Accounts payable................... 2,484 216 (4)(b) 2,696
Accrued liabilities................ 6,365 174 73 (c) 6,612
------- ------ ---- -------
Total current liabilities........ $10,726 $ 390 $ 69 $11,185
------- ------ ---- -------
Long-term debt..................... 3,119 -- -- 3,119
Deferred income taxes.............. 2,011 14 -- 2,025
Other liabilities.................. 1,729 66 -- 1,795
Company obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
company-guaranteed debentures..... 484 -- -- 484
Preferred stock, $100 par value
issuable in series................ -- -- -- --
Common stock, $3 par value......... 1,822 2 (2)(a) 2,122
300 (a)
Additional paid-in capital......... 2,107 1,951 (298)(a) 3,571
(189)(d)
Retained earnings.................. 8,487 113 (73)(c) 8,527
Non-owner changes to equity........ 1,262 42 -- 1,304
Less treasury stock, at cost....... -- (189) 189 (d) --
------- ------ ---- -------
Total stockholders' equity....... 13,678 1,919 (73) 15,524
------- ------ ---- -------
Total liabilities and
stockholders' equity............ $31,747 $2,389 $ (4) $34,132
======= ====== ==== =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
56
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
Six Months Ended July 3, 1999
(in millions, except per share data)
<TABLE>
<CAPTION>
General
Motorola Instrument Motorola
July 3, June 30, Pro Forma Pro
1999 1999 Adjustments Forma
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................. $14,745 $1,046 $(25)(b) $15,766
------- ------ ---- -------
Costs and expenses:
Manufacturing and other costs of
sales.............................. 8,641 733 (25)(b) 9,349
Selling, general and administrative
expenses........................... 2,803 96 -- 2,899
Research & development
expenditures....................... 1,555 74 -- 1,629
Depreciation expense................ 1,114 29 -- 1,143
Interest (income) expense, net...... 93 (8) -- 85
------- ------ ---- -------
Total costs and expenses.......... $14,206 $ 924 $(25) $15,105
------- ------ ---- -------
Earnings before income taxes........ 539 122 -- 661
Income tax provision................ 162 45 -- 207
------- ------ ---- -------
Net earnings........................ $ 377 $ 77 $ -- $ 454
======= ====== ==== =======
Net earnings per common share:
Basic............................... $ 0.63 $ 0.44 $ 0.65
======= ====== =======
Diluted............................. $ 0.61 $ 0.41 $ 0.62
======= ====== =======
Weighted average common shares
outstanding:
Basic............................... 603.4 174.1 703.5
======= ====== =======
Diluted............................. 619.8 188.9 728.4
======= ====== =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
57
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
Six Months Ended June 27, 1998
(in millions, except per share data)
<TABLE>
<CAPTION>
General
Motorola Instrument
June 27, June 30, Pro Forma Motorola
1998 1998 Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................... $13,909 $ 905 $ (23)(b) $14,791
------- ------ ----- -------
Costs and expenses:
Manufacturing and other costs of
sales............................ 8,445 657 (23)(b) 9,079
Selling, general and
administrative expenses.......... 2,550 115 -- 2,665
Restructuring and other charges... 1,980 -- -- 1,980
Research & development
expenditures..................... 1,425 150 -- 1,575
Depreciation expense.............. 1,058 26 -- 1,084
Interest expense, net............. 91 1 -- 92
------- ------ ----- -------
Total costs and expenses.......... $15,549 $ 949 $ (23) $16,475
------- ------ ----- -------
Loss before income taxes............ (1,640) (44) -- (1,684)
Income tax benefit.................. (492) (14) -- (506)
------- ------ ----- -------
Net loss............................ $(1,148) $ (30) $ -- $(1,178)
======= ====== ===== =======
Net loss per common share:
Basic............................. $ (1.92) $(0.20) $ (1.72)
======= ====== =======
Diluted........................... $ (1.92) $(0.20) $ (1.72)
======= ====== =======
Weighted average common shares
outstanding:
Basic............................. 597.6 150.5 684.1
======= ====== =======
Diluted........................... 597.6 150.5 684.1
======= ====== =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
58
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 1998
(in millions, except per share data)
<TABLE>
<CAPTION>
General
Motorola Instrument
December December Pro Forma Motorola
31, 1998 31, 1998 Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales......................... $ 29,398 $ 1,988 $ (50)(b) $ 31,336
--------- ------- ----- --------
Costs and expenses:
Manufacturing and other costs of
sales.......................... 18,043 1,399 (50)(b) 19,392
Selling, general and
administrative expenses........ 5,443 213 -- 5,656
Restructuring and other
charges........................ 1,980 -- -- 1,980
Research & development
expenditures................... 2,893 225 -- 3,118
Depreciation expense............ 2,197 58 -- 2,255
Interest (income) expense, net.. 216 (1) -- 215
--------- ------- ----- --------
Total costs and expenses...... $ 30,772 $ 1,894 $ (50) $ 32,616
--------- ------- ----- --------
Earnings (loss) before income
taxes............................ (1,374) 94 -- (1,280)
Income tax provision (benefit).... (412) 39 -- (373)
--------- ------- ----- --------
Net earnings (loss)............... $ (962) $ 55 $ -- $ (907)
========= ======= ===== ========
Net earnings (loss) per common
share:
Basic........................... $ (1.61) $ 0.35 $ (1.31)
========= ======= ========
Diluted......................... $ (1.61) $ 0.33 $ (1.31)
========= ======= ========
Weighted average common shares
outstanding:
Basic........................... 598.6 159.5 690.3
========= ======= ========
Diluted......................... 598.6 169.0 690.3
========= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
59
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 1997
(in millions, except per share data)
<TABLE>
<CAPTION>
General
Motorola Instrument
December December Pro Forma Motorola
31, 1997 31, 1997 Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales......................... $29,794 $ 1,764 $ (63) (b) $31,495
------- ------- -------- -------
Costs and expenses:
Manufacturing and other costs of
sales.......................... 17,283 1,309 (63) (b) 18,529
Selling, general and
administrative expenses........ 5,160 213 -- 5,373
Restructuring and other
charges........................ 327 -- -- 327
Research & development
expenditures................... 2,748 182 -- 2,930
Depreciation expense............ 2,329 65 -- 2,394
Interest expense, net........... 131 5 -- 136
------- ------- -------- -------
Total costs and expenses........ $27,978 $ 1,774 $ (63) $29,689
------- ------- -------- -------
Earnings (loss) before income
taxes............................ 1,816 (10) -- 1,806
Income tax provision.............. 636 6 -- 642
------- ------- -------- -------
Net earnings (loss)............... $ 1,180 $ (16) $ -- $ 1,164
======= ======= ======== =======
Net earnings (loss) per common
share:
Basic........................... $ 1.98 $ (0.11) $ 1.71
======= ======= =======
Diluted......................... $ 1.94 $ (0.11) $ 1.67
======= ======= =======
Weighted average common shares
outstanding:
Basic........................... 595.5 147.5 680.3
======= ======= =======
Diluted......................... 612.2 147.5 697.6
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
60
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 1996
(in millions, except per share data)
<TABLE>
<CAPTION>
General
Motorola Instrument
December 31, December 31, Pro Forma Motorola
1996 1996 Adjustments Pro Forma
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................... $27,973 $1,756 $(72)(b) $29,657
------- ------ ---- -------
Costs and expenses:
Manufacturing and other costs
of sales.................... 16,610 1,316 (72)(b) 17,854
Selling, general and
administrative expenses..... 4,701 326 -- 5,027
Research & development
expenditures................ 2,394 178 -- 2,572
Depreciation expense......... 2,308 59 -- 2,367
Interest expense, net........ 185 26 -- 211
------- ------ ---- -------
Total costs and expenses... $26,198 $1,905 $(72) $28,031
------- ------ ---- -------
Earnings (loss) before income
taxes......................... 1,775 (149) -- 1,626
Income tax provision
(benefit)..................... 621 (53) -- 568
------- ------ ---- -------
Net earnings (loss)............ $ 1,154 $ (96) $-- $ 1,058
======= ====== ==== =======
Net earnings (loss) per common
share:
Basic........................ $ 1.95 $(0.65) $ 1.56
======= ====== =======
Diluted...................... $ 1.90 $(0.65) $ 1.52
======= ====== =======
Weighted average common shares
outstanding:
Basic........................ 592.5 147.3 677.2
======= ====== =======
Diluted...................... 609.0 147.3 694.3
======= ====== =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
61
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
(in millions, except per share data)
Note 1: Pro Forma Adjustments
(a) The pro forma amount assumes 100 million shares of Motorola common stock
are issued in the merger, based on the exchange ratio of 0.575 shares of
Motorola common stock for each share of General Instrument common stock and
the number of shares of General Instrument common stock outstanding as of
July 3, 1999. The actual number of shares of Motorola common stock to be
issued will be determined at the time the merger is completed, based upon
the number of shares of General Instrument common stock then outstanding.
<TABLE>
<CAPTION>
Common
Stock
Outstanding
-----------
<S> <C>
General Instrument Common Stock Issued........................ 180.9
Less: Treasury Stock.......................................... (7.6)
------
General Instrument Common Stock Outstanding................... 173.3
Exchange Ratio................................................ 0.575
------
Motorola Common Shares to be Exchanged........................ 100
Motorola Common Stock Par Value............................... $ 3.00
------
Par Value of Motorola Common Stock to be Issued............... $ 300
======
</TABLE>
(b) Prior to the merger, Motorola acted as a supplier of certain products to
General Instrument. At that time, those sales were treated as arm's-length
transactions between unrelated parties. As a combined entity, these
transactions are classified as intercompany transactions and must be
eliminated when preparing the pro forma combined financial statements.
(c) Adjusted to reflect incurrence of an estimated $73 of non-recurring merger-
related costs. These costs include fees for financial advisors, legal
advisors, accountants, printing costs, registration and transfer fees and
other nominal charges. This amount does not include costs which will be
incurred to integrate and restructure the operations of Motorola and
General Instrument.
(d) In the application of the pooling of interests method, treasury stock of
the entity being combined is presented in the financial statements of the
combined enterprise as if it were retired on the date the pooling of
interest is completed.
Note 2: Earnings Per Share
The calculation of basic and diluted net earnings (loss) per common share for
the pro forma statements of operations uses the applicable weighted average
number of outstanding shares of Motorola and General Instrument common stock
adjusted to equivalent shares of Motorola common stock. In calculating net
earnings (loss) per common share for the year ended December 31, 1998 and the
six months ended June 27, 1998, common stock equivalent shares consisting of
stock options and convertible securities have been excluded because their
inclusion would have been antidilutive.
Note 3: Reclassifications
Certain historical amounts have been reclassified to conform with the pro forma
combined presentation.
62
<PAGE>
DESCRIPTION OF MOTOROLA CAPITAL STOCK
The following description of certain terms of the capital stock of Motorola
does not purport to be complete and is qualified in its entirety by reference
to the Motorola certificate of incorporation. For more information as to how
you can obtain the Motorola certificate of incorporation, see "Where You Can
Find More Information."
Motorola Common Stock
The Motorola certificate of incorporation authorizes Motorola to issue up to
1,400,000,000 Motorola shares, par value $3.00 per share. Each Motorola share
is entitled to one vote, in person or by proxy, at any and all meetings of the
Motorola stockholders on all propositions before such meetings and on all
elections of directors of Motorola. The Motorola certificate of incorporation
does not provide for cumulative voting in the election of directors. Subject to
any preferential rights of any outstanding series of Motorola preferred stock
created by the Motorola Board from time to time, the holders of Motorola common
stock are entitled to dividends only if, when and as the dividends are declared
by the Motorola Board and as may be permitted by law, and, upon liquidation,
will be entitled to receive pro rata all assets of Motorola available for
distribution to such holders. As of [ ], 1999, [ ] Motorola
shares were issued and outstanding, held by approximately [ ] holders of
record. For a description of voting requirements and change of control
restrictions, see "--Motorola Rights Plan" and "Comparison of Certain Rights of
Stockholders of Motorola and General Instrument."
Motorola Preferred Stock
Motorola is also authorized to issue 500,000 shares of preferred stock, par
value $100 per share, of Motorola from time to time in one or more series and
with such designation for each such series as determined by the Motorola Board.
The Motorola Board may, without further action by the Motorola stockholders,
issue a series of Motorola preferred stock and state and fix the rights and
preferences of those shares, including:
. the voting powers, if any, of the holders of stock of such series;
. the rate per annum and the times at and conditions upon which the
holders of stock of such series will be entitled to receive dividends,
and whether such dividends will be cumulative or noncumulative and, if
cumulative, the terms upon which such dividends will be cumulative;
. the price or prices and the time or times at and the manner in which the
stock of such series will be redeemable;
. the right to which the holders of the shares of stock of such series
shall be entitled upon any voluntary or involuntary liquidation,
dissolution or winding-up of Motorola;
. the terms, if any, upon which shares of stock of such series shall be
convertible into, or exchangeable for, shares of any stock of any other
class or classes or of any other series of the same or any other class
or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
. any other designations, preferences, and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof so far as they are not inconsistent with the
provisions of the Motorola certificate of incorporation, as amended, and
to the full extent now or hereafter permitted by the laws of Delaware.
On November 5, 1998, the Motorola Board designated a series of Motorola
preferred stock, Junior Participating Preferred Stock, Series B (the "Series B
Preferred Stock") and authorized 250,000 shares for issuance in connection with
the adoption of the Motorola rights plan. As of [ ], 1999, no shares of
Motorola preferred stock of any series were outstanding.
63
<PAGE>
Motorola Rights Plan
On November 5, 1998, the Motorola Board authorized the issuance of one
preferred share purchase right (a "Right") for each outstanding Motorola share,
pursuant to a Rights Agreement between Motorola and Harris Trust and Savings
Bank, as Rights Agent. Each Right entitles the registered holder to purchase
from Motorola one ten-thousandth of a share of Series B Preferred Stock at an
exercise price of $200 per one ten-thousandth of a share of Series B Preferred
Stock, subject to adjustment. The Rights become exercisable on the earlier of:
. the tenth day after a public announcement that a person or group of
affiliated or associated persons has acquired or obtained the right to
acquire 10% or more of the outstanding Motorola shares (thereby becoming
an "Acquiring Person"); and
. the tenth business day after the commencement or public disclosure of an
intention to commence a tender offer or exchange offer by a person other
than an exempt person if, upon completion of the offer, such person
could become an Acquiring Person.
A majority of the Motorola Board may elect to defer the date on which the
Rights become exercisable. The Rights expire on November 20, 2008 unless
earlier redeemed or exchanged by Motorola as described below.
If a person or group becomes an Acquiring Person, each holder of a Right
(except those held by the Acquiring Person and its affiliates and associates)
will have the right to purchase, upon exercise, Motorola shares (or, in certain
circumstances, shares of Series B Preferred Stock, common stock equivalents or
cash) having a value equal to two times the exercise price of the Right. In
addition, in the event that, at the time or after a person becomes an Acquiring
Person, Motorola is involved in a merger or other business combination in which
(1) Motorola is not the surviving corporation, (2) Motorola common stock is
changed or exchanged, or (3) 50% or more of Motorola's consolidated assets or
earning power are sold, then each Right (other than Rights that are or were
owned by the Acquiring Person and certain related persons and transferees,
which will thereafter be void) will thereafter be exercisable for a number of
shares of common stock of the acquiring company having a market value of two
times the exercise price of the Right. In addition, at any time after any
person or group becomes an Acquiring Person and before any person acquires 50%
or more of the outstanding Motorola shares and before a business combination
occurs, the Motorola Board may exchange the Rights (other than Rights owned by
the Acquiring Person which will have become void), in whole or in part, at an
exchange ratio of one Motorola share, or one ten-thousandth of a share of
Series B Preferred Stock (or a common stock equivalent), per Right (subject to
adjustment).
The Motorola Board may redeem all but not less than all Rights at a
redemption price of $.01 per Right at any time prior to the time that a person
or a group has become an Acquiring Person. Immediately upon redemption, the
right to exercise will terminate, and the only right of holders will be to
receive the redemption price. As long as the Rights are redeemable, the terms
of the Rights may be amended by the Motorola Board in its discretion without
the consent of the Rights holders. After that time, no amendment may adversely
affect the interests of the Rights holder (other than the Acquiring Person).
The Rights will not prevent a takeover of Motorola. The Rights, however, may
have certain antitakeover effects. The Rights may cause substantial dilution to
a person or group that attempts to acquire Motorola on terms not approved by
the Motorola Board or make the acquisition of Motorola substantially more
costly, unless the Motorola Board redeems the Rights prior to the person
becoming an Acquiring Person. The Rights should not interfere with any merger
or other business combination approved by the Motorola Board because of the
Board's ability to redeem the Rights or amend the Motorola rights plan. A
description of the Motorola rights plan specifying the terms of the Rights and
the Series B Preferred Stock has been included in reports filed by Motorola
under the Securities Exchange Act of 1934, as amended. See "Where You Can Find
More Information." This summary description is qualified in its entirety by
reference to the Motorola rights plan.
64
<PAGE>
Each Motorola share issued in the merger will have a corresponding Right
attached to it.
Transfer Agent and Registrar
Harris Trust and Savings Bank is the transfer agent and registrar for the
Motorola common stock.
65
<PAGE>
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
OF MOTOROLA AND GENERAL INSTRUMENT
Upon completion of the merger, the stockholders of General Instrument will
become stockholders of Motorola, and the Motorola certificate of incorporation
and the Motorola by-laws will govern the rights of former General Instrument
stockholders. Both Motorola and General Instrument are incorporated under
Delaware law and are subject to the Delaware General Corporation Law.
The following is a summary of material differences between the rights of
holders of Motorola common stock and the rights of holders of General
Instrument common stock. These differences arise from differences between the
Motorola certificate of incorporation and the Motorola by-laws, on the one
hand, and the General Instrument certificate of incorporation and the General
Instrument by-laws, on the other hand. See "Description of Motorola Capital
Stock." This discussion is not, and does not purport to be, complete or to
identify all differences that may, under given situations, be material to
stockholders. The following summaries are qualified in their entirety by
reference to the Motorola certificate of incorporation and the Motorola by-
laws, which are filed as exhibits to Motorola's Annual Report on Form 10-K for
the year ended December 31, 1998, and to the General Instrument certificate of
incorporation and the General Instrument by-laws, which are filed as exhibits
to Motorola's Annual Report on Form 10-K for the year ended December 31, 1998.
To obtain these documents, see "Where You Can Find More Information."
<TABLE>
<CAPTION>
General Instrument Motorola
Stockholder Rights Stockholder Rights
------------------ ------------------
<S> <C> <C>
Authorized The authorized capital stock of The authorized capital stock of
Capital Stock: General Instrument consists of Motorola consists of 1.4
400 million shares of common billion shares of common stock
stock and 20 million shares of and 500,000 shares of preferred
preferred stock. stock.
