EXHIBIT 3
TCI Ventures Group, LLC
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-3000
August 1, 1998
Forstmann Little & Co. Subordinated
Debt and Equity Management
Buyout Partnership-IV
Instrument Partners
c/o Forstmann Little & Co.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Re: TCI Ventures Group, LLC, a Delaware limited liability
company ("TCIV") and General Instrument Corporation, a
Delaware corporation ("GI").
Ladies and Gentlemen:
Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-IV, a New York limited partnership ("MBO-IV"), and
Instrument Partners, a New York limited partnership (collectively with
MBO-IV, "FLC"), collectively beneficially own 21,708,665 shares (such
shares, together with all other shares of capital stock of GI now or
hereafter owned by FLC being referred to herein as the "FLC Shares") of
common stock, par value $.01 per share, of GI ("GI Common Stock").
This letter confirms our agreement, for good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
that, from and after the date hereof and prior to December 31, 2005, FLC
shall not sell, assign, transfer or otherwise dispose of any of the FLC
Shares except in compliance with the terms of this letter agreement:
1. (a) If FLC shall receive a bona fide offer in writing, which
FLC proposes to accept (an "Offer"), from a third party (the "Offeror") to
acquire all or part of the FLC Shares (the "First Refusal Shares"), FLC
shall deliver to GI and TCIV a notice (a "Notice of Sale") containing a
copy of the Offer, the identity of the Offeror and an offer to sell the
First Refusal Shares to TCIV on the following terms: (i) if the Offer
contemplates a purchase of the First Refusal Shares by the Offeror for
consideration consisting solely of cash, then FLC's offer shall be to sell
the First Refusal Shares for cash in an amount equal to the purchase price
specified in, and otherwise on the terms and conditions contained in, the
Offer, and (ii) if the Offer contemplates an acquisition of the First
Refusal Shares by the Offeror for consideration any portion of which is not
cash, then FLC's offer shall be to sell the First Refusal Shares for cash
in an amount equal to the sum of the cash consideration and the fair market
value of the noncash consideration (as determined pursuant to paragraph (c)
below) specified in, and otherwise on the terms and conditions contained
in, the Offer; provided, however that if the Offer is a public tender or
exchange offer, made by a person that is not an affiliate of FLC, to
acquire shares of GI Common Stock, the per share price to be paid for the
First Refusal Shares shall be equal to the highest per share price actually
paid for shares of GI Common Stock in such public tender or exchange offer.
The Notice of Sale shall specify the price at which the First Refusal
Shares are offered, as provided in the preceding sentence. If TCIV desires
to accept the offer set forth in a Notice of Sale, TCIV shall, within 30
days of receipt of such Notice of Sale, notify FLC in writing of its
intention to acquire the First Refusal Shares.
(b) If (i) TCIV does not timely accept the offer set forth
in a Notice of Sale, or (ii) the purchase of the First Refusal Shares is
not consummated within the period set forth in Section 2(a)(iii) for any
reason other than a breach by FLC of any of its covenants, representations
or warranties that are a condition to consummation of such purchase, then
TCIV shall be deemed to have rejected such offer as of the last date for
accepting such offer or closing such purchase, as applicable, and FLC shall
have the right, at any time during the thirty day period beginning on the
date that the offer set forth in a Notice of Sale is deemed rejected or the
day following the last day of the period set forth in Section 2(a)(iii), as
applicable, to enter into a binding agreement to sell all of the First
Refusal Shares to the Offeror on terms and conditions no less favorable in
the aggregate to FLC than those set forth in the Offer, and thereafter
(within the period specified below in this paragraph (b)) to sell all of
the First Refusal Shares to the Offeror pursuant to such agreement. If FLC
does not enter into such an agreement during such thirty-day period, or
does not close the sale thereunder within sixty days after execution of
such an agreement (subject to extension for a maximum of one hundred eighty
additional days to the extent required to obtain all required governmental
and third party approvals), the procedure set forth above with respect to
the Notice of Sale shall be repeated with respect to any subsequent
proposed sale, assignment or other disposition of FLC Shares.
