-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U2ULouCIF/O/buSuRjT8Jj2UFRTooRM+u1Or9shCf3cAqlfR5tJwd4YZGUJN1mzZ v7LUHR/bz3/inNB5uzPylg== 0000912057-97-027988.txt : 19970815 0000912057-97-027988.hdr.sgml : 19970815 ACCESSION NUMBER: 0000912057-97-027988 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEXTLEVEL SYSTEMS INC CENTRAL INDEX KEY: 0001035881 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 364134221 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12925 FILM NUMBER: 97662546 BUSINESS ADDRESS: STREET 1: 8770 WEST BRYN MAWR AVE CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 7136951000 MAIL ADDRESS: STREET 1: 8770 WEST BRYN MAWR AVENUE CITY: CHICAGO STATE: IL ZIP: 60631 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ------------ to ------------ Commission file number 001-12925
NEXTLEVEL SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-4134221 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
8770 WEST BRYN MAWR AVENUE, CHICAGO, ILLINOIS 60631 (Address of principal executive offices) (Zip Code) (773) 695-1000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / / No /X/ * * Registrant became subject to the filing requirements on June 13, 1997. ------------------------ As of July 31, 1997 there were 147,314,624 shares of Common Stock outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I FINANCIAL INFORMATION NEXTLEVEL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
(UNAUDITED) JUNE 30, DECEMBER 31, 1997 1996 ------------ ------------ ASSETS Current Assets: Short-term investment................................................................ $ 30,306 $ -- Accounts receivable, less allowance for doubtful accounts of $13,556 and $12,910, respectively....................................................................... 352,311 392,984 Inventories.......................................................................... 282,629 263,829 Prepaid expenses and other current assets............................................ 21,878 17,657 Deferred income taxes................................................................ 68,856 81,226 ------------ ------------ Total current assets........................................................... 755,980 755,696 Property, plant and equipment, net................................................... 255,234 251,748 Intangibles, less accumulated amortization of $81,075 and $76,077, respectively...... 87,804 92,802 Excess of cost over fair value of net assets acquired, less accumulated amortization of $100,670 and $93,552, respectively.............................................. 471,665 478,783 Investments and other assets......................................................... 37,290 18,208 Deferred income taxes................................................................ 46,154 32,499 ------------ ------------ TOTAL ASSETS......................................................................... $ 1,654,127 $1,629,736 ------------ ------------ ------------ ------------ LIABILITIES AND DIVISIONAL NET EQUITY Current Liabilities: Accounts payable..................................................................... $ 179,826 $ 201,382 Accrued interest payable............................................................. 10,248 4,274 Accrued liabilities.................................................................. 166,590 168,508 ------------ ------------ Total current liabilities...................................................... 356,664 374,164 Deferred income taxes................................................................ 7,372 6,353 NLC litigation liability............................................................. 138,000 139,100 Other non-current liabilities........................................................ 67,639 58,945 ------------ ------------ Total liabilities.............................................................. 569,675 578,562 ------------ ------------ Commitments and contingencies Divisional net equity................................................................ 1,084,452 1,051,174 ------------ ------------ TOTAL LIABILITIES AND DIVISIONAL NET EQUITY.......................................... $ 1,654,127 $1,629,736 ------------ ------------ ------------ ------------
See notes to consolidated financial statements. 2 NEXTLEVEL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED--IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ----------------------- 1997 1996 1997 1996 ---------- ----------- ---------- ----------- NET SALES...................................................... $ 450,403 $ 433,173 $ 858,431 $ 820,121 ---------- ----------- ---------- ----------- OPERATING COSTS AND EXPENSES Cost of sales................................................ 332,785 322,357 627,299 609,171 Selling, general and administrative.......................... 51,890 40,200 94,644 74,307 NLC litigation costs......................................... -- 141,000 -- 141,000 Research and development..................................... 49,630 51,328 100,675 97,320 Amortization of excess of cost over fair value of net assets acquired................................................... 3,560 3,485 7,118 7,001 ---------- ----------- ---------- ----------- Total operating costs and expenses....................... 437,865 558,370 829,736 928,799 ---------- ----------- ---------- ----------- OPERATING INCOME (LOSS)........................................ 12,538 (125,197) 28,695 (108,678) Other expense, net............................................. (1,324) (413) (1,853) (851) Interest expense, net.......................................... (6,420) (6,742) (13,511) (13,400) ---------- ----------- ---------- ----------- INCOME (LOSS) BEFORE INCOME TAXES.............................. 4,794 (132,352) 13,331 (122,929) (Provision) Benefit for income taxes........................... (4,388) 46,223 (7,965) 42,643 ---------- ----------- ---------- ----------- NET INCOME (LOSS).............................................. $ 406 $ (86,129) $ 5,366 $ (80,286) ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
See notes to consolidated financial statements. 3 NEXTLEVEL SYSTEMS, INC. CONSOLIDATED STATEMENT OF DIVISIONAL NET EQUITY (UNAUDITED--IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 1997 ----------------- Balance, January 1, 1997....................................................................... $ 1,051,174 Net income..................................................................................... 5,366 Transfers to General Instrument................................................................ (8,990) Other transactions with General Instrument..................................................... 18,415 Unrealized gain on investment, net of income taxes of $11,819.................................. 18,487 ----------------- Balance, June 30, 1997......................................................................... $ 1,084,452 ----------------- -----------------
See notes to consolidated financial statements. 4 NEXTLEVEL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED--IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------- 1997 1996 --------- ---------- Operating Activities: Net income (loss)........................................................................... $ 5,366 $ (80,286) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization............................................................. 45,660 38,186 NLC litigation costs, net................................................................. -- 91,650 Changes in assets and liabilities: Accounts receivable..................................................................... 49,560 (49,606) Inventories............................................................................. (18,800) (99,330) Prepaid expenses and other current assets............................................... 779 (4,595) Deferred income taxes................................................................... 4,620 9,938 Accounts payable, income taxes payable and other accrued liabilities.................... (21,806) 40,044 Other non-current liabilities........................................................... 3,041 1,799 Other..................................................................................... (2,105) (3,341) --------- ---------- Net cash provided by (used in) operating activities......................................... 66,315 (55,541) --------- ---------- Investing Activities: Additions to property, plant and equipment................................................ (36,547) (67,492) Investments in other assets............................................................... (20,778) (11,671) --------- ---------- Net cash used in investing activities....................................................... (57,325) (79,163) --------- ---------- Financing Activities: Transfers (to) from General Instrument.................................................... (8,990) 134,704 --------- ---------- Net cash (used in) provided by financing activities......................................... (8,990) 134,704 --------- ---------- Change in cash and cash equivalents......................................................... -- -- Cash and cash equivalents, beginning of period.............................................. -- -- --------- ---------- Cash and cash equivalents, end of period.................................................... $ -- $ -- --------- ---------- --------- ----------
See notes to consolidated financial statements. 5 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 1. COMPANY BACKGROUND NextLevel Systems, Inc. ("NextLevel Systems" or the "Company"), formerly the Communications Business of General Instrument Corporation ("General Instrument"), was incorporated in Delaware in January 1997 and is a leading worldwide supplier of systems and components for high-performance networks, delivering video, voice and Internet/data services to the cable, telephony and satellite markets. NextLevel Systems' Broadband Networks Group is the world leader in digital and analog set-top systems for wired and wireless cable television networks, as well as hybrid fiber/coaxial network transmission systems used by cable television operators. NextLevel Systems' Satellite Data Networks Group is a leading provider of digital satellite systems for programmers, direct-to-home satellite network providers and private networks for business communications. Through its Next Level Communications business, NextLevel Systems will provide telephone network solutions through its NLevel(3) Switched Digital Services system. General Instrument (i) transferred all the assets and liabilities relating to the manufacture and sale of broadband communications products used in the cable television, satellite, and telecommunications industries to NextLevel Systems (then a wholly-owned subsidiary of General Instrument) and all the assets and liabilities relating to the manufacture and sale of coaxial, fiber optic and other electric cable used in the cable television, satellite and other industries to its wholly-owned subsidiary CommScope, Inc. ("CommScope") and (ii) distributed all of its outstanding shares of capital stock of each of NextLevel Systems and CommScope to its stockholders on a pro rata basis as a dividend in a transaction that was consummated on July 28, 1997. Approximately 147.3 million shares of NextLevel Systems Common Stock, based on an exchange ratio of one for one, were distributed to General Instrument's stockholders of record on July 25, 1997 (the "NextLevel Distribution"). On July 28, 1997, approximately 49.1 million shares of CommScope Common Stock, based on an exchange ratio of one for three, were distributed to NextLevel Systems' stockholders of record on that date (the "CommScope Distribution" and, together with the NextLevel Distribution, the "Distributions"). On July 28, 1997, NextLevel Systems and CommScope began operating as independent entities with publicly traded common stock, and General Instrument retained no ownership interest in either NextLevel Systems or CommScope. Additionally, immediately following the NextLevel Distribution, General Instrument was renamed General Semiconductor, Inc. ("General Semiconductor") and effected a one for four reverse stock split. For the purpose of governing certain of the ongoing relationships among NextLevel Systems, CommScope and General Semiconductor after the Distributions and to provide mechanisms for an orderly transition, NextLevel Systems, CommScope and General Semiconductor have entered into various agreements. NextLevel Systems, CommScope and General Semiconductor believe that the agreements are fair to each of the parties and are comparable to those which would have been reached in arm's length negotiations with unaffiliated parties. In connection with the Distributions, NextLevel Systems recorded a charge of $16 million to cost of sales during the three months ended June 30, 1997 ($18 million for the six months ended June 30, 1997) for employee costs related to dividing General Instrument's Taiwan operations between NextLevel Systems and General Semiconductor. Additionally, NextLevel Systems recorded a charge of $6 million to selling, general and administrative expense for costs, primarily legal and other professional fees, incurred during the three months ended June 30, 1997. 6 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 2. BASIS OF PRESENTATION The accompanying interim consolidated financial statements reflect the results of operations, financial position, changes in divisional net equity and cash flows of NextLevel Systems that were transferred from General Instrument in the Distributions (See Note 1). The consolidated balance sheet as of June 30, 1997, the consolidated statements of operations for the three and six months ended June 30, 1997 and 1996, the consolidated statements of cash flows for the six months ended June 30, 1997 and 1996 and the consolidated statement of divisional net equity for the six months ended June 30, 1997 of NextLevel Systems are unaudited and reflect all adjustments of a normal recurring nature (except for those charges disclosed in Notes 1 and 5) which are, in the opinion of management, necessary for a fair presentation of the interim period financial statements. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The consolidated financial statements include an allocation of certain assets, liabilities and general corporate expenses from General Instrument. In the opinion of management, general corporate administrative expenses have been allocated to NextLevel Systems on a reasonable and consistent basis using management's estimate of services provided to NextLevel Systems by General Instrument. However, such allocations are not necessarily indicative of the level of expenses which would have been incurred had NextLevel Systems been operating as a separate stand-alone entity during the periods presented. Prior to the Distributions, NextLevel Systems participated in General Instrument's cash management program, and the accompanying financial statements include an allocation of net interest expense from General Instrument. To the extent NextLevel Systems generated positive cash, such amounts were remitted to General Instrument. To the extent NextLevel Systems experienced temporary cash needs for working capital purposes or capital expenditures, such funds were historically provided by General Instrument. The net effect of these transactions is reflected in divisional net equity. Net interest expense has been allocated based upon NextLevel Systems' net assets as a percentage of the total net assets of General Instrument. The allocations were made consistently in each period, and management believes the allocations are reasonable. However, these interest costs would not necessarily be indicative of what the actual costs would have been had NextLevel Systems operated as a separate, stand-alone entity. Subsequent to the Distributions, NextLevel Systems is responsible for the cash management functions using its own resources or purchased services and will be responsible for the costs associated with operating a public company. NextLevel Systems' financial results include the costs incurred by General Instrument pension and postretirement benefit plans for employees and retirees of NextLevel Systems. The provision for income taxes for the three and six months ended June 30, 1997 and 1996 are based on NextLevel Systems' expected annual effective rate including the tax effects of restructuring charges, calculated assuming NextLevel Systems had filed separate tax returns under its existing structure. The financial information included herein does not necessarily reflect the consolidated results of operations, financial position, changes in divisional net equity and cash flows of NextLevel Systems in the future or on a historical basis had NextLevel Systems been a separate stand-alone entity for the periods presented. There were no adjustments of a non-recurring nature recorded during the three and six months ended June 30, 1997 and 1996 except for the charges discussed in Notes 1 and 5. These interim consolidated financial statements should be read in conjunction with the Company's December 31, 1996 audited combined financial statements contained in the Company's Prospectus, dated June 13, 1997. 7 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 2. BASIS OF PRESENTATION (CONTINUED) Certain reclassifications have been made to the comparative prior period financial statements to conform to the current period presentation. 3. PRO FORMA FINANCIAL INFORMATION The accompanying unaudited pro forma consolidated statements of operations present the consolidated results of NextLevel Systems and were prepared to give effect to the Distributions as if they had occurred on January 1, 1996. The unaudited pro forma statements of operations set forth below do not purport to represent what NextLevel Systems' operations actually would have been had the Distributions occurred on January 1, 1996 or to project NextLevel Systems' operating results for any future period. The unaudited pro forma information has been prepared utilizing the historical consolidated statements of operations of NextLevel Systems which were adjusted to reflect: (i) an additional $1.8 million of selling, general and administrative ("SG&A") costs for the three months ended June 30, 1997 and 1996 and an additional $3.6 million and $3.7 million of SG&A costs for the six months ended June 30, 1997 and 1996, respectively, to eliminate the allocation of corporate expenses to CommScope and General Semiconductor, as such costs subsequent to the Distributions will no longer be allocable and are expected to be incurred by NextLevel Systems in the future; and (ii) a net debt level of $100 million at the beginning of each period presented.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ------------------------ 1997 1996 1997 1996 ---------- ----------- ----------- ----------- Net sales........................................................... $ 450,403 $ 433,173 $ 858,431 $ 820,121 ---------- ----------- ----------- ----------- Operating costs and expenses Costs of sales.................................................... 332,785 322,357 627,299 609,171 Selling, general and administrative............................... 53,690 42,000 98,244 78,007 NLC litigation costs.............................................. -- 141,000 -- 141,000 Research and development.......................................... 49,630 51,328 100,675 97,320 Amortization of excess of cost over fair value of net assets acquired........................................................ 3,560 3,485 7,118 7,001 ---------- ----------- ----------- ----------- Total operating costs and expenses.................................. 439,665 560,170 833,336 932,499 ---------- ----------- ----------- ----------- Operating income (loss)............................................. 10,738 (126,997) 25,095 (112,378) Other expense, net.................................................. (1,324) (413) (1,853) (851) Interest expense.................................................... (1,900) (1,900) (3,800) (3,800) ---------- ----------- ----------- ----------- Income (loss) before income taxes................................... 7,514 (129,310) 19,442 (117,029) Income tax (provision) benefit...................................... (5,488) 45,223 (10,387) 40,556 ---------- ----------- ----------- ----------- Net income (loss)................................................... $ 2,026 $ (84,087) $ 9,055 $ (76,473) ---------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- Pro forma shares outstanding (*).................................... 148,700 148,700 148,700 148,700 Pro forma earnings (loss) per share (*)............................. $ 0.01 $ (0.57) $ 0.06 $ (0.51) ---------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
- ------------------------ (*) Pro forma earnings (loss) per share was calculated by dividing pro forma net income (loss) by the sum of 147.3 million NextLevel System common shares issued, and 1.4 million common equivalent shares existing, on the date of the Distributions. 8 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 3. PRO FORMA FINANCIAL INFORMATION (CONTINUED) Stockholders' equity on a pro forma and historical basis at June 30, 1997 was approximately $1.1 billion. 4. INVENTORIES Inventories consist of:
JUNE 30, 1997 DECEMBER 31, 1996 ------------- ----------------- Raw materials............................................... $ 122,874 $ 104,984 Work in process............................................. 28,009 21,344 Finished goods.............................................. 131,746 137,501 ------------- -------- $ 282,629 $ 263,829 ------------- -------- ------------- --------
5. LITIGATION In April 1995, prior to the Company's acquisition of Next Level Communications ("NLC") in September 1995, DSC Communications Corporation and DSC Technologies Corporation (collectively, "DSC") brought suit against NLC and the founders of NLC ("NLC Litigation"). On March 28, 1996, a jury verdict was reached in the case which stated that the founders of NLC breached certain employee agreements with DSC, failed to disclose and diverted a corporate opportunity of DSC, misappropriated DSC trade secrets and conspired to take certain of the foregoing actions, and that NLC used or benefited from the diversion of corporate opportunity and misappropriation of trade secrets. In June 1996, a final judgment against NLC and the individual defendants was entered in favor of DSC, in a total amount of $137 million. However, the court denied DSC's request for entry of permanent injunctive relief. In June 1996, a pre-tax charge to earnings of $141 million was recorded, reflecting the judgment and costs of litigation. Both sides appealed to the U.S. Court of Appeals for the Fifth Circuit. Enforcement of the judgment was stayed pending the determination of the appeal. On February 28, 1997, the U.S. Court of Appeals for the Fifth Circuit confirmed the trial court's denial of DSC's request for injunctive relief, reversed the district court judgment for diversion of a corporate opportunity and remanded the case to the trial court for the entry of judgment on the misappropriation of trade secrets claim, which the Company expects to result in a damage award of not more than $138 million plus accrued interest. On June 25, 1997, the Court of Appeals denied both parties' motions for rehearing, and the trial court has not entered a revised final judgment. An action entitled BROADBAND TECHNOLOGIES, INC. VS. GENERAL INSTRUMENT CORP. was brought in March 1997 in the United States District Court for the Eastern District of North Carolina. The complaint alleges that the Company infringes BroadBand Technologies, Inc.'s U.S. Patent No. 5,457,560 (the "560 Patent"), covering an electronic communications system which delivers television signals, and seeks monetary damages and injunctive relief. On June 13, 1997, General Instrument's motion to dismiss the complaint for lack of personal jurisdiction was denied. In March 1997, NLC commenced an action against BroadBand Technologies, Inc. in the United States District Court for the Northern District of California for a declaratory judgment that BroadBand Technologies, Inc. 560 Patent is invalid and unenforceable; for patent infringement; and for violation of the antitrust laws of the United States. In the patent infringement claim, NLC charges that BroadBand Technologies, Inc. infringes two patents licensed to NLC relating to video compression and video signal 9 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 5. LITIGATION (CONTINUED) processing. BroadBand Technologies, Inc. has answered the complaint and does not contest jurisdiction, but has filed a motion to have the case transferred to North Carolina. During October 1995, General Instrument and certain of its officers and directors were named as defendants in purported class action complaints in which the plaintiffs alleged that during various periods, generally extending from March 21, 1995 through October 18, 1995, General Instrument and certain officers and directors violated certain federal securities laws by making false and misleading statements about General Instrument's financial prospects, and as a result, the plaintiffs allege that the market value of General Instrument's stock declined, thereby causing unspecified monetary damages to the plaintiffs. General Instrument has filed motions to dismiss these complaints. In February 1996, General Instrument and NLC were named as defendants in a complaint in which the plaintiffs, who were some of the holders of preferred stock of NLC, allege, among other things, that the defendants violated federal securities laws by making misrepresentations and omissions and breached fiduciary duties to NLC in connection with the acquisition by General Instrument of NLC in September 1995. Plaintiffs seek, among other things, unspecified compensatory and punitive damages and attorney's fees and costs. General Instrument has filed a motion to dismiss the complaint. In connection with the Distributions, NextLevel Systems has agreed to indemnify General Semiconductor (formerly General Instrument) with respect to its obligations, if any, related to these matters. While the ultimate outcome of the matters described above cannot be determined, management does not believe that the final disposition of these matters beyond the amounts previously provided for in the financial statements will have a material adverse effect on the Company's financial statements. 6. EARNINGS (LOSS) PER SHARE Historical earnings (loss) per share has been omitted since the Company was not a separate company with a capital structure of its own for any period presented. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share ("SFAS No. 128"), which supersedes Accounting Principles Board Opinion No. 15, Earnings per Share, and replaces primary and fully diluted earnings per share with basic and diluted earnings per share, respectively. SFAS No. 128 will be adopted by the Company on December 31, 1997. 7. SUBSEQUENT EVENT In July 1997, NextLevel Systems entered into a bank credit agreement (the "Credit Agreement") which provides a $600 million unsecured revolving credit facility and matures on December 31, 2002. The Credit Agreement permits NextLevel Systems to choose between two interest rate options: an Adjusted Base Rate (as defined in the Credit Agreement), which is based on the highest of (i) the rate of interest publicly announced by The Chase Manhattan Bank as its prime rate, (ii) 1% per annum above the secondary market rate for three-month certificates of deposit and (iii) the federal funds effective rate from time to time plus 0.5%, and a Eurodollar rate (LIBOR) plus a margin which varies based on certain performance criteria. NextLevel Systems is also able to set interest rates through a competitive bid procedure. In addition, the Credit Agreement requires NextLevel Systems to pay a facility fee on the total loan commitment. The Credit Agreement contains financial and operating covenants, including limitations on guarantee obligations, liens and sale of assets, and requires the maintenance of certain financial ratios. None of the restrictions contained in the Credit Agreement is expected to have a significant effect on the 10 NEXTLEVEL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, UNLESS OTHERWISE NOTED) 7. SUBSEQUENT EVENT (CONTINUED) Company's ability to operate. As of August 14, 1997, the Company had no amounts outstanding under the Credit Agreement. 11 NEXTLEVEL SYSTEMS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET SALES Net sales for the three months ended June 30, 1997 ("Second Quarter 1997") were $450 million compared to $433 million for the three months ended June 30, 1996 ("Second Quarter 1996"), an increase of $17 million, or 4%. Net sales for the six months ended June 30, 1997 were $858 million compared to $820 million for the six months ended June 30, 1996, an increase of $38 million, or 5%. The increase in net sales for the three and six month periods reflect higher sales in the Broadband Networks Group, partially offset by lower sales in the Satellite Data Networks Group. Broadband Networks sales (consisting of digital and analog cable and wireless television systems and network transmission systems) of $319 million and $618 million for Second Quarter 1997 and for the six months ended June 30, 1997, respectively, increased $26 million, or 9%, and $83 million, or 15%, respectively, from the comparable 1996 periods primarily as a result of increased U.S. sales volume of digital cable terminals and headends and CFT-2200 advanced analog set-top terminals, partially offset by lower sales of analog cable and transmission network systems. These sales reflect the continued commitment of domestic cable television operators to deploy state-of-the-art addressable systems and enhanced services and the continued deployment of new cable television systems in international markets. International Broadband Networks sales increased 8% and 21% for Second Quarter 1997 and the six months ended June 30, 1997, respectively, over the comparable 1996 periods and represented approximately 30% of worldwide Broadband Networks sales for all periods. Analog and digital products of the Broadband Networks Group represented 85% and 15%, respectively, of worldwide Broadband Networks sales for both Second Quarter 1997 and the six months ended June 30, 1997. For Second Quarter 1996 and the six months ended June 30, 1996, all worldwide Broadband Networks sales related to analog products. Satellite Data Networks sales of $131 million and $240 million for Second Quarter 1997 and the six months ended June 30, 1997, respectively, decreased $9 million, or 6%, and $44 million, or 16%, respectively, from the comparable 1996 periods primarily due to lower sales volumes of digital satellite receivers to PRIMESTAR Partners, partially offset by higher sales volumes of DigiCipher-Registered Trademark- II/MPEG-2 digital satellite systems and digital video broadcast ("DVB") compliant Magnitude-Registered Trademark- satellite encoders. International Satellite Data Networks sales represented 25% and 21%, respectively, of worldwide Satellite Data Networks sales for Second Quarter 1997 and the six months ended June 30, 1997, compared to 13% and 9% for the comparable 1996 periods. Analog and digital products represented approximately 7% and 93%, respectively, of worldwide Satellite Data Networks sales for both Second Quarter 1997 and the six months ended June 30, 1997, compared to 9% and 91%, respectively, for the 1996 periods. In late 1996, TCI announced that it would significantly curtail capital spending on its cable networks, although TCI informed General Instrument that it planned to continue spending on its digital cable networks. TCI represented approximately 23% of the revenues of NextLevel Systems for the year ended December 31, 1996. NextLevel Systems does not expect this announcement to have a significant negative impact on its 1997 financial statements, as NextLevel Systems expects sales of digital products to TCI to increase significantly from 1996, although no assurance can be given to the amount of such sales. GROSS PROFIT (NET SALES LESS COST OF SALES) Gross profit of $118 million and $231 million for Second Quarter 1997 and the six months ended June 30, 1997, respectively, increased $7 million, or 6%, and $20 million, or 10%, respectively, from the comparable 1996 periods. Gross profit was 26% and 27% of sales for Second Quarter 1997 and the six months ended June 30, 1997, respectively, compared to 26% for the 1996 periods. Gross profit for Second Quarter 1997 and the six months ended June 30, 1997 included $16 million and $18 million, respectively, of 12 charges for employee costs incurred related to dividing General Instrument's Taiwan operations between NextLevel Systems and General Semiconductor (see Note 1 to the consolidated financial statements). Excluding these restructuring charges, the gross profit margin for Second Quarter 1997 and the six months ended June 30, 1997 would have increased to 30% and 29%, respectively. The higher gross profit and gross profit margin resulted from higher production volumes noted above and ongoing cost reduction programs on advanced analog and digital products. SELLING, GENERAL AND ADMINISTRATIVE Selling general & administrative ("SG&A") expense was $52 million and $95 million for Second Quarter 1997 and the six months ended June 30, 1997, respectively, compared to $40 million and $74 million for the comparable 1996 periods. SG&A increased as a percentage of sales to 12% and 11% for Second Quarter 1997 and the six months ended June 30, 1997, respectively, from 9% for the 1996 periods. SG&A spending for Second Quarter 1997 and the six months ended June 30, 1997 was greater than for the comparable 1996 periods as a result of new growth opportunities from businesses acquired, including the marketing and field support of NLC's NLevel(3) telephony system and Magnitude's DVB-compliant digital satellite products, and increased sales force, field support and marketing activities to take advantage of increased growth opportunities in international cable and satellite television and worldwide telecommunications markets. Additionally, a $6 million charge was recorded for costs, primarily legal and other professional fees, which were incurred in Second Quarter 1997. Pro forma SG&A expense for both Second Quarter 1997 and 1996 reflect an additional $2 million, and an additional $4 million for both the six months ended June 30, 1997 and 1996, of costs to eliminate the allocation of corporate expenses to CommScope and General Semiconductor, as such costs subsequent to the Distributions will no longer be allocable and are expected to be incurred by NextLevel Systems in the future. Excluding the spin-off related charges of $6 million and including the pro forma adjustments, SG&A as a percentage of sales would have been 11% for the 1997 periods and 10% for the 1996 periods. NLC LITIGATION COSTS In June 1996, NextLevel Systems recorded a pre-tax charge of $141 million reflecting the judgment and costs of litigation in the case involving NLC, its founders and DSC Communications Corporation (the "NLC Litigation") subsequent to the entry of a final judgment by the United States District Court for the Eastern District of Texas. See Note 5 to the consolidated financial statements. RESEARCH AND DEVELOPMENT Research and development ("R&D") expense was $50 million for Second Quarter 1997 and $101 million for the six months ended June 30, 1997, compared to $51 million and $97 million for the comparable 1996 periods. R&D expense decreased as a percentage of sales to 11% in Second Quarter 1997 from 12% in Second Quarter 1996 and was 12% of sales for both the six months ended June 30, 1997 and 1996. The current level of spending reflects: the continued development of next-generation products, including high-speed data systems for cable and telephone networks, switched-digital access systems for fiber and twisted-pair networks, as well as the modification of existing products for international markets; the continued development of enhanced addressable analog terminals and advanced digital systems for cable and satellite television distribution; and product development and international expansion through strategic alliances. In addition, NextLevel Systems is focused on reducing costs and enhancing the features of its digital cable and satellite systems. INTEREST EXPENSE-NET Net interest expense represents an allocation of interest expense from General Instrument and was allocated based upon NextLevel Systems' net assets as a percentage of the total net assets of General 13 Instrument. Net interest expense allocated to NextLevel Systems was $6 million and $14 million for Second Quarter 1997 and the six months ended June 30, 1997, respectively, compared to $7 million and $13 million for the comparable 1996 periods. Pro forma interest expense for Second Quarter 1997 and 1996 and for the six months ended June 30, 1997 and 1996 reflect a net debt level of $100 million at the beginning of each period presented. INCOME TAXES Income taxes have been determined as if NextLevel Systems had filed separate tax returns under its existing structure for the periods presented. Accordingly, future tax rates could vary from the historical effective tax rates depending on NextLevel Systems' future legal structure and tax elections. NextLevel Systems recorded a provision for income taxes of $4 million and $8 million for Second Quarter 1997 and the six months ended June 30, 1997, respectively, and a benefit of $46 million and $43 million for the comparable 1996 periods. Excluding the charges related to the Distributions recorded in Second Quarter 1997 and the six months ended June 30, 1997 and the NLC charge recorded in Second Quarter 1996, the effective tax rates were approximately 39% for Second Quarter 1997 and the six months ended June 30, 1997 compared to 36% and 37%, respectively, for Second Quarter 1996 and the six months ended June 30, 1996. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations was $66 million for the six months ended June 30, 1997 compared to cash used in operations of $56 million for the six months ended June 30, 1996. Cash provided by operations in the first half of 1997 reflects net income adjusted for non-cash items and the collection of accounts receivable, partially offset by the payment of accounts payable and increased inventory levels to support business growth and the introduction of new products. Cash used in operations in the first half of 1996 reflects the net loss adjusted for non-cash items, more than offset by increased working capital requirements. At June 30, 1997, working capital was $399 million compared to $382 million at December 31, 1996. Based on current levels of order input and backlog, as well as significant sales agreements not yet reflected in order and backlog levels, NextLevel Systems believes that working capital levels are appropriate to support future operations. There can be no assurance, however, that future industry specific developments or general economic trends will not alter NextLevel Systems' working capital requirements. During the six months ended June 30, 1997 and 1996, NextLevel Systems invested $37 million and $67 million, respectively, in equipment and facilities. NextLevel Systems expects to continue to expand its capacity to meet increased current and anticipated future demands for analog and digital products, with capital expenditures for the year expected to approximate $130 million. NextLevel Systems' R&D expenditures were $101 million and $97 million for the six months ended June 30, 1997 and 1996, respectively, and are expected to approximate $210 million for the year ending December 31, 1997. NextLevel Systems management assesses its liquidity in terms of its overall ability to obtain cash to support its ongoing business levels and to fund its growth objectives. Through the date of the Distributions, NextLevel Systems participated in General Instrument's cash management program. To the extent NextLevel Systems generated positive cash, such amounts were remitted to General Instrument. To the extent NextLevel Systems experienced temporary cash needs for working capital purposes or capital expenditures, such funds were historically provided by General Instrument. In July 1997, NextLevel Systems entered into a bank credit agreement (the "Credit Agreement") which provides a $600 million unsecured revolving credit facility and matures on December 31, 2002. The Credit Agreement permits NextLevel Systems to choose between two interest rate options: an Adjusted 14 Base Rate (as defined in the Credit Agreement), which is based on the highest of (i) the rate of interest publicly announced by The Chase Manhattan Bank as its prime rate, (ii) 1% per annum above the secondary market rate for three-month certificates of deposit and (iii) the federal funds effective rate from time to time plus 0.5%, and a Eurodollar rate (LIBOR) plus a margin which varies based on certain performance criteria. NextLevel Systems is also able to set interest rates through a competitive bid procedure. In addition, the Credit Agreement requires NextLevel Systems to pay a facility fee on the total loan commitment. The Credit Agreement contains financial and operating covenants, including limitations on guarantee obligations, liens and sale of assets, and requires the maintenance of certain financial ratios. None of the restrictions contained in the Credit Agreement is expected to have a significant effect on the Company's ability to operate. As of August 14, 1997, the Company had no amounts outstanding under the Credit Agreement. In June 1996, a final judgment against NLC and the individual defendants was entered in the NLC Litigation which, in February 1997, was affirmed in part, reversed in part and remanded to the trial court by the U.S. Court of Appeals for the Fifth Circuit. NextLevel Systems expects the judgment on remand to result in a damage award of not more than $138 million plus accrued interest. NextLevel Systems has the ability and intent to pay this judgment utilizing borrowings under the Credit Agreement. NextLevel Systems' principal sources of liquidity both on a short-term and long-term basis are cash flows provided by operations and borrowings under the Credit Agreement. NextLevel Systems believes that, based upon its analysis of its consolidated financial position, its cash flow during the past 12 months and the expected results of operations in the future, operating cash flow and available funding under the Credit Agreement will be adequate to fund operations, research and development expenditures, capital expenditures, litigation expenditures and any debt service for the next 12 months. There can be no assurance, however, that future industry-specific developments or general economic trends will not adversely affect NextLevel Systems' operations or its ability to meet its cash requirements. 15 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS A securities class action is presently pending in the United States District Court for the Northern District of Illinois, Eastern Division, IN RE GENERAL INSTRUMENT CORPORATION SECURITIES LITIGATION. This action, which consolidates numerous class action complaints filed in various courts between October 10 and October 27, 1995, is brought by plaintiffs, on their own behalves and as representatives of a class of purchasers of General Instrument Common Stock during the period March 21, 1995 through October 18, 1995. The complaint alleges that General Instrument and certain of its officers and directors, as well as Forstmann Little & Co. and certain related entities violated the federal securities laws, namely, Sections 10(b) and 20(a) of the Exchange Act, by allegedly making false and misleading statements and failing to disclose material facts about General Instrument's planned shipments in 1995 of its CFT-2200 and DigiCipher II products. The plaintiffs have moved for class certification. General Instrument has filed a motion to dismiss the Consolidated Amended Class Action Complaint. Also pending in the same court, under the same name, is a derivative action brought on behalf of General Instrument. The derivative action alleges that the members of General Instrument's Board of Directors, several of its officers and Forstmann Little & Co. and related entities had breached their fiduciary duties by reason of the matter complained of in the class action and the defendants' alleged use of material non-public information to sell shares of General Instrument's stock for personal gain. General Instrument has filed a motion to dismiss the derivative complaint. An action entitled BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP. was brought in February 1996 by shareholders of NLC, which was merged into General Instrument in September 1995. The action was originally filed in the Northern District of California and was subsequently transferred to the Northern District of Illinois. The complaint alleges that the General Instrument Common Stock, which was received by the plaintiffs as a result of the merger, was overpriced because of the matters complained of in the class action and General Instrument's failure to disclose information concerning a significant reduction in its gross margins. General Instrument has filed a motion to dismiss the complaint. In April 1995, prior to General Instrument's acquisition of NLC in September 1995, DSC Communications Corporation and DSC Technologies Corporation (collectively, "DSC") brought suit against NLC and the founders of NLC. On March 28, 1996, a jury verdict was reached in the case which stated that the founders of NLC breached certain employee agreements with DSC, failed to disclose and diverted a corporate opportunity of DSC, misappropriated DSC trade secrets and conspired to take certain of the foregoing actions, and that NLC used or benefited from the diversion of corporate opportunity and misappropriation of trade secrets. In June 1996, a final judgment against NLC and the individual defendants was entered in favor of DSC, in a total amount of $137 million. However, the court denied DSC's request for entry of permanent injunctive relief. In June 1996, a pre-tax charge to earnings of $141 million was recorded, reflecting the judgment and costs of litigation. Both sides appealed to the U.S. Court of Appeals for the Fifth Circuit. Enforcement of the judgment was stayed pending the determination of the appeal. On February 28, 1997, the U.S. Court of Appeals for the Fifth Circuit confirmed the trial court's denial of DSC's request for injunctive relief, reversed the district court judgment for diversion of a corporate opportunity and remanded the case to the trial court for the entry of judgment on the misappropriation of trade secrets claim, which the Company expects to result in a damage award of not more than $138 million plus accrued interest. On June 25, 1997, the Court of Appeals denied both parties' motions for rehearing, and the trial court has not entered a revised final judgment. An action entitled BROADBAND TECHNOLOGIES, INC. VS. GENERAL INSTRUMENT CORP. was brought in March 1997 in the United States District Court for the Eastern District of North Carolina. The complaint alleges that the Company infringes BroadBand Technologies, Inc.'s U.S. Patent No. 5,457,560 (the "560 16 Patent"), covering an electronic communications system which delivers television signals, and seeks monetary damages and injunctive relief. On June 13, 1997, General Instrument's motion to dismiss the complaint for lack of personal jurisdiction was denied. In March 1997, NLC commenced an action against BroadBand Technologies, Inc. in the United States District Court for the Northern District of California for a declaratory judgment that BroadBand Technologies, Inc. 560 Patent is invalid and unenforceable; for patent infringement; and for violation of the antitrust laws of the United States. In the patent infringement claim, NLC charges that BroadBand Technologies, Inc. infringes two patents licensed to NLC relating to video compression and video signal processing. BroadBand Technologies, Inc. has answered the complaint and does not contest jurisdiction, but has filed a motion to have the case transferred to North Carolina. In connection with the Distributions, NextLevel Systems has agreed to indemnify General Semiconductor (formerly General Instrument) with respect to its obligations, if any, related to these matters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 10, 1997, the sole stockholder of the Company approved the following by written consent: 1. NextLevel Systems, Inc. 1997 Long-Term Incentive Plan 2. Amendment to the Certificate of Incorporation to increase the authorized capital of the Company. On July 25, 1997, the sole stockholder of the Company approved the following by written consent: 1. NextLevel Systems, Inc. 1997 Long-Term Incentive Plan, as amended 2. Amended and Restated Certificate of Incorporation to provide for a classified board of directors. 3. The merger of NextLevel Systems of Delaware, Inc. with and into the Company 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NO. DESCRIPTION - ------------- ----------------------------------------------------------------------------------------------------- 2 Agreement of Merger, dated as of July 25, 1997, between NextLevel Systems, Inc. and NextLevel Systems of Delaware, Inc. 3.1 Amended and Restated Certificate of Incorporation of NextLevel Systems, Inc. 3.2 Amended and Restated By-Laws of NextLevel Systems, Inc. 10.1 Employee Benefits Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and General Semiconductor, Inc. 10.2 Debt and Cash Allocation Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and General Semiconductor, Inc. 10.3 Insurance Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and General Semiconductor, Inc. 10.4 Tax Sharing Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and General Semiconductor, Inc. 10.5 Trademark License Agreement, dated as of July 25, 1997, among NextLevel Systems, Inc., CommScope, Inc. and General Semiconductor, Inc. 10.6 Transition Services Agreement, dated as of July 25, 1997, between NextLevel Systems, Inc. and General Semiconductor, Inc. 10.7 Transition Services Agreement, dated as of July 25, 1997, between NextLevel Systems, Inc. and CommScope, Inc. 10.8 Credit Agreement, dated as of July 23, 1997, among NextLevel Systems, Inc., Certain Banks, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank, Bank of America National Trust and Savings Association, BankBoston, N.A., The Bank of Nova Scotia, Bank of Tokyo-Mitsubishi Trust Company, Caisse Nationale de Credit Agricole, CIBC Inc., Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch, The Fuji Bank Limited and NationsBank, N.A. as Co-Agents. 27 Financial Data Schedule 99 Forward-Looking Information
(b) Report on Form 8-K No reports on Form 8-K were filed by the Registrant during the three months ended June 30, 1997. 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEXTLEVEL SYSTEMS, INC. /s/Paul J. Berzenski ---------------------------------------------------------------------- Paul J. Berzenski Vice President and Controller Signing both in his capacity as Vice President on behalf of the Registrant and as Chief Accounting Officer of the Registrant August 14, 1997 Date 19 EX-2 2 EXHIBIT 2 EXHIBIT 2 AGREEMENT OF MERGER AGREEMENT OF MERGER, dated as of July 25, 1997 (the "Agreement"), between NEXTLEVEL SYSTEMS, INC., a Delaware corporation ("NextLevel Systems"), and NEXTLEVEL SYSTEMS OF DELAWARE, INC., a Delaware corporation ("Systems Delaware"). Systems Delaware and NextLevel Systems are hereinafter sometimes collectively called the "Constituent Corporations." RECITALS WHEREAS, General Instrument Corporation of Delaware, Inc. is the sole stockholder of each of the Constituent Corporations; WHEREAS, the Board of Directors, and the sole stockholder, of each of the Constituent Corporations deems it advisable and to the welfare and advantage of such Constituent Corporation and its respective sole stockholder that the Constituent Corporations merge under and pursuant to Section 251 of the General Corporation Law of the State of Delaware (the "DGCL") into a single corporation, and that NextLevel Systems shall be the surviving corporation, and have approved this Agreement and the merger contemplated hereby (the "Merger"); WHEREAS, the registered office of NextLevel Systems in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company; and the registered office of Systems Delaware in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company. NOW, THEREFORE, the parties to this Agreement, in consideration of the mutual covenants, agreements and provisions hereinafter contained do hereby prescribe the terms and conditions of said merger and mode of carrying the same into effect as follows: ARTICLE I THE MERGER SECTION 1.01 The Merger. Upon the terms hereof, and in accordance with the relevant provisions of the DGCL, at the Effective Time (as defined in Section 1.02 hereof), Systems Delaware shall be merged with and into NextLevel Systems. Following the Merger, NextLevel Systems shall continue as the surviving corporation (the "Surviving Corporation") and shall continue its corporate existence and organization under the laws of the State of Delaware, and the separate existence of Systems Delaware shall thereupon cease. SECTION 1.02 Effective Time. The Merger shall be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger (the "Certificate of Merger") in accordance with the DGCL. The Merger shall become effective at the effective time specified in the Certificate of Merger (the time the Merger becomes effective being the "Effective Time"). SECTION 1.03 Certificate of Incorporation. At the Effective Time, the Certificate of Incorporation of NextLevel Systems, as in effect at the Effective Time, shall constitute and continue to be the Certificate of Incorporation of the Surviving Corporation until further amended or changed as provided therein or by law. SECTION 1.04 By-laws. At the Effective Time, the By-laws of NextLevel Systems, as in effect at the Effective Time, shall constitute and continue to be the By-laws of the Surviving Corporation until amended or changed as provided therein or by law. SECTION 1.05 Directors. The directors of NextLevel Systems at the Effective Time shall be and remain the directors of the Surviving Corporation, and each shall hold office until their respective successors are duly elected and qualified. SECTION 1.05 Officers. The officers of NextLevel Systems at the Effective Time shall be and remain the officers of the Surviving Corporation, and each shall hold office until their respective successors are duly elected and qualified. SECTION 1.07 Effect of the Merger. The Surviving Corporation shall succeed, without other transfer, to all the rights and property of Systems Delaware and shall be subject to all the debts and liabilities thereof in the same manner as if the Surviving Corporation had itself incurred them. All rights of creditors and all liens put on the property of each of the Constituent Corporations shall be preserved unimpaired. -2- SECTION 1.08 Confirmatory Instruments. If any time after the Effective Time the Surviving Corporation shall consider or be advised that any instruments of further assurance are desirable in order to evidence the vesting in it of the title of either of the Constituent Corporations to any of the property rights of the Constituent Corporations, the appropriate officers or directors of either of the Constituent Corporations, are hereby authorized to execute, acknowledge and deliver all such instruments of further assurance and to do all other acts or things, either in the name of Systems Delaware or in the name of NextLevel Systems, as may be requisite or desirable to carry out the provisions of this Agreement. ARTICLE II MANNER OF CONVERTING SHARES SECTION 2.01 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Systems Delaware or NextLevel Systems, each share of capital stock of Systems Delaware shall be converted into 14,731,462 shares of fully paid and non-assessable common stock, par value $.01 per share, of NextLevel Systems. The shares of capital stock of NextLevel Systems outstanding immediately prior to the Effective Time shall continue as shares of capital stock of the Surviving Corporation. ARTICLE III MISCELLANEOUS SECTION 3.01 Termination of Merger. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and abandoned by the Board of Directors of NextLevel Systems at any time prior to the date of filing the Certificate of Merger with the Delaware Secretary of State. This Agreement may be amended by the Boards of Directors of the Constituent Corporations at any time prior to the date of filing the Certificate of Merger with the Delaware Secretary of State. SECTION 3.02 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -3- IN WITNESS WHEREOF, each party to this Agreement has caused it to be executed by an authorized officer, and attested by the Assistant Secretary, thereof as the respective act, deed and agreement of each of said corporations, on this 25th day of July, 1997. NEXTLEVEL SYSTEMS OF DELAWARE, INC. By: /s/ Keith A Zar ----------------------------------------- Name: Keith A. Zar Title: Vice President ATTEST: By: /s/ Thomas A. Dumit --------------------------- Name: Thomas A. Dumit Title: Assistant Secretary NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A Zar ----------------------------------------- Name: Keith A. Zar Title: Vice President and General Counsel ATTEST: By: /s/ Thomas A. Dumit --------------------------- Name: Thomas A. Dumit Title: Assistant Secretary -4- EX-3.1 3 EXHIBIT 3.1 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NEXTLEVEL SYSTEMS, INC. (Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware) The undersigned, Keith A. Zar, certifies that he is the Vice President and General Counsel of NextLevel Systems, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), and does hereby further certify as follows: (1) The name of the Corporation is NextLevel Systems, Inc. (2) The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 6, 1997. The Corporation's original name was NextLevel Systems of Delaware, Inc. A Certificate of Amendment was filed with the Secretary of State of the State of Delaware on June 11, 1997. (3) This Amended and Restated Certificate of Incorporation, which amends and restates the certificate of incorporation of the Corporation, was duly adopted by unanimous stockholder written consent in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware (the "GCL"). (4) Pursuant to Section 103(d) of the GCL, this Amended and Restated Certificate of Incorporation shall become effective at 5:00 p.m. on July 25, 1997 (the "Effective Date"). (5) The text of the Amended and Restated Certificate of Incorporation of the Corporation is amended and restated to read in its entirety as follows: -1- FIRST: The name of the Corporation is NextLevel Systems, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the GCL. FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is 420,000,000 shares divided into two classes of which 20,000,000 shares of par value $.01 per share shall be designated Preferred Stock and 400,000,000 shares of par value $.01 per share shall be designated Common Stock. A. Common Stock 1. Dividends. Subject to the preferential rights, if any, of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of Common Stock. 2. Voting Rights. Except as otherwise required by law, at every annual or special meeting of stockholders of the Corporation, every holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share of Common Stock standing in such holder's name on the books of the Corporation. 3. Liquidation, Dissolution, or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the -2- Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential amounts, if any, to which the holders of Preferred Stock shall be entitled, the holders of all outstanding shares of Common Stock shall be entitled to share ratably in the remaining net assets of the Corporation. B. Preferred Stock 1. Issuance. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by law, to provide for the issuance of shares of Preferred Stock of the Corporation from time to time in one or more series, each of which series shall have such distinctive designation or title as shall be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such series of Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware. 2. Amendment. Except as may otherwise be required by law or this Amended and Restated Certificate of Incorporation, the terms of any series of Preferred Stock may be amended without the consent of the holders of any other series of Preferred Stock or of any class of Common Stock of the Corporation. FIFTH: The business and affairs of the Corporation shall be managed by and under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or this Amended and Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders. -3- A. Number of Directors. Except as otherwise fixed by or pursuant to the provisions of this Amended and Restated Certificate of Incorporation relating to the rights of the holders of Preferred Stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the then authorized number of directors of the Corporation, but in no event shall the number of directors be fewer than three. No director need be a stockholder. B. Classes and Terms of Directors. The directors shall be divided into three classes (I, II and III), as nearly equal in number as possible, and no class shall include less than one director. The initial term of office for members of Class I shall expire at the annual meeting of stockholders in 1998; the initial term of office for members of Class II shall expire at the annual meeting of stockholders in 1999; and the initial term of office for members of Class III shall expire at the annual meeting of stockholders in 2000. At each annual meeting of stockholders beginning in 1998, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, and shall continue to hold office until their respective successors are elected and qualified. In the event of any increase in the number of directors fixed by the Board of Directors, the additional directors shall be so classified that all classes of directors have as nearly equal numbers of directors as may be possible. In the event of any decrease in the number of directors, all classes of directors shall be decreased equally as nearly as may be possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. C. Newly-Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of -4- Directors resulting from death, resignation, retirement, disqualification, removal from office or any other cause shall be filled only by a majority of the directors then in office, even if less than a quorum is then in office, or by the sole remaining director, and shall not be filled by stockholders. Directors elected to fill a newly created directorship or other vacancies shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor has been elected and has qualified. D. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, the directors or any director may be removed from office at any time, but only for cause, at a meeting called for that purpose, and only by the affirmative vote of the holders of at least a majority of the voting power of all issued and outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. E. Rights of Holders of Preferred Stock. Notwithstanding the foregoing provisions of this Article FIFTH, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the rights and preferences of such Preferred Stock as set forth in this Amended and Restated Certificate of Incorporation or in the resolution or resolutions of the Board of Directors relating to the issuance of such Preferred Stock, and such directors so elected shall not be divided into classes pursuant to this Article FIFTH unless expressly provided by such rights and preferences. F. Written Ballot Not Required. Elections of directors need not be by written ballot unless the By-laws of the Corporation shall otherwise provide. -5- SIXTH: To the fullest extent permitted under the law of the State of Delaware, including the GCL, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for damages for any breach of fiduciary duty as a director. No amendment to or repeal of this Article SIXTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. In the event that the GCL is hereafter amended to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the Corporation shall be so eliminated or limited to the fullest extent permitted by the GCL as so amended without further action by either the Board of Directors or the stockholders of the Corporation. SEVENTH: Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any threatened, pending or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative ("Proceeding"), by reason of the fact that such person (the "Indemnitee") is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such Proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as such a director or officer, shall be indemnified and held harmless by the Corporation to the full extent permitted by law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), or by other applicable law as then in effect, against all -6- expense, liability, losses and claims (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974, as amended from time to time, penalties and amounts to be paid in settlement) actually incurred or suffered by such Indemnitee in connection with such Proceeding. EIGHTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, repeal, alter, amend, or rescind the By-laws of the Corporation. In addition, the By-laws of the Corporation may be adopted, repealed, altered, amended or rescinded by the affirmative vote of the holders of at least a majority of the voting power of all the issued and outstanding shares of capital stock of the Corporation entitled to vote thereon. NINTH: The Corporation reserves the right to repeal, alter, amend or rescind any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -7- IN WITNESS WHEREOF, NextLevel Systems, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by Keith A. Zar, its Vice President and General Counsel, on this 25th day of July, 1997. NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ---------------------------- Name: Keith A. Zar Title: Vice President and General Counsel EX-3.2 4 EXHIBIT 3.2 EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF NEXTLEVEL SYSTEMS, INC. (hereinafter called the "Corporation") (As of July 25, 1997) ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation within the State of Delaware shall be in the City of Wilmington, County of New Castle. Section 2. Other Offices. The Corporation may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. Annual meetings of stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver thereof. At such annual meetings, the stockholders shall elect by a plurality vote the directors standing for election and transact such other business as may properly be brought before the meeting in accordance with these Amended and Restated By-Laws. Section 3. Special Meetings. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by statute may be called by the Board of Directors, the Chairman of the Board of Directors, if one shall have been elected, or the President and shall be called by the Secretary upon the request in writing of a stockholder or stockholders holding of record at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote at such meeting. Section 4. Notice of Meetings. Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not less than ten nor more than sixty days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Notice shall be given personally or by mail and, if by mail, shall be sent in a postage prepaid envelope, addressed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice. Section 5. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or, in such person's absence or if one shall not have been elected, the President, shall act as chairman of the meeting. The Secretary or, in such person's absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof. Section 6. Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her in order. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. Section 7. Quorum, Adjournments. The holders of a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have -2- the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty days, or, if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Voting. Except as otherwise provided by statute or the Certificate of Incorporation and these Amended and Restated By-Laws, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Corporation standing in such stockholder's name on the record of stockholders of the Corporation: (a) on the date fixed pursuant to the provisions of Section 7 of Article V of these Amended and Restated By-Laws as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or (b) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held. Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for such stockholder by a proxy signed by such stockholder or such stockholder's attorney-in-fact, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereon, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Certificate of Incorporation or of these Amended and Restated By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by such stockholder's proxy, if there be such proxy. Section 9. List of Stockholders Entitled to Vote. At least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the -3- meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder shall be prepared. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city, town, or village where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 10. Inspectors. The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may appoint one or more inspectors. Each inspector, before entering upon the discharge of such inspector's duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of such inspector's ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. Section 11. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided by statute or in the Certificate of Incorporation, any action required to be taken or which may be taken at any annual or special meeting of the stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of any such corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 12. Advance Notice Provisions for Election of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible -4- for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 12. In addition to any other applicable requirements, for a nomination to be made by a stockholder such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the date of the annual meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the -5- persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Section 13. Advance Notice Provisions for Business to be Transacted at Annual Meeting. No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 13 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 13. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the date of the annual meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record -6- address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 13, provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 13 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE III DIRECTORS Section 1. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting. Section 2. The annual meeting of the Board of Directors may be held at such time or place (within or without the State of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 5 of this Article III. Section 3. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Section 4. Special meetings of the Board of Directors may be called by the Chairman of the Board, if one shall have been elected, or by two or more directors of the Corporation or by the President. -7- Section 5. Notice of Meetings. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by law or these Amended and Restated By-Laws. Notice of each special meeting of the Board of Directors for which notice shall be required, shall be given by the Secretary as hereinafter provided in this Section 5, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these Amended and Restated By-Laws, such notice need not state the purposes of such meeting. Notice of any special meeting, and of any regular or annual meeting for which notice is required, shall be given to each director at least (a) four hours before the meeting if by telephone or by being personally delivered or sent by telex, telecopy, or similar means or (b) two days before the meeting if delivered by mail to the director's residence or usual place of business. Such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage prepaid, or when transmitted if sent by telex, telecopy, or similar means. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Any director may waive notice of any meeting by a writing signed by the director entitled to the notice and filed with the minutes or corporate records. The attendance at or participation of the director at a meeting shall constitute waiver of notice of such meeting, unless the director at the beginning of the meeting or promptly upon such director's arrival objects to holding the meeting or transacting business at the meeting. Section 6. Organization. At each meeting of the Board of Directors, the Chairman of the Board, if one shall have been elected, or, in the absence of the Chairman of the Board or if one shall not have been elected, the President (or, in the President's absence, another director chosen by a majority of the directors present) shall act as chairman of the meeting and preside thereat. The Secretary or, in such person's absence, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof. Section 7. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and, except as otherwise expressly required by statute or the Certificate of Incorporation or these Amended and Restated By-Laws, the affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice need only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which might have -8- been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such. Section 8. Action by Consent. Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be. Section 9. Telephonic Meeting. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting. Section 10. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence of disqualification of any member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which require it; provided, however, that no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of Delaware to be submitted to stockholders for approval or (b) adopting, amending or repealing any by-law of the Corporation. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors. -9- Section 11. Fees and Compensation. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the Board of Directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Resignations. Any director of the Corporation may resign at any time by giving written notice of such director's resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 13. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such person's or persons' votes are counted for such purposes if (a) the material facts as to such person's or persons' relationship or interest and as to the contract or transaction are disclosed or are known to the directors or committee who then in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum, (b) the material facts as to such person's or persons' relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, one or more Vice Presidents (including Senior, Executive or other classifications of Vice Presidents) and a Secretary. The Board of Directors, in its discretion, may also choose as an officer of the Corporation a Chairman of the Board and a Vice Chairman of the Board and may choose other -10- officers (including a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers) as may be necessary or desirable. Such officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any officer of the Corporation the power to choose such other officers and to proscribe their respective duties and powers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Amended and Restated By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board and Vice Chairman of the Board of Directors, need such officers be directors of the Corporation. Section 2. Term. All officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 3. Resignations. Any officer of the Corporation may resign at any time by giving written notice of such officer's resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective. Section 4. Removal. Any officer may be removed at any time by the Board of Directors with or without cause. Section 5. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board of Directors. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that such officer is also a director of the Corporation. Section 6. Chairman of the Board. The Chairman of the Board, if one shall have been elected, shall be a member of the Board, an officer of the Corporation and, if present, shall preside at each meeting of the Board of Directors or the stockholders. The Chairman of the Board shall advise and counsel with the President, and in the President's absence with other executives of the Corporation, and shall perform such other duties as may from time to time be assigned to the Chairman of the Board by the Board of Directors. -11- ARTICLE V STOCK CERTIFICATES AND THEIR TRANSFER Section 1. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board or a Vice Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person was such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or the owner's legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. -12- Section 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its records; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. Section 5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars. Section 6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these Amended and Restated By-Laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. Section 7. Fixing the Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 8. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. -13- ARTICLE VI INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 1. General. Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any threatened, pending or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative ("Proceeding") brought by reason of the fact that such person (the "Indemnitee") is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such Proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as such a director or officer, shall be indemnified and held harmless by the Corporation to the full extent authorized by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expenses, liabilities, losses and claims (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974, as amended from time to time, penalties and amounts to be paid in settlement) actually incurred or suffered by such Indemnitee in connection with such Proceeding (collectively, "Losses"). Section 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any Proceeding brought by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person (also an "Indemnitee") is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against Losses actually incurred or suffered by the Indemnitee in connection with the defense or settlement of such action or suit if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which Delaware law expressly prohibits such indemnification by reason of an adjudication of liability of the Indemnitee unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the -14- circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification in Certain Cases. Notwithstanding any other provision of this Article VI, to the extent that an Indemnitee has been wholly successful on the merits or otherwise in any Proceeding referred to in Sections 1 or 2 of this Article VI on any claim, issue or matter therein, the Indemnitee shall be indemnified against Losses actually incurred or suffered by the Indemnitee in connection therewith. If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Corporation shall indemnify the Indemnitee, against Losses actually incurred or suffered by the Indemnitee in connection with each successfully resolved claim, issue or matter. In any review or Proceeding to determine such extent of indemnification, the Corporation shall bear the burden of proving any lack of success and which amounts sought in indemnity are allocable to claims, issues or matters which were not successfully resolved. For purposes of this Section 3 and without limitation, the termination of any such claim, issue or matter by dismissal with or without prejudice shall be deemed to be a successful resolution as to such claim, issue or matter. Section 4. Procedure. (a) Any indemnification under Sections 1 and 2 of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Indemnitee is proper (except that the right of the Indemnitee to receive payments pursuant to Section 5 of this Article VI shall not be subject to this Section 4) in the circumstances because the Indemnitee has met the applicable standard of conduct. Such determination shall be made promptly, but in no event later than 60 days after receipt by the Corporation of the Indemnitee's written request for indemnification. The Secretary of the Corporation shall, promptly upon receipt of the Indemnitee's request for indemnification, advise the Board of Directors that the Indemnitee has made such request for indemnification. (b) The entitlement of the Indemnitee to indemnification shall be determined in the specific case (1) by the Board of Directors by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum (the "Disinterested Directors"), or (2) if there are no Disinterested Directors, or if such Disinterested Directors so direct, by independent legal counsel, or (3) by the stockholders. (c) In the event the determination of entitlement is to be made by independent legal counsel, such independent legal counsel shall be selected by the Board of Directors and approved by the Indemnitee. Upon failure of the Board of Directors to so select such independent legal counsel or upon failure of the Indemnitee to so approve, such independent legal counsel shall be selected by the American Arbitration Association -15- in New York, New York or such other person as such Association shall designate to make such selection. (d) If the Board of Directors or independent legal counsel shall have determined that the Indemnitee is not entitled to indemnification to the full extent of the Indemnitee's request, the Indemnitee shall have the right to seek entitlement to indemnification in accordance with the procedures set forth in Section 6 of this Article VI. (e) If the person or persons empowered pursuant to Section 4(b) of this Article VI to make a determination with respect to entitlement to indemnification shall have failed to make the requested determination within 60 days after receipt by the Corporation of such request, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be absolutely entitled to such indemnification, absent (i) misrepresentation by the Indemnitee of a material fact in the request for indemnification or (ii) a final judicial determination that all or any part of such indemnification is expressly prohibited by law. (f) The termination of any proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, adversely affect the rights of the Indemnitee to indemnification hereunder except as may be specifically provided herein, or create a presumption that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation or create a presumption that (with respect to any criminal action or proceeding) the Indemnitee had reasonable cause to believe that the Indemnitee's conduct was unlawful. (g) For purposes of any determination of good faith hereunder, the Indemnitee shall be deemed to have acted in good faith if the Indemnitee's action is based on the records or books of account of the Corporation or an affiliate, including financial statements, or on information supplied to the Indemnitee by the officers of the Corporation or an affiliate in the course of their duties, or on the advice of legal counsel for the Corporation or an affiliate or on information or records given or reports made to the Corporation or an affiliate by an independent certified public accountant or by an appraiser or other expert selected with reasonable care to the Corporation or an affiliate. The Corporation shall have the burden of establishing the absence of good faith. The provisions of this Section 4(g) of this Article VI shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in these Amended and Restated By-Laws. (h) The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Corporation or an affiliate shall not be imputed to the -16- Indemnitee for purposes of determining the right to indemnification under these Amended and Restated By-Laws. Section 5. Advances for Expenses and Costs. All expenses (including attorneys' fees) incurred by or on behalf of the Indemnitee (or reasonably expected by the Indemnitee to be incurred by the Indemnitee within three months) in connection with any Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding within twenty days after the receipt by the Corporation of a statement or statements from the Indemnitee requesting from time to time such advance or advances whether or not a determination to indemnify has been made under Section 4 of this Article VI. The Indemnitee's entitlement to such advancement of expenses shall include those incurred in connection with any Proceeding by the Indemnitee seeking an adjudication or award in arbitration pursuant to these Amended and Restated By-Laws. The financial ability of an Indemnitee to repay an advance shall not be a prerequisite to the making of such advance. Such statement or statements shall reasonably evidence such expenses incurred (or reasonably expected to be incurred) by the Indemnitee in connection therewith and shall include or be accompanied by a written undertaking by or on behalf of the Indemnitee to repay such amount if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified therefor pursuant to the terms of this Article VI. Section 6. Remedies in Cases of Determination Not to Indemnify or to Advance Expenses. (a) In the event that (i) a determination is made that the Indemnitee is not entitled to indemnification hereunder, (ii) advances are not made pursuant to Section 5 of this Article VI or (iii) payment has not been timely made following a determination of entitlement to indemnification pursuant to Section 4 of this Article VI, the Indemnitee shall be entitled to seek a final adjudication either through an arbitration proceeding or in an appropriate court of the State of Delaware or any other court of competent jurisdiction of the Indemnitee's entitlement to such indemnification or advance. (b) In the event a determination has been made in accordance with the procedures set forth in Section 4 of this Article VI, in whole or in part, that the Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration referred to in paragraph (a) of this Section 6 shall be de novo and the Indemnitee shall not be prejudiced by reason of any such prior determination that the Indemnitee is not entitled to indemnification, and the Corporation shall bear the burdens of proof specified in Sections 3 and 4 of this Article VI in such proceeding. (c) If a determination is made or deemed to have been made pursuant to the terms of Sections 4 or 6 of this Article VI that the Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial -17- proceeding or arbitration in the absence of (i) a misrepresentation of a material fact by the Indemnitee or (ii) a final judicial determination that all or any part of such indemnification is expressly prohibited by law. (d) To the extent deemed appropriate by the court, interest shall be paid by the Corporation to the Indemnitee at a reasonable interest rate for amounts which the Corporation indemnifies or is obliged to indemnify the Indemnitee for the period commencing with the date on which the Indemnitee requested indemnification (or reimbursement or advancement of expenses) and ending with the date on which such payment is made to the Indemnitee by the Corporation. Section 7. Rights Non-Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 8. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. Section 9. Definition of Corporation. For purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, shall stand in the same position under this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. -18- Section 10. Other Definitions. For purposes of this Article VI, references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VI. Section 11. Survival of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. No amendment, alteration, rescission or replacement of these Amended and Restated By-Laws or any provision hereof shall be effective as to an Indemnitee with respect to any action taken or omitted by such Indemnitee in Indemnitee's position with the Corporation or any other entity which the Indemnitee is or was serving at the request of the Corporation prior to such amendment, alteration, rescission or replacement. Section 12. Indemnification of Employees and Agents of the Corporation. The Corporation may, by action of the Board of Directors from time to time, grant rights to indemnification and advancement of expenses to employees and agents of the Corporation with the same scope and effect as the provisions of this Article VI with respect to the indemnification of directors and officers of the Corporation. Section 13. Savings Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each person entitled to indemnification under the first paragraph of this Article VI as to all losses actually and reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this Article VI to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation -19- may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation. Section 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors may think conducive to the interests of the Corporation. The Board of Directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors. Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the Board of Directors. Section 5. Checks, Notes, Drafts, Etc.. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation. Section 6. Execution of Contracts, Deeds, Etc.. The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. Section 7. Voting of Stock in Other Corporations. Unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board or the President, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of the shares or other securities of such other corporation. In the event one or more attorneys or agents are appointed, the Chairman of the Board or the President may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairman of the Board or the President may, or may instruct the attorneys or agents appointed to, execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, -20- such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances. ARTICLE VIII AMENDMENTS These Amended and Restated By-Laws may be repealed, altered, amended or rescinded in whole or in part, or new By-Laws may be adopted by either the affirmative vote of the holders of at least a majority of the voting power of all of the issued and outstanding shares of capital stock of the Corporation entitled to vote thereon or by the Board of Directors. -21- EX-10.1 5 EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYEE BENEFITS ALLOCATION AGREEMENT THIS BENEFITS AGREEMENT is made and entered into as of this 25th day of July, 1997 by and among General Semiconductor, Inc. a Delaware corporation ("GS"), NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), and CommScope, Inc., a Delaware corporation ("CommScope"). WHEREAS, pursuant to the terms of that certain Distribution Agreement by and among General Instrument Corporation, NextLevel Systems and CommScope and dated as of June 12, 1997 (the "Distribution Agreement"), the parties have entered into this Agreement regarding certain employment, compensation and benefit matters occasioned by the Distributions. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement and the Distribution Agreement, each of the parties hereto, on behalf of itself and each other member of its Group over which it has direct or indirect legal or effective control, hereby agrees as follows: SECTION 1. Definitions. The following terms, when capitalized herein, shall have the meanings set forth below in this Section 1. All other capitalized terms which are used but are not otherwise defined herein shall have the meanings ascribed to them in the Distribution Agreement. "Active Employees" means, with respect to each Group, all employees regularly engaged in the performance of services to, for or on behalf of any member of such Group as of the close of business on the NextLevel Systems Distribution Date. "Former Employees" means, with respect to each Group, all former employees of GI and/or its Subsidiaries (including, but not limited to, such employees who, as of the close of business on the NextLevel Systems Distribution Date, are on leave of absence, long-term disability or layoff with recall rights and the dependents of those persons) who, if they were regularly engaged in the performance of services to, for or on behalf of GI or any of its Subsidiaries at the close of business on the NextLevel Systems Distribution Date, would be an Active Employee of such Group, determined on a basis consistent with the determination of the Active Employees of such Group and shall, with respect to GS, include former employees of previously disposed of businesses, discontinued operations and the corporate office of GI. "GS Salaried Welfare Plans" means, collectively, the General Instrument Corporation Group Welfare Benefits Plan and the General Instrument Corporation Cafeteria Plan. SECTION 2. General Employment Matters. 2.01. General Obligations. Except as specifically provided herein, from and after the NextLevel Systems Distribution Date, each of GS, NextLevel Systems and CommScope shall and shall, as applicable, cause each of the other members of its respective Group over which it has direct or indirect legal or effective control to, (a) continue the employment of all of the Active Employees of its respective Group, subject, however to the terms of Section 2.03 below and (b) except as otherwise specifically provided herein, pay, perform and discharge any and all labor, employment, compensation and benefit liabilities, whether arising prior to, on or after the NextLevel Systems Distribution Date, with respect to all such Active Employees and all Former Employees of its respective Group. Except as specifically provided herein, each of GS, NextLevel Systems and CommScope shall be solely responsible for the Former Employees of its respective Group. 2.02. Initial Compensation of Active Employees. The initial compensation (base salary or wage level) of each Active Employee of each Group shall be the same as the compensation (base salary or wage level) of such Active Employee immediately prior to the NextLevel Systems Distribution Date. 2.03. No Additional Employment Rights Created. Nothing in this Agreement shall give any Active Employee of any Group any right to continued employment by any member of that Group or any other Group beyond the NextLevel Systems Distribution Date, which is in addition to or supplemental to any such right he or she may have arising under contract or otherwise. SECTION 3. United States Salaried Pension and Savings Plan Benefits. 3.01. Defined Benefit Plans. (a) Effective as of June 30, 1997, Next Level Communications (a member of the NextLevel Group) ceased to be a sponsor of the General Instrument Corporation Pension Plan for Salaried and Hourly Paid Non-Union Employees (the "Pension Plan"), and GS and the members of the GS Group became the only sponsors of the Pension Plan. Effective as of July 1, 1997, NextLevel Systems established a defined benefit plan (the "NextLevel Systems Pension Plan") for the benefit of the Active Employees and Former Employees of the NextLevel Group who were, immediately prior to such effective date, participants in the Pension Plan. Upon the transfer of assets contemplated in Section 3.01(c), all liabilities for benefits accrued under the Pension Plan through June 30, 1997 in respect of the Active Employees and Former Employees of the NextLevel Group shall be transferred from the Pension Plan to the NextLevel Systems Pension Plan. The Pension Plan shall retain all other liabilities of the Pension Plan. (b) Promptly after the NextLevel Systems Distribution Date, GS shall cause the actuary of the Pension Plan (the "Plan Actuary") to allocate the assets of the Pension Plan as of June 30, 1997 between the Pension Plan and the NextLevel Systems Pension Plan. Such allocation shall reflect the division of liabilities set forth in Section 3.01(a) and shall be effected in accordance with Section 414(l) of the Code and the regulations thereunder, using for such purpose those actuarial assumptions prescribed by the Pension Benefit Guaranty Corporation for calculating unfunded benefit liabilities in connection with single employer plans terminating on June 30, 1997 (the "Assumptions"). If the fair market value of the assets of the Pension Plan as of June 30, 1997, exceeds the present value of accrued benefit liabilities calculated on a plan termination basis using the Assumptions, such excess shall be allocated between the Pension Plan and the NextLevel Systems Pension Plan in proportion to the present value of the accrued benefit liabilities allocated to each such plan. The assets allocable to the NextLevel Systems Pension Plan pursuant to this Section 3.01(b) as of June 30, 1997 is hereinafter referred to as the "Distribution Date Asset Value." (c) As promptly as practical after the determination of the Distribution Date Asset Value pursuant to Section 3.01(b), GS shall cause the trustee of the Pension Plan to transfer to the trustee of the NextLevel Systems Pension Plan the Distribution Date Asset Value (i) increased by a proportionate share of the earnings (or decreased by a proportionate share of losses) of the Pension Plan from June 30, 1997 until the date of transfer (the "Interim Period") and (ii) decreased by benefit payments to the Active Employees and Former Employees of the NextLevel Group during the Interim Period (the "Transferred Amount"). The Transferred Amount shall be transferred in cash or other property as may be agreed between the trustees of the respective plans. (d) During the Interim Period, the Pension Plan shall make all benefit payments that become due in respect of the Active Employees and Former Employees of the NextLevel Group to the extent such benefits were accrued under the Pension Plan through June 30, 1997. (e) All calculations required under this Section 3.01 shall initially be made by the Plan Actuary. The Plan Actuary shall provide to the actuary for the NextLevel Pension Plan (the "NextLevel Actuary"), for review, all calculations made pursuant to this Section 3.01, together with all supporting documentation, work papers, census data and other information reasonably requested by the NextLevel Actuary. If the Plan Actuary and the NextLevel Actuary cannot agree on the determination of the Transferred Amount, a third actuary, mutually agreeable to GS and NextLevel Systems, shall be appointed, whose determination of the Transferred Amount shall be binding on all parties; provided, however, that the amount determined by the third actuary may not be lower than the lowest amount nor higher than the highest amount determined by the Plan Actuary and the NextLevel Actuary. 3.02. CommScope, Inc. Employees Profit Sharing and Savings Plan. CommScope shall, immediately following the NextLevel Systems Distribution Date, continue to sponsor the CommScope, Inc. Employees Profit Sharing and Savings Plan (the "CommScope DC Plan"). -2- 3.03. General Instrument (Puerto Rico), Inc. Savings Plan. NextLevel Systems shall, immediately following the NextLevel Systems Distribution Date, cause its subsidiary, General Instrument (Puerto Rico), Inc. ("GI Puerto Rico"), to continue to sponsor the General Instrument (Puerto Rico), Inc. Savings Plan (the "Puerto Rico Plan"). 3.04. General Instrument Corporation Savings Plan. The active participation in the General Instrument Corporation Savings Plan (the "GI Savings Plan") by persons other than the Active Employees of the GS Group ceased to be effective as of June 30, 1997. In addition, as of June 30, 1997, all members of the NextLevel Group ceased to be sponsors of the GI Savings Plan and the members of the GS Group became the only sponsors of the GI Savings Plan. 3.05. Establishment of NextLevel Systems Defined Contribution Plan. (a) NextLevel Systems Plan. NextLevel Systems has established or made available, effective as of July 1, 1997, a defined contribution plan for the benefit of the Active Employees of the NextLevel Systems Group (the "NextLevel Systems DC Plan"). (b) Transfer of Account Balances to NextLevel Systems DC Plans. As promptly as practical after the NextLevel Systems Distribution Date, GS shall cause the trustee of the GI Savings Plan to transfer to the trustee of the NextLevel Systems DC Plan, the account balances of each Active Employee of the NextLevel Systems Group and each Former Employee of the NextLevel Systems Group with respect to whom the GI Savings Plan maintains an account as of the close of business on the NextLevel Systems Distribution Date. Such transfers shall be equal to the value of the transferred account balances as of the close of business on the day preceding the date of transfer and shall be in cash, except that the NextLevel Systems DC Plan will accept the following: (i) GS Common Stock for the GS Common Stock fund portion of such account balances (together with any and all of the shares of the common stock of NextLevel Systems and CommScope distributed in connection with the Distributions); and (ii) amounts credited to the GI Savings Plan which are held in mutual funds which are also investment media in the NextLevel Systems DC Plan. 3.06. Transfer of Employer Stock. Each of the sponsors of the GI Savings Plan, the CommScope DC Plan, the NextLevel Systems DC Plan and the Puerto Rico Plan shall cause their respective plans (i) to permit the participants therein to sell from the GS Common Stock Fund portion of the plan the shares of Common Stock of the two entities that do not sponsor the plan immediately after the NextLevel Systems Distribution Date, or in the case of the Puerto Rico Plan, are not the parent corporation of such plan's sponsor, immediately after the NextLevel Systems Distribution Date and (ii) not to permit the future investment in the shares of Common Stock of any entity that does not sponsor the plan, or in the case of the Puerto Rico Plan, is not the parent corporation of such plan's sponsor (except for investments in the stock of such entity indirectly through mutual funds or other collective investment vehicles with respect to which participants have no control over the individual investments thereof). SECTION 4. Pension Matters Outside the United States. With respect to the business and operations of each Group in jurisdictions outside the United States, each of the parties hereto shall (and, as applicable, shall cause each other member of its Group over which it has direct or indirect legal or effective control to) assume or retain, as the case may be, any and all pension liabilities and attendant plans and their assets related to its Active Employees and Former Employees. SECTION 5. Executive Compensation. 5.01. GI Supplemental Executive Retirement Plan. None of the Active Employees of the NextLevel Group have accrued any benefits under the GI Supplemental Executive Retirement Plan (the "SERP") from and after June 30, 1997. As of the NextLevel Systems Distribution Date, NextLevel Systems shall assume all liabilities under the SERP in respect of the Active Employees and Former Employees of the NextLevel Group. 5.02. GI Voluntary Deferred Compensation Plan. The participation of the Active Employees and Former Employees of the NextLevel Systems Group and the CommScope Group in the GI Voluntary Deferred Compensation Plan (the "Deferred Compensation Plan") shall cease as of the NextLevel Systems Distribution Date. As of the NextLevel Systems Distribution Date, NextLevel Systems and CommScope shall assume the liability for the accounts of their respective Active Employees and Former Employees in the Deferred Compensation Plan. GS shall continue to sponsor the Deferred Compensation Plan and shall retain all other liabilities under the Deferred Compensation Plan including the liability for the accounts of its Active Employees and Former Employees in the Deferred Compensation Plan. The total of each account of each -3- Active Employee or Former Employee of the NextLevel Systems Group and the CommScope Group in the Deferred Compensation Plan as of the NextLevel Systems Distribution Date shall become the opening balance of such Active Employee's or Former Employee's account in a nonqualified deferred compensation plan established, as of the NextLevel Systems Distribution Date, by NextLevel Systems (the "NextLevel Systems Deferred Compensation Plan") or CommScope (the "CommScope Deferred Compensation Plan"), as the case may be. As promptly as practical after the NextLevel Systems Distribution Date, assets having a fair market value as of the date of transfer equal to the transferred account balances as of such date shall be transferred to a successor trust established by NextLevel Systems in connection with the NextLevel Systems Deferred Compensation Plan or to a successor trust established by CommScope in connection with the CommScope Deferred Compensation Plan, as the case may be. Such transferred assets shall be in cash or such other property as may be agreed between GS and NextLevel Systems and between GS and CommScope. 5.03. Options. NextLevel Systems and CommScope have established, respectively, the NextLevel Systems 1997 Long-Term Incentive Plan (the "NextLevel Systems Incentive Plan") and the CommScope 1997 Long-Term Incentive Plan (the "CommScope Incentive Plan"). Effective as of the NextLevel Systems Distribution Date, all outstanding options in respect of GI Common Stock held immediately prior to the NextLevel Systems Distribution (the "Current Options"): (i)(A) by Active Employees and Former Employees (except as otherwise provided herein) of either the NextLevel Group or the CommScope Group and (B) current directors of GI immediately prior to the NextLevel Systems Distribution will be replaced with substitute options in respect of NextLevel Systems Common Stock or CommScope Common Stock, as the case may be (the "Substitute Options"), issued under either the NextLevel Systems Incentive Plan or the CommScope Incentive Plan; and (ii) by one Former Employee (Daniel F. Akerson) and certain retired directors (Daniel F. Akerson, Morton H. Meyerson, Felix G. Rohatyn, Paul G. Stern and Robert S. Strauss) shall be adjusted so that, after the NextLevel Systems Distribution, in addition to options held in respect of GS Common Stock ("GS Options"), such persons will also hold replacement options in respect of NextLevel Systems Common Stock and CommScope Common Stock ("Spin-off Options"). The number of shares with respect to which the Spin-off Options shall be granted shall be the number of shares of NextLevel Systems Common Stock and CommScope Common Stock that the holder of the Current Options would have received in the NextLevel Systems Distribution if he were a holder on the NextLevel Systems Distribution Date of that number of shares of GI Common Stock covered by the Current Option. Substitute Options, GS Options and Spin-off Options shall be designed to preserve the economic value of the related Current Options, and the vesting and expiration dates and other terms of the related awards will remain in effect under the Substitute Options, GS Options and Spin-off Options, as applicable. Effective as of the NextLevel Systems Distribution Date, all outstanding options in respect of GS Common Stock held by Active Employees of the GS Group as of the NextLevel Systems Distribution Date will be adjusted as necessary to reflect the NextLevel Systems Distribution. The number of shares covered by the Substitute Options, GS Options, and Spin-off Options, and the exercise price thereof, shall be determined by a committee consisting of the chief executive officers of GS, NextLevel Systems and CommScope. 5.04. Stock Appreciation Rights. Prior to the NextLevel Systems Distribution Date, certain persons held stock appreciation right ("SAR") agreements ("SAR Agreements") with respect to GI Common Stock. Effective as of the NextLevel Systems Distribution Date, all outstanding SAR Agreements shall be adjusted so that, after the NextLevel Systems Distribution, in addition to a SAR held in respect of GS Common Stock ("GS SAR"), such persons will also hold a SAR in respect of NextLevel Systems Common Stock and CommScope Common Stock ("Spin-off SARs "). The number of reference shares with respect to which each Spin-Off SAR shall be granted shall be the number of shares of NextLevel Systems Common Stock and CommScope Common Stock that the holder of the SAR would have received in the NextLevel Systems Distribution if he were a holder on the NextLevel Systems Distribution Date of that number of shares of GI Common Stock covered by the SAR. A Spin-off SAR shall be designed to preserve the economic value of the related SAR, and the other terms of the related SAR will remain in effect under the Spin-off SAR, as applicable. The number of reference shares covered by each Spin-off SAR shall be determined by a committee consisting of the chief executive officers of GS, NextLevel Systems and CommScope. 5.05. Employment and Other Agreements. CommScope shall retain or assume, as the case may be, any and all contractual obligations to Mr. Drendel with respect to his employment agreement. GS shall have no further obligation to Mr. Drendel with respect to his employment agreement. SECTION 6. Welfare Benefits. 6.01. GS Salaried Welfare Plans. Effective on the NextLevel Systems Distribution Date, GS shall serve as the sole sponsor of the GI Salaried Welfare Plans from and after the NextLevel Systems Distribution Date. -4- 6.02. Allocation and Discharge of Welfare Plan Liabilities. NextLevel Systems shall retain or assume, as the case may be, and discharge all welfare plan liabilities with respect to Active Employees and Former Employees of the NextLevel Systems Group and their dependents. CommScope shall retain or assume, as the case may be, and discharge all welfare plan liabilities with respect to Active Employees and Former Employees of the CommScope Group and their dependents. GS shall retain and discharge all other welfare plan liabilities which remain after allocation of liabilities to CommScope and NextLevel Systems under the two immediately preceding sentences, including, without limitation, all such liabilities relating to the Active Employees and Former Employees of the GS Group and their dependents. SECTION 7. General. 7.01. Post-Distribution Administration of Plans. The parties hereto agree to administer all plans consistently herewith, and to the extent necessary to amend their respective employee benefit plans accordingly. 7.02. Cost and Expenses. Each party shall bear all costs and expenses, including but not limited to legal and actuarial fees, incurred in the design, drafting and implementation of any and all plans and compensation structures which it establishes or creates and the amendment of its existing plans or compensation structures. SECTION 8. Miscellaneous. 8.01. Complete Agreement; Construction. This Agreement and the Distribution Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Notwithstanding any other provisions in this Agreement or the Distribution Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement or any other Ancillary Agreement, this Agreement shall control. 8.02. Other Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by any of the other Ancillary Agreements. 8.03. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. 8.04. Survival of Agreements. Except as otherwise expressly provided herein, all covenants and agreements of the parties contained in this Agreement shall survive the NextLevel Systems Distribution Date. 8.05. Notices. All notices and other communications to a party hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to such party (and will be deemed given on the date on which the notice is received by such party) at the address for such party set forth below (or at such other address for the party as the party shall, from time to time, specify by like notice to the other parties): If to GS, at: General Semiconductor, Inc. 10 Melville Park Road Melville, New York 11747-3113 Attn: General Counsel If to NextLevel Systems, at: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to CommScope, at: CommScope, Inc. 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attn: General Counsel -5- 8.06. Waivers. The failure of any party hereto to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. 8.07. Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by the parties hereto. 8.08. Assignment. This Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all the assets of a party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other parties to this Agreement. Otherwise, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the others, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. 8.09. Successors and Assigns. The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and permitted assigns. 8.10. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and the members of their respective Groups and Affiliates, after giving effect to the Distributions, and should not be deemed to confer upon third parties any remedy, claim, liability, right of reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 8.11. Attorney Fees. A party in breach of this Agreement shall, on demand, indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including, without limitation, reasonable legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled hereunder or otherwise. 8.12. Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. WITHOUT LIMITING THE PROVISIONS OF SECTIONS 8.14 AND 8.15 HEREOF, EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF (A) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND (B) IN THE CIRCUMSTANCE SET FORTH IN THE NEXT SENTENCE, THE SUPREME COURT OF THE STATE OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR OF ANY ANCILLARY AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF THE PARTIES AGREES TO COMMENCE ANY ACTION, SUIT OR PROCEEDING RELATING HERETO ONLY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IF SUCH SUIT, ACTION OR OTHER PROCEEDING MAY NOT BE BROUGHT IN SUCH COURT FOR JURISDICTIONAL REASONS, IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY, AND IN NO OTHER FORUM. EACH OF THE PARTIES FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY'S RESPECTIVE ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR PROCEEDING IN THE FORUM PROVIDED FOR HEREIN WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS SECTION. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN (I) THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR (II) IN THE CIRCUMSTANCES SET FORTH IN THE SECOND SENTENCE HEREOF, THE SUPREME COURT OF THE STATE OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 8.14. Mediation. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any -6- way related to this Agreement or any transaction contemplated hereby or thereby, including, without limitation, any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the general counsels (or other chief legal officers) of the relevant parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute. 8.15. Arbitration. If after the reasonable period of time provided for in Section 8.14, the relevant general counsels (or other chief legal officers) are unable to settle an Agreement Dispute, such Agreement Dispute shall be settled by arbitration administered by the American Arbitration Association in accordance with its applicable Rules for Commercial Arbitration and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any such arbitration shall be commenced and all the proceedings thereof conducted in New York City. If any such arbitration requires the consent of a non-party to this Agreement to submit to arbitration, the party initiating the arbitration shall use reasonable efforts to procure such consent. If such consent cannot be procured, the initiating party shall nevertheless be bound to proceed against all other parties herein solely by arbitration pursuant to this Section 8.15, and shall (unless otherwise agreed by all parties herein who may be affected by such Agreement Dispute) be bound by Section 8.13 with respect to claims arising out of any Agreement Disputes against a non-party to this Agreement which is amenable to, or consents to, jurisdiction in the forum set forth in Section 8.13. 8.16. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 8.17. Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantee the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party which is contemplated to be a Subsidiary of such party on and after the NextLevel Systems Distribution Date. -7- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag ----------------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ----------------------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ----------------------------- Name: Frank B. Wyatt, II Title: Secretary -8- EX-10.2 6 EXHIBIT 10.2 EXHIBIT 10.2 DEBT AND CASH ALLOCATION AGREEMENT DEBT AND CASH ALLOCATION AGREEMENT, dated as of July 25, 1997 (this "Agreement"), among General Semiconductor, Inc., a Delaware corporation ("GS"), NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), and CommScope, Inc., a Delaware corporation ("CommScope"). WHEREAS, pursuant to the terms of the Distribution Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), among General Instrument Corporation, a Delaware corporation ("GI"), NextLevel Systems and CommScope, the parties have entered into this Agreement regarding the allocation of certain indebtedness and cash of GI and its consolidated subsidiaries as of the close of business on the NextLevel Systems Distribution Date (the "Distribution Time"). NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement and the Distribution Agreement, each of the parties hereto, on behalf of itself and each of the other members of its Group, hereby agrees as follows: SECTION 1. Certain Definitions. Unless otherwise defined herein or unless the context otherwise requires, the following terms will have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined). "Accounts Payable" shall have the meaning ascribed to such term under GAAP. "Accounts Receivable" shall have the meaning ascribed to such term under GAAP. "Actual CommScope Debt Amount" shall mean the aggregate amount (expressed as a positive number), as of the Distribution Time, of the following, without duplication: (i) the then outstanding amount of the CommScope Credit Facility plus accrued and accreted interest and fees and expenses in respect thereof (as reflected on the CommScope Adjusted Closing Balance Sheet); plus (ii) the then outstanding principal amount of Consolidated Debt of CommScope and the CommScope Subsidiaries other than that which is described in clause (i) above (for this purpose undrawn letters of credit and guarantees shall not be treated as outstanding), plus accrued and accreted interest and fees and expenses in respect thereof as reflected on the CommScope Adjusted Closing Balance Sheet, including without limitation, outstanding indebtedness incurred in connection with the issuance of industrial revenue bonds by the Alabama State Industrial Development Authority. "Actual GS Debt Amount" shall mean the aggregate amount (expressed as a positive number), as of the Distribution Time, of the following, without duplication: (i) the then outstanding amount of the GS Credit Facility plus accrued and accreted interest and fees and expenses in respect thereof (as reflected on the GS Adjusted Closing Balance Sheet) ; plus (ii) the then outstanding principal amount of Consolidated Debt of GS and the GS Subsidiaries other than that which is described in clause (i) above (for this purpose undrawn letters of credit and guarantees shall not be treated as outstanding), plus accrued and accreted interest and fees and expenses in respect thereof as reflected on the GS Adjusted Closing Balance Sheet, including without limitation, debt incurred with respect to the General Instrument Taiwan, Ltd. ("GI Taiwan") mortgage facility (the "Taiwan Facility"). "Agreement" shall have the meaning specified in the first paragraph hereof. "Auditors" shall have the meaning specified in Section 5(a). "BKP Litigation" means the action entitled BKP Partners, L.P. v. General Instrument Corp., as more fully described in the Proxy Statement. "Cash and Cash Equivalents" shall have the meaning ascribed to such term under GAAP; provided, however, that in all events checks issued by GS and the GS Subsidiaries which remain unpaid as of the Distribution Time shall be deducted from Cash and Cash Equivalents, and checks received by GS and the GS Subsidiaries which remain uncollected prior to the Distribution Time (other than checks that have been dishonored) shall be included in Cash and Cash Equivalents. "CommScope" shall have the meaning specified in the first paragraph hereof. "CommScope Adjusted Closing Balance Sheet" shall have the meaning specified in Section 5(b). "CommScope Base Amount" shall mean the amount designated as such on Schedule I. "CommScope Closing Balance Sheet" shall have the meaning specified in Section 5(a). -2- "CommScope Credit Facility" shall have the meaning specified in Section 3(c). "CommScope Credit Facility Debt" shall have the meaning specified in Section 3(c). "CommScope Determination Date" shall have the meaning specified in Section 5(b). "CommScope Dispute" shall have the meaning specified in Section 5(b). "CommScope Distribution Date" shall have the meaning specified in the Distribution Agreement. "CommScope Dividend Amount" shall mean an amount equal to the CommScope Base Amount (i) less the outstanding indebtedness with respect to the industrial revenue bonds relating to CommScope issued by the Alabama State Industrial Development Authority, as of the CommScope Distribution Date , (ii) plus the amount of Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries as of the CommScope Distribution Date. "CommScope Group" means CommScope, the CommScope Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of CommScope or any of the CommScope Subsidiaries following the consummation of the Corporate Restructuring Transactions and the NextLevel Systems Distribution. "Consolidated Debt" shall mean (without duplication) with respect to any Person, every obligation of such Person and its consolidated Subsidiaries (i) for money borrowed, (ii) evidenced by bonds, debentures, notes or other similar instruments, (iii) for reimbursement with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person or its consolidated Subsidiaries, (iv) for the deferred purchase price of property or services if, and to the extent that, such obligation would appear as a liability upon a balance sheet of such Person or its consolidated Subsidiaries prepared in accordance with GAAP (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), and (v) to guarantee or otherwise be liable for, any obligation of the type referred to in clauses (i) through (iv) of another Person. "Corporate Restructuring Transactions" shall have the meaning specified in the Distribution Agreement. "Disputing Party" shall have the meaning ascribed to such term in Section 5(b). -3- "Distribution Agreement" shall have the meaning specified in the recitals to this Agreement. "Distributions" shall have the meaning specified in the Distribution Agreement. "Distribution Time" shall have the meaning specified in the recitals to this Agreement. "DSC Litigation" means the action entitled DSC Communications Corporation and DSC Technologies Corporation v. Next Level Communications, Thomas R. Eames and Peter W. Keeler, Case No. 4:95cv96, as more fully described in the Proxy Statement. "GAAP" means United States generally accepted accounting principles and practices, as in effect on the date of this Agreement, as promulgated by the Financial Accounting Standards Board and its predecessors. "GI" shall have the meaning specified in the recitals to this Agreement. "GI Common Stock" means the shares of common stock, par value $.01 per share of GI. "GI Credit Agreement" shall mean the Third Amended and Restated Credit Agreement dated as of August 12, 1996, among General Instrument Corporation of Delaware, The Chase Manhattan Bank as administrative agent, and certain lenders named therein. "GI Delaware" means General Instrument Corporation of Delaware, a Delaware corporation and a wholly owned subsidiary of GI. "GI Taiwan" means General Instrument Taiwan, Ltd., a Taiwanese corporation and an indirect wholly owned subsidiary of GI. "Group" means (i) with respect to GS, the GS Group, (ii) with respect to NextLevel Systems, the NextLevel Systems Group, and (iii) with respect to CommScope, the CommScope Group. "GS" shall have the meaning specified in the first paragraph hereof. "GS Adjusted Closing Balance Sheet" shall have the meaning specified in Section 5(b). "GS Base Amount" shall mean the amount designated as such on Schedule I. -4- "GS Closing Balance Sheet" shall have the meaning specified in Section 5(a). "GS Credit Facility" shall have the meaning specified in Section 3(a). "GS Credit Facility Debt" shall have the meaning specified in Section 3(a). "GS Dispute" shall have the meaning specified in Section 5(b). "GS Determination Date" shall have the meaning specified in Section 5(b). "GS Group" means GS, the GS Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of GS or any of the GS Subsidiaries following consummation of the Corporate Restructuring Transactions and the Distributions. "Independent Auditors" shall have the meaning specified in Section 5(b). "NextLevel Systems" shall have the meaning specified in the first paragraph hereof. "NextLevel Systems Credit Facility" shall have the meaning specified in Section 3(b). "NextLevel Systems Distribution" shall have the meaning specified in the Distribution Agreement. "NextLevel Systems Distribution Date" shall have the meaning specified in the Distribution Agreement. "NextLevel Systems Group" means NextLevel Systems, the NextLevel Systems Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of any of NextLevel Systems or any of the NextLevel Systems Subsidiaries following the consummation of the Corporate Restructuring Transactions and the Distributions. "Notice" shall have the meaning specified in Section 7(j). "Person" means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or other entity, or any government, or any agency or political subdivision thereof. -5- "Proxy Statement" means the Proxy Statement, dated June 13, 1997, sent to the holders of GI Common Stock in connection with the Distributions, including any amendment or supplement thereto. "Securities Litigation" means the class action entitled In Re General Instrument Corporation Securities Litigation, as more fully described in the Proxy Statement. "Subsidiary" means, with respect to any Person: (i) any corporation of which at least a majority in interest of the outstanding voting stock (having by the terms thereof voting power under ordinary circumstances to elect a majority of the directors of such corporation, irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of a contingency) is at the time, directly or indirectly, owned or controlled by such Person or by such Person and one or more of its Subsidiaries; or (ii) any non-corporate entity in which such Person or such Person and one or more Subsidiaries of such Person either (A) directly or indirectly, at the date of determination thereof, has at least majority ownership interest, or (B) at the date of determination is a general partner or an entity performing similar functions (e.g., manager of a Limited Liability Company or a trustee of a trust). SECTION 2. Allocation of Debt. Prior to or contemporaneously with the consummation of the NextLevel Systems Distribution, each of the parties hereto will take such action and make such transfers so that, to the extent possible, as of the Distribution Time (a) the Actual GS Debt Amount (less the amount of any Cash and Cash Equivalents held by GS or the GS Subsidiaries) shall equal the GS Base Amount, and (b) the Actual CommScope Debt Amount (less the amount of any Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) shall equal the CommScope Base Amount. SECTION 3. Credit Facilities. (a) GS shall, at its expense, obtain and have in place on or prior to the Distribution Time a credit facility (the "GS Credit Facility") for GS and the GS Subsidiaries in an aggregate principal amount at least equal to (i) the GS Base Amount, less the outstanding indebtedness with respect to the Taiwan Facility as of the Distribution Time, but plus the amount of Cash and Cash Equivalents held by GS or the GS Subsidiaries as of the Distribution Time (such portion of the GS Credit Facility to be used to repay amounts under the GI Credit Agreement and for any other purposes required in accordance with Section 2 hereof) and (ii) such additional amounts as shall be sufficient (together with other funds available to GS) for other general corporate purposes. The aggregate amount of debt (including accrued and accreted interest and fees -6- and expenses) outstanding as of the Distribution Time under this facility is hereinafter called the "GS Credit Facility Debt". (b) NextLevel Systems shall, at its expense, obtain and have in place on or prior to the Distribution Time, a credit facility (the "NextLevel Systems Credit Facility") for NextLevel Systems and the NextLevel Systems Subsidiaries in an aggregate amount at least sufficient (together with other funds available to NextLevel Systems): (i) to repay the portion of the outstanding indebtedness under the GI Credit Agreement, if any, to be assumed and repaid by NextLevel Systems so as to allocate debt among the parties hereto in accordance with Section 2 hereof; (ii) to satisfy any reasonably anticipated liabilities in connection with the Securities Litigation, the BKP Litigation, the DSC Litigation and all other pending legal proceedings; and (iii) for other general corporate purposes. (c) CommScope shall, at its expense, obtain and have in place on or prior to the Distribution Time, a credit facility (the "CommScope Credit Facility") for CommScope and the CommScope Subsidiaries in an aggregate principal amount at least sufficient (together with other funds available to CommScope): (i) to pay the CommScope Dividend Amount to GI Delaware on or prior to the Distribution Time and (ii) for other general corporate purposes. The aggregate amount of debt (including accrued and accreted interest and fees and expenses) outstanding as of the Distribution Time under this facility is hereinafter called the "CommScope Credit Facility Debt". SECTION 4. Conduct of Business. Each of NextLevel Systems, CommScope and GS represents and warrants that the Accounts Payable and Accounts Receivable of its respective business have been incurred and paid during 1997(to date), consistent with past practice in all material respects. SECTION 5. Post-Distribution Audit. (a) Preparation of Closing Balance Sheets. As soon as practicable after the Distribution Time, but in any event within 60 days following the Distribution Time, NextLevel Systems shall cause Deloitte & Touche LLP (or another comparable independent accounting firm selected by NextLevel Systems) (the "Auditors") to: (i) conduct an audit of GS and the GS Subsidiaries to determine the aggregate amount, as of the Distribution Time, of each of (a) the GS Credit Facility Debt, (b) the Consolidated Debt (other than the GS Credit Facility Debt) of GS and the GS Subsidiaries, and (c) the Cash and Cash Equivalents held by GS and the GS Subsidiaries, and to prepare and deliver to each of NextLevel Systems, GS and CommScope a consolidated balance sheet for GS and the GS Subsidiaries -7- as of the Distribution Time reflecting the amount of each of the foregoing (the "GS Closing Balance Sheet"); (ii) conduct an audit of CommScope and the CommScope Subsidiaries to determine the aggregate amount, as of the Distribution Time, of each of (a) the CommScope Credit Facility Debt, (b) the Consolidated Debt (other than the CommScope Credit Facility Debt) of CommScope and the CommScope Subsidiaries, and (c) the Cash and Cash Equivalents held by CommScope and the CommScope Subsidiaries, and to prepare and deliver to each of NextLevel Systems, GS and CommScope a consolidated balance sheet for CommScope and the CommScope Subsidiaries as of the Distribution Time reflecting the aggregate amount of each of the foregoing (the "CommScope Closing Balance Sheet"); and (iii) conduct procedures (to be agreed upon) to determine the accuracy of the representations and warranties contained in Section 4 hereof. The GS Closing Balance Sheet and the CommScope Closing Balance Sheet shall each be prepared on the basis of an audit conducted by the Auditors in accordance with GAAP consistently applied and without giving effect to any change in accounting principles required on account of the consummation of the Distributions, except that, to the extent that any definition contained herein contemplates inclusion or exclusion of an item that would not be included or excluded under GAAP, the Auditors shall compute such item in accordance with such definition. During the course of the preparation of the GS Closing Balance Sheet and the CommScope Closing Balance Sheet by the Auditors, and during any period in which there is a dispute regarding either the GS Closing Balance Sheet or the CommScope Closing Balance Sheet, each of GS and CommScope, as the case may be, shall cooperate with the Auditors and each other and shall have access to all work papers of the Auditors and all pertinent accounting and other records of GS and the GS Subsidiaries and CommScope and the CommScope Subsidiaries, as applicable. NextLevel Systems shall pay the fees and expenses of the Auditors. (b) Disputes Regarding Closing Balance Sheet. Unless (i) in the case of the GS Closing Balance Sheet, GS delivers written notice to NextLevel Systems on or prior to the 30th day after its receipt of the GS Closing Balance Sheet that it disputes any of the amounts set forth on the GS Closing Balance Sheet (a "GS Dispute"), or (ii) in the case of the CommScope Closing Balance Sheet, CommScope delivers written notice to NextLevel Systems on or prior to the 30th day after its receipt of the CommScope Closing Balance Sheet that it disputes any of the amounts set forth on the CommScope Closing Balance Sheet (a "CommScope Dispute") then, as applicable, GS and/or CommScope shall be deemed to have accepted and agreed to the GS Closing Balance Sheet or the CommScope Closing Balance Sheet, as applicable, in the form in which it -8- was delivered to it by the Auditors. If such a notice of a GS Dispute is given by GS or a notice of a CommScope Dispute is given by CommScope (in either case such party being hereinafter referred to as the "Disputing Party") within such 30-day period, then NextLevel Systems and the Disputing Party shall, within 15 days after the giving of any such notice, attempt to resolve such GS Dispute or CommScope Dispute, as the case may be, and agree in writing upon the final content of the GS Closing Balance Sheet or CommScope Closing Balance Sheet, as the case may be. If the Disputing Party and NextLevel Systems are unable to resolve any GS Dispute or CommScope Dispute, as the case may be, within such 15-day period, then a mutually acceptable independent accounting firm (the "Independent Auditors") shall be employed as arbitrator hereunder to settle such GS Dispute and/or CommScope Dispute, as the case may be, as soon as practicable. The Independent Auditors shall have access to all documents and facilities necessary to perform its function as arbitrator. The determination of the Independent Auditors with respect to any GS Dispute and/or CommScope Dispute, as the case may be, shall be final and binding on the applicable parties hereto. NextLevel Systems and the Disputing Party shall each pay one-half of the fees and expenses of the Independent Auditors for such services. NextLevel Systems and the Disputing Party each agree to execute, if requested by the Independent Auditors, a reasonable engagement letter. The term "GS Adjusted Closing Balance Sheet", as used herein, shall mean the definitive GS Closing Balance Sheet agreed to by GS and NextLevel Systems or, as the case may be, the definitive GS Closing Balance Sheet resulting from the determinations made by the Independent Auditors in accordance with this Section 5(b) (in addition to the matters theretofore agreed to by GS and NextLevel Systems). The term "CommScope Adjusted Closing Balance Sheet", as used herein, shall mean the definitive CommScope Closing Balance Sheet agreed to by CommScope and NextLevel Systems or, as the case may be, the definitive CommScope Closing Balance Sheet resulting from the determinations made by the Independent Auditors in accordance with this Section 5(b) (in addition to the matters theretofore agreed to by CommScope and NextLevel Systems). The date on which the GS Adjusted Closing Balance Sheet is determined and provided to each of NextLevel Systems and GS pursuant to this Section 5(b) is hereinafter referred to as the "GS Determination Date". The date on which the CommScope Adjusted Closing Balance Sheet is determined and provided to each of NextLevel Systems and CommScope pursuant to this Section 5(b) is hereinafter referred to as the "CommScope Determination Date". SECTION 6. Post Distribution Adjustments and Cash Payments. (a) If the Actual GS Debt Amount (less the amount of any Cash and Cash Equivalents held by GS or the GS Subsidiaries) exceeds the GS Base Amount, NextLevel Systems shall pay to GS the amount of such excess in cash within 10 days -9- after the GS Determination Date. If, on the other hand, the Actual GS Debt Amount (less the amount of any Cash and Cash Equivalents held by GS or the GS Subsidiaries) is less than the GS Base Amount, GS shall pay to NextLevel Systems the amount of such deficiency in cash within 10 days after the GS Determination Date. (b) If the Actual CommScope Debt Amount (less the amount of any Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) exceeds the CommScope Base Amount, NextLevel Systems shall pay to CommScope the amount of such excess in cash within 10 days after the CommScope Determination Date. If, on the other hand, the Actual CommScope Debt Amount (less the amount of any Cash and Cash Equivalents held by CommScope or the CommScope Subsidiaries) is less than the CommScope Base Amount, CommScope shall pay to NextLevel Systems the amount of such deficiency in cash within 10 days after the CommScope Determination Date. (c) After the Distribution Time, (i) GS shall promptly pay over to NextLevel Systems or CommScope, respectively, any payments received by GS in respect of accounts receivable transferred to NextLevel Systems or CommScope, as the case may be, pursuant to the Distribution Agreement, (ii) each of NextLevel Systems, CommScope and GS shall be solely responsible for collecting, and taking action regarding, accounts payable transferred or allocated to such company pursuant to the Distribution Agreement, and (iii) each of NextLevel Systems and CommScope shall have the right to endorse the name of General Instrument Corporation or General Semiconductor, Inc. on any check or other evidence of indebtedness received by such company in respect of accounts receivable transferred to it pursuant to the Distribution Agreement. SECTION 7. Miscellaneous Provisions. (a) Termination. This Agreement may not be terminated except by an agreement in writing signed by all of the parties hereto. (b) Further Actions. If at any time after the Distribution Time any further action is necessary or desirable to carry out the purposes of this Agreement, each of GS, NextLevel Systems and CommScope shall, on the written request of any of them, take (or cause the appropriate member of its Group over which it has direct or indirect legal or effective control to take) all such reasonably necessary or desirable action. (c) Cooperation. The parties hereto agree to use their reasonable best efforts to cooperate with respect to the various matters contemplated by this Agreement. (d) Successors and Assigns. Except as otherwise expressly provided herein, no party hereto may assign or delegate, whether by operation of law or otherwise, -10- any of such party's rights or obligations under or in connection with this Agreement without the written consent of each other party hereto. No assignment will, however, release the assignor of any of its obligations under this Agreement or waive or release any right or remedy the other parties may have against such assignor hereunder. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will be binding upon and enforceable against the respective successors and assigns of such party and will be enforceable by and will inure to the benefit of the respective successors and permitted assigns of such party. (e) Modification; Waiver; Severability. This Agreement may be amended, supplemented or waived only by a subsequent writing signed by all of the parties hereto. The failure of any party hereto to require strict performance by any other party of any provision of this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transaction contemplated hereby is not affected in any manner adverse to any party. (f) Counterparts. This Agreement may be executed with counterpart signature pages or in one or more counterparts, all of which shall be one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to all the parties hereto. (g) Descriptive Headings. The descriptive headings of this Agreement are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. (h) Notices. All notices, consents, requests, waivers or other communications required or permitted under this Agreement (each a "Notice") shall be in writing and shall be sufficiently given (a) if hand delivered or sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c) if sent by registered or certified mail, postage prepaid, return receipt requested, and in each case addressed as follows: -11- If to GS, at: General Semiconductor, Inc. 10 Melville Park Road Melville, New York 11747-3113 Attn: General Counsel If to NextLevel Systems, at: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to CommScope, at: CommScope, Inc. 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attn: General Counsel or such other address as shall be furnished by any of the Parties in a Notice. Any Notice shall be deemed given upon receipt. (i) Survival. Except as otherwise expressly provided herein, all representations, warranties, covenants and agreements of the parties contained in this Agreement shall survive the Distribution Time. (j) No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and the members of their respective Groups, and shall not be deemed to confer upon third parties any remedy, claim, liability, right of reimbursement, claim or action or other right in excess of those existing without reference to this Agreement. (k) Governing Law and Consent to Jurisdiction. THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. -12- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag ------------------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ------------------------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ------------------------------- Name: Frank B. Wyatt, II Title: Secretary EX-10.3 7 EXHIBIT 10.3 EXHIBIT 10.3 INSURANCE AGREEMENT This Insurance Agreement (the "Agreement") is made and entered into as of this 25th day of July, 1997, by and among General Semiconductor, Inc., a Delaware corporation ("GS"), NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), and CommScope, Inc., a Delaware corporation ("CommScope"). WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"), NextLevel Systems, and CommScope have entered into that certain Distribution Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), pursuant to which (i) GI and its Subsidiaries shall cause to be consummated the Corporate Restructuring Transactions in order to restructure, divide, and separate their existing businesses and assets so that (a) the NextLevel Systems Assets and NextLevel Systems Business shall be owned, controlled, and operated, directly and indirectly, by NextLevel Systems, (b) the CommScope Assets and CommScope Business shall be owned, controlled, and operated, directly and indirectly, by CommScope, and (c) the GS Assets and GS Business shall be owned, controlled, and operated, directly and indirectly, by GI, which will be renamed General Semiconductor, Inc., a Delaware corporation, immediately following the NextLevel Systems Distribution (as defined herein), (ii) GI shall distribute (the "NextLevel Systems Distribution") to the holders of GI's outstanding shares of common stock the outstanding shares of common stock of NextLevel Systems ("NextLevel Systems Common Stock"), and (iii) NextLevel Systems shall distribute (the "CommScope Distribution") to the holders of NextLevel Systems Common Stock (which holders also will be the stockholders of GI) the outstanding shares of common stock of CommScope (such two distributions being collectively referred to as the "Distributions"), upon the terms and subject to the conditions set forth in the Distribution Agreement; WHEREAS, GI, its Subsidiaries, and their respective predecessors have historically maintained various Policies for the benefit or protection of one or more of the NextLevel Systems Covered Persons, the CommScope Covered Persons, and the GS Covered Persons; WHEREAS, in connection with the transactions contemplated by the Distribution Agreement, GI, NextLevel Systems, and CommScope have determined that it is necessary and desirable to provide for the respective continuing rights and obligations in respect of said Policies from and after the NextLevel Systems Distribution Date; and WHEREAS, pursuant to the Distribution Agreement the parties hereto have agreed to enter into this Agreement, NOW THEREFORE, in consideration of the mutual agreements, provisions, and covenants contained in this Agreement and the Distribution Agreement, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 General. Unless otherwise defined herein or unless the context otherwise requires, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). "Agreement" shall mean this Insurance Agreement, dated as of July 25, 1997, by and among GS, NextLevel Systems, and CommScope, including any amendments hereto and each Schedule attached hereto. "Cable Manufacturing Business" shall mean, when unqualified, the CommScope Assets, CommScope Liabilities, and/or CommScope Business. "Claims Administration" shall mean, with respect to any Policy, the processing of claims made under such Policy, including, without limitation, the reporting of losses or claims to insurance carriers and the management, defense, and settlement of claims. "Claims Deposit" shall mean the amount of funds, as of the NextLevel Systems Distribution Date, maintained by GS on deposit for the benefit of the insurance carriers under the Retrospective-Rated Policies. "Claims-Made" shall mean, with respect to any Policy, coverage provided by such Policy for claims made during a period specified therein. "Claims-Made Policies" shall mean those current and past Policies which are Claims-Made in nature, including but not limited to those Policies identified on Schedule A hereto, which show GI or any of its predecessors (or such entity and its subsidiaries and/or affiliates) as the named insured, but excluding (i) any directors' and officers' liability insurance policies which are or were maintained by or on behalf of GI, (ii) the Exclusive Policies, and (iii) the Retrospective-Rated Policies. "Common Policies" shall mean the Claims-Made Policies, Occurrence-Based Policies, and Retrospective-Rated Policies. "CommScope Assets" shall have the meaning set forth in the Distribution Agreement. "CommScope Business" shall have the meaning set forth in the Distribution Agreement. "CommScope Covered Person" shall mean each member of the CommScope Group and any other Person, in each case to the extent any Policy addressed herein purports to provide insurance coverage in respect of any claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, damages, or expenses incurred by such Person arising out of, in connection with, or otherwise related to the Cable Manufacturing Business. "CommScope Distribution" shall have the meaning set forth in the recitals. "CommScope Exclusive Policies" shall mean all current and past Policies identified on Schedule D hereto, which show CommScope, any other member of the CommScope Group, or any of their respective predecessors (or such entity and its subsidiaries and/or affiliates) as the named insured and do not purport to relate to the Communications Business or the Power Semiconductor Business or to cover any NextLevel Systems Covered Person or GS Covered Person, excluding (i) any directors' and officers' liability policies which are or were maintained by or on behalf of CommScope, and (ii) any Retrospective-Rated Policy. "CommScope Group" shall have the meaning set forth in the Distribution Agreement. "CommScope Liabilities" shall have the meaning set forth in the Distribution Agreement. "Communications Business" shall mean, when unqualified, the NextLevel Systems Assets, NextLevel Systems Liabilities, and/or NextLevel Systems Business. "Corporate Restructuring Transactions" shall have the meaning set forth in the Distribution Agreement. "Covered Persons" shall mean (i) with respect to GS, the GS Covered Persons, (ii) with respect to NextLevel Systems, the NextLevel Systems Covered Persons, and (iii) with respect to CommScope, the CommScope Covered Persons. "Current Claims-Made Policies" shall mean the Claims-Made Policies in effect as of the NextLevel Systems Distribution Date, which Policies are set forth on Schedule A hereto. 2 "Current Occurrence-Based Policies" shall mean the Occurrence-Based Policies in effect as of the NextLevel Systems Distribution Date, which Policies are set forth on Schedule B hereto. "Distribution Agreement" shall mean that certain Distribution Agreement, dated as of June 12, 1997, by and among GI, NextLevel Systems, and CommScope, including any amendments, exhibits, and schedules thereto. "Distributions" shall have the meaning set forth in the recitals. "Distribution Time" shall mean the time at which the NextLevel Systems Distribution shall become effective. "Exclusive Policies" shall mean the NextLevel Systems Exclusive Policies and the CommScope Exclusive Policies. "Group" shall have the meaning set forth in the Distribution Agreement. "GS Assets" shall have the meaning set forth in the Distribution Agreement. "GS Business" shall have the meaning set forth in the Distribution Agreement. "GS Covered Person" shall mean each member of the GS Group and any other Person, in each case to the extent any Policy addressed herein purports to provide insurance coverage in respect of any claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, damages, or expenses incurred by such Person arising out of, in connection with, or otherwise related to the Power Semiconductor Business or the discontinued GI operations. "GS Group" shall have the meaning set forth in the Distribution Agreement. "GS Liabilities" shall have the meaning set forth in the Distribution Agreement. "Insurance Administration" shall mean, with respect to any Policy, the accounting for premiums, defense costs, indemnity payments, deductibles, and retentions, as appropriate, under the terms and conditions of such Policy, and the distribution of Insurance Proceeds. "Insurance Proceeds" shall mean those monies, net of any applicable premium adjustment, deductible, retention, or similar cost paid or held by or for the benefit of an insured party which are either (i) received by an insured from an insurance carrier, or (ii) paid by an insurance carrier on behalf of an insured. "Letters of Credit" shall have the meaning set forth in Section 7.1 hereof. "NextLevel Systems Assets" shall have the meaning set forth in the Distribution Agreement. "NextLevel Systems Business" shall have the meaning set forth in the Distribution Agreement. "NextLevel Systems Common Stock" shall have the meaning set forth in the recitals. "NextLevel Systems Covered Person" shall mean each member of the NextLevel Systems Group and any other Person, in each case to the extent any Policy addressed herein purports to provide insurance coverage in respect of any claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, damages, or expenses incurred by such Person arising out of, in connection, with or otherwise related to the Communications Business. "NextLevel Systems Distribution" shall have the meaning set forth in the recitals. 3 "NextLevel Systems Distribution Date" shall have the meaning set forth in the Distribution Agreement. "NextLevel Systems Exclusive Policies" shall mean all current and past Policies, including but not limited to the current Policies set forth on Schedule E hereto, which show NextLevel Systems, any other member of the NextLevel Systems Group, or any of their respective predecessors (or such entity and its subsidiaries and/or affiliates) as the named insured and do not purport to relate to the Cable Manufacturing Business or the Power Semiconductor Business or to cover any CommScope Covered Person or GS Covered Person, excluding (i) any directors' and officers' liability policies which are or were maintained by or on behalf of NextLevel Systems, and (ii) any Retrospective-Rated Policy. "NextLevel Systems Group" shall have the meaning set forth in the Distribution Agreement. "NextLevel Systems Liabilities" shall have the meaning set forth in the Distribution Agreement. "Occurrence-Based" shall mean, with respect to any Policy, coverage provided by such Policy for acts, omissions, damages, or injuries which occur or are alleged to have occurred during a period specified in such Policy. "Occurrence-Based Policies" shall mean those current and past Policies which are Occurrence-Based in nature, including but not limited to those policies identified on Schedule B hereto, which show GI or any of its predecessors (or such entity and its subsidiaries and/or affiliates) as the named insured, but excluding (i) any directors' and officers' liability policies which are or were maintained by or on behalf of GI, (ii) the Exclusive Policies, and (iii) the Retrospective-Rated Policies. "Person" shall have the meaning set forth in the Distribution Agreement. "Policies" means insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including, without limitation, primary, excess, and umbrella policies, commercial general liability policies, fiduciary liability, automobile, aircraft, property and casualty, workers' compensation, and employee dishonesty insurance policies, bonds, and self-insurance and captive insurance company arrangements, together with the rights, benefits, and privileges thereunder. "Power Semiconductor Business" shall mean, when unqualified, the GS Assets, GS Liabilities, and/or GS Business. "Retrospective-Rated Policies" shall mean the Policies identified on Schedule C hereto, together with all other current and past primary workers' compensation, automobile liability, and general liability (including products liability) Policies showing GI, any member of the NextLevel Systems Group, the CommScope Group, or the GS Group, or any of their respective predecessors (or such entity and its subsidiaries and/or affiliates) as the insured party and which are cost plus, fronting, high deductible, or retrospective premium programs. "Subsidiary" shall have the meaning set forth in the Distribution Agreement. "Termination Time" shall mean with respect to coverage under any Policy for any Covered Person, the time as of which coverage under said Policy is to be cancelled with respect to that Covered Person pursuant to the terms hereof. 1.2 References. References herein to a "Schedule" are, unless otherwise specified, to one of the Schedules attached to this Agreement, and references to an "Article" or a "Section" are, unless otherwise specified, to one of the Articles or Sections, respectively, of this Agreement. 4 ARTICLE II CANCELLATION OF POLICIES 2.1 Current Occurrence-Based Policies. On or prior to the NextLevel Systems Distribution Date, GI shall take or cause to be taken all necessary or appropriate action to cause the Current Occurrence-Based Policies identified on Schedule B hereto to be cancelled as of, and to afford no future coverage to the insureds thereunder except as otherwise contemplated by this Agreement from and after, the Distribution Time, with respect to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person. 2.2 Current Claims-Made Policies. On or prior to the NextLevel Systems Distribution Date, GI shall take or cause to be taken all necessary or appropriate action to cause the Current Claims-Made Policies identified on Schedule A hereto to be cancelled as of, and to afford no future coverage to the insureds thereunder except as otherwise contemplated by this Agreement from and after, the Distribution Time, with respect to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person. ARTICLE III COVERAGE 3.1 Maintenance of Coverage Through Distribution Time. From the date hereof up to the Distribution Time, the parties hereto agree to maintain (and to cause each member of their respective Groups over which they have legal or effective direct or indirect control to maintain) in full force and effect the Occurrence-Based Policies, Claims-Made Policies, and Retrospective-Rated Policies for the benefit of any NextLevel Systems Covered Person, CommScope Covered Person, and GS Covered Person to which such Policies by their terms relate. 3.2 Coverage Under Occurrence-Based Policies. (a) Termination of Coverage Under Occurrence-Based Policies. The parties hereto agree to take or cause to be taken all necessary or appropriate action so that, notwithstanding anything to the contrary contained in any Occurrence-Based Policy, coverage under the Occurrence-Based Policies shall be terminated so that none of the Occurrence-Based Policies shall afford any future coverage to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person for occurrences which take place or are alleged to have taken place on or after the Distribution Time, with respect to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person. (b) Access to Policies Following Termination Time. Notwithstanding the provisions of Section 3.2(a) hereof, from and after their respective Termination Time under any Occurrence-Based Policy each NextLevel Systems Covered Person, CommScope Covered Person, and GS Covered Person shall have the right to coverage and to make or pursue a claim for coverage under such Occurrence-Based Policy with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, and damages incurred or claimed to have been incurred prior to such Termination Time, as well as all expenses that relate to such claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, and damages, whether incurred prior to or after such Termination Time, by such Covered Person in or in connection with the operation of, or otherwise related to, (i) the Communications Business, with respect to any NextLevel Systems Covered Person, (ii) the Cable Manufacturing Business, with respect to any CommScope Covered Person, or (iii) the Power Semiconductor Business, with respect to any GS Covered Person, in each case subject to the terms, conditions, and limitations of such Occurrence-Based Policy, provided, however, that nothing in this Section 3.2(b) shall be deemed to constitute or reflect an assignment of any such Occurrence-Based Policy. 5 (c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person entitled hereunder to make or pursue a claim for insurance coverage under an Occurrence-Based Policy may claim for such insurance as and to the extent that such insurance is available up to the full extent of the applicable limits of liability under such Occurrence-Based Policy. Notwithstanding the foregoing, each of NextLevel Systems, CommScope, and GS shall, to the extent any of its respective Covered Persons shall have exhausted all or any portion of the limits of liability, if any, under any Occurrence-Based Policy, use its best efforts to obtain and maintain in full force and effect a Policy in replacement of the limits of liability exhausted under such Occurrence-Based Policy for all claims which would be covered thereby absent such exhaustion (including any pending or known claims), and be responsible for and pay all costs and expenses in connection therewith, which Policy shall provide at least the same coverage, and contain terms and provisions which are no less favorable to the insured parties, as existed under the Occurrence-Based Policy in respect of which such replacement is obtained, provided, however, that no party hereto shall be required to expend more than an amount equal to 350% of the original premium paid with respect to the portion of the limits of liability under such Occurrence-Based Policy (determined on a pro rata basis) exhausted by such party's respective Covered Persons to obtain a replacement Policy as contemplated hereby, it being understood that each party hereto shall nonetheless be required to obtain the maximum amount of replacement coverage available for such 350% premium amount in accordance with the terms and provisions of this sentence. If at any time a party (an "Impairing Party") hereto becomes aware (such party being deemed to be aware whenever any of the directors or executive officers of such party or any other member of its respective Group become aware) of a claim or potential claim against any of such Impairing Party's respective Covered Persons, which claim is reasonably likely to exhaust (but has not yet exhausted) all or any portion of the aggregate limits of liability, if any, under any Occurrence-Based Policy (a "Potential Impairment"), such Impairing Party shall promptly provide notice of such Potential Impairment to the other parties hereto. If such Potential Impairment actually occurs, the Impairing Party shall have five business days thereafter to obtain a Policy in replacement of such limits of liability (in accordance with the terms and provisions of the second preceding sentence). 3.3 Coverage Under Claims-Made Policies. (a) Termination of Coverage Under Claims-Made Policies. The parties hereto agree to take or cause to be taken all necessary or appropriate action so that, notwithstanding anything to the contrary contained in any Claims-Made Policy, coverage under the Claims-Made Policies shall be terminated so that no Claims-Made Policy shall afford any future coverage to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person for claims which have not been reported or made as provided by the terms of such Claims-Made Policy prior to the Distribution Time, with respect to any NextLevel System Covered Person, CommScope Covered Person, or GS Covered Person. (b) Access to Policies Following Termination Time. Notwithstanding the provisions of Section 3.3(a) hereof, from and after their respective Termination Time under any Claims-Made Policy each NextLevel Systems Covered Person, CommScope Covered Person, and GS Covered Person shall have the right to coverage and to make or pursue a claim for coverage under such Claims-Made Policy with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, damages, and expenses which are reported in accordance with the terms of such Claims-Made Policy prior to such Termination Time and which are incurred or claimed to be incurred by such Covered Person in or in connection with the operation of, or otherwise related to, (i) the Communications Business, with respect to any NextLevel Systems Covered Person, (ii) the Cable Manufacturing Business, with respect to any CommScope Covered Person, or (iii) the Power Semiconductor Business, with respect to any GS Covered Person, in each case subject to the terms, conditions, and limitations of such Claims-Made Policy, provided, however, that nothing in this Section 3.3(b) shall be deemed to constitute or reflect an assignment of any such Claims-Made Policy. (c) Policy Limits. Any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person entitled hereunder to make or pursue a claim for insurance coverage under a Claims-Made Policy may claim for such insurance as and to the extent that such insurance is available up to the full extent of the applicable limits of 6 liability under such Claims-Made Policy. Notwithstanding the foregoing, each of NextLevel Systems, CommScope, and GS shall, to the extent any of its respective Covered Persons shall have exhausted all or any portion of the limits of liability, if any, under any Claims-Made Policy, use its best efforts to obtain and maintain in full force and effect at its own cost a Policy in replacement of the limits of liability exhausted under such Claims-Made Policy for all claims which would be covered thereby absent such exhaustion (including any pending or known claims), and be responsible for and pay all costs and expenses in connection therewith, which Policy shall provide at least the same coverage, and contain terms and provisions which are no less favorable to the insured parties, as existed under the Claims-Made Policy in respect of which such replacement is obtained, provided, however, that no party hereto shall be required to expend more than an amount equal to 350% of the original premium paid with respect to the portion of the limits of liability under such Claims-Made Policy (determined on a pro rata basis) exhausted by such party's respective Covered Persons to obtain a replacement Policy as contemplated hereby, it being understood that each party hereto shall nonetheless be required to obtain the maximum amount of replacement coverage available for such 350% premium amount in accordance with the terms and provisions of this sentence. If at any time an Impairing Party becomes aware (such party being deemed to be aware whenever any of the directors or executive officers of such party or any other member of its respective Group become aware) of a claim or potential claim against any of such Impairing Party's respective Covered Persons which claim is reasonably likely to exhaust (but has not yet exhausted) all or any portion of the aggregate limits of liability, if any, under any Claims-Made Policy, such Impairing Party shall promptly provide notice of such Potential Impairment to the other parties hereto. If such Potential Impairment actually occurs, the Impairing Party shall have five business days thereafter to obtain a Policy in replacement of such limits of liability (in accordance with the terms and provisions of the second preceding sentence). 3.4 Coverage Under Retrospective-Rated Policies. (a) Termination of Coverage at Distribution Time. On or prior to the NextLevel Systems Distribution Date, the parties hereto agree to take or cause to be taken all necessary or appropriate action so that, except as otherwise contemplated by the terms of this Agreement and notwithstanding anything to the contrary contained in any Retrospective-Rated Policy, coverage under the Retrospective-Rated Policies shall be terminated so that none of the Retrospective-Rated Policies shall afford any future coverage to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person for occurrences which take place or are alleged to have taken place on or after the Distribution Time, with respect to any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person. (b) Access to Policies and Policy Limits. Notwithstanding the provisions of Section 3.4(a) hereof, from and after their respective Termination Time under any Retrospective-Rated Policy each NextLevel Systems Covered Person, CommScope Covered Person, and GS Covered Person shall have the right to coverage and to make or pursue a claim for coverage under such Retrospective-Rated Policy with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, and damages incurred or claimed to have been incurred prior to such Termination Time, as well as all expenses that relate to such claims, suits, actions, proceedings, injuries, losses, liabilities, occurrences, and damages, whether incurred prior to or after such Termination Time, by such Covered Person in or in connection with the operation of, or otherwise related to, (i) the Communications Business, with respect to any NextLevel Systems Covered Person, (ii) the Cable Manufacturing Business, with respect to any CommScope Covered Person, or (iii) the Power Semiconductor Business, with respect to any GS Covered Person, in each case subject to the terms, conditions, and limitations of such Retrospective-Rated Policy, provided, however, that nothing in this Section 3.4(b) shall be deemed to constitute or reflect an assignment of any such Retrospective-Rated Policy. Any NextLevel Systems Covered Person, CommScope Covered Person, or GS Covered Person may claim insurance coverage under a Retrospective-Rated Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability under such Retrospective-Rated Policy. 3.5 Coverage Under Exclusive Policies. From and after the Distribution Time, coverage under any Exclusive Policy may (at the option of the party or parties shown as the named insured thereunder, and subject to the rights of the insurers thereunder) continue with respect to any claims, suits, actions, proceedings, injuries, losses, liabilities, 7 occurrences, damages, or expenses incurred or claimed to have been incurred prior to, on, or after the Distribution Time, subject to the terms, conditions, and limitations of such Exclusive Policy, provided, however, that (i) no member of the NextLevel Systems Group or GS Group shall have any liability or obligation with respect to any of the CommScope Exclusive Policies, and (ii) no member of the CommScope Group or GS Group shall have any liability or obligation with respect to any of the NextLevel Systems Exclusive Policies. 3.6 Assistance in Obtaining Additional Coverage. Each of the parties hereto agrees to use its reasonable best efforts to assist the other parties in the transition to obtain separate insurance coverage for the NextLevel Systems Group, CommScope Group, and GS Group from and after the NextLevel Systems Distribution Date, which assistance shall include, but shall not be limited to, the identification of potential insurance carriers. 3.7 Discovery Periods. Except as specified in this Section 3.7 and except as the parties hereto may otherwise agree, the parties hereto acknowledge and agree that when this Agreement calls for the termination of insurance coverage under a Claims-Made Policy, such insurance coverage shall be terminated as of the time specified and that no discovery period of coverage in respect of such Policy shall be provided thereunder, notwithstanding anything to the contrary contained herein or in any such Policy. Notwithstanding the foregoing, GS shall use its reasonable best efforts to cause the relevant insurers under the Claims-Made Policies providing directors' and officers' liability insurance to offer to GS the maximum discovery period of coverage available under said Claims-Made Policies, and/or to purchase run-off coverage for the liabilities insured under said Claims-Made Policies with an aggregate limitation of liability separate from the limitation of liability under said Claims-Made Policies. All premiums, costs, and other charges with respect to any discovery period of coverage provided under any Claims-Made Policy or any run-off coverage for the liabilities insured under any Claims-Made Policy shall be the sole responsibility of (i) NextLevel Systems, with respect to coverage for NextLevel Systems Covered Persons, (ii) CommScope, with respect to coverage for CommScope Covered Persons, and (iii) GS, with respect to coverage for GS Covered Persons. Each party hereto shall not (and shall not permit any of its respective Covered Persons over which it has legal or effective direct or indirect control to) take any action contrary to the provisions of this Section 3.7. 3.8 Further Assurances. Each of NextLevel Systems, CommScope, and GS agrees to take (and to cause each of its respective Covered Persons over which it has direct or indirect legal or effective control to take) all such actions as are necessary or appropriate, including the provision of notice to all relevant insurance carriers, to effectuate the purposes of this Article III. ARTICLE IV PREMIUMS, DEDUCTIBLES, AND RELATED MATTERS 4.1 Occurrence-Based and Claims-Made Policies. (a) Premiums in Respect of Occurrence-Based and Claims-Made Policies. From and after the Distribution Time, all premiums, costs, and other charges with respect to any Occurrence-Based Policy or Claims-Made Policy shall be paid by GS, provided, however, that (i) NextLevel Systems shall promptly reimburse GS in full for any such premiums, costs, or other charges in respect of the cover afforded under any such Occurrence-Based Policy or Claims-Made Policy to any NextLevel Systems Covered Person, and (ii) CommScope shall promptly reimburse GS in full for any such premiums, costs, or other charges in respect of the cover afforded under any such Occurrence-Based Policy or Claims-Made Policy to any CommScope Covered Person, in each case determined in accordance with GI's historical practices with respect to the allocation of such premiums, costs, and charges prior to the date hereof. All amounts refunded from and after the Distribution Time by insurance carriers in respect of premiums previously paid under any Occurrence-Based Policy or Claims-Made Policy shall be the sole property of NextLevel Systems, provided, however, that NextLevel Systems shall promptly pay to CommScope or GS, as applicable, upon receipt thereof from an insurance carrier, the CommScope Group's or the GS Group's respective share of any such amounts refunded (such respective share to be determined in accordance with GI's historical practices with respect 8 to the allocation of insurance premiums among its Subsidiaries and divisions prior to the date hereof). Each of CommScope and GS shall (and shall cause each member of its respective Group over which it has direct or indirect legal or effective control to) promptly pay to NextLevel Systems any such refunded amounts actually received by it to which NextLevel Systems is entitled pursuant hereto. (b) Deductibles, Retentions, and Self-Insured Amounts. From and after the Distribution Time, all deductibles, retentions, and self-insured amounts with respect to coverage or a claim for coverage under any Occurrence-Based Policy or Claims-Made Policy shall be the sole responsibility of (i) NextLevel Systems, with respect to any coverage or claim for coverage in respect of any NextLevel Systems Covered Person, (ii) CommScope, with respect to any coverage or claim for coverage in respect of any CommScope Covered Person, and (iii) GS, with respect to any coverage or claim for coverage in respect of any GS Covered Person. 4.2 Retrospective-Rated Policies. (a) Premiums, Costs, and Other Charges. From and after the Distribution Time, all premiums, costs, and other charges with respect to any Retrospective-Rated Policy, including claim payments and associated expenses under cost plus or fronting policies or retrospective-rated premium programs, shall be the sole responsibility of and be paid by GS, provided, however, that (i) NextLevel Systems shall promptly reimburse GS for all such premiums, costs, and other charges paid by GS (including amounts paid by GS as reimbursement in respect of amounts drawn under Letters of Credit maintained by GS pursuant to Section 7.1 hereof but excluding LC Maintenance Fees defined in Section 7.1 hereof) in respect of coverage provided for any NextLevel Systems Covered Person to the extent such premiums, costs, and other charges exceed the amount of the Claims Deposit, and (ii) CommScope shall promptly reimburse GS for all such premiums, costs, and other charges paid by GS (including amounts paid by GS as reimbursement in respect of amounts drawn under Letters of Credit maintained by GS pursuant to Section 7.1 hereof but excluding LC Maintenance Fees defined in Section 7.1 hereof) in respect of coverage provided for any CommScope Covered Person to the extent such premiums, costs, and other charges exceed the amount of the Claims Deposit. All amounts refunded from and after the Distribution Time by insurance carriers pursuant to the terms of any Retrospective-Rated Policy incepting before April 1, 1991 shall be shared equally by GS and NextLevel Systems, and all amounts refunded from and after the Distribution Time by insurance carriers pursuant to the terms of any Retrospective-Rated Policy incepting on or after April 1, 1991 shall be shared equally by GS, NextLevel Systems, and CommScope. (b) Deductibles, Retentions, and Self-Insured Amounts. From and after the Distribution Time, all deductibles, retentions, and self-insured amounts with respect to coverage or a claim for coverage under any Retrospective-Rated Policy shall be the sole responsibility of (i) NextLevel Systems, with respect to any coverage or claim for coverage in respect of any NextLevel Systems Covered Person, (ii) CommScope, with respect to any coverage or claim for coverage in respect of any CommScope Covered Person, and (iii) GS, with respect to any coverage or claim for coverage in respect of any GS Covered Person. (c) Conversion to Guaranteed-Cost. From and after the Distribution Time, (i) GS shall be authorized to negotiate with the insurance carrier of any Retrospective-Rated Policy to convert such Policy to provide coverage in respect of GS Covered Persons on a guaranteed-cost basis; (ii) NextLevel Systems shall be authorized to negotiate with the insurance carrier of any Retrospective-Rated Policy to convert such Policy to provide coverage in respect of NextLevel Systems Covered Persons on a guaranteed-cost basis, and (iii) CommScope shall be authorized to negotiate with the insurance carrier of any Retrospective-Rated Policy to covert such Policy to provide coverage in respect of CommScope Covered Persons on a guaranteed-cost basis, provided, however, that (i) GS shall not be authorized to negotiate the conversion of any Retrospective-Rated Policy in respect of NextLevel Systems Covered Persons or CommScope Covered Persons, (ii) NextLevel Systems shall not be authorized to negotiate the conversion of any Retrospective-Rated Policy in respect of GS Covered Persons or CommScope Covered Persons, and (iii) CommScope shall not be authorized to negotiate the conversion of any Retrospective-Rated Policy in respect of GS Covered Persons or NextLevel Systems Covered Persons. 9 4.3 Exclusive Policies. From and after the Distribution Time, all deductibles, retentions, self-insured amounts, premiums, and other costs with respect to any Exclusive Policy or claim for coverage thereunder shall be the sole responsibility of, and all refunded premiums with respect to any Exclusive Policy shall be the sole property of, (i) NextLevel Systems, with respect to any NextLevel Systems Exclusive Policy, and (ii) CommScope, with respect to any CommScope Exclusive Policy. 4.4 Excess Costs and Settlements. Each Covered Person shall be responsible for any excess costs and expenses relating to its respective claims permitted hereunder (or those of any member of its respective Group) under the Common Policies, including defense costs to the extent such defense costs are not covered under such Common Policies, and shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of such claims. 4.5 Effect on Other Agreements. Notwithstanding anything to the contrary contained herein, nothing in this Article IV shall be construed to alter or in any way limit any rights to indemnity provided in the Distribution Agreement or in any other Ancillary Agreement (as such term is defined in the Distribution Agreement). ARTICLE V ADMINISTRATION 5.1 Occurrence-Based and Claims-Made Policies. (a) Administration. From and after the NextLevel Systems Distribution Date, Claims Administration and Insurance Administration with respect to the Occurrence-Based Policies and Claims-Made Policies shall be the responsibility of (i) NextLevel Systems, with respect to any coverage or claim for coverage of any NextLevel Systems Covered Person, (ii) CommScope, with respect to any coverage or claim for coverage of any CommScope Covered Person, and (iii) GS, with respect to any coverage or claim for coverage of any GS Covered Person. Each of NextLevel Systems and CommScope shall (and shall cause each of its respective Covered Persons over which it has direct or indirect legal or effective control to) provide prompt notice to GS of all actions taken by it with respect to the Claims Administration and Insurance Administration for the Occurrence-Based Policies and Claims-Made Policies as contemplated by this Section 5.1. Each party hereto shall (and shall cause each other member of its Group over which it has direct or indirect legal or effective control to) take all necessary or appropriate action, if any, to delegate Claims Administration and Insurance Administration with respect to the Occurrence-Based Policies and Claims-Made Policies to any other party who is to assume such responsibilities pursuant hereto, but, to the extent any party hereto (a "Precluded Party") is not permitted by the terms of any such policy to engage in Claims Administration or Insurance Administration with respect to coverage or claims for its respective Covered Persons, the party permitted to engage in Claims Administration or Insurance Administration shall do so with respect to coverage or claims for the Precluded Party's Covered Persons only upon the express authorization and direction of such Precluded Party. Each party hereto shall be responsible for its own disbursements and out-of-pocket expenses and the direct and indirect costs of its employees or agents relating to Claims Administration and Insurance Administration contemplated by this Section 5.1. Notwithstanding anything to the contrary contained herein, GS shall have the right to undertake at its own cost and expense Claims Administration and/or Insurance Administration with respect to any coverage or claim for coverage of any NextLevel Systems Covered Person or CommScope Covered Person. (b) Effect of Administrative Responsibilities. Each of NextLevel Systems, CommScope, and GS acknowledges and agrees that each other party's responsibilities under this Section 5.1 for Claims Administration and Insurance Administration shall not relieve any party submitting an insured claim under any Occurrence-Based Policy or Claims-Made Policy of (a) the primary responsibility for reporting such insured claim accurately, completely, and in a timely manner, or (b) any other right or responsibility which such party may have pursuant to the terms of any Occurrence-Based Policy or Claims-Made Policy. 10 5.2 Retrospective-Rated Policies. From and after the Distribution Time, GS shall be solely responsible for Claims Administration and Insurance Administration with respect to the Retrospective-Rated Policies including, without limitation, the administration of all billings associated with the Retrospective-Rated Policies by the insurance carriers thereunder. Notwithstanding the foregoing, each of NextLevel Systems and CommScope shall retain the right to, at its option, direct the management, defense, reporting, and settlement of claims involving its respective Covered Persons under the Retrospective-Rated Policies. GS shall not settle any claim against any NextLevel Systems Covered Person or CommScope Covered Person under any Retrospective-Rated Policy without the consent of NextLevel Systems or CommScope, respectively. ARTICLE VI PROCEEDS 6.1 Occurrence-Based and Claims-Made Policies. From and after the NextLevel Systems Distribution Date, Insurance Proceeds received with respect to claims, costs, and expenses under the Occurrence-Based Policies and Claims-Made Policies shall be paid to the Covered Person to which such Insurance Proceeds are due pursuant to the terms of such Policies. 6.2 Retrospective-Rated Policies. From and after the NextLevel Systems Distribution Date, Insurance Proceeds received with respect to claims, costs, and expenses under the Retrospective-Rated Policies shall be paid, as appropriate, to the Covered Person to which such Insurance Proceeds are due pursuant to the terms of such Policies. 6.3 Return of Proceeds. Each of NextLevel Systems, CommScope, and GS shall (and shall cause each of its respective Covered Persons over which it has direct or indirect legal or effective control to) promptly pay to each other party any Insurance Proceeds actually received by it to which any of such other party's Covered Persons are entitled pursuant hereto, which other party shall then distribute such Insurance Proceeds to the Covered Person to which they are due pursuant hereto. ARTICLE VII LETTERS OF CREDIT AND SURETY BONDS 7.1 Maintenance. (a) Letters of Credit. From and after the NextLevel Systems Distribution Date, to secure obligations under the Retrospective-Rated Policies relating to periods preceding the Distribution Time, GS shall, for such time as may be required by law or the terms of any Retrospective-Rated Policy, maintain in full force and effect the letters of credit identified on Schedule 7.1-A hereto or, as necessary or appropriate, substitute therefor and maintain in full force and effect letters of credit acceptable to the insurance carriers and/or surety under the Retrospective-Rated Policies issued by comparably rated lenders containing substantially identical terms and conditions (collectively, the "Letters of Credit"). GS shall be solely responsible for the actual and reasonable administrative fees and expenses (the "LC Maintenance Fees") in respect of the issuance and maintenance of the Letters of Credit and shall not obtain reimbursement for any portion thereof from either NextLevel Systems or CommScope. (b) Surety Bonds. The parties hereto acknowledge that GI is obligated to indemnify the sureties under certain performance bonds and other surety instruments that secure obligations of the NextLevel Systems Business, NextLevel Systems Group, CommScope Business, CommScope Group, GS Business, and/or GS Group including, but not limited to, the surety instruments identified on Schedule 7.1-B hereto (the "GI-Provided Bonds"). From and after the Distribution Time, GS shall maintain such GI-Provided Bonds in place for such time as may be required by law. To the extent possible on commercially reasonable terms, each of NextLevel Systems and CommScope shall use reasonable commercial efforts to obtain a replacement for each GI-Provided Bond that 11 secures obligations of the NextLevel Systems Business or NextLevel Systems Group (in the case of NextLevel Systems) or the CommScope Business or CommScope Group (in the case of CommScope) and to thereafter arrange for the release of GS from the GI-Provided Bond which has been so replaced. If the surety under any GI-Provided Bond is required to and does in fact perform according to the terms of said GI-Provided Bond and GS is required to and does in fact indemnify such surety in respect thereof, (i) NextLevel Systems shall reimburse GS for all amounts actually paid by GS to such surety to the extent such amounts constitute NextLevel Systems Liabilities, and (ii) CommScope shall reimburse GS for all amounts actually paid by GS to such surety to the extent such amounts constitute CommScope Liabilities. ARTICLE VIII MISCELLANEOUS 8.1 Termination. This Agreement may not be terminated except upon the written agreement of each of the parties hereto. 8.2 Further Assurances. If at any time after the NextLevel Systems Distribution Date any further action is necessary or desirable to carry out the purposes of this Agreement, each of NextLevel Systems, CommScope, and GS shall, on the written request of any of them, take (or cause the appropriate member of its Group over which it has direct or indirect legal or effective control to take) all such reasonably necessary or desirable action. If subsequent to the NextLevel Systems Distribution Date any Policy showing any member of the NextLevel Systems Group, CommScope Group, or GS Group, or any of their respective predecessors, as named insured is discovered which was in effect for periods prior to the Distribution Time and has not been addressed by the provisions of this Agreement, the parties hereto agree to negotiate in good faith an arrangement with respect to such Policy which shall give, to the fullest extent possible, effect to the purposes of this Agreement and the transactions contemplated by the Distribution Agreement. 8.3 Cooperation. The parties hereto agree to use their reasonable best efforts to cooperate with respect to the various insurance matters contemplated by this Agreement. Each party hereto shall not (and shall not permit any of its respective Covered Persons over which it has legal or effective direct or indirect control to) take any action or permit any inaction that could reasonably be expected to jeopardize or otherwise interfere with the rights of any other party (or any of such other party's respective Covered Persons) hereunder or the ability of any other party (or any of such other party's respective Covered Persons) to collect any proceeds which might be available under any of the Policies addressed herein in accordance with the terms of this Agreement. 8.4 No Representations and Warranties. The parties hereto understand and agree that no representation or warranty as to the existence, applicability, or extent of insurance coverage for the Communications Business, the Cable Manufacturing Business, or the Power Semiconductor Business under any Policy is herein being made. 8.5 Limitation on Liability. Except as may be otherwise expressly provided for herein, no party hereto shall be liable hereunder to another party or any of such other party's Covered Persons for claims not reimbursed by insurers for any reason not within the control of such party including, without limitation, coinsurance provisions, deductibles, quota share deductibles, exhaustion of aggregates, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Policy limitations or restrictions, any coverage disputes, any failure to timely claim, or any defect in such claim or its processing. 8.6 Successors and Assigns. Except as otherwise expressly provided herein, no party hereto may assign or delegate, whether by operation of law or otherwise, any of such party's rights or obligations under or in connection with this Agreement without the written consent of each other party hereto. No assignment will, however, release the assignor of any of its obligations under this Agreement or waive or release any right or remedy the other parties may have against such assignor hereunder. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will be binding upon and 12 enforceable against the respective successors and assigns of such party and will be enforceable by and will inure to the benefit of the respective successors and permitted assigns of such party. 8.7 Modification; Waiver; Severability. This Agreement may not be amended or modified except in a writing executed by each of the parties hereto. The failure by any party to exercise or a delay in exercising any right provided for herein shall not be deemed a waiver of any right hereunder. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 8.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 8.9 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 8.10 Notices. All notices, demands, or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or five business days after mailing by certified or registered mail, return receipt requested and postage prepaid, to the recipient at such recipient's address as indicated below: NextLevel Systems: 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attention: General Counsel CommScope: 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attention: General Counsel GS: 10 Melville Park Road Melville, New York 11747-3113 Attention: General Counsel or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 8.11 Survival. Each of the agreements of the parties herein shall survive the NextLevel Systems Distribution Date. 8.12 No Third Party Beneficiaries. This Agreement is made solely for the benefit of the parties hereto and their respective Covered Persons and shall not give rise to any rights of any kind to any other third parties. 8.13 Other. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION, VALIDITY, AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE. This Agreement, together with the Distribution Agreement and other Ancillary Agreements (as such term is defined in the Distribution Agreement), constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof. 13 8.14 Sole Agent. In all matters relating to this Agreement, including the resolution of any disputes relating to this Agreement between any members of different Groups, (i) NextLevel Systems shall be the sole agent for the members of the NextLevel Systems Group, (ii) CommScope shall be the sole agent for the members of the CommScope Group, and (iii) GS shall be the sole agent for members of the GS Group. No member of any Group shall have any authority to represent itself in any such matter or to terminate such agency without the prior written consent of each party hereto. 8.15 No Double Recovery. No provision of this Agreement shall be construed to provide recovery to any Person for any costs, expenses, or other amounts for which such Person has been fully compensated under any other provision of this Agreement, any other agreement, or otherwise. 14 IN WITNESS WHEREOF, the parties have made and entered into this Insurance Agreement as of the date first set forth above. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag ---------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ---------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ---------------------- Name: Frank B. Wyatt, II Title: Secretary EX-10.4 8 EXHIBIT 10.4 EXHIBIT 10.4 TAX SHARING AGREEMENT among GENERAL SEMICONDUCTOR, INC. COMMSCOPE, INC. and NEXTLEVEL SYSTEMS, INC. TABLE OF CONTENTS Page SECTION 1. Definition of Terms 2 SECTION 2. Allocation of Tax Liabilities 7 SECTION 3. Proration of Taxes for Straddle Periods 11 SECTION 4. Preparation and Filing of Tax Returns 12 SECTION 5. Tax Payments and Intercompany Billings 17 SECTION 6. Tax Benefits 21 SECTION 7. Assistance and Cooperation 22 SECTION 8. Tax Records 23 SECTION 9. Tax Contests 24 SECTION 10. Effective Date; Termination of Prior Intercompany Tax 25 Allocation Agreements SECTION 11. No Inconsistent Actions 25 SECTION 12. Survival of Obligations 27 SECTION 13. Employee Matters 27 SECTION 14. Treatment of Payments; Tax Gross Up 27 SECTION 15. Disagreements 29 SECTION 16. Late Payments 29 SECTION 17. Expenses 29 SECTION 18. General Provisions 30 (i) TAX SHARING AGREEMENT This Agreement is entered into as of July 25, 1997 by and among General Semiconductor, Inc., a Delaware corporation ("GS"), CommScope, Inc., a Delaware corporation ("CommScope"), and NextLevel Systems, Inc. a Delaware corporation ("Systems"). Capitalized terms used in this Agreement are defined in Section 1 below. Unless otherwise indicated, all "Section" references in this Agreement are to sections of this Agreement. RECITALS WHEREAS, as of the opening of business on the date hereof, General Instrument Corporation ("GI") was the common parent of an affiliated group of corporations, including CommScope and Systems, which has elected to file consolidated Federal income tax returns; and WHEREAS, the Companies have entered into a Distribution Agreement, dated as of June 12, 1997, setting forth the corporate transactions pursuant to which GI will distribute all of the outstanding shares of common stock of Systems to GI shareholders, and Systems will distribute all of the outstanding shares of CommScope to Systems shareholders, in transactions intended to qualify as tax-free distributions under Section 355 of the Code; and WHEREAS, as a result of the Systems Distribution, CommScope and Systems, and their respective subsidiaries, will cease to be members of the affiliated group of which GI is the common parent, effective as of the Distribution Date; and WHEREAS, as a result of the CommScope Distribution, CommScope and its subsidiaries will cease to be members of the affiliated group of which Systems is the common parent, effective as of the CommScope Distribution Date; and WHEREAS, as of the Distribution Date, GI will be renamed General Semiconductor, Inc.; and WHEREAS, the Companies desire to provide for and agree upon the allocation between the parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the - 1 - transactions contemplated by the Distribution Agreement, and to provide for and agree upon other matters relating to Taxes; NOW THEREFORE, in consideration of the mutual agreements contained herein, the Companies hereby agree as follows: SECTION 1. Definition of Terms. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings: "Accounting Cutoff Date" means, with respect to each of GS, CommScope and Systems, any date as of the end of which there is a closing of the financial accounting records for such entity. "Accounting Firm" shall have the meaning provided in Section 15. "Adjustment Request" means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (a) any amended Tax return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, or (b) any claim for refund or credit of Taxes previously paid. "Affiliate" means any entity that directly or indirectly is "controlled" by the person or entity in question. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise. Except as otherwise provided herein, the term Affiliate shall refer to Affiliates of a person as determined immediately after the Distributions. "Agreement" shall mean this Tax Sharing Agreement. "Allocated Federal Tax Liability" shall have the meaning provided in Section 5.01(b)(i). "Carryback" means any net operating loss, net capital loss, excess tax credit, or other similar Tax item which may or must be carried from one Tax Period to another Tax Period under the Code or other applicable Tax Law. - 2 - "Code" means the U.S. Internal Revenue Code of 1986, as amended, or any successor law. "CommScope" means CommScope, Inc., a Delaware corporation, and any successor. "CommScope Distribution" means the CommScope Distribution, as that term is defined in the Distribution Agreement. "CommScope Distribution Date" means the CommScope Distribution Date, as that term is defined in the Distribution Agreement. "CommScope Group" means Commscope and its Affiliates as determined immediately after the Distributions. "Companies" means GS, CommScope, and Systems, collectively, and "Company" means any one of GS, CommScope or Systems. "Consolidated or Combined Income Tax" means any Income Tax computed by reference to the assets and activities of members of more than one Group. "Consolidated or Combined State Income Tax" means any State Income Tax computed by reference to the assets and activities of members of more than one Group. "Consolidated Tax Liability" means, with respect to any GI Federal Consolidated Return, the "tax liability of the group" as that term is used in Treasury Regulation Section 1.1552-1(a)(1) (including applicable interest, additions to the tax, additional amounts, and penalties as provided in the Code), provided that such tax liability shall be treated as including any alternative minimum tax liability under Code Section 55. "Cumulative Federal Tax Payment" shall have the meaning provided in Section 5.01(b)(ii). "Distribution Agreement" means the agreement, as amended from time to time, setting forth the corporate transactions required to effect the distribution to GI shareholders of Systems common shares, and the distribution to Systems shareholders of CommScope common shares, and to which this Tax Sharing Agreement is attached as an exhibit. - 3 - "Distribution Date" means the NextLevel Systems Distribution Date, as that term is defined in the Distribution Agreement. "Distributions" means the NextLevel Systems Distribution and the CommScope Distribution, as such terms are defined in the Distribution Agreement. "Federal Income Tax" means any Tax imposed by Subtitle A or F of the Code. "Foreign Income Tax" means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession, which is an income tax as defined in Treasury Regulation Section 1.901-2. "GI Delaware" means General Instrument Corporation of Delaware, a Delaware corporation. "GI Federal Consolidated Return" means any United States federal Tax Return for the affiliated group (as that term is defined in Code Section 1504) that includes GI or GS as the common parent and includes any member of the CommScope Group or the Systems Group. "GS" means General Semiconductor, Inc., a Delaware corporation, and any successor. "GS Group" means GS and its Affiliates, excluding any entity that is a member of the Systems Group or the CommScope Group. "Group" means the GS Group, the CommScope Group, and the Systems Group, as the context requires. "Income Tax" means any Federal Income Tax, State Income Tax, or Foreign Income Tax. "Payment Date" means (i) with respect to any GI Federal Consolidated Return, the due date for any required installment of estimated taxes determined under Code Section 6655, the due date (determined without regard to extensions) for filing the return determined under Code Section 6072, and the date the return is filed, and (ii) with respect to any Tax Return for any Consolidated or Combined State Income Tax, the corresponding dates determined under the applicable Tax Law. - 4 - "Pre-Distribution Consolidated Tax Liability" means Consolidated Tax Liability with respect to all Tax Periods ending on or prior to the Distribution Date and in the case of the Tax Period which includes the Distribution Date, the Consolidated Tax Liability computed as if the Distribution Date were the last day of the Tax Period. "Post-Distribution Period" means any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date. "Pre-Distribution Period" means any Tax Period ending on or before the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date. "Prime Rate" means the base rate on corporate loans charged by Citibank, N.A., New York, New York from time to time, compounded daily on the basis of a year of 365 or 366 (as applicable) days and actual days elapsed. "Prior Intercompany Tax Allocation Agreements" means any written or oral agreement or any other arrangements relating to allocation of Taxes existing between or among the GS Group, the CommScope Group, and the Systems Group as of the Distribution Date (other than this Agreement and other than any such agreement or arrangement between or among persons who are members of a single Group). "Responsible Company" means, with respect to any Tax Return, the Company having responsibility for preparing and filing such Tax Return under this Agreement. "Restructuring Tax" means the Taxes described in Sections 2.06(a)(ii) or 2.06(a)(iii) (relating to Tax resulting from any income or gain recognized as a result of the Transactions). "Ruling Request" means the letter filed by GI with the Internal Revenue Service requesting a ruling from the Internal Revenue Service regarding certain tax consequences of the Transactions (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter. - 5 - "Separate Company Tax" means any Tax computed by reference to the assets and activities of a member or members of a single Group. "Straddle Period" means any Tax Period that begins on or before and ends after the Distribution Date. "State Income Tax" means any Tax imposed by any State of the United States or by any political subdivision of any such State which is imposed on or measured by net income, including state and local franchise or similar Taxes measured by net income. "Systems" means NextLevel Systems, Inc., a Delaware corporation, and any successor. "Systems Delaware" means NextLevel Systems of Delaware, Inc., a Delaware corporation. "Systems Group" means Systems and its Affiliates as determined immediately after the Distributions. "Systems Distribution" means the NextLevel Systems Distribution, as that term is defined in the Distribution Agreement. "Tainting Act" shall have the meaning provided in Section 11. "Tax" or "Taxes" means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing. "Tax Authority" means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision. - 6 - "Tax Benefit" means any refund, credit, or other reduction in otherwise required Tax payments (including any reduction in estimated tax payments), net of any associated or corresponding item of income, gain or other increase in otherwise required Tax payments. "Tax Contest" means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes of any of the Companies or their Affiliates (including any administrative or judicial review of any claim for refund). "Tax Item" means, with respect to any Income Tax, any item of income, gain, loss, deduction, and credit. "Tax Law" means the law of any governmental entity or political subdivision thereof relating to any Tax. "Tax Period" means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law. "Tax Records" means Tax Returns, Tax Return workpapers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority. "Tax Return" means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing. "Transactions" means the transactions contemplated by the Distribution Agreement (including the Corporate Restructuring Steps and Distributions, as defined in such agreement). "Transferred Communications Businesses" shall have the meaning provided in Section 2.05. - 7 - "Treasury Regulations" means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period. SECTION 2. Allocation of Tax Liabilities. The provisions of this Section 2 are intended to determine each Company's liability for Taxes with respect to Pre-Distribution Periods, Straddle Periods, and Post-Distribution Periods. Once the liability has been determined under this Section 2, Section 5 determines the time when payment of the liability is to be made, and whether the payment is to be made to the Tax Authority directly or to another Company. 2.01 General Rule (a) Systems Liability. Systems shall indemnify and hold harmless the GS Group and the CommScope Group from and against any liability for Taxes which Systems is liable for under this Section 2. (b) GS Liability. GS shall be liable for, and shall indemnify and hold harmless the Systems Group and the CommScope Group from and against any liability for Taxes which are allocated to GS under this Section 2. (c) CommScope Liability. CommScope shall be liable for, and shall indemnify and hold harmless the Systems Group and the GS Group from and against any liability for, Taxes which are allocated to CommScope under this Section 2. 2.02 Allocation of United States Federal Income Tax. Except as otherwise provided in this Agreement: (a) Allocation of Tax Relating to GI Federal Consolidated Returns. With respect to any GI Federal Consolidated Return: (i) Systems shall be liable for all Pre-Distribution Consolidated Tax Liability and (ii) GS shall be liable for any Consolidated Tax Liability for the Tax Period which includes the Distribution Date in excess of Systems' liability under clause (i). (b) Allocation of GI Federal Consolidated Return Tax Adjustments. With respect to any GI Federal Consolidated Return: (i) Systems shall be liable for any adjustments to the - 8 - reported Pre-Distribution Consolidated Tax Liability and (ii) GS shall be liable for any adjustments to the Consolidated Tax Liability for the Tax Period which includes the Distribution Date in excess of Systems' liability under clause (i). 2.03 Allocation of State Income Taxes. Except as otherwise provided in this Agreement, State Income Taxes shall be allocated as follows: (a) Separate Company Taxes. In the case of any State Income Tax which is a Separate Company Tax that is apportioned under this Agreement to a Pre-Distribution Period, Systems shall be liable (i) to GS for such Tax imposed on any members of the GS Group, and (ii) to CommScope for such Tax imposed on any members of the CommScope Group. (b) Consolidated or Combined State Income Taxes. (i) Allocation of Tax Reported on Tax Returns Filed After the Distribution Date. Systems shall be liable for any Consolidated or Combined State Income Tax that is apportioned under this Agreement to a Pre-Distribution Period. (ii) Allocation of Combined or Consolidated State Income Tax Adjustments. Systems shall be liable for any adjustment to the amount of Consolidated or Combined State Income Tax reported on any Tax Return (or as previously adjusted) that is apportioned under this Agreement to a Pre-Distribution Period. 2.04 Allocation of State Income Tax Effects of Federal Audit Adjustments. Systems shall be liable for any State Income Taxes resulting from the adjustments to GI Federal Consolidated Returns, to the extent that such State Income Taxes are apportioned to a Pre-Distribution Period. In accordance with Section 6, any Tax Benefit realized by the CommScope Group or by the GS Group as a result of Systems' payment of such State Income Taxes shall be for the account of Systems and shall be paid to Systems under Section 6. For example, if Systems pays a State Income Tax liability of $100x related to adjustments to the Tax Return of a member of the CommScope Group, and if such payment is available as a deduction on the CommScope Group's Tax Return for Federal Income Tax, CommScope shall pay to Systems the Federal Income Tax - 9 - benefit attributable to the deduction (i.e., $35x assuming a 35% maximum marginal tax rate under Code Section 11, and assuming the payment is treated as a nondeductible dividend, capital contribution, or combination thereof under the Code in accordance with Section 14 of this Agreement). 2.05 Allocation of Foreign Income Taxes and Other Taxes. Except as provided in Section 2.06, all Taxes (including without limitation any Foreign Income Taxes and any Taxes with respect to Post-Distribution Periods) other than those specifically allocated pursuant to Sections 2.02 through 2.04 shall be allocated based on the legal entity on which the legal incidence of the Tax is imposed; provided, however, any such Taxes specifically related to the businesses transferred by GI Delaware to Systems in the Transactions (the "Transferred Communications Businesses") shall be allocated to Systems. Subject to the proviso in the preceding sentence, as between the parties to this Agreement, GS shall be liable for all Taxes imposed on any member of the GS Group, Systems shall be liable for all Taxes imposed on any member of the Systems Group and CommScope shall be liable for all Taxes imposed on any member of the CommScope Group. The Companies believe that there is no Tax not specifically allocated pursuant to Sections 2.02 through 2.04 relating to Pre-Distribution Periods which is legally imposed on more than one legal entity or is not solely allocable to the Transferred Communications Businesses (e.g., joint and several liability); however, if there is any such Tax, it shall be allocated in accordance with past practices as reasonably determined by the affected Companies, or in the absence of such practices, in accordance with any allocation method agreed upon by the affected Companies. 2.06 Transaction and Other Taxes (a) Systems Liability. Except as otherwise provided in this Section 2.06, Systems shall be liable for, and shall indemnify and hold harmless the GS Group and the CommScope Group from and against any liability for, all Taxes resulting from the Transactions, including: - 10 - (i) Any sales and use, gross receipts, or other transfer Taxes imposed on the transfers occurring pursuant to the Transactions; (ii) any Tax resulting from any income or gain recognized under Treasury Regulation Sections 1.1502-13 or 1.1502-19 (or any corresponding provisions of other applicable Tax Laws) as a result of the Transactions; and (iii) any Tax resulting from any income or gain recognized as a result of any of the transactions contemplated by the Distribution Agreement failing to qualify for tax-free treatment under Code Sections 332, 351, 355, 361, or other provisions of the Code (as contemplated in the Ruling Request) or other applicable Tax Laws. (b) Indemnity for Inconsistent Acts. GS shall be liable for, and shall indemnify and hold harmless the Systems Group and the CommScope Group from and against any liability for, any Restructuring Tax (described in subparagraphs (ii) and (iii) above) to the extent arising from any breach of GS's representations or covenants under Section 11 or any Tainting Act by GS or its Affiliates. CommScope shall be liable for, and shall indemnify and hold harmless the Systems Group and the GS Group from and against any liability for, any Restructuring Tax to the extent arising from any breach of CommScope's representations or covenants under Section 11 or any Tainting Act by CommScope or its Affiliates. (c) Indemnity for Representations. Systems shall be liable for, and shall indemnify and hold harmless the GS Group and the CommScope Group from and against any liability for, any Restructuring Tax to the extent arising from the inaccuracy of any factual statements or representations in connection with the Ruling Request, but only to the extent such inaccuracy arises from facts in existence prior to the Distribution Date, and excluding any inaccuracy with respect to any statements or representations relating to CommScope or its Affiliates or any plan or intention on the part of CommScope or its Affiliates as to actions to be taken at or subsequent to the Distribution Date. CommScope shall be liable for, and shall indemnify and hold harmless the Systems Group and the GS Group from and against any liability for, any - 11 - Restructuring Tax to the extent arising from the inaccuracy of any factual statements or representations relating to the CommScope or its Affiliates in connection with the Ruling Request. 2.07 Application to Interim Period Between Distributions. The parties intend that Systems and CommScope will file consolidated and combined Income Tax Returns for the period beginning on the day after the Systems Distribution and ending on the date of the CommScope Distribution. In connection with such period, Systems and CommScope intend that the principles of this Agreement (with Systems having the role of both Systems and, as applicable, GS) shall apply thereto mutatis mutandis, except as the parties hereto may otherwise agree. SECTION 3. Proration of Taxes for Straddle Periods 3.01 General Method of Proration. In the case of any Straddle Period, Tax Items shall be apportioned between Pre-Distribution Periods and Post-Distribution Periods in accordance with the principles of Treasury Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the Companies. No election shall be made under Treasury Regulation Section 1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items). If the Distribution Date is not an Accounting Cutoff Date, the provisions of Treasury Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the items (other than extraordinary items) for the month which includes the Distribution Date. 3.02 Transaction Treated as Extraordinary Item. In determining the apportionment of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any Tax Items relating to the Transactions shall be treated as an extraordinary item described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and any Taxes related to such items shall be treated under Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be allocated to Pre-Distribution Periods. - 12 - SECTION 4. Preparation and Filing of Tax Returns 4.01 General. Except as otherwise provided in this Section 4, Tax Returns shall be prepared and filed when due (including extensions) by the person obligated to file such Tax Returns under the Code or applicable Tax Law. The Companies shall provide, and shall cause their Affiliates to provide, assistance and cooperate with one another in accordance with Section 7 with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Section 7. 4.02 Pre-Distribution Period and Straddle Period Tax Returns. All Tax Returns required to be filed for Pre-Distribution Periods or Straddle Periods, if not filed by the Distribution Date, shall be: (1) prepared and filed by Systems, in the case of any Tax Returns relating to a Consolidated or Combined Income Tax;1 and (2) prepared and filed, or caused to be prepared and filed, by the Group to which such Tax Return relates in all other cases. Each of GS and CommScope shall, for each Tax Period or portion thereof for which a member of the GS Group or the CommScope Group, respectively, is included in a Tax Return described in clause (1) of the preceding sentence, provide Systems with (i) a true and correct tax return for its Group together with an accompanying computation of Tax liability of its Group, (ii) separate tax returns for each member of its Group together with accompanying computations of the separate tax return Tax liabilities of each member of its Group, and (iii) a reconciliation of book income to federal taxable income for each member of its Group. GS and CommScope each hereby agrees to use its best efforts to provide Systems with such returns and computations no later than the first day of the sixth month following the end of the period to which such returns and computations relate, but in any event shall provide such returns and computations to Systems - -------- 1 Systems may prepare these Tax Returns under the Transition Services Agreement. - 13 - no later than the fifteenth day of the sixth month following the end of the period to which such returns and computations relate. Each of GS and CommScope, in preparing the above mentioned tax returns for its Group, shall not consider or give effect to any (i) net operating loss carryover or carryover, (ii) capital loss carryover or carryback, (iii) excess charitable deduction carryover, (iv) excess tax carryover or carryback, or (v) other similar carryback or carryback item. 4.03 Post-Distribution Period Tax Returns. Except as otherwise provided in Section 4.02 with respect to Straddle Period Tax Returns: (1) All Tax Returns related to the CommScope Group for Post-Distribution Periods shall be prepared and filed (or caused to be prepared and filed) by CommScope, (2) All Tax Returns related to the Systems Group for Post-Distribution Periods shall be prepared and filed (or caused to be prepared and filed) by Systems. (3) All Tax Returns related to the GS Group for Post-Distribution Periods shall be prepared and filed (or caused to be prepared and filed) by GS. 4.04 Manner of Filing. (a) All Tax Returns filed or caused to be filed by GS, CommScope or Systems after the Distribution Date shall be prepared on a basis that is consistent with any IRS ruling obtained by GI in connection with the restructuring of GI contemplated by the Distribution Agreement (in the absence of a controlling change in law or circumstances), and shall be filed on a timely basis by the party responsible for such filing under this Agreement. (b) All Tax Returns filed or caused to be filed by GS, or CommScope or Systems after the Distribution Date shall be prepared (in the absence of a controlling change in law or circumstances) consistent with past practices, elections, accounting methods, conventions, and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar items have been filed prior to the Distribution Date. - 14 - 4.05 Right to Review Tax Returns (a) General. The Responsible Company with respect to any Tax Return shall make such Tax Return and related workpapers available for review by the other Companies, if requested, to the extent (i) such Tax Return relates to Taxes for which the requesting party may be liable, (ii) such Tax Return relates to Taxes for which the requesting party may be liable in whole or in part for any additional Taxes owing as a result of adjustments to the amount of Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes for which the requesting party may have a claim for Tax Benefits under this Agreement, or (iv) the requesting party reasonably determines that it must inspect such Tax Return to confirm compliance with the terms of this Agreement. The Responsible Company shall use its reasonable best efforts to make such Tax Return available for review as required under this paragraph sufficiently in advance of the due date for filing such Tax Returns to provide the requesting party with a meaningful opportunity to analyze and comment on such Tax Returns and have such Tax Returns modified before filing, taking into account the person responsible for payment of the tax (if any) reported on such Tax Return and the materiality of the amount of Tax liability with respect to such Tax Return. The Companies shall attempt in good faith to resolve any issues arising out of the review of such Tax Returns. (b) Execution of Returns Prepared by Other Party. In the case of any Tax Return which is required to be prepared and filed by one Company under this Agreement and which is required by law to be signed by another Company (or by its authorized representative), the Company which is legally required to sign such Tax Return shall not be required to sign such Tax Return under this Agreement if there is no reasonable basis for the tax treatment of any material items reported on the Tax Return. Any such Tax Return shall be supplied by the Company responsible for its preparation and filing to the Company responsible for its signing at least five days prior to the due date of such Tax Return (including applicable extensions) and such signing Company shall deliver an executed copy of such Tax Return to the filing - 15 - Company at least two days prior to the due date of such Tax Return (including applicable extensions). 4.06 Claims for Refund, Carrybacks, and Self-Audit Adjustments ("Adjustment Requests") (a) Consent Required for Adjustment Requests Related to Consolidated or Combined Income Taxes. Except as provided in paragraph (b) below, each of the Companies hereby agrees that, unless each of the other Companies consents in writing, which consent shall not be unreasonably withheld, (i) no Adjustment Request with respect to any Consolidated or Combined Income Tax for a Pre-Distribution Period shall be filed, and (ii) any available elections to waive the right to claim in any Pre-Distribution Period with respect to any Consolidated or Combined Income Tax any Carryback arising in a Post-Distribution Period shall be made, and no affirmative election shall be made to claim any such Carryback. Any Adjustment Request which the Companies consent to make under this Section 4.06 shall be prepared and filed by the Responsible Company under Sections 4.02 and 4.03 for the Tax Return to be adjusted. The Company requesting the Adjustment Request shall provide to the Responsible Company all information required for the preparation and filing of such Adjustment Request in such form and detail as reasonably requested by the Responsible Company. (b) Exception for Adjustment Requests Related to Audit Adjustments. Each of the Companies shall be entitled, without the consent of any other Company, to require GS to file an Adjustment - 16 - Request to take into account any net operating loss, net capital loss, deduction, credit, or other adjustment attributable to such Company or any member of its Group corresponding to any adjustment resulting from any audit by the Internal Revenue Service or other Tax Authority with respect to Consolidated or Combined Income Taxes for any Pre-Distribution Period. For example, if the Internal Revenue Service requires a Company to capitalize an item deducted for the taxable year 1993, such Company shall be entitled, without the consent of any other Company, to require GS to file an Adjustment Request for the taxable year 1994 (and later years) to take into account any depreciation or amortization deductions in such years directly related to the item capitalized in 1993. In addition, Systems shall be entitled to require GS or CommScope, as appropriate, to file an Adjustment Request of the same sort with respect to Separate Company Taxes for any Pre-Distribution Periods. (c) Other Adjustment Requests Permitted. Nothing in this Section 4.06 shall prevent any Company or its Affiliates from filing any Adjustment Request with respect to Income Taxes which are not Consolidated or Combined Income Taxes or with respect to any Taxes other than Income Taxes; provided, however, that without the written consent of Systems (which consent shall not be unreasonably withheld) neither GS nor CommScope shall file an amended Tax Return with respect to Taxes for which Systems is liable under this Agreement. Any refund or credit obtained as a result of any such Adjustment Request (or otherwise) shall be for the account of the person liable for the Tax under this Agreement. (d) Payment of Refunds. Any refunds or other Tax Benefits received by any Company (or any of its Affiliates) as a result of any Adjustment Request which are for the account of another Company (or member of such other Company's Group) shall be paid by the Company receiving (or whose Affiliate received) such refund or Tax Benefit to such other Company in accordance with Section 6. SECTION 5. Tax Payments and Intercompany Billings 5.01 Payment of Taxes With Respect to GI Federal Consolidated Returns Filed After the Distribution Date. In the case of any GI Federal Consolidated Return the due date for which (including extensions) is after the Distribution Date, (a) Computation and Payment of Tax Due. At least ten business days prior to any Payment Date, GS shall compute the amount of Tax required to be paid to the Internal Revenue Service (taking into account the requirements of Section 4.04 relating to consistent accounting practices) with respect to such Tax Return on such Payment Date and shall notify - 17 - Systems in writing of the amount of Tax required to be paid on such Payment Date. GS will pay such amount to the Internal Revenue Service on or before such Payment Date. (b) Computation and Payment of Systems Liability With Respect to Tax Due. Within 30 days following any Payment Date, Systems will pay to GS the excess (if any) of (i) the Pre-Distribution Consolidated Tax Liability determined as of such Payment Date with respect to the applicable Tax Period allocable to Systems in a manner consistent with the provisions of Section 2.02(a) (the "Allocated Federal Tax Liability"), over (ii) the cumulative net payments with respect to such Tax Return prior to such Payment Date made before the Distribution Date, plus all such payments by the members of the Systems Group made from the Distribution Date to the Payment Date (the "Cumulative Federal Tax Payment"). If the Systems Cumulative Federal Tax Payment is greater than the Systems Allocated Federal Tax Liability as of any Payment Date, then GS shall pay such excess to Systems within 30 days of GS's receipt of the corresponding Tax Benefit (i.e., through either a reduction in GS's otherwise required Tax payment, or a refund of prior Tax payments). (c) Interest on Intergroup Tax Allocation Payments. In the case of any payments to GS required under paragraph (b) of this subsection 5.01, Systems shall also pay to GS an amount of interest computed at the Prime Rate on the amount of the payment required based on the number of days from the applicable Payment Date to the date of payment. In the case of any payments by GS required under paragraph (b) of this subsection 5.01, GS shall also pay to the payee an amount of interest computed at the Prime Rate on the amount of the payment required based on the number of days from the date of receipt of the Tax Benefit to the date of payment of such amount to the payee. (d) Representation Regarding Cumulative 1997 Federal Income Tax Payments. Systems represents and warrants to GS that, as of the the date hereof, $16,500,000 of cumulative net - 18 - payments have been made by GI, and credited by the Internal Revenue Service, with respect to the 1997 GI Federal Consolidated Return. 5.02 Payment of Federal Income Tax Related to Adjustments (a) Adjustments Resulting in Underpayments. GS shall pay to the Internal Revenue Service when due any additional Federal Income Tax required to be paid as a result of any adjustment to the Pre-Distribution Consolidated Tax Liability with respect to any GI Federal Consolidated Return. Systems shall pay to GS such amount within 30 days from the later of (i) the date the additional Tax was paid by GS or (ii) the date of receipt by Systems of a written notice and demand from GS for payment of the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. Any payments required under this Section 5.02(a) shall include interest computed at the Prime Rate based on the number of days from the date the additional Tax was paid by GS to the date of the payment under this Section 5.02(a). (b) Adjustments Resulting in Overpayments. Within 30 days of receipt by GS of any Tax Benefit resulting from any adjustment to the Pre-Distribution Consolidated Tax Liability with respect to any GI Federal Consolidated Return, GS shall pay to Systems its share of any such Tax Benefit, as determined by Systems. Any payments required under this Section 5.02(b) shall include interest computed at the Prime Rate based on the number of days from the date the Tax Benefit was received by GS to the date of payment to Systems Company under this Section 5.02(b). 5.03 Payment of State Income Tax Relating to Pre-Distribution Periods With Respect to Returns Filed After the Distribution Date (a) Computation and Payment of Tax Due. At least three business days prior to any Payment Date for any Tax Return with respect to any State Income Tax relating to a Pre-Distribution Period, the Responsible Company shall compute the amount of Tax required to be paid to the applicable Tax Authority (taking into account the requirements of Section 4.04 - 19 - relating to consistent accounting practices) with respect to such Tax Return on such Payment Date and-- (i) If such Tax Return is with respect to a Consolidated or Combined State Income Tax, GS shall notify Systems in writing of the amount of Tax required to be paid on such Payment Date. GS will pay such amount to such Tax Authority on or before such Payment Date. (ii) If such Tax Return is with respect to a Separate Company Tax, the Responsible Company shall, if it is not the Company liable for the Tax reported on such Tax Return, notify the Company liable for such Tax in writing of the amount of Tax required to be paid on such Payment Date. The Company liable for such Tax will pay such amount to such Tax Authority on or before such Payment Date. (b) Computation and Payment of Systems Liability With Respect to Tax Due. Within 120 days following the due date (including extensions) for filing any Tax Return for any Consolidated or Combined State Income Tax (excluding any Tax Return with respect to payment of estimated Taxes or Taxes due with a request for extension of time to file) relating to a Pre-Distribution Period, Systems shall pay to GS the tax liability allocable to Systems as determined by Systems under the provisions of Section 2.03(b)(i), plus interest computed at the Prime Rate on the amount of the payment based on the number of days from the due date (including extensions) to the date of payment by Systems to GS 5.04 Payment of State Income Taxes Related to Adjustments (a) Adjustments Resulting in Underpayments. GS shall pay to the applicable Tax Authority when due any additional State Income Tax required to be paid as a result of any adjustment to the Tax liability with respect to any Tax Return for any Consolidated or Combined State Income Tax for any Pre-Distribution Period. Systems shall pay to GS its respective share of any such additional Tax payment determined by Systems in accordance with Section 2.03(b)(ii) within 120 days from the later of (i) the date the additional Tax was - 20 - paid by GS or (ii) the date of receipt by Systems of a written notice and demand from GS for payment of the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. Systems shall also pay to GS interest on its respective share of such Tax computed at the Prime Rate based on the number of days from the date the additional Tax was paid by GS to the date of its payment to GS under this Section 5.04(a). (b) Adjustments Resulting in Overpayments. Within 120 days of receipt by GS of any Tax Benefit resulting from any adjustment to the Tax liability with respect to any Tax Return for any Consolidated or Combined State Income Tax for any Pre-Distribution Period, GS shall pay to Systems its share of any such Tax Benefit determined by Systems. Any payments required under this Section 5.04(b) computed at the Prime Rate based on the number of days from the date the Tax Benefit was received by GS to the date of payment to Systems under this Section 5.04(b). 5.05 Payment of Separate Company Taxes. Each Company shall pay, or shall cause to be paid, to the applicable Tax Authority when due all Separate Company Taxes owed by such Company or a member of such Company's Group. 5.06 Indemnification Payments. If any Company (the "payor") is required to pay to a Tax Authority a Tax that another Company (the "responsible party") is required to pay to such Taxing Authority under this Agreement, the responsible party shall reimburse the payor within 30 days of delivery by the payor to the responsible party of an invoice for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. The reimbursement shall include interest on the Tax payment computed at the Prime Rate based on the number of days from the date of the payment to the Tax Authority to the date of reimbursement under this Section 5.06. - 21 - Section 6. Tax Benefits If a Tax Benefit accrues to a member of one Group as the result of an adjustment to any Tax Return with respect to any Taxes for which a member of another Group is liable hereunder, the Company to which such Tax Benefit accrues shall make a payment to the Company that is liable for such Taxes hereunder within 30 days following accrual of the Tax Benefit. Such payment shall be in an amount equal to the present value of such Tax Benefit (including any Tax Benefit realized as a result of the payment), plus interest on such amount computed at the Prime Rate based on the number of days from the date of accrual of the Tax Benefit to the date of payment of such amount under this Section; provided, however, that no payment under this Section 6 by the Company to which such Tax Benefit accrues shall exceed the present value of the detriment to the Company liable for such Taxes, which deteriment results from the adjustment giving rise to such Tax Benefit. Section 7. Assistance and Cooperation 7.01 General. After the Distribution Date, each of the Companies shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other's agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Companies and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Companies and their Affiliates available to such other Companies as provided in Section 8. Each of the Companies shall also make available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or - 22 - for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. Any information or documents provided under this Section 7 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. 7.02 Income Tax Return Information. Each Company will provide to each other Company information and documents relating to their respective Groups required by the other Companies to prepare Tax Returns. The Responsible Company shall determine a reasonable compliance schedule for such purpose in accordance with GI's past practices. Any additional information or documents the Responsible Company requires to prepare such Tax Returns will be provided in accordance with past practices, if any, or as the Responsible Company reasonably requests and in sufficient time for the Responsible Company to file such Tax Returns timely. Section 8. Tax Records 8.01 Retention of Tax Records. Except as provided in Section 8.02, each Company shall preserve and keep all Tax Records exclusively relating to the assets and activities of their respective Groups for Pre-Distribution Tax Periods, and Systems shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitation, and (ii) seven years after the Distribution Date. If, prior to the expiration of the applicable statute of limitation and such seven-year period, a Company reasonably determines that any Tax Records which it is required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law, such Company may dispose of such records upon 90 days prior notice to the other Companies. Such notice shall include a list of the records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed. The notified - 23 - Companies shall have the opportunity, at their cost and expense, to copy or remove, within such 90-day period, all or any part of such Tax Records. 8.02 State Income Tax Returns. Tax Returns with respect to State Income Taxes and workpapers prepared in connection with preparing such Tax Returns shall be preserved and kept, in accordance with the guidelines of Section 8.01, by the Company responsible for preparing and filing the applicable Tax Return. 8.03 Access to Tax Records. The Companies and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records in their possession to the extent reasonably required by the other Company in connection with the preparation of Tax Returns, audits, litigation, or the resolution of items under this Agreement. Section 9. Tax Contests 9.01 Notice. Each of the parties shall provide prompt notice to the other parties of any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware related to Taxes for Tax Periods for which it is indemnified by one or more other parties hereunder. Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters. If an indemnified party has knowledge of an asserted Tax liability with respect to a matter for which it is to be indemnified hereunder and such party fails to give the indemnifying party prompt notice of such asserted Tax liability, then (i) if the indemnifying party is precluded from contesting the asserted Tax liability in any forum as a result of the failure to give prompt notice, the indemnifying party shall have no obligation to indemnify the indemnified party for any Taxes arising out of such asserted Tax liability, and (ii) if the indemnifying party is not precluded from contesting the asserted Tax liability in any forum, but such failure to give prompt notice results in a monetary detriment to the indemnifying party, then any amount which the indemnifying - 24 - party is otherwise required to pay the indemnified party pursuant to this Agreement shall be reduced by the amount of such detriment. 9.02 Control of Tax Contests. Each Company shall have full responsibility and discretion in handling, settling or contesting any Tax Contest involving a Tax for which it is liable pursuant to Section 2 of this Agreement; provided, however, Systems may participate in any Tax Contest with respect to Restructuring Taxes regardless of whether it has liability or indemnification obligations with respect to such Taxes under this Agreement. Section 10. Effective Date; Termination of Prior Intercompany Tax Allocation Agreements. This Agreement shall be effective on the Distribution Date. Immediately prior to the close of business on the Distribution Date (i) all Prior Intercompany Tax Allocation Agreements (the "Prior Agreements") shall be terminated, and (ii) amounts due under such Prior Agreements as of the Distribution Date shall be settled as of the Distribution Date (including capitalization or distribution of amounts due or receivable under such agreements). Upon such termination and settlement, no further payments by or to the GS Group, by or to the CommScope Group, or by or to the Systems Group, with respect to such Prior Agreements shall be made, and all other rights and obligations resulting from such Prior Agreements between the Companies and their Affiliates shall cease at such time. Any payments pursuant to such Prior Agreements shall be ignored for purposes of computing amounts due under this Agreement. Section 11. No Inconsistent Actions. (a) Each of the Companies covenants and agrees that it will not take any action, and it will cause its Affiliates to refrain from taking any action, which may be inconsistent with the Tax treatment of the Transactions as contemplated in the Ruling Request (any such action is referred to in this Section 11 as a "Tainting Act"), unless (i) the Company or Affiliate thereof proposing such Tainting Act (the "Requesting Party") either (A) obtains a ruling with respect to the Tainting Act from the Internal Revenue Service or other applicable Tax Authority that is reasonably satisfactory to each other Company (the "Requested Parties") (except that the - 25 - Requesting Party shall not submit any such ruling request if a Requested Party determines in good faith that filing such request might have a materially adverse effect upon such Requested Party), or (B) obtains an unqualified opinion of independent nationally recognized tax counsel acceptable to each Requested Party, on a basis of assumed facts and representations consistent with the facts at the time of such action, that such Tainting Act will not affect the Tax treatment of the Transactions as contemplated in the Ruling Request, or (ii) each Requested Party consents in writing to such Tainting Act, which consent shall be granted or withheld in the sole and absolute discretion of each such Requested Party. Without limiting the foregoing: (i) Specified Actions. During the two year period following the Distribution Date, unless clause (i) or (ii) of the preceding paragraph is satisfied with respect to the applicable action, no Company or its Affiliate will (A) liquidate or merge with or into any other corporation (other than a merger which results in the outstanding stock of such Company or its Affiliates immediately before the merger continuing to represent at least eighty (80) percent of the outstanding voting stock and non-voting stock of the merged corporations after the transaction); (B) issue more than 20%, by vote or value, of its capital stock in one or more transactions; (C) redeem, purchase or otherwise reacquire more than five (5) percent, by vote or value, of its capital stock in one or more transactions (other than in connection with future employee benefit plans or pursuant to a future market purchase program involving five (5) percent or less of its publicly traded stock); (D) sell, exchange, distribute or otherwise dispose of, other than in the ordinary course of business, more than 25% of the assets constituting the trades or businesses relied upon in the Ruling Request to sastisfy Section 355(b) of the Code; or (E) discontinue or cause to be discontinued the active conduct of the trades or businesses relied upon in the Ruling Request to satisfy Section 355(b) of the Code. - 26 - (ii) No Inconsistent Plan or Intent. Each of the Companies represents and warrants that neither it nor any of its Affiliates has any plan or intent to take any action which is inconsistent with any factual statements or representations in the Ruling Request. Regardless of any change in circumstances, each of the Companies covenants and agrees that it will not take, and it will cause its Affiliates to refrain from taking, any such inconsistent action on or before the last day of the calendar year ending after the second anniversary of the Distribution Date other than as permitted in this Section 11. (iii) Amended or Supplemental Rulings. Each of the Companies covenants and agrees that it will not file, and it will cause its Affiliates to refrain from filing, any amendment or supplement to the Ruling Request subsequent to the Distribution Date without the consent of the other Companies, which consent shall not be unreasonably withheld. (b) Notwithstanding anything to the contrary in this Agreement, each Company shall be solely liable for, and shall indemnify and hold harmless each other Company from any Restructuring Tax resulting from a Tainting Act by such first Company or its Affiliates, regardless of whether clause (i) or (ii) of Section 11(a) was satisfied with respect to such Tainting Act. Section 12. Survival of Obligations. The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time. Section 13. Employee Matters. Each of the Companies agrees to utilize, or cause its Affiliates to utilize, the alternative procedure set forth in Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to wage reporting. Section 14. Treatment of Payments; Tax Gross Up 14.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the absence of any change in tax treatment under the Code or other applicable Tax Law, - 27 - (a) any Tax indemnity payments made by a Company under Section 5 shall be reported for Tax purposes by the payor and the recipient as distributions or capital contributions, as appropriate, occurring immediately before the Systems Distribution on the Distribution Date, but only to the extent the payment does not relate to a Tax allocated to the payor in accordance with Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of other applicable Tax Laws), and (b) any Tax Benefit payments made by a Company under Section 6, shall be reported for Tax purposes by the payor and the recipient as distributions or capital contributions, as appropriate, occurring immediately before the Systems Distribution on the Distribution Date, but only to the extent the payment does not relate to a Tax allocated to the payor in accordance with Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of other applicable Tax Laws). 14.02 Tax Gross Up. If notwithstanding the manner in which Tax indemnity payments and Tax Benefit payments were reported, there is an adjustment to the Tax liability of a Company as a result of its receipt of a payment pursuant to this Agreement, such payment shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Income Taxes payable with respect to the receipt thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Income Taxes), shall equal the amount of the payment which the Company receiving such payment would otherwise be entitled to receive pursuant to this Agreement. 14.03 Interest Under This Agreement. Anything herein to the contrary notwithstanding, to the extent one Company ("indemnitor") makes a payment of interest to another Company ("indemnitee") under this Agreement with respect to the period from the date that the indemnitee made a payment of Tax to a Tax Authority to the date that the indemnitor reimbursed the indemnitee for such Tax payment, or with respect to the period from the date that the indemnitor received a Tax Benefit to the date indemnitor paid the Tax Benefit to the indemnitee, the interest - 28 - payment shall be treated as interest expense to the indemnitor (deductible to the extent provided by law) and as interest income by the indemnitee (includible in income to the extent provided by law). The amount of the payment shall not be adjusted under Section 14.02 to take into account any associated Tax Benefit to the indemnitor or increase in Tax to the indemnitee. Section 15. Disagreements. If after good faith negotiations the parties cannot agree on the application of this Agreement to any matter, then the matter will be referred to a nationally recognized accounting firm acceptable to each of the parties (the "Accounting Firm"). The Accounting Firm shall furnish written notice to the parties of its resolution of any such disagreement as soon as practical, but in any event no later than 45 days after its acceptance of the matter for resolution. Any such resolution by the Accounting Firm will be conclusive and binding on all parties to this Agreement. In accordance with Section 17, each party shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the matter to the Accounting Firm. All fees and expenses of the Accounting Firm in connection with such referral shall be shared equally by the parties affected by the matter. Section 16. Late Payments. Any amount owed by one party to another party under this Agreement which is not paid when due shall bear interest at the Prime Rate plus two percent, compounded semiannually, from the due date of the payment to the date paid. To the extent interest required to be paid under this Section 16 duplicates interest required to be paid under any other provision of this Agreement, interest shall be computed at the higher of the interest rate provided under this Section 16 or the interest rate provided under such other provision. Section 17. Expenses. Except as provided in Section 15, each party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement. - 29 - Section 18. General Provisions 18.01 Addresses and Notices. Any notice, demand, request or report required or permitted to be given or made to any party under this Agreement shall be in writing and shall be deemed given or made when delivered in party or when sent by first class mail or by other commercially reasonable means of written communication (including delivery by an internationally recognized courier service or by facsimile transmission) to the party at the party's address as follows: If to GS, at: General Semiconductor, Inc. 10 Melville Park Road Melville, New York 11747-3113 Attn: General Counsel If to Systems, at: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to CommScope, at: CommScope, Inc. 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attn: General Counsel A party may change the address for receiving notices under this Agreement by providing written notice of the change of address to the other parties. 18.02 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. 18.03 Waiver. No failure by any party to insist upon the strict performance of any obligation under this Agreement or to exercise any right or remedy under this Agreement shall constitute waiver of any such obligation, right, or remedy or any other obligation, rights, or remedies under this Agreement. 18.04 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not be affected thereby. - 30 - 18.05 Further Action. The parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other parties in accordance with Section 9. 18.06 Integration. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements and understandings pertaining thereto. In the event of any inconsistency between this Agreement and the Distribution Agreement or any other agreements relating to the transactions contemplated by the Distribution Agreement, the provisions of this Agreement shall control. 18.07 Construction. The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and shall not be strictly construed for or against any party. 18.08 No Double Recovery; Subrogation. No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged party has been fully compensated under any other provision of this Agreement or under any other agreement or action at law or equity. Unless expressly required in this Agreement, a party shall not be required to exhaust all remedies available under other agreements or at law or equity before recovering under the remedies provided in this Agreement. Subject to any limitations provided in this Agreement (for example, the limitation on filing claims for refund in Section 4.06), the indemnifying party shall be subrogated to all rights of the indemnified party for recovery from any third party. 18.09 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. - 31 - 18.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. - 32 - IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective officers as of the date set forth above. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag ---------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ---------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ---------------------- Name: Frank B. Wyatt, II Title: Secretary EX-10.5 9 EXHIBIT 10.5 EXHIBIT 10.5 TRADEMARK LICENSE AGREEMENT TRADEMARK LICENSE AGREEMENT, dated as of July 25, 1997 (this "Agreement"), between and among NextLevel Systems, Inc., a Delaware corporation ("NextLevel Systems"), CommScope, Inc., a Delaware corporation ("CommScope"), and General Semiconductor, Inc., a Delaware corporation ("GS"). RECITALS WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"), is being separated and divided into three separate and independent public companies and, in order to effectuate the separation, (a) GI intends to distribute (the "Next Level Systems Distribution"), as a dividend to the holders of shares of common stock, par value $.01 per share, of GI, shares of common stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems Common Stock") and (b) NextLevel Systems intends to distribute, following the NextLevel Systems Distribution, as a dividend to the holders of NextLevel Systems Common Stock, shares of common stock, par value $.01 per share of CommScope (the "CommScope Distribution"; and, together with the NextLevel Systems Distribution, the "Distributions"); WHEREAS, the Distributions will be effected pursuant to a Distribution Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), among NextLevel Systems, CommScope and GI; WHEREAS, the NextLevel Systems Distribution is becoming effective as of the date hereof (the "NextLevel Systems Distribution Date"); WHEREAS, NextLevel Systems, as a result of the NextLevel Systems Distribution, is the owner of all right, title and interest in and to the GI Trademarks (as hereinafter defined); WHEREAS, NextLevel Systems desires to license to both CommScope and GS the use of the GI Trademarks for limited purposes for a transitional period of time after the NextLevel Systems Distribution Date to avoid operating inefficiencies and unnecessary expense, and CommScope and GS desire to take such license for said purposes; and WHEREAS, the parties hereto have determined that this Agreement is appropriate in order to effectuate the purposes of the Distribution Agreement as described therein. - 1 - NOW, THEREFORE, in consideration of the mutual agreements, undertakings and covenants herein and therein, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE I. DEFINITIONS Section 1.01 General. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Agreement" shall have the meaning specified in the first paragraph hereof. "Ancillary Agreements" shall have the meaning as set forth in the Distribution Agreement. "CommScope Distribution" shall have the meaning specified in the recitals to this Agreement. "Distributions" shall have the meaning specified in the recitals to this Agreement. "Distribution Agreement" shall have the meaning specified in the recitals to this Agreement. "GI Trademarks" shall mean GENERAL INSTRUMENT, the logo "GI", and all other trademarks, service marks, and trade names containing "General Instrument" or variations thereof, along with their respective applications and registrations wherever used or registered and the goodwill associated therewith. "NextLevel Systems Common Stock" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Distribution" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Distribution Date" shall have the meaning specified in the recitals to this Agreement. "Notice" shall have the meaning specified in Section 4.03 hereof. "Subsidiary", with respect to any party, shall mean any corporation, partnership, joint venture or other entity of which such party, directly or indirectly, owns an interest sufficient to elect a majority of the board of directors (or persons performing 2 - similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency). "Transition Period" shall have the meaning specified in Section 2.01(a) hereof. ARTICLE II. GI TRADEMARKS LICENSE Section 2.01 Subject to the terms and conditions of this Agreement, NextLevel Systems hereby grants to each of CommScope and GS a limited, non-assignable, worldwide, non-exclusive, royalty-free license, without right to grant sublicenses (except to Subsidiaries of each of CommScope or GS, as the case may be), to use the GI Trademarks and the goodwill appurtenant thereto, as follows: (a) For a period of up to 12 months (the "Transition Period") following the NextLevel Systems Distribution Date, each of CommScope and GS and their respective Subsidiaries shall be entitled to use and/or sell its existing parts and products which have imprinted thereon the GI Trademarks to the extent that such parts and products were existing inventory (or had been sold by GI) prior to the NextLevel Systems Distribution Date. From and after the NextLevel Systems Distribution Date, CommScope, GS and their respective Subsidiaries shall not print or manufacture any new parts or products bearing the GI Trademarks. Each of CommScope, GS and their respective Subsidiaries shall cease using and/or selling any parts and products bearing the GI Trademarks as soon as practicable but in no event later than the end of the Transition Period. (b) For the Transition Period, each of CommScope and GS and their respective Subsidiaries shall be entitled to use the GI Trademarks on existing signs, stationery, displays or other identification or advertising material to the extent that such signs, stationery, displays or other identification or advertising material were existing prior to the NextLevel Systems Distribution Date. From and after the NextLevel Systems Distribution Date, CommScope, GS and their respective Subsidiaries shall not prepare, print or install any new signs, stationery, displays or other identification or advertising material bearing the GI Trademarks. Each of CommScope, GS and their respective Subsidiaries shall remove any and all references to the GI Trademarks from any and all signs, stationery, displays or other identification or advertising material as soon as practicable but in no event later than the end of the Transition Period. Section 2.02 Each of CommScope and GS, when using the GI Trademarks under this Agreement, undertakes to comply substantially with all laws pertaining to 3 - the GI Trademarks. This provision includes compliance with marking requirements. Each of CommScope and GS represents and warrants that all goods and services to be sold under the GI Trademarks and the marketing, sales, and distribution of them shall meet or exceed all federal, state, and local laws, ordinances, standards, regulations, and guidelines pertaining to such products or activities, including, but not limited to, those pertaining to product safety, quality, labeling and propriety. Each of CommScope and GS agrees that it will not package, market, sell, or distribute any goods or services or cause or permit any goods or services to be packaged, marketed, sold, or distributed in violation of any such federal, state, or local law, ordinance, standard, regulation, or guideline. Section 2.03 The GI Trademarks license granted herein is for the sole purpose of assisting each of CommScope and GS to effectuate the purposes of the Distribution Agreement as described therein and is not assignable or transferable in any manner whatsoever. Section 2.04 Any and all goodwill arising from CommScope's or GS's use of the GI Trademarks shall inure solely to the benefit of NextLevel Systems, and neither CommScope nor GS shall assert any claims to the GI Trademarks or such goodwill. Neither CommScope nor GS shall, at any time, do or suffer to be done any act or thing which in any way adversely affects any rights in and to the GI Trademarks or any goodwill associated therewith or which reduces the value of the GI Trademarks or detracts from their reputation. Section 2.05 (a) The GI Trademarks license granted herein to CommScope may be terminated by NextLevel Systems at any time, at NextLevel Systems' option, in the event of a material breach of any term of this Article II by CommScope, upon written Notice to CommScope. (b) The GI Trademarks license granted herein to GS may be terminated by NextLevel Systems at any time, at NextLevel Systems' option, in the event of a material breach of any term of this Article II by GS, upon written Notice to GS. Section 2.06 Upon termination under Section 2.05 of the GI Trademarks license granted herein, or expiration of the time periods set forth in Section 2.01, (a) CommScope and GS's rights, as applicable, with respect to use of the GI Trademarks in any way shall be as if this Agreement had not been entered into and (b) CommScope and GS, as applicable, shall cease using the GI Trademarks immediately in all ways. In addition, CommScope and GS, as applicable, will destroy all documents and materials bearing the GI Trademarks and will certify to NextLevel Systems that it has done so. CommScope and GS will not at any time adopt or use without NextLevel Systems' prior 4 - written consent, any word or mark which is likely to be similar to or confusing with the GI Trademarks. Section 2.07 Each of CommScope and GS hereby acknowledge NextLevel Systems' exclusive right, title and interest in and to the GI Trademarks and agree that it will not at any time do or cause to be done any act or thing contesting or in any way impairing any part or all of such right, title and interest. CommScope and GS agree that they shall not in any manner represent that they have any ownership in the GI Trademarks or registrations thereof and hereby acknowledge that use of the GI Trademarks will inure to the benefit of NextLevel Systems. ARTICLE III. UNDERTAKINGS Section 3.01 To the extent that the grants of the GI Trademarks licenses under Article II herein would violate or be prohibited by any agreement with a third party, and such GI Trademarks are actually used by the grantee party, then the granting party undertakes to use reasonable efforts to obtain the necessary consent(s) from such third party so as to be permitted to make such grants. However, each party hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications, possibly contemplated by this Agreement will satisfy the provisions of any and all applicable agreements or the requirements of any or all applicable laws or judgments. ARTICLE IV. MISCELLANEOUS Section 4.01 Entire Agreement. This Agreement, together with the Distribution Agreement and the Ancillary Agreements (as defined in the Distribution Agreement) constitute the entire agreement and understanding between and among the parties with respect to the subject matter hereof and shall supersede any prior agreements and understandings among the parties with respect to such subject matter. Section 4.02 Counterparts. This Agreement may be executed with counterpart signature pages or in one or more counterparts, all of which shall be one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to all the parties. Section 4.03 Notices. All notices, consents, requests, waivers or other communications required or permitted under this Agreement (each a "Notice") shall be in writing and shall be sufficiently given (a) if hand delivered or sent by telecopy, (b) if sent 5 - by nationally recognized overnight courier, or (c) if sent by registered or certified mail, postage prepaid, return receipt requested, and in each case addressed as follows: If to NextLevel Systems, to: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to CommScope, to: CommScope, Inc. 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attn: General Counsel If to GS, to: General Semiconductor, Inc. 10 Melville Park Road Melville, New York 11747-3113 Attn: General Counsel or such other address as shall be furnished by any of the parties in a Notice. Any Notice shall be deemed given upon receipt. Section 4.04 Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish the first party's right to demand strict performance thereafter of that or any other provision hereof. Section 4.05 Amendments. This Agreement may be amended, supplemented or waived only by a subsequent writing signed by each of the parties. Section 4.06 Assignment. This Agreement may not be assigned by any party without the consent of the other parties. Section 4.07 Successors and Assigns. All terms and conditions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of the parties. Section 4.08 Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any 6 - entity that becomes a Subsidiary of such party on and after the NextLevel Systems Distribution Date. Section 4.09 Third Party Beneficiaries. Each party intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto. Section 4.10 Specific Performance. Each of the parties hereto acknowledges that there is no adequate remedy at law for failure by such parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the parties hereto under this Agreement. Section 4.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. Section 4.12 Interpretation. The parties intend that the Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986, as amended, so that no gain or loss shall be recognized for Federal income tax purposes as a result of the transaction, and all provisions of this Agreement shall be so interpreted. Section 4.13 Severability. If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transaction contemplated hereby is not affected in any manner adverse to any party. 