Number of The General Instrument The Motorola by-laws provide
Directors: certificate of incorporation that the Motorola Board shall
provides that the General consist of 16 directors or such
Instrument Board has exclusive other number that the Motorola
authority to fix the number of Board may fix. The Motorola
directors pursuant to a Board currently consists of 15
resolution adopted by a directors.
majority of the directors of
General Instrument, but the
number cannot be less than
three. General Instrument
currently has six directors,
plus one vacancy.
Classification The General Instrument Board is Motorola does not have a
of Board of divided into three classes, classified board.
Directors: with each class serving a
staggered three-year term.
Quorum for The Motorola by-laws state that
Meeting of one-third of the number of
Directors: The General Instrument by-laws directors fixed in accordance
provide that a majority of the with the provisions of the
entire General Instrument Board Motorola by-laws shall
shall constitute a quorum. constitute a quorum.
Election of Pursuant to Delaware law, The Motorola by-laws provide
Directors: directors are elected by a that directors shall be elected
plurality of the General by the affirmative vote of a
Instrument shares represented plurality of the Motorola
at the meeting and entitled to shares represented at the
vote on the election of meeting and entitled to vote on
directors. the election of directors.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
General Instrument Motorola
Stockholder Rights Stockholder Rights
------------------ ------------------
<S> <C> <C>
Removal of The General Instrument The Motorola certificate of
Directors: certificate of incorporation incorporation and the Motorola
provides that directors may by-laws contain no specific
only be removed for cause, at a provision regarding removal.
meeting called for such Delaware law provides that in
purpose, and only by a vote of the absence of such a
the holders of a majority of provision, directors of a
the voting power of General corporation may be removed with
Instrument capital stock or without cause by the holders
entitled to vote in the of a majority of the shares
election of directors, voting entitled to vote at an election
as a single class. of directors.
Amendment of The Motorola by-laws provide
By-Laws: that the by-laws may be
altered, amended or repealed
and new by-laws may be adopted
at any meeting of the Motorola
Board by a majority vote of the
directors present at the
The General Instrument by-laws meeting. Delaware law provides
may be altered, repealed, that stockholders entitled to
amended or rescinded, or new vote also have the power to
by-laws may be adopted, either adopt, amend or repeal the by-
by the affirmative vote of laws. Amendment of the Motorola
holders of at least a majority by-laws by the Motorola
of the voting power of all of stockholders requires the
the issued and outstanding affirmative vote of holders of
shares of capital stock of a majority of the shares of
General Instrument entitled to voting stock represented at the
vote on such amendment or by meeting and entitled to vote on
the General Instrument Board. that subject matter.
Voting Stock: The outstanding voting
securities of General The outstanding voting
Instrument are the General securities of Motorola are the
Instrument common stock. Motorola common stock.
Stockholder Each General Instrument share As discussed in "Description of
Rights Plan: has attached to it one Motorola Capital Stock--
preferred share purchase right Motorola Rights Plan," each
issued pursuant to the General Motorola share has attached to
Instrument rights plan. General it one Right issued pursuant to
Instrument has taken all action the Motorola rights plan.
necessary to render the rights
issued pursuant to the General
Instrument rights plan
inapplicable to the merger and
the related agreements and
transactions.
Special The chairman, the president or The Motorola by-laws provide
Meetings of the General Instrument Board that either the Motorola Board
Stockholders: may call a special meeting for or its chairman may call a
any purpose. The secretary of special meeting.
General Instrument shall call a
special meeting upon the
written request of stockholders
holding at least a majority of
the voting power of the issued
and outstanding shares of
capital stock entitled to vote
at such meeting.
</TABLE>
67
<PAGE>
EXPERTS
The consolidated financial statements and schedule of Motorola and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, incorporated by reference herein,
have been audited by KPMG LLP, independent certified public accountants. Such
financial statements and schedule have been incorporated by reference herein in
reliance upon the reports with respect thereto of KPMG LLP, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The combined financial statements of The Hits Access and Control Division as
of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, included in the Form 8-K of General Instrument
and incorporated by reference herein, have been audited by KPMG LLP,
independent certified public accountants. Such financial statements have been
incorporated by reference herein in reliance upon the report with respect
thereto of KPMG LLP, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this proxy statement/prospectus by reference from General
Instrument's Annual Report on Form 10-K for the year ended December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL AND TAX MATTERS
The validity of the Motorola shares to be issued in connection with the
merger is being passed upon for Motorola by Donald F. McLellan, Esq., Senior
Transactions Counsel, Motorola Corporate Law Department. As of October 8, 1999,
Mr. McLellan owned 174 Motorola shares and held options to purchase an
additional 4,300 Motorola shares (of which 2,600 were vested).
Certain of the tax consequences of the merger will be passed upon at the
Effective Time, as a condition to the merger, by KPMG LLP, tax advisor to
Motorola, and by Simpson Thacher & Bartlett, counsel to General Instrument. See
"The Merger Agreement--Conditions."
SUBMISSION OF STOCKHOLDER PROPOSALS
In the event that we do not complete the merger, there will be an annual
meeting of the General Instrument stockholders in 2000. Stockholders who intend
to present proposals at the 2000 annual meeting, and who wish to have such
proposals included in the proxy statement for such meeting, must submit such
proposals in writing by notice delivered or mailed by first-class United States
mail, postage prepaid, to the Secretary, General Instrument Corporation, 101
Tournament Drive, Horsham, Pennsylvania 19044, and such notice must be received
no later than December 15, 1999. Such proposals must meet the requirements set
forth in the rules and regulations of the SEC in order to be eligible for
inclusion in General Instrument's proxy statement for its 2000 annual meeting.
In addition, under General Instrument's by-laws, stockholders must comply
with specified procedures to nominate directors or introduce an item of
business at the 2000 annual meeting. Nominations or an item of business to be
introduced at an annual meeting must be submitted in writing and received by
General Instrument generally not less than 60 days nor more than 90 days in
advance of an annual meeting. To be in proper written form, a stockholder's
notice must contain the specific information required by General Instrument's
by-laws. A copy of the by-laws which describes the advance notice procedures
can be obtained from the Secretary of General Instrument.
68
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are identified by
the use of forward-looking words or phrases including, but not limited to,
"intended," "will be positioned," "expects," "expected," "anticipates," and
"anticipated." These forward-looking statements are based on current
expectations of Motorola or General Instrument, as the case may be. All
statements other than statements of historical facts included in this proxy
statement/prospectus, including those regarding the financial position, results
of operations, cash flows, business strategy, projected costs, growth
opportunities for existing products, benefits from new technology and plans and
objectives of management for future operations of Motorola or General
Instrument, as the case may be, are forward-looking statements. Although
Motorola or General Instrument believes that the expectations of Motorola or
General Instrument, as the case may be, reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations
will prove to have been correct. Because forward-looking statements involve
risks and uncertainties, the actual results of Motorola and General Instrument,
as the case may be, could differ materially. Important factors that could cause
actual results to differ materially from the expectations of Motorola or
General Instrument, as the case may be ("Cautionary Statements"), are disclosed
under "Risk Factors Relating to the Merger," "Reasons for the Merger," and
elsewhere in this proxy statement/prospectus and in Motorola's and General
Instrument's SEC filings listed on page 70. These forward-looking statements
represent the judgment of Motorola or General Instrument, as the case may be,
as of the date of this proxy statement/prospectus. All subsequent written and
oral forward-looking statements attributable to Motorola or General Instrument
or persons acting on behalf of Motorola or General Instrument are expressly
qualified in their entirety by the Cautionary Statements. Motorola and General
Instrument disclaim, however, any intent or obligation to update their
respective forward-looking statements.
69
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Motorola and General Instrument file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
we file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from commercial document retrieval services and at the Internet
world wide web site maintained by the SEC at www.sec.gov.
Motorola filed a registration statement on Form S-4 to register with the SEC
the Motorola common stock to be issued to General Instrument stockholders in
the merger. This proxy statement/prospectus is a part of the Motorola
registration statement and constitutes both a prospectus of Motorola and a
proxy statement of General Instrument for its special meeting.
As allowed by SEC rules, this proxy statement/prospectus does not contain
all the information you can find in the Motorola registration statement or the
exhibits to the Motorola registration statement.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.
<TABLE>
<CAPTION>
Motorola SEC Filings (File No. 1-07221) Period
- --------------------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended April 3, 1999 and July 3, 1999
Current Reports on Form 8-K Filed on September 16, 1999
Proxy Statement Dated March 23, 1999
The description of Motorola's common stock
contained in its Registration Statement on
Form 8-B dated July 2, 1973, including any
amendments or reports filed for the
purpose of updating such description.
The description of the Rights contained in
its Registration Statement on Form 8-A
dated November 5, 1998, including any
amendment or report filed for the purpose
of updating such description.
<CAPTION>
General Instrument SEC Filings (File No. 1-
12925) Period
- ------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K Filed on January 28, 1999, April 2, 1999, April 5, 1999,
August 27, 1999, September 17, 1999,
September 23, 1999 and October 7, 1999
Proxy Statement Dated April 14, 1999
</TABLE>
Motorola and General Instrument also incorporate by reference into this
proxy statement/prospectus additional documents that may be filed with the SEC
from the date of this proxy statement/prospectus to the date of the General
Instrument special meeting. These include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, as well as proxy statements.
70
<PAGE>
Motorola has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Motorola, and General Instrument
has supplied all such information relating to General Instrument.
If you are a stockholder, we may already have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC
or the SEC's Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this proxy statement/prospectus. Stockholders may obtain documents incorporated
by reference in this proxy statement/prospectus by requesting them in writing
or by telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Motorola, Inc. General Instrument Corporation
1303 East Algonquin Road 101 Tournament Drive
Schaumburg, Illinois 60196 Horsham, Pennsylvania 19044
Tel: (800) 262-8509 Tel: (215) 323-1000
Attn.: Investor Relations Attn.: Investor Relations
website: www.motorola.com/investor website: www.gi.com
</TABLE>
If you would like to request documents from us, please do so by [
] to receive them before the General Instrument special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the transactions. We
have not authorized anyone to provide you with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated [ ], 1999. You should not assume that
the information contained in this proxy statement/prospectus is accurate as of
any date other than that date, and neither the mailing of this proxy
statement/prospectus to stockholders nor the issuance of Motorola common stock
in the merger shall create any implication to the contrary.
71
<PAGE>
APPENDIX A
Agreement and Plan of Merger
By and Among
Motorola, Inc.,
Lucerne Acquisition Corp.
and
General Instrument Corporation
Dated as of September 14, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
The Merger
<C> <S> <C>
SECTION 1.1. The Merger............................................... A-1
SECTION 1.2. Effective Time........................................... A-1
SECTION 1.3. Effect of the Merger..................................... A-1
SECTION 1.4. Certificate of Incorporation; By-laws.................... A-2
SECTION 1.5. Directors and Officers................................... A-2
ARTICLE II
Conversion of Securities; Exchange of Certificates
SECTION 2.1. Conversion of Securities................................. A-2
SECTION 2.2. Exchange of Certificates................................. A-2
SECTION 2.3. Stock Transfer Books..................................... A-5
SECTION 2.4. Stock Options............................................ A-5
SECTION 2.5 Warrants................................................. A-5
ARTICLE III
Representations and Warranties of the Company
SECTION 3.1. Organization and Qualification; Subsidiaries............. A-6
SECTION 3.2. Certificate of Incorporation and By-laws; Corporate Books A-6
and Records..............................................
SECTION 3.3. Capitalization........................................... A-6
SECTION 3.4. Authority Relative to This Agreement..................... A-7
SECTION 3.5. No Conflict; Required Filings and Consents............... A-8
SECTION 3.6. Permits; Compliance With Law............................. A-9
SECTION 3.7. SEC Filings; Financial Statements........................ A-9
SECTION 3.8. Absence of Certain Changes or Events..................... A-10
SECTION 3.9. Employee Benefit Plans; Labor Matters.................... A-11
SECTION 3.10. Accounting and Tax Matters............................... A-12
SECTION 3.11. Contracts; Debt Instruments.............................. A-13
SECTION 3.12. Litigation............................................... A-13
SECTION 3.13. Environmental Matters.................................... A-14
SECTION 3.14. Intellectual Property.................................... A-14
SECTION 3.15. Taxes.................................................... A-15
SECTION 3.16. Insurance................................................ A-16
SECTION 3.17. Opinion of Financial Advisors............................ A-16
SECTION 3.18. Vote Required............................................ A-16
SECTION 3.19. Brokers.................................................. A-17
SECTION 3.20. Year 2000 Compliance..................................... A-17
SECTION 3.21. Disclosure............................................... A-17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
<C> <S> <C>
SECTION 4.1. Organization and Qualification; Subsidiaries............. A-17
SECTION 4.2. Certificate of Incorporation and By-laws; Corporate Books A-17
and Records..............................................
SECTION 4.3. Capitalization........................................... A-18
SECTION 4.4. Authority Relative to This Agreement..................... A-18
SECTION 4.5. No Conflict; Required Filings and Consents............... A-18
SECTION 4.6. SEC Filings; Financial Statements........................ A-19
SECTION 4.7. Absence of Certain Changes or Events..................... A-19
SECTION 4.8. Accounting and Tax Matters............................... A-19
SECTION 4.9. Ownership of Merger Sub; No Prior Activities............. A-20
SECTION 4.10. Opinion of Financial Advisor............................. A-20
SECTION 4.11. Brokers.................................................. A-20
SECTION 4.12. Disclosure............................................... A-20
ARTICLE V
Covenants
SECTION 5.1. Conduct of Business by the Company Pending the Closing... A-20
SECTION 5.2. Conduct of Business by Parent Pending the Closing........ A-21
SECTION 5.3. Cooperation.............................................. A-23
SECTION 5.4. Next Level Communications................................ A-23
ARTICLE VI
Additional Agreements
SECTION 6.1. Registration Statement; Proxy Statement.................. A-23
SECTION 6.2. Stockholders' Meetings................................... A-24
SECTION 6.3. Access to Information; Confidentiality................... A-25
SECTION 6.4. No Solicitation of Transactions.......................... A-25
SECTION 6.5. Appropriate Action; Consents; Filings.................... A-25
SECTION 6.6. Pooling.................................................. A-27
SECTION 6.7. Letters of Accountants................................... A-27
SECTION 6.8. Certain Notices.......................................... A-27
SECTION 6.9. Pooling Affiliates....................................... A-28
SECTION 6.10. Public Announcements..................................... A-28
SECTION 6.11. Stock Exchange Listing................................... A-28
SECTION 6.12. Employee Benefit Matters................................. A-28
SECTION 6.13. Certain Employment Arrangements.......................... A-29
SECTION 6.14. Indemnification of Directors and Officers................ A-29
SECTION 6.15. Plan of Reorganization................................... A-30
ARTICLE VII
Closing Conditions
SECTION 7.1. Conditions to Obligations of Each Party Under This A-30
Agreement................................................
SECTION 7.2. Additional Conditions to Obligations of Parent and Merger A-30
Sub......................................................
SECTION 7.3. Additional Conditions to Obligations of the Company...... A-30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VIII
Termination, Amendment and Waiver
<C> <S> <C>
SECTION 8.1. Termination................................................ A-32
SECTION 8.2. Effect of Termination...................................... A-33
SECTION 8.3. Amendment.................................................. A-33
SECTION 8.4. Waiver..................................................... A-33
SECTION 8.5. Fees and Expenses.......................................... A-34
ARTICLE IX
General Provisions
SECTION 9.1. Non-Survival of Representations and Warranties............. A-34
SECTION 9.2. Notices.................................................... A-34
SECTION 9.3. Certain Definitions........................................ A-35
SECTION 9.4. Headings................................................... A-35
SECTION 9.5. Severability............................................... A-35
SECTION 9.6. Entire Agreement........................................... A-35
SECTION 9.7. Assignment................................................. A-35
SECTION 9.8. Parties in Interest........................................ A-35
SECTION 9.9. Mutual Drafting............................................ A-36
SECTION 9.10. Governing Law.............................................. A-36
SECTION 9.11. Counterparts............................................... A-36
</TABLE>
<TABLE>
<C> <S>
EXHIBIT A VOTING AGREEMENT
EXHIBIT B CERTAIN EMPLOYMENT MATTERS
EXHIBIT 6.9(a) FORM OF COMPANY AFFILIATE LETTER
</TABLE>
iii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Section
-------
<S> <C>
Acquisition Agreement.................................... Section 6.4(d)
Acquisition Proposal..................................... Section 6.4(c)
affiliate................................................ Section 9.3(a)
Agreement................................................ Preamble
Benefit Plans............................................ Section 6.12(a)
Blue Sky Laws............................................ Section 3.5(b)
Business Day............................................. Section 9.3(b)
CERCLA................................................... Section 3.13
Certificate of Merger.................................... Section 1.2
Certificates............................................. Section 2.2(b)
Code..................................................... Preamble
Company.................................................. Preamble
Company Benefit Plans.................................... Section 3.9(a)
Company Breakup Fee...................................... Section 8.2(b)
Company By-laws.......................................... Section 3.2(a)
Company Certificate...................................... Section 3.2(a)
Company Common Stock..................................... Section 2.1(a)
Company Disclosure Schedule.............................. Article III Preamble
Company Employees........................................ Section 6.12(a)
Company Financial Advisor................................ Section 3.17
Company Material Adverse Effect.......................... Section 3.1
Company Material Contract................................ Section 3.11
Company Option........................................... Section 2.4
Company Permits.......................................... Section 3.6
Company Preferred Stock.................................. Section 3.3
Company Rights Agreement................................. Section 3.4
Company SEC Filings...................................... Section 3.7(a)
Company Stock Option Plans............................... Section 2.4
Company Stockholders' Meeting............................ Section 6.2(a)
Company Subsidiaries..................................... Section 3.1
Confidentiality Agreement................................ Section 6.3(b)
Control.................................................. Section 9.3(c)
DGCL..................................................... Preamble
Distribution Agreement................................... Section 3.7(d)
Effective Time........................................... Section 1.2
Environmental Laws....................................... Section 3.13
Environmental Permits.................................... Section 3.13
ERISA.................................................... Section 3.9(a)
Excess Shares............................................ Section 2.2(e)(2)
Exchange Act............................................. Section 3.5(b)
Exchange Agent........................................... Section 2.2(a)
Exchange Fund............................................ Section 2.2(a)
Exchange Ratio........................................... Section 2.1(a)
GAAP..................................................... Section 3.7(b)
Governmental Entity...................................... Section 3.5(b)
Hazardous Materials...................................... Section 3.13
HSR Act.................................................. Section 3.5(b)
Indemnified Parties...................................... Section 6.14(b)
Insurance Amount......................................... Section 6.14(c)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Section
-------
<S> <C>
Intellectual Property..................................... Section 3.14
IRS....................................................... Section 3.9(a)
knowledge................................................. Section 9.3(d)
Law....................................................... Section 3.5(a)
Material Intellectual Property............................ Section 3.14(b)
Merger.................................................... Preamble
Merger Consideration...................................... Section 8.3
Merger Sub................................................ Preamble
Merger Sub Common Stock................................... Section 2.1(c)
Multiemployer Plan........................................ Section 3.9(b)
Multiple Employer Plan.................................... Section 3.9(b)
1997 Plan................................................. Section 2.4
1999 Plan................................................. Section 2.4
NL........................................................ Section 3.7(a)
NLP....................................................... Section 3.7(b)
NYSE...................................................... Section 2.2(e)(2)
Parent.................................................... Preamble
Parent Common Stock....................................... Section 2.1(a)
Parent Disclosure Schedule................................ Article IV Preamble
Parent Financial Advisor.................................. Section 4.10
Parent Material Adverse Effect............................ Section 4.1
Parent Preferred Stock.................................... Section 4.3
Parent SEC Filings........................................ Section 4.6(a)
Parent Stockholders' Meeting.............................. Section 6.2(b)
Parent Subsidiaries....................................... Section 4.1
PBGC...................................................... Section 3.9(b)
person.................................................... Section 9.3(e)
Pooling Affiliate......................................... Section 6.9(a)
Proxy Statement........................................... Section 6.1 (a)
Registration Statement.................................... Section 6.1(a)
Representatives........................................... Section 6.3(a)
Section 16................................................ Section 6.12(b)
Securities Act............................................ Section 3.5(b)
Share Issuance............................................ Section 4.4
Spin-Offs................................................. Section 3.7(d)
subsidiary or subsidiaries................................ Section 9.3(f)
Surviving Corporation..................................... Section 1.1
Tax Sharing Agreement..................................... Section 3.7(d)
Taxes..................................................... Section 3.15(a)
Warrant Agreement......................................... Section 2.5
Warrants.................................................. Section 2.5
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of September 14, 1999 (this
"Agreement"), by and among Motorola, Inc., a Delaware corporation ("Parent"),
Lucerne Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent ("Merger Sub"), and General Instrument Corporation, a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the "Merger") upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective business strategies and is in the best interest of their respective
stockholders, and Parent has approved this Agreement and the Merger as the sole
stockholder of Merger Sub;
WHEREAS, as a condition to, and in connection with the execution of this
Agreement, Lucerne Media Corporation has entered into a Voting Agreement with
Parent in the form attached hereto as Exhibit A;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization under the provisions of section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests";
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
The Merger
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time
(as defined in Section 1.2), Merger Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
SECTION 1.2. Effective Time. No later than three Business Days after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the date and time of such
filing, or if another date and time is specified in such filing, such specified
date and time, being the "Effective Time").
SECTION 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
A-1
<PAGE>
SECTION 1.4. Certificate of Incorporation; By-laws. At the Effective Time,
the Certificate of Incorporation and the By-laws of the Surviving Corporation
shall be amended in their entirety to contain the provisions set forth in the
Certificate of Incorporation and By-laws of Merger Sub, as in effect
immediately prior to the Effective Time.
SECTION 1.5. Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-laws of the Surviving Corporation.
ARTICLE II
Conversion of Securities; Exchange of Certificates
SECTION 2.1. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior
to the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 2.1(b)) shall be converted, subject to Section
2.2(e), into the right to receive 0.575 of a share of common stock, par
value $3.00 per share ("Parent Common Stock"), of Parent (the "Exchange
Ratio"), including the corresponding percentage of a right to purchase
shares of Junior Participating Preferred Stock, Series B, par value $100
per share, of Parent pursuant to the Rights Agreement, dated November 5,
1998, between Parent and Harris Trust and Savings Bank, as Rights Agent;
provided, however, that, in any event, if between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common
Stock or Company Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. All such shares
of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously representing any such shares shall thereafter
represent the right to receive a certificate representing the shares of
Parent Common Stock into which such Company Common Stock was converted in
the Merger. Certificates previously representing shares of Company Common
Stock shall be exchanged for certificates representing whole shares of
Parent Common Stock issued in consideration therefor upon the surrender of
such certificates in accordance with the provisions of Section 2.2, without
interest. No fractional share of Parent Common Stock shall be issued, and,
in lieu thereof, a cash payment shall be made pursuant to Section 2.2(e)
hereof.
(b) Each share of Company Common Stock held in the treasury of the
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit, or shall
cause to be deposited, with Harris Trust and Savings Bank or another bank or
trust company designated by Parent and reasonably satisfactory to the Company
(the "Exchange Agent"), for the benefit of the holders of shares of Company
A-2
<PAGE>
Common Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the shares of Parent Common Stock
(such certificates for shares of Parent Common Stock, together with cash in
lieu of fractional shares and any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding shares of Company Common
Stock. The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Parent Common Stock contemplated to be issued pursuant to Section 2.1 out
of the Exchange Fund. Except as contemplated by Section 2.2(e) hereof, the
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. Promptly after the Effective Time, Parent shall
instruct the Exchange Agent to mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") (1) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in customary form) and (2)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive in
respect of the shares of Company Common Stock formerly represented by such
Certificate (after taking into account all shares of Company Common Stock then
held by such holder), cash in lieu of fractional shares of Parent Common Stock
to which such holder is entitled pursuant to Section 2.2(e) and any dividends
or other distributions to which such holder is entitled pursuant to Section
2.2(c), and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on any cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of Certificates.
Notwithstanding anything to the contrary contained herein, no certificate
representing Parent Common Stock or cash in lieu of a fractional share interest
shall be delivered to a person who is a Pooling Affiliate (as defined in
Section 6.9(a)) of the Company unless such Pooling Affiliate has theretofore
executed and delivered to Parent the agreement referred to in Section 6.9(a).
In the event of a transfer of ownership of shares of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued
to a transferee if the Certificate representing such shares of Company Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(c).
(c) Distributions with Respect to Unexchanged Shares of Parent Common Stock.
No dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.2(e), unless and until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of escheat, tax or other applicable Laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (1) promptly, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock and (2) at the
appropriate payment date, the amount of dividends or other distributions, with
a record date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such whole shares of
Parent Common Stock.
A-3
<PAGE>
(d) No Further Rights in Company Common Stock. All shares of Parent Common
Stock issued upon conversion of the shares of Company Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.2(c) or (e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. (1) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Common Stock shall be payable on or with respect to any fractional share and
such fractional share interests will not entitle the owner thereof to any
rights of a stockholder of Parent.
(2) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (A) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent pursuant to Section
2.2(a) over (B) the aggregate number of full shares of Parent Common Stock to
be distributed to holders of Company Common Stock pursuant to Section 2.2(b)
(such excess being herein called the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for such holders of
Parent Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
paragraph (3) of this Section 2.2(e).
(3) The sale of the Excess Shares by the Exchange Agent shall be executed on
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. Until the net proceeds of any such sale
or sales have been distributed to such holders of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such holders of Company
Common Stock as part of the Exchange Fund. The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs of the
Exchange Agent incurred in connection with such sale or sales of Excess Shares.
In addition, the Company shall pay the Exchange Agent's compensation and
expenses in connection with such sale or sales. The Exchange Agent shall
determine the portion of such net proceeds to which each holder of Company
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds by a fraction the numerator of which is the amount of
the fractional share interest to which such holder of Company Common Stock is
entitled (after taking into account all shares of Parent Common Stock to be
issued to such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Company Common Stock are
entitled.
(4) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Company Common Stock subject to and in accordance with the
terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.2(e) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.2(c), in each case, without any interest thereon.
(g) No Liability. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock for any such shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond, in such reasonable amount as Parent may
direct, as indemnity
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against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled
pursuant to Section 2.2(e) and any dividends or other distributions to which
the holders thereof are entitled pursuant to Section 2.2(c), in each case,
without any interest thereon.
(i) Withholding. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent are required to deduct and withhold under the Code, or any
provision of state, local or foreign tax law, with respect to the making of
such payment. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common Stock in respect
of whom such deduction and withholding was made by Parent or the Exchange
Agent.
SECTION 2.3. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and thereafter, there shall be no further
registration of transfers of shares of Company Common Stock theretofore
outstanding on the records of the Company. From and after the Effective Time,
the holders of certificates representing shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Common Stock except as otherwise
provided herein or by Law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be converted
into the shares of Parent Common Stock, any cash in lieu of fractional shares
of Parent Common Stock to which the holders thereof are entitled pursuant to
Section 2.2(e) and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.2(c).
SECTION 2.4. Stock Options. Prior to the Effective Time, the Company and
Parent shall take such action as may be necessary to cause each unexpired and
unexercised option to purchase shares of Company Common Stock (each, a "Company
Option") under (1) the Company's Amended and Restated 1997 Long-Term Incentive
Plan (the "1997 Plan"), a true and complete copy of which has heretofore been
provided to Parent by the Company, and (2) the Company's 1999 Long-Term
Incentive Plan (the "1999 Plan," and together with the 1997 Plan, the "Company
Stock Option Plans"), a true and complete copy of which has heretofore been
provided to Parent by the Company, to be exercisable solely for such number of
shares of Parent Common Stock as is equal to the number of shares of Company
Common Stock that could have been purchased under such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio
(rounded to the nearest whole number of shares of Parent Common Stock), at a
price per share of Parent Common Stock equal to the per-share option exercise
price specified in the Company Option divided by the Exchange Ratio (rounded
down to the nearest whole cent). Such Company Option shall otherwise be subject
to the same terms and conditions (including provisions regarding vesting and
the acceleration thereof) as in effect at the Effective Time, including the
date of grant. At the Effective Time, (1) all references in the Company Stock
Option Plans and in the related stock option agreements to the Company shall be
deemed to refer to Parent and (2) Parent shall assume all of the Company's
obligations with respect to Company Options as so amended. Promptly after the
Effective Time, to the extent necessary to provide for registration of shares
of Parent Common Stock subject to such Company Options, Parent shall file a
registration statement on Form S-8 (or any successor form) with respect to such
shares of Parent Common Stock and shall use its best efforts to maintain such
registration statement (or any successor form), including the current status of
any related prospectus or prospectuses, for so long as the Company Options
remain outstanding. None of the Company Options are "incentive stock options"
within the meaning of Section 422 of the Code.
SECTION 2.5 Warrants. Effective as of the Effective Time, pursuant to the
terms of the agreements (collectively, the "Warrant Agreements") governing the
outstanding warrants to purchase shares of Company Common Stock (the
"Warrants"), Parent shall assume all of the rights and obligations of the
Company under all Warrant Agreements and the parties hereto shall each take
such action as may be necessary so that upon
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exercise of each outstanding Warrant, on and after the Effective Time, subject
to the terms and provisions thereof, the holder shall receive such number of
shares of Parent Common Stock which such holder would have been entitled to
receive if such holder exercised such Warrant and thereby received shares of
Company Common Stock immediately prior to the Effective Time including, without
limitation, the entry into a supplemental agreement with each holder whereby
Parent assumes the performance and observance of the covenants and conditions
of the applicable Warrant Agreement theretofore to be performed and observed by
the Company.
ARTICLE III
Representations and Warranties of the Company
Except as set forth in the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), which identifies exceptions only by specific Section references,
the Company hereby represents and warrants to Parent as follows:
SECTION 3.1. Organization and Qualification; Subsidiaries. Each of the
Company and each subsidiary of the Company (collectively, the "Company
Subsidiaries") has been duly organized, and is validly existing and in good
standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Each of the Company and the Company Subsidiaries is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing or good standing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. For purposes of this Agreement,
"Company Material Adverse Effect" means any change affecting, or condition
having an effect on, the Company and the Company Subsidiaries that is, or would
reasonably be expected to be, materially adverse to the assets, liabilities,
business, financial condition or results of operations of the Company and the
Company Subsidiaries, taken as a whole other than any change or condition
relating to the economy or securities markets in general, or the industries in
which the Company operates in general, and not specifically relating to the
Company. Section 3.1 of the Company Disclosure Schedule sets forth a true and
complete list of all of the Company Subsidiaries. Except as set forth in
Section 3.1 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary holds any interest in a partnership or joint venture of any
kind.
SECTION 3.2. Certificate of Incorporation and By-laws; Corporate Books and
Records. The copies of the Company's Restated Certificate of Incorporation (the
"Company Certificate") and Amended and Restated By-laws (the "Company By-laws")
that are set forth as exhibits to the Company's Form 10-K for the year ended
December 31, 1998 are complete and correct copies thereof as in effect on the
date hereof. The Company is not in violation of any of the provisions of the
Company Certificate or the Company By-laws. True and complete copies of all
minute books of the Company have been made available by the Company to Parent.
SECTION 3.3. Capitalization. The authorized capital stock of the Company
consists of (a) 400,000,000 shares of Company Common Stock and (b) 20,000,000
shares of preferred stock, par value $0.01 per share (the "Company Preferred
Stock"). As of September 10, 1999, (1) 173,591,700 shares of Company Common
Stock were issued and outstanding, all of which were validly issued and fully
paid, nonassessable and free of preemptive rights, (2) 7,302,575 shares of
Company Common Stock were held in the treasury of the Company or by the Company
Subsidiaries, (3) 10,895,347 shares of Company Common Stock were issuable (and
such number was reserved for issuance) upon exercise of Company Options
outstanding as of such date and (4) 28,715,960 shares of Company Common Stock
were issuable (and such number was reserved for issuance)
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upon exercise of the Warrants. As of the date hereof, 400,000 shares of Company
Preferred Stock are designated as Series A Junior Participating Preferred
Stock, and no shares of Company Preferred Stock are issued or outstanding.
Except for Company Options to purchase not more than 10,895,347 shares of
Company Common Stock, Warrants to purchase 28,715,960 shares of Company Common
Stock granted pursuant to the Warrant Agreements and arrangements and
agreements set forth in Section 3.3 of the Company Disclosure Schedule, there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which the Company or any Company Subsidiary is
a party or by which the Company or any Company Subsidiary is bound relating to
the issued or unissued capital stock or other equity interests of the Company
or any Company Subsidiary, or securities convertible into or exchangeable for
such capital stock or equity interests, or obligating the Company or any
Company Subsidiary to issue or sell any shares of capital stock or equity
interests, or securities convertible into or exchangeable for such capital
stock, of, or other equity interests in, the Company or any Company Subsidiary.
The Company Options referred to in the preceding sentence include, without
limitation, all options to purchase Company Common Stock granted in tandem with
options to acquire equity interests in Next Level Communications or NLP. NLP
has agreed to assume all obligations of Next Level Communications with respect
to options to acquire equity interests in Next Level Communications, and from
and after the IPO Next Level Communications will have no such obligations.
Since September 10, 1999, the Company has not issued any shares of its capital
stock, or securities convertible into or exchangeable for such capital stock or
other equity interest, other than those shares of capital stock reserved for
issuance as set forth in this Section 3.3 or Section 3.3 of the Company
Disclosure Schedule. The Company has previously provided Parent with a true and
complete list, as of the date hereof, of (A) the prices at which outstanding
Company Options may be exercised under the applicable Company Stock Option
Plan, the number of Company Options outstanding at each such price and the
vesting schedule of the Company Options for each officer of the Company who may
become a "(S)16(b)" officer of Parent and (B) the outstanding Warrants, the
price at which outstanding Warrants may be exercised and the vesting schedule
of the Warrants. All shares of Company Common Stock subject to issuance under
the Company Stock Option Plans or the Warrant Agreements, upon issuance prior
to the Effective Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as set forth in
Section 3.3 of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any Company Subsidiary (A)
restricting the transfer of, (B) affecting the voting rights of, (C) requiring
the repurchase, redemption or disposition of, or containing any right of first
refusal with respect to, (D) requiring the registration for sale of, or (E)
granting any preemptive or antidilutive right with respect to, any shares of
Company Common Stock or any capital stock of, or other equity interests in, any
Company Subsidiary. Except as set forth in Section 3.3 of the Company
Disclosure Schedule, each outstanding share of capital stock of, or other
equity interest in, each Company Subsidiary is duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights and is owned by the
Company or another Company Subsidiary free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Company Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever. Except as set forth in
Section 3.3 of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any Company Subsidiary to provide
funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any Company Subsidiary or any other person, other than
guarantees by the Company of any indebtedness or other obligations of any
wholly-owned Company Subsidiary.
SECTION 3.4. Authority Relative to This Agreement.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated herein to be consummated by the
Company. The execution and delivery of this Agreement by the Company and the
consummation by the Company of such transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company and no stockholder votes are necessary to authorize
this Agreement or to consummate such transactions other than, with respect to
the Merger, the adoption of this Agreement by the affirmative vote of a
majority of the outstanding shares of
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Company Common Stock entitled to vote thereon. The Board of Directors of the
Company has approved this Agreement and the transactions contemplated hereby
and has directed that this Agreement and the transactions contemplated hereby
be submitted to the Company's stockholders for approval at a meeting of such
stockholders. This Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) The Company has taken all appropriate actions so that the restrictions
on business combinations contained in Section 203 of the DGCL will not apply
with respect to or as a result of this Agreement, the Voting Agreement and the
transactions contemplated hereby and thereby, including the Merger, without any
further action on the part of the stockholders or the Board of Directors of the
Company. True and complete copies of all Board resolutions reflecting such
actions have been previously provided to Parent. No other state takeover
statute is applicable to the Merger.
(c) The Rights Agreement, dated as of June 12, 1997, between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, as amended by
Amendment dated as of December 16, 1997, has been amended (as so amended, the
"Company Rights Agreement") so that: (1) Parent and Merger Sub are each exempt
from the definition of "Acquiring Person" contained in the Company Rights
Agreement, and no "Shares Acquisition Date" or "Distribution Date" or
"Triggering Event" (as such terms are defined in the Company Rights Agreement)
will occur as a result of the execution of this Agreement or the Voting
Agreement or the consummation of the Merger and the other transactions
contemplated by this Agreement or the Voting Agreement and (2) the Company
Rights Agreement will terminate and the Rights will expire immediately prior to
the Effective Time. The Company Rights Agreement, as so amended, has not been
further amended or modified. True and complete copies of all such amendments to
the Company Rights Agreement have been previously provided to Parent.
SECTION 3.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, except as set forth
in Section 3.5(a) of the Company Disclosure Schedule, (1) (assuming, the
stockholder approval set forth in Section 3.4 is obtained) conflict with or
violate any provision of the Company's Certificate or the Company's By-laws or
any equivalent organizational documents of any Company Subsidiary, (2) assuming
that all consents, approvals, authorizations and permits described in Section
3.5(b) have been obtained and all filings and notifications described in
Section 3.5(b) have been made, conflict with or violate any foreign or domestic
law, statute, code, ordinance, rule, regulation, order, judgment, writ,
stipulation, award, injunction, decree or arbitration award or finding ("Law")
applicable to the Company or any Company Subsidiary or by which any property or
asset of the Company or any Company Subsidiary is bound or affected or (3)
require any consent or approval under, result in any breach of, any loss of any
benefit under or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any right of
termination, vesting, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, Company Permit (as defined in
Section 3.6) or other instrument or obligation, except, with respect to clauses
(2) and (3), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, reasonably be
expected to either (A) have a Company Material Adverse Effect or (B) prevent or
materially delay the performance of this Agreement by the Company.
(b) Except as set forth in Section 3.5(a) or 3.5(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign governmental, administrative, judicial
or regulatory authority ("Governmental Entity") or any other person, except (1)
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), the Securities Act of
1933, as amended, and the rules and
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regulations promulgated thereunder (the "Securities Act"), state securities or
"blue sky" laws ("Blue Sky Laws"), the rules and regulations of the NYSE, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), foreign antitrust and competition
laws and the filing and recordation of the Certificate of Merger as required by
the DGCL and (2) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to (A) prevent or
materially delay consummation of the Merger, (B) otherwise prevent the Company
from performing its material obligations under this Agreement or (C) have a
Company Material Adverse Effect.
SECTION 3.6. Permits; Compliance With Law. Each of the Company and the
Company Subsidiaries is in possession of all authorizations, licenses, permits,
certificates, approvals and clearances of any Governmental Entity necessary for
the Company or any Company Subsidiary to own, lease and operate its properties
or to carry on their respective businesses substantially in the manner
described in the Company SEC Filings filed prior to the date hereof and
substantially as it is being conducted as of the date hereof (the "Company
Permits"), and all such Company Permits are valid, and in full force and
effect, except where the failure to have, or the suspension or cancellation of,
or failure to be valid or in full force and effect of, any of the Company
Permits would neither, individually or in the aggregate, reasonably be expected
to (a) have a Company Material Adverse Effect nor (b) prevent or materially
delay the performance of this Agreement by the Company. Neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of, (1)
any Law applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is bound or affected
or (2) any Company Permits, except for any such conflicts, defaults or
violations that would neither, individually or in the aggregate, reasonably be
expected to (A) have a Company Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement by the Company.
SECTION 3.7. SEC Filings; Financial Statements.
(a) The Company has timely filed all registration statements, prospectuses,
forms, reports and documents required to be filed by it under the Securities
Act or the Exchange Act, as the case may be, since July 25, 1997 (collectively,
the "Company SEC Filings"). The Company SEC Filings (1) as of their respective
dates, were prepared in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and (2) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. As of the date of this Agreement, no Company
Subsidiary is subject to the periodic reporting requirements of the Exchange
Act. The registration statement on Form S-1 (the "IPO Registration Statement")
filed by Next Level Communications, Inc. ("NL") (1) will, at the time it
becomes effective, comply with the requirements of the Securities Act and (2)
will not at the time it becomes effective, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Filings was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied (except as may be indicated in the notes thereto and, in the case of
unaudited quarterly financial statements, as permitted by Form 10-Q under the
Exchange Act) on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto), and each presented fairly the
consolidated financial position, results of operations and cash flows of the
Company and the consolidated Company Subsidiaries as of the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal year-end adjustments which did not and would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect). Each of the consolidated financial statements
(including, in each case, any notes thereto) of Next Level Communications, L.P.
("NLP") contained in the Company SEC Filings was prepared in accordance with
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GAAP applied (except as may be indicated in the notes thereto) on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto), and each presented fairly the consolidated financial position,
results of operation and cash flows of NLP as of the respective dates thereof
and for the respective periods indicated therein. The books and records of the
Company and the Company Subsidiaries have been, and are being, maintained in
accordance with applicable legal and accounting requirements.
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the consolidated Company Subsidiaries as of December 31,
1998 included in the Company's Form 10-K for the year ended December 31, 1998,
including the notes thereto (the "Company's Form 10-K"), neither the Company
nor any consolidated Company Subsidiary has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1998 that would neither,
individually or in the aggregate, reasonably be expected to (1) have a Company
Material Adverse Effect nor (2) prevent or materially delay the performance of
this Agreement by the Company. Except as and to the extent set forth on the
consolidated balance sheet of NLP as of December 31, 1998 included in the
Company's Form 10-K, NLP has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 1998 that would not, individually or in the
aggregate, reasonably be expected to either (1) have a Company Material Adverse
Effect or (2) prevent or materially delay the performance of this Agreement by
the Company.
(d) Except as and to the extent set forth in Section 3.7(d) of the Company
Disclosure Schedule, on the date hereof, there is no suit, claim, action,
proceeding, dispute, indemnification claim, or investigation pending or, to the
knowledge of the Company, threatened in writing against the Company or any
Company Subsidiary, or for which the Company or any Company Subsidiary is
obligated to indemnify a third party, arising out of, or relating to, the spin-
off of the Company by General Semiconductor, Inc. ("GSI"), and the spin-off of
Commscope Inc. by the Company (collectively, the "Spin-Offs"), pursuant to the
Distribution Agreement among GSI, the Company and Commscope Inc. dated as of
June 12, 1997 (the "Distribution Agreement"), any of the Ancillary Agreements
(as defined in the Distribution Agreement) or otherwise. The Company has not
and, to the Company's knowledge, neither GSI nor Commscope Inc. has taken any
action that would constitute a breach of, or be inconsistent with its
obligations under, the Tax Sharing Agreement dated as of July 25, 1997 among
GSI, the Company and Commscope Inc. (the "Tax Sharing Agreement"). The Company
knows of no reason why the Spin-Offs would fail to be qualified as tax-free
transactions under Section 355 of the Code.
(e) The business purpose for the Spin-Offs was to permit the Company and the
businesses now known as GSI and Commscope Inc. to more effectively focus
efforts on their respective businesses.
(f) There was no plan at the time of the Spin-Offs to engage in any
subsequent transactions whereby one or more persons would directly or
indirectly acquire stock representing a 50% or greater interest in the Company.
SECTION 3.8. Absence of Certain Changes or Events. Since December 31, 1998,
except as specifically contemplated by, or as disclosed in, this Agreement or
as and to the extent set forth in Section 3.8 of the Company Disclosure
Schedule, the Company and the Company Subsidiaries have conducted their
businesses in the ordinary course consistent with past practice, and, since
such date, there has not been (a) any Company Material Adverse Effect or an
event or development that would, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect, (b) any event or
development that would, individually or in the aggregate, reasonably be
expected to prevent or materially delay the performance of this Agreement by
the Company, or (c) any action taken by the Company or any of the Company
Subsidiaries during the period from January 1, 1999 through the date of this
Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 5.1.
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SECTION 3.9. Employee Benefit Plans; Labor Matters.
(a) Section 3.9(a) of the Company Disclosure Schedule sets forth a true and
complete list as of the date hereof of each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "employee
benefit plan", as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained, or contributed to, by
the Company or any Company Subsidiary, or to which the Company or any Company
Subsidiary is required to contribute (the "Company Benefit Plans"). With
respect to each Company Benefit Plan, the Company has heretofore delivered or
made available to Parent a true, correct and complete copy of: (1) each writing
constituting a part of such Company Benefit Plan, including without limitation
all plan documents, trust agreements, and insurance contracts and other funding
vehicles; (2) the most recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (3) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under ERISA); (4) the most recent annual financial report, if any;
(5) the most recent actuarial report, if any; and (6) the most recent
determination letter from the IRS, if any. Except as specifically provided in
the foregoing documents delivered to Parent, there are no amendments to any
Company Benefit Plan that have been adopted or approved nor has the Company or
any Company Subsidiary undertaken to make any such amendments or to adopt or
approve any new Plan.
(b) With respect to each Company Benefit Plan which is subject to Title IV
of ERISA, or Section 302 of ERISA or Section 412 or 4971 of the Code (1) the
present value of accrued benefits under such Company Benefit Plan, based upon
the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Company Benefit Plan's actuary with respect
to such Company Benefit Plan, did not, as of its latest valuation date, exceed
the then current value of the assets of such Company Benefit Plan allocable to
such accrued benefits, (2) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any Company Benefit Plan for which
the 30-day notice requirement has not been waived, (3) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived, (4) all premiums to the Pension
Benefit Guaranty Corporation ("PBGC") have been timely paid in full, (5) except
as set forth in Section 3.9(b) of the Company Disclosure Schedule, no liability
(other than for premiums to the PBGC) under Title IV of ERISA has been or is
expected to be incurred by the Company or any of its subsidiaries, and (6) the
PBGC has not instituted proceedings to terminate any such Company Benefit Plan
and, to the Company's knowledge, no condition exists that presents a risk that
such proceedings will be instituted or which would constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any such Company Benefit Plan. No Company Benefit Plan is a
"multiemployer pension plan" (as such term is defined in section 3(37) of
ERISA) (a "Multiemployer Plan") or a plan that has two or more contributing
sponsors at least two of whom are not under common control, within the meaning
of Section 4063 of ERISA (a "Multiple Employer Plan"). Neither the Company nor
any Company Subsidiaries nor any of their respective ERISA Affiliates (as
defined below) has (1) at any time during the last six years, contributed to or
been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan, or (2) incurred any withdrawal liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan that
has not been satisfied in full. Except as set forth in Section 3.9(b) of the
Company Disclosure Schedule, there does not now exist, nor, to the knowledge of
the Company, do any circumstances exist that could result in, any liability
that would be a liability of the Company or any of the Company Subsidiaries
following the Closing (1) under Title IV of ERISA, (2) under section 302 of
ERISA, (3) under sections 412 and 4971 of the Code, or (4) as a result of a
failure to comply with the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, other than such liabilities that
arise solely out of, or relate solely to, the Company Benefit Plans.
(c) Each of the Company Benefit Plans has been operated and administered in
all material respects in accordance with applicable Laws and administrative
rules and regulations of any Governmental Entity, including, but not limited
to, ERISA and the Code, except where a violation of any such Law, rule or
regulation would not, individually or in the aggregate, reasonably be expected
to have a Company Material
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Adverse Effect. Each of the Company Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter as to such qualification from the IRS, and no event has
occurred, either by reason of any action or failure to act, which would cause
the loss of any such qualification, except where such action or failure to act
can be cured without having, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 3.9(c) of the Company
Disclosure Schedule, no Company Benefit Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of the Company or any Company Subsidiary
beyond their retirement or other termination of service, other than (1)
coverage mandated by applicable Law, (2) death benefits or retirement benefits
under any "employee pension plan" (as such term is defined in Section 3(2) of
ERISA), (3) deferred compensation benefits accrued as liabilities on the books
of the Company or any Company Subsidiary or (4) benefits the full cost of which
is borne by the current or former employee (or his beneficiary). All
contributions or other amounts payable by the Company or any Company Subsidiary
as of the Effective Time with respect to each Company Benefit Plan in respect
of current or prior plan years will have been paid or accrued by such time in
accordance with GAAP.
(d) Except as set forth in Section 3.9(d) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary, and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary. There is no labor dispute, strike, slowdown or work
stoppage against the Company or any Company Subsidiary pending or, to the
knowledge of the Company, threatened which may interfere in any respect that
would have a Company Material Adverse Effect with the respective business
activities of the Company or any Company Subsidiary. To the knowledge of the
Company, none of the Company, any Company Subsidiary or their respective
representatives or employees has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or
any Company Subsidiary, and there is no charge or complaint against the Company
or any Company Subsidiary by the National Labor Relations Board or any
comparable state or foreign agency pending or, to the knowledge of the Company,
threatened, except where such unfair labor practice, charge or complaint would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(e) The Company has identified in Section 3.9(e) of the Company Disclosure
Schedule and has made available to Parent true and complete copies of (1) all
severance and employment agreements with directors, executive officers, key
employees or consultants of the Company; (2) all severance programs and
policies of each of the Company and each Company Subsidiary with or relating to
its employees; and (3) all plans, programs, agreements and other arrangements
of each of the Company and each Company Subsidiary with or relating to its
employees which contain change in control provisions. Except as set forth in
Section 3.9(e) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with any other event,
such as termination of employment) (A) result in any material payment
(including, without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or any employee of the
Company or any Company Subsidiary or affiliate from the Company or any Company
Subsidiary or affiliate under any Company Benefit Plan or otherwise, (B)
materially increase any benefits otherwise payable under any Company Benefit
Plan or (C) result in any acceleration of the time of payment or vesting of any
material benefits. No individual who is a party to an employment agreement
listed in Section 3.9 (a) of the Disclosure Schedule or any change-of-control
employment agreement with the Company has terminated employment or been
terminated, nor has any event occurred that could give rise to a termination
event, in either case under circumstances that has given, or could give, rise
to a severance obligation on the part of the Company under such agreement.
SECTION 3.10. Accounting and Tax Matters
(a) None of the Company, any Company Subsidiary or, to the knowledge of the
Company, any of the Company's affiliates has taken or agreed to take any action
that would prevent the Merger from qualifying for "pooling of interests"
accounting treatment under applicable U.S. accounting rules, including, without
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limitation, GAAP and applicable SEC accounting standards, or would prevent the
Merger from constituting a transaction qualifying under section 368(a) of the
Code. The Company is not aware of any agreement, plan or other circumstance
that would prevent the Merger from so qualifying under the accounting rules and
section 368(a) of the Code and, as of the date of this Agreement, the Company
has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
(b) The Company has been orally advised by Deloitte & Touche LLP that such
firm believes that, assuming consummation of the transactions contemplated
hereby in accordance herewith, such firm should be able to deliver the opinion
contemplated by Section 7.3(e).
SECTION 3.11. Contracts; Debt Instruments. Except as disclosed in or filed
as exhibits to the Company SEC Filings filed prior to the date hereof, or as
disclosed in Section 3.11 of the Company Disclosure Schedule, neither the
Company nor any of the Company Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral)
(a) except as set forth in Sections 3.5(a) and 3.9(e) of the Company Disclosure
Schedule, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (b) as of the date hereof, (A) which is a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC), (B) which involves expenditures in excess of $40,000,000 or
(C) which involves annual expenditures in excess $20,000,000 and is not
cancelable within one year, (c) which contains any non-compete or exclusivity
provisions with respect to any material line of business or material geographic
area with respect to the Company or any of the Company Subsidiaries, or which
restricts the conduct of any material line of business by the Company or any of
the Company Subsidiaries or any material geographic area in which the Company
or any of the Company Subsidiaries may conduct business, in each case in any
material respect, or (d) which would prohibit or materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement. The Company has previously made available to Parent true and
complete copies of all (1) material supply or similar agreements with the
parties listed on Schedule 3.11 and any affiliates thereof to which the Company
or any of the Company Subsidiaries is a party and (2) employment and deferred
compensation agreements with directors, executive officers and key employees,
and material agreements with consultants, which are in writing and to which the
Company or any of the Company Subsidiaries is a party. Each contract,
arrangement, commitment or understanding of the type described in this Section
3.11, whether or not set forth in Section 3.11 of the Company Disclosure
Schedule, is referred to herein as a "Company Material Contract." Each Company
Material Contract is valid and binding on the Company or a Company Subsidiary,
as applicable, and in full force and effect, and the Company and each of the
Company Subsidiaries have in all material respects performed all obligations
required to be performed by them to the date hereof under each Company Material
Contract, except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary knows of, or has received notice of, any violation or
default under (or any condition which with the passage of time or the giving of
notice would cause such a violation of or default under) any Company Material
Contract or any other loan or credit agreement, note, bond, mortgage, indenture
or lease, or any other contract, agreement, arrangement or understanding to
which it is a party or by which it or any of its properties or assets is bound,
except for violations or defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect.
SECTION 3.12. Litigation. Except as and to the extent set forth in Section
3.12 of the Company Disclosure Schedule or in the Company SEC Filings filed
prior to the date hereof, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened in
writing against the Company or any Company Subsidiary or for which the Company
or any Company Subsidiary is obligated to indemnify a third party that (a)
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect or (b) as of the date hereof, challenges the
validity or propriety, or seeks to prevent consummation of, the transactions
contemplated by this Agreement. Neither the Company nor any
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Company Subsidiary is subject to any outstanding order, writ, injunction,
decree or arbitration ruling, award or other finding which has had or would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.13. Environmental Matters. Except as would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect:
(a) the Company and the Company Subsidiaries (1) are in compliance with
all, and are not subject to any liability, in each case with respect to
any, applicable Environmental Laws, (2) hold or have applied for all
Environmental Permits necessary to conduct their current operations and (3)
are in compliance with their respective Environmental Permits;
(b) neither the Company nor any Company Subsidiary has received any
written notice, demand, letter, claim or request for information alleging
that the Company or any of its Subsidiaries may be in violation of, or
liable under, any Environmental Law;
(c) neither the Company nor any Company Subsidiary (1) has entered into
or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials and, to
the knowledge of the Company, no investigation, litigation or other
proceeding is pending or threatened in writing with respect thereto, or (2)
is an indemnitor in connection with any claim threatened or asserted in
writing by any third-party indemnitee for any liability under any
Environmental Law or relating to any Hazardous Materials; and
(d) none of the real property owned or leased by the Company or any
Company Subsidiary is listed or, to the knowledge of the Company, proposed
for listing on the "National Priorities List" under CERCLA, as updated
through the date hereof, or any similar state or foreign list of sites
requiring investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree, judgment,
stipulation, injunction, permit, authorization, policy, opinion, or agency
requirement, in each case having the force and effect of law, relating to
the pollution, protection, investigation or restoration of the environment,
health and safety as affected by the environment or natural resources,
including, without limitation, those relating to the use, handling,
presence, transportation, treatment, storage, disposal, release, threatened
release or discharge of Hazardous Materials or noise, odor, wetlands,
pollution or contamination.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-
containing materials or polychlorinated biphenyls or (b) any chemical,
material or other substance defined or regulated as toxic or hazardous or
as a pollutant or contaminant or waste under any applicable Environmental
Law.
SECTION 3.14. Intellectual Property.
(a) "Intellectual Property" means all intellectual property or other
proprietary rights of every kind, including all domestic or foreign patents,
domestic or foreign patent applications, inventions (whether or not
patentable), processes, products, technologies, discoveries, copyrightable and
copyrighted works, apparatus,
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trade secrets, trademarks, trademark registrations and applications, service
marks, service mark registrations and applications, trade names, trade dress,
copyright registrations, customer lists, confidential marketing and customer
information, licenses, confidential technical information, software, and all
documentation thereof.
(b) The Company owns or has the defensible right to use, whether through
ownership, licensing or otherwise, all Intellectual Property significant to the
businesses of the Company and the Company Subsidiaries in substantially the
same manner as such businesses are conducted on the date hereof ("Material
Intellectual Property"). Except as set forth in Section 3.14 of the Company
Disclosure Schedule and except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse impact on the validity or
value of any Material Intellectual Property: (1) no written claim of invalidity
or conflicting ownership rights with respect to any Material Intellectual
Property has been made by a third party and no such Intellectual Property is
the subject of any pending or, to the Company's knowledge, threatened action,
suit, claim, investigation, arbitration or other proceeding; (2) no person or
entity has given notice to the Company or any Company Subsidiary that the use
of any Material Intellectual Property by the Company, any Company Subsidiary or
any licensee is infringing or has infringed any domestic or foreign patent,
trademark, service mark, trade name, or copyright or design right, or that the
Company, any Company Subsidiary or any licensee has misappropriated or
improperly used or disclosed any trade secret, confidential information or
know-how; (3) to the Company's knowledge after due inquiry for such purpose,
the making, using, selling, manufacturing, marketing, licensing, reproduction,
distribution, or publishing of any process, machine, manufacture or product
related to any Material Intellectual Property, does not and will not infringe
any domestic or foreign patent, trademark, service mark, trade name, copyright
or other intellectual property right of any third party, and does not and will
not involve the misappropriation or improper use or disclosure of any trade
secrets, confidential information or know-how of any third party; (4) to the
Company's knowledge, there exists no prior act or current conduct or use by the
Company, any Company Subsidiary or any third party that would void or
invalidate any Material Intellectual Property; and (5) the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby will not breach, violate or
conflict with any instrument or agreement concerning any Material Intellectual
Property, will not cause the forfeiture or termination or give rise to a right
of forfeiture or termination of any of the Material Intellectual Property or
impair the right of Parent or the Surviving Corporation to make, use, sell,
license or dispose of, or to bring any action for the infringement of, any
Material Intellectual Property. In addition, the matters disclosed on Section
3.14 of the Company Disclosure Schedule would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.15. Taxes.
(a) The Company and the Company Subsidiaries have timely filed or will
timely file all material returns and reports required to be filed with any
taxing authority with respect to Taxes for any period ending on or before the
Effective Time, taking into account any extension of time to file granted to or
obtained on behalf of the Company and the Company Subsidiaries. Except as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, (1) all Taxes that are due prior to the (A) date
hereof have been paid or accrued and (B) Effective Time will be paid or accrued
prior thereto and (2) no deficiency for any Tax has been asserted or assessed
by a taxing authority against the Company or any of the Company Subsidiaries
which deficiency has not been paid or is not being contested in good faith. The
Company and the Company Subsidiaries have provided adequate reserves (in
accordance with GAAP) in their financial statements for any Taxes that have not
been paid, whether or not shown as being due on any returns. As used in this
Agreement, "Taxes" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any Governmental Entity or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchise, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs
and similar charges.
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(b) There are no audits or disputes pending, or claims asserted in writing
for, Taxes or assessments for which the Company or any of its Subsidiaries is
responsible, nor has the Company or any of its Subsidiaries been requested in
writing to give any currently effective waivers extending the statutory period
of limitation applicable to any federal or state income tax return for which
the Company is responsible for any period which audits, disputes, claims,
assessments or waivers would reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
(c) There are no material Tax liens upon any property or assets of the
Company or any of the Company Subsidiaries except liens for current Taxes not
yet due.
(d) Neither the Company nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by the Company or any of
its Subsidiaries, and the IRS has not initiated or proposed any such adjustment
or change in accounting method, in either case which adjustment or change has
had or would reasonably be expected, individually or in the aggregate, to have
a Company Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries has entered into a
transaction which is being accounted for under the installment method of
Section 453 of the Code, which could reasonably be expected to have a Company
Material Adverse Effect.
(f) Each of the Company and its Subsidiaries has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(g) Neither the Company nor any of its Subsidiaries is a party to any
material Tax allocation or sharing agreement, other than the Tax Sharing
Agreement. To the best knowledge of the Company, neither the Company nor any of
its Subsidiaries is responsible for the Taxes of any other person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee, by contract, or otherwise which could
reasonably be expected to give rise to a Company Material Adverse Effect.
(h) The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period described in Code Section 897(c)(1)(A)(ii).
(i) Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, none of the interest
payable by the Company or any of its Subsidiaries under outstanding
indebtedness is nondeductible under Code Section 163 or is treated as interest
on corporate acquisition indebtedness under Code Section 279.
(j) Neither the Company nor any of its Subsidiaries is a party to any
contract, plan, or arrangement under which it is obligated to make or to
provide, or could become obligated to make or to provide, a payment or benefit
that would be nondeductible under Code Section 280G.
SECTION 3.16. Insurance. The Company maintains insurance coverage with
reputable insurers, or maintains self-insurance practices, in such amounts and
covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to that of the Company (taking into
account the cost and availability of such insurance).
SECTION 3.17. Opinion of Financial Advisors. Each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated and CIBC World Markets Corp. (collectively, the
"Company Financial Advisors") has delivered to the Board of Directors of the
Company its separate oral opinion as of the date hereof that, as of the date
hereof, the Exchange Ratio was fair from a financial point of view to the
holders of Company Common Stock.
SECTION 3.18. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of capital stock or other equity interests
of the Company or any Company Subsidiary necessary to approve the Merger.
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SECTION 3.19. Brokers. No broker, finder or investment banker (other than
the Company Financial Advisors) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of the Company or any Company Subsidiary. The Company has
heretofore made available to Parent a true and complete copy of all agreements
between the Company and the Company Financial Advisors pursuant to which such
firm would be entitled to any payment relating to the Merger.
SECTION 3.20. Year 2000 Compliance. The Company has taken steps that are
reasonable to ensure that the occurrence of the year 2000 will not materially
and adversely affect the information and business systems of the Company or its
Subsidiaries, and it is the Company's reasonable expectation that no material
expenditures in excess of currently budgeted items will be required in order to
cause such systems to operate properly following the change of the year 1999 to
2000.
SECTION 3.21. Disclosure. Notwithstanding anything to the contrary herein,
any matter disclosed in any section of the Company Disclosure Schedule shall be
considered disclosed for other sections of the Company Disclosure Schedule (but
only to the extent such matter on its face would reasonably be expected to be
pertinent to a particular section of the Company Disclosure Schedule in light
of the disclosure made in such section).
ARTICLE IV
Representations and Warranties
of Parent and Merger Sub
Except as set forth in the Disclosure Schedule delivered by Parent and
Merger Sub to the Company prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), which shall identify exceptions by specific Section
references, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
SECTION 4.1. Organization and Qualification; Subsidiaries. Each of Parent,
Merger Sub and each other subsidiary of Parent (collectively, the "Parent
Subsidiaries") has been duly organized, and is validly existing and in good
standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Each of Parent, Merger Sub and the other Parent Subsidiaries is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature
of its business makes such qualification or licensing or good standing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. For purposes of this
Agreement, "Parent Material Adverse Effect" means any change affecting, or
condition having an effect on, Parent, Merger Sub and the Parent Subsidiaries
that is, or would reasonably be expected to be, materially adverse to the
assets, liabilities, business, financial condition or results of operations of
Parent and the Parent Subsidiaries, taken as a whole, other than any change or
condition relating to the economy or securities markets in general, or the
industries in which Parent operates in general, and not specifically relating
to Parent.
SECTION 4.2. Certificate of Incorporation and By-laws; Corporate Books and
Records. The copies of Parent's Restated Certificate of Incorporation and By-
laws that are set forth as exhibits to Parent's Form 10-K for the year ended
December 31, 1998 are complete and correct copies thereof as in effect on the
date hereof. Parent is not in violation of any of the provisions of its
Restated Certificate of Incorporation or By-laws.
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SECTION 4.3. Capitalization. The authorized capital stock of Parent consists
of (a) 1,400,000,000 shares of Parent Common Stock and (b) 500,000 shares of
preferred stock, par value $100 per share (the "Parent Preferred Stock"). As of
August 27, 1999, (1) 608,392,300 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued and fully paid, nonassessable and
free of preemptive rights and (2) 80,192 shares of Parent Common Stock were
held in the treasury of Parent or by the Parent Subsidiaries. As of September
13, 1999, 35,687,689 shares of Parent Common Stock were reserved for issuance
upon exercise of stock options, rights and warrants outstanding as of such
date. As of August 27, 1999, 1,927,908 shares of Parent Common Stock were
issuable in connection with Parent's Liquid Yield Option Notes due 2009 and
Liquid Yield Option Notes due 2013. As of the date hereof, 250,000 shares of
the Parent Preferred Stock are designated as Junior Participating Preferred
Stock, Series B and no shares of Parent Preferred Stock are issued and
outstanding. As of August 27, 1999, except for stock options and agreements or
arrangements described in Section 4.3 or Section 4.3 of the Parent Disclosure
Schedule and for Parent's preferred share purchase rights, there were no
options, warrants or other rights to purchase capital stock of Parent, or
securities convertible into or exchangeable for such capital stock or
obligating Parent to issue or sell any shares of capital stock, or securities
convertible into or exchangeable for such capital stock of Parent. The shares
of Parent Common Stock to be issued in connection with the Merger, when issued
as contemplated herein, will be duly authorized, validly issued, fully paid and
nonassessable and will not be issued in violation of any preemptive rights.
SECTION 4.4. Authority Relative to This Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein to be consummated by Parent. Each of (a) the
execution and delivery of this Agreement by each of Parent and Merger Sub and
the consummation by Parent and Merger Sub of such transactions and (b) the
issuance (the "Share Issuance") of shares of Parent Common Stock in accordance
with the Merger have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Parent and
Merger Sub and no other stockholder votes are necessary to authorize this
Agreement or to consummate such transactions other than, with respect to the
Share Issuance, the approval of the Share Issuance by an affirmative vote of a
majority of the shares of Parent Common Stock represented at a meeting of the
stockholders of Parent called for such purpose and entitled to vote thereon
(provided that at least a majority of such shares are represented in person or
by proxy at such meeting), if required for NYSE purposes. This Agreement has
been duly authorized and validly executed and delivered by Parent and Merger
Sub and constitutes a legal, valid and binding obligation of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms.
SECTION 4.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will not,
(1) conflict with or violate any provision of the Certificate of Incorporation
or By-laws of Parent or Merger Sub, (2) assuming that all consents, approvals,
authorizations and permits described in Section 4.5(b) have been obtained, that
all filings and notifications described in Section 4.5(b) have been made, and
that the stockholders have approved the Share Issuance (if required for NYSE
purposes) as described in Section 4.4, conflict with or violate any foreign or
domestic Law applicable to Parent or Merger Sub or any Parent Subsidiary or by
which any property or asset of Parent, Merger Sub or any Parent Subsidiary is
bound or affected or (3) except as set forth in Section 4.5(a) of the Parent
Disclosure Schedule, result in any breach of, any loss of any benefit under or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent, Merger Sub or any
Parent Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, other instrument or obligation, except, with
respect to clauses (2) and (3), for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the
aggregate, reasonably be expected to either (A) have a Parent Material Adverse
Effect nor (B) prevent or materially delay the performance of this Agreement by
Parent and Merger Sub.
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(b) Except as set forth in Section 4.5(b) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub do not,
and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign Governmental Entity, except (1) under
the Exchange Act, the Securities Act, Blue Sky Laws, the rules and regulations
of NYSE, the HSR Act, foreign antitrust and competition laws, filing and
recordation of the Certificate of Merger as required by the DGCL and as
otherwise set forth in Section 4.5(b) of the Parent Disclosure Schedule and (2)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not, individually or in the
aggregate, reasonably be expected to (A) prevent or materially delay
consummation of the Merger, (B) otherwise prevent Parent from performing its
material obligations under this Agreement or (C) have a Parent Material Adverse
Effect.
SECTION 4.6. SEC Filings; Financial Statements.
(a) Parent has timely filed all registration statements, prospectuses,
forms, reports and documents required to be filed by it under the Securities
Act or the Exchange Act, as the case may be, since January 1, 1998
(collectively, the "Parent SEC Filings"). Except as set forth in Section 4.6 of
the Parent Disclosure Schedule, the Parent SEC Filings (1) as of their
respective dates were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (2) did not at the
time they were filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(b) Except as set forth in Section 4.6 of the Parent Disclosure Schedule,
each of the consolidated financial statements (including, in each case, any
notes thereto) contained in the Parent SEC Filings was prepared in accordance
with GAAP applied (except as may be indicated in the notes thereto and, in the
case of unaudited quarterly financial statements, as permitted by Form 10-Q
under the Exchange Act) on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto), and each presented fairly
the consolidated financial position of Parent and the consolidated Parent
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which did not and would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse
Effect). The books and records of Parent and the Parent Subsidiaries have been,
and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
SECTION 4.7. Absence of Certain Changes or Events. Since December 31, 1998,
except as specifically contemplated by, or as disclosed in, this Agreement or
as set forth in Section 4.7 of the Parent Disclosure Schedule, there has not
been (a) any Parent Material Adverse Effect or an event or development that
would, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect, (b) any event or development that would,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the performance of this Agreement by Parent, or (c) any action
taken by Parent or any of the Parent Subsidiaries during the period from
January 1, 1999 through the date of this Agreement that, if taken during the
period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 5.2.
SECTION 4.8. Accounting and Tax Matters.
(a) None of Parent, Merger Sub, any Parent Subsidiary or, to the knowledge
of Parent, any of Parent's affiliates has taken or agreed to take any action
that would prevent the Merger from qualifying for "pooling of interests"
accounting treatment under applicable U.S. accounting rules, including, without
limitation, GAAP and applicable SEC accounting standards, or would prevent the
Merger from constituting a transaction qualifying under section 368(a) of the
Code. Parent is not aware of any agreement, plan or other circumstance that
would prevent the Merger from so qualifying under the accounting rules and
section 368(a) of the Code and, as of the date of this Agreement, Parent has no
reason to believe that the Merger will not qualify as a "pooling of interests"
for accounting purposes.
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(b) Parent has been orally advised by KPMG LLP that such firm believes that,
assuming consummation of the transactions contemplated hereby in accordance
herewith, such firm should be able to deliver the opinion contemplated by
Section 7.2(e).
SECTION 4.9. Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) All of the outstanding capital stock of Merger Sub is owned directly by
Parent. There are no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which Merger Sub is a party
of any character relating to the issued or unissued capital stock of, or other
equity interests in, Merger Sub or obligating Merger Sub to grant, issue or
sell any shares of the capital stock of, or other equity interests in, Merger
Sub, by sale, lease, license or otherwise. There are no obligations, contingent
or otherwise, of Merger Sub to repurchase, redeem or otherwise acquire any
shares of the capital stock of Merger Sub.
(c) Except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement, Merger Sub has not and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.
SECTION 4.10. Opinion of Financial Advisor. Goldman, Sachs & Co. (the
"Parent Financial Advisor") has delivered to the Board of Directors of Parent
its oral opinion as of the date hereof that, as of the date hereof, the
Exchange Ratio is fair from a financial point of view to Parent.
SECTION 4.11. Brokers. No broker, finder or investment banker (other than
the Parent Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of Parent or any Parent Subsidiary.
SECTION 4.12. Disclosure. Notwithstanding anything to the contrary herein,
any matter disclosed in any section of the Parent Disclosure Schedule shall be
considered disclosed for other sections of the Parent Disclosure Schedule (but
only to the extent such matter on its face would reasonably be expected to be
pertinent to a particular section of the Parent Disclosure Schedule in light of
the disclosure made in such section).
ARTICLE V
Covenants
SECTION 5.1. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.1 of the Company Disclosure Schedule or as
specifically permitted by any other provision of this Agreement, unless Parent
shall otherwise agree in writing: (a) the business of the Company and the
Company Subsidiaries shall be conducted in the ordinary course of business
consistent with past practice and (b) the Company shall use its reasonable best
efforts to keep available the services of such of the current officers, key
employees and consultants of the Company and the Company Subsidiaries and to
preserve the current relationships of the Company and the Company Subsidiaries
with such of the customers, suppliers and other persons with which the Company
or any Company Subsidiary has significant business relations as is reasonably
necessary in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 5.1
of the Company Disclosure Schedule or as specifically permitted by any other
provision of this Agreement, the Company shall not (unless required by
applicable Laws or stock exchange regulations), and shall not permit any
Company Subsidiary to, between the date of this Agreement and the Effective
Time, directly or indirectly, do, or agree to do, any of the following without
the prior written consent of Parent:
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(a) amend or otherwise change its Certificate of Incorporation or By-
laws or equivalent organizational documents;
(b) (1) issue, sell, pledge, dispose of, grant, transfer, encumber, or
authorize the issuance, sale, pledge, disposition, grant, transfer, or
encumbrance of any shares of capital stock of, or other equity interests
in, the Company or any Company Subsidiary of any class, or securities
convertible or exchangeable or exercisable for any shares of such capital
stock or other equity interests, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock or other equity
interests or such convertible or exchangeable securities, or any other
ownership interest (including, without limitation, any phantom interest),
of the Company or any Company Subsidiary, other than the issuance of
Company Common Stock upon the exercise of Company Options or Warrants in
accordance with their terms or (2) except in the ordinary course of
business consistent with past practice, sell, pledge, dispose of, transfer,
lease, license, guarantee or encumber, or authorize the sale, pledge,
disposition, transfer, lease, license, guarantee or encumbrance of, any
material property or assets of the Company or any Company Subsidiary;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than dividends paid by wholly-owned Company
Subsidiaries to the Company or to other wholly-owned Company Subsidiaries)
or enter into any agreement with respect to the voting of its capital
stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (1) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any
division thereof (other than a wholly-owned Company Subsidiary) or any
assets, other than acquisitions of assets in the ordinary course of
business consistent with past practice and any other acquisitions for
consideration that is individually not in excess of $10,000,000, or in the
aggregate, not in excess of $40,000,000; (2) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person (other than a wholly-owned Company Subsidiary)
for borrowed money, except for indebtedness for borrowed money incurred in
the ordinary course of business or other indebtedness for borrowed money
with a maturity of not more than one year in a principal amount not, in the
aggregate, in excess of $5,000,000; (3) terminate, cancel or request any
material change in, or agree to any material change in, any Company
Material Contract other than in the ordinary course of business consistent
with past practice; (4) make or authorize any capital expenditure in excess
of the Company's budget as disclosed to Parent prior to the date hereof,
other than capital expenditures that are not, in the aggregate, in excess
of $10,000,000 for the Company and the Company Subsidiaries taken as a
whole; or (5) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under this
Section 5.1(e);
(f) except as may be required by contractual commitments or corporate
policies with respect to severance or termination pay in existence on the
date hereof as disclosed in Section 3.9 of the Company Disclosure Schedule:
(1) increase the compensation payable or to become payable to its officers
or employees (except for increases in accordance with past practices in
salaries or wages of employees of the Company or any Company Subsidiary
which are not across-the-board increases), (2) grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or
any Company Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee,
except to the extent required by applicable Law or the terms of a
collective bargaining agreement or (3) take any affirmative action to
accelerate the vesting of any stock-based compensation;
(g) make any change in accounting policies or procedures, other than in
the ordinary course of business consistent with past practice or except as
required by GAAP or by a Governmental Entity;
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(h) waive, release, assign, settle or compromise any material claims, or
any material litigation or arbitration;
(i) make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(j) take any action that would prevent or impede the Merger from
qualifying (1) for "pooling-of-interests" accounting treatment or (2) as a
reorganization within the meaning of Section 368 of the Code;
(k) amend or modify, or propose to amend or modify, or otherwise take
any action under, the Company Rights Agreement;
(l) modify, amend or terminate, or waive, release or assign any material
rights or claims with respect to any confidentiality or standstill
agreement to which the Company is a party;
(m) write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $5,000,000 except for
depreciation and amortization in accordance with GAAP consistently applied;
(n) take any action to exempt or make not subject to (1) the provisions
of Section 203 of the DGCL, (2) any other state takeover law or state law
that purports to limit or restrict business combinations or the ability to
acquire or vote shares or (3) the Company Rights Agreement, any person or
entity (other than Parent or its subsidiaries) or any action taken thereby,
which person, entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(o) take any action that is intended or would reasonably be expected to
result in any of the conditions to the Merger set forth in Article VII not
being satisfied, except, in every case, as may be required by applicable
Law; or
(p) authorize or enter into any agreement or otherwise make any
commitment to do any of the foregoing.
SECTION 5.2. Conduct of Business by Parent Pending the Closing. Except as
set forth in Section 5.2 of the Parent Disclosure Schedule or as specifically
permitted by any other provision of this Agreement, Parent shall not (unless
required by applicable Laws or stock exchange regulations), and shall not
permit any Parent Subsidiary (unless required by applicable Laws or stock
exchange regulations) to, between the date of this Agreement and the Effective
Time, directly or indirectly, do, or agree to do, any of the following, without
the prior written consent of the Company:
(a) amend or otherwise change Parent's Certificate of Incorporation or
By-laws or equivalent organizational documents in a manner that adversely
affects the rights of holders of Parent Common Stock;
(b) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
Parent's capital stock (other than regular quarterly cash dividends);
(c) make any change in accounting policies or procedures, other than in
the ordinary course of business consistent with past practice or except as
required by GAAP or a Governmental Entity;
(d) take any action that would prevent or impede the Merger from
qualifying (1) for "pooling of interests" accounting treatment or (2) as a
reorganization within the meaning of Section 368 of the Code;
(e) take any action that is intended or could reasonably be expected to
result in any of the conditions to the Merger set forth in Article VII not
being satisfied, except, in every case, as may be required by applicable
Law; or
(f) authorize or enter into any agreement or otherwise make any
commitment to do any of the foregoing.
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SECTION 5.3. Cooperation. The Company and Parent shall coordinate and
cooperate in connection with (a) the preparation of the Registration Statement
(as defined in Section 6.1(a)) and the Proxy Statement (as defined in Section
6.1(a)), (b) determining whether any action by or in respect of, or filing
with, any Governmental Entity is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any Company Material
Contracts, in connection with the consummation of the Merger and (c) seeking
any such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the
Registration Statement and the Proxy Statement and timely seeking to obtain any
such actions, consents, approvals or waivers.
SECTION 5.4. Next Level Communications. The parties hereby agree and
acknowledge that the Company may proceed to effect the initial public offering
and other associated transactions upon the terms and subject to the conditions
set forth in the registration statement on Form S-1 filed prior to the date
hereof (as so filed, without giving effect to any amendments thereto, the "Form
S-1") by NL (the "IPO"); provided that (1) except as set forth in Section 5.4
of the Company Disclosure Schedule, in no event shall the Company own,
following the IPO, less than 65-70% of the fully diluted equity of NL, (2) no
action shall be taken by the Company in connection with the IPO that would
prevent the Merger from qualifying for "pooling of interests" accounting
treatment or would prevent the Merger from qualifying under Section 368(a) of
the Code, (3) no change shall be made by the Company to any material term or
condition of the IPO from those set forth in the Form S-1 without the consent
of Parent and (4) prior to the effectiveness of the IPO, the certificate of
incorporation and bylaws of NL, along with the voting trust agreement described
in the Form S-1, shall be amended such that, upon the effectiveness of the
Merger, the voting trust shall terminate, NL shall have one class of common
stock with one vote per share and the Company shall be able to exercise voting
control of NL including, without limitation, to elect a majority of the Board
of NL. The parties acknowledge and agree that so long as the Company complies
with the foregoing sentence, there shall be no breach of any representation,
warranty or covenant herein by virtue of the IPO. Each of Parent and the
Company agree to certain additional matters set forth in Section 5.4 of the
Company Disclosure Schedule.
ARTICLE VI
Additional Agreements
SECTION 6.1. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement, Parent
and the Company shall prepare and file with the SEC a joint proxy statement
relating to the meeting of the Company's stockholders to be held in connection
with the Merger and, if required for NYSE purposes, the meeting of the Parent's
stockholders to be held in connection with the Share Issuance (together with
any amendments thereof or supplements thereto, the "Proxy Statement") and
Parent shall prepare and file with the SEC a registration statement on Form S-4
(together with all amendments thereto, the "Registration Statement") in which
the Proxy Statement shall be included as a prospectus, in connection with the
registration under the Securities Act of the shares of Parent Common Stock to
be issued to the stockholders of the Company pursuant to the Merger. Each of
Parent and the Company will use all reasonable efforts to cause the
Registration Statement to become effective as promptly as practicable, and,
prior to the effective date of the Registration Statement, Parent shall take
all or any action required under any applicable federal or state securities
laws in connection with the issuance of shares of Parent Common Stock in the
Merger. Each of Parent and the Company shall furnish all information concerning
it and the holders of its capital stock as the other may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Proxy Statement. As promptly as practicable after the Registration
Statement shall have become effective, each of the Company and, if required for
NYSE purposes, Parent shall mail the Proxy Statement to its stockholders. The
Proxy Statement shall include the recommendation of the Board of Directors of
the Company in favor of the Merger (subject to the last sentence of Section
6.4(d) hereof) and, if Parent stockholder approval is sought, the
recommendation of the Board of Directors of Parent in favor of the Share
Issuance.
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Subject to the last sentence of Section 6.4(d) hereof, no amendment or
supplement to the Proxy Statement or the Registration Statement will be made by
Parent or the Company without the approval of the other party (which approval
shall not be unreasonably withheld or delayed). Parent and the Company each
will advise the other, promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, the suspension of
the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional
information.
(b) The information supplied by Parent for inclusion in the Registration
Statement and the Proxy Statement shall not, at (1) the time the Registration
Statement is declared effective, (2) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company, (3) if applicable, the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders of Parent, (4)
the time of the Company Stockholders' Meeting (as defined in Section 6.2(a)),
(5) if applicable, the time of the Parent Stockholders' Meeting (as defined in
Section 6.2(b)), and (6) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to Parent
or any Parent Subsidiary, or their respective officers or directors, should be
discovered by Parent which should be set forth in an amendment or a supplement
to the Registration Statement or Proxy Statement, Parent shall promptly inform
the Company. All documents that Parent is responsible for filing with the SEC
in connection with the transactions contemplated herein will comply as to form
and substance in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder.
(c) The information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (1) the time the
Registration Statement is declared effective, (2) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company, (3) if applicable, the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to
stockholders of Parent, (4) the time of the Company Stockholders' Meeting, (5)
if applicable, the time of the Parent Stockholders' Meeting (as defined in
Section 6.2(b)), and (6) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to the
Company or any Company Subsidiary, or their respective officers or directors,
should be discovered by the Company which should be set forth in an amendment
or a supplement to the Registration Statement or Proxy Statement, the Company
shall promptly inform Parent. All documents that the Company is responsible for
filing with the SEC in connection with the transactions contemplated herein
will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
SECTION 6.2. Stockholders' Meetings.
(a) Company Stockholders' Meeting. The Company shall call and hold a meeting
of its stockholders (the "Company Stockholders' Meeting") as promptly as
practicable for the purpose of voting upon the approval of the Merger, and the
Company shall use its best efforts to hold the Company Stockholders' Meeting as
soon as practicable after the date on which the Registration Statement becomes
effective. Without limiting the generality of the foregoing, the Company agrees
that it shall continue to be obligated to call a meeting pursuant to the first
sentence of this Section 6.2(a) even if the withdrawal or modification in any
adverse manner of its approval or recommendation of this Agreement is permitted
under the last sentence of Section 6.4(d) hereof.
(b) Parent Stockholders' Meeting. If required for NYSE purposes, Parent
shall call and hold a meeting of its stockholders (the "Parent Stockholders'
Meeting") as promptly as practicable for the purpose of voting upon the
approval of the Share Issuance, and, if so required, Parent shall use its best
efforts to hold the Parent Stockholders' Meeting as soon as practicable after
the date on which the Registration Statement becomes effective.
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SECTION 6.3. Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which the Company or Parent or any of their
respective subsidiaries is a party (which such person shall use reasonable best
efforts to cause the counterparty thereto to waive) or pursuant to applicable
Law or the regulations or requirements of any stock exchange or other
regulatory organization with whose rules the parties are required to comply,
from the date of this Agreement to the Effective Time, each party shall (and
shall cause its subsidiaries to): (1) provide to the other party (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives, collectively, "Representatives") access at
reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of such party and its subsidiaries and
to the books and records thereof and (2) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities, personnel
and other aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request. No investigation conducted pursuant to
this Section 6.3 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement previously executed by the Company and Parent (the
"Confidentiality Agreements") with respect to the information disclosed
pursuant to this Section 6.3.
SECTION 6.4. No Solicitation of Transactions.
(a) Neither the Company nor any of the Company Subsidiaries shall, directly
or indirectly, take (nor shall the Company authorize or permit its
Representatives or, to the extent within the Company's control, other
affiliates to take) any action to (1) encourage (including by way of furnishing
nonpublic information), solicit, initiate or facilitate any Acquisition
Proposal (as defined in Section 6.4(c)), (2) enter into any agreement with
respect to any Acquisition Proposal or (3) participate in any way in
discussions or negotiations with, or furnish any information to, any person in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or could reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that if, at any time
prior to the obtaining of the Company's stockholders' approval of the Merger,
the Board of Directors of the Company determines in good faith, based on the
advice of outside counsel, that it is necessary to do so to discharge properly
its fiduciary duties to stockholders, the Company may, in response to a
Superior Proposal and subject to such party's compliance with Section 6.4(b),
(A) furnish information with respect to the Company and the Company
Subsidiaries to the person making such Superior Proposal pursuant to a
customary confidentiality agreement the benefits of the terms of which are no
more favorable to the other party to such confidentiality agreement than those
in place with Parent and (B) participate in discussions with respect to such
Superior Proposal. It is expressly understood and agreed that with respect to
the foregoing proviso, the Company's legal and financial advisors shall be able
to make inquiries, and engage in discussions, with any party that has made an
Acquisition Proposal (and such party's legal and financial advisors) in order
to elicit information to allow the Board of Directors of the Company to
determine in good faith if such Acquisition Proposal is a Superior Proposal.
The Company shall cease immediately and cause to be terminated any and all
existing discussions or negotiations with any parties conducted heretofore with
respect to an Acquisition Proposal and promptly request that all confidential
information furnished on behalf of the Company be returned.
(b) The Company will as promptly as practicable communicate to Parent any
inquiry received by it relating to any potential Acquisition Proposal and the
material terms of any proposal or inquiry, including the identity of the person
and its affiliates making the same, that it may receive in respect of any such
transaction, or of any such information requested from it or of any such
negotiations or discussions being sought to be initiated with it; and shall
keep Parent fully informed on a prompt basis with respect to any developments
with respect to the foregoing.
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(c) "Acquisition Proposal" means any offer or proposal concerning any (1)
merger, consolidation, business combination, or similar transaction involving
the Company, (2) sale, lease or other disposition directly or indirectly by
merger, consolidation, business combination, share exchange, joint venture, or
otherwise of assets of the Company or the Company Subsidiaries representing 20%
or more of the consolidated assets of the Company and the Company Subsidiaries,
(3) issuance, sale, or other disposition of (including by way of merger,
consolidation, business combination, share exchange, joint venture, or any
similar transaction) securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such securities) representing
20% or more of the voting power of the Company or (4) transaction in which any
person shall acquire beneficial ownership (as such term is defined in Rule 13d-
3 under the Exchange Act), or the right to acquire beneficial ownership or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
20% or more of the outstanding voting capital stock of the Company. "Superior
Proposal" means a bona fide Acquisition Proposal made by a third party which
was not solicited by the Company, its subsidiaries, Representatives or other
affiliates and which, in the good faith judgment of the Company's Board of
Directors, taking into account, to the extent deemed appropriate by the
Company's Board of Directors, the various legal, financial and regulatory
aspects of the proposal and the person making such proposal (A) if accepted, is
reasonably likely to be consummated, and (B) if consummated, is reasonably
likely to result in a transaction that is more favorable to the Company's
stockholders (in their capacity as stockholders), from a financial point of
view, than the transactions contemplated by this Agreement.
(d) Neither the Board of Directors of the Company nor any committee thereof
shall (1) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Board of
Directors or such committee of the adoption and approval of the Merger and the
matters to be considered at the Company Stockholders' Meeting, (2) other than
the Merger, approve or recommend, or propose publicly to approve or recommend,
any Acquisition Proposal, or (3) other than the Merger, cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") related to any
Acquisition Proposal. Nothing contained in this Section 6.4 shall prohibit the
Company (A) from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to its stockholders if, in the good faith
judgment of its Board of Directors, based on the advice of outside counsel,
failure to so disclose would result in a violation of applicable Law, or (B) in
the event that a Superior Proposal is made, from withdrawing or modifying its
recommendation of the Merger no earlier than two business days following
written notice to Parent of its intention to do so, so long as the Company
continues to comply with all other provisions of this Agreement including,
without limitation, Section 6.2(a) hereof.
SECTION 6.5. Appropriate Action; Consents; Filings.
(a) The Company and Parent shall use their reasonable best efforts to (1)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by
this Agreement as promptly as practicable, (2) obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Parent or the Company or any of their
subsidiaries, or to avoid any action or proceeding by any Governmental Entity
(including, without limitation, those in connection with the HSR Act), in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated herein, including, without
limitation, the Merger, and (3) make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement and the Merger
required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities Laws, (B) the HSR Act and (C) any other
applicable Law; provided, that Parent and the Company shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith and,
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provided, further, that nothing in this Section 6.5(a) shall require Parent to
agree to (1) the imposition of conditions, (2) the requirement of divestiture
or (3) the requirement of expenditure of money by Parent or the Company to a
third party in exchange for any such consent that, in any such case, would be
materially adverse to Parent, the Company and their subsidiaries, taken as a
whole). The Company and Parent shall furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law (including all information required to be
included in the Proxy Statement and the Registration Statement) in connection
with the transactions contemplated by this Agreement. The Company and Parent
shall not take any action, or refrain from taking any action, the effect of
which would be to delay or impede the ability of the Company and Parent to
consummate the transactions contemplated by this Agreement.
(b) (1) The Company and Parent shall give (or shall cause their respective
subsidiaries to give) any notices to third parties, and use, and cause their
respective subsidiaries to use, all reasonable efforts to obtain any third
party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) required to be disclosed in
the Company Disclosure Schedule or the Parent Disclosure Schedule, as
applicable, or (C) required to prevent a Company Material Adverse Effect from
occurring prior to or after the Effective Time or a Parent Material Adverse
Effect from occurring after the Effective Time.
(2) In the event that either party shall fail to obtain any third party
consent described in subsection (b)(1) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other party hereto, to minimize any adverse effect upon the Company and Parent,
their respective subsidiaries, and their respective businesses resulting, or
which could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the Company
shall promptly notify Parent in writing of any pending or, to the knowledge of
the Company, threatened action, suit, arbitration or other proceeding or
investigation by any Governmental Entity or any other person (1) challenging or
seeking material damages in connection with the Merger or the conversion of
Company Common Stock into Parent Common Stock pursuant to the Merger or (2)
seeking to restrain or prohibit the consummation of the Merger or otherwise
limit the right of Parent or its subsidiaries to own or operate all or any
portion of the businesses or assets of the Company or its subsidiaries, which
in either case would reasonably be expected to have a Company Material Adverse
Effect prior to or after the Effective Time or a Parent Material Adverse Effect
after the Effective Time.
SECTION 6.6. Pooling. From and after the date hereof and until the Effective
Time, none of Parent, Merger Sub, the Company, or any of their respective
subsidiaries or other affiliates over which they exercise control, shall
knowingly take any action, or knowingly fail to take any action, that would
reasonably be expected to jeopardize the treatment of the Merger as a "pooling
of interests" for accounting purposes. Between the date of this Agreement and
the Effective Time, each of Parent, Merger Sub and the Company shall take all
reasonable actions necessary to cause the Merger to be characterized as a
"pooling of interests" for accounting purposes if such a characterization shall
have been jeopardized by action taken by Parent, Merger Sub or the Company
prior to the Effective Time.
SECTION 6.7. Letters of Accountants. Each of Parent and the Company shall
use their reasonable best efforts to cause to be delivered to the other two
letters from their respective independent public accountants, one dated the
date on which the Registration Statement shall become effective and one dated a
date within two business days before the Effective Time, in form and substance
reasonably satisfactory to the recipient and customary in scope and substance
for comfort letters delivered by independent public accountants.
SECTION 6.8. Certain Notices. From and after the date of this Agreement
until the Effective Time, each party hereto shall promptly notify the other
party hereto of (a) the occurrence, or non-occurrence, of any event that would
be likely to cause any condition to the obligations of any party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied or (b) the failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or
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satisfied by it pursuant to this Agreement which would reasonably be expected
to result in any condition to the obligations of any party to effect the Merger
and the other transactions contemplated by this Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 6.8
shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement or otherwise
limit or affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.9. Pooling Affiliates.
(a) Not less than 45 days prior to the Effective Time, the Company shall
deliver to Parent a list of names and addresses of each person who, in the
Company's reasonable judgment, is an affiliate within the meaning of Rule 145
of the rules and regulations promulgated under the Securities Act or otherwise
applicable SEC accounting releases with respect to "pooling of interests"
accounting treatment (each such person, a "Pooling Affiliate") of the Company.
The Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. The Company shall
deliver or cause to be delivered to Parent, not later than 30 days prior to the
Effective Time, an affiliate letter in the form attached hereto as Exhibit
6.9(a), executed by each of the Pooling Affiliates of the Company identified in
the foregoing list. Parent shall be entitled to place legends as specified in
such affiliate letters on the certificates evidencing any of the Parent Common
Stock to be received by such Pooling Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of such Letters.
(b) Not less than 45 days prior to the Effective Time, Parent shall deliver
to the Company a list of names and addresses of each person who, in Parent's
reasonable judgment is a Pooling Affiliate of Parent. Parent shall provide the
Company such information and documents as the Company shall reasonably request
for purposes of reviewing such list. Parent shall deliver or cause to be
delivered to the Company, not later than 30 days prior to the Effective Time,
an affiliate letter in form comparable to Exhibit 6.9(a), with such
modifications as may be appropriate, executed by each of the Pooling Affiliates
of Parent identified in the foregoing list.
SECTION 6.10. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable Law or any listing agreement with the NYSE or the
National Association of Securities Dealers, Inc.
SECTION 6.11. Stock Exchange Listing. Parent shall promptly prepare and
submit to the NYSE and any other applicable exchange a listing application
covering the shares of Parent Common Stock to be issued in the Merger and shall
use reasonable best efforts to cause such shares to be approved for listing on
such exchange, subject to official notice of issuance, prior to the Effective
Time.
SECTION 6.12. Employee Benefit Matters.
(a) Obligations of Parent; Comparability of Benefits. Except with respect to
the incentive, benefits and perquisite plans and programs ("Benefit Plans")
specifically provided for in Exhibit B hereto, as to which the specific
provisions therein shall override the provisions set forth herein, following
the Merger employees and former employees of the Company and the Company
Subsidiaries ("Company Employees") shall be eligible to participate in all
Benefit Plans of Parent on a basis no less favorable, in the aggregate, than
that for comparable officers and employees of Parent. Notwithstanding the
foregoing, nothing herein shall require (1) the continuation of any particular
Parent benefit plan or prevent the amendment or termination thereof (subject to
the maintenance, in the aggregate, of the benefits as provided in the preceding
sentence) or (2) Parent or the Surviving Corporation to continue or maintain
any stock purchase or other equity plan related to the equity of the Company or
the Surviving Corporation.
(b) Pre-Existing Limitations; Deductible; Service Credit. With respect to
any Benefit Plans of Parent or any Parent Subsidiary in which the Company
Employees participate effective as of the Effective Time, Parent shall, or
shall cause the Surviving Corporation to (1) waive any limitations as to pre-
existing conditions,
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exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under which any welfare
Benefit Plan in which such Company Employees may be eligible to participate
after the Effective Time (provided, however, that no such waiver shall apply to
a pre-existing condition of any Company Employee to the extent that he or she
was, as of the Effective Time, excluded from participation in a Company Benefit
Plan by nature of such pre-existing condition), (2) provide each Company
Employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any welfare Benefit Plan in which such employees may be
eligible to participate after the Effective Time and (3) recognize all service
of the Company Employees with the Company, for all purposes other than benefit
accrual, in any Benefit Plan in which such Company Employees may be eligible to
participate after the Effective Time. Prior to the Effective Time, the Board of
Directors of Parent, or an appropriate committee of non-employee directors
thereof, shall adopt a resolution consistent with the interpretive guidance of
the SEC so that the acquisition by any officer or director of the Company who
may become a covered person of Parent for purposes of Section 16 of the
Exchange Act and the rules and regulations thereunder ("Section 16") of shares
of Parent Common Stock or options to acquire Parent Common Stock pursuant to
this Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.
SECTION 6.13. Certain Employment Arrangements. Parent agrees to treat the
outstanding Company arrangements, set forth in Exhibit B, and to undertake new
arrangements set forth in Exhibit B, from and after the Effective Time in the
manner, and upon the terms and conditions, set forth in such Exhibit B.
SECTION 6.14. Indemnification of Directors and Officers.
(a) Parent and the Surviving Corporation agree that the indemnification
obligations set forth in the Company's Certificate and the Company's By-laws,
in each case as of the date of this Agreement, shall survive the Merger (and,
prior to the Effective Time, Parent shall cause the Certificate of
Incorporation and By-laws of Merger Sub to reflect such provisions) and shall
not be amended, repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the rights
thereunder of the individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company or the Company
Subsidiaries.
(b) The Company shall, to the fullest extent permitted under applicable Law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, Parent and the Surviving Corporation
shall, to the fullest extent permitted under applicable Law, indemnify and hold
harmless, each present and former director, officer, trustee, fiduciary,
employee or agent of the Company and each Company Subsidiary and each such
person who served at the request of the Company or any Company Subsidiary as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or enterprise (collectively, the "Indemnified Parties") against
all costs and expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and settlement amounts paid in
connection with any claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), whether civil, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer or director, in each case occurring before the Effective
Time (including the transactions contemplated by this Agreement).
(c) For six years from the Effective Time, the Surviving Corporation shall
use its best efforts to provide to the Company's current directors and officers
liability insurance protection of the same kind and scope as that provided by
the Company's directors' and officers' liability insurance policies (true and
complete copies of which have been made available to Parent); provided,
however, that in no event shall Parent be required to expend more than 200% of
the current amount expended by the Company (the "Insurance Amount") to maintain
or procure insurance coverage pursuant hereto and further provided that if
Parent is unable to maintain or obtain the insurance called for by this Section
6.14(c), Parent shall use its best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
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SECTION 6.15. Plan of Reorganization. The Agreement is intended to
constitute a "plan of reorganization" within the meaning of section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date hereof and until the Effective Time, each party hereto shall use its
reasonable best efforts to cause the Merger to qualify, and will not knowingly
take any actions or cause any actions to be taken which could reasonably be
expected to prevent the Merger from qualifying, as a reorganization under the
provisions of section 368(a) of the Code. Following the Effective Time, neither
the Surviving Corporation, Parent nor any of their affiliates shall knowingly
take any action or knowingly cause any action to be taken which could
reasonably be expected to cause the Merger to fail to qualify as a
reorganization under section 368(a) of the Code.
ARTICLE VII
Closing Conditions
SECTION 7.1. Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose shall have been initiated or, to the knowledge of Parent
or the Company, threatened by the SEC.
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company and, if applicable, by the requisite vote of the stockholders of
Parent.
(c) No Order. No Governmental Entity, nor any federal or state court of
competent jurisdiction or arbitrator shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, judgment, injunction or arbitration award or finding or
other order (whether temporary, preliminary or permanent), in any case
which is in effect and which prevents or prohibits consummation of the
Merger or any other transactions contemplated in this Agreement.
(d) Consents and Approvals. All consents, approvals and authorizations
of any Governmental Entity or other person required to be set forth in
Section 3.5 or 4.5 or the related sections of the Company Disclosure
Schedule or the Parent Disclosure Schedule as necessary to consummate the
Merger shall have been obtained (in each case, without (1) the imposition
of conditions, (2) the requirement of divestiture or (3) the requirement of
expenditure of money by Parent or the Company to a third party in exchange
for any such consent that, in any such case, would be materially adverse to
Parent, the Company and their subsidiaries, taken as a whole), except for
such consents, approvals and authorizations the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect or a Parent Material Adverse Effect after
the Effective Time.
(e) HSR Act. The applicable waiting period, together with any extensions
thereof, under the HSR Act shall have expired or been terminated.
(f) NYSE. The shares of Parent Common Stock issuable to the Company's
stockholders in the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
SECTION 7.2. Additional Conditions to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated herein are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall
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be true and correct in all respects giving effect to such standard) as of
the date hereof and as of the Effective Time as though made on and as of
the Effective Time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct
in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects giving effect to
such standard) as of such date. Parent shall have received a certificate of
the Chief Executive Officer or Chief Financial Officer of the Company to
that effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Parent shall have received a certificate of
the Chief Executive Officer or Chief Financial Officer of the Company to
that effect.
(c) Tax Opinion. Parent shall have received the opinion of KPMG LLP,
special tax advisors to Parent, in form and substance reasonably
satisfactory to Parent, based upon facts, representations and assumptions
set forth in such opinion which are consistent with the state of facts
existing at the Effective Time, to the effect that for federal income tax
purposes (1) the Merger will be treated as a reorganization qualifying
under the provisions of Section 368(a) of the Code, and Parent, Merger Sub
and the Company will each be a party to the reorganization, (2) no gain or
loss will be recognized by Parent, Merger Sub or the Company as a result of
the Merger, and (3) no gain or loss will be recognized by the stockholders
of the Company who exchange their Company Common Stock solely for Parent
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest), dated the date of the Effective
Time. In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of Parent, the
Company and certain stockholders of Parent and the Company.
(d) Accountant Letters. Parent shall have received from the Company
"cold comfort" letters of Deloitte & Touche LLP, dated the date on which
the Registration Statement shall become effective and a date within two
business days before the Effective Time and addressed to Parent, in form
and substance reasonably satisfactory to Parent and reasonably customary in
scope and substance for comfort letters delivered by independent public
accountants.
(e) Pooling Opinion. Parent shall have received a report from KPMG LLP,
dated as of the date on which the Registration Statement shall become
effective and the Effective Time, to the effect that as of the date of the
report, they concur with Parent's conclusion that no conditions exist that
would preclude Parent's ability to be a party to a business combination
with the Company to be accounted for as a pooling of interests.
(f) Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Company Material Adverse Effect or any event or
development that would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
SECTION 7.3. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement is also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent contained in this Agreement shall be true and correct
in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects giving effect to
such standard) as of the date hereof and as of the Effective Time as though
made on and as of the Effective Time, except that those representations and
warranties which address matters only as of a particular date shall remain
true and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects
giving effect to such standard) as of such date. The Company shall have
received a certificate of a responsible officer of Parent to that effect.
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(b) Agreements and Covenants. Parent shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of Parent to that effect.
(c) Tax Opinion. The Company shall have received the opinion of Simpson,
Thacher & Bartlett, in form and substance reasonably satisfactory to the
Company based upon facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Effective Time, to the effect that for federal income tax purposes (1) the
Merger will be treated as a reorganization qualifying under the provisions
of section 368(a) of the Code, and Parent, Merger Sub and the Company will
each be a party to the reorganization, (2) no gain or loss will be
recognized by Parent, Merger Sub or the Company as a result of the Merger,
and (3) no gain or loss will be recognized by the stockholders of the
Company who exchange their Company Common Stock solely for Parent Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest), dated the date of the Effective Time. In
rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Parent, the Company and certain
stockholders of Parent and the Company.
(d) Accountant Letters. The Company shall have received from Parent
"cold comfort" letters of KPMG LLP, dated the date on which the
Registration Statement shall become effective and a date within two
business days before the Effective Time and addressed to the Company, in
form and substance reasonably satisfactory to the Company and reasonably
customary in scope and substance for comfort letters delivered by
independent public accountants.
(e) Pooling Opinion. The Company shall have received a report from
Deloitte & Touche LLP, dated as of the date on which the Registration
Statement shall become effective and the Effective Time, to the effect that
as of the date of the report, they concur with the Company's conclusion
that no conditions exist that would preclude the Company's ability to be a
party to a business combination with Parent to be accounted for as a
pooling of interests.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of this Agreement and
the Merger by the stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) (1) by Parent (provided that Parent is not then in material breach
of any representation, warranty, covenant or other agreement contained
herein), if there has been a breach by the Company of any of its
representations, warranties, covenants or agreements contained in this
Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.2(a) or Section 7.2(b) will
not be satisfied and, in either such case, such breach or condition has not
been promptly cured within 30 days following receipt by the Company of
written notice of such breach;
(2) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), if there has been a breach by Parent of any of its
representations, warranties, covenants or agreements contained in this
Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.3(a) or Section 7.3(b) will
not be satisfied and such breach or condition has not been promptly cured
within 30 days following receipt by Parent of written notice of such
breach;
(c) by either Parent or the Company if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction, any
arbitrator or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable (so
long as the party seeking termination is not in breach of Section 6.5(a)
hereof);
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(d) by either Parent or the Company if the Merger shall not have been
consummated before March 31, 2000 unless the failure of the Effective Time
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe in all material respects the
covenants and agreements of such party set forth herein; or
(e) by either Parent or the Company if (1) this Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company Stockholders' Meeting or any adjournment or
postponement thereof or (2) the Share Issuance shall fail to receive the
requisite vote for approval by the stockholders of Parent at the Parent
Stockholders' Meeting or any adjournment or postponement thereof, if such
vote of the stockholders of Parent was, in Parent's sole judgment, required
for NYSE purposes.
SECTION 8.2. Effect of Termination.
(a) In the event of the termination of this Agreement by either the Company
or Parent pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Parent or the
Company, other than the provisions of this Section 8.2 and Section 8.5, and
except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
(b) Parent and the Company agree that the Company shall pay to Parent the
sum of $300 million (the "Company Breakup Fee") solely as follows: (1) if (A)
the Company or Parent shall terminate this Agreement pursuant to Section 8.1(d)
or (e)(1) where the Company's stockholders have failed to adopt this Agreement,
(B) at any time after the date of this Agreement and prior to the Company
Stockholders Meeting, if any, there shall have been publicly announced an
Acquisition Proposal, (C) the Company shall not at any time prior to the
Company Stockholders Meeting have withdrawn, or modified or changed in a manner
adverse to Parent, its approval or recommendation of the Merger and (D) within
9 months of the termination of this Agreement, the Company enters into a
definitive Acquisition Agreement, or (2) if (A) Parent shall terminate this
Agreement pursuant to Section 8.1(b)(1) due to a breach of Section 6.1, Section
6.2 or Section 6.4, or (B) Parent shall terminate this Agreement pursuant to
Section 8.1(d) or (e)(1) where the Company's stockholders have failed to adopt
this Agreement and the Company shall have withdrawn, or modified or changed in
a manner adverse to Parent, its approval or recommendation of the Merger.
(c) The Termination Fee required to be paid to Parent pursuant to Section
8.2(b)(1) shall be made to Parent not later than five Business Days after the
entering into of an Acquisition Agreement. The Termination Fee required to be
paid to Parent pursuant to Section 8.2(b)(2) shall be made to Parent within two
Business Days after notice of termination of this Agreement by Parent. All
payments under Section 8.2(b) shall be made by wire transfer of immediately
available funds to an account designated by Parent.
SECTION 8.3. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of
the Merger by the stockholders of the Company, no amendment may be made without
further stockholder approval which, by law or in accordance with the rules of
any relevant stock exchange, requires further approval by such stockholders.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.4. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
the stockholders of the Company, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
issued to holders of Company Common Stock as provided for in this Agreement
(the
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<PAGE>
"Merger Consideration") other than as contemplated by this Agreement. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby, but such extension
or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
SECTION 8.5. Fees and Expenses. Subject to Section 8.2(b) hereof, all
expenses incurred by the parties hereto shall be borne solely and entirely by
the party which has incurred the same; provided, however, that each of Parent
and the Company shall pay one-half of the expenses related to printing, filing
and mailing the Registration Statement and the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Registration
Statement and the Proxy Statement.
ARTICLE IX
General Provisions
SECTION 9.1. Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered by a nationally
recognized courier service to the parties at the following addresses (or at
such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Parent or Merger Sub, addressed to it at:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Telecopier No.: (847) 576-3628
Attention: General Counsel
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier No.: (212) 403-2000
Attention: Patricia A. Vlahakis, Esq.
(b) If to the Company, addressed to it at:
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Telecopier No.: (215) 323-1293
Attention: General Counsel
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
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Telecopier No.: (212) 455-2502
Attention: Charles I. Cogut, Esq.
Mario A. Ponce, Esq.
SECTION 9.3. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first-mentioned person;
(b) "Business Day" shall mean any day other than a day on which banks in
the State of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock
or as trustee or executor, by contract or credit arrangement or otherwise;
(d) "knowledge" will be deemed to be present when the matter in question
was brought to the attention of any officer of Parent or the Company, as
the case may be;
(e) "person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d) of the Exchange Act);
(f) "subsidiary" or "subsidiaries" of Parent, the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which Parent, the Company, the Surviving
Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, a majority of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the Board of
Directors or other governing body of such corporation or other legal
entity, including, without limitation, in the case of the Company, NL, NLP
and their respective subsidiaries.
SECTION 9.4. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.5. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 9.6. Entire Agreement. This Agreement (together with the Exhibits,
Parent and Company Disclosure Schedules and the other documents delivered
pursuant hereto), the Voting Agreement and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
SECTION 9.7. Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
SECTION 9.8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective
successors and assigns, and nothing in this Agreement, express or implied,
other than pursuant to Section 6.13, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
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<PAGE>
SECTION 9.9. Mutual Drafting. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware.
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
MOTOROLA, INC.
/s/ Keith J. Bane
By: _________________________________
Name: Keith J. Bane
Title: Executive Vice President
and President, Americas
Region
LUCERNE ACQUISITION CORP.
/s/ Keith J. Bane
By: _________________________________
Name: Keith J. Bane
Title: Vice President
GENERAL INSTRUMENT CORPORATION
/s/ Edward D. Breen
By: _________________________________
Name: Edward D. Breen
Title: Chairman of the Board and
Chief Executive Officer
A-36
<PAGE>
APPENDIX B
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH]
September 14, 1999
Board of Directors
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Members of the Board of Directors:
General Instrument Corporation ("GI") and Motorola, Inc. ("Motorola")
propose to enter into an Agreement and Plan of Merger (the "Agreement")
pursuant to which Lucerne Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Motorola ("Motorola Sub"), will be merged with and
into GI (the "Merger") and each outstanding share of the common stock, par
value $0.01 per share, of GI (the "GI Common Stock") will be converted into the
right to receive 0.575 of a share (the "Exchange Ratio") of common stock, par
value $3.00 per share, of Motorola (the "Motorola Common Stock").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of GI Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to GI and Motorola that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flows, assets, liabilities and
prospects of GI and Motorola furnished to us by GI and Motorola;
(3) Conducted discussions with members of senior management and
representatives of GI and Motorola concerning the matters described in
clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the Merger;
(4) Reviewed the market prices and valuation multiples for the GI Common
Stock and the Motorola Common Stock and compared them with those of
certain publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of GI and Motorola and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of GI and Motorola and their respective financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an
B-1
<PAGE>
independent evaluation or appraisal of any of the assets or liabilities of GI
or Motorola. In addition, we have not assumed any obligation to conduct, nor
have we conducted, any physical inspection of the properties or facilities of
GI or Motorola. With respect to the financial forecast information furnished to
or discussed with us by GI or Motorola, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgments of the respective managements of GI or Motorola as to the expected
future financial performance of GI or Motorola, as the case may be. We have
further assumed that the Merger will be accounted for as a pooling of interests
under generally accepted accounting principles and that it will qualify as a
tax-free reorganization for U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by GI or the Board of Directors to solicit, nor have we solicited,
third-party indications of interest for the acquisition of all or any part of
GI.
We are acting as financial advisor to GI in connection with the Merger and
will receive a fee from GI for our services contingent upon the consummation of
the Merger. In addition, GI has agreed to indemnify us for certain liabilities
arising out of our engagement. We have, in the past, provided financial
advisory and financing services to GI and Motorola and may continue to do so
and have received, and may receive, compensation for the rendering of such
services. In addition, in the ordinary course of our business, we may actively
trade GI Common Stock, as well as Motorola Common Stock and other securities of
Motorola, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of GI in
its evaluation of the Merger and may not be used for any other purpose. Our
opinion does not address the merits of the underlying decision by GI to engage
in the Merger and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on the proposed Merger.
We are not expressing any opinion herein as to the prices at which Motorola
Common Stock will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of GI Common Stock.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
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<PAGE>
APPENDIX C
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
September 14, 1999
The Board of Directors
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness, from
a financial point of view, to the holders of the common stock of General
Instrument Corporation ("GI") of the Exchange Ratio (defined below) provided
for in the Agreement and Plan of Merger, dated as of September 14, 1999 (the
"Merger Agreement"), by and among Motorola Inc. ("Motorola"), Lucerne
Acquisition Corp., a wholly owned subsidiary of Motorola ("Motorola Sub"), and
GI. The Merger Agreement provides for, among other things, the merger of
Motorola Sub with and into GI (the "Merger") pursuant to which each outstanding
share of the common stock, par value $0.01 per share, of GI ("GI Common Stock")
will be converted into the right to receive 0.575 of a share of the common
stock, par value $3.00 per share, of Motorola ("Motorola Common Stock" and the
number of shares of Motorola Common Stock into which shares of GI Common Stock
will be so converted in the Merger, the "Exchange Ratio").
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed audited financial statements of GI for the fiscal years ended
December 31, 1997 and December 31, 1998, and audited financial
statements of Motorola for the fiscal years ended December 31, 1997 and
December 31, 1998;
(c) reviewed unaudited financial statements of GI and Motorola for the six
months ended June 30, 1999 and July 3, 1999, respectively;
(d) reviewed financial projections for GI and Motorola prepared by the
managements of GI and Motorola;
(e) reviewed the historical market prices and trading volume for GI Common
Stock and Motorola Common Stock;
(f) held discussions with the senior management of GI with respect to the
business, capital requirements and prospects for future growth of GI
and Motorola;
(g) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to GI and Motorola;
(h) performed a discounted cash flow analysis of GI using certain
assumptions of future performance provided to us by the management of
GI;
(i) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Merger;
(j) reviewed public information concerning GI and Motorola; and
(k) performed such other analyses and reviewed such other information as we
deemed appropriate.
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In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by GI,
Motorola and their respective employees, representatives and affiliates. With
respect to forecasts of future financial condition and operating results of GI
and Motorola provided to or discussed with us, we assumed, at the direction of
the managements of GI and Motorola, without independent verification or
investigation, that such forecasts were reasonably prepared on bases reflecting
the best available information, estimates and judgments of the managements of
GI and Motorola. We have been advised, and therefore have assumed, that the
Merger will be accounted for as a pooling of interest under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have neither made nor obtained any
independent evaluations or appraisals of the assets or the liabilities of GI
and Motorola or such other affiliated entities. We are not expressing any
opinion as to the underlying valuation, future performance or long-term
viability of GI and Motorola, or the price at which the Motorola Common Stock
will trade subsequent to announcement or consummation of the Merger. Our
Opinion is necessarily based on the information available to us and general
economic, financial and stock market conditions and circumstances as they exist
and can be evaluated by us on the date hereof. It should be understood that,
although subsequent developments may affect this Opinion, we do not have any
obligation to update, revise or reaffirm the Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as financial advisor to GI in connection with the Merger and
to the Board of Directors of GI in rendering this Opinion and will receive a
fee for our services contingent upon consummation of the Merger. In the
ordinary course of business, CIBC World Markets and its affiliates may actively
trade securities of GI and Motorola for their own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, and such other factors as we deemed
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio is
fair to the holders of GI Common Stock from a financial point of view. This
Opinion is for the use of the Board of Directors of GI and does not constitute
a recommendation to any stockholder as to how such stockholder should vote on
any matters relating to the Merger.
Very truly yours,
CIBC World Markets Corp.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation has the power to indemnify its officers, directors, employees and
agents (or persons serving in such positions in another entity at the request
of the corporation) against the expenses, including attorneys' fees, judgments,
fines or settlement amounts actually and reasonably incurred by them in
connection with the defense of any action by reason of being or having been
directors or officers, if such person shall have acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation (and, with respect to any criminal action, had no reasonable cause
to believe the person's conduct was unlawful), except that, if such action
shall be by or in the right of the corporation, no such indemnification shall
be provided as to any claim, issue or matter as to which such person shall have
been judged to have been liable to the corporation unless and to the extent
that the Court of Chancery of the State of Delaware, or another court in which
the suit was brought, shall determine upon application that, in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity.
As permitted by Section 102 of the DGCL, the registrant's Restated
Certificate of Incorporation provides that no director shall be personally
liable to the registrant or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability (i) for breaches
of the director's duty of loyalty to the registrant or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for the unlawful payment of dividends or
unlawful stock purchases or redemptions under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit.
The registrant's Restated Certificate of Incorporation further provides that
the registrant must indemnify and hold harmless, to the fullest extent
authorized by the DGCL, as the same exists or may be hereafter amended (but, in
the case of any such amendment, only to the extent that the amendment permits
the registrant to provide broader indemnification rights than the DGCL
permitted the registrant to provide prior to such amendment), each person who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
registrant or is or was serving (at such time as such person is or was a
director or officer of the registrant) at the request of the registrant as a
director, officer, employee or agent of another entity, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, against all expense, liability and loss reasonably incurred or
suffered by such indemnitee in connection therewith. This right to
indemnification will continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and will inure to the benefit of the
indemnitee's heirs, executors and administrators. However, except as provided
below with respect to proceedings to enforce rights to indemnification, the
registrant will indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by that indemnitee only if the proceeding was
authorized by the registrant's Board of Directors.
The Restated Certificate of Incorporation provides that the right to
indemnification is a contract right and includes the right to be paid by the
registrant the expenses incurred in defending any such proceeding in advance of
its final disposition. However, if and to the extent that the DGCL requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) will be made only upon delivery to the registrant of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision that
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<PAGE>
such indemnitee is not entitled to be indemnified for such expenses. The
registrant's Restated Certificate of Incorporation also provides that the
registrant may, by action of the registrant's Board of Directors or by action
of any person to whom the registrant's Board of Directors has delegated such
authority, provide indemnification to employees and agents of the registrant
with the same scope and effect as the indemnification of the registrant's
officers and directors. The rights to indemnification and to the advancement of
expenses conferred in the Restated Certificate of Incorporation will not be
exclusive of any other right which any person may have or hereafter acquire
under the Restated Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145 of the DGCL also provides that a corporation has the 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 who was serving at
the request of the corporation in such position at another entity) 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 DGCL. The Restated Certificate of Incorporation provides
that the registrant may maintain insurance, at its own expense, to protect
itself and any director, officer, employee or agent of the registrant or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the registrant would
have the power to indemnify such person against such expense, liability or loss
under the DGCL. All of the directors and officers of the registrant are covered
by insurance policies maintained and held in effect by the registrant against
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933, as amended, subject to certain exclusions.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of September 14,
1999, by and among the registrant, Lucerne Acquisition
Corp. and General Instrument Corporation (included as
Appendix A to the prospectus incorporated as part of this
registration statement).
4.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(i)(b) to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended April 2, 1994 (File No. 1-7221)).
4.2 Certificate of Designations, Preferences and Rights of
Junior Participating Preferred Stock, Series B
(incorporated by reference to Exhibit 3.3 to the
registrant's Registration Statement on Form S-3 dated
January 20, 1999 (Registration No. 333-70827)).
4.3 By-laws, as amended through February 17, 1999
(incorporated by reference to Exhibit 3.3 to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (File No. 1-7221)).
4.4 Rights Agreement, dated as of November 5, 1998 between the
registrant and Harris Trust and Savings Bank, as Rights
Agent (incorporated by reference to Exhibit 1.1 to the
registrant's Amendment No. 1 to Registration Statement on
Form 8-A/A dated March 16, 1999 (File No. 1-7221)).
5.1 Opinion of Donald F. McLellan, Esq., Senior Transactions
Counsel, Motorola Corporate Law Department, as to the
legality of the shares being issued.
8.1 Opinion of KPMG LLP regarding the federal income tax
consequences of the Merger.*
8.2 Opinion of Simpson Thacher & Bartlett regarding the
federal income tax consequences of the Merger.*
23.1 Consent of KPMG LLP (Registrant).
</TABLE>
* To be filed by a post-effective amendment upon completion of the merger.
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<TABLE>
<C> <S> <C>
23.2 Consent of Deloitte & Touche LLP (General Instrument and
Next Level Communications).
23.3 Consent of KPMG LLP (Hits Access and Control Division).
23.4 Consent of Donald F. McLellan, Senior Transactions
Counsel, Motorola Corporate Law Department (included in
Exhibit No. 5.1).
23.5 Consent of KPMG LLP (included in Exhibit No. 8.1).
23.6 Consent of Simpson Thacher & Bartlett (included in Exhibit
No. 8.2).
24.1 Power of Attorney (included on page II-5 of this
registration statement).
99.1 Form of Proxy Card of General Instrument.
99.2 Voting Agreement, dated as of September 14, 1999, from
Liberty Media Corporation to the registrant and General
Instrument (incorporated by reference to Exhibit 99.1 to
the registrant's Current Report on Form 8-K dated
September 16, 1999 (File No. 1-7221)).
99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
99.4 Consent of CIBC World Markets Corp.
</TABLE>
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change in such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
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<PAGE>
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(e) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of Section l0(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized, in Schaumburg, Illinois, on October
8, 1999.
Motorola, Inc.
/s/ Christopher B. Galvin
By: _________________________________
Christopher B. Galvin
Chairman of the Board and
Chief Executive Officer
Each of the undersigned hereby constitutes and appoints Christopher B.
Galvin, Robert L. Growney, Carl F. Koenemann and Anthony M. Knapp, and each of
them, as attorneys for him and in his name, place and stead, and in any and all
capacities, to execute and file any amendments, supplements or statements with
respect thereto, hereby giving and granting to said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
whatsoever requisite and necessary to be done in and about the premises, as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys, or any of them, or their or his substitute or substitutes, may or
shall lawfully do, or cause to be done, by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Christopher B. Galvin Chairman of the Board and October 8, 1999
____________________________________ Chief Executive Officer
Christopher B. Galvin (Principal Executive
Officer)
/s/ Carl F. Koenemann Executive Vice President and October 8, 1999
____________________________________ Chief Financial Officer
Carl F. Koenemann (Principal Financial
Officer)
/s/ Anthony M. Knapp Senior Vice President and October 8, 1999
____________________________________ Controller (Principal
Anthony M. Knapp Accounting Officer)
/s/ Ronnie C. Chan Director October 8, 1999
____________________________________
Ronnie C. Chan
/s/ H. Laurance Fuller Director October 8, 1999
____________________________________
H. Laurance Fuller
/s/ Robert W. Galvin Director October 8, 1999
____________________________________
Robert W. Galvin
/s/ Robert L. Growney Director October 8, 1999
____________________________________
Robert L. Growney
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anne P. Jones Director October 8, 1999
____________________________________
Anne P. Jones
/s/ Donald R. Jones Director October 8, 1999
____________________________________
Donald R. Jones
Director October , 1999
____________________________________
Judy C. Lewent
/s/ Dr. Walter E. Massey Director October 8, 1999
____________________________________
Dr. Walter E. Massey
/s/ Nicholas Negroponte Director October 8, 1999
____________________________________
Nicholas Negroponte
/s/ John E. Pepper, Jr. Director October 8, 1999
____________________________________
John E. Pepper, Jr.
/s/ Samuel C. Scott III Director October 8, 1999
____________________________________
Samuel C. Scott III
/s/ Gary L. Tooker Director October 8, 1999
____________________________________
Gary L. Tooker
/s/ B. Kenneth West Director October 8, 1999
____________________________________
B. Kenneth West
/s/ Dr. John A. White Director October 8, 1999
____________________________________
Dr. John A. White
</TABLE>
II-6
<PAGE>
Exhibit 5.1
October 8, 1999
Motorola, Inc.
1303 E. Algonquin Road
Schaumburg, IL 60196
Ladies and Gentlemen:
I refer to the Registration Statement on Form S-4 (the "Registration
Statement") of Motorola, Inc. (the "Company") filed on October 8, 1999 with the
Securities and Exchange Commission under the Securities Act of 1993, as amended
(the "Securities Act"). The Registration Statement relates to up to 122,045,481
shares of the Company's Common Stock, $3 par value (including the associated
preferred stock rights, the "Shares"), which are to be issued in connection
with the merger of General Instrument Corporation ("General Instrument") with
Lucerne Acquisition Corp., a wholly-owned subsidiary of the Company, pursuant
to the Agreement and Plan of Merger dated as of September 14, 1999, as amended,
by and among General Instrument, the Company and Lucerne Acquisition Corp. (the
"Merger Agreement").
I have examined and am familiar with (i) the Company's Restated Certificate
of Incorporation, as amended, (ii) its By-Laws, as amended, and (iii) the
corporate proceedings relating to the Registration Statement. Upon the basis of
the foregoing, and having satisfied myself as to such other matters of law and
fact as I consider relevant for the purposes of this opinion, I advise you
that, in my opinion, upon issuance of the Shares in accordance with the Merger
Agreement, the Shares will have been validly and legally issued and will be
fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal and
Tax Matters." In giving this consent, I do not admit that I am within the
category of persons whose consent is required by Section 7 of the Securities
Act.
Very truly yours,
/s/ Donald F. McLellan, Esq.
Donald F. McLellan, Esq.
Senior Transactions Counsel
Motorola, Inc.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Motorola Inc.:
We consent to incorporation by reference in the registration statement on Form
S-4 of Motorola, Inc. of our reports dated January 13, 1999, except as to Note
8, which is as of March 1, 1999, relating to the consolidated balance sheets of
Motorola, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows and related financial statement schedule for each of the years in the
three-year period ended December 31, 1998, which reports appear in or are
incorporated by reference in the annual report on Form 10-K of Motorola, Inc.
for the year ended December 31, 1998, and to the reference to our firm under
the headings "Experts" and "Summary Selected Financial Information" in the
prospectus.
/s/ KMPG LLP
--------------
KPMG LLP
Chicago, Illinois
October 8, 1999
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
We consent to the incorporation by reference in this proxy
statement/prospectus of General Instrument Corporation and in the Registration
Statement on Form S-4 of Motorola, Inc., of which the proxy
statement/prospectus forms a part, of our reports dated February 9, 1999,
appearing on pages F-1, F-30 and F-32, in the Annual Report on Form 10-K of
General Instrument Corporation for the year ended December 31, 1998 and to the
references to us under the headings "Summary Selected Financial Information"
and "Experts" in the proxy statement/prospectus, which is part of this
Registration Statement.
/s/ DELOITTE & TOUCHE, LLP
Parsippany, New Jersey
October 7, 1999
<PAGE>
Exhibit 23.3
Consent of Independent Auditors
We consent to the incorporation by reference in the registration statement
on Form S-4 of Motorola, Inc. of our report dated March 26, 1999, relating to
the combined balance sheets of the Hits Access and Control Division (as defined
in Note 1 to the combined financial statements) as of December 31, 1997 and
1996, and the related combined statements of operations and parent's
investment, and cash flows for each of the years in the three-year period ended
December 31, 1997, which report appears in the Form 8-K of General Instrument
Corporation dated July 31, 1998, and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG LLP
--------------
KPMG LLP
Denver, Colorado
October 8, 1999
<PAGE>
EXHIBIT 99.2
[FORM]
GENERAL INSTRUMENT CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [ ], 1999
The undersigned hereby appoints Edward D. Breen and Robert A. Scott and
each or either of them his attorneys and agents, with full power of substitution
to vote as Proxy for the undersigned as herein stated at the Special Meeting of
Stockholders of General Instrument Corporation (the "Company") to be held at
[Location and Address] on [ ], 1999 at 10:00 a.m., local time, and at any
adjournment thereof, according to the number of votes the undersigned would be
entitled to vote if personally present, on the proposals set forth below and in
accordance with their discretion on any other matters that may properly come
before the meeting or any adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice and Proxy Statement, dated [ ], 1999. If
this proxy is returned without direction being given, this proxy will be voted
FOR Proposal One.
PLEASE MAKE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
2
The Board of Directors recommends that stockholders vote FOR Proposal One
FOR AGAINST ABSTAIN
PROPOSAL ONE: To approve and adopt the
merger and merger agreement
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[ ]
Please sign as your name appears. If
acting as attorney, executor,
administrator, trustee guardian, etc.,
you should so indicate when signing. If
a corporation, please sign the full
corporation name by President or other
duly authorized officer. If a
partnership, please sign in full
partnership name by authorized person.
If shares are held jointly, both parties
must sign and date.
<TABLE>
<S> <C> <S> <C>
Signature(s): Date: Signature(s): Date:
__________ __________, 1999 __________ _________, 1999
</TABLE>
<PAGE>
Exhibit 99.3
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
We hereby consent to the inclusion of our opinion letter dated September 14,
1999 to the Board of Directors of General Instrument Corporation ("General
Instrument") as Appendix B to the proxy statement/prospectus relating to the
proposed merger of General Instrument and Motorola, Inc. and to the references
thereto in such proxy statement/prospectus under the captions "SUMMARY--
Opinions of General Instrument's Financial Advisors" and "THE MERGER--Opinions
of Financial Advisors to General Instrument." In giving this consent, we do not
admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933 and the rules and regulations promulgated thereunder.
/s/ Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:___________________________________________________
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
New York, New York
October 8, 1999
1
<PAGE>
Exhibit 99.4
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
The Board of Directors
General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Members of the Board:
CIBC World Markets Corp. ("CIBC") hereby consents to the inclusion of the
opinion of CIBC dated September 14, 1999 (the "Opinion") as Appendix C to, and
to the references thereto under the captions "SUMMARY--Opinions of General
Instrument's Financial Advisors" and "THE MERGER--Opinions of Financial
Advisors to General Instrument" in the proxy statement/prospectus relating to
the proposed merger of General Instrument Corporation ("General Instrument")
and Motorola, Inc. ("Motorola"), it being expressly understood and acknowledged
by General Instrument that such Opinion has been rendered for the benefit of
the Board of Directors of General Instrument and is not intended to, and may
not, be relied upon by Motorola or its affiliates.
/s/ CIBC World Markets Corp.
By: _________________________________
CIBC WORLD MARKETS CORP.
New York, New York
October 8, 1999