(c) Before submitting a Notice of Sale pursuant to paragraph
(a) in response to an Offer that contemplates (i) a sale of the First
Refusal Shares in conjunction with other assets, or (ii) an acquisition of
the First Refusal Shares by the Offeror for consideration any portion of
which is not cash, FLC and TCIV shall cause (A) if the Offer contemplates a
sale of the First Refusal Shares in conjunction with other assets, the
total consideration specified in the Offer to be allocated between the
First Refusal Shares and such other assets, (B) if the Offer contemplates
an acquisition of the First Refusal Shares by the Offeror for consideration
any portion of which is not cash, the fair market value of the noncash
consideration to be determined, in each case pursuant to this paragraph
(c):
(i) FLC shall deliver to TCIV a notice stating that FLC
intends to deliver a Notice of Sale to which this paragraph
(c) applies and identifying an appraiser (the "First
Appraiser") who has been retained by FLC to allocate the
total consideration specified in the Offer or to conduct an
appraisal of the noncash consideration pursuant to this
paragraph (c). Within ten business days after its receipt of
FLC's notice pursuant to the preceding sentence, TCIV shall
send a notice to FLC identifying a second appraiser (the
"Second Appraiser") who shall be retained by TCIV to make
such allocation or conduct such appraisal, as applicable,
pursuant to this paragraph (c).
(ii) The First Appraiser and the Second Appraiser shall
submit their independent determinations of the amount of
consideration allocable to the First Refusal Shares or the
fair market value of the noncash consideration as
applicable, within thirty days after the date on which the
Second Appraiser is retained. If the respective
determinations of the First Appraiser and the Second
Appraiser vary by less than ten percent of the higher
determination, the amount of consideration allocable to the
First Refusal Shares or the fair market value of the noncash
consideration, as applicable, for purposes of paragraph (a),
shall be the average of the two determinations.
(iii) If the respective determinations of the First
Appraiser and the Second Appraiser vary by ten percent or
more of the higher determination, the two Appraisers shall
promptly designate a third appraiser (the "Third
Appraiser"), who shall be retained by FLC and TCIV to make
an allocation or conduct an appraisal pursuant to this
paragraph (c). The First Appraiser and the Second Appraiser
shall be instructed not to, and FLC and TCIV shall not
provide any information to the Third Appraiser as to the
determinations of the First Appraiser and the Second
Appraiser or otherwise influence the Third Appraiser's
determination in any way. The Third Appraiser shall submit
its determination of the amount of consideration allocable
to the First Refusal Shares or the fair market value of the
noncash consideration, as applicable, within thirty days
after the date on which the Third Appraiser is retained. If
a Third Appraiser is retained, the amount of consideration
allocable to the First Refusal Shares or the fair market
value of the noncash consideration, as applicable, for
purposes of paragraph (a), shall equal the average of the
two closest of the three determinations, except that, if the
difference between the highest and middle determinations is
no more than 105% and no less than 95% of the difference
between the middle and lowest determinations, then the
amount of consideration allocable to the First Refusal
Shares or the fair market value of the noncash
consideration, as applicable, for purposes of paragraph (a),
shall equal the middle determination.
(iv) Any appraiser retained pursuant to this paragraph
(c) shall be nationally recognized as being qualified and
experienced in the appraisal of assets comparable to the
First Refusal Shares and, if applicable, any other assets
proposed to be sold pursuant to the Offer and shall not be
an affiliate of any party to this Agreement. All fees and
expenses of the First Appraiser shall be borne by FLC, of
the Second Appraiser shall be borne by TCIV and of the Third
Appraiser shall be borne equally by FLC and TCIV.
(v) In determining the fair market value of the noncash
consideration, each appraiser retained pursuant to this
paragraph (c) shall: (A) assume that the fair market value
of the applicable asset is the price at which the asset
would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or sell
and each having reasonable knowledge of all relevant facts;
(B) assume that the applicable asset would be sold for cash;
and (C) use valuation techniques then prevailing in the
relevant industry.
2. (a) Any purchase and sale of the First Refusal Shares pursuant
to Section 1 shall be subject to the following terms and conditions:
(i) FLC shall represent and warrant that TCIV will
receive good and valid title to the First Refusal Shares,
free and clear of all Liens of any nature whatsoever except
for governmental and third party approvals required for
transfers of shares of the GI Common Stock generally.