7 - IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag ---------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ---------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ---------------------- Name: Frank B. Wyatt, II Title: Secretary EX-10.6 10 EXHIBIT 10.6 EXHIBIT 10.6 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT, dated as of July 25, 1997 (this "Agreement"), between NextLevel Systems, Inc., a Delaware corporation ("Service Provider" or "NextLevel Systems") and General Semiconductor, Inc., a Delaware corporation ("Recipient" or "GS"). WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"), is being separated and divided into three separate and independent public companies and, in order to effectuate the separation, (a) GI intends to distribute (the "Next Level Systems Distribution"), as a dividend to the holders of shares of common stock, par value $.01 per share, of GI, shares of common stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems Common Stock") and (b) NextLevel Systems intends to distribute, following the NextLevel Systems Distribution, as a dividend to the holders of NextLevel Systems Common Stock, shares of common stock, par value $.01 per share of CommScope (the "CommScope Distribution"; and, together with the NextLevel Systems Distribution, the "Distributions"); WHEREAS, the Distributions will be effected pursuant to a Distribution Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), among NextLevel Systems, CommScope and GI; WHEREAS, the NextLevel Systems Distribution is becoming effective as of the date hereof (the "NextLevel Systems Distribution Date"); and WHEREAS, in order to facilitate the orderly continuation of Recipient's business for a transitional period after the NextLevel Systems Distribution Date, Service Provider has agreed to provide to Recipient, and Recipient has agreed to purchase from Service Provider, the Transition Services described in this Agreement. NOW, THEREFORE, in consideration of the premises and of the respective covenants and agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Agreement, the following terms shall have the following respective meanings (capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Distribution Agreement): "Agreement" shall have the meaning specified in the first paragraph hereof. "CommScope" shall have the meaning specified in the recitals to this Agreement. "CommScope Distribution" shall have the meaning set forth in the recitals. "Distributions" shall have the meaning specified in the recitals to this Agreement. "Distribution Agreement" shall have the meaning specified in the recitals to this Agreement. "Distribution Date" shall have the meaning specified in the recitals to this Agreement. "GI" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Common Stock" shall have the meaning set forth in the recitals. "NextLevel Systems Distribution" shall have the meaning set forth in the recitals. "NextLevel Systems Distribution Date" shall have the meaning specified in the recitals to this Agreement. "Notice" shall have the meaning specified in Section 4.08 hereof. "Other Services" shall have the meaning specified in Section 2.04. "Recipient" shall have the meaning set forth in the first paragraph hereof. "Service Provider" shall have the meaning set forth in the first paragraph hereof. "Transition Period" shall mean, for each Transition Service, the transition period (commencing on the NextLevel Systems Distribution Date) set forth opposite such Transition Service on Schedule I hereto. "Transition Services" shall mean the administrative services set forth on Schedule I hereto. - 2 - ARTICLE II TRANSITION SERVICES Section 2.01. Transition Period. Service Provider shall make available to Recipient each of the Transition Services for the applicable Transition Period on the terms and subject to the conditions set forth herein. The Transition Period for each Transition Service may be extended for such additional periods as may be mutually agreed by the parties hereto. The Service Provider shall only be obligated to provide Transition Services during normal business hours and in a manner that will not interfere with the Service Provider's business operations. Section 2.02. Fees. Recipient shall pay to Service Provider the fees set forth on Schedule I hereto in respect of each of the Transition Services, plus reasonable out-of-pocket expenses incurred by the Service Provider in providing the Transition Services (including, but not limited to travel, overnight lodging, telephone, postage, reproduction costs, computer time, supplies and parts). Any payments required to be made hereunder shall be due and payable within 30 days of the date of invoice. Recipient shall pay any value-added tax and any tariff, duty, export or import fee, sales tax, use tax, service tax or other tax or charge subsequently imposed by any government or government agency on Recipient or Service Provider with respect to the Transition Services or the execution or performance of this Agreement. Section 2.03. Performance of Transition Services. Service Provider agrees to perform the Transition Services to be provided hereunder in a professional and competent manner, using at least the same standard of care that it uses in performing such services in its own affairs. Recipient understands that the Transition Services provided hereunder are transitional in nature and are furnished by Service Provider solely for the purpose of facilitating the Distributions. Recipient understands that Service Provider is not in the business of providing Transition Services to third parties and has no long term interest in continuing this Agreement. Recipient agrees to make a transition to its own internal organization or other third party suppliers for the Transition Services as promptly as practicable. Section 2.04. Other Services. From time to time, Recipient may find it desirable to request, in addition to the Transition Services, additional services to be made available to Recipient by Service Provider ("Other Services"). It is understood and agreed, however, that Service Provider is under no obligation to provide Other Services, nor has Service Provider made any promises, representations, or commitments to provide Recipient with any such Other Services. Upon Recipient's written request for such Other Services, the parties shall commence negotiations in good faith in order to arrange for the delivery thereof and compensation therefor. Any such Other Services shall only be - 3 - deemed to be Transition Services upon execution of an amendment to Schedule I signed by each party hereto. Section 2.05. Personnel. Service Provider shall select, employ, pay, supervise, and direct all Service Provider personnel providing Transition Services hereunder. Service Provider shall be solely responsible for the payment of all direct and indirect compensation (including fringe benefits) for Service Provider personnel assigned to perform services under this Agreement, and shall be responsible for worker's compensation insurance, employment taxes, and other employer liabilities relating to such personnel. Service Provider shall be solely responsible for assigning personnel to perform the Transition Services, which personnel shall be instructed by Service Provider to perform the Transition Services in a timely, efficient and workmanlike manner. ARTICLE III NO WARRANTIES; LIMITATION ON LIABILITY; INDEMNIFICATION Section 3.01. No Warranties. Service Provider makes no warranties, express or implied, including but not limited to any implied warranties of merchantability or fitness for a particular purpose with respect to the Transition Services to be provided hereunder. Section 3.02. Limitation on Liability. In no event shall Service Provider be liable for any incidental or consequential damages (including without limitation lost profits) to Recipient arising from the provision of the Transition Services by Service Provider hereunder, other than for Service Provider's gross negligence or willful misconduct. Section 3.03. Indemnification. Recipient agrees to indemnify, defend and hold harmless Service Provider, its directors, officers, employees, agents and representatives from any and all claims, actions, demands, judgments, losses, costs, expenses, damages and liabilities (including but not limited to attorneys fees and other expenses of litigation) arising out of or connected with the Transition Services supplied under this Agreement or in any way related to this Agreement, regardless of the legal theory asserted (other than such as result directly from Service Provider's gross negligence or willful misconduct). Recipient further agrees to reimburse Service Provider and indemnify, defend and hold harmless Service Provider, its directors, officers, employees, agents, and representatives from any and all claims, actions, demands, judgments, losses, costs, expenses, damages, and liabilities (including but not limited to attorneys fees and expenses of litigation), arising from or related to any Recipient act or omission connected with the provision of any Transition Service by Service Provider in the performance of this Agreement or caused by any Recipient product or information provided to Service Provider in connection with the Transition Services. This indemnity - 4 - shall apply to claims, actions and demands for which Service Provider may be, or may be claimed to be, partially or solely liable. The parties agree that the indemnities set forth in this Section 3.03 shall not apply to claims between the parties arising out of or connected to this Agreement. Service Provider shall promptly notify Recipient in writing of any claim, action, or demand for which Service Provider intends to claim indemnification hereunder (however, failure to give such notice shall not relieve Recipient from its obligations hereunder). Service Provider agrees that Recipient will control the defense of all claims, actions, or demands which are indemnified against hereunder at Recipient's expense, unless Service Provider notifies Recipient that it will assume responsibility therefor (in which event Recipient shall bear all expenses thereof, including fees and expenses of one counsel and any local counsel). Service Provider will cooperate fully with Recipient and its legal representatives in the investigation and defense of any claim, action, or demand covered by this indemnification. Service Provider will permit Recipient to settle any claim, action or demand and agrees that Recipient will control such settlement, provided, however that such settlement does not adversely affect Service Provider's rights under this Agreement or impose any obligations on Service Provider in addition to those stated in this Agreement. Recipient, in the defense of any claims, actions or demands, will not consent to entry of any judgment or enter into any settlement which does not include as an unconditional term the giving by the claimant or plaintiff to Service Provider of a release from all liability with respect to the claim, action, or demand. No such claim, action, or demand will be settled by Service Provider without the prior written consent of Recipient. ARTICLE IV MISCELLANEOUS Section 4.01. Cooperation. The parties hereto shall cooperate with each other and shall cause their officers, employees, agents, auditors and representatives to cooperate with each other during the Transition Period to facilitate the orderly transition of the separation of the businesses of NextLevel Systems, CommScope and GS and to minimize any disruption to the respective businesses that might result from the transactions contemplated by the Distribution Agreement and hereby. Section 4.02. Relationship of the Parties. The parties hereto agree that, from after the NextLevel Systems Distribution Date, nothing herein shall constitute, be construed to be, or create a partnership, joint venture or similar relationship between them, and that any actions performed by or on behalf of another party hereunder shall be as an agent for such other party. Section 4.03. Amendments. This Agreement may be amended, supplemented or waived only by a subsequent writing signed by all of the parties hereto. - 5 - Section 4.04. Successors and Assigns. All terms and conditions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of the parties hereto. Section 4.05. Termination. This Agreement shall be automatically terminated without action by either party if the Distribution Agreement is terminated and the NextLevel Systems Distribution is abandoned. In the event of such termination, neither party shall have any liability of any kind to the other party. This Agreement, or any Transition Service provided hereunder, may be terminated by either party upon written notice to the other party if the other party fails to perform or otherwise breaches an obligation under this Agreement; provided, however, that such party failing to perform or otherwise breaching shall have thirty days from the date notice of intention to terminate is received to cure the failure to perform or breach of an obligation. Notwithstanding the foregoing, neither party shall be responsible for any delay in the performance of any obligation hereunder due to labor disturbances, accidents, fires, floods, wars, riots, rebellions, blockages, acts of governments, governmental requirements and regulations, restrictions imposed by law or any other similar conditions, beyond the reasonable control and without the fault or negligence of such party, and the time for performance by such party shall be extended by the period of such delay. Section 4.06. Confidentiality. From and after the NextLevel Systems Distribution Date, each of Service Provider and Recipient shall hold, and cause their affiliates, directors, officers, employees, agents, consultants, advisors and representatives to hold, in strict confidence, and shall not make use of, divulge or otherwise disclose any Information (as defined in the Distribution Agreement) concerning the other party's business obtained by it prior to the NextLevel Systems Distribution Date, including any trade secret or other similar proprietary data, or furnished to it by such other party pursuant to the Distribution Agreement, any ancillary agreements to the Distribution Agreement or this Agreement, except disclosure to such of its directors, officers, employees, agents, consultants, advisors, affiliates and representatives, who shall have a bona fide "need to know" and (in the case of agents, consultants, advisors and representatives) who shall execute an agreement agreeing to be bound by the provisions of this Section 4.06, and each party shall be responsible for a breach by any of such persons or representatives; provided, however, that the Service Provider or Recipient, or any of their respective affiliates, may disclose such Information to the extent that: (a) disclosure is compelled by an order of a court of competent jurisdiction or is required by law to be disclosed to a governmental authority and the applicable party uses reasonable efforts to notify the other party prior to (and, to the extent practicable, at least ten days prior to) any disclosure of Information pursuant to the foregoing clause (a), except to the extent that the giving of such notice would be unlawful or violate any order, ruling or directive of any governmental authority; or (b) such party can show that such Information was (i) available to such person on a nonconfidential basis (other than from the other - 6 - party or its affiliates or representatives) prior to the disclosure by the other party, (ii) in the public domain through no fault of such person, or (iii) lawfully acquired by such person from another source after the time it was furnished to such person by the other party, and not acquired from such source subject to any confidentiality obligation on the part of such source, or on the part of the acquiror. Section 4.07. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. Section 4.08. Notices. All notices, consents, requests, waivers or other communications required or permitted under this Agreement (each a "Notice") shall be in writing and shall be sufficiently given (a) if hand delivered or sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c) if sent by registered or certified mail, postage prepaid, return receipt requested, and in each case addressed as follows: If to Service Provider, to: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to Recipient, to: General Semiconductor, Inc. 10 Melville Park Road Melville, New York 11747-3113 Attn: General Counsel or such other address as shall be furnished by any of the Parties in a Notice. Any Notice shall be deemed given upon receipt. Section 4.09. Counterparts. This Agreement may be executed with counterpart signature pages or in one or more counterparts, all of which shall be one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to all the parties hereto. Section 4.10. Interpretation. The parties intend that the Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986, as amended, so that no gain or loss shall be recognized for Federal income tax purposes as a result of the transaction, and all provisions of this Agreement shall be so interpreted. - 7 - Section 4.11. Severability. If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transaction contemplated hereby is not affected in any manner adverse to any party. - 8 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. GENERAL SEMICONDUCTOR, INC. By: /s/ Ronald A. Ostertag -------------------------------- Name: Ronald A. Ostertag Title: Chairman, CEO & President NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar -------------------------------- Name: Keith A. Zar Title: Vice President and General Counsel EX-10.7 11 EXHIBIT 10.7 EXHIBIT 10.7 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT, dated as of July 25, 1997 (this "Agreement"), between NextLevel Systems, Inc., a Delaware corporation ("Service Provider" or "NextLevel Systems") and CommScope, Inc., a Delaware corporation ("Recipient" or "CommScope"). WHEREAS, General Instrument Corporation, a Delaware corporation ("GI"), is being separated and divided into three separate and independent public companies and, in order to effectuate the separation, (a) GI intends to distribute (the "Next Level Systems Distribution"), as a dividend to the holders of shares of common stock, par value $.01 per share, of GI, shares of common stock, par value $.01 per share, of NextLevel Systems (the "NextLevel Systems Common Stock") and (b) NextLevel Systems intends to distribute, following the NextLevel Systems Distribution, as a dividend to the holders of NextLevel Systems Common Stock, shares of common stock, par value $.01 per share of CommScope (the "CommScope Distribution"; and, together with the NextLevel Systems Distribution, the "Distributions"); WHEREAS, the Distributions will be effected pursuant to a Distribution Agreement, dated as of June 12, 1997 (the "Distribution Agreement"), among NextLevel Systems, CommScope and GI; WHEREAS, the NextLevel Systems Distribution is becoming effective as of the date hereof (the "NextLevel Systems Distribution Date"); and WHEREAS, in order to facilitate the orderly continuation of Recipient's business for a transitional period after the NextLevel Systems Distribution Date, Service Provider has agreed to provide to Recipient, and Recipient has agreed to purchase from Service Provider, the Transition Services described in this Agreement; NOW, THEREFORE, in consideration of the premises and of the respective covenants and agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Agreement, the following terms shall have the following respective meanings (capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Distribution Agreement): "Agreement" shall have the meaning specified in the first paragraph hereof. "CommScope Distribution" shall have the meaning specified in the recitals to this Agreement. "Distributions" shall have the meaning specified in the recitals to this Agreement. "Distribution Agreement" shall have the meaning specified in the recitals to this Agreement. "GI" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Common Stock" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Distribution" shall have the meaning specified in the recitals to this Agreement. "NextLevel Systems Distribution Date" shall have the meaning specified in the recitals to this Agreement. "Notice" shall have the meaning specified in Section 4.08 hereof. "Other Services" shall have the meaning specified in Section 2.04. "Recipient" shall have the meaning set forth in the first paragraph hereof. "Service Provider" shall have the meaning set forth in the first paragraph hereof. "Transition Period" shall mean, for each Transition Service, the transition period (commencing on the NextLevel Systems Distribution Date) set forth opposite such Transition Service on Schedule I hereto. "Transition Services" shall mean the administrative services set forth on Schedule I hereto. ARTICLE II TRANSITION SERVICES Section 2.01. Transition Period. Service Provider shall make available to Recipient each of the Transition Services for the applicable Transition Period on the terms and subject to the conditions set forth herein. The Transition Period for each Transition Service may be extended for such additional periods as may be mutually agreed by the parties hereto. The Service Provider shall only be obligated to provide - 2 - Transition Services during normal business hours and in a manner that will not interfere with the Service Provider's business operations. Section 2.02. Fees. Recipient shall pay to Service Provider the fees set forth on Schedule I hereto in respect of each of the Transition Services, plus reasonable out-of-pocket expenses incurred by the Service Provider in providing the Transition Services (including, but not limited to travel, overnight lodging, telephone, postage, reproduction costs, computer time, supplies and parts). Any payments required to be made hereunder shall be due and payable within 30 days of the date of invoice. Recipient shall pay any value-added tax and any tariff, duty, export or import fee, sales tax, use tax, service tax or other tax or charge subsequently imposed by any government or government agency on Recipient or Service Provider with respect to the Transition Services or the execution or performance of this Agreement. Section 2.03. Performance of Transition Services. Service Provider agrees to perform the Transition Services to be provided hereunder in a professional and competent manner, using at least the same standard of care that it uses in performing such services in its own affairs. Recipient understands that the Transition Services provided hereunder are transitional in nature and are furnished by Service Provider solely for the purpose of facilitating the Distributions. Recipient understands that Service Provider is not in the business of providing Transition Services to third parties and has no long term interest in continuing this Agreement. Recipient agrees to make a transition to its own internal organization or other third party suppliers for the Transition Services as promptly as practicable. Section 2.04. Other Services. From time to time, Recipient may find it desirable to request, in addition to the Transition Services, additional services to be made available to Recipient by Service Provider ("Other Services"). It is understood and agreed, however, that Service Provider is under no obligation to provide Other Services, nor has Service Provider made any promises, representations, or commitments to provide Recipient with any such Other Services. Upon Recipient's written request for such Other Services, the parties shall commence negotiations in good faith in order to arrange for the delivery thereof and compensation therefor. Any such Other Services shall only be deemed to be Transition Services upon execution of an amendment to Schedule I signed by each party hereto. Section 2.05. Personnel. Service Provider shall select, employ, pay, supervise, and direct all Service Provider personnel providing Transition Services hereunder. Service Provider shall be solely responsible for the payment of all direct and indirect compensation (including fringe benefits) for Service Provider personnel assigned to perform services under this Agreement, and shall be responsible for worker's compensation insurance, employment taxes, and other employer liabilities relating to such - 3 - personnel. Service Provider shall be solely responsible for assigning personnel to perform the Transition Services, which personnel shall be instructed by Service Provider to perform the Transition Services in a timely, efficient and workmanlike manner. ARTICLE III NO WARRANTIES; LIMITATION ON LIABILITY; INDEMNIFICATION Section 3.01. No Warranties. Service Provider makes no warranties, express or implied, including but not limited to any implied warranties of merchantability or fitness for a particular purpose with respect to the Transition Services to be provided hereunder. Section 3.02. Limitation on Liability. In no event shall Service Provider be liable for any incidental or consequential damages (including without limitation lost profits) to Recipient arising from the provision of the Transition Services by Service Provider hereunder, other than for Service Provider's gross negligence or willful misconduct. Section 3.03. Indemnification. Recipient agrees to indemnify, defend and hold harmless Service Provider, its directors, officers, employees, agents and representatives from any and all claims, actions, demands, judgments, losses, costs, expenses, damages and liabilities (including but not limited to attorneys fees and other expenses of litigation) arising out of or connected with the Transition Services supplied under this Agreement or in any way related to this Agreement, regardless of the legal theory asserted (other than such as result directly from Service Provider's gross negligence or willful misconduct). Recipient further agrees to reimburse Service Provider and indemnify, defend and hold harmless Service Provider, its directors, officers, employees, agents, and representatives from any and all claims, actions, demands, judgments, losses, costs, expenses, damages, and liabilities (including but not limited to attorneys fees and expenses of litigation), arising from or related to any Recipient act or omission connected with the provision of any Transition Service by Service Provider in the performance of this Agreement or caused by any Recipient product or information provided to Service Provider in connection with the Transition Services. This indemnity shall apply to claims, actions and demands for which Service Provider may be, or may be claimed to be, partially or solely liable. The parties agree that the indemnities set forth in this Section 3.03 shall not apply to claims between the parties arising out of or connected to this Agreement. Service Provider shall promptly notify Recipient in writing of any claim, action, or demand for which Service Provider intends to claim indemnification hereunder (however, failure to give such notice shall not relieve Recipient from its obligations hereunder). Service Provider agrees that Recipient will control the defense of all claims, actions, or demands which are indemnified against hereunder at Recipient's expense, unless Service Provider notifies Recipient that it will assume responsibility - 4 - therefor (in which event Recipient shall bear all expenses thereof, including fees and expenses of one counsel and any local counsel). Service Provider will cooperate fully with Recipient and its legal representatives in the investigation and defense of any claim, action, or demand covered by this indemnification. Service Provider will permit Recipient to settle any claim, action or demand and agrees that Recipient will control such settlement, provided, however that such settlement does not adversely affect Service Provider's rights under this Agreement or impose any obligations on Service Provider in addition to those stated in this Agreement. Recipient, in the defense of any claims, actions or demands, will not consent to entry of any judgment or enter into any settlement which does not include as an unconditional term the giving by the claimant or plaintiff to Service Provider of a release from all liability with respect to the claim, action, or demand. No such claim, action, or demand will be settled by Service Provider without the prior written consent of Recipient. ARTICLE IV MISCELLANEOUS Section 4.01. Cooperation. The parties hereto shall cooperate with each other and shall cause their officers, employees, agents, auditors and representatives to cooperate with each other during the Transition Period to facilitate the orderly transition of the separation of the businesses of NextLevel Systems, CommScope and GS and to minimize any disruption to the respective businesses that might result from the transactions contemplated by the Distribution Agreement and hereby. Section 4.02. Relationship of the Parties. The parties hereto agree that, from after the NextLevel Systems Distribution Date, nothing herein shall constitute, be construed to be, or create a partnership, joint venture or similar relationship between them, and that any actions performed by or on behalf of another party hereunder shall be as an agent for such other party. Section 4.03. Amendments. This Agreement may be amended, supplemented or waived only by a subsequent writing signed by all of the parties hereto. Section 4.04. Successors and Assigns. All terms and conditions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of the parties hereto. Section 4.05. Termination. This Agreement shall be automatically terminated without action by either party if the Distribution Agreement is terminated and the NextLevel Systems Distribution is abandoned. In the event of such termination, neither party shall have any liability of any kind to the other party. This Agreement, or - 5 - any Transition Service provided hereunder, may be terminated by either party upon written notice to the other party if the other party fails to perform or otherwise breaches an obligation under this Agreement; provided, however, that such party failing to perform or otherwise breaching shall have thirty days from the date notice of intention to terminate is received to cure the failure to perform or breach of an obligation. Notwithstanding the foregoing, neither party shall be responsible for any delay in the performance of any obligation hereunder due to labor disturbances, accidents, fires, floods, wars, riots, rebellions, blockages, acts of governments, governmental requirements and regulations, restrictions imposed by law or any other similar conditions, beyond the reasonable control and without the fault or negligence of such party, and the time for performance by such party shall be extended by the period of such delay. Section 4.06. Confidentiality. From and after the NextLevel Systems Distribution Date, each of Service Provider and Recipient shall hold, and cause their affiliates, directors, officers, employees, agents, consultants, advisors and representatives to hold, in strict confidence, and shall not make use of, divulge or otherwise disclose any Information (as defined in the Distribution Agreement) concerning the other party's business obtained by it prior to the NextLevel Systems Distribution Date, including any trade secret or other similar proprietary data, or furnished to it by such other party pursuant to the Distribution Agreement, any ancillary agreements to the Distribution Agreement or this Agreement, except disclosure to such of its directors, officers, employees, agents, consultants, advisors, affiliates and representatives, who shall have a bona fide "need to know" and (in the case of agents, consultants, advisors and representatives) who shall execute an agreement agreeing to be bound by the provisions of this Section 4.06, and each party shall be responsible for a breach by any of such persons or representatives; provided, however, that the Service Provider or Recipient, or any of their respective affiliates, may disclose such Information to the extent that: (a) disclosure is compelled by an order of a court of competent jurisdiction or is required by law to be disclosed to a governmental authority and the applicable party uses reasonable efforts to notify the other party prior to (and, to the extent practicable, at least ten days prior to) any disclosure of Information pursuant to the foregoing clause (a), except to the extent that the giving of such notice would be unlawful or violate any order, ruling or directive of any governmental authority; or (b) such party can show that such Information was (i) available to such person on a nonconfidential basis (other than from the other party or its affiliates or representatives) prior to the disclosure by the other party, (ii) in the public domain through no fault of such person, or (iii) lawfully acquired by such person from another source after the time it was furnished to such person by the other party, and not acquired from such source subject to any confidentiality obligation on the part of such source, or on the part of the acquiror. Section 4.07. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, - 6 - THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER. Section 4.08. Notices. All notices, consents, requests, waivers or other communications required or permitted under this Agreement (each a "Notice") shall be in writing and shall be sufficiently given (a) if hand delivered or sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c) if sent by registered or certified mail, postage prepaid, return receipt requested, and in each case addressed as follows: If to Service Provider, to: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue Chicago, Illinois 60631 Attn: General Counsel If to Recipient, to: CommScope, Inc. 1375 Lenoir-Rhyne Boulevard Hickory, North Carolina 28601 Attn: General Counsel or such other address as shall be furnished by any of the Parties in a Notice. Any Notice shall be deemed given upon receipt. Section 4.09. Counterparts. This Agreement may be executed with counterpart signature pages or in one or more counterparts, all of which shall be one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to all the parties hereto. Section 4.10. Interpretation. The parties intend that the Distributions shall be tax-free pursuant to the Internal Revenue Code of 1986, as amended, so that no gain or loss shall be recognized for Federal income tax purposes as a result of the transaction, and all provisions of this Agreement shall be so interpreted. Section 4.11. Severability. If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transaction contemplated hereby is not affected in any manner adverse to any party. - 7 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. NEXTLEVEL SYSTEMS, INC. By: /s/ Keith A. Zar ---------------- Name: Keith A. Zar Title: Vice President and General Counsel COMMSCOPE, INC. By: /s/ Frank B. Wyatt, II ---------------------- Name: Frank B. Wyatt, II Title: Secretary EX-10.8 12 EXHIBIT 10.8 EXHIBIT 10.8 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CREDIT AGREEMENT among NEXTLEVEL SYSTEMS, INC., CERTAIN BANKS, THE CHASE MANHATTAN BANK, as Administrative Agent, and THE CHASE MANHATTAN BANK, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANKBOSTON, N.A., THE BANK OF NOVA SCOTIA, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, CAISSE NATIONALE DE CREDIT AGRICOLE, CIBC INC., DEUTSCHE BANK, AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, THE FUJI BANK LIMITED, AND NATIONSBANK, N.A. as Co-Agents Dated as of July 23, 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- SECTION 1 DEFINITIONS........................................... 2 1.1 Defined Terms......................................... 2 1.2 Other Definitional Provisions......................... 21 SECTION 2 AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS.................................. 21 2.1 Revolving Credit Commitments......................... 21 2.2 Proceeds of Revolving Credit Loans................... 22 2.3 Issuance of Letters of Credit........................ 22 2.4 Participating Interests.............................. 23 2.5 Procedure for Opening Letters of Credit.............. 23 2.6 Payments in Respect of Letters of Credit............. 23 2.7 The Bid Loans........................................ 24 2.8 Procedure for Bid Loan Borrowing..................... 24 2.9 Bid Loan Payments.................................... 27 2.10 Swing Line Commitment................................ 27 2.11 Participations....................................... 29 SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT......................... 30 3.1 Procedure for Borrowing.............................. 30 3.2 Conversion Options................................... 30 3.3 Changes of Commitment Amounts........................ 31 3.4 Optional Prepayments................................. 32 3.5 Mandatory Prepayments................................ 32 3.6 Interest Rates and Payment Dates..................... 33 3.7 Computation of Interest and Fees..................... 34 3.8 Facility Fees........................................ 34 3.9 Certain Fees......................................... 34 3.10 Letter of Credit Fees................................ 34 3.11 Letter of Credit Reserves............................ 35 3.12 Further Assurances................................... 36 3.13 Obligations Absolute................................. 36 3.14 Assignments.......................................... 37 3.15 Participations....................................... 37 3.16 Inability to Determine Interest Rate................. 37 3.17 Pro Rata Treatment and Payments...................... 38 3.18 Illegality........................................... 41 3.19 Requirements of Law.................................. 41 3.20 Indemnity............................................ 42 -i- PAGE ---- 3.21 Repayment of Loans, Evidence of Debt................. 43 3.22 Mitigation Obligations; Replacement of Banks......... 44 SECTION 4 REPRESENTATIONS AND WARRANTIES....................... 45 4.1 Financial Condition................................. 45 4.2 No Material Change.................................. 46 4.3 Corporate Existence; Compliance with Law............ 47 4.4 Corporate Power; Authorization...................... 47 4.5 Enforceable Obligations............................. 47 4.6 No Legal Bar........................................ 48 4.7 No Material Litigation.............................. 48 4.8 Investment Company Act.............................. 48 4.9 Federal Regulation.................................. 48 4.10 No Default.......................................... 48 4.11 No Burdensome Restrictions.......................... 49 4.12 Taxes............................................... 49 4.13 Subsidiaries........................................ 49 4.14 Ownership of Property; Liens........................ 49 4.15 ERISA............................................... 50 4.16 Accuracy of Disclosure.............................. 50 4.17 Intellectual Property............................... 50 SECTION 5 CONDITIONS PRECEDENT................................ 50 5.1 Conditions to Effectiveness of this Agreement....... 50 5.2 Conditions to Initial Loans and Letters of Credit... 53 5.3 Conditions to All Loans and Letters of Credit....... 53 SECTION 6 AFFIRMATIVE COVENANTS............................... 54 6.1 Financial Statements................................ 54 6.2 Certificates; Other Information..................... 55 6.3 Payment of Obligations.............................. 57 6.4 Conduct of Business and Maintenance of Existence.... 57 6.5 Maintenance of Property; Insurance.................. 57 6.6 Inspection of Property; Books and Records; Discussions........................................ 57 6.7 Notices............................................. 58 6.8 Additional Subsidiary Guarantors.................... 59 SECTION 7 NEGATIVE COVENANTS.................................. 59 7.1 Amendments of Spin-Off Documents.................... 59 7.2 Limitation on Liens................................. 60 7.3 Limitation on Guarantee Obligations................. 61 -ii- PAGE ---- 7.4 Prohibition of Fundamental Changes.................. 62 7.5 Limitation on Sale of Assets........................ 62 7.6 Limitation on Investments, Loans and Advances....... 62 7.7 Maintenance of Consolidated Net Worth............... 63 7.8 Maintenance of Interest Coverage.................... 63 7.9 Maintenance of Leverage Ratio....................... 63 7.10 Limitation on Dividends and Stock Repurchases....... 63 7.11 Transactions with Affiliates........................ 63 7.12 Foreign Exchange Contracts.......................... 63 7.13 Fiscal Year......................................... 64 SECTION 8 EVENTS OF DEFAULT................................... 64 SECTION 9 THE CO-AGENTS; THE ADMINISTRATIVE AGENT; ISSUING BANKS................................ 67 9.1 Appointment.......................................... 67 9.2 Delegation of Duties................................. 67 9.3 Exculpatory Provisions............................... 67 9.4 Reliance by Co-Agents and Administrative Agent............................................... 68 9.5 Notice of Default.................................... 68 9.6 Non-Reliance on Co-Agents, Administrative Agent and Other Banks..................................... 68 9.7 Indemnification...................................... 69 9.8 Co-Agents and Administrative Agent in their Individual Capacities............................... 69 9.9 Successor Co-Agent or Administrative Agent........... 70 9.10 An Issuing Bank as Issuer of Letters of Credit....... 70 SECTION 10 MISCELLANEOUS........................................ 70 10.1 Amendments and Waivers............................... 70 10.2 Notices.............................................. 71 10.3 No Waiver; Cumulative Remedies....................... 74 10.4 Survival of Representations and Warranties........... 74 10.5 Payment of Expenses and Taxes........................ 74 10.6 Successors and Assigns; Participations; Purchasing Banks..................... 75 10.7 Adjustments; Set-off................................. 78 10.8 Judgment............................................. 79 10.9 Counterparts......................................... 80 10.10 Integration.......................................... 80 10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS................. 80 10.12 SUBMISSION TO JURISDICTION; WAIVERS.................. 80 10.13 Acknowledgements..................................... 81 -iii- SCHEDULES: Schedule I Lists of Addresses for Notices; Lending Offices; Commitment Amounts Schedule II Available Foreign Currencies Schedule III RESERVED Schedule IV Domestic Subsidiaries Schedule V Foreign Subsidiaries Schedule VI Consents Schedule VII Guarantee Obligations EXHIBITS: Exhibit A Bid Loan Confirmation Exhibit B Bid Loan Offer Exhibit C Bid Loan Request Exhibit D Subsidiary Guarantee Exhibit E-1 Opinion of Fried, Frank, Harris, Shriver & Jacobson Exhibit E-2 Opinion of Keith A. Zar, Esq. Exhibit F Company Closing Certificate Exhibit G L/C Participation Certificate Exhibit H Swing Line Loan Participation Certificate Exhibit I Assignment and Acceptance Exhibit J Exemption Certificate -iv- CREDIT AGREEMENT, dated as of July 23, 1997, among NEXTLEVEL SYSTEMS, INC., a Delaware corporation (the "Company"), the several lenders from time to time parties hereto (the "Banks"), THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Banks (in such capacity, the "Administrative Agent"), and The Chase Manhattan Bank ("Chase"), Bank of America National Trust and Savings Association, BankBoston, N.A., The Bank of Nova Scotia, Bank of Tokyo-Mitsubishi Trust Company, Caisse Nationale de Credit Agricole, CIBC Inc., Deutsche Bank, AG, New York Branch and/or Cayman Islands Branch, The Fuji Bank, Limited and NationsBank, N.A. as co-agents for the Banks (in such capacity, collectively, the "Co-Agents"; each, individually, a "Co-Agent"). W I T N E S S E T H: 1. Pursuant to the Distribution Agreement dated as of June 12, 1997 (as amended, modified or supplemented from time to time in accordance with subsection 7.1, the "Distribution Agreement") among General Instrument Corporation, a Delaware corporation ("GI Holdings"), the Company, which is an indirect wholly-owned Subsidiary (such term and the other capitalized terms used in these recitals having the meaning set forth in this Agreement unless the context otherwise requires) of GI Holdings, and CommScope, Inc., a Delaware corporation ("CommScope") which is an indirect wholly-owned Subsidiary of GI Holdings, GI Holdings has agreed to separate and divide the existing businesses of GI Holdings so that (a) the business (the "Communications Business") of the manufacture and sale of broadband communications products used in the cable television, satellite and telecommunications industries shall be owned directly and indirectly by the Company, (b) the business (the "Cable Manufacturing Business") of the manufacture and sale of coaxial, fiber optic and other electronic cable used in the cable television, satellite and other industries shall be owned directly and indirectly by CommScope, and (c) the business (the "Power Semiconductor Business") of the manufacture and sale of discrete power rectifiers and transient voltage suppression components used in telecommunications, automotive and consumer electronic products shall be directly and indirectly owned by GI Holdings which will be merged with General Instrument Corporation of Delaware, Inc., a Delaware corporation ("GI Delaware"), with GI Holdings as the surviving corporation, and be renamed "General Semiconductor, Inc.", a Delaware corporation ("General Semiconductor"), immediately following the separation and division described above and prior to the distribution described in the succeeding paragraph. 2. Following the separation and division described in the preceding paragraph (a) GI Holdings shall distribute, as a dividend to the holders of the shares of its common stock, all of the capital stock of the Company, which, at the time of the distribution, will own all of the capital stock of CommScope, and promptly thereafter (b) the Company shall distribute, as a dividend to the holders of the shares of its common stock, all of the capital stock of CommScope (the transactions described in paragraph 1 above and this paragraph 2, as more particularly described in the S-4 Filing (as defined below), the "Spin-Off"). 3. Pursuant to the Distribution Agreement and in connection with the Spin-Off, certain pre-existing indebtedness of GI Holdings, the Company and CommScope and their respective Subsidiaries will be paid in full and cancelled and certain other transactions will be consummated (the Spin-Off and the other transactions to be performed pursuant to and in connection with the Spin-Off, the "Spin-Off Transactions"). 4. The Company has requested that the Banks, the Administrative Agent and the Co-Agents enter this Agreement in order to make available to the Company the $600,000,000 credit facilities described herein on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company, the Banks, the Administrative Agent and the Co-Agents hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms defined in the preamble hereto shall have the meanings set forth therein, and the following terms have the following meanings: "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chase in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is 2 unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the ABR shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans whose interest rate is based on the ABR. "Absolute Rate Bid Loan": any Bid Loan bearing interest at an absolute fixed rate. "Absolute Rate Bid Loan Request": any Bid Loan Request requesting the Bid Loan Lenders to offer to make Bid Loans at an absolute fixed rate for the term of the Bid Loan. "Administrative Agent": as defined in the preamble hereto. "Affiliate": of any Person (a) any Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person, or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding the foregoing, CommScope and its Subsidiaries shall be deemed to be Affiliates of the Company and its Subsidiaries for any period during which CommScope is a Subsidiary of the Company. "Aggregate Extensions of Credit": at any particular time, the sum of (a) the aggregate then outstanding principal amount of the Revolving Credit Loans, (b) the aggregate then outstanding Dollar Equivalent Amount of the principal amount of the Bid Loans, (c) the aggregate amount then available to be drawn under all outstanding Letters of Credit, (d) the aggregate amount of Revolving L/C Obligations and (e) the aggregate then outstanding principal amount of the Swing Line Loans. "Agreement": this Credit Agreement, as amended, supplemented or modified from time to time. "Agreement Currency": as defined in subsection 10.8(b). "Alternate Rate Loan": as defined in subsection 3.18. "Applicable Index Rate": in respect of any Bid Loan requested pursuant to an Index Rate Bid Loan Request, the applicable Eurocurrency Rate. 3 "Applicable Margin": for each Eurodollar Loan, the Facility Fee and the Standby L/C fees, the rate per annum determined from time to time based upon the Leverage Ratio determined as of the last day of the most recent fiscal quarter for which the Company has delivered financial statements pursuant to subsections 6.1(a) and (b) and the related certificate of the chief financial officer of the Company referred to in subsection 6.2 as set forth under the relevant column heading below opposite such Leverage Ratio: (in basis points) Eurodollar Loan Standby Leverage Ratio Applicable Margin Facility Fee L/C Fee - -------------- ----------------- ------------ -------- Less than 0.75 to 1.0 15.50 7.00 15.50 Less than 1.0 to 1.0 but greater than or equal to 0.75 to 1.0 17.00 8.00 17.00 Less than 1.25 to 1.0 but greater than or equal to 1.0 to 1.0 18.50 9.00 18.50 Less than 1.75 to 1.0 but greater than or equal to 1.25 to 1.0 22.50 10.00 22.50 Less than 2.25 to 1.0 but greater than or equal to 1.75 to 1.0 25.00 15.00 25.00 Greater than or equal to 2.25 to 1.0 43.75 18.75 43.75 For the purpose of this Agreement, any change in the Eurodollar Loan Applicable Margin, the Facility Fee and the Standby L/C fees shall become effective on the day following the delivery to the Administrative Agent by the Company of the financial statements referred to in subsections 6.1(a) and (b) and the related certificate of the chief financial officer of the Company referred to in subsection 6.2 indicating the Leverage Ratio as of the last day of such period. If the Company shall fail to deliver the financial statements referred to in subsections 6.1(a) and (b) and the related certificate of the chief financial officer of the Company referred to in subsection 6.2 indicating the Leverage Ratio as of such last day, then the Applicable Margin, Facility Fee and Standby L/C fee shall automatically, and without further act of the Administrative Agent, the Co-Agents or any Bank, equal the highest Applicable Margin, Facility Fee and Standby L/C Fee set forth above. Notwithstanding the foregoing, for the period from the Closing Date through January 25, 1998, the Applicable Margin shall be calculated as if the Leverage Ratio was less than 1.75 to 1.0 but greater than or equal to 1.25 to 1.0. "Assignee": as defined in subsection 10.6(c). "Assignment and Acceptance": an Assignment and Acceptance substantially in 4 the form of Exhibit I hereto. "Available Foreign Currencies": the currencies set forth on Schedule II, and any other available and freely-convertible non-Dollar currency selected by the Company and approved by the Administrative Agent in the manner described in subsection 10.1(c). "Available Revolving Credit Commitments": as to all the Banks, at a particular time, an amount equal to the excess, if any, of (a) the Revolving Credit Commitments at such time less (b) the Aggregate Extensions of Credit. "Banks": as defined in the preamble hereto. "Benefitted Bank": as defined in subsection 10.7 hereof. "Bid Loan": each Bid Loan made pursuant to subsection 2.7. "Bid Loan Commitment Period": the period from and including the Closing Date until the date which is 15 days prior to the Revolving Credit Termination Date. "Bid Loan Confirmation": each confirmation by the Company of its acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be substantially in the form of Exhibit A and shall be delivered to the Administrative Agent in writing, by telex or by facsimile transmission. "Bid Loan Interest Payment Date": as to each Bid Loan, each interest payment date specified by the Company for such Bid Loan in the related Bid Loan Request. "Bid Loan Lenders": Banks from time to time designated by the Company as Bid Loan Lenders as provided in subsection 2.7. "Bid Loan Maturity Date": as to any Bid Loan, the date specified by the Company pursuant to subsection 2.8(d)(2) in its acceptance of the related Bid Loan Offer. "Bid Loan Offer": each offer by a Bid Loan Lender to make Bid Loans pursuant to a Bid Loan Request, which Bid Loan Offer shall contain the information specified in Exhibit B and shall be delivered to the Administrative Agent by telephone, immediately confirmed by telex or facsimile transmission. "Bid Loan Request": each request by the Company for Bid Loan Lenders to submit bids to make Bid Loans, which request shall contain the information in respect of such requested Bid Loans specified in Exhibit C and shall be delivered to the Administrative Agent in writing, by telex or facsimile transmission, or by telephone, immediately confirmed by telex or facsimile transmission. "Board": the Board of Governors of the Federal Reserve System of the United States. "Borrowing Date": any Business Day, or, in the case of Eurocurrency Loans, any Working Day, specified in a notice pursuant to (a) subsection 2.8, 2.10 or 3.1 as a date on 5 which the Company requests Bid Loan Lenders to make Bid Loans, a Swing Line Bank to make Swing Line Loans or the Banks to make Revolving Credit Loans, respectively, hereunder or (b) subsection 2.5 as a date on which the Company requests an Issuing Bank to issue a Letter of Credit hereunder. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Chicago, Illinois are authorized or required by law to close. "Cable Manufacturing Business": as defined in the recitals hereto. "C/D Assessment Rate": for any day as applied to any ABR Loan, the net annual assessment rate (rounded upward to the nearest 1/100th of 1%) determined by the Administrative Agent to be payable on such day to the Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's insuring time deposits made in Dollars at the offices of Chase in the United States. "CD Reserve Percentage": for any day as applied to any ABR Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board (or any successor), for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Change in Law": with respect to any Bank, the adoption of any law, rule, regulation, policy, guideline or directive (whether or not having the force of law) or any change therein or in the interpretation or application thereof by any Governmental Authority, including, without limitation, the issuance of any final rule, regulation or guideline by any regulatory agency having jurisdiction over such Bank. "Chase": as defined in the preamble hereto. "Class": as to any Loan, its nature as a Revolving Credit Loan, Bid Loan or Swing Line Loan. "Closing Date": as defined in subsection 5.2. "Co-Agents": as defined in the preamble hereto. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commercial L/C": a commercial documentary Letter of Credit under which the relevant Issuing Bank agrees to make payments in Dollars for the account of the Company, on behalf of the Company or any Subsidiary thereof, in respect of obligations of the Company or any Subsidiary thereof in connection with the importation or exportation of goods in the ordinary course of business. "Commitment Percentage" or "Revolving Credit Commitment Percentage": as to any Bank at any time, the percentage which such Bank's Revolving Credit Commitment constitutes of all Revolving Credit Commitments. 6 "Commitments": the collective reference to the Revolving Credit Commitments and the Swing Line Commitment; individually, a "Commitment". "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code. "CommScope": as defined in the recitals hereto. "Communications Business": as defined in the recitals hereto. "Company": as defined in the preamble hereto. "Consolidated EBITDA": for any period, the Consolidated Net Income ((i) including earnings and losses from discontinued operations and (ii) excluding extraordinary non-cash gains and losses) of the Company and its Subsidiaries for such period, plus to the extent reflected as a charge in the statement of consolidated net income for such period, the sum of (a) interest expense (net of interest income), amortization and write offs of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Letters of Credit, (b) taxes measured by income, (c) depreciation and amortization expenses (including accelerated amortization of purchased in-process technologies), (d) non-cash compensation expenses arising from the sale of stock, the granting of stock options, the granting of stock appreciation rights and similar arrangements and (e) pre-tax charges related to costs incurred in connection with the Spin-Off not exceeding $10,000,000 in the aggregate for the period from July 1, 1997 to December 31, 1997; provided, that, (i) Consolidated EBITDA for the period of four consecutive quarters ending September 30, 1997 shall be equal to the product of (A) Consolidated EBITDA for the fiscal quarter ending September 30, 1997 times (B) 4, (ii) Consolidated EBITDA for the period of four consecutive fiscal quarters ending December 31, 1997 shall be equal to the product of (A) Consolidated EBITDA for the two consecutive fiscal quarters ending December 31, 1997 times (B) 2, and (iii) Consolidated EBITDA for the period of four consecutive fiscal quarters March 31, 1998 shall be equal to the product of (A) Consolidated EBITDA for the three consecutive fiscal quarters ending March 31, 1998 times (B) 4/3. "Consolidated Interest Expense": for any period the amount of interest expense both expensed and capitalized (excluding amortization and write offs of debt discount and debt issuance costs), net of interest income, of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP for such period; provided, however, the interest portion of lease payments accrued under the leases established under the Lease Facility shall be excluded from the calculation of Consolidated Interest Expense to the extent such interest portion is deducted in determining Consolidated EBITDA; provided, that, (i) Consolidated Interest Expense for the period of four consecutive fiscal quarters ending September 30 1997 shall be equal to the product of (A) Consolidated Interest Expense for the fiscal quarter ending September 30, 1997 times (B) 4, (ii) Consolidated Interest Expense for the period of four consecutive fiscal quarter ending December 31, 1997 shall be equal to the product of (A) Consolidated Interest 7 Expense for the two consecutive fiscal quarters ending December 31, 1997 times (B) 2, and (iii) Consolidated Interest Expense for the period of four consecutive fiscal quarters ending March 31, 1998 shall be equal to the product (A) Consolidated Interest Expense for the three consecutive fiscal quarters ending March 31, 1998 times (B) 4/3. "Consolidated Net Income": for any period, the net income or net loss of the Company and its Subsidiaries for such period, determined in accordance with GAAP on a consolidated basis, as reflected in the financial statements furnished to the Administrative Agent in accordance with subsections 6.1(a) and (b) hereof. "Consolidated Net Worth": as of any date of determination, all items which in conformity with GAAP would be included under shareholders' equity on a consolidated balance sheet of the Company and its Subsidiaries at such date, provided, that such amount shall be increased, on a cumulative basis from June 30, 1997, for (i) amortization and write-offs of debt discount and debt issuance costs and (ii) any amount reflected as a charge in the Company's consolidated income statements for non-cash compensation arising from the sale of stock, the granting of stock options, the granting of stock appreciation rights and similar arrangements. "Consolidated Total Indebtedness": as of any date of determination, all Indebtedness of the Company and its Subsidiaries which would be reflected as debt on a consolidated balance sheet of the Company prepared in accordance with GAAP, excluding to the extent otherwise included the Indebtedness of the Company and its Subsidiaries consisting of Lease Obligations under leases entered into in connection with the Lease Facility (regardless of the treatment of such Indebtedness under GAAP). "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of the property owned by it is bound. "Credit Documents": the collective reference to this Agreement, any Registered Form Notes and any Subsidiary Guarantee executed and delivered pursuant to the terms of subsection 6.8. "Credit Parties": the collective reference to the Company and each Subsidiary which is a party, or which at any time becomes a party, to a Credit Document. "Currency" or "Currencies": the collective reference to Dollars and Available Foreign Currencies. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Distribution Agreement": as defined in the recitals hereto. "Dollar Equivalent Amount": with respect to (i) the amount of any Available Foreign Currency on any date, the equivalent amount in Dollars of such amount of Available Foreign Currency, as determined by the Administrative Agent using the applicable Exchange Rate and (ii) any amount in Dollars, such amount. 8 "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Lending Office": initially the office of each Bank designated as such in Schedule I; thereafter, one or more other offices of such Bank, as designated from time to time in a notice from such Bank to the Administrative Agent. "Domestic Subsidiary": any Subsidiary of the Company other than a Foreign Subsidiary. "DSC Litigation": the case entitled DSC Communications Corporation and DSC Technologies Corporation v. Next Level Communications, Thomas R. Eames and Peter W. Keeler, Case No. 4:95cv96 in the United States District Court for the Eastern District of Texas, Sherman Division for which the final judgment was entered on June 11, 1996. "Effective Date": as defined in subsection 5.1. "Environmental Laws": any and all Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning environmental protection matters, including without limitation, Hazardous Materials, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Base Rate": with respect to each day during any Interest Period for any Eurocurrency Loan, the rate per annum equal to the rate at which Chase is offered deposits in Dollars or the applicable Available Foreign Currency at or about 11:00 a.m. London time, two Working Days prior to the beginning of such Interest Period (or, in the case of U.K. Pounds Sterling, on the first day of such Interest Period) in the interbank eurocurrency market where the foreign currency and exchange operations in respect of Dollars or such applicable Available Foreign Currency, as the case may be, are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurocurrency Loan to be outstanding during such Interest Period. "Eurocurrency Lending Office": initially, the office of each Bank designated as such in Schedule I; thereafter, one or more other offices of such Bank, if any, which shall be making or maintaining Eurocurrency Loans as designated as such from time to time in a notice from such Bank to the Administrative Agent. "Eurocurrency Loans": Loans at such time as they are made and/or being maintained at a rate of interest based upon a Eurocurrency Rate. "Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): 9 Eurocurrency Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurocurrency Reserve Requirements": for any day, as applied to a Eurocurrency Loan, the aggregate (without duplication) of the rates (expressed as a decimal) of reserve requirements current on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto), as now and from time to time hereafter in effect, dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Eurodollar Loans": Revolving Credit Loans the rate of interest applicable to which is based upon the Eurocurrency Rate. "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Exchange Rate": with respect to any Available Foreign Currency on any date, the rate at which such Available Foreign Currency may be exchanged into Dollars, as set forth on such date on the relevant Reuters currency page at or about 11:00 A.M. New York City time on such date. In the event that such rate does not appear on any Reuters currency page, the "Exchange Rate" with respect to such Available Foreign Currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company or, in the absence of such agreement, such "Exchange Rate" shall instead be the Administrative Agent's spot rate of exchange in the interbank market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted, at or about 10:00 A.M., local time, at such date for the purchase of Dollars with such Available Foreign Currency, for delivery two Business Days later; provided that if at the time of any such determination, no such spot rate can reasonably be quoted, the Administrative Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error (without prejudice to the determination of the reasonableness of such method) and (ii) for purposes of conversions of Currencies and calculating the Dollar Equivalent Amount, in each case under subsection 2.10, the Exchange Rate shall be deemed to be the Spot Rate. "Excluded Litigation": the DSC Litigation and any other litigation specifically described and identified in the S-4 Filing, in each case only to the extent that the responsibility for the DSC Litigation or such other litigation, as the case may be, is borne by the party to whom the Distribution Agreement has allocated responsibility therefor. "Existing GI Delaware Credit Agreement": The Third Amended and Restated Credit Agreement dated as of August 12, 1996, as amended, to which GI Delaware is a party and for which Chase acts as administrative agent. "Extensions of Credit": the collective reference to the making of any Loans and the issuance of any Letters of Credit. 10 "FL Affiliate": any of FL & Co., the partners of FL & Co. on the Closing Date, any subordinated debt and equity partnership controlled by FL & Co., any equity partnership controlled by FL & Co., any Affiliate of FL & Co., any directors, executive officers or other employees or other members of the management of the Company or any Subsidiary thereof (or any "associate" (as defined in Rule 405 under the Securities Act of 1933, as amended) of any thereof or employee benefit plan beneficially owned by any thereof), the Company or any Subsidiary thereof on the Closing Date, or any combination of the foregoing. "FL & Co.": Forstmann Little & Co., a New York partnership. "Facility Fee": the facility fee payable by the Company pursuant to subsection 3.8. "Foreign Currency Exposure": at any date, the aggregate Dollar Equivalent Amount of the outstanding principal amount of all Bid Loans then outstanding which are denominated in an Available Foreign Currency. "Foreign Subsidiary": any Subsidiary of the Company (a) which is organized under the laws of any jurisdiction outside the United States (within the meaning of Section 7701(a)(9) of the Code), or (b) whose principal assets consist of capital stock or other equity interests of one or more Persons which conduct the major portion of their business outside the United States (within the meaning of Section 7701(a)(9) of the Code). "GAAP": generally accepted accounting principles in the United States of America in effect from time to time. "General Semiconductor": as defined in the recitals hereto. "GI Delaware": as defined in the recitals hereto. "GI Holdings": as defined in the recitals hereto. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) 11 otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation shall be deemed to be an amount equal to the stated or determinable amount (based on the maximum reasonably anticipated net liability in respect thereof as determined by the Company in good faith) of the primary obligation or portion thereof in respect of which such Guarantee Obligation is made or, if not stated or determinable, the maximum reasonably anticipated net liability in respect thereof (assuming such Person is required to perform thereunder) as determined by the Company in good faith; provided, however, that the amount of any Guarantee Obligation associated with the Company's vendor financing programs shall be deemed to be the amount estimated by the Company to be its liability in connection therewith and for which the Company has estimated reserves in accordance with GAAP. "Hazardous Materials": any substance (a) which is or becomes defined as a "hazardous waste," "hazardous substance," pollutant or contaminant under any federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); and (b) without limitation, which is or contains petroleum products (including crude oil or any fraction thereof), PCBs, asbestos, urea formaldehyde foam insulation, radon gas or infectious or radioactive materials. "Indebtedness": of any Person, at any particular date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade payables or liabilities and deferred payment for services to employees or former employees incurred in the ordinary course of business and payable in accordance with customary practices), (b) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (c) all liabilities (other than Lease Obligations) secured by any Lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof, (d) lease obligations of such Person which, in accordance with GAAP, should be capitalized and (e) all indebtedness of such Person arising under acceptance facilities; but excluding (y) customer deposits and interest payable thereon in the ordinary course of business and (z) trade and other accounts and accrued expenses payable in the ordinary course of business in accordance with customary trade terms and in the case of both clauses (y) and (z) above, which are not overdue for a period of more than 90 days or, if overdue for more than 90 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of such Person. "Indemnified Taxes": as defined in subsection 3.22(a). "Indemnitee": as defined in subsection 3.22. "Index Rate Bid Loan": any Bid Loan bearing interest based on the Applicable Index Rate. "Index Rate Bid Loan Request": any Bid Loan Request requesting the Bid Loan 12 Lenders to offer to make Bid Loans at an interest rate equal to the Applicable Index Rate plus (or minus) a margin. "Insolvency": with respect to a Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "Interest Coverage Ratio": as at the last day of any fiscal quarter of the Company, the ratio of (a) Consolidated EBITDA for the period of four fiscal quarters ending on such day on a consolidated basis of the Company and its Subsidiaries, to (b) Consolidated Interest Expense for the period of four fiscal quarters ending on such day on a consolidated basis of the Company and its Subsidiaries. "Interest Payment Date": (a) as to ABR Loans, the last day of each March, June, September and December, commencing on the first such day to occur after any ABR Loans are made or any Eurodollar Loans are converted to ABR Loans, (b) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of one, two or three months, the last day of such Interest Period, (c) as to any Eurodollar Loan in respect of which the Company has selected an Interest Period of six months, the day which is three months after the date on which such Eurodollar Loan is made or an ABR Loan is converted to such a Eurodollar Loan, and the last day of such Interest Period, (d) as to any other Eurodollar Loan, each day on which principal of such Eurodollar Loan is payable and (e) in the case of the Revolving Credit Loans, on the Revolving Credit Termination Date. "Interest Period": with respect to any Eurocurrency Loan: (a) initially, the period commencing on, as the case may be, the Borrowing Date or conversion date with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter as selected by the Company in its notice of borrowing as provided in subsection 2.10, 3.1 or its notice of conversion as provided in subsection 3.2; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter as selected by the Company by irrevocable notice to the Administrative Agent not less than three Working Days prior to the last day of the then current Interest Period with respect to such Eurocurrency Loan; provided that the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would otherwise end on a day which is not a Working Day, that Interest Period shall be extended to the next succeeding Working Day, unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Working Day; (B) any Interest Period that would otherwise extend beyond the Revolving 13 Credit Termination Date shall end on the Revolving Credit Termination Date, or if the Revolving Credit Termination Date shall not be a Working Day, on the next preceding Working Day; (C) if the Company shall fail to give notice as provided above in clause (b), it shall be deemed to have selected a conversion of a Eurocurrency Loan into an ABR Loan (which conversion shall occur automatically and without need for compliance with the conditions for conversion set forth in subsection 3.2); (D) any Interest Period that begins on the last day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Working Day of a calendar month; and (E) the Company shall select Interest Periods so as not to require a prepayment (to the extent practicable) or a scheduled payment of a Eurocurrency Loan during an Interest Period for such Eurocurrency Loan. "Issuing Bank": Chase and any other financial institution which is a Co-Agent, as selected by the Company, with the approval of the Administrative Agent and such Co-Agent, in accordance with subsection 2.5. "Judgment Currency": as defined in subsection 10.9(b). "L/C Application": a letter of credit application in the relevant Issuing Bank's then customary form for the type of letter of credit requested. "L/C Participating Interest": an undivided participating interest in the face amount of each issued and outstanding Letter of Credit and the L/C Application relating thereto. "L/C Participation Certificate": a certificate in substantially the form of Exhibit G hereto. "Lease Facility": the collective reference to the synthetic lease facilities entered into by GI Delaware on August 12, 1996 and June 30, 1997 (and to be assigned to and assumed by the Company in connection with the Spin-Off). "Lease Obligations": of the Company and its Subsidiaries, as of the date of any determination thereof, the rental commitments of the Company and its Subsidiaries determined on a consolidated basis, if any, under leases for real and/or personal property (net of rental commitments from sub-leases thereof), excluding however, obligations under leases which are classified as Indebtedness under clause (d) of the definition of Indebtedness. "Leased Property": the collective reference to the facilities of the Company located at Horsham, Pennsylvania, San Diego, California and Rohnert Park, California which secure the Lease Facility. 14 "Letter of Credit": a letter of credit issued by an Issuing Bank pursuant to the terms of subsection 2.3. "Leverage Ratio": as of the last day of any fiscal quarter, the ratio of Consolidated Total Indebtedness on a consolidated basis for the Company and its Subsidiaries on such day to Consolidated EBITDA for the period of four consecutive fiscal quarters of the Company ending on such day. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any effective financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing, except for the filing of financing statements in connection with Lease Obligations incurred by the Company or its Subsidiaries to the extent that such financing statements relate to the property subject to such Lease Obligations). "Loans": the collective reference to the Revolving Credit Loans, the Swing Line Loans and the Bid Loans; individually, a "Loan". "Material Subsidiaries": any Subsidiary of the Company which at any time has a total asset book value (including the total asset book values of any Subsidiaries), or for which the Company or any of its Subsidiaries shall have paid consideration (including the assumption of Indebtedness) in connection with the acquisition of the stock or the assets of such Subsidiary, in excess of $50,000,000, other than Foreign Subsidiaries or other Subsidiaries if more than 75% of the assets of such Subsidiaries are securities of foreign companies (such determination to be made on the basis of fair market value). A Subsidiary which is a Material Subsidiary shall continue to be a Material Subsidiary notwithstanding that its total asset book value may fall to less than $50,000,000. "Money Market Rate": for any day, with respect to any Money Market Rate Loan, the rate per annum quoted by a Swing Line Bank to the Company in accordance with subsection 2.10(a) as the rate at which such Swing Line Bank is willing to make such Loan. "Money Market Rate Loans": Swing Line Loans the rate of interest applicable to which is based upon the Money Market Rate. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Non-U.S. Bank": as defined in subsection 3.17(e). "Obligations": the unpaid principal of and interest on the Loans and all other obligations and liabilities, in any Currency, of the Company to the Administrative Agent, the Co-Agents or the Banks, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in 15 connection with, this Agreement, the other Credit Documents, any Letter of Credit or L/C Application, any agreements between the Company and any Bank or any Affiliate of a Bank relating to interest rate, currency or similar swap and hedging arrangements or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent, the Co-Agents or any Bank) or otherwise. "Other Taxes": as defined in subsection 3.22(b). "Participant": as defined in subsection 10.6(b). "Participating Bank": any Bank (other than the Issuing Bank with respect to such Letter of Credit) with respect to its L/C Participating Interest in each Letter of Credit. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": any pension plan which is covered by Title IV of ERISA and in respect of which the Company or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA. "Power Semiconductor Business": as defined in the recitals hereto. "Properties": each parcel of real property currently or previously owned or operated by the Company or any Subsidiary. "Refunded Swing Line Loans": as defined in subsection 2.10(b). "Refunding Date": as defined in subsection 2.10(c). "Register": as defined in subsection 10.6. "Registered Form Note": as defined in subsection 3.21(e). "Regulation G": Regulation G of the Board, as from time to time in effect. "Regulation U": Regulation U of the Board, as from time to time in effect. "Related Document": any agreement, certificate, document or instrument relating to a Letter of Credit. "Release Banks": at a particular time Banks that hold Revolving Credit Commitments in an aggregate principal amount equal to at least 75% of the aggregate Revolving Credit Commitments. 16 "Reorganization": with respect to a Multiemployer Plan, the condition that such Plan is in reorganization as such term is used in Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder. "Required Banks": at a particular time Banks that hold Revolving Credit Commitments in an aggregate principal amount equal to at least 51% of the aggregate Revolving Credit Commitments, provided, however, that for the purposes of clause (y)(ii) of Section 8, Required Banks shall mean Banks that hold at least 51% of (a) the aggregate then outstanding principal amount of the Revolving Credit Loans, (b) the aggregate outstanding Dollar Equivalent Amount of the principal amount of Bid Loans, as of the most recent date of calculation of such amount pursuant to subsection 3.5(b), (c) the L/C Participating Interests in the aggregate amount then available to be drawn under all outstanding Letters of Credit and (d) the aggregate then outstanding principal amount of Revolving L/C Obligations. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation (including, without limitation, Environmental Laws) or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer or the chief operating officer of the Company or, with respect to financial matters, the chief financial officer or controller of the Company. "Restricted Payment": as defined in subsection 7.10. "Revolving Credit Commitment": as to any Bank, its obligations to make Revolving Credit Loans to the Company pursuant to subsection 2.1, and to purchase its L/C Participating Interest in any Letter of Credit, in an aggregate amount on the Closing Date not to exceed at any time the amount set forth opposite such Bank's name in Schedule I under the heading "Revolving Credit" and in an aggregate amount not to exceed at any time the amount equal to such Bank's Revolving Credit Commitment Percentage of the aggregate Revolving Credit Commitments, as the aggregate Revolving Credit Commitments may be reduced from time to time pursuant to this Agreement; collectively, as to all the Banks, the "Revolving Credit Commitments". "Revolving Credit Commitment Period": the period from and including the Closing Date to but not including the Revolving Credit Termination Date. "Revolving Credit Loan" and "Revolving Credit Loans": as defined in subsection 2.1(a). "Revolving Credit Termination Date": the earlier of (i) December 31, 2002 and (ii) any other date on which the Revolving Credit Commitments shall terminate 17 hereunder. "Revolving L/C Obligations": the obligations of the Company to reimburse the relevant Issuing Bank for any payments made by the relevant Issuing Bank under any Letter of Credit that have not been reimbursed by the Company pursuant to subsection 2.6. "S-4 Filing": Amendment No. 4 to the Joint Registration Statement on Form S-4 filed by the Company and CommScope with the Securities and Exchange Commission on June 13, 1997 with respect to the Spin-Off. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Spin-Off": as defined in the recitals hereto. "Spin-Off Documents": the collective reference to (i) the Distribution Agreement, and (ii) the Ancillary Agreements (as defined in the Distribution Agreement as in effect on the date hereof), as the same may be amended, modified or supplemented from time to time. "Spin-Off Transactions": as defined in the recitals hereto. "Spot Rate": with respect to any Available Foreign Currency on any date, Chase's spot rate of exchange in the interbank market where its foreign currency exchange operations in respect of such Available Foreign Currency are then being conducted at or about 10:00 A.M. local time at such date for the purchase of Dollars with such Available Foreign Currency. "Standby L/C": an irrevocable Letter of Credit under which the relevant Issuing Bank agrees to make payments in Dollars for the account of the Company, on behalf of the Company or any Subsidiary thereof, in respect of obligations of the Company or a Subsidiary thereof, including, without limitation, obligations to government entities and incurred pursuant to contracts made or performance undertaken, or to be undertaken, or like matters relating to contracts to which the Company or a Subsidiary thereof is or proposes to become a party in the ordinary course of the Company's or such Subsidiary's business, including, without limitation, for insurance purposes or in respect of advance payments or as bid or performance bonds. "Subsidiary": as to any Person, any corporation, partnership or other entity of which shares of stock of each class or other equity interests having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned by such Person or by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person; provided, however, that CommScope and its direct and indirect Subsidiaries shall be deemed not to be a Subsidiary of the Company hereunder for all purposes, including but not limited to, financial reporting purposes. A Subsidiary shall be deemed wholly-owned by a Person who owns all of the voting shares of such Subsidiary except for 18 directors' qualifying or similar shares. "Subsidiary Guarantee": the Subsidiary Guarantee to be executed by each Subsidiary Guarantor in favor of the Administrative Agent, for the ratable benefit of the Banks, substantially in the form of Exhibit D hereto, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary Guarantor": any Subsidiary which enters into a Subsidiary Guarantee pursuant to subsection 6.8. "Swing Line Bank": Chase and each Bank then acting as a Co-Agent hereunder selected by the Company which has agreed to make Swing Line Loans to the Company. "Swing Line Commitment": each Swing Line Bank's obligation to make Swing Line Loans pursuant to subsection 2.10. "Swing Line Loan" and "Swing Line Loans": as defined in subsection 2.10(a). "Swing Line Loan Participation Certificate": a certificate in substantially the form of Exhibit H hereto. "Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of any Governmental Authority or any taxing authority thereof. "Type": as to any Loan, its nature as an ABR Loan, a Eurocurrency Loan, or a Money Market Rate Loan. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 (or any successor publication), as the same may be amended from time to time. "Working Day": any day on which dealings in foreign currencies and exchange between banks may be carried on in London, England and in New York, New York. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any other Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein, any other Credit Document and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1 to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. 19 (d) The meanings given to terms defined herein shall be equally applicable to the singular and plural forms of such terms. (e) Reference herein to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole shall refer to the Company and its Subsidiaries taken as a whole from time to time after giving effect to the Spin-Off and all transactions contemplated thereby, including the financing thereof. SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Bank severally agrees to extend credit to the Company from time to time on any Borrowing Date during the Revolving Credit Commitment Period (i) by purchasing an L/C Participating Interest in each Letter of Credit issued by an Issuing Bank and (ii) by making loans in Dollars (individually, a "Revolving Credit Loan", and collectively the "Revolving Credit Loans") to the Company from time to time. Notwithstanding the foregoing, in no event shall any Revolving Credit Loan or Swing Line Loan be made, or any Letter of Credit be issued, if, after giving effect to such making or issuance and the use of proceeds thereof as irrevocably directed by the Company, the Aggregate Extensions of Credit would exceed the aggregate Revolving Credit Commitments. During the Revolving Credit Commitment Period, the Company may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans or Swing Line Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof, and/or by having the Issuing Banks issue Letters of Credit, having such Letters of Credit expire undrawn upon or if drawn upon, reimbursing the relevant Issuing Bank for such drawing, and having the Issuing Banks issue new Letters of Credit. (b) Each borrowing of Revolving Credit Loans pursuant to the Revolving Credit Commitments shall be in an aggregate principal amount of the lesser of (i) $5,000,000, or a whole multiple of $1,000,000 in excess thereof, and (ii) the Available Revolving Credit Commitments, except that any borrowing of a Revolving Credit Loan to be used solely to pay a like amount of Swing Line Loans may be in the aggregate principal amount of such Swing Line Loans. 2.2 Proceeds of Revolving Credit Loans. The Company shall use the proceeds of Revolving Credit Loans solely for the purposes of (a) financing the payment of fees and expenses incurred in connection with this Agreement and the Spin-Off, (b) making payments to the Issuing Banks to reimburse the Issuing Banks for drawings made under the Letters of Credit, (c) repaying Swing Line Loans, Bid Loans and Revolving Credit Loans after the Closing Date, (d) financing general working capital needs of the Company or any of its Subsidiaries, (e) refinancing Indebtedness of GI Delaware assumed by the Company in connection with the Spin-Off or through payment of dividends to GI Delaware and (f) other general corporate purposes of the Company or any of its Subsidiaries, including, without limitation, supporting payment of commercial paper issued by the Company in the United States commercial paper market, financing acquisitions, payment of dividends and repurchases of debt and equity securities issued by the Company, all in accordance with the terms and conditions hereof. 2.3 Issuance of Letters of Credit. (a) The Company may from time to time 20 request an Issuing Bank to issue a Letter of Credit, which may be either a Standby L/C or a Commercial L/C, by delivering to the Administrative Agent at its address specified in subsection 10.2 and such Issuing Bank an L/C Application completed to the satisfaction of such Issuing Bank, together with the proposed form of such Letter of Credit (which shall comply with the applicable requirements of paragraph (b) below) and such other certificates, documents and other papers and information as such Issuing Bank may reasonably request; provided that if such Issuing Bank informs the Company that it is for any reason unable to open such Letter of Credit, the Company may request another Issuing Bank or, if all Issuing Banks are unable to do so, any Bank to open such Letter of Credit upon the same terms offered to the initial proposed Issuing Bank and each reference to an Issuing Bank for purposes of the Credit Documents shall be deemed to be a reference to such Bank. (b) Each Letter of Credit issued hereunder shall, among other things, (i) be denominated in Dollars, (ii) be in such form requested by the Company as shall be acceptable to the relevant Issuing Bank in its sole discretion and (iii) have an expiry date occurring not later than the earlier of (x) 365 days after the date of issuance of such Letter of Credit and (y) the date five Business Days prior to the Revolving Credit Termination Date; provided that unless the Issuing Bank notifies the Company not less than 30 days prior to the expiry of such Letter of Credit that the Issuing Bank is not willing to extend it, any Letter of Credit which has an expiry date of 365 days after its date of issuance may by its terms be automatically extended for periods of one year from the current or any future expiration date thereof (but not to any date which is later than five Business Days prior to the Revolving Credit Termination Date). Each L/C Application and each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. 2.4 Participating Interests. Effective in the case of each Letter of Credit opened by an Issuing Bank as of the date of the opening thereof, such Issuing Bank agrees to allot and does allot, to itself and each other Bank, and each Bank severally and irrevocably agrees to take and does take in such Letter of Credit and the related L/C Application, an L/C Participating Interest in a percentage equal to such Bank's Revolving Credit Commitment Percentage. 2.5 Procedure for Opening Letters of Credit. Upon receipt of any L/C Application from the Company in respect of a Letter of Credit, the Administrative Agent will promptly notify each Bank thereof. The relevant Issuing Bank will process such L/C Application, and the other certificates, documents and other papers delivered to such Issuing Bank in connection therewith, upon receipt thereof in accordance with its customary procedures and, subject to the terms and conditions hereof, shall promptly open such Letter of Credit by issuing the original of such Letter of Credit to the beneficiary thereof and by furnishing a copy thereof to the Company and each of the other Banks, provided that no such Letter of Credit shall be issued if subsection 2.1 would be violated thereby. 2.6 Payments in Respect of Letters of Credit. (a) The Company agrees forthwith upon demand by the relevant Issuing Bank and otherwise in accordance with the terms of the L/C Application relating thereto (i) to reimburse such Issuing Bank, through the Administrative Agent, for any payment made by such Issuing Bank under any Letter of Credit on the next Business Day of such payment by such Issuing Bank and (ii) to pay interest on any unreimbursed portion of any such payment from the date of such payment until reimbursement in full thereof at a rate per annum equal to (A) prior to the date which is one Business Day after the day on which such Issuing Bank demands reimbursement from the Company for such payment, the ABR and 21 (B) on such date and thereafter, the ABR plus 2%. (b) In the event that an Issuing Bank makes a payment under any Letter of Credit and is not reimbursed in full therefor forthwith upon demand of such Issuing Bank, and otherwise in accordance with the terms of the L/C Application relating to such Letter of Credit, such Issuing Bank will promptly notify each other Bank through the Administrative Agent. Forthwith upon its receipt of any such notice, each other Bank will transfer to such Issuing Bank, through the Administrative Agent, in immediately available funds, an amount equal to such other Bank's pro rata share of the Revolving L/C Obligation arising from such unreimbursed payment. Upon its receipt from such other Bank of such amount, the Administrative Agent will complete, execute and deliver to such other Bank an L/C Participation Certificate dated the date of such receipt and in such amount. (c) Whenever, at any time after an Issuing Bank has made a payment under any Letter of Credit and has received from any other Bank such other Bank's pro rata share of the Revolving L/C Obligation arising therefrom, such Issuing Bank receives any reimbursement on account of such Revolving L/C Obligation or any payment of interest on account thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded), such Issuing Bank will promptly distribute to such other Bank, through the Administrative Agent, such other Bank's pro rata share thereof in like funds as received; provided, that in the event that the receipt by such Issuing Bank of such reimbursement or such payment of interest (as the case may be) is required to be returned, such other Bank will return to such Issuing Bank, through the Administrative Agent, any portion thereof previously distributed by such Issuing Bank to it in like funds as such reimbursement or payment is required to be returned by such Issuing Bank. 2.7 The Bid Loans. Subject to the terms and conditions of this Agreement, the Company may borrow Bid Loans from time to time during the Bid Loan Commitment Period on any Business Day (in the case of Bid Loans made pursuant to an Absolute Rate Bid Loan Request) or any Working Day (in the case of Bid Loans made pursuant to an Index Rate Bid Loan Request). The Company shall designate Banks from time to time as Bid Loan Lenders by written notice to the Administrative Agent. The Administrative Agent shall transmit each such notice of designation promptly to each designated Bid Loan Lender. Each Bid Loan shall bear interest at rates, be payable on the dates, be made in Dollars or any Available Foreign Currency, and shall mature on the date, in each case agreed between the Company and the relevant Bid Loan Lender at the time such Bid Loan is made; provided, that the maturity date for each Bid Loan (i) shall be not less than 15 days nor more than 180 days after the Borrowing Date therefor with respect to an Absolute Rate Bid Loan and (ii) shall be on the last day of an Interest Period with respect to an Index Rate Bid Loan (and, in each case, in any event shall be not later than the Revolving Credit Termination Date). Within the limits and on the conditions hereinafter set forth with respect to Bid Loans, the Company from time to time may borrow, repay and reborrow Bid Loans; provided that no Bid Loan shall be made if, after giving effect to the making of such Loan and the simultaneous application of the proceeds thereof, (A) the Aggregate Extensions of Credit would exceed the aggregate amount of the Revolving Credit Commitments or (B) the Foreign Currency Exposure would exceed $50,000,000. 2.8 Procedure for Bid Loan Borrowing. (a) The Company shall request Bid Loans by delivering a Bid Loan Request to the Administrative Agent, not later than 12:00 Noon (New York City time) four Working Days prior to the proposed Borrowing Date (in the case of 22 an Index Rate Bid Loan Request), and not later than 10:00 A.M. (New York City time) one Business Day prior to the proposed Borrowing Date (in the case of an Absolute Rate Bid Loan Request). Each Bid Loan Request shall specify the requested Currency. Each Bid Loan Request may solicit bids for Bid Loans in an aggregate principal Dollar Equivalent Amount equal to $10,000,000 or an integral multiple of $5,000,000 in excess thereof and having not more than four alternative maturity dates. The Administrative Agent shall notify each Bid Loan Lender promptly by telex or facsimile transmission of the contents of each Bid Loan Request received by the Administrative Agent. (b) In the case of an Index Rate Bid Loan Request, upon receipt of notice from the Administrative Agent of the contents of such Bid Loan Request, each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to make one or more Bid Loans at the Applicable Index Rate plus or minus a margin determined by such Bid Loan Lender in its sole discretion for each such Bid Loan. Any such irrevocable offer shall be made by delivering a Bid Loan Offer to the Administrative Agent, before 10:00 A.M. (New York City time) on the day that is three Working Days before the proposed Borrowing Date, setting forth: (1) the maximum amount of such Bid Loans for each maturity date and the aggregate maximum amount of such Bid Loans for all maturity dates which such Bank would be willing to make (which amounts may, subject to subsection 2.7, exceed such Bid Loan Lender's Revolving Credit Commitment); and (2) the margin above or below the Applicable Index Rate at which such Bid Loan Lender is willing to make each such Bid Loan. The Administrative Agent shall advise the Company promptly but no later than 10:30 A.M. (New York City time) on the date which is three Working Days before the proposed Borrowing Date of the contents of each such Bid Loan Offer received by it. If the Administrative Agent, in its capacity as a Bid Loan Lender, shall elect, in its sole discretion, to make any such Bid Loan Offer, it shall advise the Company of the contents of its Bid Loan Offer before 9:45 A.M. (New York City time) on the date which is three Working Days before the proposed Borrowing Date. (c) In the case of an Absolute Rate Bid Loan Request, upon receipt of notice from the Administrative Agent of the contents of such Bid Loan Request, each Bid Loan Lender may elect, in its sole discretion, to offer irrevocably to make one or more Bid Loans at a rate of interest determined by such Bid Loan Lender in its sole discretion for each such Bid Loan. Any such irrevocable offer shall be made by delivering a Bid Loan Offer to the Administrative Agent before 10:00 A.M. (New York City time) on the proposed Borrowing Date, setting forth: (1) the maximum amount of such Bid Loans for each maturity date, and the aggregate maximum amount of such Bid Loans for all maturity dates, which such Bid Loan Lender would be willing to make (which amounts may, subject to subsection 2.7, exceed such Bid Loan Lender's Revolving Credit Commitment); and (2) the fixed rate of interest at which such Bid Loan Lender is willing to make each such Bid Loan. The Administrative Agent shall advise the Company promptly but in no event later than 10:30 A.M. (New York City time) on the proposed Borrowing Date of the contents of each such 23 Bid Loan Offer received by it. If the Administrative Agent, in its capacity as a Bid Loan Lender, shall elect, in its sole discretion, to make any such Bid Loan Offer, it shall advise the Company of the contents of its Bid Loan Offer before 9:45 A.M. (New York City time) on the proposed Borrowing Date. (d) Before 12:00 noon (New York City time) three Working Days before the proposed Borrowing Date (in the case of Bid Loans requested by an Index Rate Bid Loan Request) and before 11:00 A.M. (New York City time) on the proposed Borrowing Date (in the case of Bid Loans requested by an Absolute Rate Bid Loan Request), the Company, in its absolute discretion, shall: (1) cancel such Bid Loan Request by giving the Administrative Agent telephone notice to that effect, or (2) by giving telephone notice to the Administrative Agent (immediately confirmed by delivery to the Administrative Agent of a Bid Loan Confirmation in writing or by telex or fax transmission)(1) subject to the provisions of subsection 2.8(e), accept one or more of the offers made by any Bid Loan Lender or Bid Loan Lenders pursuant to subsection 2.8(b) or subsection 2.8(c), as the case may be, of the amount of Bid Loans for each relevant maturity date and (2) reject any remaining offers made by Bid Loan Lenders pursuant to subsection 2.8(b) or subsection 2.8(c), as the case may be. If the Company fails to give any such notice prior to such time, such Bid Loan Request shall be deemed to have been canceled. (e) The Company's acceptance of Bid Loans in response to any Bid Loan Request shall be subject to the following limitations: (1) the principal amount of Bid Loans accepted for each maturity date specified by any Bid Loan Lender in its Bid Loan Offer shall not exceed the maximum amount for such maturity date specified in such Bid Loan Offer; (2) the aggregate principal amount of Bid Loans accepted for all maturity dates specified by any Bid Loan Lender in its Bid Loan Offer shall not exceed the aggregate maximum amount specified in such Bid Loan Offer for all such maturity dates; (3) the Company may not accept offers for Bid Loans for any maturity date in an aggregate principal amount in excess of the maximum principal amount of Bid Loans requested in the related Bid Loan Request for such maturity date; (4) if the Company accepts any of such offers, it must accept offers based solely upon pricing for such relevant maturity date and upon no other criteria whatsoever and if two or more Bid Loan Lenders submit offers for any maturity date at identical pricing and the Company accepts any of such offers but does not wish to (or by reason of the limitations set forth in subsection 2.7 or in clause 2.8(e)(3) cannot) borrow the total amount offered by such Bid Loan Lenders with such identical pricing, the Company shall accept offers from all of such Bid Loan Lenders in amounts allocated among them pro rata according to the amounts offered by such Bid Loan Lenders (or as nearly pro rata as 24 shall be practicable after giving effect to the requirement that Bid Loans made by a Bid Loan Lender on a Borrowing Date for each relevant maturity date shall be in a principal Dollar Equivalent Amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof); and (5) the Company may not accept offers for Bid Loans in any Currency other than the Currency specified in the related Bid Loan Request. (f) If the Company notifies the Administrative Agent that a Bid Loan Request is cancelled pursuant to subsection 2.8(d)(1), the Administrative Agent shall give prompt telephone notice thereof to the Bid Loan Lenders. (g) If the Company accepts pursuant to subsection 2.8(d)(2) one or more of the offers made by any Bid Loan Lender or Bid Loan Lenders, the Administrative Agent promptly shall notify each Bid Loan Lender which has made such a Bid Loan Offer of (i) the aggregate amount of such Bid Loans to be made on such Borrowing Date for each maturity date and (ii) the acceptance or rejection of any offers to make such Bid Loans made by such Bid Loan Lender. Before 12:00 Noon (New York City time) on the Borrowing Date specified in the applicable Bid Loan Request, each Bid Loan Lender whose Bid Loan Offer has been accepted shall make available to the Administrative Agent at its office set forth in subsection 10.2 the amount of Bid Loans in the applicable Currency to be made by such Bid Loan Lender in immediately available funds. The Administrative Agent will make such funds available to the Company as soon as practicable on such date at the Administrative Agent's aforesaid address. As soon as practicable after each Borrowing Date, the Administrative Agent shall notify each Bank of the aggregate amount of Bid Loans advanced on such Borrowing Date and the respective maturity dates thereof. (h) Unless otherwise agreed by the Bid Loan Lender making a Bid Loan, such Bid Loan may not be optionally prepaid prior to the scheduled maturity date thereof. 2.9 Bid Loan Payments. (a) The Company shall repay to the Administrative Agent for the account of each Bid Loan Lender which has made a Bid Loan (or the Bid Loan Assignee in respect thereof, as the case may be) on the applicable Bid Loan Maturity Date the then unpaid principal amount of such Bid Loan. The Company shall not have the right to prepay any principal amount of any Bid Loan except with the consent of the relevant Bid Loan Lender. (b) The Company shall pay interest on the unpaid principal amount of each Bid Loan from the Borrowing Date to the applicable Bid Loan Maturity Date at the rate of interest specified in the Bid Loan Offer accepted by the Company in connection with such Bid Loan (calculated on the basis of a 360-day year for actual days elapsed), payable on each applicable Bid Loan Interest Payment Date. (c) If all or a portion of the principal amount of any Bid Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount shall, without limiting any rights of any Bank under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 2% above the rate which would otherwise be applicable to such Bid Loan until the stated maturity date of such Bid Loan, and for each day thereafter at a rate per annum which is 2% above the ABR, in each case until paid in full (as well after as before judgment). 25 2.10 Swing Line Commitment. (a) Subject to the terms and conditions hereof, each Swing Line Bank agrees to make swing line loans (individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the Company from time to time during the Revolving Credit Commitment Period in Dollars in an aggregate principal amount (when added together with all other Swing Line Loans) at any one time outstanding not to exceed $40,000,000, provided that at no time may the Aggregate Extensions of Credit exceed the Revolving Credit Commitments. Amounts borrowed by the Company under this subsection may be repaid and, through but excluding the Revolving Credit Termination Date, reborrowed. The Swing Line Loans may from time to time be (i) ABR Loans, (ii) Money Market Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the Administrative Agent and the applicable Swing Line Bank in accordance herewith, and shall not be entitled to be converted into Eurodollar Loans. The Company may, on any Borrowing Date for Swing Line Loans and prior to the time that an irrevocable notice requesting such Swing Line Loans must be made pursuant to this subsection 2.10(a), request a quote of the Money Market Rate which would be applicable for such Swing Line Loans from a Swing Line Bank, specifying the amount of the proposed Money Market Rate Loans and the maturity date thereof (which shall be no less than one and no more than 30 days following such Borrowing Date). Upon receipt of such quote, the Company shall promptly (but not later than the time that an irrevocable notice requesting such Swing Line Loans must be made pursuant to this subsection 2.10(a)) notify the Administrative Agent and the applicable Swing Line Bank whether it requests such Swing Line Bank to make Money Market Rate Loans at such Money Market Rate. The Company shall give the Administrative Agent and the applicable Swing Line Bank irrevocable notice (which notice must be received by the Administrative Agent and the applicable Swing Line Bank prior to 12:00 Noon, New York City time) on the requested Borrowing Date specifying the amount of each requested Swing Line Loan, which shall be in minimum amount of (i) in the case of Swing Line Loans which are ABR Loans, $500,000 or a whole multiple thereof and (ii) in the case of Swing Line Loans which are Money Market Rate Loans, $2,000,000 or a whole multiple of $1,000,000 in excess thereof. The proceeds of each Swing Line Loan will be made available by the applicable Swing Line Bank to the Company by crediting the specified account of the Company with such proceeds in the manner from time to time agreed by the Company and the applicable Swing Line Bank. The proceeds of Swing Line Loans may be used solely for the purposes referred to in subsection 2.2. (b) Each Swing Line Bank (i) at any time in its sole and absolute discretion may, (ii) if any Event of Default has occurred and is continuing, shall and (iii) on the thirtieth day (or if such day is not a Business Day, the next Business Day) after the Borrowing Date with respect to any Swing Line Loans shall, on behalf of the Company (which hereby irrevocably directs each Swing Line Bank to act on its behalf), request each Bank, including such Swing Line Bank, to make a Revolving Credit Loan in Dollars to the Company (which shall be initially an ABR Loan) in an amount equal to such Bank's Revolving Credit Commitment Percentage of the amount of such Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such notice is given. Unless any of the events described in paragraph (f) of Section 8 shall have occurred (in which event the procedures of paragraph (c) of this subsection shall apply) each Bank shall make the proceeds of its Revolving Credit Loan available to the Administrative Agent for the account of the applicable Swing Line Bank at the office of the Administrative Agent 26 located at 270 Park Avenue, New York, New York 10017 prior to 12:00 Noon (New York City time) in funds immediately available on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Refunded Swing Line Loans. (c) If prior to the making of a Revolving Credit Loan pursuant to paragraph (b) of this subsection one of the events described in paragraph (f) of Section 8 shall have occurred, each Bank will, on the date such Loan would otherwise have been made (the "Refunding Date"), purchase an undivided participating interest in the Refunded Swing Line Loans in an amount equal to its Revolving Credit Commitment Percentage of such Refunded Swing Line Loans. On the Refunding Date, each Bank will immediately transfer to the Administrative Agent, for the account of the applicable Swing Line Bank, in immediately available funds, the amount of its participation and upon receipt thereof the Administrative Agent and the applicable Swing Line Bank will deliver to such Bank a Swing Line Loan Participation Certificate dated the date of receipt of such funds and in such amount. (d) Whenever, at any time after the Administrative Agent or a Swing Line Bank has received from any Bank such Bank's participating interest in a Swing Line Loan, the Administrative Agent or such Swing Line Bank, as the case may be, receives any payment on account thereof, the Administrative Agent or such Swing Line Bank, as the case may be, will promptly distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded) in like funds as received; provided, however, that in the event that such payment received by the Administrative Agent or such Swing Line Bank, as the case may be, is required to be returned, such Bank will return to the Administrative Agent or such Swing Line Bank, as the case may be, any portion thereof previously distributed by the Administrative Agent or such Swing Line Bank, as the case may be, to it in like funds as such payment is required to be returned by the Administrative Agent or such Swing line Bank, as the case may be. (e) Each Bank's obligation to make Revolving Credit Loans pursuant to subsection 2.10(b) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against any other Bank or the Company, or the Company may have against any Bank or any other Person, as the case may be, for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company or any of its Subsidiaries; (iv) any breach of this Agreement by the Company or any other Bank (not including any Swing Line Bank); or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.11 Participations. Each Bank's obligation to purchase participating interests pursuant to subsections 2.4 and 2.10(c) is absolute and unconditional as set forth in subsection 3.15. 27 SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT 3.1 Procedure for Borrowing. (a) Except with respect to Swing Line Loans, for which borrowing procedures are set forth in subsection 2.10, the Company may borrow under the Commitments on any Working Day, if the borrowing is of Eurodollar Loans, or on any Business Day, if the borrowing is of ABR Loans, provided that, with respect to the borrowings, if any, to take place on the Closing Date, the Company shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, on the Closing Date), and with respect to any subsequent borrowings, the Company shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (i) three Working Days prior to the requested Borrowing Date if all or any part of the Loans are to be Eurodollar Loans and (ii) one Business Day prior to the requested Borrowing Date if the borrowing is to be solely of ABR Loans) specifying (A) the amount of the borrowing, (B) whether such Loans are initially to be Eurodollar Loans or ABR Loans, or a combination thereof, and (C) if the borrowing is to be entirely or partly Eurodollar Loans, the length of the Interest Period for such Eurodollar Loans. Upon receipt of such notice the Administrative Agent shall promptly notify each Bank (which notice shall in any event be delivered to each Bank by 4:00 P.M., New York City time, on such date). Not later than 12:00 Noon, New York City time, on the Borrowing Date specified in such notice, each Bank shall make available to the Administrative Agent at the office of the Administrative Agent specified in subsection 10.2 (or at such other location as the Administrative Agent may direct) an amount in immediately available funds equal to the amount of the Loan to be made by such Bank. Loan proceeds received by the Administrative Agent hereunder shall promptly be made available to the Company by the Administrative Agent's crediting the account of the Company, at the office of the Administrative Agent specified in subsection 10.2, with the aggregate amount actually received by the Administrative Agent from the Banks and in like funds as received by the Administrative Agent. (b) Any borrowing of Eurodollar Loans hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, (i) the aggregate principal amount of all Eurodollar Loans having the same Interest Period shall not be less than $5,000,000, or a whole multiple of $1,000,000 in excess thereof, and (ii) no more than ten Interest Periods shall be in effect at any one time. (c) Eurodollar Loans shall be made by each Bank at its Eurocurrency Lending Office and ABR Loans shall be made by each Bank at its Domestic Lending Office. 3.2 Conversion Options. The Company may elect from time to time to convert Eurodollar Loans into ABR Loans by giving the Administrative Agent irrevocable notice of such election, to be received by the Administrative Agent prior to 12:00 Noon, New York City time, at least one Business Day prior to the proposed conversion date, provided that any such conversion of Eurodollar Loans shall only be made on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert all or a portion of the ABR Loans (other than Swing Line Loans) then outstanding to Eurodollar Loans by giving the Administrative Agent irrevocable notice of such election, to be received by the Administrative Agent prior to 12:00 Noon, New York City time, at least three Working Days prior to the proposed conversion date, specifying the Interest Period(s) selected therefor, and, if no Default or Event of Default has occurred and is continuing, such conversion shall be made on the requested 28 conversion date or, if such requested conversion date is not a Working Day, on the next succeeding Working Day. Upon receipt of any notice pursuant to this subsection 3.2, the Administrative Agent shall promptly, but in any event by 4:00 P.M., New York City time, notify each Bank thereof. All or any part of the outstanding Loans (other than Swing Line Loans and Bid Loans) may be converted as provided herein, provided that partial conversions of Loans shall be in the aggregate principal amount of $5,000,000, or a whole multiple of $1,000,000 in excess thereof, and the aggregate principal amount of the resulting Eurodollar Loans outstanding in respect of any one Interest Period shall be at least $5,000,000 or a whole multiple of $1,000,000 in excess thereof. 3.3 Changes of Commitment Amounts. (a) The Company shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate or, from time to time, reduce the Revolving Credit Commitments subject to the provisions of this subsection 3.3. To the extent, if any, that the Aggregate Extensions of Credit exceeds the amount of the Revolving Credit Commitments as then reduced, the Company shall be required to make a prepayment equal to such excess amount, the proceeds of which shall be applied first, to payment of the Swing Line Loans then outstanding, second, to payment of the Revolving Credit Loans which are not Eurodollar Loans then outstanding, third, to payment of any Revolving L/C Obligations then outstanding, and last, to cash collateralize any outstanding Letters of Credit, Bid Loans and Revolving Credit Loans which are Eurocurrency Loans on terms (including Currencies) reasonably satisfactory to the Administrative Agent. Any termination of the Revolving Credit Commitments shall be accompanied by prepayment in full of the Revolving Credit Loans which are not Eurodollar Loans, Swing Line Loans and Revolving L/C Obligations then outstanding and by cash collateralization of any outstanding Letter of Credit, Bid Loans and Revolving Credit Loans which are Eurocurrency Loans on terms reasonably satisfactory to the Administrative Agent. Upon termination of the Revolving Credit Commitments, any Letter of Credit, Bid Loan or Revolving Credit Loan which is a Eurocurrency Loan then outstanding which has been so cash collateralized shall no longer be considered a "Letter of Credit", "Bid Loan" or "Eurocurrency Loan", as the case may be, as defined in subsection 1.1 and any L/C Participating Interests heretofore granted by an Issuing Bank to the Banks in such Letter of Credit shall be deemed terminated (subject to automatic reinstatement in the event that such cash collateral is returned and such Issuing Bank is not fully reimbursed for any such L/C Obligations) but the Letter of Credit fees payable under subsection 3.10 shall continue to accrue to such Issuing Bank (or, in the event of any such automatic reinstatement, as provided in subsection 3.10) with respect to such Letter of Credit until the expiry thereof. (b) Interest accrued on the amount of any partial prepayment pursuant to this subsection 3.3 to the date of such partial prepayment shall be paid on the Interest Payment Date next succeeding the date of such partial prepayment. In the case of the termination of the Revolving Credit Commitments, interest accrued on the amount of any prepayment relating thereto and any unpaid commitment fee accrued hereunder shall be paid on the date of such termination. Any such partial reduction of the Revolving Credit Commitments shall be in an amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, and shall reduce permanently the Revolving Credit Commitments then in effect. 3.4 Optional Prepayments. The Company may at any time and from time to time prepay Loans (other than Bid Loans), in whole or in part, without premium or penalty, upon at least one Business Days' irrevocable notice to the Administrative Agent in the case of ABR Loans and two Working Days' irrevocable notice to the Administrative Agent in the case of 29 Eurodollar Loans and specifying the date and amount of prepayment, subject to subsection 3.20. Upon receipt of such notice the Administrative Agent shall promptly notify each Bank thereof. If such notice is given, the Company shall make such prepayment, and the payment amount specified in such notice shall be due and payable, on the date specified therein. Accrued interest on the amount of any Loans paid in full pursuant to this subsection 3.4 shall be paid on the date of such prepayment. Accrued interest on the amount of any partial prepayment shall be paid on the Interest Payment Date next succeeding the date of such partial prepayment. Partial prepayments of Revolving Credit Loans shall be in an aggregate principal Dollar Equivalent Amount equal to the lesser of (A) $2,500,000 or a whole multiple of $1,000,000 in excess thereof and (B) the aggregate unpaid principal amount of the Revolving Credit Loans, as the case may be. 3.5 Mandatory Prepayments. (a) The Company shall, without notice or demand, immediately prepay the Loans (other than Bid Loans and Eurocurrency Loans until the respective current Interest Periods therefor expire) and, if necessary, cash collateralize Bid Loans and Eurocurrency Loans to the extent that (i) the Aggregate Extensions of Credit exceeds the aggregate Commitments of all the Banks then in effect or (ii) the Foreign Currency Exposure exceeds $50,000,000. The Company will implement and maintain internal accounting controls to monitor the borrowings and repayments of Loans by the Company and the issuance of and drawings under Letters of Credit, with the object of preventing any request for an Extension of Credit that would result in (i) the Aggregate Extensions of Credit being in excess of the Revolving Credit Commitments or (ii) the Foreign Currency Exposure exceeding $50,000,000 and of promptly identifying and remedying any circumstance where, by reason of changes in exchange rates, (A) the Aggregate Extensions of Credit exceeds the Revolving Credit Commitments or (B) the amount of the Foreign Currency Exposure exceeds $50,000,000. In the event that at any time the Company determines that (i) the Aggregate Extensions of Credit exceeds the Revolving Credit Commitments or (ii) the amount of the Foreign Currency Exposure exceeds $50,000,000, the Company will immediately make or cause to be made such repayments or prepayments of Loans (other than Bid Loans and Eurocurrency Loans until the respective current Interest Periods therefor expire) and, if necessary, cash collateralize Bid Loans and Eurocurrency Loans as shall be necessary to cause (i) the Aggregate Extensions of Credit to no longer exceed the Revolving Credit Commitments and (ii) the amount of the Foreign Currency Exposure not to exceed $50,000,000. (b) The Administrative Agent will calculate the Aggregate Extensions of Credit from time to time, and in any event not less frequently than once during each calendar month. In making such calculations, the Administrative Agent will rely on the information most recently received by it from the Banks in respect of outstanding Swing Line Loans, from the Bid Loan Lenders in respect of outstanding Bid Loans, and Issuing Banks in respect of Revolving L/C Obligations and the aggregate amount available to be drawn under outstanding Letters of Credit. Upon making each such calculation, the Administrative Agent will inform the Company and the Banks of the results thereof. (c) In the event that on any date the Administrative Agent calculates that (i) the Aggregate Extensions of Credit exceeds the aggregate amount of the Revolving Credit Commitments or (ii) the Foreign Currency Exposure exceeds $50,000,000, the Administrative Agent will give notice to such effect to the Company. The Company will immediately make or cause to be made such repayments or prepayments of Loans or, if necessary, cash collateralize Bid Loans as shall be necessary to cause (i) the Aggregate Extensions of Credit to no longer 30 exceed the Revolving Credit Commitments and (ii) the Foreign Currency Exposure not to exceed $50,000,000. (d) Upon the Revolving Credit Termination Date the Company shall, with respect to each then outstanding Letter of Credit, if any, either (i) cause such Letter of Credit to be cancelled without such Letter of Credit being drawn upon or (ii) collateralize the Revolving L/C Obligations with respect to such Letter of Credit with a letter of credit issued by banks or a bank satisfactory to the Administrative Agent, or with cash collateral, all on terms satisfactory to the Administrative Agent. 3.6 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the applicable Eurocurrency Rate determined for such Interest Period plus the Applicable Margin. (b) ABR Loans shall bear interest for the period from and including the date thereof until maturity thereof on the unpaid principal amount thereof at a rate per annum equal to the ABR. (c) Money Market Rate Loans shall bear interest for the period from and including the date thereof until maturity thereof on the unpaid principal amount thereof at a rate per annum equal to the Money Market Rate. (d) If all or a portion of (i) the principal amount of any of the Loans (other than Bid Loans) or (ii) any interest payable thereon shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Banks under Section 8, bear interest at a rate per annum which is (x) in the case of overdue principal, 2% above the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection or (y) in the case of overdue interest, 2% above the rate described in paragraph (b) of this subsection, in each case from the date of such nonpayment until such amount is paid in full (as well after as before judgment). (e) Interest shall be payable in arrears on each Interest Payment Date; provided that interest accruing pursuant to paragraph (d) of this subsection shall be payable on demand by the Administrative Agent made at the request of the Required Banks. 3.7 Computation of Interest and Fees. (a) Interest in respect of ABR Loans at any time when the ABR Loan is calculated based on the Prime Rate and all fees hereunder shall be calculated on the basis of a 365 or 366, as the case may be, day year for the actual days elapsed. Interest in respect of Eurocurrency Loans and other ABR Loans shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Company and the Banks of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the ABR shall become effective as of the opening of business on the day on which such change in the ABR becomes effective. The Administrative Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the 31 Banks in the absence of manifest error. The Administrative Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations used by the Administrative Agent in determining the Eurocurrency Rate. 3.8 Facility Fees. The Company agrees to pay to the Administrative Agent, for the account of each Bank, a facility fee from and including July 22, 1997 to, but excluding, the Revolving Credit Termination Date on the amount of such Bank's Revolving Credit Commitment (whether or not utilized) at the rate per annum for each day during the period for which payment is made set forth in the definition of Applicable Margin under the column captioned "Facility Fee". The Facility Fee provided for in this subsection shall be payable quarterly in arrears on the last day of each fiscal quarter, commencing September 30, 1997, and on the Revolving Credit Termination Date with respect to the Revolving Credit Commitments. 3.9 Certain Fees. (a) The Company, together with CommScope, Inc. of North Carolina and General Semiconductor, Inc., agrees to pay to the Administrative Agent for its own account certain fees in the amounts, and on the dates, specified in the letter agreement dated June 18, 1997 among GI Delaware, Chase and Chase Securities Inc. 3.10 Letter of Credit Fees. (a) (i) In lieu of any letter of credit commissions and fees provided for in any L/C Application relating to Standby L/Cs (other than standard administrative issuance, amendment and negotiation fees), the Company agrees to pay the Administrative Agent, for the account of the relevant Issuing Bank and the Participating Banks, with respect to each Standby L/C, a Standby L/C fee on the amount available to be drawn under each Standby L/C payable, in arrears, on the last day of each fiscal quarter of the Company, at the rate per annum for each day during the period for which payment is made set forth in the definition of "Applicable Margin" under the column captioned "Standby L/C Fee". The Standby L/C Fee provided for in this subsection shall be payable quarterly in arrears on the last day of each fiscal quarter, commencing September 30, 1997, and on the Revolving Credit Termination Date. (ii) In addition, the Company shall pay to each Issuing Bank of a Standby L/C, in arrears on such day, a fee of 1/8 of 1% per annum on the amount available to be drawn on such Standby L/C solely for its own account as Issuing Bank of such Standby L/C and not on account of its L/C Participating Interest therein. (b) In lieu of any letter of credit commissions and fees provided for in any L/C Application relating to Commercial L/Cs (other than standard administrative issuance, amendment and negotiation fees), the Company agrees to pay the Administrative Agent, for the account of the relevant Issuing Bank and the Participating Banks, with respect to each Commercial L/C, a Commercial L/C fee of 3/8 of 1% (of which such Issuing Bank shall retain for its own account, as the issuing bank and not on account of its L/C Participating Interest therein, 1/8 of 1%) on the maximum face amount of each Commercial L/C payable on the date such Commercial L/C is issued. (c) In connection with any payment of fees pursuant to this subsection 3.10, the Administrative Agent agrees to provide to the Company a statement of any such fees so paid; provided that the failure by the Administrative Agent to provide the Company with any such invoice shall not relieve the Company of its obligation to pay such fees. 32 3.11 Letter of Credit Reserves. (a) If any Change in Law after the date of this Agreement shall either (i) impose, modify, deem or make applicable any reserve, special deposit, assessment or similar requirement against letters of credit issued by an Issuing Bank or (ii) impose on such Issuing Bank any other condition regarding this Agreement or any Letter of Credit, and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost to such Issuing Bank of issuing or maintaining any Letter of Credit (which increase in cost shall be the result of such Issuing Bank's reasonable allocation of the aggregate of such cost increases resulting from such events), then, upon demand by such Issuing Bank, the Company shall immediately pay to such Issuing Bank, from time to time as specified by such Issuing Bank, additional amounts which shall be sufficient to compensate such Issuing Bank for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the ABR. A certificate submitted by such Issuing Bank to the Company concurrently with any such demand by such Issuing Bank, shall be conclusive, absent manifest error, as to the amount thereof. (b) In the event that at any time after the date hereof any Change in Law with respect to an Issuing Bank shall, in the opinion of such Issuing Bank, require that any obligation under any Letter of Credit be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by such Issuing Bank or any corporation controlling such Issuing Bank, and such Change in Law shall have the effect of reducing the rate of return on such Issuing Bank's or such corporation's capital, as the case may be, as a consequence of such Issuing Bank's obligations under such Letter of Credit to a level below that which such Issuing Bank or such corporation, as the case may be, could have achieved but for such Change in Law (taking into account such Issuing Bank's or such corporation's policies, as the case may be, with respect to capital adequacy) by an amount deemed by such Issuing Bank to be material, then from time to time following notice by such Issuing Bank to the Company of such Change in Law, within 15 days after demand by such Issuing Bank, the Company shall pay to such Issuing Bank such additional amount or amounts as will compensate such Issuing Bank or such corporation, as the case may be, for such reduction. If such Issuing Bank becomes entitled to claim any additional amounts pursuant to this subsection 3.11(b), it shall promptly notify the Company of the event by reason of which it has become so entitled. A certificate submitted by such Issuing Bank to the Company concurrently with any such demand by such Issuing Bank, shall be conclusive, absent manifest error, as to the amount thereof. (c) The Company agrees that the provisions of the foregoing paragraphs (a) and (b) and the provisions of each L/C Application providing for reimbursement or payment to an Issuing Bank in the event of the imposition or implementation of, or increase in, any reserve, special deposit, capital adequacy or similar requirement in respect of the Letter of Credit relating thereto shall apply equally to each Participating Bank in respect of its L/C Participating Interest in such Letter of Credit, as if the references in such paragraphs and provisions referred to, where applicable, such Participating Bank or any corporation controlling such Participating Bank. (d) Notwithstanding any other provision of this subsection 3.11, no Bank shall demand compensation for any increased cost or reduction referred to in subsection 3.11(a) or (b) if it shall not at the time be the general policy or practice of such Bank to demand such compensation in similar circumstances under comparable provisions of other credit agreements. 3.12 Further Assurances. The Company hereby agrees, from time to time, to do 33 and perform any and all acts and to execute any and all further instruments reasonably requested by an Issuing Bank to effect more fully the purposes of this Agreement and the issuance of Letters of Credit hereunder. The Company further agrees to execute any and all instruments reasonably requested by any Issuing Bank in connection with the obtaining and/or maintaining of any insurance coverage applicable to any Letters of Credit. 3.13 Obligations Absolute. The payment obligations of the Company under this Agreement with respect to the Letters of Credit shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) the existence of any claim, set-off, defense or other right which the Company or any of its Subsidiaries may have at any time against any beneficiary, or any transferee, of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank, the Administrative Agent, any Co-Agent or any Bank, or any other Person, whether in connection with this Agreement, the Related Documents, any Credit Documents, the transactions contemplated herein, or any unrelated transaction; (ii) any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) payment by any Issuing Bank under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit, except where such payment constitutes gross negligence or wilful misconduct on the part of any Issuing Bank; or (iv) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing, except for any such circumstances or happening constituting gross negligence or wilful misconduct on the part of any Issuing Bank. 3.14 Assignments. No Participating Bank's participation in any Letter of Credit or any of its rights or duties hereunder shall be subdivided, assigned or transferred (other than in connection with a transfer of part or all of such Participating Bank's Revolving Credit Commitment in accordance with subsection 10.6) without the prior written consent of the relevant Issuing Bank, which consent will not be unreasonably withheld. Such consent may be given or withheld without the consent or agreement of any other Participating Bank. Notwithstanding the foregoing, a Participating Bank may subparticipate its L/C Participating Interest without obtaining the prior written consent of the relevant Issuing Bank. 3.15 Participations. Each Bank's obligation to purchase participating interests pursuant to subsections 2.4 and 2.10(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against any Issuing Bank, the Company or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company; (iv) any breach of this Agreement by the Company or any other Bank; or (v) 34 any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 3.16 Inability to Determine Interest Rate. In the event that the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Company) that (a) by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for any Interest Period with respect to (i) proposed Loans that the Company has requested be made as Eurocurrency Loans, (ii) any Eurodollar Loans that will result from the requested conversion of all or part of ABR Loans into Eurodollar Loans or (iii) the continuation of any Eurodollar Loan as such for an additional Interest Period, or (b) deposits in the relevant Currency in the relevant amount and for the relevant period with respect to any such Eurocurrency Loan are not available to any of the Banks required to fund such Loan in their respective Eurocurrency Lending Offices' interbank eurodollar market, the Administrative Agent shall forthwith give notice of such determination, confirmed in writing, to the Company and the Banks at least one day prior to the requested Borrowing Date, the conversion date or the last day of such Interest Period, as the case may be. If such notice is given (i) any requested Eurodollar Loans shall be made as ABR Loans, (ii) any ABR Loans that were to have been converted to Eurodollar Loans shall be continued as ABR Loans, and (iii) any outstanding Eurodollar Loans shall be converted, on the last day of the then current Interest Period applicable thereto, into ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made. 3.17 Pro Rata Treatment and Payments. (a) Each borrowing of any Loans (other than Swing Line Loans and Bid Loans) by the Company from the Banks, each payment by the Company on account of any fee hereunder (other than as otherwise set forth in subsections 3.9 and 3.10) and any reduction of the Revolving Credit Commitments of the Banks hereunder shall be made pro rata according to the relevant Commitment Percentages of the Banks. Each payment (including each prepayment) by the Company on account of principal of and interest on the Loans (other than Swing Line Loans and Bid Loans and other than as set forth in subsections 3.18, 3.19 and 3.20) shall be made pro rata according to the relevant Commitment Percentages of the Banks. All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without set-off or counterclaim and shall be made to the Administrative Agent, for the account of the Banks, at the Administrative Agent's office located at 270 Park Avenue, New York, New York 10017 or such other office designated by the Administrative Agent for payments in such Currency in the relevant Currency and in immediately available funds. The Administrative Agent shall promptly distribute such payments ratably to each Bank in like funds as received. If any payment hereunder (other than payments on Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Working Day, the maturity thereof shall be extended to the next succeeding Working Day unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Working Day. (b) Unless the Administrative Agent shall have been notified in writing by any Bank prior to a Borrowing Date that such Bank will not make the amount which would constitute its relevant Commitment Percentage of the borrowing on such date available to the Administrative Agent, the Administrative Agent may assume that such Bank has made such 35 amount available to the Administrative Agent on such Borrowing Date in accordance with subsection 3.1 and the Administrative Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such amount is made available to the Administrative Agent by such Bank on a date after such Borrowing Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the product of (i) the daily average Federal funds rate during such period as quoted by the Administrative Agent, times (ii) the amount of such Bank's relevant Commitment Percentage of such borrowing, times (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's relevant Commitment Percentage of such borrowing shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this subsection 3.17(b) shall be conclusive, absent manifest error. If such Bank's relevant Commitment Percentage of such borrowing is not in fact made available to the Administrative Agent by such Bank within three Business Days of such Borrowing Date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Company, without prejudice to any rights which the Company or the Administrative Agent may have against such Bank hereunder. Nothing contained in this subsection 3.17(b) shall relieve any Bank which has failed to make available its ratable portion of any borrowing hereunder from its obligation to do so in accordance with the terms hereof. (c) The failure of any Bank to make the Loan to be made by it on any Borrowing Date shall not relieve any other Bank of its obligation, if any, hereunder to make its Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on such Borrowing Date. (d) All payments and optional prepayments (other than prepayments as set forth in subsection 3.19 with respect to increased costs) of Eurodollar Loans hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all Eurodollar Loans with the same Interest Period shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (e) Each Bank, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America, or any estate or trust that is subject to U.S. federal income taxation regardless of the source of its income (a "Non-U.S. Bank") shall deliver to the Company and the Administrative Agent, and if applicable, the assigning Bank (or, in the case of a Participant, to the Bank from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) (x) two duly completed and signed original copies of either Internal Revenue Service Form 1001 (relating to such Non-U.S. Bank and entitling it to a complete exemption from withholding of United States federal income taxes on all amounts to be received by such Non-U.S. Bank pursuant to this Agreement and the other Credit Documents) or Form 4224 (relating to all amounts to be received by such Non-U.S. Bank pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the 36 case may be, and (y) two duly completed and signed original copies of Internal Revenue Service Form W-8 or W-9, or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Bank that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit J (or such other form of statement as shall be reasonably requested by the Company from time to time) to the effect that such Non-U.S. Bank is eligible for a complete exemption from withholding of United States federal income taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed original copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Company described in clause (C) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 3.17(e)). Further, each Non-U.S. Bank agrees (i) to deliver to the Company and the Administrative Agent, and if applicable, the assigning Bank (or, in the case of a Participant, to the Bank from which the related participation shall have been purchased) two further duly completed and signed original copies of such Forms 1001, 4224, W-8 or W-9, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Company (or, in the case of a Participant, to the Bank from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations, (ii) in the case of a Non-U.S. Bank that delivers a statement in the form of Exhibit J (or such other form of statement as shall have been requested by the Company), to deliver to the Company and the Administrative Agent, and if applicable, the assigning Bank, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Bank became a party to this Agreement and to deliver promptly to the Company and the Administrative Agent, and if applicable, the assigning Bank, such additional statements and forms as shall be reasonably requested by the Company from time to time, and (iii) to notify promptly the Company and the Administrative Agent (or, in the case of a Participant, the Bank from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 3.17(e). Each Non-U.S. Bank agrees to indemnify and hold harmless the Company from and against any Taxes imposed by or on behalf of the United States or any taxing jurisdiction thereof, penalties, additions to tax, fines, interest or other liabilities, costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Company as a result of the failure of the Company to comply with its obligations to deduct or withhold any Taxes imposed by or on behalf of the United States or any taxing jurisdiction thereof (including penalties, additions to tax, fines or interest on such Taxes) from any payments made pursuant to this Agreement to such Non-U.S. Bank or the Administrative Agent which failure resulted from the Company's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Bank pursuant to clause (B) or clause (ii) of this subsection 3.17(e). The Company hereby agrees that for so long as a Non-U.S. Bank complies with this subsection 3.17(e), the Company shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Bank, unless the Company 37 reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Bank pursuant to this Agreement. Notwithstanding any other provision of this subsection 3.17(e), a Non-U.S. Bank shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 3.17(e) that such Non-U.S. Bank is not legally able to deliver (it being understood and agreed that the Company shall withhold or deduct such amounts from any payments made to such Non-U.S. Bank that the Company reasonably determines are required by law). If any Credit Party other than the Company makes any payment to any Non-U.S. Bank under any Credit Document, the foregoing provisions of this subsection 3.17(e) shall apply to such Non-U.S. Bank and such Credit Party as if such Credit Party were the Company (but a Non-U.S. Bank shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Bank has received a request to do so from such Credit Party and has a reasonable time to comply with such request). 3.18 Illegality. Notwithstanding any other provisions herein, if any Requirement of Law or any change therein or in the interpretation or application thereof occurring after the date that any lender becomes a Bank party to this Agreement, shall make it unlawful for such Bank to make or maintain Eurocurrency Loans as contemplated by this Agreement, the commitment of such Bank hereunder to make Eurodollar Loans or to convert all or a portion of ABR Loans into Eurodollar Loans shall forthwith be cancelled and such Bank's Loans then outstanding as Eurocurrency Loans, if any, shall, if required by law and if such Bank so requests, be converted automatically on the date specified by such Bank in such request (a) in the case of Eurodollar Loans and Index Rate Bid Loans denominated in Dollars, to ABR Loans, and (b) in the case of an Index Rate Bid Loan denominated in an Available Foreign Currency, to a loan bearing interest at an alternate fixed or floating rate reasonably determined by the relevant Bid Loan Lender to be a rate for such Available Foreign Currency comparable to the ABR and to compensate it for loss of the Applicable Margin due to such conversion (each, an "Alternate Rate Loan"). To the extent that such affected Eurocurrency Loans are converted into ABR Loans or Alternate Rate Loans, as the case may be, all payments of principal which would otherwise be applied to such Eurocurrency Loans shall be applied instead to such Bank's ABR Loans or Alternate Rate Loans, as the case may be. The Company hereby agrees promptly to pay any Bank, upon its demand, any additional amounts necessary to compensate such Bank for any costs incurred by such Bank in making any conversion in accordance with this subsection 3.18 including, but not limited to, any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurocurrency Loans hereunder (such Bank's notice of such costs, as certified to the Company through the Administrative Agent, to be conclusive absent manifest error). 3.19 Requirements of Law. (a) In the event that, at any time after the date hereof, the adoption of any Requirement of Law, or any change therein or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority: (i) does or shall subject any Bank to any tax of any kind whatsoever with respect to this Agreement or any Eurocurrency Loans made by it, or change the basis of taxation of payments to such Bank of principal, commitment fee, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of such Bank), it being understood and agreed that, in the case of a Non-U.S. Bank that does not comply with clause (A) of subsection 38 3.17(e), this clause (i) shall apply only to the extent that it would have applied if such Non-U.S. Bank were able to comply with clause (A) of subsection 3.17(e); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Bank which are not otherwise included in the determination of the Eurocurrency Rate; or (iii) does or shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank of making, converting, renewing or maintaining advances or extensions of credit or to reduce any amount receivable hereunder, in each case, in respect of its Eurocurrency Loans, then, in any such case, the Company shall promptly pay such Bank, on demand, any additional amounts necessary to compensate such Bank for such additional cost or reduced amount receivable which such Bank deems to be material as determined by such Bank with respect to such Eurocurrency Loans, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the ABR. The Loans referred to in the last sentence of subsection 2.1(a) shall be entitled to the benefits of this subsection 3.19. (b) In the event that at any time after the date hereof, any Change in Law with respect to any Bank shall, in the opinion of such Bank, require that any Commitment of such Bank be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by such Bank or any corporation controlling such Bank, and such Change in Law shall have the effect of reducing the rate of return on such Bank's or such corporation's capital, as the case may be, as a consequence of such Bank's obligations hereunder to a level below that which such Bank or such corporation, as the case may be, could have achieved but for such Change in Law (taking into account such Bank's or such corporation's policies, as the case may be, with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time following notice by such Bank to the Company of such Change in Law as provided in paragraph (c) of this subsection 3.19, within 15 days after demand by such Bank, the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank or such corporation, as the case may be, for such reduction. (c) A certificate submitted by such Bank, through the Administrative Agent, to the Company shall be conclusive in the absence of manifest error. The covenants contained in this subsection 3.19 shall survive the termination of this Agreement and payment of the outstanding Loans. (d) Notwithstanding any other provision of this subsection 3.19, no Bank shall demand compensation for any increased cost or reduction referred to above if it shall not at the time be the general policy or practice of such Bank to demand such compensation in similar circumstances under comparable provisions of other credit agreements. 3.20 Indemnity. The Company agrees to indemnify each Bank and to hold such Bank harmless from any loss or expense which such Bank may sustain or incur as a consequence of (a) default by the Company in payment of the principal amount of or interest on any Eurocurrency Loans or Absolute Rate Bid Loans of such Bank, including, but not limited to, any 39 such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurocurrency Loans or Absolute Rate Bid Loans hereunder, (b) default by the Company in making a borrowing of Eurocurrency Loans or Absolute Rate Bid Loans after the Company has given a notice in accordance with subsection 2.10 or 3.1 or in making a conversion of ABR Loans to Eurocurrency Loans after the Company has given notice in accordance with subsection 3.2, (c) default by the Company in making any prepayment of Eurocurrency Loans or Absolute Rate Bid Loans after the Company has given a notice in accordance with subsection 3.4 or (d) a payment or prepayment of a Eurocurrency Loan, Money Market Rate Loan or Absolute Rate Bid Loan or conversion of any Eurocurrency Loan into an ABR Loan, in either case on a day which is not the last day of an Interest Period with respect thereto (or, with respect to a Money Market Rate Loan, the maturity date thereof), including, but not limited to, any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurocurrency Loans hereunder. This covenant shall survive termination of this Agreement and payment of the outstanding Obligations. 3.21 Repayment of Loans, Evidence of Debt. (a) The Company hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Bank the then unpaid principal amount of each Revolving Credit Loan on the Revolving Credit Termination Date, (ii) to the Administrative Agent for the account of each Bid Loan Lender the then unpaid principal amount of each Bid Loan on the Bid Loan Maturity Date applicable to such Bid Loan, and (iii) to the Administrative Agent for the account of the applicable Swing Line Bank the then unpaid principal amount of each Swing Line Loan on the Revolving Credit Termination Date (or such other date as required by subsection 2.10(a)). (b) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Company to such Bank resulting from each Loan made and each Letter of Credit issued by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Extension of Credit made hereunder to the Company, the Class, Type, and with respect to Bid Loans, the applicable Available Foreign Currency, thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company to each Bank hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Banks and each Bank's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Loans in accordance with the terms of this Agreement. (e) Any Bank may request that Loans made by it be evidenced by a promissory note. In such event, the Company shall prepare, execute and deliver to such Bank either (i) a promissory note payable to the order of such Bank or (ii) if requested by such Bank, a promissory note payable to such Bank and its registered assigns (a "Registered Form Note") and in each case in a form approved by the Administrative Agent. Thereafter, the Loans evidenced 40 by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.2) be represented by one or more promissory notes in such form payable to the order of the payee named therein or, if such promissory note is a Registered Form Note, to such payee and its registered assigns. Registered Form Notes may not be exchanged for promissory notes that are not Registered Form Notes. A Registered Form Note and the Obligation(s) evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Form Note and the Obligation(s) evidenced thereby on the Register (and each Registered Form Note shall expressly so provide). Any assignment or transfer of all or part of such Obligation(s) and the Registered Form Note(s) evidencing the same shall be registered on the Register only upon surrender for registration of assignment or transfer of the Registered Form Note(s) evidencing such Obligation(s), duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Registered Form Note(s) in the same aggregate principal amount shall be issued to the designated Assignee(s) and the old Registered Form Note shall be returned to the Company marked "cancelled". No assignment of a Registered Form Note and the Obligation(s) evidenced thereby shall be effective unless it shall have been recorded in the Register by the Administrative Agent as provided in this subsection 3.21(e). 3.22 Mitigation Obligations; Replacement of Banks. (a) If any Bank requests compensation under subsection 3.11 or 3.19 or gives notice to the Company pursuant to subsection 3.18, or if the Company withholds any amounts from any payments made pursuant to this Agreement to any Non-U.S. Bank, then such Bank or Non-U.S. Bank, as the case may be, shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Bank or Non-U.S. Bank, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to subsection 3.11 or 3.19, make it no longer unlawful for such Bank to make or maintain Eurocurrency Loans or eliminate the need to withhold any amounts from any payments made pursuant to the Agreement, as the case may be, in the future and (ii) would not subject such Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Bank. The Company hereby agrees to pay all reasonable costs and expenses incurred by any Bank in connection with any such designation or assignment. (b) If any Bank requests compensation under subsection 3.11 or 3.19 or gives notice to the Company pursuant to subsection 3.18, or if the Company withholds any amounts from any payments made pursuant to this Agreement to any Non-U.S. Bank, or if any Bank defaults in its obligation to fund Loans hereunder, then the Company may, at its sole expense and effort, upon notice to such Bank or Non-U.S. Bank, as the case may be, and the Administrative Agent, either (i) reduce or terminate the Revolving Credit Commitment of such Bank or Non-U.S. Bank (and pay all amounts owed to such Bank or Non-U.S. Bank under this Agreement other than Bid Loans prior to the expiration of the Interest Periods therefor, unless such Bank or Non-U.S. Bank agrees to such payment) or (ii) require such Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in subsection 10.6), all its interests, rights and obligations under this Agreement (other than any outstanding Bid Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Bank, if such Bank accepts such assignment); provided that (A) the Company shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, the Issuing Bank and the Swing Line Bank), which consent shall not unrea- 41 sonably be withheld, (B) such Bank shall have received payment of an amount equal to the outstanding principal of its Loans (other than Bid Loans) and participations in Letter of Credit and Swing Line Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (C) in the case of any such assignment resulting from a claim for compensation under subsection 3.11 or 3.19, a notice pursuant to subsection 3.18 or amounts withheld from any payments made pursuant to this Agreement to any Non-U.S. Bank, such assignment will result in a reduction in such compensation or withholding or result in an assignment to a Bank which may make or maintain Eurocurrency Loans. A Bank shall not be required to make any such assignment and delegation and the Company shall not be permitted to reduce or terminate the Revolving Credit Commitments of a Bank if, prior thereto, as a result of an irrevocable waiver by such Bank or otherwise, the circumstances entitling the Company to require such assignment and delegation or make such reduction or termination cease to apply. (c) If any Bank becomes entitled to claim any additional amounts pursuant to subsection 3.11 or 3.19, it shall promptly notify the Company, through the Administrative Agent, of the event by reason of which it has become so entitled. If any Bank has notified the Company through the Administrative Agent of any increased costs pursuant to paragraph (a) of this subsection 3.22, the Company at any time thereafter may, upon at least two Business Days' notice to the Administrative Agent, prepay or convert into ABR Loans all (but not a part) of the Eurodollar Loans then outstanding. (d) The Company's indemnification obligations under subsection 3.20 shall apply to the transactions described in this subsection 3.22. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce the Banks to enter into this Agreement and to continue and make the Loans and to induce the Issuing Banks to issue, and the Participating Banks to participate in, the Letters of Credit, the Company hereby represents and warrants to each Bank, each Co-Agent and the Administrative Agent, on and as of the Closing Date and, other than with respect to subsection 4.2, on the date of each Loan is made or Letter of Credit is issued thereafter, that: 4.1 Financial Condition. (a) (i) The audited combined balance sheet of the Communications Business at each of December 31, 1995 and December 31, 1996 and the combined statements of operations, divisional net equity and cash flows for each of the fiscal years ending December 31, 1994, December 31, 1995 and December 31, 1996, reported on by Deloitte & Touche LLP, and (ii) the unaudited combined balance sheet of the Communications Business at March 31, 1997 and the related combined statements of operations, divisional net equity and cash flows for the fiscal quarter ending March 31, 1997, certified as complete and correct and prepared in accordance with GAAP (subject to normal year-end adjustments) by the chief financial officer of the Company, copies of each of which have heretofore been furnished to each Bank, are complete and correct and present fairly (except, with respect to interim statements, for normal year-end adjustments) the combined financial position of the Communications Business as at such dates, and the combined results of operations and cash flows for the fiscal periods then ended and, in the case of the statements referred to in the 42 foregoing clause (ii), the portion of the fiscal year through such date. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except, with respect to interim statements, for normal year-end adjustments and that such interim statements may be condensed and exclude detailed footnote disclosure and except as concurred in by such accountants or such chief financial officer, as the case may be, and as disclosed therein). (b) The unaudited pro forma combined balance sheet of the Communications Business at March 31, 1997 (including the notes thereto) (the "Pro Forma Balance Sheet"), and the related combined statements of operations for the fiscal year ending December 31, 1996 and the fiscal quarter ended March 31, 1997 (the "Pro Forma Statements of Operations"), copies of which have heretofore been furnished to each Bank, have been prepared based upon the combined balance sheet of the Communications Business as of March 31, 1997 and the combined statements of operations for the fiscal year ended December 31, 1996 and the fiscal quarter ended March 31, 1997, respectively, assuming that the Spin-Off occurred on January 1, 1996 and January 1, 1997, respectively, and do not purport to represent what the financial position actually would have been had the Spin-Off occurred on January 1, 1996 or January 1, 1997, as the case may be, or to project the financial position of the Communications Business for any future date. The Pro Forma Balance Sheet presents fairly on a pro forma basis the combined financial position of the Communications Business at March 31, 1997, and the Pro Forma Statements of Operations present fairly on a pro forma basis the combined operating results of the Communications Business for the respective fiscal periods covered thereby, in each case assuming that the events and assumptions specified in the preceding sentence had actually occurred or are true, as the case may be on March 31, 1997 or for the respective periods covered by the Pro Forma Statements of Operations, as the case may be (except (i) for changes in such financial position which are not materially adverse to the financial position of the Communications Business, and (ii) as provided in the notes thereto). The unaudited pro forma adjustments are based upon currently available information and certain assumptions that the management of the Communications Business believes to be reasonable. As of the date of the Pro Forma Balance Sheet, the Communications Business had no material obligation, contingent or otherwise, which was not reflected therein or in the notes thereto and which would have a material adverse effect on the business, financial condition, assets, liabilities, net assets, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole (other than the Excluded Litigation, as to which no representation is made). 4.2 No Material Change. Since June 13, 1997 (a) there has been no occurrence (other than the Excluded Litigation as to which no representation is made in this subsection 4.2) which has had a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, and (b) other than as disclosed in any financial statements delivered hereunder pursuant to subsection 6.1, neither the Company nor any of its Subsidiaries has, since December 31, 1996, incurred any material obligation, contingent or otherwise (other than in connection with the Excluded Litigation, as to which no representation is made in this subsection 4.2), which has had a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 4.3 Corporate Existence; Compliance with Law. Each Credit Party and its Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has the corporate power and authority and the 43 legal right to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged, except to the extent that the failure to possess such corporate power and authority and such legal right would not, in the aggregate, have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole and (d) is in compliance with all Requirements of Law (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, or any applicable federal, state, local or other statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Materials), except to the extent that the failure to comply therewith would not, in the aggregate, have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 4.4 Corporate Power; Authorization. Each Credit Party has the corporate power and authority and the legal right to make, deliver and perform the Credit Documents to which it is a party; and the Company has the corporate power and authority and legal right to borrow hereunder and to have Letters of Credit issued for its account hereunder. Each Credit Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party and, in case of the Company, to authorize the borrowings hereunder and the issuance of Letters of Credit for its account hereunder. No consent or authorization of, or filing with, any Person (including, without limitation, any Governmental Authority) is required in connection with the execution, delivery or performance by any Credit Party, or the validity or enforceability against any Credit Party, of any Credit Document to the extent that it is a party thereto, or the guarantee of the Obligations pursuant to the Subsidiary Guarantees. 4.5 Enforceable Obligations. Each of the Credit Documents has been duly executed and delivered on behalf of each Credit Party which is a party thereto and each of such Credit Documents constitutes the legal, valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 4.6 No Legal Bar. The performance of each Credit Document, the guarantee of the Obligations pursuant to the Subsidiary Guarantees and the use of the proceeds of the Loans and of drawings under the Letters of Credit will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon any Credit Party, any of its Subsidiaries or any of its properties or assets, which violations, individually or in the aggregate, would have a material adverse effect on the ability of such Credit Party to perform its obligations under the Credit Documents to the extent that it is a party thereto, or which would give rise to any liability on the part of the Administrative Agent, any Co-Agent or any Bank, or which would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, and will not result in 44 the creation or imposition (or the obligation to create or impose) of any Lien on any of its or their respective properties or assets pursuant to any Requirement of Law applicable to it or them, as the case may be, or any of its or their Contractual Obligations. 4.7 No Material Litigation. No litigation, investigation known to the Company or proceeding of or by any Governmental Authority or any other Person is pending against any Credit Party or any of its Subsidiaries, (a) with respect to the validity, binding effect or enforceability of any Credit Document or with respect to the Loans made hereunder, the use of proceeds thereof or of any drawings under a Letter of Credit and the other transactions contemplated hereby or thereby, or (b) except for the Excluded Litigation (as to which no representation is made in this subsection 4.7), which would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 4.8 Investment Company Act. Neither any Credit Party nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). 4.9 Federal Regulation. No part of the proceeds of any of the Loans or any drawing under a Letter of Credit will be used for any purpose which violates, or which would be inconsistent with, the provisions of Regulation G, T, U or X of the Board. Neither the Company nor any of its Subsidiaries is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under said Regulation U. 4.10 No Default. Neither the Company nor any of its Subsidiaries is in default in the payment or performance of any of its or their Contractual Obligations in any respect which would be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. Neither the Company nor any of its Subsidiaries is in default under any order, award or decree of any Governmental Authority or arbitrator binding upon or affecting it or them or by which any of its or their properties or assets may be bound or affected in any respect which would be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, and no such order, award or decree would materially adversely affect the ability of the Company and its Subsidiaries taken as a whole to carry on their businesses as presently conducted or the ability of any Credit Party to perform its obligations under any Credit Document. 4.11 No Burdensome Restrictions. Neither the Company nor any of its Subsidiaries is a party to or is bound by any Contractual Obligation or subject to any Requirement of Law or other corporate restriction which materially and adversely affects the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 45 4.12 Taxes. Each of the Company and its Subsidiaries has filed or caused to be filed or has timely requested an extension to file or has received an approved extension to file all tax returns which, to the knowledge of the Company, are required to have been filed, and has paid all taxes shown to be due and payable on said returns or extension requests or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided in the books of the Company or its Subsidiaries, as the case may be), except any such filings or taxes, fees or charges, the making of or the payment of which, or the failure to make or pay, would not materially adversely affect the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole; and, to the knowledge of the Company, no claims are being asserted with respect to any such taxes, fees or other charges (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided in the books of the Company or its Subsidiaries, as the case may be), except as to any such taxes, fees or other charges, the payment of which, or the failure to pay, would not materially adversely affect the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 4.13 Subsidiaries. The Subsidiaries of the Company listed on Schedule IV constitute all of the Domestic Subsidiaries of the Company and the Subsidiaries listed on Schedule V constitute all of the Foreign Subsidiaries of the Company as of the Closing Date. The Company has no Material Subsidiaries on the Closing Date. 4.14 Ownership of Property; Liens. The Company and each of its Subsidiaries has good and marketable title to, or valid and subsisting leasehold interests in, all its respective material real property, and good title to all its respective material other property, and none of such property is subject, except as permitted hereunder, to any Lien (including, without limitation, Federal, state and other tax liens). 4.15 ERISA. No "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or Reportable Event (other than a Reportable Event with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived or which occurs by reason of the Spin-Off Transactions) has occurred during the five years preceding each date on which this representation is made or deemed made with respect to any Plan in any case the consequences of which would be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. The present value of all accrued benefits under each Single Employer Plan maintained by the Company or a Commonly Controlled Entity (based on those assumptions used to fund such Plan) did not, as of the most recent annual valuation date in respect of each such Plan, exceed the fair market value of the assets of the Plan (including for these purposes accrued but unpaid contributions) allocable to such benefits by an amount that would be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. The liability to which the Company or any Commonly Controlled Entity would become subject under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most 46 closely preceding the date hereof would not be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. To the Company's knowledge, no Multiemployer Plan is either in Reorganization or Insolvent in any case the consequences of which would be materially adverse to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 4.16 Accuracy of Disclosure. All written information, other than financial projections, which has been made available to the Administrative Agent or the Banks by the Company or any of its representatives and all other information which has been made available to the Administrative Agent or the Banks by any officers of the Company and its Subsidiaries is complete and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading. The financial projections that have been made available to the Administrative Agent and the Banks by the Company or any of its representatives have been prepared in good faith based upon reasonable assumptions. 4.17 Intellectual Property. The Company and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which would not have any reasonable likelihood of having a material adverse effect on the business, operations, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Effectiveness of this Agreement. The effectiveness of this Agreement is subject to the satisfaction, or waiver by each Bank (or, in the case of the conditions specified in subsections 5.1(b), (c), (e) and (i), waiver by the Administrative Agent), immediately prior to or concurrently with the effectiveness of this Agreement, of the following conditions precedent on or prior to August 31, 1997 (the date of effectiveness, the "Effective Date"): (a) Agreement. The Administrative Agent shall have received this Agreement, executed and delivered by a duly authorized officer of each of the Company, the Banks, the Co-Agents and the Administrative Agent. (b) Legal Opinions. The Administrative Agent shall have received, addressed to the Administrative Agent, the Co-Agents and the Banks, (i) an opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel to the Company, dated the Effective Date, substantially in the form of Exhibit E-1 hereto with such changes thereto as may be approved by and otherwise in form and substance satisfactory to the Administrative Agent and its counsel, and (ii) an opinion of Keith A. Zar, Esq., Vice President and General Counsel to the Company, dated the Effective Date, substantially in the form of Exhibit E-2 hereto with such changes thereto as may be approved by and otherwise in form and substance satisfactory to the Administrative Agent and its counsel. Such opinions shall also cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent shall reasonably require. 47 (c) Closing Certificate. The Administrative Agent shall have received a Closing Certificate of the Company, dated the Effective Date, substantially in the form of Exhibit F-1 hereto, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent and its counsel, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company. (d) No Violation. The consummation of the transactions contemplated hereby shall not contravene, violate or conflict with, nor involve any Bank in a violation of, any Requirement of Law, except for violations not involving any Bank and which would not have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. (e) Consents, Authorizations, and Filings, etc. The Administrative Agent shall have received copies of all consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by each Credit Party, and the validity and enforceability against each Credit Party, of the Credit Documents to which it is a party, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, including, without limitation, the consents, authorizations and filings listed on Schedule VI, the failure to obtain which would not have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Credit Parties and their Subsidiaries taken as a whole. (f) No Legal Constraints. There shall be no inquiry, injunction, restraining order, action, suit or proceeding pending or entered or any statute or rule proposed, enacted or promulgated by any Governmental Authority or any other Person, which, in the opinion of the Administrative Agent (i) would have a material adverse effect on the making of the Loans or the issuance of the Letters of Credit or the Spin-Off or (ii) other than the Excluded Litigation, has or will have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Credit Parties and their Subsidiaries taken as a whole or (iii) would give rise to any liability on the part of any Bank, the Administrative Agent or any Co-Agent in connection with this Agreement, any other Credit Document or the transactions contemplated hereby or thereby or (iv) would bar the making of the Loans, the issuance of the Letters of Credit or the use of the proceeds thereof in accordance with the terms of this Agreement. (g) Absence of Certain Legal Developments. There shall have been no development in any action, suit or proceeding which, in any such case in the opinion of the Administrative Agent, (i) would have a material adverse effect on the making of the Loans or the issuance of the Letters of Credit or (ii) (A) except for the Excluded Litigation, has or will have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Credit Parties and their Subsidiaries taken as a whole or (B) would give rise to any liability on the part of any Bank, the Administrative Agent or any Co-Agent in connection with this Agreement, any other Credit Document or the transactions 48 contemplated hereby or thereby. (h) Events of Default Under Other Agreements. There shall exist no event of default (or condition which would constitute an event of default with the giving of notice or the passage of time) under any capital stock, financing agreements, lease agreements or other contracts of the Company or its Subsidiaries which default would have a material adverse effect on business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. (i) Related Agreements. The Administrative Agent shall have received each additional document, instrument or piece of information reasonably requested by the Banks, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which any Credit Party or their Subsidiaries may be a party. (j) Financial Statements. The Administrative Agent shall have received a copy of the financial statements referred to in subsection 4.1(a) and (b), with a photocopy thereof for each Bank, which shall be satisfactory in form and substance to the Administrative Agent. (k) Business Plan. The Banks shall have received a satisfactory business plan for the 1997 through 1999 fiscal years of the Company and a reasonably satisfactory written analysis of the business and prospects of the Company and its subsidiaries for the period from the Closing Date through the Revolving Credit Termination Date. The Banks acknowledge that they have received such business plan and analysis and that this condition is satisfied. (l) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Administrative Agent and its counsel. 5.2 Conditions to Initial Loans and Letters of Credit. The obligation of each Bank to make its initial Loans and the obligation of each Issuing Bank to issue its initial Letter of Credit are subject to the satisfaction, or waiver by each Bank, immediately prior to or concurrently with the making of such Loans or the issuance of such Letter of Credit, as the case may be, of the following conditions precedent on or prior to November 30, 1997 (the date of the initial Extensions of Credit, the "Closing Date"): (a) Effective Date. The conditions set forth in subsection 5.1 shall have been satisfied or waived in accordance with the terms hereof. (b) Spin-Off. (i) The Spin-Off Transactions that are scheduled to occur under the Spin-Off Documents on or prior to the Closing Date shall have been consummated in all material respects, and the conditions precedent scheduled to occur under the Spin-Off Documents on or prior to the Closing Date shall have been consummated in all material respects, and the S-4 Filing and the Spin-Off Documents shall not have been amended in any material respect without the consent of the Administrative Agent. 49 (ii) The rulings received by GI Holdings from the Internal Revenue Service, to the effect that the Spin-Off will be tax-free for federal income tax purposes to GI Holdings, the Company, CommScope and their respective Subsidiaries and to the stockholders of GI Holdings, shall be in full force and effect. (c) Fees. The Administrative Agent shall have received for the account of the Banks, or for its own account, as the case may be, all fees (including the fees referred to in subsection 3.9) payable to the Banks and the Administrative Agent on or prior to the Closing Date. 5.3 Conditions to All Loans and Letters of Credit. The obligation of each Bank to make any Loan (other than any Revolving Credit Loan the proceeds of which are to be used to repay Refunded Swing Line Loans or a Loan that does not increase the aggregate outstanding principal amount of the Loans of any Bank) and the obligation of each Issuing Bank to issue any Letter of Credit (other than any Letter of Credit which is an extension, renewal or replacement of an existing Letter of Credit and which does not increase the face amount thereof) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Representations and Warranties. If such Loan is made (and/or Letter of Credit issued) on the Closing Date, each of the representations and warranties made in or pursuant to Section 4, or which are contained in any other Credit Document or any certificate, document or financial or other statement furnished by or on behalf of the Company or any Subsidiary thereof, at any time under or in connection herewith, shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date (unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date). If such Loan is made (and/or Letter of Credit issued) subsequent to the Closing Date, each of the representations and warranties made in or pursuant to Section 4 (excluding the representations made pursuant to subsection 4.2 which shall be made only on the Closing Date) or which are contained in any other Credit Document or in any certificate, document or financial or other statement furnished by or on behalf of the Company or any Subsidiary thereof shall be true and correct in all material respects on and as of the date of such Loan (or Letter of Credit) as if made on and as of such date (unless stated to relate to a specific earlier date, in which case, such representations and warranties shall be true and correct in all material respects as of such earlier date). (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loan to be made or the Letter of Credit to be issued on such Borrowing Date. Each borrowing by the Company hereunder and the issuance of each Letter of Credit by each Issuing Bank hereunder shall constitute a representation and warranty by the Company as of the date of such borrowing or issuance that the conditions in this subsection 5.3 have been satisfied. 50 SECTION 6. AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect, any Loan, or Revolving L/C Obligation remains outstanding and unpaid, any amount remains available to be drawn under any Letter of Credit or any other amount is owing to any Bank, any Co-Agent, any Issuing Bank, or the Administrative Agent hereunder, it shall, and, in the case of the agreements contained in subsections 6.3, 6.4, 6.5, 6.6 and 6.8 cause each of its Subsidiaries to: 6.1 Financial Statements. Furnish to the Administrative Agent (with sufficient copies for each Bank): (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Company, a copy of the consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of operations, stockholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Deloitte & Touche LLP or other independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter, the related unaudited consolidated statements of stockholders' equity and cash flows of the Company and its consolidated Subsidiaries from the beginning of such fiscal year through the end of such quarter and the related unaudited consolidated statements of operations of the Company and its consolidated Subsidiaries for such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event within 90 days after the beginning of each fiscal year of the Company to which such budget relates, a consolidated operating budget for the Company and its Subsidiaries taken as a whole, in each case as adopted by the Board of Directors of the Company. All financial statements shall be complete and correct in all material respects (subject, in the case of interim statements, to normal year-end audit adjustments) and shall be prepared in reasonable detail (except that interim statements may be condensed and may exclude detailed footnote disclosure to the extent consistent with the rules and regulations of the Securities and Exchange Commission relating to the presentation of financial information in Quarterly Reports on Form 10-Q) and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as concurred in by such accountants or officer, as the case may be, and disclosed therein and except that interim financial statements need not be restated for changes in accounting principles which require retroactive application, and operations which have been discontinued (as defined in Accounting Principles Board Opinion No. 30) during the current year need not be shown in interim financial statements as such either for the current period or comparable prior period). In the event the Company changes its accounting methods 51 because of changes in GAAP, or any change in GAAP occurs which increases or diminishes the protection and coverage afforded to the Banks under current GAAP accounting methods, the Company or the Administrative Agent, as the case may be, may request of the other parties to this Agreement an amendment of the financial covenants contained in this Agreement to reflect such changes in GAAP and to provide the Banks with protection and coverage equivalent to that existing prior to such changes in accounting methods or GAAP, and each of the Company, the Administrative Agent, the Co-Agents and the Banks agree to consider such request in good faith. 6.2 Certificates; Other Information. Furnish to the Administrative Agent (with sufficient copies for each Bank other than reports listed in subsection 6.2(c) which shall be made available by the Administrative Agent to any Bank upon request): (a) concurrently with the delivery of the consolidated financial statements referred to in subsection 6.1(a), a letter from the independent certified public accountants reporting on such financial statements (i) stating that their audit examination has included a review of the terms of subsections 7.3(b), 7.7, 7.8 and 7.9 of this Agreement and any definitions set forth in this Agreement relating thereto, in each case as they relate to accounting matters, and (ii) stating whether, in connection with their audit examination, any condition or event that constitutes any Default or Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of their audit examination; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and (b), a certificate of the chief financial officer of the Company (i) stating that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (ii) showing in detail as of the end of the related fiscal period the figures and calculations supporting such statement in respect of clause (b) of subsection 7.3, clause (i) of subsection 7.2 and subsections 7.7, 7.8, and 7.9; (iii) showing in detail as of the end of the related fiscal period the Leverage Ratio as of the end of such fiscal period and the calculations supporting such statement and stating the Applicable Margin payable as a result of such Leverage Ratio; (iv) if not specified in the financial statements delivered pursuant to subsection 6.1, specifying the aggregate amount of interest paid or accrued by the Company and its Subsidiaries, and the aggregate amount of depreciation, depletion and amortization charged on the books of the Company and its Subsidiaries, during such accounting period; and (v) listing all Indebtedness for borrowed money (other than Indebtedness hereunder) in each case incurred since the date of the previous consolidated balance sheet of the Company delivered pursuant to subsection 6.1(a) or (b); (c) promptly upon receipt thereof, copies of all final reports submitted to the Company by independent certified public accountants in connection with each annual, interim or special audit of the books of the Company made by such accountants, including, without limitation, any final comment letter submitted by such accountants to management in connection with their annual audit; (d) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company or 52 any of its Subsidiaries and all regular and periodic reports and all final registration statements and final prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any Governmental Authority succeeding to any of its functions; (e) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and (b), a management summary describing and analyzing the performance of the Company and its Subsidiaries during the periods covered by such financial statements to the extent not included in the reports filed by the Company with the Securities and Exchange Commission which are delivered to the Banks; (f) promptly, such additional financial and other information as any Bank may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its obligations and liabilities of whatever nature, except (a) when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or any of its Subsidiaries, as the case may be, (b) for delinquent obligations which do not have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole and (c) for trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue for a period of more than 90 days (or any longer period if longer payment terms are accepted in the ordinary course of business) or, if overdue for more than 90 days (or such longer period), as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of the Company and its Subsidiaries, as the case may be. 6.4 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except for rights, privileges and franchises the loss of which would not in the aggregate have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, and except as otherwise permitted by subsections 7.4 and 7.5; and comply with all applicable Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. 6.5 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted); and (b) Maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and with only such deductibles as are usually maintained by, and against at least such risks as are usually insured against in the same general area by, companies engaged in the same or a similar business; provided that the Company may implement programs of self insurance in the ordinary course of business and in accordance with 53 industry standards for a company of similar size so long as reserves are maintained in accordance with GAAP for the liabilities associated therewith. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities in accordance with GAAP and all Requirements of Law; and permit representatives of any Bank upon reasonable notice to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired upon reasonable notice, and to discuss the business, operations, properties and financial and other condition of the Company and its Subsidiaries with officers and employees thereof and with their independent certified public accountants. 6.7 Notices. Promptly give notice to the Administrative Agent and each Bank: (a) of the occurrence of any Default or Event of Default; (b) of any (i) default or event of default under any instrument or other agreement, guarantee or collateral document of the Company or any of its Subsidiaries which default or event of default has not been waived and would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, or receipt of any notice of any environmental claim or assessment against the Company or any of its Subsidiaries by any Governmental Authority, which in any such case would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole; (c) of any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which more than $50,000,000 of the amount claimed is not covered by insurance or (ii) in which injunctive or similar relief is sought which if obtained would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole; (d) of the following events, as soon as practicable after, and in any event within 30 days after, the Company knows thereof: (i) the occurrence of any Reportable Event with respect to any Single Employer Plan which Reportable Event would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, or (ii) the institution of proceedings or the taking of any other action by PBGC, the Company or any Commonly Controlled Entity to terminate, withdraw from or partially withdraw from any Plan and, with respect to a Multiemployer Plan, the Reorganization or Insolvency of such Plan, in each of the foregoing cases which would have a material adverse effect on the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole, and in addition to such notice, 54 deliver to the Administrative Agent and each Bank whichever of the following may be applicable: (A) a certificate of the chief financial officer of the Company setting forth details as to such Reportable Event and the action that the Company or such Commonly Controlled Entity proposes to take with respect thereto, together with a copy of any notice of such Reportable Event that may be required to be filed with PBGC, or (B) any notice delivered by PBGC evidencing its intent to institute such proceedings or any notice to PBGC that such Plan is to be terminated, as the case may be; and (e) of a material adverse change known to the Company or any of its Subsidiaries in the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole. Each notice pursuant to this subsection 6.7 shall be accompanied by a statement of the chief executive officer or the chief financial officer of the Company setting forth details of the occurrence referred to therein and (in the cases of clauses (a) through (e)) stating what action the Company proposes to take with respect thereto. 6.8 Additional Subsidiary Guarantors. (a) If any Subsidiary of the Company (whether presently existing or hereafter created or acquired) shall become a Material Subsidiary, the Company shall cause such Material Subsidiary to promptly thereafter execute and deliver a Subsidiary Guarantee in favor of the Administrative Agent in substantially the form of Exhibit D, each of which Subsidiary Guarantees shall be accompanied by such resolutions, incumbency certificates and legal opinions as are reasonably requested by the Administrative Agent and its counsel. (b) In the event that there shall be a Change in Law which eliminates the adverse tax consequences to the Company or any of its Subsidiaries which would have resulted on the date hereof from the guarantee by a Subsidiary, which would be a Material Subsidiary but for the fact that 75% of the assets of such Subsidiary are securities of foreign companies, of the Loans and the other obligations of the Company hereunder, the Company shall promptly thereafter cause any such Subsidiary that has not previously executed and delivered a Subsidiary Guarantee because of such adverse tax consequences to deliver a Subsidiary Guarantee to the Administrative Agent to the extent any such guarantee can be so executed and delivered without adverse tax consequences to the Company or any of its Subsidiaries. SECTION 7. NEGATIVE COVENANTS The Company hereby agrees that from and after the Closing Date it shall not, and shall not permit any of its Subsidiaries to, directly or indirectly so long as the Commitments remain in effect or any Loan or Revolving L/C Obligation remains outstanding and unpaid, any amount remains available to be drawn under any Letter of Credit or any other amount is owing to any Bank, any Co-Agent, any Issuing Bank or the Administrative Agent hereunder: 7.1 Amendments of Spin-Off Documents. Amend, waive or terminate, or permit any amendment, waiver or termination of, any Spin-Off Document that materially adversely affects (a) the Company and its Subsidiaries taken as a whole, (b) the ability of the Company or any of its Subsidiaries to perform their respective obligations under the Spin-Off Documents or 55 (c) the rights and remedies of the Banks. 7.2 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets, income or profits, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments or other governmental charges not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or such Subsidiary, as the case may be, in accordance with GAAP; (b) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations which are not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or such Subsidiary, as the case may be, in accordance with GAAP; (c) pledges or deposits in connection with workmen's compensation, unemployment insurance and other social security legislation; (d) Liens or deposits to secure the performance of bids, tenders, trade or government contracts (other than for borrowed money), leases, licenses, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, right-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not interfere with or adversely affect in any material respect the ordinary conduct of the business of the Company and its Subsidiaries taken as a whole; (f) Liens in favor of the Banks pursuant to the Credit Documents and bankers' liens arising by operation of law; (g) Liens on assets of corporations which became or become Subsidiaries of the Company, provided that such Liens exist at the time such corporations became or become Subsidiaries and are not created in anticipation thereof; (h) Liens on documents of title and the property covered thereby securing Indebtedness in respect of the Letters of Credit which are Commercial L/Cs; (i) Liens not otherwise permitted by this subsection 7.2 securing any Indebtedness permitted under this Agreement, provided that (i) the aggregate principal amount of Indebtedness secured by such Liens permitted by this paragraph (i) shall at no time exceed $150,000,000 and (ii) no such Liens shall encumber any capital stock of the Company or any Subsidiary; (j) Liens on the Leased Property created pursuant to, or expressly permitted by, the Lease Facility; 56 (k) any judgment or judicial attachment Lien with respect to any judgment that does not constitute an Event of Default; (l) license or leases in the ordinary course of business of patents, copyrights, trademarks, trade names and other intellectual property owned by the Company or any Subsidiary, which do not in the aggregate materially detract from the value of its property or other assets or materially impair the use thereof in the operation of its business, and rights to royalties, fees and other compensation in respect of intellectual property licensed, leased or used by the Company or any Subsidiary; (m) Liens arising solely out of consignments of inventory and work-in-process in the ordinary course of business; and (n) Liens on fixed or capital assets acquired or improved by the Company or any Subsidiary; provided that (i) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such improvements and the Indebtedness secured thereby does not exceed 100% of the cost of acquiring or improving such fixed or capital assets and (ii) such security interests shall not apply to any other property or assets of the Company or any Subsidiary. 7.3 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) guarantees of obligations to third parties made in the ordinary course of business in connection with relocation of employees of the Company or any of its Subsidiaries; (b) guarantees not otherwise permitted by this subsection 7.3 by the Company and its Subsidiaries incurred in the ordinary course of business for an aggregate amount not to exceed $150,000,000 at any one time; (c) Guarantee Obligations existing on the Closing Date and described in Schedule VII; (d) Guarantee Obligations in respect of foreign currency exchange contracts permitted by subsection 7.12; (e) Guarantee Obligations pursuant to the Subsidiary Guarantees; (f) guarantees by the Company of Indebtedness and other obligations of its Subsidiaries and by Subsidiaries of Indebtedness and other obligations of other Subsidiaries and the Company, in each case as permitted under this Agreement; (g) the guarantee by the Company of the Lease Facility; and (h) indemnities and other similar Guarantee Obligations arising out of the Spin-Off Documents. 7.4 Prohibition of Fundamental Changes. Enter into any transaction of 57 acquisition of, or merger or consolidation or amalgamation with, any other Person (including any Subsidiary or Affiliate of the Company or any of its Subsidiaries), or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or make any material change in the present method of conducting business or engage in any type of business other than of the same general type now conducted by it, except for the transactions otherwise permitted pursuant to subsections 7.5 and 7.6. 7.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, tax benefits, receivables and leasehold interests), whether now owned or hereafter acquired except (a) for the sale or other disposition of any property that, in the reasonable judgment of the Company, has become uneconomic, obsolete or worn out, and which is disposed of in the ordinary course of business; (b) for sales of inventory and receivables made in the ordinary course of business; (c) that any Subsidiary of the Company may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Company or a wholly-owned Subsidiary of the Company and any Subsidiary of the Company may sell or otherwise dispose of, or part with control of any or all of, the stock of any Subsidiary to a wholly-owned Subsidiary of the Company or a Subsidiary of the Company may merge with the Company (so long as the Company is the surviving corporation) or another Subsidiary; and (d) for the sale or other disposition by the Company or any of its Subsidiaries of other assets consummated after the Closing Date, provided that (i) such sale or other disposition shall be made for fair value on an arm's-length basis and (ii) the aggregate fair market value of all such assets sold or disposed of under this clause (d) shall not exceed 25% of the consolidated total assets of the Company and its Subsidiaries as of the date of such sale; provided that in no event shall the Company or any of its Subsidiaries sell any assets pursuant to this clause (d) if the revenue generated by such assets would have exceeded 25% of the consolidated net revenue of the Company and its Subsidiaries for the preceding fiscal year. 7.6 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of, or make any other investment in, any Person, unless, after giving effect to such loan, advance, extension of credit to, or acquisition of or investment in such other Person, the Company shall be in pro forma compliance with subsections 7.7, 7.8 and 7.9 and no Default or Event or Default shall have occurred and be continuing or shall result therefrom. 7.7 Maintenance of Consolidated Net Worth. Permit Consolidated Net Worth at any time to be less than the sum (without duplication of any item) of (i) $600,000,000 and (ii) 50% of the Consolidated Net Income of the Company, if positive, for each fiscal quarter (commencing with the fiscal quarter beginning on or about July 1, 1997). 7.8 Maintenance of Interest Coverage. Permit the Interest Coverage Ratio on the last day of any fiscal quarter to be less than 5.0 to 1.0. 7.9 Maintenance of Leverage Ratio. Permit, as of the last day of any fiscal quarter, the Leverage Ratio to be greater than 3.0 to 1.0. 7.10 Limitation on Dividends and Stock Repurchases. Declare any dividends on any shares of any class of stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement or other acquisition of 58 any shares of any class of stock (including the outstanding capital stock of the Company), whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any of its Subsidiaries (all of the foregoing being referred to herein as "Restricted Payments"); except that: (a) Subsidiaries may pay dividends directly or indirectly to the Company or the other Subsidiaries which are directly or indirectly wholly-owned by the Company, and Foreign Subsidiaries may pay dividends directly or indirectly to Foreign Subsidiaries which are directly or indirectly wholly-owned by the Company; (b) the Company at any time may make Restricted Payments so long as (i) after giving effect to such Restricted Payments, the Company shall be in pro forma compliance with subsection 7.7 and (ii) at the time thereof and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or shall result therefrom; and (c) the Company may distribute to its shareholders the capital stock of CommScope in connection with the Spin-Off. 7.11 Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate except (a) for transactions which are otherwise permitted under this Agreement and which are in the ordinary course of the Company's or a Subsidiary's business and which are upon fair and reasonable terms no less favorable to the Company or such Subsidiary than it would obtain in a hypothetical comparable arm's length transaction with a Person not an Affiliate, (b) as permitted under subsections 7.3(a) and (f), subsection 7.6 and subsection 7.10 or (c) any transactions entered into as part of the Spin-Off Transactions. 7.12 Foreign Exchange Contracts. Enter into any foreign currency exchange contracts other than in the ordinary course of business. 7.13 Fiscal Year. Permit the fiscal year of the Company to end on a day other than December 31, unless the Company shall have given at least 45 days prior written notice to the Administrative Agent. SECTION 8. EVENTS OF DEFAULT Upon the occurrence of any of the following events: (a) The Company shall fail to (i) pay any principal of any Loan when due in accordance with the terms hereof or thereof or to reimburse an Issuing Bank in accordance with subsection 2.6 or (ii) pay any interest on any Loan or any other amount payable hereunder within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by any Credit Party in any Credit Document or which is contained in any certificate, guarantee, document or financial or other statement furnished under or in connection with this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed 59 made; or (c) The Company shall default in the observance or performance of any agreement contained in subsection 6.7(a) or Section 7 of this Agreement or any Credit Party shall default in the observance or performance of any agreement contained in Section 2 of any Subsidiary Guarantee to which it is a party; or (d) The Company or any other Credit Party shall default in the observance or performance of any other agreement contained in any Credit Document, and such default shall continue unremedied for a period of 30 days; or (e) The Company or any of its Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans, the Revolving L/C Obligations and any intercompany debt) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity, any applicable grace period having expired, or such Guarantee Obligation to become payable, any applicable grace period having expired, provided that the aggregate principal amount of all such Indebtedness and Guarantee Obligations under clauses (i) and (ii) equals or exceeds $15,000,000; or (f) (i) The Company or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Company or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company or any of its Subsidiaries shall generally not, or shall be unable to, or shall 60 admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event (other than a Reportable Event with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived or which occurs by reason of the Spin-Off Transactions) shall occur with respect to, or proceedings to have a trustee appointed shall commence with respect to, or a trustee shall be appointed to administer or to terminate, any Single Employer Plan, which Reportable Event or institution of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Banks, likely to result in the termination of such Plan for purposes of Title IV of ERISA, and, in the case of a Reportable Event, such Reportable Event shall continue unremedied for ten days after notice of such Reportable Event is given and, in the case of the institution of proceedings, such proceedings shall continue for ten days after commencement thereof or (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA; and in each case in clauses (i) through (iv) above, such event or condition, together with all other such events or conditions relating to such Plans, if any, could subject the Company or any of its Subsidiaries to any tax, penalty or other liabilities which in the aggregate are material in relation to the business, financial condition, properties, results of operations, value or prospects of the Company and its Subsidiaries taken as a whole; or (h) Except with respect to the Excluded Litigation, one or more final judicial judgments or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate for all such Persons a liability (not paid or fully covered by insurance) of $15,000,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within the time required by the terms of such judgment; or (i) Any Guarantee shall cease, for any reason, to be in full force and effect or any Credit Party shall so assert in writing; or (j) (i) Any Person or two or more Persons (except FL Affiliates and, prior to the Spin-Off, General Instrument Corporation) acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Exchange Act) of more than 33% of the outstanding shares of voting stock of the Company; or (ii) any Person or two or more Persons (except FL Affiliates) acting in concert shall acquire the power to elect a majority of the Board of Directors of the Company; then, and in any such event, (x) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above, automatically (i) the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (ii) all obligations of the Company in respect of the Letters of Credit, although contingent and unmatured, shall become immediately due and payable and the Issuing Banks' obligations to issue Letters of Credit shall immediately terminate and (y) if such event is any other Event of Default, so long as any such Event of Default shall be continuing, either or both of the following actions may be taken: (i) with the 61 consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice to the Company, declare the Commitments and any Bank's obligations to issue Letters of Credit to be terminated forthwith, whereupon the Commitments and such obligations shall immediately terminate; and (ii) with the consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice of default to the Company, (A) declare all or a portion of the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable, and (B) declare all or a portion of the obligations of the Company in respect of the Letters of Credit, although contingent and unmatured, to be due and payable forthwith, whereupon the same shall immediately become due and payable and/or demand that the Company discharge any or all of the obligations supported by the Letters of Credit by paying or prepaying any amount due or to become due in respect of such obligations. All payments under this Section 8 on account of undrawn Letters of Credit shall be made by the Company directly to a cash collateral account established by the Administrative Agent for such purpose for application to the Company's reimbursement obligations under subsection 2.6 as drafts are presented under the Letters of Credit, with the balance, if any, to be applied to the Company's obligations under this Agreement as the Administrative Agent shall determine with the approval of the Required Banks. Except as expressly provided above in this Section 8, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 9. THE CO-AGENTS; THE ADMINISTRATIVE AGENT; ISSUING BANKS 9.1 Appointment. Each Bank hereby irrevocably designates and appoints Chase, Bank of America National Trust and Savings Association, BankBoston, N.A., The Bank of Nova Scotia, Bank of Tokyo-Mitsubishi Trust Company, Caisse Nationale de Credit Agricole, CIBC Inc., Deutsche Bank, AG, New York Branch and/or Cayman Islands Branch, The Fuji Bank, Limited and NationsBank, N.A. as the Co-Agents of such Bank under this Agreement and acknowledges that no Co-Agent, in its capacity as such, shall have any duties under the Credit Documents. Each Bank hereby irrevocably designates and appoints Chase as the Administrative Agent under this Agreement and irrevocably authorizes Chase as Administrative Agent for such Bank to take such action on its behalf under the provisions of the Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of the Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Co-Agents nor the Administrative Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Credit Documents or otherwise exist against the Co-Agents or the Administrative Agent. 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and each of the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Without limiting the foregoing, the Administrative Agent may appoint Chase Manhattan Bank Agency Services Corporation as its agent to perform the functions of the 62 Administrative Agent hereunder relating to the advancing of funds to the Company and distribution of funds to the Banks and to perform such other related functions of the Administrative Agent hereunder as are reasonably incidental to such functions. None of the Co-Agents nor the Administrative Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care, except as otherwise provided in subsection 9.3. 9.3 Exculpatory Provisions. Neither the Co-Agents nor the Administrative Agent nor any of their officers, directors, employees, agents, attorneys-in-fact, Affiliates or Subsidiaries shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in the Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by any Co-Agent or the Administrative Agent under or in connection with, the Credit Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Credit Documents or for any failure of any Credit Party to perform its obligations thereunder. None of the Co-Agents or the Administrative Agent shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any Credit Document, or to inspect the properties, books or records of any Credit Party. 9.4 Reliance by Co-Agents and Administrative Agent. Each of the Co-Agents and the Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by such Co-Agent or the Administrative Agent. Each of the Co-Agents and the Administrative Agent may deem and treat the payee of any promissory note issued under or in connection with this Agreement as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Co-Agent or the Administrative Agent. Each of the Co-Agents and the Administrative Agent shall be fully justified in failing or refusing to take any action under any Credit Document unless it shall first receive such advice or concurrence of the Required Banks (or, where unanimous consent of the Banks is expressly required hereunder, such Banks) as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each of the Co-Agents and the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Credit Document in accordance with a request of the Required Banks (or the Release Banks with respect to matters requiring the consent of the Release Banks), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 9.5 Notice of Default. None of the Co-Agents or the Administrative Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Co-Agent or the Administrative Agent has received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly give notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default 63 as shall be reasonably directed by the Required Banks; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 9.6 Non-Reliance on Co-Agents, Administrative Agent and Other Banks. Each Bank expressly acknowledges that none of the Co-Agents or the Administrative Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by any Co-Agent or the Administrative Agent hereafter taken, including any review of the affairs of the Credit Parties, shall be deemed to constitute any representation or warranty by any Co-Agent or the Administrative Agent to any Bank. Each Bank represents to each Co-Agent and to the Administrative Agent that it has, independently and without reliance upon any Co-Agent or the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Credit Parties and made its own decision to make its Loans hereunder, issue and participate in the Letters of Credit and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon any Co-Agent or the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Credit Parties. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Administrative Agent hereunder, none of the Co-Agents and the Administrative Agent shall have any duty or responsibility to provide any Bank with any credit or other information concerning the business, financial condition, assets, liabilities, net assets, properties, results of operations, value, prospects and other condition or creditworthiness of the Credit Parties which may come into the possession of any Co-Agent or the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact, Affiliates or Subsidiaries. 9.7 Indemnification. The Banks severally agree to indemnify each of the Co-Agents and the Administrative Agent in its capacity as such (to the extent not reimbursed by the Credit Parties and without limiting the obligation of the Credit Parties to do so), ratably according to the respective amounts of their Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Loans) be imposed on, incurred by or asserted against any Co-Agent or the Administrative Agent in any way relating to or arising out of the Credit Documents or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by any Co-Agent or the Administrative Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from any Co-Agent's or the Administrative Agent's gross negligence or willful misconduct. The agreements contained in this subsection 9.7 shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Co-Agents and Administrative Agent in their Individual Capacities. Each of the Co-Agents and the Administrative Agent and their respective Affiliates and Subsidiaries may 64 make loans to, accept deposits from and generally engage in any kind of business with the Credit Parties as though such Co-Agent or Administrative Agent were not a Co-Agent or the Administrative Agent hereunder, as the case may be. With respect to its Loans made or renewed by it and any Letter of Credit issued by or participated in by it, each of the Co-Agents and the Administrative Agent shall have the same rights and powers, duties and liabilities under the Credit Documents as any Bank and may exercise the same as though it were not a Co-Agent or the Administrative Agent, as the case may be, and the terms "Bank" and "Banks" shall include each of the Co-Agents and the Administrative Agent in their individual capacities. 9.9 Successor Co-Agent or Administrative Agent. Each Co-Agent and the Administrative Agent may resign as Co-Agent or Administrative Agent, as the case may be, upon 30 days' notice to the Banks. The resignation of any Co-Agent shall be effective without any further act or deed on the part of such former Co-Agent. If the Administrative Agent shall resign as Administrative Agent under the Credit Documents, then the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company (which approval shall not be unreasonably withheld) and upon its acceptance thereof, such successor agent shall succeed to the rights, powers and duties of the Administrative Agent and the term "Administrative Agent" shall mean such successor agent effective upon its appointment, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After any retiring Co-Agent's or Administrative Agent's resignation hereunder as Co-Agent or Administrative Agent, as the case may be, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Co-Agent or Administrative Agent, as the case may be, under the Credit Documents. 9.10 An Issuing Bank as Issuer of Letters of Credit. Each Bank and each Co-Agent hereby acknowledge that the provisions of this Section 9 shall apply to any Issuing Bank, in its capacity as issuer of any Letter of Credit, in the same manner as such provisions are expressly stated to apply to the Administrative Agent. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. No Credit Document nor any terms thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection 10.1. With the written consent of the Required Banks, the Administrative Agent and the respective Credit Parties may, from time to time, enter into written amendments, supplements or modifications to any Credit Document for the purpose of adding any provisions to such Credit Document to which they are parties or changing in any manner the rights of the Banks or of any such Credit Party or any other Person thereunder or waiving, on such terms and conditions as the Administrative Agent may specify in such instrument, any of the requirements of any such Credit Document or any Default or Event of Default and its consequences; provided, however, that: (a) no such waiver and no such amendment, supplement or modification shall directly or indirectly release any Subsidiary Guarantor from its obligations under the Subsidiary Guarantee without the written consent of the Release Banks, except as otherwise provided; 65 (b) no such waiver and no such amendment, supplement or modification shall (x) extend the scheduled final maturity of any Loan (other than a Bid Loan) or extend the expiry date of any Letter of Credit beyond the Revolving Credit Termination Date, or reduce the rate or extend the time of payment of interest thereon, or change the method of calculating interest thereon, or reduce or extend the time of payment of any fee payable to the Banks hereunder, or reduce the principal amount thereof, or increase the amount of any Bank's Commitments, without the written consent of each Bank affected thereby, or (y) amend, modify or waive any provision of this subsection 10.1 or reduce the percentages specified in the definition of Required Banks or Release Banks, or change the percentage of the Banks required to waive a condition precedent under Section 5 or consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document, in each case, without the written consent of each Bank, provided that with respect to any Bid Loan, no such waiver and no such amendment, supplement or modification shall be made without the written consent of each Bank holding such Bid Loan; (c) in addition to amendments effected pursuant to the foregoing paragraphs (a) and (b), Schedule II may be amended to add Available Foreign Currencies, upon execution and delivery by the Company and the Administrative Agent of a written instrument providing for such amendment; and (d) the Administrative Agent shall give prompt notice to each Bank of any amendment effected pursuant to subsection 10.1(c). Any such waiver and any such amendment, supplement or modification described in this subsection 10.1 shall apply equally to each of the Banks and shall be binding upon each Credit Party, the Banks, the Co-Agents, the Administrative Agent. No waiver, amendment, supplement or modification of any Letter of Credit shall extend the expiry date thereof without the written consent of the Participating Banks. In the case of any waiver, the Company, the Banks, the Co-Agents and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 66 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy or telex), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when sent, confirmation of receipt received, or, in the case of telex notice, when sent, answerback received, addressed as follows in the case of each Credit Party and the Administrative Agent, and as set forth in Schedule I in the case of any Bank, or to such other address as may be hereafter notified by the respective parties hereto: The Company: NextLevel Systems, Inc. 8770 West Bryn Mawr Avenue, Suite 1300 Chicago, Illinois 60631 Attention: Treasurer Telecopy: (312) 695-1001 With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: F. William Reindel, Esq. Telecopy: (212) 859-8587 The Administrative Agent: The Chase Manhattan Bank c/o Chase Securities Inc. 10 South LaSalle Street Suite 2300 Chicago, Illinois 60603 Attention: Leonard Essex Telecopy: (312) 807-4077 The Co-Agents: The Chase Manhattan Bank c/o Chase Securities Inc. 10 South LaSalle Street Suite 2300 Chicago, Illinois 60603 Attention: Leonard Essex Telecopy: (312) 807-4077 Bank of America National Trust and Savings Association 555 California Street 41st Floor San Francisco, California 94104 Attention: Kevin McMahon Telecopy: (415) 622-2514 67 BankBoston, N.A. 100 Federal Street Corporate 01-09-05 Boston, Massachusetts 02110 Attention: Christopher M. Holtz Telecopy: (617) 434-6685 The Bank of Nova Scotia 181 W. Madison Suite 3700 Chicago, Illinois 60602 Attention: Lisa A. Garling Telecopy: (312) 201-4108 Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas 12th Floor New York, New York 10020-1104 Attention: Friedrich N. Wilms Telecopy: (212) 782-6445 Caisse Nationale de Credit Agricole 55 E. Monroe Suite 4700 Chicago, Illinois 60603 Attention: Linda Hayes Telecopy: (312) 372-4421 CIBC Inc. 425 Lexington Avenue 8th Floor New York, New York 10017 Attention: Paolo Ferrari Telecopy: (212) 856-3991 Deutsche Bank, AG, New York Branch and/or Cayman Islands Branch 31 West 52nd Street New York, New York 10019 Attention: Ralf Hoffman Telecopy: (212) 469-8212 The Fuji Bank, Limited 225 West Wacker Drive Suite 2000 Chicago, Illinois 60606 Attention: Stephen P. Peca Telecopy: (312) 621-0539 / (312) 419-3677 68 NationsBank, N.A. 233 South Wacker Drive Suite 2800 Chicago, Illinois 60606 Attention: Lisa Donoghue Telecopy: (312) 234-5619 provided that any notice, request or demand to or upon the Administrative Agent or the Banks pursuant to subsections 2.3, 2.8, 2.10, 3.1, 3.2, 3.3 and 3.4 shall not be effective until received and provided further that the failure to provide the copies of notices to the Company provided for in this subsection 10.2 shall not result in any liability to the Administrative Agent, any Co-Agent or any Bank. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent, any Co-Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Letters of Credit. 10.5 Payment of Expenses and Taxes. The Company agrees: (a) to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, the Credit Documents and any other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent; (b) to pay or reimburse each Bank, each Co-Agent and the Administrative Agent for all their costs and expenses incurred in connection with, and to pay, indemnify, and hold the Administrative Agent, each Co-Agent and each Bank harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever arising out of or in connection with, the enforcement or preservation of any rights under any Credit Document and any such other documents, including, without limitation, reasonable fees and disbursements of counsel to the Administrative Agent, each Co-Agent and each Bank incurred in connection with the foregoing and in connection with advising the Administrative Agent with respect to its rights and responsibilities under this Agreement and the documentation relating thereto; (c) to pay, indemnify, and to hold the Administrative Agent, each Co-Agent and 69 each Bank harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes (other than withholding taxes), if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, any Credit Document and any such other documents; and (d) to pay, indemnify, and hold the Administrative Agent, each Co-Agent and each Bank and their respective officers, directors, employees and agents harmless from and against any and all other liabilities, obligations, losses, damages (including punitive damages), penalties, fines, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable experts' and consultants' fees and reasonable fees and disbursements of counsel and third party claims for personal injury or real or personal property damage) which may be incurred by or asserted against the Administrative Agent, any Co-Agent or the Banks (x) arising out of or in connection with any investigation, litigation or proceeding related to this Agreement, the other Credit Documents, the proceeds of the Loans, or any of the other transactions contemplated hereby, whether or not the Administrative Agent, any Co-Agent or any of the Banks is a party thereto, (y) with respect to any environmental matters, any actual or alleged environmental compliance expenses and any actual or alleged remediation expenses in connection with the presence, suspected presence, release or suspected release of any Hazardous Materials in or into the air, soil, groundwater, surface water or improvements at, on, about, under, or within the Properties, or any portion thereof, or elsewhere in connection with the transportation of Hazardous Materials to or from the Properties or (z) without limiting the generality of the foregoing, by reason of or in connection with the execution and delivery or transfer of, or payment or failure to make payments under, Letters of Credit (it being agreed that nothing in this subsection 10.5(d)(z) is intended to limit the Company's obligations pursuant to subsection 2.6); (all the foregoing, collectively, the "indemnified liabilities"), provided that the Company shall have no obligation hereunder with respect to indemnified liabilities of the Administrative Agent, any Co-Agent or any Bank or any of their respective officers, directors, employees or agents arising from (i) the gross negligence or willful misconduct of such Administrative Agent, Co-Agent or Bank or their respective directors, officers, employees or agents or (ii) legal proceedings commenced against the Administrative Agent, any Co-Agent or any Bank by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such or (iii) legal proceedings commenced against the Administrative Agent, any Co-Agent or any such Bank by any Transferee (as defined in subsection 10.6). The agreements in this subsection 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations; Purchasing Banks. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the Co-Agents and the Administrative Agent, and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. 70 (b) Any Bank may, in the ordinary course of its commercial banking or lending business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Bank, any participating interest of such Bank in the Letters of Credit, any Commitment of such Bank or any other interest of such Bank hereunder and under the other Credit Documents, provided, however, that no Bank shall sell any such participating interest to any Participant which is a Non-U.S. Bank that is unable to deliver to such Bank either an Internal Revenue Service Form 4224 or Form 1001 pursuant to clause (A) of subsection 3.17(e) hereof. In the event of any such sale by a Bank of participating interests to a Participant, such Bank's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof for all purposes under this Agreement and the other Credit Documents and the Company and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and the other Credit Documents. The Company agrees that if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement; provided that such Participant shall only be entitled to such right of setoff if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with the Banks the proceeds thereof, as provided in subsection 10.7. The Company also agrees that each Participant shall be entitled to the benefits of subsections 3.11, 3.18, 3.19 and 3.20 with respect to its participation in the Letters of Credit and in the Commitments and the Loans outstanding from time to time; provided that no Participant shall be entitled to receive any greater amount pursuant to such subsections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. (c) Any Bank may, in the ordinary course of its commercial banking or lending business and in accordance with applicable law, at any time sell to any Bank or any Affiliate thereof (including any Affiliate or Subsidiary of such transferor Bank) and, with the consent of the Company and the Administrative Agent, the Issuing Bank, if applicable, and the Swing Line Bank, if applicable (which in each case shall not be unreasonably withheld), sell to one or more additional banks or financial institutions (an "Assignee"), all or any part of its rights and obligations under this Agreement and the other Credit Documents and with respect to the Letters of Credit, pursuant to an Assignment and Acceptance executed by such Assignee, such assigning Bank (and, in the case of an Assignee that is not then a Bank or an affiliate thereof, by the Company and the Administrative Agent), and delivered to the Administrative Agent for its acceptance and recording in the Register (as defined below); provided that (A) each such sale pursuant to this subsection 10.6(c) (I) to a Person which is not then a Bank or an Affiliate of a Bank shall be of Commitments and/or Loans of $10,000,000 (or if such assigning Bank has Commitments and Loans in an amount less than $10,000,000 in the aggregate, such lesser amount) or more and (II) to a Person which is then a Bank or an Affiliate of a Bank may be in any amount, (B) in the event of a sale of less than all of such rights and obligations, such Bank after such sale shall retain Commitments and/or Loans (without duplication) aggregating $10,000,000; and provided further that the foregoing shall not prohibit a Bank from selling participating interests in accordance with subsection 10.6(b) in all or any portion of its Commitments and/or Loans (without duplication) and (C) each Assignee which is a Non-U.S. Bank shall comply with the provisions of clause (A) of subsection 3.17(e) hereof, or, with the 71 prior written consent of the Company which may be withheld in its sole discretion, with or without cause, the provisions of clause (B) of subsection 3.17(e) hereof (and, in either case, with all of the other provisions of subsection 3.17(e) hereof), and provided, further, that no Bank shall assign any Bid Loans pursuant to this subsection 10.6(c) except in connection with the assignment of all of its Loans and Commitments under this Agreement. If at any time any Co-Agent shall own less than 5% of the Commitments and/or the Loans (without duplication), then such Co-Agent shall, at the Company's request after consultation with the Administrative Agent, no longer be entitled to the benefits of the title "Co-Agent" under this Agreement and shall promptly resign as a Co-Agent; provided that nothing contained in this sentence shall be construed or interpreted as impairing any right of a resigning Co-Agent in its capacity as a Bank under this Agreement; and provided further that the foregoing shall not prohibit a Co-Agent from selling participating interests in accordance with subsection 10.6(b) in all or any portion of its Commitments and/or Loans. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder with the Commitments as set forth therein, and (y) the assigning Bank thereunder shall, to the extent of the interest transferred, as reflected in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such assigning Bank shall cease to be a party hereto). Such Assignment and Acceptance shall be deemed to amend this Agreement and Schedule I hereto to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Commitment Percentages arising from the purchase by such Assignee of all or a portion of the rights and obligations of such assigning Bank under this Agreement. (d) The Administrative Agent acting on behalf of and as agent for the Company, shall maintain at its address referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Banks and the registered owners of the Obligations evidenced by the Registered Form Notes and the Commitments of, the principal amount of any Loans owing to, and, if such Bank has any Revolving Credit Commitment, the L/C Participating Interests of, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and the Banks shall treat each Person whose name is recorded in the Register as the owner of the Loans, Registered Form Notes or L/C Participating Interests recorded therein for all purposes of this Agreement. Any assignment of a Loan, Registered Form Notes or other obligation hereunder shall be effective only upon appropriate entries with respect thereto being made in the Register. Any assignment or transfer of an obligation hereunder evidenced by a promissory note shall be registered in the Register only upon the surrender of such note for registration of such assignment or transfer, and thereupon one or more new notes shall be issued to the Assignee and the old note shall be returned by the Administrative Agent to the Company, marked "cancelled". The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an Assignee (and, in the case of an Assignee that is not then a Bank or an Affiliate thereof, by the Company and the Administrative Agent), together with payment to the Administrative Agent of a registration and processing fee of $4,000 if the Assignee is not a Bank 72 or an Affiliate thereof prior to the execution of such Assignment and Acceptance and $1,000 otherwise, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto, record the information contained therein in the Register and give notice of such acceptance and recordation to the Banks and the Company. (f) The Company authorizes each Bank to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee any and all financial information in such Bank's possession concerning the Company and its Subsidiaries and Affiliates which has been delivered to such Bank by or on behalf of the Company pursuant to this Agreement or which has been delivered to such Bank by or on behalf of the Company in connection with such Bank's credit evaluation of the Company and its Subsidiaries and Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement is transferred to any Transferee which would be a Non-U.S. Bank upon the effectiveness of such transfer, the assigning Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Bank (for the benefit of the assigning Bank, the Administrative Agent and the Company) that under applicable law and treaties no United States federal income taxes or United States backup withholding taxes will be required to be withheld by the Administrative Agent, the Company or the assigning Bank with respect to any payments to be made to such Transferee in respect of the Loans or L/C Participating Interests, (ii) to furnish to the assigning Bank (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Company) such Internal Revenue Service Forms required to be furnished pursuant to subsection 3.17(e) and (iii) to agree (for the benefit of the assigning Bank, the Administrative Agent and the Company) to be bound by the provisions of subsections 3.17(e). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Bank of any Loan to any Federal Reserve Bank in accordance with applicable law; provided that any transfer of Loans upon, or in lieu of, enforcement of or the exercise of remedies under any such pledge shall be treated as an assignment thereof which shall not be made without compliance with the requirements of this subsection 10.6. 10.7 Adjustments; Set-off. (a) If any Bank (a "Benefitted Bank") shall at any time receive any payment of all or part of any of its Revolving Credit Loans (other than payment of Swing Line Loans or Bid Loans) or L/C Participating Interests, as the case may be, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Revolving Credit Loans or L/C Participating Interests, as the case may be, or interest thereon, such benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Revolving Credit Loans or L/C Participating Interests, as the case may be, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably in accordance with 73 their Commitment Percentages with each of the Banks; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Loans and/or L/C Participating Interests may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Bank were the direct holder of such portion. The Administrative Agent shall promptly give the Company notice of any set-off, provided that the failure to give such notice shall not affect the validity of such set-off. (b) Upon the occurrence of an Event of Default specified in subsection 8(a) or 8(f), the Administrative Agent, each Bank and each Co-Agent are hereby irrevocably authorized at any time and from time to time without notice to the Company, any such notice being hereby waived by the Company, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Administrative Agent, such Bank or such Co-Agent or any Affiliate thereof to or for the credit or the account of the Company, or any part thereof in such amounts as the Administrative Agent, such Bank or such Co-Agent may elect, on account of the liabilities of the Company hereunder and under the other Credit Documents and claims of every nature and description of the Administrative Agent, such Bank or such Co-Agent against the Company, in any currency, whether arising hereunder or under any other Credit Document, as the Administrative Agent, such Bank or such Co-Agent may elect, whether or not the Administrative Agent, such Bank or such Co-Agent has made any demand for payment and although such liabilities and claims may be contingent or unmatured. The Administrative Agent, each Bank and each Co-Agent shall notify the Company promptly of any such setoff made by it and the application made by it of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent, each Bank and each Co-Agent under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Administrative Agent, such Bank or such Co-Agent may have. 10.8 Judgment. (a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding the day on which final judgment is given. (b) The obligation of the Company in respect of any sum due to any Bank or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement or the other Credit Documents (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by such Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in the Judgment Currency such Bank or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to such Bank or the Administrative Agent (as the case may be) in the Agreement 74 Currency, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Administrative Agent (as the case may be) against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to any Bank or the Administrative Agent (as the case may be), such Bank or the Administrative Agent (as the case may be) agrees to remit to the Company such excess. 10.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Administrative Agent. This Agreement shall become effective with respect to the Company, the Co-Agents, the Administrative Agent and the Banks when the Administrative Agent shall have received copies of this Agreement executed by the Company, the Co-Agents and the Banks, or, in the case of any Bank, shall have received telephonic confirmation from such Bank stating that such Bank has executed counterparts of this Agreement or the signature pages hereto and sent the same to the Administrative Agent and the other conditions set forth in subsection 5.1 shall have been satisfied or waived in accordance with the terms thereof. 10.10 Integration. This Agreement and the other Credit Documents represent the entire agreement of the Credit Parties, the Administrative Agent, the Co-Agents and the Banks with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, any Co-Agent or any Bank relative to the subject matter hereof or thereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW; NO THIRD PARTY RIGHTS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT IS SOLELY FOR THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AND, EXCEPT AS SET FORTH IN SUBSECTION 10.6, NO OTHER PERSONS SHALL HAVE ANY RIGHT, BENEFIT, PRIORITY OR INTEREST UNDER, OR BECAUSE OF THE EXISTENCE OF, THIS AGREEMENT. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (ii) CONSENTS THAT ANY SUCH ACTION OR 75 PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND (iv) AGREES THAT NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. (b) EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE. 10.13 Acknowledgements. The Company hereby acknowledges that: (a) none of the Administrative Agent, any Co-Agent or any Bank has any fiduciary relationship to any Credit Party, and the relationship between the Administrative Agent, the Co-Agents and the Banks, on the one hand, and the Credit Parties, on the other hand, is solely that of creditor and debtor; and (b) no joint venture exists among the Banks or among any Credit Parties and the Banks. 76 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by their proper and duly authorized officers as of the day and year first above written. NEXTLEVEL SYSTEMS, INC. By: /s/ THOMAS A. DUMIT ----------------------- Title: Vice President THE CHASE MANHATTAN BANK, as Administrative Agent, as a Co-Agent and as a Bank By: /s/ LAURIE B. PERPER ------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: BANKBOSTON, N.A., as a Co-Agent and as a Bank By: /s/ ------------------------- Title: THE BANK OF NOVA SCOTIA, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: CAISSE NATIONALE DE CREDIT AGRICOLE, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: By: /s/ ------------------------- Title: CIBC INC., as a Co-Agent and as a Bank By: /s/ ------------------------- Title: DEUTSCHE BANK, AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: By: /s/ ------------------------- Title: THE FUJI BANK, LIMITED, as a Co-Agent and as a Bank By: /s/ ------------------------- Title: NATIONSBANK, N.A., as a Co-Agent and as a Bank By: /s/ ------------------------- Title: THE BANK OF NEW YORK By: /s/ ------------------------- Title: BANQUE NATIONALE DE PARIS By: /s/ ------------------------- Title: THE DAI-ICHI KANGYO BANK, LTD. By: /s/ ------------------------- Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ ------------------------- Title: THE NORTHERN TRUST COMPANY By: /s/ ------------------------- Title: THE SANWA BANK LIMITED, CHICAGO BRANCH By: /s/ ------------------------- Title: THE SUMITOMO BANK, LTD., CHICAGO BRANCH By: /s/ ------------------------- Title: THE SUMITOMO TRUST AND BANKING CO., LTD., NEW YORK BRANCH By: /s/ ------------------------- Title: EX-27 13 EXHIBIT 27
5 The schedule contains summary financial information extracted from the NextLevel Systems, Inc. financial statements for the six months ended June 30, 1997 and is qualified in its entirety by references to such financial statements. 0001035881 NEXTLEVEL SYSTEMS, INC. 1,000 6-MOS DEC-31-1997 JUN-30-1997 0 30,306 352,311 13,556 282,629 755,980 255,234 0 1,654,127 356,664 0 0 0 0 1,084,452 1,654,127 858,431 858,431 627,299 627,299 0 0 13,511 13,331 7,965 5,366 0 0 0 5,366 0 0
EX-99 14 EXHIBIT 99 Exhibit 99 NEXTLEVEL SYSTEMS, INC. EXHIBIT 99 - FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. The Company's Form 10-K, the Company's Annual Report to Stockholders, any Form 10-Q or Form 8-K of the Company, or any other oral or written statements made by or on behalf of the Company, may include forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are identified by their use of such terms and phrases as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects," "expect," "expected," "project," "projects," "projected," "projections," "plans," "anticipates," "anticipated," "should," "designed to," "foreseeable future," "believe," "believes" and "scheduled" and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The actual results of the Company may differ significantly from the results discussed in forward-looking statements. Factors that might cause such a difference include, but are not limited to, (a) the general political, economic and competitive conditions in the United States and other markets where the Company operates; (b) changes in capital availability or costs, such as changes in interest rates, market perceptions of the industry in which the Company operates, or security ratings; (c) employee workforce factors; and (d) authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board and the Securities and Exchange Commission, and the factors set forth below. FACTORS RELATING TO THE DISTRIBUTION General Instrument Corporation (i) transferred all the assets and liabilities relating to the manufacture and sale of broadband communications products used in the cable television, satellite, and telecommunications industries (the "Communications Business") to the Company (then a wholly-owned subsidiary of GI) and transferred all the assets and liabilities relating to the manufacture and sale of coaxial, fiber optic and other electric cable used in the cable television, satellite and other industries (the "Cable Manufacturing Business") to its wholly-owned subsidiary CommScope, Inc. ("CommScope") and (ii) then distributed all of the outstanding shares of capital stock of each of the Company and CommScope to its shareholders on a pro rata basis as a dividend (the "Distribution"), in a transaction that was consummated on July 28, 1997. General Instrument Corporation prior to the Distribution is herein referred to as "GI" and following the Distribution is referred to herein as "General Semiconductor". The Company is a smaller and less diversified company than GI was prior to the Distribution and has no recent operating history as a separate entity. The ability of the Company to satisfy its obligations and maintain profitability will be solely dependent upon its own future performance, and the Company will no longer be able to rely on the capital resources and cash flows of the businesses of CommScope or General Semiconductor. In particular, in recent years, the Communications Business has invested heavily in the development of new technologies and products and relied on the cash flows of GI's other businesses to help fund these expenditures. Although this source of funding is no longer available, the Company believes that its expected cash flow, as well as other sources of funding available to it, will be sufficient to finance its planned expenditures. The future performance and cash flows of the Company will be subject to prevailing economic conditions and to financial, business and other factors affecting the business operations of the Company, including factors beyond its control. The division of GI may result in some temporary dislocation and inefficiencies to the business operations, as well as the organization and personnel structure, of the Company, and will also result in the duplication of certain personnel, administrative and other expenses required for the operation of an independent company. The management of the Company has not previously operated its business as a separate public company so there can be no assurance that the transition will not alter or disrupt, at least temporarily, the management and operations of Company's business. The Distribution Agreement dated as of June 12, 1997, among the Company, CommScope and General Semiconductor (the "Distribution Agreement") and certain other agreements executed in connection with the Distribution (collectively, the "Ancillary Agreements") allocate among the Company, CommScope, and General Semiconductor and their respective subsidiaries responsibility for various indebtedness, liabilities and obligations. It is possible that a court would disregard this contractual allocation of indebtedness, liabilities and obligations among the parties and require the Company or its subsidiaries to assume responsibility for obligations allocated to another party, particularly if such other party were to refuse or was unable to pay or perform any of its allocated obligations. Pursuant to the Distribution Agreement and certain of the Ancillary Agreements, the Company has agreed to indemnify the other parties (and certain related persons) from and after consummation of the Distribution with respect to certain indebtedness, liabilities and obligations, which indemnification obligations could be significant. Although the Company has received a favorable ruling from the Internal Revenue Service, if the Distribution were not to qualify as a tax free spin-off under Section 355 of the Internal Revenue Code of 1986, as amended, then, in general, a corporate tax would be payable by the consolidated group of which GI was the common parent based upon the difference between the fair market value of the stock distributed and the distributing corporation's adjusted basis in such stock. The corporate level tax would be payable by General Semiconductor and could substantially exceed the net worth of General Semiconductor. However, under certain circumstances, the Company and CommScope have agreed to indemnify General Semiconductor for such tax liability. In addition, under the consolidated return rules, each member of the consolidated group (including the Company and CommScope) is severally liable for such tax liability. -2- LEVERAGE; CERTAIN RESTRICTIONS UNDER CREDIT FACILITIES The degree to which the Company is leveraged could have important consequences, including the following: (i) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, product development, acquisitions, general corporate purposes or other purposes may be impaired; (ii) a portion of the Company's and its subsidiaries' cash flow from operations must be dedicated to the payment of the principal of and interest on its indebtedness; (iii) the Credit Agreement dated as of July 23, 1997, among the Company, certain banks, and The Chase Manhattan Bank, as Administrative Agent contains certain restrictive financial and operating covenants, including, among others, requirements that the Company satisfy certain financial ratios; (iv) a significant portion of the Company's borrowings will be at floating rates of interest, causing the Company to be vulnerable to increases in interest rates; (v) the Company's degree of leverage may make it more vulnerable to a downturn in general economic conditions; and (vi) the Company's degree of leverage may limit its flexibility in responding to changing business and economic conditions. In addition, in a lawsuit by an unpaid creditor or representative of creditors, such as a trustee in bankruptcy, a court may be asked to void the Distribution (in whole or in part) as a fraudulent conveyance and to require that the stockholders return the special dividend (in whole or in part) to General Semiconductor or require the Company to fund certain liabilities of General Semiconductor and CommScope for the benefit of creditors. DEPENDENCE OF THE COMPANY ON THE CABLE TELEVISION INDUSTRY AND CABLE TELEVISION CAPITAL SPENDING The majority of the Company's revenues come from sales of systems and equipment to the cable television industry. Demand for these products depends primarily on capital spending by cable television operators for constructing, rebuilding or upgrading their systems. The amount of this capital spending, and, therefore, the Company's sales and profitability will be affected by a variety of factors, including general economic conditions, consolidation in the industry, the financial condition of domestic cable television operators and their access to financing, competition from satellite and wireless television providers and telephone companies, technological developments in the broadband communications industry and new legislation and regulation of cable television operators as described below. Capital spending in the cable television industry fell sharply in the middle of 1990 compared to 1989 and remained at a low level until it began to recover in mid-1992. Although the Company believes that the constraining pressures on domestic cable television capital spending eased and that cable television capital spending generally increased from mid-1992 through 1996, there can be no assurance that such increases will continue or that such increased level of cable television capital spending will be maintained. In recent years, cable television capital spending has also been affected by new legislation and regulation, on the federal, state and local level, and many aspects of such regulation are -3- currently the subject of judicial proceedings and administrative or legislative proposals. During 1993 and 1994, the Federal Communications Commission (the "FCC") adopted rules under the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), regulating rates that cable television operators may charge for lower tiers of service and generally not regulating the rates for higher tiers of service. In 1996, the Telecommunications Act of 1996 (the "Telecom Act") was enacted to eliminate certain governmental barriers to competition among local and long distance telephone, cable television, broadcasting and wireless services. When fully implemented by the FCC, the Telecom Act may significantly impact the communications industry and alter federal, state and local laws and regulations regarding the provision of cable and telephony services. Among other things, the Telecom Act eliminates substantially all restrictions on the entry of telephone companies and certain public utilities into the cable television business. Telephone companies may now enter the cable television business as traditional cable operators, as common carrier conduits for programming supplied by others, as operators of wireless distribution systems, or as hybrid common carrier/cable operator providers of programming on so-called "open video systems." The economic impact of the 1992 Cable Act, the Telecom Act and the rules thereunder on the cable television industry and the Company is still uncertain. Although the domestic cable television industry is comprised of approximately 11,200 cable systems, a small number of cable television operators own a majority of cable television systems and account for a majority of the capital expenditures made by cable television operators. The loss of some or all of the Company's principal cable television customers could have a material adverse effect on the business of the Company. TELECOMMUNICATIONS INDUSTRY COMPETITION AND TECHNOLOGICAL CHANGES AFFECTING THE COMPANY The Company will be significantly affected by the competition among cable television operators, satellite television providers and telephone companies to provide video, voice and data/Internet services. In particular, although cable television operators have historically provided television services to the majority of U.S. households, direct-to-home ("DTH") satellite television has attracted a growing number of subscribers and the regional telephone companies have begun to offer competing cable and wireless cable services. This competitive environment is characterized by rapid technological changes, particularly with respect to developments in digital compression and broadband access technology. The Company believes that, as a result of the new products developed by the Communications Business based on emerging technologies and the diversity of its product offerings, it is well positioned to supply each of the cable, satellite and telephone markets. The future success of the Company, however, will be dependent on its ability to market and deploy these new products successfully and continue to develop and timely exploit new technologies and market opportunities both in the United States and internationally. The development of the Communications Business' digital television systems took significantly longer than anticipated as a result of several factors, including increased system complexity, evolving international Motion -4- Picture Experts Group 2 ("MPEG-2") standards and other system design issues. Accordingly, volume shipments to cable television operators and satellite television programmers were delayed from their original expected delivery dates. There can be no assurance that the Company will be able to continue to successfully introduce new products and technologies, that it will be able to deploy them successfully on a large-scale or that its technologies and products will achieve significant market acceptance. Further, there can be no assurance that the development of products using new technologies (such as digital compression) will not have an adverse impact on sales by the Company of certain of its other products. In addition, because of the competitive environment and the nature of the Company' business, there have been and may continue to be legal challenges to its new technologies. The Company's sales to international markets have recently increased substantially and will continue to be an important focus of the Company in the future. However, there can be no assurance that international markets will continue to expand, or that growth and profitability in international sales will not be affected by political uncertainties, currency exchange rate fluctuations or variations in capital spending cycles in developing countries. COMPETITION The Company's products and services compete with those of a substantial number of foreign and domestic companies, some with greater resources, financial or otherwise, than the Company, and the rapid technological changes occurring in the Company's markets are expected to lead to the entry of new competitors. The Company's ability to anticipate technological changes and introduce enhanced products on a timely basis will be a significant factor in the Company's ability to expand and remain competitive. Existing competitors' actions and new entrants may have an adverse impact on the Company's sales and profitability. The Company believes that it enjoys a strong competitive position because of its large installed cable television equipment base, its strong relationships with the major cable television operators, its technological leadership and new product development capabilities, and the likely need for compatibility of new technologies with currently installed systems. There can be no assurance, however, that competitors will not be able to develop systems compatible with, or that are alternatives to, the Company's proprietary technology or systems. INTERNATIONAL OPERATIONS; FOREIGN CURRENCY RISKS U.S. broadband system designs and equipment are increasingly being employed in international markets, where cable television penetration is low. However, there can be no assurance that international markets will continue to develop or that the Company will receive additional contracts to supply its systems and equipment in international markets. A significant portion of the Company's products are manufactured or assembled in Mexico and Taiwan (Republic of China) and other countries outside the United States. In addition, sales of equipment into international markets by the Company have recently grown. These foreign operations are subject to the usual risks inherent in situating operations abroad, -5- including risks with respect to currency exchange rates, economic and political destabilization, restrictive actions by foreign governments, nationalizations, the laws and policies of the United States affecting trade, foreign investment and loans, and foreign tax laws. The Company's cost-competitive status relative to other competitors could be adversely affected if the New Taiwan dollar or another relevant currency appreciates relative to the U.S. dollar. ENVIRONMENT The Company is subject to various federal, state, local and foreign laws and regulations governing the use, discharge and disposal of hazardous materials. The Company's manufacturing facilities are believed to be in substantial compliance with current laws and regulations. Compliance with current laws and regulations has not had and is not expected to have a material adverse effect on the Company's financial condition. The Company's present and past facilities have been in operation for many years, and over that time in the course of those operations, such facilities have used substances which are or might be considered hazardous, and the Company has generated and disposed of wastes which are or might be considered hazardous. Therefore, it is possible that additional environmental issues may arise in the future which the Company cannot now predict. -6- -----END PRIVACY-ENHANCED MESSAGE-----