(ii) The closing of the purchase and sale shall be
subject to the satisfaction of the following conditions:
(A) all applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated
thereunder, shall have expired or been terminated;
(B) all governmental and third party approvals
expressly required with respect to the transactions to
be consummated at such closing shall have been
obtained, to the extent the failure to obtain such
approvals would prevent FLC from performing any of its
material obligations under the transaction documents or
would result in any material adverse change in, or
material adverse effect on, GI;
(C) there shall be no preliminary or permanent
injunction or other order by any court of competent
jurisdiction restricting, preventing or prohibiting the
consummation of the transactions to be consummated at
such closing; and
(D) the representation and warranty of FLC
contemplated by clause (i) of this Section 2(a) shall
be true and correct at the closing of such sale with
the same force and effect as if then made.
(iii) Unless otherwise agreed by the applicable
parties, the closing of any purchase and sale of First
Refusal Shares pursuant to Section 1 shall take place at the
principal executive offices of GI at 10:00 a.m. local time
on a business day selected by TCIV, provided that such
closing shall occur as promptly as practicable, and in any
event within sixty days after the acceptance of the
applicable offer, subject to extension for a maximum of one
hundred eighty additional days to the extent required to
obtain all required governmental and third party approvals.
(iv) Unless otherwise agreed by the applicable parties,
the purchase price shall be payable by wire transfer of same
day funds or by certified or cashier's check drawn to the
order of FLC, as specified by FLC.
(b) In furtherance of the rights set forth in this letter
agreement, GI agrees that, on reasonable notice following the delivery of a
Notice of Sale, at reasonable times and without interfering with the
business or operations of GI, it will provide reasonable assistance to FLC
and TCIV in obtaining all necessary consents to any disposition of the
First Refusal Shares.
(c) FLC and TCIV shall each use commercially reasonable
efforts to cooperate with the other in connection with FLC's efforts to
transfer any interest in the First Refusal Shares in accordance with the
provisions of Sections 1 and 2, including making qualified personnel
available for attending hearings and meetings respecting any consents,
approvals and authorizations required for such transfer and, at the request
of FLC, making all filings with, and giving all notices to, third parties
and governmental authorities that may be necessary or reasonably required
to be made or given by FLC and TCIV in order to effect the contemplated
transfers. Subject to the other provisions of this letter agreement,
neither FLC or TCIV shall take any action to delay, impair or impede the
receipt of any required consents, approvals or authorizations.
"Commercially reasonable efforts" as used in this letter agreement shall
not require any party to undertake extraordinary or unreasonable measures
to obtain any consents, approvals or other authorizations.
3. Notwithstanding anything herein to the contrary, FLC shall be
permitted to effect the following transactions, free of the restrictions of
this letter agreement: (a) a distribution of some or all of the FLC Shares
by FLC to its partners, (b) the sale by FLC to a party or parties not
affiliated with FLC of a number of the FLC Shares that when added to the
aggregate number of FLC Shares sold pursuant to this exception subsequent
to the date hereof and prior to such sale does not exceed in the aggregate
5% of the number of FLC Shares held as of the date hereof by FLC or (c) a
registered public offering of some or all of the FLC Shares for cash. The
FLC Shares sold or distributed pursuant to this Section 3 shall upon such
sale or distribution cease to be subject to the provisions of this letter
agreement.
4. Any FLC Shares transferred to a party other than TCIV in
compliance with the provisions of this letter agreement shall not
thereafter be subject to the provisions of this letter agreement.
5. This letter agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to the
principles of conflicts of laws thereunder.
6. This letter agreement supercedes all prior agreements and
understandings, oral or written, between FLC and GI on the one hand, and
TCIV and Tele-Communications, Inc., a Delaware corporation and sole member
of TCIV on the other hand, with respect to the subject matter hereof.
Please confirm your agreement with the foregoing by
countersigning this letter and returning an executed copy to us.
Sincerely,
Tele-Communications, Inc.
By:
-------------------------------
Name:
Title:
Agreed To And Accepted As
Of The Date Above Written:
Forstmann Little & Co. Subordinated TCI Ventures Group, LLC
Debt and Equity Management
Buyout Partnership-IV
By:
------------------------------
By: FLC Partnership, L.P., Name:
general partner Title:
By:
------------------------------
Name:
Title: General Partner
Instrument Partners
By: FLC XXII Partnership,
general partner
By:
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Name:
Title: General Partner
General Instrument Corporation
By:
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Name:
Title:
