<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DC HOLDCO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
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<S> <C> <C>
DELAWARE 7812 95-4545390
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
CLASSIFICATION CODE NUMBER)
</TABLE>
---------------
500 SOUTH BUENA VISTA STREET
BURBANK, CALIFORNIA 91521
818-560-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
DAVID K. THOMPSON, ESQ.
SENIOR VICE PRESIDENT -- ASSISTANT GENERAL COUNSEL
500 SOUTH BUENA VISTA STREET
BURBANK, CALIFORNIA 91521
818-560-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MORTON A. PIERCE, ESQ. SAMUEL C. BUTLER, ESQ.
MARK R. BAKER, ESQ. CRAVATH, SWAINE & MOORE
DEWEY BALLANTINE WORLDWIDE PLAZA
1301 AVENUE OF THE AMERICAS 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the transactions described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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=======================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value(4)............... 694,244,639 $57.24 $39,740,965,998 $13,703,781.34
=======================================================================================
</TABLE>
(1) Based upon the maximum number of shares expected to be issued in
connection with the transactions described herein.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f)(1). The proposed maximum aggregate offering
price is based upon the sum of (a) the product of (i) $58 1/16 (the
average of the high and low prices of Disney Common Stock on November 7,
1995 on the Consolidated Reporting System) times (ii) 540,044,409 (the sum
of the number of shares of Disney Common Stock outstanding plus the number
of shares of Disney Common Stock issuable prior to the Effective Time upon
the exercise of options to purchase Disney Common Stock) and (b) the
product of (i) $119 3/8 (the average of the high and low prices of Capital
Cities Common Stock on November 7, 1995 on the Consolidated Reporting
System) times (ii) 154,200,230 (the sum of the number of shares of Capital
Cities Common Stock outstanding plus the number of shares of Capital
Cities Common Stock issuable prior to the Effective Time upon the exercise
of options to purchase Capital Cities Common Stock) less $10,023,014,950
to be paid to holders of Capital Cities Common Stock pursuant to Rule
457(f)(3). The proposed maximum offering price per share is based upon the
proposed maximum aggregate offering price divided by the amount to be
registered.
(3) Pursuant to Rule 457(b), includes the fee of $3,627,532.20 previously paid
in connection with the filing with the Commission of the preliminary proxy
materials relating to the transactions described herein on September 15,
1995.
(4) This Registration Statement also covers the associated preferred stock
purchase rights (the "New Disney Rights") issued pursuant to a Rights
Agreement dated as of November 8, 1995 between the Registrant and The Bank
of New York, as rights agent. Until the occurrence of certain proscribed
events, the New Disney Rights are not exercisable, are evidenced by the
certificates for the New Disney Common Stock, and will be transferred
along with and only with such securities. Thereafter, separate
certificates will be issued representing one New Disney Right for each
share of New Disney Common Stock, subject to adjustment for dilution.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
DC HOLDCO, INC.
----------------
CROSS-REFERENCE SHEET BETWEEN ITEMS IN
FORM S-4 AND PROSPECTUS PURSUANT TO
ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
---- ---------------- ---------------------
<C> <S> <C>
Item 1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus... Outside Front Cover Page
Item 2. Inside Front and Outside
Back Cover Pages of
Prospectus................. Inside Front Cover Page; Available
Information; Incorporation of Certain
Documents by Reference; Table of
Contents
Item 3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information...... Summary; The Acquisition; Comparative
Per Share Market Price and Dividend
Information; Selected Consolidated
Historical Financial Information of
Disney; Unaudited Pro Forma Combined
Condensed Financial Statements
Item 4. Terms of the Transaction.... Summary; The Acquisition; The
Reorganization Agreement; Comparison
of Stockholders' Rights; Description
of New Disney Capital Stock
Item 5. Pro Forma Financial
Information................ Summary; Unaudited Pro Forma Combined
Condensed Financial Statements; Notes
to Unaudited Pro Forma Combined
Condensed Financial Statements
Item 6. Material Contracts with the
Company Being Acquired..... The Acquisition; The Reorganization
Agreement; Business Relationships
Between Disney and Capital Cities
Item 7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters......... Not Applicable
Item 8. Interests of Named Experts
and Counsel................ Legal Matters; Experts
Item 9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ Not Applicable
Item 10. Information With Respect to
S-3 Registrants............ Incorporation of Certain Documents By
Reference, Summary, Business of New
Disney
Item 11. Incorporation of Certain
Information by Reference... Incorporation of Certain Documents by
Reference
Item 12. Information With Respect to
S-2 or S-3 Registrants..... Not Applicable
Item 13. Incorporation of Certain
Information by Reference... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
---- ---------------- ---------------------
<C> <S> <C>
Item 14. Information With Respect to
Registrants Other Than S-3 or
S-2 Registrants.............. Not Applicable
Item 15. Information With Respect to
S-3 Companies................ Incorporation of Certain Documents by
Reference; Business of Disney;
Business of Capital Cities
Item 16. Information With Respect to
S-2 or S-3 Companies......... Not Applicable
Item 17. Information With Respect to
Companies Other Than S-3 or
S-2 Companies................ Not Applicable
Item 18. Information if Proxies,
Consents or Authorizations
are to be Solicited.......... Incorporation of Certain Documents by
Reference; The Special Meetings; The
Acquisition; Management of New
Disney; Security Ownership of New
Disney
Item 19. Information if Proxies,
Consents or Authorizations
are not to be Solicited or in
an Exchange Offer............ Not Applicable
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY CAPITAL CITIES/ABC, INC.
JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF
STOCKHOLDERS OF THE WALT DISNEY COMPANY
AND
SHAREHOLDERS OF CAPITAL CITIES/ABC, INC.
TO BE HELD JANUARY 4, 1996
---------------
DC HOLDCO, INC.
(TO BE RENAMED "THE WALT DISNEY COMPANY" UPON CONSUMMATION OF THE MERGERS
DESCRIBED HEREIN)
PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock of The Walt Disney Company, a Delaware corporation ("Disney"), in
connection with the solicitation of proxies by the Board of Directors of
Disney (the "Disney Board") for use at the special meeting of stockholders of
Disney to be held on January 4, 1996, or any adjournment or postponement
thereof (the "Disney Meeting"), and to holders of common stock of Capital
Cities/ABC, Inc., a New York corporation ("Capital Cities"), in connection
with the solicitation of proxies by the Board of Directors of Capital Cities
(the "Capital Cities Board") for use at the special meeting of shareholders of
Capital Cities to be held on January 4, 1996, or any adjournment or
postponement thereof (the "Capital Cities Meeting," and together with the
Disney Meeting, the "Special Meetings").
The Disney Meeting has been called to consider and vote upon a proposal (the
"Disney Proposal") to approve and adopt (i) an Amended and Restated Agreement
and Plan of Reorganization, dated as of July 31, 1995, between Disney and
Capital Cities (the "Reorganization Agreement"), which provides, among other
things, that DC Holdco, Inc., a Delaware corporation ("New Disney"), will be
renamed "The Walt Disney Company" following the consummation of the
transactions contemplated by the Reorganization Agreement, and (ii) an
Agreement and Plan of Merger (the "Disney Merger Agreement"), among Disney,
New Disney and DCA Merger Corp., a Delaware corporation and a wholly owned
subsidiary of New Disney ("DCA Merger Corp."), which provides for the merger
of DCA Merger Corp. with and into Disney (the "Disney Merger"). At the Disney
Meeting, holders of common stock of Disney also will be asked to consider and
approve the adoption of the 1995 Stock Incentive Plan and the rules relating
thereto (the "1995 Plan"), and an amendment to the 1990 Stock Incentive Plan
and the rules relating thereto (the "1990 Plan"), to conform the 1990 Plan
(the "Amended 1990 Plan") to the proposed 1995 Plan (collectively, the "Disney
Option Proposal"). See "DISNEY OPTION PLANS."
The Capital Cities Meeting has been called to consider and vote upon a
proposal (the "Capital Cities Proposal"), to approve and adopt (i) the
Reorganization Agreement and (ii) an Agreement and Plan of Merger (the
"Capital Cities Merger Agreement," and together with the Disney Merger
Agreement, the "Merger Agreements"), among Capital Cities, New Disney and DCB
Merger Corp., a New York corporation and a wholly owned subsidiary of New
Disney ("DCB Merger Corp."), which provides for the merger of DCB Merger Corp.
with and into Capital Cities (the "Capital Cities Merger," and together with
the Disney Merger, the "Mergers").
The reorganization of the business of Disney and Capital Cities contemplated
by the Reorganization Agreement and the Merger Agreements is referred to
herein as the "Acquisition." As a result of the Acquisition, each of Disney
and Capital Cities will become a wholly owned subsidiary of New Disney.
This Joint Proxy Statement/Prospectus also serves as a prospectus of New
Disney with respect to up to 694,244,639 shares of common stock, par value
$0.01 per share (the "New Disney Common Stock"), that will be issued to (i)
holders of outstanding shares of Disney Common Stock, par value $0.025 per
share (the "Disney Common Stock"), upon consummation of the Disney Merger, and
(ii) certain holders of outstanding shares of Capital Cities Common Stock, par
value $0.10 per share (the "Capital Cities Common Stock"), upon consummation
of the Capital Cities Merger. See "THE REORGANIZATION AGREEMENT--Conversion of
Disney Common Stock" and "THE REORGANIZATION AGREEMENT--Capital Cities Merger
Consideration." Each share of new Disney Common Stock issued in connection
with the Mergers will be accompanied by one New Disney Right (a "New Disney
Right") to purchase one one-hundredth of a share of New Disney Series R
Preferred Stock pursuant to a Rights Agreement, dated as of November 8, 1995,
between New Disney and The Bank of New York, as rights agent (the "New Disney
Rights Agreement"). See "COMPARISON OF STOCKHOLDERS' RIGHTS--Comparison of
Stockholders' Rights with Respect to New Disney and Disney--Rights Plan" and
"DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Preferred Stock Purchase Rights."
This Joint Proxy Statement/Prospectus and accompanying form of proxy are
first being mailed to the stockholders of Disney and the shareholders of
Capital Cities on or about November 17, 1995.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is November 13, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 4
SUMMARY................................................................... 5
The Companies............................................................ 5
The Special Meetings..................................................... 5
The Reorganization Agreement............................................. 6
The Acquisition.......................................................... 10
Summary Historical and Unaudited Pro Forma Combined Condensed Financial
Information............................................................. 13
Comparative Per Share Data............................................... 16
Comparative Market Prices and Dividends.................................. 17
Listing of New Disney Common Stock....................................... 17
Certain Other Agreements................................................. 17
THE SPECIAL MEETINGS...................................................... 19
Times and Places; Purposes............................................... 19
Voting Rights; Votes Required for Approval............................... 19
Proxies.................................................................. 20
THE ACQUISITION........................................................... 23
Background............................................................... 23
Recommendation of Disney Board; Disney's Reasons for the Acquisition..... 24
Recommendation of Capital Cities Board; Capital Cities' Reasons for the
Acquisition............................................................. 26
Fairness Opinions........................................................ 29
Interests of Certain Persons in the Acquisition.......................... 37
Accounting Treatment..................................................... 42
Certain Federal Income Tax Consequences.................................. 42
Regulatory Approvals..................................................... 46
Certain Litigation....................................................... 50
Stock Exchange Listing................................................... 50
Federal Securities Laws Consequences..................................... 50
Dissenters' Rights....................................................... 51
Financing the Acquisition................................................ 53
THE REORGANIZATION AGREEMENT.............................................. 54
The Mergers.............................................................. 54
Conversion of Disney Common Stock........................................ 54
Capital Cities Merger Consideration...................................... 54
Election Procedure....................................................... 56
Certain Representations and Warranties................................... 57
Certain Covenants........................................................ 57
Conditions to the Acquisition............................................ 60
Termination of the Reorganization Agreement.............................. 61
Termination Fee.......................................................... 62
Registration Rights Agreement............................................ 62
Stock Agreement.......................................................... 63
Programming Agreement.................................................... 64
BUSINESS OF DISNEY........................................................ 65
BUSINESS OF CAPITAL CITIES................................................ 66
BUSINESS OF NEW DISNEY.................................................... 66
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION............... 67
CAPITALIZATION............................................................ 68
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS........................................... 69
COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 80
Comparison of Stockholders' Rights with Respect to New Disney and
Disney.................................................................. 80
Comparison of Stockholders' Rights with Respect to New Disney and Capital
Cities.................................................................. 81
</TABLE>
<TABLE>
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PAGE
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DESCRIPTION OF NEW DISNEY CAPITAL STOCK.................................. 89
Authorized Capital Stock................................................ 89
Common Stock............................................................ 89
Preferred Stock......................................................... 89
Preferred Stock Purchase Rights......................................... 90
Transfer Agent and Registrar............................................ 91
Certain Antitakeover Effects of New Disney Certificate, New Disney By-
laws and Delaware Law.................................................. 92
MANAGEMENT OF NEW DISNEY................................................. 94
Directors............................................................... 94
Compensation of Directors............................................... 98
Committees of the Board of Directors.................................... 98
Officers................................................................ 99
Compensation of Executive Officers...................................... 100
SECURITY OWNERSHIP OF NEW DISNEY......................................... 101
SECURITY OWNERSHIP OF DISNEY............................................. 102
Security Ownership of Certain Beneficial Owners......................... 102
Security Ownership of Directors and Executive
Officers............................................................... 103
SECURITY OWNERSHIP OF CAPITAL CITIES..................................... 104
Security Owenership of Certain Beneficial Owners........................ 104
Security Ownership of Directors and Executive
Officers............................................................... 105
BUSINESS RELATIONSHIPS BETWEEN DISNEY AND CAPITAL CITIES................. 106
DISNEY OPTION PLANS...................................................... 106
Description of the 1995 Plan and Amended 1990 Plan...................... 107
Administration.......................................................... 109
Certain Federal Income Tax Considerations............................... 110
SIGNIFICANT REGULATIONS APPLICABLE TO BROADCASTING SERVICES.............. 111
Alien Ownership......................................................... 111
Renewal and Ownership................................................... 111
Advanced Television..................................................... 112
Prime Time Access Rule.................................................. 112
Financial Interest and Syndication Rules................................ 113
Legislative Reforms..................................................... 113
LEGAL MATTERS............................................................ 114
EXPERTS.................................................................. 114
FUTURE STOCKHOLDER PROPOSALS............................................. 115
Appendix A-1 - Amended and Restated Agreement and Plan of Reorganization,
dated as of July 31, 1995, between The Walt Disney Company and Capital
Cities/ABC, Inc.
Appendix A-2 - Form of Agreement and Plan of Merger among DC Holdco,
Inc., The Walt Disney Company and DCA Merger Corp.
Appendix A-3 - Form of Agreement and Plan of Merger among DC Holdco,
Inc., Capital Cities/ABC, Inc. and DCB Merger Corp.
Appendix B-1 - 1995 Stock Incentive Plan and the rules relating thereto
Appendix B-2 - 1990 Stock Incentive Plan and the rules relating thereto
Appendix C - Fairness Opinion of Bear, Stearns & Co. Inc.
Appendix D - Fairness Opinion of Allen & Company Incorporated
Appendix E - Section 623 of the New York Business Corporation Law
</TABLE>
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE INTO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND, IF SO GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR THE SALE OF ANY SECURITIES HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF DISNEY OR CAPITAL CITIES SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Disney and Capital Cities are each subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Disney Common Stock and Capital Cities Common Stock are listed on the
New York Stock Exchange, Inc. (the "NYSE") and the Pacific Stock Exchange,
Inc. (the "PSE") and such material may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005, and at the offices of the
PSE, 115 Sansome Street, 2nd Floor, San Francisco, California 94104. After
consummation of the Acquisition, Disney and Capital Cities may no longer file
reports, proxy statements or other information with the Commission. Instead,
such information would be provided, to the extent required, in filings made by
New Disney.
New Disney has filed with the Commission a registration statement on Form S-
4 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), relating to shares of New Disney Common Stock that are proposed to be
issued in connection with the Acquisition to holders of Disney Common Stock
and to certain holders of Capital Cities Common Stock. See "THE REORGANIZATION
AGREEMENT--Conversion of Disney Common Stock" and "THE REORGANIZATION
AGREEMENT--Capital Cities Merger Consideration." This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement filed by New Disney with the Commission, certain
portions of which are omitted in accordance with the rules and regulations of
the Commission. Such additional information is available for inspection and
copying at the offices of the Commission. Statements contained in this Joint
Proxy Statement/Prospectus or in any document incorporated into this Joint
Proxy Statement/Prospectus by reference as to the contents of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such
reference.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Disney with the Commission under
the Exchange Act are incorporated herein by reference:
(a) Disney's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (the "Disney Form 10-K");
(b) Disney's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1994, March 31, 1995 and June 30, 1995 (the "Disney Form 10-
Qs"); and
(c) Disney's Current Reports on Form 8-K dated July 31, 1995 and October
6, 1995 (collectively with the Disney Form 10-K and the Disney Form 10-Qs,
the "Disney Reports").
The following documents previously filed by Capital Cities with the
Commission under the Exchange Act are incorporated herein by reference:
(a) Capital Cities' Annual Report on Form 10-K for the year ended
December 31, 1994 (the "Capital Cities Form 10-K");
(b) Capital Cities' Quarterly Reports on Form 10-Q for the quarters ended
April 2, 1995 and July 2, 1995 (the "Capital Cities Form 10-Qs"); and
(c) Capital Cities' Current Reports on Form 8-K dated July 31, 1995 and
October 6, 1995 (collectively with the Capital Cities Form 10-K and the
Capital Cities Form 10-Qs, the "Capital Cities Reports").
All documents filed by Disney or Capital Cities pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the Election Deadline (as hereinafter
defined) shall be deemed to be incorporated by reference into this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes such previous statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus relating to Disney has been supplied by Disney and all
such information relating to Capital Cities has been supplied by Capital
Cities.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON ORAL OR
WRITTEN REQUEST BY ANY PERSON TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS
HAS BEEN DELIVERED, IN THE CASE OF DOCUMENTS RELATING TO DISNEY, FROM THE WALT
DISNEY COMPANY, 500 SOUTH BUENA VISTA STREET, BURBANK, CALIFORNIA 91521,
ATTENTION: SHAREHOLDER SERVICES; TELEPHONE NUMBER (818) 505-7040, AND IN THE
CASE OF DOCUMENTS RELATING TO CAPITAL CITIES, FROM CAPITAL CITIES/ABC, INC.,
77 WEST 66TH STREET, NEW YORK, NEW YORK 10023, ATTENTION: PHILIP R.
FARNSWORTH, SECRETARY; TELEPHONE NUMBER (212) 456-7213. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH
REQUEST SHOULD BE MADE BY DECEMBER 27, 1995. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS PRIOR TO THE ELECTION DEADLINE (AS DEFINED BELOW),
ANY SUCH REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE
ELECTION DEADLINE.
4
<PAGE>
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this Joint Proxy Statement/Prospectus. This summary is
not intended to be complete and is qualified in its entirety by the more
detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated by
reference or otherwise referred to herein. Stockholders of Disney and
shareholders of Capital Cities are urged to review this entire Joint Proxy
Statement/Prospectus carefully, including the Appendices hereto and such other
documents.
THE COMPANIES
Disney. Disney, together with its subsidiaries, is a diversified
international entertainment company with operations in three business segments:
Filmed Entertainment, Theme Parks and Resorts, and Consumer Products. The
mailing address of Disney's principal executive offices is 500 South Buena
Vista Street, Burbank, California 91521; its telephone number is (818) 560-
1000. See "BUSINESS OF DISNEY."
Capital Cities. Capital Cities, directly or through its subsidiaries,
operates the ABC Television Network, ten television stations, the ABC Radio
Networks and 21 radio stations, and provides programming for cable television.
Capital Cities, through joint ventures, is engaged in international
broadcast/cable services and television production and distribution. Capital
Cities also publishes daily and weekly newspapers, shopping guides, various
specialized and business periodicals and books, provides research services, and
distributes information from databases. The mailing address of Capital Cities'
principal executive offices is 77 West 66th Street, New York, New York 10023;
its telephone number is (212) 456-7777. See "BUSINESS OF CAPITAL CITIES."
New Disney. New Disney, a Delaware corporation, is a wholly owned subsidiary
of Disney incorporated in 1995 that has not conducted any substantial business
activities to date. As a result of the Acquisition, Disney and Capital Cities
will become wholly owned subsidiaries of New Disney. Accordingly, the business
of New Disney will be the business currently conducted by Disney and Capital
Cities. The mailing address of New Disney's principal executive offices will be
500 South Buena Vista Street, Burbank, California 91521; its telephone number
will be (818) 560-1000. See "BUSINESS OF NEW DISNEY."
THE SPECIAL MEETINGS
Disney. The Disney Meeting will be held at The Waldorf-Astoria Hotel, 301
Park Avenue, New York, New York on January 4, 1996, starting at 10:00 a.m.,
local time. See "THE SPECIAL MEETINGS." At the Disney Meeting, holders of
Disney Common Stock will be asked to approve and adopt the Disney Proposal. The
Reorganization Agreement and the Disney Merger Agreement are attached hereto as
Appendices A-1 and A-2, respectively. See "THE ACQUISITION" and "THE
REORGANIZATION AGREEMENT." At the Disney Meeting, holders of Disney Common
Stock also will be asked to consider and approve the Disney Option Proposal.
The 1995 Plan and the Amended 1990 Plan (which are the subject of the Disney
Option Proposal) are attached hereto as Appendices B-1 and B-2, respectively.
The Disney Proposal and the Disney Option Proposal are not conditioned upon one
another. See "DISNEY OPTION PLANS."
Holders of record of Disney Common Stock at the close of business on November
10, 1995 (the "Disney Record Date") have the right to receive notice of and to
vote at the Disney Meeting. On November 7, 1995, there were 524,378,016 shares
of Disney Common Stock outstanding and entitled to vote. Each share of Disney
Common Stock is entitled to one vote on each matter that is properly presented
to stockholders for a vote at the Disney Meeting. Under Disney's Bylaws (the
"Disney Bylaws") and the Delaware General Corporation Law (the "DGCL"), the
affirmative vote of the holders of a majority of the outstanding shares of
Disney Common Stock is required to approve and adopt the Disney Proposal and
the affirmative vote of a majority of the shares of Disney Common Stock
represented in person or by proxy and entitled to vote on the Disney Option
Proposal is required to approve the Disney Option Proposal.
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As of September 1, 1995, directors and executive officers of Disney as a
group beneficially owned 18,794,642 shares of Disney Common Stock, or
approximately 3.6% of those shares outstanding as of such date.
Capital Cities. The Capital Cities Meeting will be held in Studio TV-1 at 7
West 66th Street, New York, New York on January 4, 1996, starting at 10:00
a.m., local time. See "THE SPECIAL MEETINGS." At the Capital Cities Meeting,
holders of Capital Cities Common Stock will be asked to approve and adopt the
Capital Cities Proposal. The Reorganization Agreement and the Capital Cities
Merger Agreement are attached hereto as Appendices A-l and A-3, respectively.
See "THE ACQUISITION" and "THE REORGANIZATION AGREEMENT."
Holders of record of Capital Cities Common Stock at the close of business on
November 15, 1995 (the "Capital Cities Record Date") have the right to receive
notice of and to vote at the Capital Cities Meeting. On November 7, 1995, there
were 153,903,230 shares of Capital Cities Common Stock outstanding and entitled
to vote. Each share of Capital Cities Common Stock is entitled to one vote on
each matter that is properly presented to shareholders for a vote at the
Capital Cities Meeting. Under the New York Business Corporation Law (the
"NYBCL"), the affirmative vote of the holders of two-thirds of the outstanding
shares of Capital Cities Common Stock is required to approve and adopt the
Capital Cities Proposal. Certain subsidiaries of Berkshire Hathaway Inc.
("Berkshire Hathaway") own, either beneficially or of record, 20,000,000
shares, or approximately 13% of the outstanding shares of Capital Cities Common
Stock (such subsidiaries, the "Berkshire Shareholders"). Pursuant to the terms
of a Stock Agreement (defined below), Berkshire Hathaway has agreed to cause
each Berkshire Shareholder to vote all its shares in favor of the Capital
Cities Proposal. See "THE REORGANIZATION AGREEMENT--Stock Agreement."
As of October 31, 1995, directors and executive officers of Capital Cities as
a group beneficially owned 21,935,507 shares of Capital Cities Common Stock
(including the shares beneficially owned by the Berkshire Shareholders), or
approximately 14.25% of those shares outstanding as of the Capital Cities
Record Date.
THE REORGANIZATION AGREEMENT
General. The Reorganization Agreement provides, among other things, for: (a)
the merger of DCA Merger Corp. with and into Disney pursuant to the Disney
Merger Agreement, which will result in Disney, as the surviving corporation of
the Disney Merger, becoming a wholly owned subsidiary of New Disney, and (b)
the merger of DCB Merger Corp. with and into Capital Cities pursuant to the
Capital Cities Merger Agreement, which will result in Capital Cities, as the
surviving corporation of the Capital Cities Merger, becoming a wholly owned
subsidiary of New Disney.
Conversion of Disney Common Stock. Upon consummation of the Disney Merger,
each outstanding share of Disney Common Stock will be converted into one share
of New Disney Common Stock. Each share of Disney Common Stock which is held in
the treasury of Disney ("Disney Treasury Stock") will be canceled and cease to
exist. See "THE REORGANIZATION AGREEMENT--Conversion of Disney Common Stock."
For a description of the New Disney Common Stock, see "DESCRIPTION OF NEW
DISNEY CAPITAL STOCK." For a summary of the principal differences between the
rights of holders of New Disney Common Stock and Disney Common Stock, see
"COMPARISON OF STOCKHOLDERS' RIGHTS--Comparison of Stockholders' Rights with
Respect to New Disney and Disney."
AT THE EFFECTIVE TIME, EACH CERTIFICATE REPRESENTING SHARES OF DISNEY COMMON
STOCK SHALL, WITHOUT ANY ACTION ON THE PART OF THE HOLDER THEREOF, BE DEEMED TO
REPRESENT AN EQUIVALENT NUMBER OF SHARES OF NEW DISNEY COMMON STOCK. HOLDERS OF
DISNEY COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING DISNEY COMMON
STOCK WITH THE ENCLOSED PROXY CARD.
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Consideration to be Received by Capital Cities Shareholders. Upon
consummation of the Capital Cities Merger, each Outstanding Capital Cities
Share (as defined below), will be converted into the right to receive cash,
shares of New Disney Common Stock or a combination of both cash and New Disney
Common Stock. See "THE REORGANIZATION AGREEMENT--Capital Cities Merger
Consideration." Each Capital Cities shareholder will have the opportunity to
indicate, on a form of election (the "Election Form"), whether such shareholder
wishes to make a Standard Election, a Stock Election or a Cash Election (as
such terms are defined below) for each share of Capital Cities Common Stock
held by such shareholder. The allocation of cash and/or shares of New Disney
Common Stock that a shareholder of Capital Cities may receive will depend on
(i) the stated preferences of the Capital Cities shareholders on the Election
Forms and (ii) the proration procedures to be applied if the Requested Stock
Amount exceeds the Stock Component or the Requested Cash Amount exceeds the
Cash Component (as such terms are defined below).
Shareholders of Capital Cities who make an effective "Standard Election" will
receive, for each share of Capital Cities Common Stock for which such election
is made, one share of New Disney Common Stock plus $65 in cash (collectively,
the "Standard Consideration"). The number of shares of New Disney Common Stock
and the amount of cash to be distributed to Capital Cities shareholders who
make an effective Standard Election will not be affected in any way by the
proration procedures described below. Shareholders of Capital Cities who make
an effective "Stock Election" will receive (subject to the proration procedures
described below), for each share of Capital Cities Common Stock for which such
election is made, (i) one share of New Disney Common Stock plus (ii) a number
of shares of New Disney Common Stock equal to a fraction, the numerator of
which is $65 and the denominator of which is the Disney Common Stock Price
(collectively, the "Stock Consideration"). The "Disney Common Stock Price" is
an amount equal to the average of the closing sales prices of Disney Common
Stock on the NYSE Composite Tape on each of the ten consecutive trading days
immediately preceding the second trading day prior to the Effective Time.
"Effective Time" means the time and date which is the later of (a) the date and
time of the filing of the certificate of merger relating to the Disney Merger
with the Secretary of State of the State of Delaware (or such other date and
time as may be specified in such certificate as permitted by Delaware law) and
(b) the date and time of the filing of a certificate of merger by the
Department of State of the State of New York with respect to the Capital Cities
Merger (or such other date and time as may be specified in such certificate as
permitted by New York law). Shareholders of Capital Cities who make an
effective "Cash Election" will receive (subject to the proration procedures
described below) for each share of Capital Cities Common Stock for which such
election is made, in cash, an amount equal to $65 plus the Disney Common Stock
Price (collectively, the "Cash Consideration"). If a holder of Capital Cities
Common Stock does not make a Standard Election, a Cash Election or a Stock
Election, or properly revokes an effective, properly completed Election Form
without timely submitting a revised, properly completed Election Form, such
Capital Cities shareholder will be deemed to have made a Cash Election. See
"THE REORGANIZATION AGREEMENT--Capital Cities Merger Consideration" and "THE
REORGANIZATION AGREEMENT--Election Procedure."
In the event that the aggregate number of shares of New Disney Common Stock
requested by shareholders of Capital Cities pursuant to effective Stock
Elections (the "Requested Stock Amount") exceeds the Stock Component, each
holder making an effective Stock Election will receive, for each share of
Capital Cities Common Stock for which a Stock Election has been made, (x) a
number of shares of New Disney Common Stock equal to the product of the Stock
Consideration and a fraction, the numerator of which is the Stock Component and
the denominator of which is the Requested Stock Amount (such product, the
"Prorated Stock Amount") and (y) cash in an amount equal to the product of (A)
the Stock Consideration minus the Prorated Stock Amount and (B) the Disney
Common Stock Price. The "Stock Component" is the number of shares of
Outstanding Capital Cities Shares minus the aggregate number of shares of
Outstanding Capital Cities Shares with respect to which effective Standard
Elections have been received by the Exchange Agent. The "Outstanding Capital
Cities Shares" consist of the number of shares of Capital Cities Common Stock
outstanding immediately prior to the Effective Time (which is exclusive of
shares of Capital Cities Common Stock held in the Capital Cities treasury)
minus the number of shares of Capital Cities Common Stock with respect to which
dissenters'
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rights have been perfected pursuant to Section 623 of the NYBCL ("Dissenting
Shares"). The Exchange Agent will be a bank or trust company designated by
Disney and reasonably acceptable to Capital Cities.
In the event that the aggregate amount of cash requested by shareholders of
Capital Cities pursuant to effective or deemed Cash Elections (the "Requested
Cash Amount") exceeds the Cash Component, each such holder will receive, for
each share of Capital Cities Common Stock for which a Cash Election has been
made or deemed to be made, (x) cash in an amount equal to the product of the
Cash Consideration and a fraction, the numerator of which is the Cash Component
and the denominator of which is the Requested Cash Amount (such product, the
"Prorated Cash Amount") and (y) a number of shares of New Disney Common Stock
equal to a fraction, the numerator of which is equal to the Cash Consideration
minus the Prorated Cash Amount and the denominator of which is the Disney
Common Stock Price. The "Maximum Cash Amount" is equal to the product of the
number of Outstanding Capital Cities Shares and $65, provided, however, that
the Maximum Cash Amount may be increased in Disney's sole discretion at any
time prior to the fifth business day after the deadline (the "Election
Deadline") for Capital Cities shareholders to submit to the Exchange Agent
appointed pursuant to the Reorganization Agreement (the "Exchange Agent") their
completed Election Forms. The Election Deadline will be no later than the 20th
business day after the Effective Time. The "Cash Component" is equal to the
Maximum Cash Amount minus the product of (i) the number of shares of Capital
Cities Common Stock for which effective Standard Elections have been made and
(ii) $65.
Ability of Disney to Increase the Maximum Cash Amount After the Election
Deadline. As described above, the Maximum Cash Amount may be increased in
Disney's sole discretion at any time prior to the fifth business day after the
Election Deadline. The ability of Disney to increase the Maximum Cash Amount is
a factor that shareholders of Capital Cities may wish to consider in making an
election decision. As of the date of this Proxy Statement/Prospectus, Disney
has made no decisions regarding whether it will increase the Maximum Cash
Amount. It is anticipated that such decision will be made following the
Election Deadline based upon, among other things, the elections made by Capital
Cities shareholders, the Disney Common Stock Price, the impact, if any, on New
Disney's credit rating and borrowing costs of an increase in the amount of cash
consideration to be paid and interest rates and other conditions prevailing in
the financial markets at the time the decision is made. To the extent that the
Requested Cash Amount exceeds the Cash Component and Disney increases the
Maximum Cash Amount, (i) Capital Cities shareholders making a Cash Election
will receive a greater portion of the merger consideration in cash than would
otherwise have been received by such shareholders and (ii) the form of merger
consideration to be received by Capital Cities shareholders making a Stock
Election or a Standard Election will not be affected. If the Maximum Cash
Amount is increased, the Prorated Cash Amount will increase and, therefore, the
amount of merger consideration to be paid in the form of New Disney Common
Stock to shareholders making a Cash Election will be proportionately decreased.
If the number of shares of New Disney Common Stock issued in the Capital Cities
Merger is less than the number of Outstanding Capital Cities Shares, the
percentage of new Disney Common Stock owned by the former shareholders of
Capital Cities following the Mergers will decrease relative to the percentage
of New Disney Common Stock owned by the former stockholders of Disney following
the Mergers. See "THE REORGANIZATION AGREEMENT--Capital Cities Merger
Consideration" and "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS."
No fractional shares of New Disney Common Stock will be issued pursuant to
the Capital Cities Merger. In lieu of the issuance of any fractional shares of
New Disney Common Stock, cash equal to the product of such fractional share
amount and the Disney Common Stock Price will be paid to holders in respect of
any fractional share of New Disney Common Stock that would otherwise be
issuable.
Promptly after the Effective Time, a letter of transmittal, an Election Form
and a Joint Proxy Statement/Prospectus will be mailed to each person who was a
holder of Outstanding Capital Cities Shares immediately prior to the Effective
Time. Each such holder shall have the right to submit an Election Form
specifying the number of shares of Capital Cities Common Stock that such person
desires to have converted into Standard Consideration pursuant to a Standard
Election, the number of shares of Capital Cities Common Stock
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that such person desires to have converted, subject to the proration procedures
described above, into the Stock Consideration pursuant to a Stock Election and
the number of shares of Capital Cities Common Stock that such person desires to
have converted, subject to the proration procedures described above, into the
Cash Consideration pursuant to an effective or deemed Cash Election. See "THE
REORGANIZATION AGREEMENT--Election Procedure."
HOLDERS OF CAPITAL CITIES COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING CAPITAL CITIES COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE
TRANSACTION IS APPROVED, A LETTER OF TRANSMITTAL AND AN ELECTION FORM WILL BE
MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING
CAPITAL CITIES SHARES IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. CAPITAL CITIES
SHAREHOLDERS SHOULD SEND CERTIFICATES REPRESENTING CAPITAL CITIES COMMON STOCK
TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH, THE
INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL AND THE ELECTION FORM.
Federal Income Tax Considerations in Choosing an Election. A shareholder of
Capital Cities who makes an effective Standard Election for all of such
shareholder's Capital Cities Common Stock generally will recognize taxable gain
(but will not recognize taxable loss) for Federal income tax purposes,
calculated separately for each block of Capital Cities Common Stock
surrendered, in an amount equal to the lesser of (i) the excess of the sum of
the cash and the fair market value of New Disney Common Stock allocable to each
block of Capital Cities Common Stock surrendered over the shareholder's tax
basis in such block and (ii) the amount of cash received that is allocable to
such block. A shareholder of Capital Cities who makes an effective Stock
Election for all of such shareholder's Capital Cities Common Stock generally
will not recognize taxable gain or loss for Federal income tax purposes, unless
such shareholder receives cash as a result of the proration procedures
described above. If cash is received as a result of proration, the Federal
income tax consequences will be those described in the first sentence of this
paragraph for a shareholder who makes an effective Standard Election. A
shareholder of Capital Cities who makes (or is deemed to make) an effective
Cash Election for all of such shareholder's Capital Cities Common Stock
generally will recognize capital gain or loss equal to the difference between
the shareholder's tax basis in the shares of Capital Cities Common Stock
surrendered and the amount of cash received, unless such shareholder receives
New Disney Common Stock as a result of the proration procedures described
above. If New Disney Common Stock is received as a result of proration, the tax
consequences will be those described in the first sentence of this paragraph
for a shareholder who makes an effective Standard Election. See "THE
ACQUISITION--Certain Federal Income Tax Consequences" for a more detailed
description of the above matters and information with respect to the
applicability of the foregoing to certain taxpayers subject to special
treatment. The actual Federal income tax consequences to each Capital Cities
shareholder of making a Cash Election or Stock Election will not be
ascertainable at the time the election is made because shareholders of Capital
Cities will not know at such time if, or to what extent, the proration
procedures and Disney's ability to increase the Maximum Cash Amount described
above will apply.
Conditions to the Acquisition. The obligations of Disney and Capital Cities
to consummate the Acquisition are subject to the fulfillment of various
conditions, including, among others: (i) the effectiveness of the Registration
Statement and the absence of any stop order suspending the effectiveness
thereof and no proceeding for that purpose having been initiated by the
Commission; (ii) approval by the stockholders of Disney and the shareholders of
Capital Cities; (iii) expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); (iv) receipt of all requisite orders and approvals of
the Federal Communications Commission ("FCC"); and (v) listing of the New
Disney Common Stock on the NYSE, subject only to official notice of issuance.
See "THE REORGANIZATION AGREEMENT--Conditions to the Acquisition."
Termination of the Reorganization Agreement. The Reorganization Agreement is
subject to termination at the option of either Disney or Capital Cities if the
Mergers are not consummated on or before October 1, 1996, and prior to such
time by the mutual consent of Disney and Capital Cities, or upon the occurrence
of certain
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events. The Reorganization Agreement may be terminated by Capital Cities, at
any time prior to the Effective Time, if: (i) in the exercise of its fiduciary
duties to its shareholders, the Capital Cities Board determines that such
termination is required by reason of a proposal with respect to a merger,
acquisition or similar transaction involving the purchase of a significant
portion of the stock or assets of Capital Cities (an "Alternative Proposal")
being made; (ii) there has been a breach by Disney of any representation or
warranty in the Reorganization Agreement which would have, or which would be
reasonably likely to have, a material adverse effect on Disney; (iii) there has
been a material breach by Disney of any of the covenants or agreements in the
Reorganization Agreement which is not curable or not cured within 30 days after
written notice of the breach; or (iv) the Disney Board shall have withdrawn or
modified, in a manner materially adverse to Capital Cities, its approval or
recommendation of the Reorganization Agreement or the Mergers. Disney may
terminate the Reorganization Agreement, at any time prior to the Effective
Time, if: (i) the Capital Cities Board shall have withdrawn or modified in a
manner materially adverse to Disney its approval or recommendation of the
Reorganization Agreement or the Mergers or shall have recommended an
Alternative Proposal to the Capital Cities shareholders; (ii) there has been a
breach by Capital Cities of any representation or warranty in the
Reorganization Agreement which would have, or which would be reasonably likely
to have, a material adverse effect on Capital Cities; or (iii) there has been a
material breach by Capital Cities of any of the covenants or agreements in the
Reorganization Agreement which is not curable or not cured within 30 days of
written notice of the breach. See "THE REORGANIZATION AGREEMENT--Termination of
the Reorganization Agreement."
Termination Fee. If an Alternative Proposal is made for Capital Cities and
thereafter (i) the Reorganization Agreement is terminated (A) by action of the
Capital Cities Board in the exercise of its fiduciary duties by reason of such
Alternative Proposal or (B) by action of the Disney Board if (a) the Capital
Cities Board has withdrawn or modified in a manner materially adverse to Disney
its approval or recommendation of the Reorganization Agreement or the Mergers
or has recommended an Alternative Proposal to the Capital Cities shareholders,
or (b) there has been a breach by Capital Cities of any representation or
warranty in the Reorganization Agreement which would have, or which would be
reasonably likely to have, a material adverse effect on Capital Cities, or (c)
there has been a material breach by Capital Cities of any of the covenants or
agreements in the Reorganization Agreement which breach is not curable or not
cured within 30 days after written notice of the breach given by Disney to
Capital Cities or (ii) the Reorganization Agreement is terminated for any
reason (A) other than as a result of a breach of the Reorganization Agreement
by Disney and (B) other than as a result of the failure by the stockholders of
Disney to approve the Disney Proposal and, in the case of clause (ii) only, a
definitive agreement with respect to an Alternative Proposal is executed within
one year after such termination, then Capital Cities must pay Disney a
termination fee of $400 million. See "THE REORGANIZATION AGREEMENT--Termination
Fee."
THE ACQUISITION
Ownership of New Disney After the Acquisition. Immediately following the
Acquisition, assuming the Requested Stock Amount is equal to or in excess of
the Stock Component, (i) the former holders of Disney Common Stock will
collectively hold approximately 77.8% of the issued and outstanding shares of
New Disney Common Stock and (ii) the former holders of Capital Cities Common
Stock will collectively hold approximately 22.2% of the issued and outstanding
shares of New Disney Common Stock.
Recommendation of Disney Board; Disney's Reasons for the Acquisition. The
Disney Board, by unanimous vote, has determined that the Acquisition is in the
best interests of the holders of Disney Common Stock and recommends that
holders of Disney Common Stock vote in favor of the Disney Proposal. The
decision of the Disney Board to enter into the Reorganization Agreement and to
recommend that stockholders vote in favor of the Disney Proposal is based upon
its evaluation of a number of factors including, among others, the oral opinion
(subsequently confirmed in a written opinion dated as of July 30, 1995 of Bear,
Stearns & Co. Inc. ("Bear Stearns"), Disney's investment banker in connection
with the Acquisition, that based upon and subject to the matters set forth in
its written opinion, as of such date, the Acquisition is fair from a financial
point of view to the stockholders of Disney. Bear Stearns subsequently
confirmed such opinion by delivery of its written
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opinion dated as of the date of this Joint Proxy Statement/Prospectus. See "THE
ACQUISITION--Recommendation of Disney Board; Disney's Reasons for the
Acquisition" and "THE ACQUISITION--Fairness Opinions--Opinion of Disney's
Investment Banker."
Recommendation of Capital Cities Board; Capital Cities' Reasons for the
Acquisition. The Capital Cities Board, by unanimous vote, has determined that
the Acquisition is in the best interests of the holders of Capital Cities
Common Stock and recommends that holders of Capital Cities Common Stock vote in
favor of the Capital Cities Proposal. The decision of the Capital Cities Board
to enter into the Reorganization Agreement and to recommend that shareholders
vote in favor of the Capital Cities Proposal is based upon its evaluation of a
number of factors including, among others, the oral opinion (subsequently
confirmed in writing) of Allen & Company Incorporated ("Allen & Company"),
Capital Cities' investment banker in connection with the Acquisition, that the
consideration to be received by the holders of Capital Cities Common Stock in
the Capital Cities Merger is fair from a financial point of view. See "THE
ACQUISITION--Recommendation of Capital Cities Board; Capital Cities' Reasons
for the Acquisition" and "THE ACQUISITION--Fairness Opinions--Opinion of
Capital Cities' Investment Banker."
Interest of Certain Persons in the Acquisition; Management of New Disney
After the Acquisition. Certain members of the management of Disney and Capital
Cities and the Disney Board and Capital Cities Board have certain interests in
the Acquisition that are different from, or in addition to, the interests of
stockholders of Disney and shareholders of Capital Cities generally. Pursuant
to the Reorganization Agreement, Disney will designate the directors and
officers of New Disney. It is anticipated that all of the current directors of
Disney, as well as Michael Ovitz, President of Disney, and Thomas S. Murphy,
Chairman of the Board and Chief Executive Officer of Capital Cities, will
become directors of New Disney. Certain executive officers of Disney will
become executive officers of New Disney. See "THE ACQUISITION--Interests of
Certain Persons in the Acquisition." As a condition to Capital Cities'
obligation to effect the Merger, New Disney is required to execute a
Registration Rights Agreement (the "Registration Rights Agreement") with
"affiliates" (within the meaning of Rule 145 of the rules and regulations
promulgated under the Act) of Capital Cities as of the Capital Cities Record
Date, identified by Capital Cities ("Capital Cities Affiliates"), which
provides that Capital Cities Affiliates will have, subject to certain
conditions, both "demand" and "piggyback" registration rights to require New
Disney to register all or any portion of New Disney Common Stock then owned by
them. See "THE REORGANIZATION AGREEMENT--Registration Rights Agreement."
Regulatory Approvals. The Acquisition is subject to the requirements of the
HSR Act, and the rules and regulations thereunder, which provide that certain
transactions may not be consummated until required information and materials
are furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and the
requisite waiting period has expired or is terminated. Disney and Capital
Cities filed the required information and materials with the Antitrust Division
and the FTC effective August 10, 1995. In early September 1995, the Antitrust
Division requested additional information and materials relating to the
Acquisition. See "THE ACQUISITION--Regulatory Approvals--Antitrust."
The Acquisition is also subject to the requirements of the Communications Act
of 1934 (the "Communications Act"), and the rules and regulations thereunder,
which provide that the transfer of control of an entity that holds radio
broadcast, television and certain other communications licenses, requires the
prior approval of the FCC. Disney and Capital Cities filed the required
applications for transfer of control with the FCC on August 23, 1995. The
principal application for transfer of control also includes requests for
certain waivers of the FCC's multiple ownership rules or reaffirmations of
waivers previously granted to Capital Cities. See "THE ACQUISITION--Regulatory
Approvals."
Accounting Treatment. The Capital Cities Merger will be accounted for under
the "purchase" method of accounting, in accordance with generally accepted
accounting principles. The conversion of Disney Common Stock into New Disney
Common Stock will be treated as a reorganization with no change in the recorded
amount of Disney's assets and liabilities. See "THE ACQUISITION--Accounting
Treatment."
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Opinions of Investment Bankers. On July 30, 1995, Bear Stearns rendered to
the Disney Board its oral opinion (subsequently confirmed in writing in an
opinion dated as of July 30, 1995) to the effect that, based upon and subject
to the matters set forth in its written opinion, as of such date, the
Acquisition is fair to the holders of Disney Common Stock from a financial
point of view. Bear Stearns subsequently confirmed such opinion by delivery of
its written opinion dated as of the date of this Joint Proxy
Statement/Prospectus. The full text of the written opinion of Bear Stearns,
dated as of the date of this Joint Proxy Statement/Prospectus, which sets forth
assumptions made, factors considered and limitations on the review undertaken
by Bear Stearns, is included as Appendix C to this Joint Proxy
Statement/Prospectus. Disney stockholders are urged to read such opinion
carefully in its entirety. See "THE ACQUISITION--Fairness Opinions--Opinion of
Disney's Investment Banker."
Disney also retained James D. Wolfensohn Incorporated to act as an advisor.
James D. Wolfensohn Incorporated was not requested to, and did not, provide a
fairness opinion to the Disney Board.
On July 30, 1995, Allen & Company rendered to the Capital Cities Board its
oral opinion (subsequently confirmed in writing) to the effect that, as of such
date, the consideration to be received by the holders of the Capital Cities
Common Stock in the Capital Cities Merger is fair to such holders from a
financial point of view. The full text of the written opinion of Allen &
Company, dated as of July 31, 1995, which sets forth assumptions made, factors
considered and limitations on the review undertaken by Allen & Company, is
included as Appendix D to this Joint Proxy Statement/Prospectus. Capital Cities
shareholders are urged to read such opinion carefully in its entirety. See "THE
ACQUISITION--Fairness Opinions--Opinion of Capital Cities' Investment Banker."
Certain Federal Income Tax Consequences. It is a condition to the
consummation of the Disney Merger that Disney receive an opinion from Dewey
Ballantine, special counsel to Disney, based upon reasonably requested
representation letters, that the Disney Merger will be treated as a
reorganization described in Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and/or a transfer of property governed by
Section 351 of the Code. It is a condition to the consummation of the Capital
Cities Merger that Capital Cities receive an opinion from Cravath, Swaine &
Moore, special counsel to Capital Cities, based upon reasonably requested
representation letters, that the Capital Cities Merger will be treated as a
transfer of property under Section 351 of the Code.
In accordance with those opinions, no gain will be recognized by a holder of
Disney Common Stock who exchanges such stock for New Disney Common Stock
pursuant to the Disney Merger. Similarly, no gain or loss generally will be
recognized by a holder of Capital Cities Common Stock who exchanges such stock
solely for New Disney Common Stock pursuant to the Capital Cities Merger.
Holders of Capital Cities Common Stock who receive solely cash in exchange for
such shares will recognize gain or loss on such exchange. Holders of Capital
Cities Common Stock who receive a combination of New Disney Common Stock and
cash in exchange for their shares will recognize gain, but will not recognize
any loss, on such exchange. Holders of Capital Cities Common Stock may also
recognize gain or loss by reason of cash received in lieu of fractional shares.
See "THE ACQUISITION--Certain Federal Income Tax Consequences" for a more
detailed description of the above matters and information with respect to the
applicability of the foregoing to certain taxpayers subject to special
treatment. For a description of certain considerations relevant to each Capital
Cities shareholder's decision as to whether to make a Standard Election, a
Stock Election or a Cash Election, see "--The Reorganization Agreement--Federal
Income Tax Considerations in Choosing an Election" above.
Dissenters' Rights. Holders of Disney Common Stock are not entitled to
dissenters' or appraisal rights in connection with the Disney Merger. Holders
of Capital Cities Common Stock who do not vote in favor of the Capital Cities
Proposal, who file a written objection to the Capital Cities Proposal with
Capital Cities prior to the Capital Cities Meeting or at such meeting but
before the vote is taken on the Capital Cities Proposal and who have otherwise
properly complied with Section 623 of the NYBCL, will be entitled to
dissenters' rights. See "THE ACQUISITION--Dissenters' Rights."
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
Disney Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of Disney and has been derived from and should be read in
conjunction with Disney's audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Joint Proxy
Statement/Prospectus. Unaudited interim data reflects, in the opinion of
Disney's management, all adjustments (consisting only of normal recurring
adjustments, except for the $52.8 million charge recorded during the nine
months ended June 30, 1994 to reflect Disney's participation in the Euro Disney
financial restructuring) considered necessary for a fair presentation of
results for such interim periods. Results of operations for unaudited interim
periods are not necessarily indicative of results which may be expected for any
other interim or annual period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED OR AS OF YEAR ENDED OR AS OF SEPTEMBER 30,
--------------------------- -----------------------------------------------
JUNE 30, JUNE 30,
1995 1994 1994 1993 1992 1991 1990
------------- ------------- --------- --------- --------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $ 8,988.5 $ 7,356.7 $10,055.1 $ 8,529.2 $ 7,504.0 $6,112.0 $5,757.3
Operating Income........ 1,959.7 1,527.1 1,965.7 1,724.5 1,435.3 1,094.5 1,339.1
Income Before Cumulative
Effect of Accounting
Changes(a)............. 1,116.1 884.5 1,110.4 671.3 816.7 636.6 824.0
Earnings Per Share
Before Cumulative
Effect of Accounting
Changes(b)............. 2.11 1.62 2.04 1.23 1.52 1.20 1.50
Cash Dividends Per
Share(b)............... .26 .21 .29 .24 .20 .17 .14
BALANCE SHEET DATA:
Total Assets............ $14,381.3 $12,659.9 $12,826.3 $11,751.1 $10,861.7 $9,428.5 $8,022.3
Borrowings.............. 3,362.2 2,550.9 2,936.9 2,385.8 2,222.4 2,213.8 1,584.6
Stockholders' Equity.... 6,374.1 5,814.2 5,508.3 5,030.5 4,704.6 3,871.3 3,488.6
Book Value Per
Share(b)............... 12.20 10.85 10.51 9.39 8.97 7.43 6.62
</TABLE>
- --------
(a) 1993 includes a $350.0 million charge relating to Disney's investment in
Euro Disney.
(b) Amounts reflect the four-for-one split of Disney Common Stock, effective
April 1992.
13
<PAGE>
Capital Cities Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of Capital Cities and has been derived from and should be read in
conjunction with Capital Cities' audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Joint Proxy
Statement/Prospectus. Unaudited interim data reflects, in the opinion of
Capital Cities' management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation of results
for such interim periods. Results of operations for unaudited interim periods
are not necessarily indicative of results which may be expected for any other
interim or annual period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED OR AS OF YEAR ENDED OR AS OF DECEMBER 31,
------------------------- --------------------------------------------
JULY 2, JULY 3,
1995 1994 1994 1993 1992 1991 1990
------------ ------------ -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Revenues............ $3,255.5 $2,943.0 $6,379.2 $5,673.7 $5,344.1 $5,382.0 $5,385.6
Operating Income........ 637.1 556.1 1,238.8 862.1 721.8 761.2 923.2
Income Before
Extraordinary Charges
and Cumulative Effect
of Accounting Changes.. 366.6 305.6 679.8 467.4 389.3 374.7 477.8
Income Per Share Before
Extraordinary Charges
and Cumulative Effect
of Accounting
Changes(a)............. 2.38 1.99 4.42 2.85 2.34 2.23 2.77
Cash Dividends Per
Share(a)............... .10 .06 .16 .02 .02 .02 .02
BALANCE SHEET DATA:
Total Assets............ $6,997.4 $6,072.7 $6,768.2 $5,792.6 $6,522.2 $6,695.7 $6,696.2
Long-Term Debt.......... 612.9 616.4 614.8 622.0 1,116.0 1,602.3 1,947.4
Shareholders' Equity.... 4,603.9 3,919.3 4,288.6 3,572.1 3,805.7 3,654.8 3,367.9
Book Value Per
Share(a)............... 29.91 25.45 27.83 23.23 23.15 21.96 20.09
</TABLE>
- --------
(a) Amounts reflect the ten-for-one split of Capital Cities Common Stock,
effective June 1994.
14
<PAGE>
New Disney Unaudited Pro Forma Combined Condensed Financial Information
The summary unaudited pro forma combined condensed financial information of
New Disney has been derived from, or prepared on a basis consistent with, the
unaudited pro forma combined condensed financial statements included elsewhere
in this Joint Proxy Statement/Prospectus. This data is presented for
illustrative purposes only and is not necessarily indicative of the combined
results of operations or financial position that would have occurred if the
Acquisition had occurred at the beginning of each period presented or on the
dates indicated, nor is it necessarily indicative of future operating results
or financial position of New Disney.
<TABLE>
<CAPTION>
SCENARIO 1--MAXIMUM STOCK (a) SCENARIO 2--MAXIMUM CASH (a)
------------------------------- -------------------------------
NINE MONTHS YEAR ENDED NINE MONTHS YEAR ENDED
ENDED OR AS OF ENDED OR AS OF
OR AS OF JUNE 30, SEPTEMBER 30, OR AS OF JUNE 30, SEPTEMBER 30,
1995 (b) 1994 (b) 1995 (b) 1994 (b)
----------------- ------------- ----------------- -------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $14,218.3 $16,215.2 $14,218.3 $16,215.2
Operating Income........ 2,811.1 2,759.0 2,811.1 2,759.0
Net Income.............. 1,178.0 957.9 915.5 607.9
Earnings Per Share...... 1.72 1.37 1.73 1.12
Cash Dividends Per
Share(c)............... .26 .29 .26 .29
BALANCE SHEET DATA:
Total Assets............ $33,224.6 $32,937.0 $33,224.6 $32,937.0
Borrowings.............. 11,940.2 12,925.4 20,769.5 21,760.4
Stockholders' Equity.... 15,203.4 14,343.3 6,374.1 5,508.3
Book Value Per Share.... 22.44 21.12 12.20 10.51
</TABLE>
- --------
(a) Upon consummation of the Capital Cities Merger, each outstanding share of
Capital Cities Common Stock will be converted into the right to receive
cash, shares of New Disney Common Stock or a combination of both cash and
New Disney Common Stock. The exact amount of cash and/or shares of New
Disney Common Stock to be received by each shareholder of Capital Cities
pursuant to the Capital Cities Merger is dependent upon, among other
things, (i) the stated preferences of the Capital Cities shareholders on
the Election Forms, (ii) the proration procedures to be applied if the
Requested Stock Amount exceeds the Stock Component or the Requested Cash
Amount exceeds the Cash Component, and (iii) the level of the Maximum Cash
Amount, including any increase of the Maximum Cash Amount by Disney, in its
sole discretion. Accordingly, two alternative scenarios of unaudited pro
forma combined condensed financial statements are presented, which give
effect to the range of possible amounts of New Disney Common Stock and/or
cash to be received by Capital Cities shareholders upon consummation of the
Capital Cities Merger. Scenario 1 assumes that all Capital Cities
shareholders receive one share of New Disney Common Stock and $65 in cash
(Standard Consideration) for each outstanding share of Capital Cities
Common Stock, reflecting the maximum number of shares of New Disney Common
Stock which could be issued in connection with the Acquisition. Scenario 2
assumes that all Capital Cities shareholders receive solely cash (Cash
Consideration) for each outstanding share of Capital Cities Common Stock,
without regard to the Cash Component. See "THE REORGANIZATION AGREEMENT--
Capital Cities Merger Consideration."
(b) The unaudited pro forma combined condensed statements of income for the
nine months ended June 30, 1995 were prepared based upon the consolidated
statements of income of Disney for the nine months ended June 30, 1995 and
of Capital Cities for the six months ended July 2, 1995 and the three
months ended December 31, 1994. The unaudited pro forma combined condensed
statements of income for the year ended September 30, 1994 were prepared
based upon the consolidated statements of income of Disney for the year
ended September 30, 1994 and of Capital Cities for the nine months ended
October 2, 1994 and the three months ended December 31, 1993. The unaudited
pro forma combined condensed balance sheets were prepared based upon the
consolidated balance sheets of Disney as of June 30, 1995 and of Capital
Cities as of July 2, 1995.
(c) Pro forma cash dividends per share are assumed to be the same as
historically declared by Disney. However, any decision to increase or
decrease the cash dividend per share is at the discretion of New Disney's
Board of Directors, subject to restrictions that may be imposed by law or
contract.
15
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are historical earnings per share, cash dividends per share
and book value per share data of Disney and Capital Cities, unaudited pro forma
combined per share data of New Disney and pro forma equivalent per share data
of Capital Cities. The data set forth below should be read in conjunction with
the Disney and Capital Cities audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Joint Proxy
Statement/Prospectus. The data should also be read in conjunction with the
unaudited pro forma combined condensed financial statements, including the
notes thereto, included elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
DISNEY CAPITAL CITIES
------------------------------- -------------------------------
NINE MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED OR AS OF ENDED OR AS OF
OR AS OF JUNE 30, SEPTEMBER 30, OR AS OF JULY 2, DECEMBER 31,
1995 1994 1995 1994
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
HISTORICAL:
Earnings Per Share.... $ 2.11 $ 2.04 $ 2.38 $ 4.42
Cash Dividends Per
Share................ .26 .29 .10 .16
Book Value Per Share.. 12.20 10.51 29.91 27.83
<CAPTION>
SCENARIO 1--MAXIMUM STOCK (a) SCENARIO 2--MAXIMUM CASH (a)
------------------------------- -------------------------------
NINE MONTHS YEAR ENDED NINE MONTHS YEAR ENDED
ENDED OR AS OF ENDED OR AS OF
OR AS OF JUNE 30, SEPTEMBER 30, OR AS OF JUNE 30, SEPTEMBER 30,
1995 1994 1995 1994
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED(b):
Earnings Per Share.... $ 1.72 $ 1.37 $ 1.73 $ 1.12
Cash Dividends Per
Share(c)............. .26 .29 .26 .29
Book Value Per Share.. 22.44 21.12 12.20 10.51
CAPITAL CITIES PRO FORMA
EQUIVALENTS(d):
Earnings Per Share.... $ 1.72 $ 1.37 NA NA
Cash Dividends Per
Share................ .26 .29 NA NA
Book Value Per Share.. 22.44 21.12 NA NA
</TABLE>
- --------
(a) Upon consummation of the Capital Cities Merger, each outstanding share of
Capital Cities Common Stock will be converted into the right to receive
cash, shares of New Disney Common Stock or a combination of both cash and
New Disney Common Stock. The exact amount of cash and/or shares of New
Disney Common Stock to be received by each shareholder of Capital Cities
pursuant to the Capital Cities Merger is dependent upon, among other
things, (i) the stated preferences of the Capital Cities shareholders on
the Election Forms, (ii) the proration procedures to be applied if the
Requested Stock Amount exceeds the Stock Component or the Requested Cash
Amount exceeds the Cash Component pursuant to effective Stock Elections or
Cash Elections and (iii) the level of the Maximum Cash Amount, including
any increase of the Maximum Cash Amount by Disney, in its sole discretion.
Accordingly, two alternative scenarios of unaudited pro forma combined
condensed financial statements are presented, which give effect to the
range of possible amounts of New Disney Common Stock and/or cash to be
received by Capital Cities shareholders upon consummation of the Capital
Cities Merger. Scenario 1 assumes that all Capital Cities shareholders
receive one share of New Disney Common Stock and $65 in cash (Standard
Consideration) for each outstanding share of Capital Cities Common Stock,
reflecting the maximum number of shares of New Disney Common Stock which
could be issued in connection with the Acquisition. Scenario 2 assumes that
all Capital Cities shareholders receive solely cash (Cash Consideration)
for each outstanding share of Capital Cities Common Stock, without regard
to the Cash Component. See "THE REORGANIZATION AGREEMENT--Capital Cities
Merger Consideration."
(b) The unaudited pro forma combined condensed statements of income for the
nine months ended June 30, 1995 were prepared based upon the consolidated
statements of income of Disney for the nine months ended
16
<PAGE>
June 30, 1995 and of Capital Cities for the six months ended July 2, 1995
and the three months ended December 31, 1994. The unaudited pro forma
combined condensed statements of income for the year ended September 30,
1994 were prepared based upon the consolidated statements of income of
Disney for the year ended September 30, 1994 and of Capital Cities for the
nine months ended October 2, 1994 and the three months ended December 31,
1993. The unaudited pro forma combined condensed balance sheets were
prepared based upon the consolidated balance sheets of Disney as of June
30, 1995 and of Capital Cities as of July 2, 1995.
(c) Pro forma cash dividends per share are assumed to be the same as
historically declared by Disney. However, any decision to increase or
decrease the cash dividend per share is at the discretion of New Disney's
Board of Directors, subject to restrictions that may be imposed by law or
contract.
(d) Capital Cities pro forma equivalents represent the unaudited pro forma
combined earnings per share, cash dividends per share, and book value per
share calculated on the basis of a 1 to 1 exchange ratio.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Disney Common Stock is listed on the NYSE, the PSE, the Swiss Stock Exchange
and the Tokyo Stock Exchange under the symbol DIS. Capital Cities Common Stock
is listed on the NYSE and the PSE under the symbol CCB.
On July 28, 1995, the last full trading day preceding public announcement of
the proposed Acquisition, the closing price per share of Disney Common Stock
on the NYSE Composite Tape was $57 3/8 and the closing price per share of
Capital Cities Common Stock on the NYSE Composite Tape was $96 3/8. On
November 10, 1995, the most recent practicable date prior to the printing of
this Joint Proxy Statement/Prospectus, the closing price per share of Disney
Common Stock on the NYSE Composite Tape was $59 3/8 and the closing price per
share of Capital Cities Common Stock on the NYSE Composite Tape was $121 1/8.
See "COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION."
Holders of Disney Common Stock and Capital Cities Common Stock are urged to
obtain current market quotations prior to making any decision with respect to
the Acquisition.
The payment of future dividends on New Disney Common Stock will be a
business decision to be made by the Board of Directors of New Disney from time
to time based upon the results of operations and financial condition of New
Disney and such other factors as the New Disney Board of Directors considers
relevant. See "COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION."
LISTING OF NEW DISNEY COMMON STOCK
New Disney expects to apply for the listing of New Disney Common Stock on
the NYSE and the PSE, and it is anticipated that such shares will trade on
such exchanges upon official notice of issuance under the symbol DIS. It is a
condition to consummation of the Acquisition that the shares of New Disney
Common Stock to be issued to Capital Cities shareholders in connection with
the Capital Cities Merger shall have been approved for listing on the NYSE
subject only to official notice of issuance. See "THE ACQUISITION--Stock
Exchange Listing."
CERTAIN OTHER AGREEMENTS
Stock Agreement. Concurrently with the execution by Disney and Capital
Cities of the Reorganization Agreement, Disney, Berkshire Hathaway and Thomas
S. Murphy, Chairman and Chief Executive Officer of Capital Cities, entered
into an agreement (the "Stock Agreement") relating to the 20,000,000 shares of
Capital Cities Common Stock beneficially owned by the Berkshire Shareholders,
representing approximately 13% of the outstanding shares. Under the Stock
Agreement, Berkshire Hathaway has agreed, among other things, to cause
17
<PAGE>
each Berkshire Shareholder to vote its shares in favor of adoption of the
Capital Cities Proposal, against any Alternative Proposal and in favor of any
other matter necessary to consummate the transactions contemplated by the
Reorganization Agreement. Berkshire Hathaway has also agreed, among other
things, to prevent each Berkshire Shareholder from: (i) selling, pledging or
otherwise disposing of any of its shares; (ii) granting a proxy or entering
into any voting trust, agreement or arrangement with respect to its shares; or
(iii) entering into any contract, option or other arrangement with respect to
the direct acquisition or sale or other disposition of any Capital Cities
Common Stock, in each case until after the Capital Cities Meeting. See "THE
REORGANIZATION AGREEMENT--Stock Agreement."
Programming Agreement. Capital Cities and Disney entered into a Programming
Agreement (the "Programming Agreement") concurrently with the execution of the
Reorganization Agreement. The Programming Agreement provides that, during each
of the three Capital Cities programming seasons commencing with the Fall 1996
Season, Disney has agreed to provide to Capital Cities, and Capital Cities has
agreed to present, subject to pre-existing Capital Cities commitments: (i) a
full slate of Saturday morning programming designed for children consisting of
Disney-produced programs, including animation, and programming acquired by
Disney from third parties (at Disney's option, these programs may not be
provided to Capital Cities until the Fall 1997 Season); (ii) a weekly one hour
Disney-themed program to run in a prime-time slot (the time slot for which is
to be determined by Capital Cities after consultation with Disney); and (iii)
three prime-time specials, each at least 60 minutes in length (the time slot
for which is to be determined by Capital Cities after consultation with
Disney), featuring Disney-themed materials. See "THE REORGANIZATION AGREEMENT--
Programming Agreement."
Registration Rights Agreement. As a condition to Capital Cities' obligation
to effect the Mergers, New Disney is required to execute the Registration
Rights Agreement with each of the Capital Cities Affiliates. The Registration
Rights Agreement provides that Capital Cities Affiliates will have, subject to
certain conditions, both "demand" and "piggyback" registration rights to
require New Disney to register all or any portion of New Disney Common Stock
then owned by them. See "THE REORGANIZATION AGREEMENT--Registration Rights
Agreement."
18
<PAGE>
THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies (i) from the holders of Disney Common Stock by the
Disney Board for use at the Disney Meeting and (ii) from the holders of
Capital Cities Common Stock by the Capital Cities Board for use at the Capital
Cities Meeting.
TIMES AND PLACES; PURPOSES
Disney. The Disney Meeting will be held at The Waldorf-Astoria Hotel, 301
Park Avenue, New York, New York on January 4, 1996, starting at 10:00 a.m.,
local time. At the Disney Meeting, the stockholders of Disney will be asked to
consider and vote upon the Disney Proposal, the Disney Option Proposal and
such other matters as may properly come before the Disney Meeting. Copies of
the Reorganization Agreement and the Disney Merger Agreement are included as
Appendix A-1 and Appendix A-2, respectively, to this Joint Proxy
Statement/Prospectus. Copies of the 1995 Plan and the Amended 1990 Plan are
included as Appendix B-1 and Appendix B-2, respectively, to this Joint Proxy
Statement/Prospectus.
Capital Cities. The Capital Cities Meeting will be held in Studio TV-1 at 7
West 66th Street, New York, New York on January 4, 1996, starting at 10:00
a.m., local time. At the Capital Cities Meeting, the shareholders of Capital
Cities will be asked to consider and vote upon the Capital Cities Proposal and
such other matters as may properly come before the Capital Cities Meeting.
Copies of the Reorganization Agreement and the Capital Cities Merger Agreement
are included as Appendix A-1 and Appendix A-3, respectively, to this Joint
Proxy Statement/Prospectus.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
Disney. The Disney Board has fixed the close of business on November 10,
1995, as the Disney Record Date. Only holders of record of shares of Disney
Common Stock on the Disney Record Date are entitled to notice of and to vote
at the Disney Meeting. As of November 7, 1995, there were 524,378,016 shares
of Disney Common Stock outstanding and entitled to vote held by approximately
513,917 stockholders of record.
Each holder of record, as of the Disney Record Date, of Disney Common Stock
is entitled to cast one vote per share. The presence, in person or by proxy,
of the holders of a majority of the outstanding shares of Disney Common Stock
entitled to vote is necessary to constitute a quorum at the Disney Meeting.
Under the DGCL, the affirmative vote, in person or by proxy, of the holders
of a majority of the shares of Disney Common Stock outstanding on the Disney
Record Date is required to approve and adopt the Disney Proposal.
Under Disney's Bylaws, as amended, and the DGCL, the affirmative vote of a
majority of the shares of Disney Common Stock represented in person or by
proxy and entitled to vote on the Disney Option Proposal is required to
approve the Disney Option Proposal.
The Disney Proposal and the Disney Option Proposal are not conditioned upon
one another.
As of September 1, 1995, directors and executive officers of Disney as a
group beneficially owned 18,794,642 shares of Disney Common Stock, or
approximately 3.6% of those shares of Disney Common Stock outstanding as of
such date.
Capital Cities. The Capital Cities Board has fixed the close of business on
November 15, 1995, as the Capital Cities Record Date. Only holders of record
of shares of Capital Cities Common Stock on the Capital Cities Record Date are
entitled to notice of and to vote at the Capital Cities Meeting. On November
7, 1995, there were 153,903,230 shares of Capital Cities Common Stock
outstanding and entitled to vote at the Capital Cities Meeting held by
approximately 11,500 shareholders of record.
Each holder of record, as of the Capital Cities Record Date, of Capital
Cities Common Stock is entitled to cast one vote per share. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
Capital Cities Common Stock entitled to vote is necessary to constitute a
quorum at the Capital Cities Meeting.
19
<PAGE>
Under the NYBCL, the affirmative vote, in person or by proxy, of the holders
of two-thirds of the shares of Capital Cities Common Stock outstanding on the
Capital Cities Record Date and entitled to vote on the Capital Cities Proposal
is required to approve and adopt the Capital Cities Proposal. The Berkshire
Shareholders beneficially own 20,000,000 shares, or approximately 13% of the
outstanding shares of Capital Cities Common Stock. Pursuant to the terms of
the Stock Agreement, Berkshire Hathaway has agreed to cause each Berkshire
Shareholder to vote all its shares in favor of the Capital Cities Proposal.
See "THE REORGANIZATION AGREEMENT--Stock Agreement."
As of October 31, 1995, directors and executive officers of Capital Cities
as a group beneficially owned approximately 21,935,507 shares of Capital
Cities Common Stock (including the 20,000,000 shares beneficially owned by the
Berkshire Shareholders which are subject to the Stock Agreement), or
approximately 14.25% of those shares of Capital Cities Common Stock
outstanding as of the Capital Cities Record Date. See "THE REORGANIZATION
AGREEMENT--Stock Agreement."
If fewer shares of Disney Common Stock are voted in favor of the Disney
Proposal than the number required for approval, it is expected that the Disney
Meeting will be postponed or adjourned for the purpose of allowing additional
time for soliciting and obtaining additional proxies or votes, and, at any
subsequent reconvening of the Disney Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Disney Meeting, except for any proxies that have theretofore effectively
been revoked or withdrawn. If fewer shares of Capital Cities Common Stock are
voted in favor of the Capital Cities Proposal than the number required for
approval, it is expected that the Capital Cities Meeting will be postponed or
adjourned for the purpose of allowing additional time for soliciting and
obtaining additional proxies or votes, and, at any subsequent reconvening of
the Capital Cities Meeting, all proxies will be voted in the same manner as
such proxies would have been voted at the original convening of the Capital
Cities Meeting, except for any proxies that have theretofore effectively been
revoked or withdrawn.
PROXIES
Disney. All shares of Disney Common Stock represented by properly executed
proxies received prior to or at the Disney Meeting and not revoked, will be
voted in accordance with the instructions indicated in such proxies. If no
instructions are indicated on a properly executed returned proxy, such proxy
will be voted FOR the Disney Proposal and FOR the Disney Option Proposal. A
properly executed proxy marked "ABSTAIN," although counted for purposes of
determining whether there is a quorum, will not be voted. Accordingly, since
the affirmative vote of a majority of the shares of Disney Common Stock
outstanding on the Disney Record Date is required for approval of the Disney
Proposal and the affirmative vote of the majority of the shares of Disney
Common Stock represented in person or by proxy and entitled to vote is
required for approval of the Disney Option Proposal, a proxy marked "ABSTAIN"
will have the effect of a vote against the Disney Proposal and against the
Disney Option Proposal. In accordance with NYSE rules, brokers and nominees
are precluded from exercising their voting discretion on the Disney Proposal
and the Disney Option Proposal and thus, absent specific instructions from the
beneficial owner of such shares, are not empowered to vote such shares with
respect to the Disney Proposal or the Disney Option Proposal. Therefore,
because the affirmative vote of a majority of the shares of Disney Common
Stock outstanding on the Disney Record Date is required for approval of the
Disney Proposal and the affirmative vote of a majority of the shares of Disney
Common Stock represented in person or by proxy and entitled to vote on the
Disney Option Proposal is required to approve the Disney Option Proposal, a
broker non-vote (i.e., shares held by brokers or nominees which are
represented at a meeting but with respect to which the broker or nominee is
not empowered to vote on a particular proposal) with respect to the Disney
Proposal will have the effect of a vote against the Disney Proposal but will
not be counted with respect to the Disney Option Proposal. Shares represented
by broker non-votes will, however, be counted for purposes of determining
whether there is a quorum at the Disney Meeting.
A separate proxy/voting instruction card serves as voting instructions to
Fidelity Management Trust Company, as Trustee under the Disney Salaried
Savings and Investment Plan (the "Disney 401(k) Plan"), for voting the shares
of Disney Common Stock equivalent to the value of the interest credited to the
account of each participant in the Disney 401(k) Plan as of the Disney Record
Date. The Trustee will vote the number of
20
<PAGE>
equivalent shares credited to each participant's account as instructed by each
participant who returns an executed proxy/voting instruction card in a timely
manner (by December 29, 1995). If a Disney 401(k) Plan participant's executed
proxy/voting instruction is not timely received, the number of equivalent
shares credited to the participant's account will be voted by a designated
fiduciary independent of Disney and Capital Cities acting in accordance with
the fiduciary duties imposed under the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Any Disney 401(k) Plan participant may revoke
his voting instructions by December 29, 1995 by timely filing with the Trustee
a written notice to that effect or a duly executed proxy/voting instruction
card bearing a date later than his previously executed proxy/voting
instruction card.
Capital Cities. All shares of Capital Cities Common Stock represented by
properly executed proxies received prior to or at the Capital Cities Meeting and
not revoked will be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated on a properly executed returned proxy,
such proxy will be voted FOR the Capital Cities Proposal. A properly executed
proxy marked "ABSTAIN," although counted for purposes of determining whether
there is a quorum, will not be voted. Accordingly, since the affirmative vote of
two-thirds of the shares of Capital Cities Common Stock outstanding on the
Capital Cities Record Date is required for approval of the Capital Cities
Proposal, a proxy marked "ABSTAIN" will have the effect of a vote against the
Capital Cities Proposal. In accordance with NYSE rules, brokers and nominees are
precluded from exercising their voting discretion on the Capital Cities Proposal
and thus, absent specific instructions from the beneficial owner of such shares,
are not empowered to vote such shares on the Capital Cities Proposal. Therefore,
because the affirmative vote of two-thirds of the shares of Capital Cities
Common Stock outstanding on the Capital Cities Record Date is required for
approval of the Capital Cities Proposal, a broker non-vote with respect to the
Capital Cities Proposal will have the effect of a vote against the Capital
Cities Proposal. Shares represented by broker non-votes will, however, be
counted for purposes of determining whether there is a quorum at the Capital
Cities Meeting.
The enclosed proxy/voting instruction card serves as voting instructions to
Fidelity Management Trust Company, as Trustee under the Capital Cities/ABC,
Inc. Savings & Investment Plan ("Capital Cities SIP"), for voting the shares
of Capital Cities Common Stock equivalent to the value of the interest
credited to the account of each member in the Capital Cities SIP as of the
Capital Cities Record Date. The Trustee will vote the number of equivalent
shares credited to each member's account as instructed by each member who
returns an executed proxy/voting instruction card in a timely manner (by
December 29, 1995). If a Capital Cities SIP member's executed proxy/voting
instruction is not timely received, the number of equivalent shares credited
to the member's account will be voted by a designated fiduciary independent of
Capital Cities and Disney acting in accordance with the fiduciary duties
imposed under ERISA. Any Capital Cities SIP member may revoke his voting
instructions by December 29, 1995 by timely filing with the Trustee a written
notice to that effect or a duly executed proxy/voting instruction card bearing
a date later than his previously executed proxy/voting instruction card.
It is not expected that any matter not referred to herein will be presented
for action at the Disney Meeting or the Capital Cities Meeting, respectively.
If any other matters are properly brought before the Disney Meeting or the
Capital Cities Meeting, the persons named in the proxies will have discretion
to vote on such matters in accordance with their best judgment. However,
shares represented by proxies that have been voted "AGAINST" the Disney
Proposal or the Capital Cities Proposal, as the case may be, will not be used
to vote "FOR" postponement or adjournment of the Disney Meeting or the Capital
Cities Meeting, as the case may be, for the purpose of allowing additional
time for soliciting additional votes "FOR" the Disney Proposal or the Capital
Cities Proposal, as the case may be. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy as proxy appointees
to vote in accordance with their best judgment on matters incident to the
conduct of the Special Meetings, including (except as stated in the preceding
sentence) adjournment for the purpose of soliciting additional votes.
General. A stockholder of Disney or a shareholder of Capital Cities may
revoke his or her proxy at any time prior to its use by delivering to the
Secretary of Disney or Capital Cities, as the case may be, a signed notice of
revocation or a later dated signed proxy or by attending the Disney Meeting or
the Capital Cities
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Meeting and voting in person. Attendance at the Disney Meeting or the Capital
Cities Meeting will not in itself constitute the revocation of a proxy.
The cost of solicitation of proxies will be paid by Disney for the Disney
proxies and by Capital Cities for the Capital Cities proxies. In addition to
solicitation by mail, proxies may be solicited in person by directors,
officers and employees of Disney or Capital Cities, as the case may be,
without additional compensation, and by telephone, telegram, teletype,
facsimile or similar method. Arrangements will be made with brokerage houses
and other custodians, nominees and fiduciaries to send proxy material to
beneficial owners; and Disney or Capital Cities, as the case may be, will,
upon request, reimburse them for their reasonable expenses in so doing. Disney
has retained Georgeson & Co. to aid in the solicitation of proxies at a fee of
$25,000 plus expenses. Capital Cities has retained D.F. King & Co., Inc. to
aid in the solicitation of proxies at a fee of $15,000 plus expenses. To the
extent necessary in order to ensure sufficient representation at the Disney
Meeting or the Capital Cities Meeting, Disney or Capital Cities, as the case
may be, may request by telephone or telegram the return of proxies. The extent
to which this will be necessary depends entirely upon how promptly proxies are
returned.
HOLDERS OF CAPITAL CITIES COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING CAPITAL CITIES COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE
TRANSACTION IS APPROVED, A LETTER OF TRANSMITTAL AND AN ELECTION FORM WILL BE
MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING
CAPITAL CITIES SHARES IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. CAPITAL CITIES
SHAREHOLDERS SHOULD SEND CERTIFICATES REPRESENTING CAPITAL CITIES COMMON STOCK
TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH, THE
INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL AND THE ELECTION FORM.
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THE ACQUISITION
BACKGROUND
In the fall of 1993, Michael D. Eisner, Chairman of the Board and Chief
Executive Officer of Disney, and Sid R. Bass, a Disney stockholder, and
members of Disney's senior management met with Daniel B. Burke, then President
and Chief Executive Officer and currently a director of Capital Cities, Thomas
S. Murphy, currently the Chairman of the Board and Chief Executive Officer of
Capital Cities, and Warren E. Buffett, a director of Capital Cities, to
discuss a potential business combination. These discussions did not give rise
to a proposal with respect to a transaction.
In March 1995, Mr. Eisner and Mr. Murphy met to again discuss the
possibility of a business combination involving Disney and Capital Cities. At
this meeting, Mr. Murphy suggested that Capital Cities might consider a stock-
for-stock transaction in which Capital Cities shareholders would receive
Disney Common Stock in exchange for their shares of Capital Cities Common
Stock. Mr. Eisner indicated that Disney would not be interested in an all-
stock transaction, but instead suggested other alternatives, including the
possibility of an all-cash transaction. This meeting did not result in an
agreement or give rise to further discussions.
While attending an industry conference, Mr. Eisner met on July 14, 1995 with
Mr. Buffett and Mr. Murphy and recommenced discussions of a business
combination involving Disney and Capital Cities. At this meeting, Mr. Murphy
stated that Capital Cities would only be interested in a stock transaction
that would permit Capital Cities shareholders to have a substantial equity
interest in the combined company. In response, Mr. Eisner indicated that
Disney would not be interested in an all-stock transaction. Messrs. Eisner and
Murphy agreed to meet the following week to continue the discussion.
On July 21, 1995, Mr. Eisner and Stephen F. Bollenbach, Senior Executive
Vice President and Chief Financial Officer of Disney, met in New York with Mr.
Murphy and Mr. Burke. At the July 21 meeting, Mr. Eisner asked whether Capital
Cities would consider an all-cash transaction. Mr. Murphy reiterated that
Capital Cities would only be interested in a stock transaction. Mr. Eisner
then suggested that the two companies instead consider a strategic alliance
involving, among other things, the provision by Disney for the ABC Television
Network of Saturday morning programming and certain other programs. Mr. Murphy
indicated that he would consider the strategic alliance proposal.
On July 25, 1995, Mr. Murphy called Mr. Eisner and suggested that, in lieu
of the strategic alliance, Disney and Capital Cities enter into a merger
transaction in which Capital Cities shareholders would receive, for each share
of Capital Cities Common Stock, one share of Disney Common Stock and $65 in
cash. Over the next two days, Mr. Eisner and Mr. Murphy discussed several
possible variations on this structure, including variations proposed by Mr.
Eisner that would have involved the issuance by Disney of one-half of a share
of Disney Common Stock and more cash. In addition, Mr. Eisner had telephone
conferences with each member of the Disney Board and with Mr. Bass to discuss
the principal issues of the proposed business combination, including the
general terms of the Programming Agreement and the Stock Agreement. On July
27, 1995, the parties determined that discussions relating to a proposed
business combination had advanced to a point where the parties should meet to
negotiate definitive documentation.
From July 28 through July 31, members of the senior management of Capital
Cities and Disney, together with their legal advisors, negotiated the terms of
the Reorganization Agreement. During this period, Mr. Buffett, the Chairman
and Chief Executive Officer of Berkshire Hathaway, and representatives of
Disney negotiated the terms of the Stock Agreement, pursuant to which, among
other things, Berkshire Hathaway agreed to cause each of the Berkshire
Shareholders to vote its shares of Capital Cities Common Stock in favor of the
Capital Cities Proposal. In addition, representatives of Disney and
representatives of Capital Cities negotiated the Programming Agreement,
pursuant to which Disney and Capital Cities established a strategic alliance
for the production of certain programming for the ABC Television Network under
certain circumstances. Mr. Bass participated in certain of these discussions.
During this time, the parties also exchanged financial and legal due diligence
materials, conducted additional due diligence, and executed a Confidentiality
Agreement, dated as of July 30, 1995, which provides for the exchange of
confidential information and includes certain standstill provisions with
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respect to Disney's acquisition of Capital Cities Common Stock and the
solicitation of Capital Cities shareholders.
The Disney Board held a special meeting on July 30, 1995 to consider the
proposed Reorganization Agreement and the transactions contemplated thereby,
including the proposed consideration to be paid to Capital Cities
shareholders. At this meeting, members of Disney's senior management, together
with Dewey Ballantine, its legal advisor, and Bear Stearns, its investment
banker, reviewed with the Disney Board, among other things, the background of
the proposed Acquisition, Disney's strategic alternatives, financial and
valuation analyses of the transaction and the terms of the Reorganization
Agreement, the Programming Agreement, the Stock Agreement and the Registration
Rights Agreement. Representatives of Dewey Ballantine and Bear Stearns made
presentations to the Disney Board and discussed with the Disney Board their
views and analyses of various aspects of the proposed Acquisition. In
addition, at the July 30, 1995 meeting, Bear Stearns delivered its oral
opinion (subsequently confirmed in a written opinion dated as of July 30,
1995) to the Disney Board that, based upon the matters presented to the Disney
Board and subject to the matters set forth in its written opinion, as of such
date, the Acquisition is fair to the holders of Disney Common Stock from a
financial point of view. Bear Stearns subsequently confirmed such opinion by
delivery of its written opinion dated as of the date of this Joint Proxy
Statement/Prospectus. After extensive discussion and consideration, the Disney
Board unanimously approved the Reorganization Agreement and the transactions
contemplated thereby and authorized the execution of the Reorganization
Agreement, the Programming Agreement and the Stock Agreement.
On July 30, 1995, the Capital Cities Board met to consider the
Reorganization Agreement and the transactions contemplated thereby, including
the proposed consideration to be paid to Capital Cities shareholders. Mr.
Murphy and other members of Capital Cities' senior management and
representatives of Cravath, Swaine & Moore, Capital Cities' legal advisor, and
Allen & Company, Capital Cities' investment banker, made presentations to the
Capital Cities Board and discussed with the Capital Cities Board their views
and analyses of various aspects of the proposed transaction. The Capital
Cities Board reviewed and considered, among other things, the background of
the proposed transaction, Capital Cities' strategic alternatives, financial
and valuation analyses of the transaction, the terms of the Reorganization
Agreement, the Programming Agreement, the Stock Agreement and the Registration
Rights Agreement and the other matters described below under "--Recommendation
of the Capital Cities Board; Capital Cities' Reasons for the Acquisition."
Allen & Company delivered its oral opinion (subsequently confirmed in writing)
that, based upon the matters presented to the Capital Cities Board and as set
forth in its opinion, as of such date, the consideration to be received by
holders of Capital Cities Common Stock pursuant to the Reorganization
Agreement was fair to the holders of Capital Cities Common Stock from a
financial point of view.
On July 31, 1995, the meeting of the Capital Cities Board reconvened and,
after further deliberation, the Capital Cities Board unanimously approved the
Reorganization Agreement and authorized the execution of the Reorganization
Agreement and the Programming Agreement.
RECOMMENDATION OF DISNEY BOARD; DISNEY'S REASONS FOR THE ACQUISITION
THE DISNEY BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF DISNEY COMMON STOCK
VOTE FOR THE DISNEY PROPOSAL.
The Disney Board believes that the terms of the Reorganization Agreement and
the transactions contemplated thereby are in the best interests of Disney and
its stockholders. Accordingly, the Disney Board has approved the
Reorganization Agreement and recommends approval thereof by the stockholders
of Disney.
In view of the variety of factors considered in connection with its
evaluation of the Acquisition, the Disney Board did not quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determination.
In reaching its determination to recommend approval of the Reorganization
Agreement, the Disney Board consulted with Disney management, as well as its
legal counsel and investment banker, and considered a number
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of factors. The Disney Board considered the nature and scope of the business
of Capital Cities, and quality and breadth of its assets, its financial
condition, competitive position and prospects for further development. The
Board considered, among other things, the strong recent performance of the ABC
Television Network, as well as the strong performance of the television
stations owned by Capital Cities, covering 25% of the U.S. market. In
addition, the Disney Board reviewed the operations of the cable program
services in which Capital Cities has an interest, including Capital Cities'
80% interest in ESPN, the leading cable sports network in the United States,
the 80% ownership interest in ESPN2 and the strategic investments in Lifetime
Television and A&E Television Network. The Disney Board also considered
Capital Cities' international television presence, including its minority
investment in European and Japanese cable channels and production companies
and Capital Cities' radio and publishing businesses.
In reviewing these assets and operations, the Disney Board took into account
the quality and breadth of Capital Cities management. It also reviewed the
complementary nature of the businesses of the two companies, which have little
overlap and which present opportunities for cross-utilization and cross-
promotion of assets of each company in the businesses operated by the other.
The Disney Board considered that the quality of Capital Cities management and
the complementary nature of the two companies' businesses create significant
opportunities for development of the companies on a combined basis without the
need for significant restructuring, redirection or asset dispositions. In
addition, the Disney Board considered the significant potential synergies
between the companies that are expected to result in earnings in excess of the
individual financial performances of the two companies. The Disney Board also
reviewed the potential benefits of the evolving regulatory environment on
opportunities for future development, noting that recent regulatory changes
will enable New Disney to explore new areas of growth opportunities. One of
the most significant regulatory changes was the FCC's tentative decision to
repeal its financial interest and syndication rules ("fin-syn rules") as of
November 1995. The fin-syn rules precluded the ABC Television Network from,
among other things, engaging in active first-run or "off-network" syndication
of programs to television stations in the United States and constrained their
discretion to determine when programs owned by them would be made available
for syndication. Given Disney's syndication activities, the fin-syn rules
would have hampered New Disney's syndication and related businesses. (The fin-
syn rules were repealed pursuant to action taken by the FCC on September 6,
1995. See "SIGNIFICANT REGULATIONS APPLICABLE TO BROADCASTING SERVICES--
Financial Interest and Syndication Rules.") Additionally, the FCC's repeal of
its prime time access rule effective on August 30, 1996 will remove a
regulatory obstacle that would have prevented New Disney from supplying any
entertainment programming to ABC Television Network affiliates in the top 50
markets to be broadcast during one hour of the four-hour prime time period.
See "SIGNIFICANT REGULATIONS APPLICABLE TO BROADCASTING SERVICES--Prime Time
Access Rule."
The Disney Board also reviewed recent comparable transactions in the
entertainment industry in considering the strategic and financial rationale
for this transaction. The Disney Board considered, among other factors, the
acquisition price and its relation to earnings in each comparable transaction.
In addition, the Disney Board reviewed a financial comparison of Disney and
Capital Cities and studied the potential impacts of the Acquisition on the
balance sheet of the new combined company. The Disney Board studied the
potential effect on the earnings per share of the new combined company as a
result of the Acquisition. The Disney Board also took into account the five-
year performance of the common stock of each of Disney and Capital Cities, as
well as the price-to-earnings multiples of the two companies over the past
five years.
In its review of the quality and breadth of the assets of Capital Cities,
the Disney Board considered the favorable financial performance and growth of
the major assets in each of Capital Cities' television, radio and publishing
lines of business. The Disney Board also considered the successful programming
on the ABC television network, the heavily populated markets and competitive
positions of the television and radio stations owned and operated by Capital
Cities and the broad spectrum of publications owned by Capital Cities.
The Disney Board of Directors considered the terms and conditions of the
Reorganization Agreement, including the amount and form of consideration to be
received by the shareholders of Capital Cities. The Board considered the fact
that, pursuant to the Reorganization Agreement, Disney may, in its sole
discretion, increase
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the Maximum Cash Amount, thereby giving Disney the flexibility to increase the
portion of cash consideration. Such increase could, through the resulting
increase in the Prorated Cash Amount, assuming the Requested Cash Amount
exceeds the Cash Component, possibly decrease the portion of consideration
consisting of shares of New Disney Common Stock, paid to Capital Cities
shareholders in the Acquisition.
The Disney Board considered the provisions of the Reorganization Agreement
which prohibit Capital Cities and its subsidiaries, and their respective
directors, officers, employees and representatives from soliciting or
encouraging any Alternative Proposals or, subject to the fiduciary duties of
the Capital Cities Board, from negotiating with any third parties with respect
to an Alternative Proposal. The Disney Board further considered the provisions
of the Reorganization Agreement which require Capital Cities to pay to Disney
a fee of $400 million if the Reorganization Agreement is terminated (i) by the
Capital Cities Board in the exercise of its fiduciary duties or (ii) by
Disney, pursuant to the termination provisions of the Reorganization
Agreement, following receipt by Capital Cities of an Alternative Proposal.
The Board of Directors of Disney considered the oral opinion of Bear
Stearns, rendered on July 30, 1995 (and subsequently confirmed in a written
opinion dated as of July 30, 1995 and in a written opinion dated as of the
date of this Joint Proxy Statement/Prospectus), that the Acquisition is fair
to the holders of Disney Common Stock from a financial point of view. A copy
of Bear Stearns' written opinion to the Disney Board dated as of the date of
this Joint Proxy Statement/Prospectus is attached hereto as Appendix C and is
incorporated herein by reference. See "--Fairness Opinions--Opinion of
Disney's Investment Banker." In addition, the Disney Board considered the
presentation of Bear Stearns made at the Board of Directors meeting held on
July 30, 1995.
The Disney Board considered the terms of the Stock Agreement, pursuant to
which, among other things, Berkshire Hathaway, which beneficially owns
approximately 13% of the outstanding shares of Capital Cities Common Stock,
agreed to cause the Berkshire Shareholders to vote such shares in favor of the
transactions contemplated by the Reorganization Agreement and agreed not to
solicit, encourage or engage in any negotiations concerning any Alternative
Proposals.
The Disney Board considered the terms of the Programming Agreement,
including Capital Cities' agreement, except under certain circumstances, to
present, for three programming seasons commencing with the Fall 1996 Season,
subject to pre-existing commitments, (i) a full slate of Saturday morning
programming designed for children consisting of Disney-produced programs, (ii)
a weekly one hour Disney-themed prime-time program and (iii) three prime-time
specials.
RECOMMENDATION OF CAPITAL CITIES BOARD; CAPITAL CITIES' REASONS FOR THE
ACQUISITION
THE CAPITAL CITIES BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CAPITAL
CITIES COMMON STOCK VOTE FOR THE CAPITAL CITIES PROPOSAL.
On July 30 and 31, 1995, the Capital Cities Board received and considered
the presentations of the management of Capital Cities and its investment
banker and legal advisor regarding the Acquisition. On July 31, 1995, the
Capital Cities Board unanimously approved the Reorganization Agreement. The
Capital Cities Board has determined that the Acquisition is in the best
interests of Capital Cities and its shareholders and unanimously recommends
that the shareholders of Capital Cities vote for the approval and adoption of
the Reorganization Agreement.
In reaching its determination to approve the Reorganization Agreement, the
Capital Cities Board considered a number of factors, including, without
limitation, the factors listed below. In view of the wide variety of factors
considered in connection with its evaluation of the Acquisition, the Capital
Cities Board did not consider it practicable to, nor did it attempt to,
quantify or otherwise assign relative weights to the specific factors it
considered in reaching its determination.
(i) Management's Recommendation. The Capital Cities Board reviewed
presentations from, and discussed the terms and conditions of the
Reorganization Agreement and the Acquisition with, senior
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executive officers of Capital Cities, representatives of its legal counsel
and representatives of Allen & Company, its investment banker. The Capital
Cities Board considered management's view of recent trends in the
entertainment and media industries. The Capital Cities Board considered
management's view that a combination of Disney, a leading "content
provider" in the entertainment industry and an entertainment company with a
strong brand identity (the Disney name), with Capital Cities, a leading
distributor of programming, would create an even stronger global competitor
in the entertainment and media industries. Capital Cities' management noted
that Disney has been uniquely successful over the years in cross-promoting
and cross-marketing its film, television, theme park and retail/merchandise
licensing businesses. For example, the Disney theme parks are used to
promote the Disney films and videos in current release and the Disney films
provide characters for the theme park attractions and the
retail/merchandise licensing business. Capital Cities' management expressed
the view that the combination of the Capital Cities businesses with the
Disney businesses would greatly increase the opportunities for this type of
cross-segment revenue generation. In making its determination, the Capital
Cities Board considered the view expressed by Capital Cities' management
and Allen & Company that the Acquisition would benefit the shareholders of
Capital Cities because they would participate in the value generated
through this type of cross-segment revenue generation through their
continued equity participation in New Disney. The Capital Cities Board also
considered the fact that preliminary conversations about the possibility of
a combination of Capital Cities and Disney had taken place between senior
executive officers of the two companies on a number of occasions in the
last two years and that Capital Cities' management was convinced that a
combination between Capital Cities and Disney would yield greater benefits
to Capital Cities and its shareholders than a combination of Capital Cities
with any other company. In addition, the Capital Cities Board considered
management's view that, if Capital Cities were not to enter into the
Acquisition, Disney might well enter into a combination transaction with
one of the other television networks--an event that might result in gains
that Capital Cities anticipated from the Acquisition being realized by
another television network.
(ii) Capital Cities' Business, Condition and Prospects. In evaluating the
terms of the Acquisition, the Capital Cities Board considered, among other
things, information with respect to the financial condition, results of
operations and businesses of Capital Cities, on both a historical and
prospective basis, and current industry, economic and market conditions.
The members of the Capital Cities Board were generally familiar with and
knowledgeable about Capital Cities' affairs and further reviewed these
matters in the course of their deliberations. In evaluating Capital Cities'
prospects, the Capital Cities Board considered, among other things, the
strengths of Capital Cities' broadcasting business, including its ratings
leadership, its strong programming line-up and the recent strength of the
advertising market, as well as the challenges facing that business,
including higher programming costs, competition from its traditional full
service competitors (CBS and NBC), increased competition from the Fox
Network as well as newly formed part-time networks (such as the WB Network
and the United Paramount Network), cable and other media and the difficulty
of maintaining historical earnings growth rates on a stand-alone basis in
an increasingly competitive environment.
(iii) Historical and Recent Market Prices Compared to the Consideration
to be Received by the Holders of Capital Cities Common Stock pursuant to
the Acquisition. The Capital Cities Board reviewed the historical market
prices and recent trading activity of Capital Cities Common Stock. The
Capital Cities Board considered as favorable to its determination the fact
that the value to be received per share of Capital Cities Common Stock
(which, as of July 30, 1995, was $122 3/8 per share, based on the closing
price of
Disney Common Stock on July 28, 1995, the last trading day prior to the
execution of the Reorganization Agreement) represented a premium of more
than 27% over the closing sale price of $96 1/8 for Capital Cities Common
Stock on July 28, 1995. The Capital Cities Board took into account Allen &
Company's analysis that the value to be received by holders of Capital
Cities Common Stock pursuant to the Acquisition (considered as a multiple
of sales, earnings before interest, taxes, depreciation and amortization
("EBITDA") or net income) was within the range of multiples paid in
selected acquisitions of comparable companies. The Capital Cities Board
also considered Allen & Company's view that the value to be received
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pursuant to the Acquisition was within the range of pre-tax values that
could hypothetically be realized if Capital Cities' assets were sold
separately (i.e., Capital Cities' "break-up value").
The Capital Cities Board considered the fact that the Reorganization
Agreement did not provide a "collar" limiting the effect of changes in the
price of Disney Common Stock on the value of the consideration to be
received by the holders of Capital Cities Common Stock in the Acquisition
and that, accordingly, the value of such consideration could fluctuate
depending upon the performance of Disney Common Stock between the signing
of the Reorganization Agreement and the closing. While recognizing that the
absence of a collar exposed the Capital Cities shareholders to some market
risk, the Capital Cities Board considered this risk to be offset by the
following facts: (i) more than 50% of the transaction value (based on the
closing price of Disney Common Stock on July 28, 1995) is represented by
the $65 per share cash component--which is fixed, (ii) Capital Cities
shareholders would be able to participate in any appreciation in the value
of Disney Common Stock between the announcement of the transaction and the
Closing Date as defined below--including appreciation related to favorable
market perception of the transaction and of the prospects for New Disney
and (iii) while collar arrangements provide limited protection against
declines in the share price of the security to be received, they also limit
the benefits from any appreciation in that price.
(iv) Disney's Business, Condition and Prospects. The Capital Cities Board
considered, among other things, information provided by management and
Allen & Company with respect to the financial condition, results of
operations and businesses of Disney. The Capital Cities Board considered,
among other things, Disney's status as a leading provider of programming,
its unique consumer franchise and the fact that it is the largest (measured
by market capitalization) publicly traded diversified entertainment company
and the second largest such company (behind Time Warner) measured by
revenues. In reviewing the three segments in which Disney operates--filmed
entertainment, theme parks and resorts, and consumer products--the Capital
Cities Board noted that Disney's filmed entertainment business has achieved
unparalleled success in animated film production and distribution and is
also a major producer of live action films, successful network television
shows (including Home Improvement for ABC), first-run syndicated
programming (including Live With Regis & Kathy Lee and Siskel & Ebert) and
cable programming (The Disney Channel). The Capital Cities Board reviewed
the operations of Disney's theme parks and resorts segment, noting the
plans for future growth at Walt Disney World, the apparently successful
restructuring of Euro Disney and Disney's entry into the sports business.
The Capital Cities Board also reviewed Disney's rapidly growing consumer
products segment, which includes merchandise licensing of branded
characters, retail stores and book publishing operations. The Capital
Cities Board noted Disney's strong growth prospects, particularly with
respect to animated film production, merchandising and consumer products
and international expansion, as well as the challenges it faces, including
improving the profitability of its live-action film business and Euro
Disney. The Capital Cities Board also considered the concerns that had been
raised regarding recent management turnover at Disney but concluded that
Disney's management depth and strong corporate culture should enable it to
avoid disruption.
(v) Alternative Transactions. The Capital Cities Board determined, taking
into account, among other things, applicable regulatory, legal and
financial considerations, that it was unlikely that a combination
transaction with any other corporation could be structured that would offer
comparable value to Capital Cities' shareholders. The Capital Cities Board
considered the fact that U.S. government regulations currently preclude
non-U.S. corporations from acquiring a controlling interest in Capital
Cities and concurred with the judgment of Allen & Company that it was
unlikely that any other U.S. corporation with interests in the media or
entertainment industries and no regulatory constraints had the available
financial resources to effect a transaction that would offer greater value
to the holders of Capital Cities Common Stock than the Acquisition.
(vi) Termination Provisions and Termination Fee. The Capital Cities Board
considered the provisions of the Reorganization Agreement that permit, if
an Alternative Proposal is received, the Capital Cities Board, in the
exercise of its fiduciary duties, to terminate the Reorganization Agreement
upon the payment to Disney of a fee of $400 million (approximately 2% of
the transaction value). The Capital Cities
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Board found reasonable the views of its legal advisors and Allen & Company
that a 2% termination fee was within the range of fees payable in
comparable transactions and that--at less than $3 per share--the fee would
not in and of itself preclude an Alternative Proposal.
(vii) Opinion of Allen & Company. The Capital Cities Board considered as
favorable to its determination the oral opinion delivered by Allen &
Company, subsequently confirmed in writing, that, as of July 31, 1995, the
consideration to be received by the holders of shares of Capital Cities
Common Stock pursuant to the Acquisition was fair to such holders from a
financial point of view. The Capital Cities Board also considered the oral
and written presentations made to it by Allen & Company. See "--Fairness
Opinions--Opinion of Capital Cities' Investment Banker." A copy of Allen &
Company's written opinion to the Capital Cities Board, dated as of July 31,
1995, is attached as Appendix D to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference.
(viii) Ability of the Shareholders of Capital Cities to Obtain a
Continuing Equity Interest in New Disney. The Capital Cities Board regarded
as particularly favorable to its determination the fact that the terms of
the Acquisition permit holders of Capital Cities Common Stock who wish to
do so to continue to hold an equity interest in New Disney following the
Acquisition, thus enabling Capital Cities shareholders to participate in
the synergies expected to result from the combination of the two companies
while realizing an immediate premium for their Capital Cities shares and
while obtaining tax-free treatment to the extent that they receive stock.
In this context, the Capital Cities Board noted that a prior all-cash
proposal made by Disney was rejected because it did not permit the Capital
Cities shareholders to benefit from the prospects of New Disney.
(ix) Ability of the Shareholders of Capital Cities to Elect to Receive
Either Cash Consideration, Stock Consideration or Cash and Stock
Consideration. The Capital Cities Board considered, among other things,
information provided by Capital Cities' legal counsel with respect to the
Federal income tax consequences of the Acquisition to shareholders of
Capital Cities. The Capital Cities Board was advised that, for Federal
income tax purposes, shareholders who exchange Capital Cities Common Stock
solely for New Disney Common Stock generally would not recognize taxable
gain or loss on the exchange, that shareholders who exchange Capital Cities
Common Stock solely for cash would be taxed on the difference between their
tax basis in the Capital Cities Common Stock exchanged and the cash
received, and that shareholders who exchange Capital Cities Common Stock
for a combination of cash and New Disney Common Stock generally would
recognize taxable gain in an amount equal to the lesser of (i) the excess
of the sum of the cash and the fair market value of the New Disney Common
Stock received over the tax basis in the Capital Cities Common Stock
exchanged and (ii) the amount of cash received. The Capital Cities Board
was also advised that shareholders of Capital Cities who elect to receive
all cash or all stock could not ascertain their tax consequences at the
time of making an election due to the possible applicability of proration.
The Capital Cities Board viewed as favorable to its determination the fact
that the terms of the Acquisition will permit the shareholders of Capital
Cities to elect to receive the consideration to be issued to them pursuant
to the Acquisition in the form of cash or Disney Common Stock (subject to
proration in each case), or a combination thereof, thereby generally
permitting shareholders to influence the tax consequences to them of the
Acquisition. In addition, the Board viewed as favorable the fact that the
Acquisition will enable shareholders who prefer cash to avoid the necessity
of selling any New Disney Common Stock they otherwise would have received.
FAIRNESS OPINIONS
Opinion of Disney's Investment Banker
Disney retained Bear Stearns on July 27, 1995 as its investment banker in
connection with the transactions contemplated by the Reorganization Agreement.
Bear Stearns was selected by Disney because of its familiarity with each of
Disney and Capital Cities and their respective component businesses and Bear
Stearns' qualifications and expertise in providing advice to companies in the
entertainment and media industries, as well as its reputation as an
internationally recognized investment banking firm.
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At the request of Disney, on July 30, 1995, Bear Stearns delivered an oral
opinion to the Disney Board, which was subsequently confirmed in a written
opinion dated as of July 30, 1995 that, based upon and subject to the matters
set forth in its written opinion, as of such date, the Acquisition was fair,
from a financial point of view, to the stockholders of Disney. Bear Stearns
has confirmed such opinion by delivery of a written opinion dated as of the
date of this Joint Proxy Statement/Prospectus. In connection with its opinion
dated the date of this Joint Proxy Statement/Prospectus, Bear Stearns
performed certain procedures to update certain of its analyses and reviewed
the assumptions on which such analyses were based and the factors considered
in connection therewith. The full text of the written opinion of Bear Stearns,
dated as of the date of this Joint Proxy Statement/Prospectus, is set forth as
Appendix C to this Joint Proxy Statement/Prospectus and describes the
assumptions made, matters considered and limits on the review undertaken.
Disney stockholders are urged to read the opinion in its entirety.
Bear Stearns' opinion addresses only the fairness of the Acquisition from a
financial point of view to the stockholders of Disney and does not constitute
a recommendation to any stockholder of Disney as to how such stockholder
should vote with respect to the approval of the Disney Proposal. Although Bear
Stearns evaluated the financial terms of the Acquisition, Bear Stearns did not
recommend the specific consideration to be paid in the Acquisition. The
consideration to be received by Capital Cities' shareholders as a result of
the Acquisition was determined by negotiation between Capital Cities and
Disney.
In connection with rendering its opinion dated as of July 30, 1995, Bear
Stearns: (i) reviewed the Reorganization Agreement in substantially final
form; (ii) reviewed the Annual Reports to Shareholders and Annual Reports on
Form 10-K of Capital Cities for the fiscal years ended December 31, 1992
through 1994, and its Quarterly Reports on Form 10-Q for the periods ended
April 2 and July 2, 1995; (iii) reviewed certain historical financial
statements and 1995 budget financial statements by business segment of Capital
Cities, provided to Bear Stearns by Capital Cities management; (iv) reviewed
the Annual Reports to Stockholders and Annual Reports on Form 10-K of Disney
for the fiscal years ended September 30, 1992 through 1994, and its Quarterly
Reports on Form 10-Q for the periods ended December 31, 1994, and March 31 and
June 30, 1995; (v) reviewed certain operating and financial information,
provided to Bear Stearns by Disney management relating to Disney's and Capital
Cities' business and prospects, including financial forecasts of Disney and
Capital Cities, respectively, prepared by Disney management; (vi) met with the
Chief Financial Officer of Capital Cities to discuss Capital Cities'
historical and 1995 budget financial statements by business segment; (vii) met
with certain members of Disney's senior management to discuss its operations,
historical financial statements and future business prospects; (viii) reviewed
the pro forma financial impact of the Acquisition on the stockholders of
Disney; (ix) reviewed the historical prices and trading volumes of the Disney
Common Stock and the Capital Cities Common Stock; (x) reviewed certain
publicly available financial data and stock market performance data of
companies which Bear Stearns deemed generally comparable to Disney and/or
Capital Cities; (xi) reviewed the terms of certain other recent acquisitions
of companies and businesses which Bear Stearns deemed generally comparable to
Capital Cities and its component businesses; and (xii) conducted such other
studies, analyses, inquiries and investigations as Bear Stearns deemed
appropriate.
In the course of its review, Bear Stearns relied upon and assumed without
independent verification the accuracy and completeness of the financial and
other information provided to it by Capital Cities and Disney, as well as the
Commission filings of Capital Cities and Disney, respectively. With respect to
the financial forecasts provided to Bear Stearns by Capital Cities and Disney,
Bear Stearns assumed that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the managements of
Capital Cities and Disney as to the expected future performance of Capital
Cities and Disney, respectively. Bear Stearns did not assume any
responsibility for the information or financial forecasts provided to it and
relied upon the assurances of management of Capital Cities and Disney that
they were unaware of any facts that would make the information or financial
forecasts provided by them to Bear Stearns incomplete or misleading. In
addition, Bear Stearns did not perform or obtain appraisals of the assets of
Capital Cities or Disney, and except as described in clauses (iii), (v) and
(vi) of the preceding paragraph, Bear Stearns did not have discussions with
management or employees of Capital Cities regarding Capital Cities'
operations, historical financial statements and future prospects or have
access to financial forecasts of Capital Cities prepared by Capital Cities.
Bear Stearns' opinion is necessarily based upon economic, market and other
conditions as in effect on, and the information made available to it as of,
the date of its opinion.
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The following is a summary of the analyses performed by Bear Stearns in
connection with its presentation to the Disney Board on July 30, 1995.
Transaction Analysis. Assuming a value per share of New Disney Common Stock
issued in the Acquisition of $57 3/8 (the July 28, 1995 closing price of
Disney Common Stock), Bear Stearns noted that (i) the aggregate consideration
payable to Capital Cities shareholders pursuant to the Acquisition represented
21.9x estimated 1995 net income of Capital Cities and 7.8x tangible book
equity of Capital Cities, (ii) the Enterprise Value (defined as the aggregate
consideration payable pursuant to the Acquisition plus debt, preferred stock
and minority interest, less available cash) of Capital Cities represented
2.98x estimated 1996 revenues, 10.4x estimated 1996 operating cash flow and
11.2x estimated 1996 operating income of Capital Cities and (iii) the per
share consideration payable to Capital Cities shareholders pursuant to the
Acquisition represented a premium of 27.3% over the closing price of the
Capital Cities Common Stock on the NYSE on July 28, 1995, the last full
trading day prior to the execution of the Reorganization Agreement, a premium
of 25.4% over the closing price of the Capital Cities Common Stock on the NYSE
on July 21, 1995, and a premium of 13.3% over the closing price of the Capital
Cities Common Stock on the NYSE on June 30, 1995.
Comparable Transactions Analysis. Bear Stearns compared the consideration
payable to Capital Cities shareholders pursuant to the Acquisition to the
consideration received by stockholders in several merger and acquisition
transactions in the diversified media industry, the publishing industry, the
television broadcasting industry, the radio broadcasting industry and the
cable programming industry since 1993. The transactions reviewed were: Viacom
Inc.'s acquisition of Paramount Communications, Inc.; Gannett Co., Inc.'s
acquisition of Multimedia, Inc.; Park Acquisition Corp.'s acquisition of Park
Communications, Inc.; Seagram Company Ltd.'s acquisition of MCA Inc.;
Westinghouse Electric Corp.'s rumored acquisition of CBS Inc.; New York Times
Co.'s acquisition of Affiliated Publications Inc.; NV Vereinigd Bezit VNU's
acquisition of BPI Communications, L.P.; United Advertising's acquisition of
Harmon Publishing Co.; Gruner & Jahr USA Publishing's acquisition of the
Women's Magazines Division of New York Times Co.; Forstmann Little & Co.'s
acquisition of Ziff-Davis Publishing Co.; Hearst Corporation's acquisition of
the Houston Post; McClatchy Newspapers, Inc.'s acquisition of News & Observer
Publishing Co.; the acquisition of Madison Square Garden Corporation by a
joint venture of ITT Corp. and Cablevision Systems Corp.; Tele-Communications,
Inc.'s acquisition of Prime Ticket; the acquisition of Lifetime Television by
a joint venture of Capital Cities/ABC, Inc. and Hearst Corporation; the
acquisition of American Movie Classics by Rainbow Programming Holdings, Inc.;
and approximately 80 acquisitions of television broadcasting stations and
radio broadcasting stations. The analysis showed (a) the following ranges of
enterprise value to latest 12 months ("LTM") revenues multiples: (i) for
diversified media companies: 1.48x to 3.64x with a harmonic mean of 2.16x; and
(ii) for publishing companies: 1.43x to 3.49x with a harmonic mean of 2.18x;
and (b) the following ranges of enterprise value to LTM operating cash flow
multiples: (i) for diversified media companies: 8.9x to 18.3x with a harmonic
mean of 12.2x; (ii) for publishing companies: 8.9x to 15.1x with a harmonic
mean of 11.2x; (iii) for television broadcasting companies: 7.4x to 15.0x with
a harmonic mean of 9.6x; (iv) for radio broadcasting companies: 8.0x to 10.5x
with a harmonic mean of 9.0x; and (v) for cable programming companies: 13.0x
to 42.7x with a harmonic mean of 19.7x.
Comparable Companies Analysis. Bear Stearns performed an analysis of the
enterprise value to LTM Broadcast Cash Flow (defined as revenues less
operating expenses before corporate overhead plus program amortization expense
less cash payments for broadcasting) multiples for eight radio broadcasting
companies, consisting of Clear Channel Communications, Inc., Evergreen Media
Corp., EZ Communications, Inc. Heritage Media Corporation, Infinity
Broadcasting Corp., Jacor Communications, Inc., Saga Communications, Inc. and
SFX Broadcasting, Inc. (the "Radio Broadcast Companies"), and eight television
broadcasting companies, consisting of CBS Inc., Clear Channel Communications,
Inc., Granite Broadcasting Corp., LIN Broadcasting Corp., Outlet
Communications, Inc., Renaissance Communications Corp., United Television,
Inc. and Young Broadcasting Inc. (the "Television Broadcast Companies"), and
the enterprise value to LTM EBITDA (defined as earnings before interest,
taxes, depreciation and amortization) multiples and stock price to earnings
per share multiples relative to seven diversified media companies, consisting
of The News Corporation Limited, Polygram NV, Grupo Televisa, S.A. de C.V.,
Time Warner Entertainment L.P., Time Warner Inc., Turner Broadcasting
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System, Inc. and Viacom Inc. (the "Diversified Media Companies"), the
Television Broadcast Companies, the Radio Broadcasting Companies, nine
diversified newspaper companies, consisting of Dow Jones & Co., Inc., Gannnett
Co., Inc., Knight-Ridder, Inc., New York Times Co., Pulitzer Publishing Co.,
E.W. Scripps Co., Times Mirror Co., Tribune Co. and Washington Post Co. (the
"Diversified Newspaper Companies"), and four magazine publishing companies,
consisting of American Media Operations, Meredith Corp., Playboy Enterprises,
Inc. and Reader's Digest Association, Inc. (the "Magazine Companies"). This
analysis indicated that (i) the enterprise value of the Television Broadcast
Companies and the Radio Broadcast Companies as a multiple of LTM Broadcast
Cash Flow ranged from 8.4x to 16.7x with a harmonic mean of 10.9x, and 9.6x to
16.9x with a harmonic mean of 11.5x, respectively; (ii) the enterprise value
as a multiple of LTM EBITDA ranged from, for the Diversified Media Companies,
10.7x to 21.0x with a harmonic mean of 13.8x, for the Television Broadcast
Companies, 7.3x to 17.7x with a harmonic mean of 11.5x, for the Radio
Broadcast Companies, 9.9x to 17.6x with a harmonic mean of 12.8x, for the
Diversified Newspaper Companies, 6.4x to 9.2x with a harmonic mean of 7.5x and
for the Magazine Companies, 7.2x to 11.1x with a harmonic mean of 8.9x; and
(iii) the public trading market price as a multiple of current fiscal year
earnings per share and next fiscal year earnings per share ranged from, for
the Diversified Media Companies, 16.9x to 64.9x with a harmonic mean of 25.8x,
and 14.4x to 36.4x with a harmonic mean of 21.3x, respectively, for the
Television Broadcast Companies, 11.2x to 39.6x with a harmonic mean of 21.2x,
and 7.9x to 29.1x with a harmonic mean of 17.6x, respectively, for the Radio
Broadcast Companies, 18.3x to 55.7x with a harmonic mean of 35.0x, and 18.1x
to 180.3x with a harmonic mean of 30.3x, respectively, for the Diversified
Newspaper Companies, 15.6x to 37.2x with a harmonic mean of 18.6x, and 14.7x
to 24.8x with a harmonic mean of 16.6x, respectively, and for the Magazine
Companies, 17.2x to 22.9x with a harmonic mean of 19.4x, and 10.6x to 55.8x
with a harmonic mean of 18.2x, respectively.
Pro Forma Merger Analysis. Bear Stearns analyzed the pro forma impact of the
consummation of the Acquisition on the earnings per share of Disney and
compared such pro forma results with the forecasted earnings per share of
Disney on a stand-alone basis. Assuming solely for purposes of such pro forma
analysis, (w) that the closing of the Acquisition would occur on September 30,
1995 (and the inclusion of Capital Cities in Disney's results of operations
for the entire 1996 fiscal year), (x) a value per share of New Disney Common
Stock issued in the Acquisition of $57 3/8 (the July 28, 1995 closing price of
Disney Common Stock), (y) that the consideration payable pursuant to the
Acquisition in respect of each share of Capital Cities Common Stock will
consist of one share of New Disney Common Stock and $65.00 in cash, and (z)
the achievement of certain synergies as a result of the Acquisition, derived
from information furnished to Bear Stearns, Bear Stearns estimated that
holders of Disney Common Stock would incur dilution of forecasted earnings per
share of $0.49 (15.6%) in fiscal year 1996, $0.49 (12.6%) in fiscal year 1997,
$0.45 (10.1%) in fiscal year 1998, $0.45 (8.2%) in fiscal year 1999 and $0.36
(5.9%) in fiscal year 2000. Bear Stearns noted that the dilution of forecasted
earnings per share was primarily attributable to amortization of goodwill
resulting from the Acquisition.
Bear Stearns also performed a pro forma merger analysis assuming that the
closing of the Acquisition would occur on March 31, 1996. The results of such
pro forma merger analysis were substantially similar to the analysis described
in the preceding paragraph, except that such analysis reflects the inclusion
of Capital Cities in Disney's results of operations for only six months of
Disney's 1996 fiscal year and, accordingly, holders of Disney Common Stock
would incur dilution of forecasted earnings per share of $0.26 (8.3%) in
fiscal year 1996 (compared with $0.49 assuming a closing on September 30,
1995).
Bear Stearns' pro forma merger analysis also indicated that, assuming that
the closing of the Acquisition would occur on September 30, 1995, consolidated
net debt (i.e., debt minus cash) of New Disney as of the closing would
represent 37.8% of total capitalization of New Disney (36.8% assuming that the
closing would occur on March 31, 1996) and that, based upon such forecasted
pro forma capitalization, New Disney would have additional debt capacity.
Hypothetical Break-up Analysis. Bear Stearns performed an analysis of the
hypothetical, pre-tax break-up value per share of Capital Cities Common Stock
by valuing each of Capital Cities' business segments at multiples it deemed
appropriate, using Capital Cities' 1995 estimated Broadcast Cash Flow for each
business segment. This resulted in a pre-tax value per share ranging from
$113.49 to $135.30. Bear Stearns noted that this valuation was before taking
into account the impact of taxes on any asset sales.
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The foregoing is a summary of the financial analyses used by Bear Stearns in
connection with rendering its opinion. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analyses as a whole, could create an
incomplete view of the processes underlying Bear Stearns' opinion. In arriving
at its opinion, Bear Stearns considered the results of all such analyses. The
analyses were prepared solely for the purposes of Bear Stearns providing its
opinion as to the fairness of the Acquisition, from a financial point of view,
to the stockholders of Disney and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. No company used in the comparable company analyses summarized above
is identical to Capital Cities or Disney and no transaction used in the
comparable transaction analysis summarized above is identical to the
Acquisition. Any analysis of the fairness of the Acquisition, from a financial
point of view, to the stockholders of Disney involves complex considerations
and judgments concerning differences in the potential financial and operating
characteristics of the comparable companies and transactions and other factors
in relation to the trading and acquisition values of the comparable companies.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than those suggested by such analyses. As described above, Bear Stearns'
opinion and the related presentation to the Disney Board on July 30, 1995 was
one of many factors taken into consideration by the Disney Board in making its
determination to approve the Reorganization Agreement. The foregoing summary
does not purport to be a complete description of the analyses performed by
Bear Stearns.
In the ordinary course of its business, Bear Stearns may actively trade the
securities of Disney and Capital Cities for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to a letter agreement, dated July 30, 1995, Disney agreed to pay
Bear Stearns a fee of $2,000,000 for rendering its financial advisory
services, including its opinion. Disney has also agreed to reimburse Bear
Stearns for its out-of-pocket expenses, including the reasonable fees and
disbursements of counsel, and to indemnify Bear Stearns and certain related
persons against certain liabilities in connection with the engagement of Bear
Stearns, including certain liabilities under the Federal securities laws.
Disney also retained James D. Wolfensohn Incorporated to act as an advisor.
James D. Wolfensohn Incorporated was not requested to, and did not, provide a
fairness opinion to the Disney Board.
Opinion of Capital Cities' Investment Banker
At the meeting of the Capital Cities Board on July 30, 1995, Allen & Company
delivered its oral opinion (subsequently confirmed in writing) to the effect
that, as of such date, the consideration to be received by the holders of
Capital Cities Common Stock in connection with the Acquisition was fair to
such holders from a financial point of view. No limitations were imposed by
the Capital Cities Board upon Allen & Company with respect to the
investigations made or the procedures followed by Allen & Company in rendering
its opinion. Allen & Company was not requested by the Capital Cities Board to
make any recommendation as to the form or amount of consideration to be paid
by Disney pursuant to the Reorganization Agreement, which issues were resolved
in arm's-length negotiations between Disney and Capital Cities.
The full text of the written opinion of Allen & Company, dated July 31,
1995, is set forth as Appendix D to this Joint Proxy Statement/Prospectus and
describes the assumptions made, matters considered and limits on the review
undertaken. Capital Cities shareholders are urged to read the opinion in its
entirety. Allen & Company's opinion is directed only to the fairness, from a
financial point of view, of the consideration which the holders of Capital
Cities Common Stock would receive in the Acquisition and does not constitute a
recommendation of the Acquisition over other courses of action that may be
available to Capital Cities or constitute a recommendation to any holder of
Capital Cities Common Stock concerning how such holder should vote with
respect to the Capital Cities Proposal. The summary of the opinion of Allen &
Company set forth in this Joint Proxy
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Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion. However, such summary sets forth all material aspects of
such opinion.
Allen & Company is a nationally recognized investment banking firm that is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Capital Cities retained Allen & Company based on Allen & Company's expertise
in the valuation of media and entertainment companies as well as its
familiarity with Capital Cities and Disney.
Pursuant to an engagement letter dated July 30, 1995, Capital Cities agreed
to pay Allen & Company for its services a fee to be mutually agreed upon.
Subsequent to such date, the parties agreed to a fee of $2,000,000. Capital
Cities also agreed to indemnify Allen & Company and certain related persons
against certain liabilities, including liabilities under the Federal
securities laws, relating to or arising out of its engagement.
In arriving at its opinion, Allen & Company (i) reviewed the terms and
conditions of the Reorganization Agreement; (ii) analyzed publicly available
historical business and financial information relating to Capital Cities, as
presented in documents filed with the Commission, including Capital Cities'
Annual Report to Shareholders and Annual Report on Form 10-K for its fiscal
year ended December 31, 1994 and Capital Cities' Quarterly Report on Form 10-Q
for its quarterly period ended April 2, 1995; (iii) analyzed publicly
available historical business and financial information relating to Disney as
presented in documents filed with the Commission, including Disney's Annual
Report to Stockholders and Annual Report on Form 10-K for its fiscal year
ended September 30, 1994 and Disney's Quarterly Report on Form 10-Q for its
quarter ended March 31, 1995; (iv) reviewed drafts of Capital Cities' and
Disney's Quarterly Reports on Form 10-Q for their respective fiscal quarters
ended July 2, 1995 and June 30, 1995; (v) reviewed certain financial forecasts
and other data provided to it by Capital Cities and Disney relating to their
respective businesses for their fiscal years ending December 31, 1995 and
September 30, 1995, respectively; (vi) conducted discussions with certain
members of the senior management of Capital Cities and Disney with respect to
the financial condition, business, operations, strategic objectives and
prospects of Capital Cities and Disney, respectively; (vii) reviewed and
analyzed public information, including certain stock market data and financial
information relating to selected public companies that it deemed generally
comparable to Capital Cities and Disney; (viii) reviewed the trading history
of Capital Cities Common Stock and Disney Common Stock, including each
company's respective performance in comparison to market indices and to
selected companies in comparable businesses; (ix) reviewed public financial
and transaction information relating to merger and acquisition transactions it
deemed to be comparable to the Acquisition; and (x) conducted such other
financial analyses and investigations as it deemed necessary or appropriate
for the purposes of its opinion.
In connection with its review, Allen & Company assumed and relied on the
accuracy and completeness of the information it reviewed for the purpose of
its opinion and did not assume any responsibility for independent verification
of such information or for any independent evaluation or appraisal of the
assets of Capital Cities or Disney. With respect to Capital Cities' and
Disney's financial forecasts, Allen & Company assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of Capital Cities or Disney, as the case may
be, and Allen & Company expressed no opinion with respect to such forecasts or
the assumptions on which they were based. Allen & Company's opinion was
necessarily based upon business, market, economic and other conditions as they
existed on, and could be evaluated as of, the date of its opinion. Allen &
Company was not requested to, and did not, solicit third-party offers to
acquire all or any part of Capital Cities. Allen & Company's opinion does not
imply any conclusion as to the likely trading range of New Disney Common Stock
following the consummation of the Acquisition, which may vary depending on,
among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities.
Allen & Company's opinion does not constitute a recommendation with respect
to whether any shareholder of Capital Cities should elect to receive cash or
Disney Common Stock pursuant to the Reorganization
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Agreement. Allen & Company did not specifically analyze the impact on any
individual Capital Cities shareholder of exercising the election contemplated
by the Reorganization Agreement to receive either form of consideration
because it believed that Capital Cities shareholders would make such election
only after appropriate consultation with their respective tax planning
advisors with respect to a detailed analysis of specific tax consequences of
electing any blend of consideration made available by the Reorganization
Agreement.
The following is a summary of the presentation made by Allen & Company to
the Capital Cities Board in connection with the rendering of Allen & Company's
fairness opinion:
(i) Transaction Overview. Allen & Company presented an overview of the
proposed transaction, noting the strategic fit of combining a leading
content provider with a leading distribution company and the assets that
would be held by New Disney. Allen & Company reviewed the projected pro
forma financial statements for New Disney, based on the 1995 fiscal year
forecasts provided by Capital Cities and Disney, noting in particular the
1995 pro forma operating cash flow of $4.4 billion and net income per share
of $2.08 for New Disney. In addition, on the basis of a review of New
Disney's projected 1995 fiscal year pro forma revenue and operating income
by segment, Allen & Company noted that the filmed entertainment segment
would represent 31% of New Disney's revenues and 27% of New Disney's
operating income and that the broadcasting segment would represent 30% of
New Disney's revenues and 34% of New Disney's operating income. Allen &
Company also reviewed New Disney's 1995 fiscal year pro forma debt levels
and coverage ratios, noting particularly that on the basis of a pro forma
operating cash flow to interest expense ratio of 5.0x and net debt to net
book capitalization ratio of 41.3%, New Disney would have excess debt
capacity and that its leverage would not significantly restrict its
financial flexibility.
Allen & Company also analyzed the value of the consideration payable to
holders of Capital Cities Common Stock pursuant to the Acquisition,
reflecting the July 28, 1995 Disney Common Stock price of $57 3/8, as
multiples of New Disney's projected 1995 pro forma EBITDA (11.4x) and net
income (27.6x), and compared such multiples to multiples of operating cash
flow and net income derived from recent trading prices of other (i)
diversified entertainment companies (which ranged from 8.3x to 14.4x for
operating cash flow and from 16.8x to 46.7x for net income); (ii)
television networks (which ranged from 10.3x to 12.0x for operating cash
flow and 16.8x to 24.5x for net income); and (iii) television broadcasters
(which ranged from 8.9x to 21.5x for operating cash flow and from 11.2x to
39.6x for net income). Allen & Company observed that, at the Disney Common
Stock closing price of $57 3/8 on July 28, 1995, the pro forma multiples of
operating cash flow and net income for New Disney would fall well within
the range of multiples of comparable companies.
(ii) Overview of Disney. Allen & Company presented an overview of Disney
including a description of the three segments in which Disney operates:
filmed entertainment, theme parks and resorts and consumer products. In its
review of the filmed entertainment segment, Allen & Company noted Disney's
leadership position in animated film production and distribution as well as
the difficult environment in which its live action film operation competes.
Allen & Company described the challenging conditions currently prevailing
in the television production business but noted Disney's successful record
in producing network shows (with nine shows scheduled for network
television this year) as well as programming for the off-network
syndication market. Allen & Company noted that Disney's theme park
operations have performed well, that the potential for continued growth
exists (primarily through expansion of Florida's Walt Disney World ) and
that the Euro Disney restructuring appears to have been successful.
Finally, Allen & Company described Disney's consumer product segment,
noting its high growth and profit potential.
Allen & Company reviewed Disney's historical and 1995 projected operating
results, noting particularly that Disney's net income per share has
increased at a compound annual growth rate of over 20% over the last ten
years. Allen & Company also reviewed Disney's forecast 1995 operating
results by segment, its historical operating results by segment and its
historical balance sheet at June 30, 1995.
Allen & Company also reviewed stock price and trading volume data for
Disney Common Stock, noting that its general trading patterns were in line
with the S&P Entertainment Index over the period from
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January 1985 through June 1995. Allen & Company also compared selected
multiples derived from the recent price of Disney Common Stock to multiples
derived from recent trading prices of selected comparable diversified
entertainment companies (The News Corporation Limited, Time Warner Inc.,
Turner Broadcasting System, Inc. and Viacom Inc.), recreational service
companies (Cedar Fair, L.P., Discovery Zone, Inc., Euro Disney S.C.A. and
Mountasia Entertainment International, Inc.), specialty retailers (Barnes &
Noble, Inc., The Gap, Inc., The Home Depot, Inc., Toys 'R' Us, Inc., and
Wal-Mart Stores, Inc.) and cable programmers (BET Holdings, Inc., Gaylord
Entertainment Company, Home Shopping Network, Inc., International Family
Entertainment, Inc. and Turner Broadcasting System, Inc.). The multiples
compared included total market capitalization (long term debt plus the
recent market value of all equity securities) to LTM operating cash flow
(which was 12.1x for Disney compared to a mean of 11.4x for the diversified
entertainment companies, 11.6x for the recreational services companies,
11.5x for the specialty retailers and 16.3x for the cable programmers) and
price to 1995 estimated earnings (which was 22.1x for Disney compared to a
mean of 31.8x for the diversified entertainment companies, 13.7x for the
recreational services companies, 22.0x for the specialty retailers and
30.7x for the cable programmers). These analyses indicated that the closing
price of Disney Common Stock at July 28, 1995 ($57 3/8) represented
multiples of sales, operating cash flow, earnings before interest and taxes
and earnings per share that were within the ranges found for comparable
companies and that the Disney price earnings multiple was within the
historical range of multiples for Disney Common Stock over the past ten
years.
(iii) Overview of Capital Cities. Allen & Company presented an overview
of Capital Cities, noting particularly the opportunities represented by
Capital Cities' ratings leadership and strong programming line-up and the
recent strength of the advertising market, as well as the challenges
represented by increases in programming costs, the increased competition
for viewers and programming generated by the launch of the WB Network and
the United Paramount Network and the changing profile of the media and
entertainment industries.
Allen & Company reviewed stock price and trading volume data for Capital
Cities Common Stock, noting that its general trading patterns were in line
with the S&P 500 and the S&P Broadcasting indices from January 1985 through
June 1995. Allen & Company also compared selected multiples derived from
the recent trading price of Capital Cities Common Stock to multiples
derived from the recent trading prices of selected publicly traded
television networks (CBS Inc. and The News Corporation Limited), selected
publicly traded television broadcasters (Clear Channel Communications,
Inc., LIN Broadcasting Corporation, Granite Broadcasting Corporation, Price
Communications Corporation, Renaissance Communications Corp., Silver King
Communications, Inc., Sinclair Broadcasting Group, Inc. and Young
Broadcasting Inc.), selected publicly traded radio broadcasters (Emmis
Broadcasting Corporation, Evergreen Media Corporation, EZ Communications,
Inc., Infinity Broadcasting Corporation, Jacor Communications, Inc., SFX
Broadcasting, Inc. and Westwood One, Inc.), selected publicly traded cable
programmers (BET Holdings, Inc., Gaylord Entertainment Company,
International Family Entertainment, Inc., Home Shopping Network, Inc. and
Turner Broadcasting System, Inc.) and fourteen selected publicly-traded
newspaper publishers. The multiples compared included total market
capitalization to LTM operating cash flow (which was 9.6x for Capital
Cities compared to a mean of 11.1x for the television networks, 14.3x for
the television broadcasters, 14.0x for the radio broadcasters, 16.3x for
the cable programmers and 7.9x for the newspaper publishers) and price to
1995 estimated earnings (which was 18.5x for Capital Cities compared to a
mean of 20.6x for the television networks, 28.6x for the television
broadcasters, 45.4x for the radio broadcasters, 30.7x for the cable
programmers and 18.4x for the newspaper publishers). These analyses
indicated that the closing price of Capital Cities Common Stock at July 28,
1995 ($96 1/8) represented multiples of sales, operating cash flow,
earnings before interest and taxes and earnings per share that were within
the ranges found for comparable companies and that the Capital Cities price
earnings multiple was within the historical range of multiples for Capital
Cities Common Stock over the past ten years.
(iv) Transaction Analysis. Allen & Company noted that the per share value
of the consideration payable to the holders of Capital Cities Common Stock
pursuant to the Acquisition (based on the closing price of Disney Common
Stock on July 28, 1995) was $122 3/8, representing a premium of
approximately 27% over the closing price of Capital Cities Common Stock on
July 28, 1995. Allen & Company compared
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this premium to premiums paid in selected other large media and
entertainment transactions, noting that premiums in the cash and stock
transactions considered ranged from 8.1% to 94.5%, as compared to trading
prices on the day prior to the announcement.
Allen & Company also analyzed the value to be received by Capital Cities
shareholders in the Acquisition as multiples of New Disney's projected 1995
pro forma sales (3.4x), EBITDA (11.4x) and net income (27.6x), and compared
such multiples to multiples of EBITDA and, in certain cases, sales and net
income, paid in (i) selected acquisitions of television network and station
groups consummated during the last ten years (which ranged from 0.8x to
6.2x for sales, from 8.9x to 13.8x for EBITDA and from 18.5x to 33.3x for
net income); (ii) selected acquisitions of television broadcasting groups
consummated within the last two years (which ranged from 7.4x to 15.0x for
EBITDA); (iii) selected acquisitions of radio broadcasting groups
consummated within the last two years (which ranged from 8.5x to 13.0x for
EBITDA); (iv) selected acquisitions of interests in cable programmers
consummated within the last ten years (which ranged from 5.7x to 30.0x for
EBITDA); and (v) selected acquisitions of newspaper publishers consummated
within the last five years (which ranged from 0.6x to 4.7x for sales and
from 5.1x to 13.9x for EBITDA).
No company used in the comparable company analyses summarized above is
identical to Capital Cities or Disney and no transaction used in the
comparable transaction analysis summarized above is identical to the
Acquisition. Accordingly, any such analysis of the value of the
consideration to be received by the holders of Capital Cities Common Stock
pursuant to the Acquisition involves complex considerations and judgments
concerning differences in the potential financial and operating
characteristics of the comparable companies and transactions and other
factors in relation to the trading and acquisition values of the comparable
companies.
The preparation of a fairness opinion is not susceptible to partial
analysis or summary description. Allen & Company believes that its analyses
and the summary set forth above must be considered as a whole and that
selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete
view of the processes underlying the analysis set forth in its opinion.
Allen & Company has not indicated that any of the analyses which it
performed had a greater significance than any other.
In performing its analyses, Allen & Company made numerous assumptions
with respect to industry performance, general business, financial, market
and economic conditions and other matters, many of which are beyond the
control of Capital Cities or Disney. The analyses which Allen & Company
performed are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Allen &
Company's analysis of the fairness, from a financial point of view, of the
consideration which the holders of Capital Cities Common Stock would
receive pursuant to the Acquisition. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be
sold or the prices at which any securities may trade at the present time or
at any time in the future.
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
In considering the respective recommendations of the Disney Board and the
Capital Cities Board with respect to the Reorganization Agreement and the
transactions contemplated thereby, stockholders of Disney and shareholders of
Capital Cities should be aware that certain members of the management of
Disney and Capital Cities and the Disney Board and the Capital Cities Board
have certain interests in the Acquisition that are different from, or in
addition to, the interests of stockholders of Disney and shareholders of
Capital Cities generally.
Disney
Directors and Officers of New Disney. All of the current directors of
Disney, as well as Michael Ovitz, President of Disney, will become directors
of New Disney. See "MANAGEMENT OF NEW DISNEY--
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Directors." In addition, certain executive officers of Disney, including
Messrs. Eisner, Ovitz, Disney, Litvack, Bollenbach, Cooke, Murphy and Garand,
will become executive officers of New Disney. See "MANAGEMENT OF NEW DISNEY--
Officers."
Employee/Non-Employee Director Stock Option Programs. At the Effective Time,
each outstanding option or right to purchase shares of Disney Common Stock (a
"Disney Option"), if agreed to by the holder of any such Disney Option, shall
be assumed by New Disney in such manner that it is converted into an option to
purchase the same number of shares of New Disney Common Stock at the same
exercise price. Each Disney Option assumed by New Disney will have the same
terms and conditions as then are applicable to such Disney Option. As of
September 1, 1995, directors and executive officers of Disney held outstanding
Disney Options to purchase 11,266,000 shares of Disney Common Stock at
exercise prices ranging from $15.81 to $57.44 per share. In addition, on
October 16, 1995, Mr. Ovitz was granted stock options to purchase 5,000,000
shares of Disney Common Stock at the exercise price of $57.00 under the
Amended 1990 Plan. See "DISNEY OPTION PLANS--Description of the 1995 Plan and
Amended 1990 Plan."
Capital Cities
Directors and Officers of New Disney. Following the Acquisition, Thomas S.
Murphy, Chairman and Chief Executive Officer of Capital Cities, is expected to
relinquish that position and become a member of the New Disney Board of
Directors. See "MANAGEMENT OF NEW DISNEY--Directors." Robert A. Iger,
President and Chief Operating Officer of Capital Cities, has entered into an
employment contract with Disney and will continue in that capacity. See "--
Employment Agreement."
Employee Stock Option Programs. The Reorganization Agreement provides that,
at the Effective Time, each outstanding option or right to purchase shares of
Capital Cities Common Stock (a "Capital Cities Option") will, if agreed by the
holder thereof, be assumed by New Disney in such manner that it is converted
into an option to purchase shares of New Disney Common Stock, as provided
below. Following the Effective Time, each such Capital Cities Option will be
exercisable upon the same terms and conditions as are in effect for such
Capital Cities Option at the Effective Time, except that (i) each such Capital
Cities Option will be exercisable for that number of shares of New Disney
Common Stock equal to the product of (x) the number of shares of Capital
Cities Common Stock for which such Capital Cities Option was exercisable and
(y) the Stock Consideration (before any adjustment relating to proration) and
(ii) the exercise price of such Capital Cities Option will be equal to the
exercise price of such option as of the date of the Reorganization Agreement
divided by the Stock Consideration (before any adjustment relating to
proration). The Reorganization Agreement provides that Capital Cities and the
holder of any Capital Cities Option may amend such Capital Cities Option so
that the holder of such Capital Cities Option (if it is outstanding at the
Effective Time) may elect to receive, in settlement thereof, for each share of
Capital Cities Common Stock subject to a Capital Cities Option an amount
(subject to any applicable withholding tax) in cash equal to the Cash
Consideration (before any adjustment relating to proration) minus the per
share exercise or purchase price of such Capital Cities Option as of the date
of the Reorganization Agreement (the "Cash Settlement").
Pursuant to the terms of Capital Cities' 1991 Stock Option Plan (the "1991
Plan"), the approval and adoption of the Reorganization Agreement by the
shareholders of Capital Cities at the Capital Cities Meeting will constitute
an "Accelerating Event" resulting in all Capital Cities Options under the 1991
Plan becoming exercisable in full. As of October 31, 1995, directors and
executive officers of Capital Cities held outstanding Capital Cities Options
to purchase 416,000 shares of Capital Cities Common Stock under the 1991 Plan
at exercise prices ranging from $49.20 to $97.13 per share. In addition, as of
October 31, 1995, directors and executive officers of Capital Cities held
outstanding Capital Cities Options to purchase 9,000 shares of Capital Cities
Common Stock under the Employee Stock Option Plan of Capital Cities/ABC, Inc.
(the "1981 Plan") at an exercise price of $38.19 per share. All the Capital
Cities Options outstanding under the 1981 Plan were fully exercisable prior to
the execution of the Reorganization Agreement. The following table sets forth
information with respect to the number of vested Capital Cities Options, and
the acceleration of exercisability of Capital Cities Options, held by the
persons set forth below.
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<TABLE>
<CAPTION>
NUMBER OF UNVESTED WEIGHTED
CAPITAL CITIES OPTIONS AVERAGE EXERCISE NET PROCEEDS FROM
AT OCTOBER 31, 1995 PRICE PER SHARE CAPITAL CITIES OPTIONS
NUMBER OF VESTED TO BECOME OF VESTED AND IF HOLDER ELECTS
CAPITAL CITIES OPTIONS EXERCISABLE UPON UNVESTED CAPITAL TO RECEIVE
NAME & TITLE AT OCTOBER 31, 1995 ACCELERATING EVENT CITIES OPTIONS CASH SETTLEMENT (1)
------------ ---------------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Thomas S. Murphy........ -- 100,000 $83.00 $3,937,500
Chairman of the Board
and Chief Executive
Officer
Daniel B. Burke......... 50,000 50,000 $49.20 $7,317,500
Former President, Chief
Executive Officer and
Chief Operating Officer
Robert A. Iger.......... 20,000 60,000 $71.93 $4,035,600
President and Chief
Operating Officer
Ronald J. Doerfler...... 6,250 18,750 $63.48 $1,472,375
Senior Vice President
and Chief Financial
Officer
Herbert A. Granath...... 4,000 1,000 $44.51 $ 389,325
Senior Vice President;
President, Cable and
International Broadcast
Group
Michael P. Mallardi..... 5,000 15,000 $63.48 $1,177,900
Senior Vice President;
President; Broadcast
Group
Phillip J. Meek......... 5,000 15,000 $63.48 $1,177,900
Senior Vice President;
President, Publishing
Group
Stephen A. Weiswasser... 5,000 15,000 $63.48 $1,177,900
Senior Vice President;
President, Multimedia
Group
David Westin............ 11,250 33,750 $70.99 $2,312,325
Senior Vice President;
President, ABC
Television Network
Group
Allan J. Edelson........ 4,000 1,000 $44.51 $ 389,325
Vice President and
Controller
David J. Vondrak........ 4,000 1,000 $44.51 $ 389,325
Vice President and
Treasurer
</TABLE>
- --------
(1) Based upon an assumed value of the Cash Consideration of $122 3/8. As
described above, Capital Cities Options may also be assumed by New Disney
and converted into options to purchase New Disney Common Stock.
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Incentive Compensation Plan. Under the Incentive Compensation Plan of Capital
Cities/ABC, Inc. (the "Incentive Compensation Plan") selected key employees of
Capital Cities have been granted a number of "shadow stock" units (the "Units")
that relate to appreciation in the price of the shares of Capital Cities Common
Stock. Each Unit bears a value equal to the excess of the market price of one
share of Capital Cities Common Stock (as determined by a formula set forth in
the Incentive Compensation Plan (the "Market Price")) over a specified dollar
floor on the "determination date," which is the earlier of the date of the
participant's termination of employment or the fifth anniversary of the date of
grant of the Unit. Each participant's Units are credited with 6% interest each
December 31 based on the fair market value (as defined in the Incentive
Compensation Plan) of Capital Cities Common Stock in excess of the specified
dollar floor at that date. A participant gains vested rights in the Units on a
graduated basis over the five-year period following the grant of the Units. The
approval and adoption of the Reorganization Agreement by the shareholders of
Capital Cities at the Capital Cities Meeting will constitute an "Accelerating
Event" under the Incentive Compensation Plan resulting in the vesting of all
accrued benefits (including interest accruals) and the requirement that a full
distribution of benefits be made. Units that have previously reached their
determination date at the time of the Accelerating Event are valued based on
the excess of the Market Price on the determination date over the applicable
dollar floor. Units that will reach their determination date as a result of the
Accelerating Event are valued based on the higher of (x) the highest reported
sales price of Capital Cities Common Stock during the 60 day period prior to
the Accelerating Event and (y) the highest price paid in the transaction
resulting in the Accelerating Event (the "Accelerating Event Fair Market
Value"). All vested benefits (which includes all benefits which will become
fully vested as a result of such Accelerating Event, all benefits which are
already fully vested and all benefits the payment of which has been deferred in
whole or in part) will be distributed immediately prior to the Effective Time.
As of October 31, 1995, an aggregate of 12,903,900 Units have been granted
under the Incentive Compensation Plan, including grants of 2,348,000 Units to
directors and executive officers of Capital Cities. Assuming that the
Accelerating Event Fair Market Value, calculated as of the date of the Capital
Cities Meeting, is $122 3/8, the aggregate value of the Units held by Messrs.
Iger, Doerfler, Granath, Mallardi, Meek, Weiswasser, Westin, Braverman, Edelson
and Vondrak would be $12,301,905, $9,709,650, $7,928,812, $10,666,618,
$8,103,293, $7,099,146, $5,163,501, $1,408,732, $4,356,131 and $2,242,813,
respectively.
Benefit Equalization Plan. The approval and adoption of the Reorganization
Agreement by the holders of Capital Cities Common Stock at the Capital Cities
Meeting will constitute an "Accelerating Event" under the Benefit Equalization
Plan of Capital Cities/ABC, Inc. (the "BEP") (which provides supplemental
benefits for participants under the Capital Cities/ABC, Inc. Retirement Plan,
the Capital Cities/ABC, Inc. Savings & Investment Plan and the Capital
Cities/ABC, Inc. Supplemental Pension Plan to the extent necessary to make up
for benefits lost by reason of the limitations imposed by Sections 415 and
401(a)(17) of the Code) resulting in the vesting of all benefits and the
requirement to make a lump-sum payment of all accrued benefits. All vested
benefits will be payable immediately prior to the Effective Time. Benefits will
continue to accrue after such Accelerating Event and will vest and be paid in
accordance with the terms of the BEP as though such Accelerating Event had
never occurred. The accrued benefits that would be payable as of December 31,
1995, under this plan to Messrs. Murphy, Burke, Iger, Granath, Mallardi, Meek,
Westin, Braverman and Vondrak would be $1,373,900, $982,400, $951,900,
$2,563,800, $1,944,800, $191,000, $135,100, $50,400 and $110,200, respectively.
Supplemental Profit Sharing Plan. The approval and adoption of the
Reorganization Agreement by the holders of Capital Cities Common Stock at the
Capital Cities Meeting will constitute an "Accelerating Event" under the
Supplemental Profit Sharing Plan of Capital Cities/ABC, Inc. (which provides
supplemental benefits for participants under the Employee Profit Sharing Plan
of Capital Cities/ABC, Inc. to the extent necessary to make up for benefits
lost by reason of the limitations imposed by Sections 415 and 401(a)(17) of the
Code). All benefits accrued under the Supplemental Profit Sharing Plan are
fully vested. The occurrence of an "Accelerating Event" will require a lump-sum
payment from this plan of all benefits accrued to the date of the Capital
Cities Meeting. All vested benefits will be payable immediately prior to the
Effective Time. Benefits will continue to accrue after such Accelerating Event
and will be paid in accordance with the terms of the Supplemental Profit
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<PAGE>
Sharing Plan as though such Accelerating Event had never occurred. The accrued
benefits that would be payable as of December 31, 1995, under this plan to
Messrs. Murphy, Burke, Doerfler, Meek, Weiswasser and Edelson would be
$1,734,000, $1,646,700, $1,241,900, $943,700, $737,715 and $221,700,
respectively.
Retirement Plan for Nonemployee Directors. The Capital Cities/ABC, Inc.
Retirement Plan for Nonemployee Directors provides for the payment of an
annual retirement benefit to nonemployee directors who retire with at least
five years of service on the Capital Cities Board. The amount of the yearly
retirement benefit is equal to the cash amount of the annual retainer payable
to Capital Cities directors ($30,000). Payments are made for a period of years
equal to the number of years of Capital Cities Board service (including
service on the Board of American Broadcasting Companies, Inc.). Such benefits
would become payable upon the consummation of the Acquisition. Nonemployee
directors who retire with fewer than five years of service may receive a
retirement benefit at the Capital Cities Board's discretion. In connection
with the Acquisition, the Capital Cities Board has determined (i) to award an
annual retirement benefit to each nonemployee director with fewer than five
years' service in an amount equal to the annual retainer payable for a period
of years equal to the number of years of Capital Cities Board service accrued
by such director as of the Effective Time and (ii) to pay to each director
(including directors with fewer than five years' service) all the retirement
benefits to which he or she would be entitled under the plan, at the election
of each director, either (a) in a single lump-sum payment upon the closing of
the Acquisition, in which event the benefits payable would be discounted to
their net present value or (b) over the period of time such benefits would
otherwise be payable in accordance with the plan.
Employee Benefit Plans. The Reorganization Agreement provides that Disney
will cause to remain in effect for the benefit of Capital Cities' employees
for a period of at least two years after the Effective Time all employee
benefit plans of Capital Cities and its subsidiaries (including Capital
Cities' existing severance policies and programs but excluding stock and
incentive compensation plans and those plans that are the subject of
collective bargaining) in effect on the date of the Reorganization Agreement
and, with respect to employees who are subject to collective bargaining, all
benefits that are required to be provided in accordance with the applicable
collective bargaining agreement; provided, however, that no severance payments
will be required to be made to any employee of Capital Cities or any
subsidiary who is not terminated by Capital Cities or any subsidiary. The
Reorganization Agreement provides that no amendment may be made to any such
plan that materially adversely affects the rights or interests of the plan
participants or beneficiaries except to the extent required by applicable law
or to maintain tax qualification. In the event that any employee of Capital
Cities or its subsidiaries is at any time after the Effective Time transferred
to Disney or any affiliate of Disney or becomes a participant in an employee
benefit plan, program or arrangement maintained by or contributed by Disney or
its affiliates, Disney will cause such plan, program or arrangement to treat
the prior service of such employee with Capital Cities or its subsidiaries, to
the extent such prior service is recognized under the comparable plan, program
or arrangement of Capital Cities, as service rendered to Disney or its
affiliates, as the case may be; provided, however, that in administering such
plans, programs or arrangements of Disney or its affiliates, Disney may cause
a reduction of benefits under any such plans, programs or arrangements to the
extent necessary to avoid duplication of benefits with respect to the same
covered matter or years of service.
Indemnification. The Reorganization Agreement provides that, from and after
the Effective Time, New Disney will indemnify, defend and hold harmless, to
the fullest extent that Capital Cities would have been permitted under
applicable law, each person who is, at the date of the Reorganization
Agreement, or has been at any time prior to such date, an officer or director
of Capital Cities (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), against all losses, claims, damages, liabilities,
costs or expenses (including attorneys' fees), judgments, fines, penalties and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such occurring at
or prior to the Effective Time. The Reorganization Agreement also requires
that the provisions of Capital Cities' Certificate and Capital Cities Bylaws
(as defined below) providing for exculpation of director and officer liability
and for indemnification of the Indemnified Parties be maintained.
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<PAGE>
Directors' and Officers' Liability Insurance. The Reorganization Agreement
provides that, for a period of three years after the Effective Time,
directors' and officers' liability insurance will be maintained covering the
Indemnified Parties who are currently covered, in their capacities as
directors and officers, by Capital Cities' existing directors' and officers'
liability insurance policies on terms substantially no less advantageous to
the Indemnified Parties than such existing insurance to the extent such
coverage can be maintained or procured by the payment of an annual premium not
exceeding one and one-half times the current annual premium paid by Capital
Cities for its existing coverage (which current annual premium is
approximately $300,000).
Registration Rights Agreement. As a condition to Capital Cities' obligation
to effect the Mergers, New Disney is required to execute the Registration
Rights Agreement with Capital Cities Affiliates which provides that Capital
Cities Affiliates will have, subject to certain conditions, both "demand" and
"piggyback" registration rights to require New Disney to register all or any
portion of New Disney Common Stock then owned by them. See "THE REORGANIZATION
AGREEMENT--Registration Rights Agreement."
Employment Agreement.
Robert A. Iger will serve as President of Capital Cities after the Effective
Date pursuant to an employment agreement dated as of July 31, 1995, which
provides for his employment as President of Capital Cities for a period of
five years. Mr. Iger's base salary will be $1 million per year. In addition,
his agreement provides for a discretionary annual bonus with a target of $1
million per year. The annual bonus has been predetermined for the first year
of Mr. Iger's employment to be $2 million. Mr. Iger's employment agreement
also entitles him to a stock option grant pursuant to a stock option plan of
New Disney to purchase 700,000 shares of New Disney Common Stock. The exercise
price for the stock option will be $57.1875 or the market price of New Disney
Common Stock on the date of grant, whichever is greater. The stock option will
vest over a seven-year period. In the event that the market price of the New
Disney Common Stock on the Effective Date exceeds $57.1875, Mr. Iger shall
receive an additional bonus in an amount equal to the difference between the
market price and $57.1875 multiplied by 100,000 on each of his first seven
annual bonus payment dates. The employment agreement is terminable by either
party to the agreement in certain circumstances, including Mr. Iger's right to
terminate employment voluntarily after two and one-half years of service. Mr.
Iger is entitled to termination payments and acceleration of unvested options
as a result of termination under certain circumstances.
ACCOUNTING TREATMENT
The Capital Cities Merger will be accounted for under the purchase method of
accounting, in accordance with generally accepted accounting principles. Under
the purchase method of accounting, the purchase price of Capital Cities,
including direct costs of the Acquisition, will be allocated to the assets
acquired and liabilities assumed based upon their estimated relative fair
values, with the excess purchase consideration allocated to goodwill. The
conversion of Disney's Common Stock into New Disney Common Stock will be
treated as a reorganization with no change in the recorded amount of Disney's
assets and liabilities. The financial statements of Disney will become the
financial statements of New Disney. The results of New Disney's operations
will include the results of operations of Capital Cities commencing at the
Effective Time.
The Unaudited Pro Forma Combined Condensed Financial Statements appearing
elsewhere in this Joint Proxy Statement/Prospectus are based upon certain
assumptions and allocate the purchase price to assets and liabilities based
upon preliminary estimates of their respective fair values. The unaudited pro
forma adjustments and combined amounts are included for informational purposes
only. If the Acquisition is consummated, then New Disney's financial
statements will reflect effects of acquisition adjustments only from the
Effective Time. The actual allocation of the purchase price may differ
significantly from the allocation reflected in the Unaudited Pro Forma
Combined Condensed Financial Statements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences
applicable to holders of Disney Common Stock and Capital Cities Common Stock.
This summary is based upon the provisions of the Code, applicable Treasury
Regulations thereunder, judicial decisions, and current administrative
rulings.
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Dewey Ballantine, counsel for Disney, has delivered an opinion to the effect
that the description of the Federal income tax consequences to holders of
Disney Common Stock contained under the heading "--Treatment of Holders of
Disney Common Stock" (and the subheading thereof) below and under the heading
"--Reporting Requirements" below correctly sets forth the material Federal
income tax consequences for such holders. Cravath, Swaine & Moore, counsel for
Capital Cities, has delivered an opinion to the effect that the description of
the Federal income tax consequences to holders of Capital Cities Common Stock
contained under the heading "--Treatment of Holders of Capital Cities Common
Stock" (and the subheadings thereof) below and under the heading "--Reporting
Requirements" below correctly sets forth the material Federal income tax
consequences for such holders. Those opinions are based upon, among other
things, representation letters provided by Disney and Capital Cities to
counsel containing customary statements relating to planned dispositions of
shares of New Disney Common Stock by the holders of Disney Common Stock and
Capital Cities Common Stock, plans on the part of New Disney to undertake or
cause Disney to undertake transactions outside the ordinary course of
business, and certain other technical requirements under the Code.
Based upon such representation letters, which will be confirmed by Disney
and Capital Cities prior to the closing of the Disney Merger and the Capital
Cities Merger, (i) it is the opinion of Dewey Ballantine that the Disney
Merger will be treated for Federal income tax purposes as a reorganization
described in Section 368(a) of the Code and/or a transfer of property to New
Disney by the holders of Disney Common Stock governed by Section 351 of the
Code and (ii) it is the opinion of Cravath, Swaine & Moore that the Capital
Cities Merger will be treated as a transfer of property to New Disney by the
holders of Capital Cities Common Stock governed by Section 351(a) or Section
351(b) of the Code. It is a condition to the obligation of Disney and Capital
Cities to consummate the Disney Merger and the Capital Cities Merger,
respectively, that each shall have received confirmation, dated the closing
date, of the opinion of its respective counsel contained in this paragraph.
No rulings have been or will be requested from the Internal Revenue Service
(the "IRS") with respect to any of the matters discussed herein, and the
opinions of counsel described above are not binding on the IRS. There can be
no assurance that future legislation, regulations, administrative rulings or
court decisions will not adversely affect the accuracy of the statements
contained herein.
Treatment of Holders of Disney Common Stock
The following discussion does not address all aspects of Federal income
taxation that may be important to particular taxpayers in light of their
personal investment circumstances or to taxpayers subject to special treatment
under the Federal income tax laws (including life insurance companies, foreign
persons, tax-exempt entities, and holders who acquired their Disney Common
Stock pursuant to the exercise of employee stock options or otherwise as
compensation) and does not address any aspect of state, local or foreign
taxation. This summary also assumes that the Disney Common Stock will be held
as capital assets at the Effective Time.
Exchange of Disney Common Stock for New Disney Common Stock. A holder of
Disney Common Stock who, pursuant to the Disney Merger, exchanges Disney
Common Stock for New Disney Common Stock will not recognize gain or loss upon
such exchange. The tax basis of the New Disney Common Stock received by such
holder will be equal to the tax basis of the Disney Common Stock surrendered
and the holding period of the New Disney Common Stock will include the holding
period of the Disney Common Stock surrendered.
Treatment of Holders of Capital Cities Common Stock
The following discussion does not address all aspects of Federal income
taxation that may be important to particular taxpayers in light of their
personal investment circumstances or to taxpayers subject to special treatment
under the Federal income tax laws (including life insurance companies, foreign
persons, tax-exempt entities, and holders who acquired their Capital Cities
Common Stock pursuant to the exercise of employee stock options or otherwise
as compensation) and does not address any aspect of state, local or foreign
taxation. This summary also assumes that the Capital Cities Common Stock will
be held as capital assets at the Effective Time. The tax consequences of the
Capital Cities Merger to holders of Capital Cities Common Stock could be
different
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from those described below if persons who own 50% or more of the outstanding
Capital Cities Common Stock immediately before the Acquisition own 50% or more
of the outstanding New Disney Common Stock immediately after the Acquisition.
Based upon the terms of the Reorganization Agreement and the number of shares
of Disney Common Stock and Capital Cities Common Stock expected to be
outstanding immediately prior to the Effective Time, it would be necessary for
the holders of Capital Cities Common Stock to own more than 25% of the New
Disney Common Stock, in addition to the stock to be received in exchange for
Capital Cities Common Stock, for such overlapping ownership to occur. In that
event, cash received by a holder of Capital Cities Common Stock pursuant to
the Acquisition might be treated as a dividend rather than capital gain. The
IRS has indicated, however, that, in the case of a minority stockholder in a
publicly held corporation whose relative stock interest is minimal and who
exercises no control over the corporation's affairs, a minimal reduction in
the percentage of stock owned by such stockholder will avoid dividend
treatment. Accordingly, cash received by such a holder of Capital Cities
Common Stock whose percentage interest in New Disney Common Stock is less than
the holder's percentage interest in Capital Cities Common Stock prior to the
Acquisition should not be treated as constituting a dividend. For purposes of
determining such percentages, stock owned by certain persons related to the
holder or which the holder can acquire pursuant to the exercise of options
would be treated as owned by the holder. The discussion below is based upon
the understanding that no such overlapping ownership will occur.
Exchange of Capital Cities Common Stock Solely for New Disney Common
Stock. Except as discussed below under "--Cash in Lieu of Fractional Shares,"
and "--Transfer Taxes," a holder of Capital Cities Common Stock who receives
solely New Disney Common Stock in exchange for Capital Cities Common Stock
will not recognize gain or loss upon such exchange. The aggregate tax basis of
the New Disney Common Stock received by such holder will be equal to the
aggregate tax basis of the Capital Cities Common Stock surrendered (excluding
any portion of the holder's basis allocated to fractional shares) and the
holding period of the New Disney Common Stock will include the holding period
of the Capital Cities Common Stock surrendered. A holder of Capital Cities
Common Stock who is considering making a Stock Election should note that there
can be no assurance that such holder will receive only New Disney Common Stock
(because of the possibility of proration) and, therefore, there can be no
assurance that a holder who makes a Stock Election will recognize no taxable
gain upon such holder's exchange of Capital Cities Common Stock.
Exchange of Capital Cities Common Stock Solely for Cash. A holder of Capital
Cities Common Stock who receives solely cash in exchange for Capital Cities
Common Stock in the Capital Cities Merger or pursuant to the exercise of
appraisal rights under the NYBCL will recognize capital gain or loss equal to
the difference between the tax basis of the Capital Cities Common Stock
surrendered and the amount of cash received therefor. Such capital gain or
loss will constitute long-term capital gain or loss if the Capital Cities
Common Stock has been held by the holder for more than one year at the
Effective Time. Gain or loss must be calculated separately for each block of
Capital Cities Common Stock (i.e., shares of Capital Cities Common Stock
acquired at the same time in a single transaction). See "--Transfer Taxes"
below.
Exchange of Capital Cities Common Stock for a Combination of New Disney
Common Stock and Cash. Except as discussed below under "--Cash in Lieu of
Fractional Shares," and "--Transfer Taxes," a holder of Capital Cities Common
Stock who receives a combination of New Disney Common Stock and cash in
exchange for Capital Cities Common Stock (by reason of an effective Standard
Election or the application of proration to an effective Stock Election or an
effective Cash Election, including a deemed Cash Election) will recognize any
capital gain realized in the transaction but will not recognize any loss
realized in the transaction. The amount of capital gain that is recognized
will be calculated separately for each block of Capital Cities Common Stock
surrendered, in an amount equal to the lesser of (i) the amount of gain
realized in respect of such block (i.e., the excess of (a) the sum of the
amount of cash and the fair market value of New Disney Common Stock received
that is allocable to such block of Capital Cities Common Stock over (b) the
tax basis of such block) and (ii) the amount of cash received that is
allocable to such block. Such capital gain will constitute long-term capital
gain if such block of Capital Cities Common Stock has been held for more than
one year at the Effective Time. For this purpose, all of the cash and New
Disney Common Stock received by a holder will be
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<PAGE>
allocated proportionately among the blocks of Capital Cities Common Stock
surrendered by such holder. The tax basis of the New Disney Common Stock
received in exchange for a block of Capital Cities Common Stock will be equal
to the tax basis of such surrendered block of Capital Cities Common Stock,
decreased by the amount of cash received in respect of such block and
increased by the amount of gain recognized in respect of such block. The
holding period of the New Disney Common Stock will include the holding period
of such block of Capital Cities Common Stock surrendered.
Federal Income Tax Considerations in Choosing an Election. If a shareholder
of Capital Cities who makes an effective Stock Election for all of such
shareholder's Capital Cities Common Stock receives cash as a result of the
proration procedures, the Federal income tax consequences will be those
described in the preceding paragraph for a shareholder who makes an effective
Standard Election. If a shareholder of Capital Cities who makes (or is deemed
to make) an effective Cash Election for all of such shareholder's Capital
Cities Common Stock receives New Disney Common Stock as a result of the
proration procedures, the tax consequences will be those described in the
preceding paragraph for a shareholder who makes an effective Standard
Election. The actual Federal income tax consequences to each Capital Cities
shareholder of making a Cash Election or Stock Election will not be
ascertainable at the time the election is made because shareholders of Capital
Cities will not know at such time if, or to what extent, the proration
procedures and Disney's ability to increase the Maximum Cash Amount described
under the caption "THE REORGANIZATION AGREEMENT--Capital Cities Merger
Consideration" will apply.
Cash in Lieu of Fractional Shares. A holder of Capital Cities Common Stock
who receives cash in lieu of fractional shares of New Disney Common Stock will
be treated as having received such fractional shares pursuant to the Capital
Cities Merger and then as having exchanged such fractional shares for cash in
a redemption by New Disney. Any gain or loss attributable to fractional shares
generally will be capital gain or loss. The amount of such gain or loss will
be equal to the difference between the ratable portion of the tax basis of the
Capital Cities Common Stock surrendered in the Capital Cities Merger that is
allocated to such fractional shares and the cash received in lieu thereof. Any
such capital gain or loss will constitute long-term capital gain or loss if
the Capital Cities Common Stock has been held by the holder for more than one
year at the Effective Time.
Transfer Taxes. Pursuant to the Reorganization Agreement, New Disney will
pay New York State Tax on Gains Derived from Certain Real Property Transfers
and certain other transfer taxes ("Transfer Taxes") that arise from the
Acquisition. Such payments may be considered for Federal income tax purposes
to be additional consideration paid to each holder of Capital Cities Common
Stock. In that event, each such holder would be treated as if it received cash
equal to the amount of Transfer Taxes paid on its behalf, which could result
in additional taxable gain to such holder and a corresponding increase in tax
basis of such holder's shares of New Disney Common Stock. Pursuant to the
Reorganization Agreement, holders of Capital Cities Common Stock will be
deemed to have agreed to be bound by the values and allocations established by
Capital Cities or New Disney on any tax returns relating to Transfer Taxes.
Reporting Requirements
Each holder of Capital Cities Common Stock that receives New Disney Common
Stock in the Capital Cities Merger and each holder of Disney Common Stock that
receives New Disney Common Stock in the Disney Merger will be required to
retain records and file with such holder's Federal income tax return a
statement setting forth certain facts relating to the Disney Merger and the
Capital Cities Merger. It is also expected that holders of Capital Cities
Common Stock will be asked to indicate in the letter of transmittal their tax
basis in the shares of Capital Cities Common Stock surrendered.
THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY AND MAY
NOT APPLY TO ALL HOLDERS OF DISNEY COMMON STOCK OR TO ALL HOLDERS OF CAPITAL
CITIES COMMON STOCK. SUCH HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGERS.
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REGULATORY APPROVALS
The Communications Act and the rules, regulations and policies of the FCC
(the "FCC Rules") prohibit the transfer of control of an entity that holds
television and radio broadcast and certain other communications licenses
without the prior approval of the FCC. The Acquisition, therefore, requires
FCC approval of the transfer of control of Capital Cities and its subsidiaries
holding FCC licenses. Additionally, under applicable FCC Rules, consummation
of the Acquisition is deemed to result in a pro forma transfer of control of
Disney and its subsidiaries holding FCC licenses, including Fidelity
Television, Inc., the licensee of KCAL-TV in Los Angeles. Accordingly, FCC
approval of this transfer of control also is required. Applications requesting
the FCC's consent to the foregoing transfers of control (the "FCC
Applications") were filed with the FCC on August 23, 1995.
Ownership Restrictions
The FCC Applications include requests that the FCC waive certain applicable
"multiple ownership" rules (the "Multiple Ownership Rules") that would
otherwise come into effect upon the consummation of the Acquisition. The
Multiple Ownership Rules, which impose a variety of restrictions on the common
ownership or control of interests in television and radio broadcast stations,
cable television systems and English language daily newspapers, are described
in the Capital Cities Form 10-K. See also the discussion below in "SIGNIFICANT
REGULATIONS APPLICABLE TO BROADCASTING SERVICES."
The Acquisition requires waivers of the Multiple Ownership Rules in three
instances: (i) where Disney's ownership of one broadcast property (KCAL-TV,
Los Angeles, California) and Capital Cities' broadcast properties
(particularly KABC-TV, Los Angeles, California) in the Los Angeles market
implicates multiple ownership issues; (ii) where previously permitted
combinations of Capital Cities' properties in certain local markets must be
reaffirmed; and (iii) where short-term temporary waivers are necessary pending
the divestiture of radio station interests held by two of Disney's directors
and therefore attributed to Disney. Accordingly, Disney has requested the
following waivers of the Multiple Ownership Rules:
Television Duopoly Rule. Because the broadcast contours of WABC-TV (New
York, New York) and WPVI-TV (Philadelphia, Pennsylvania) partially overlap,
the FCC's "television duopoly rule"--which generally proscribes the common
ownership of television stations with overlapping signal contours--would
prohibit common ownership of these stations, even though each serves a
different market. Capital Cities was granted a permanent waiver of the rule
from the FCC in 1985 to allow it to own both stations. Disney has requested
the FCC to grant to it the same waiver of the television duopoly rule granted
to Capital Cities with respect to the common ownership of these stations.
KCAL-TV (Los Angeles, California), now under the control of Disney, and
KABC-TV (Los Angeles, California), now under the control of Capital Cities,
will be under the common control of New Disney after the Acquisition. Because
the broadcast contours of these stations completely overlap, Disney has
requested a temporary 18-month waiver of the television duopoly rule to permit
New Disney to control both stations after the closing of the Acquisition.
Disney has informed the FCC that it reserves the right to file a request for a
further waiver of the television duopoly rule in connection with its post-
Acquisition common control of these television stations should such a request
be appropriate in light of the then-current FCC Rules and applicable
legislative developments.
Newspaper/Broadcast Cross-Ownership Rule. The FCC's "newspaper/broadcast
cross-ownership rule" generally prohibits the common ownership or control of a
radio or television broadcast station and an English language daily newspaper
in the same market. The FCC has permitted Capital Cities to retain its control
of radio stations WBAP(AM) (Fort Worth, Texas), KSCS(FM) (Fort Worth, Texas)
and the Fort Worth Star-Telegram that was established prior to the FCC's
adoption of the newspaper/broadcast cross-ownership rule in 1975. After the
Acquisition, New Disney may not retain common ownership of this newspaper--
broadcast station combination without obtaining a waiver of the
newspaper/broadcast cross-ownership rule. Accordingly, Disney has requested a
permanent waiver of the rule to permit these media properties to remain under
common ownership after the Acquisition. In addition, Disney has requested a
permanent waiver of the
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newspaper/broadcast cross-ownership rule to permit New Disney to retain radio
stations WJR(AM) (Detroit, Michigan), WHYT(FM) (Detroit, Michigan) and The
Oakland Press (Pontiac, Michigan) after the Acquisition.
Radio/Television Combinations-One-to-a-Market Rule. The following television
and radio stations are under the common ownership of Capital Cities pursuant
to existing waivers of the Commission's "one-to-a-market rule" that generally
proscribes the common ownership of a television and radio station in the same
market:
<TABLE>
<C> <C> <S>
Chicago, Illinois: Television --WLS-TV &
Radio --WLS(AM) & WLS-FM
Flint, Michigan: Television --WJRT-TV
Radio --WJR(AM)
(Detroit, Michigan)
Toledo, Ohio: Television --WTVG(TV)
Radio --WJR(AM)
(Detroit, Michigan)
Los Angeles, California: Television --KABC-TV
Radio --KABC(AM), KMPC(AM) & KLOS(FM)
New York, New York: Television --WABC-TV
Radio --WABC(AM) & WPLJ(FM)
San Francisco, California: Television --KGO-TV
Radio --KGO(AM) & KSFO(AM)
</TABLE>
As with the television duopoly rule waiver request for Capital Cities' New
York and Philadelphia stations described above, Disney has requested that the
FCC effectively reaffirm the existing waivers of the one-to-a-market rule by
permanently waiving the rule to permit the radio and television stations
identified above to remain under the common ownership of New Disney after the
consummation of the Acquisition. Additionally, to the extent the FCC grants
Disney's request for a temporary waiver of the television duopoly rule and
thereby permits New Disney to control both KCAL-TV and KABC-TV in Los Angeles,
Disney's one-to-a-market waiver request for the Los Angeles market assumes
such continued control of KCAL-TV.
Shamrock Broadcasting, Inc.-Temporary Waivers. Under FCC Rules, two
directors of Disney, Roy E. Disney and Stanley P. Gold, have "attributable"
interests in Shamrock Broadcasting, Inc. ("Shamrock") and the seven AM and 12
FM radio stations owned by Shamrock (the "Shamrock Stations"). Because these
directors of Disney are deemed to have such attributable interests, Disney
itself is attributed with interests in the Shamrock Stations under FCC Rules,
even though Disney does not own or control the Shamrock Stations. However,
Trefoil Communications, Inc., the sole shareholder of Shamrock, has entered
into an agreement with Chancellor Broadcasting Company ("Chancellor") pursuant
to which Shamrock and the Shamrock Stations will be sold to Chancellor (the
"Shamrock-Chancellor Transaction"). Disney has been informed by
representatives of Shamrock that, subject to prior FCC approval, the Shamrock-
Chancellor Transaction is scheduled to close in February 1996 with respect to
all of the Shamrock Stations other than one FM radio station (WFOX(FM),
Gainesville, Georgia), which may be transferred to Chancellor several months
later. As Disney and Capital Cities hope to consummate the Acquisition prior
to such time, the Shamrock Stations would continue to be attributed to Disney
for a brief period following the closing of the Acquisition.
The attribution of the Shamrock Stations to New Disney after the
consummation of the Acquisition would result in the applicability of several
of the Multiple Ownership Rules unless Disney obtains temporary waivers of
these rules. Accordingly, Disney has asked the FCC to waive the following
Multiple Ownership Rules until the earlier of the date on which the Shamrock--
Chancellor Transaction is closed or the six-month anniversary of the
consummation of the Acquisition:
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<PAGE>
National Multiple Ownership Rule. Because New Disney would be attributed
with interests in 22 FM radio stations (10 owned by Capital Cities and 12
owned by Shamrock), Disney has requested a temporary waiver of the FCC's
Multiple Ownership Rule which generally prohibits common ownership of more
than 20 FM radio stations.
Radio Contour Overlap Rule. The Radio Contour Overlap Rule (also known as
the "radio duopoly rule") generally prohibits common ownership of more than
two AM or two FM radio stations in the same market. Following the Acquisition,
New Disney will be attributed with more than the permissible number of
stations in the following markets solely because of the attribution of the
Shamrock Stations to New Disney:
<TABLE>
<CAPTION>
MARKET STATIONS
------ --------
<C> <C> <S>
Los Angeles, California Disney: KABC(AM), KMPC(AM) & KLOS(FM)
Shamrock: KLAC(AM) & KZLA(FM)
Total: 3 AM and 2 FM
San Francisco/Oakland, California Disney: KGO(AM) & KSFO(AM)
(San Francisco)
Shamrock: KBGG(FM) & KSAN(FM)
(San Francisco);
KNEW(AM) & KABL(AM)
(Oakland)
Total: 4 AM and 2 FM
Atlanta, Georgia Disney: WKHX(AM) (Atlanta),
WYAY(FM) (Gainesville) &
WKHX-FM (Marietta)
Shamrock: WFOX(FM) (Gainesville)
Total: 2 AM and 3 FM
Minneapolis/St. Paul, Minnesota Disney: KQRS(AM) & KQRS-FM
(Golden Valley)
KEGE-FM (Minneapolis) and
KEGE(AM)(1)
(Richfield)
Shamrock: KEEY(FM) (St. Paul) &
KFAN(AM) (Minneapolis)
Total: 3 AM and 3FM
</TABLE>
- --------
(1) Capital Cities currently brokers more than 15 percent of the broadcast
time on this station, which is owned by an unaffiliated entity. Under the
Multiple Ownership Rules, KEGE(AM) is therefore attributed to Capital
Cities, and will be attributed to New Disney following the closing of the
Acquisition.
Accordingly, Disney has requested a temporary waiver of the radio duopoly
rule for the brief period specified above.
One-to-a-Market Rule. The Grade A signal contour of KTRK-TV (Houston,
Texas), a television station owned by Capital Cities, encompasses Lake
Jackson, Texas, the community of license of KRQT(FM), a Shamrock Station. Such
a combination would be prohibited under the FCC's one-to-a-market rule.
Accordingly, Disney has requested a temporary waiver of the rule for the brief
period specified above.
Although Disney and Capital Cities are hopeful that the FCC will grant all
of the foregoing permanent and temporary waiver requests, there can be no
assurance that this result will be achieved. If the FCC does not grant the
waivers as requested, it could nevertheless approve the FCC Applications
contingent upon the divestiture after the Acquisition of the properties
affected as a result of the unwillingness to grant permanent or temporary
waivers of the Multiple Ownership Rules. It is also possible, but less likely,
that the FCC would require the divestiture of such properties prior to the
closing of the Acquisition. In any event, Section 7.4 of the Reorganization
Agreement effectively mandates that Disney and Capital Cities divest any
assets that may be required in order to obtain FCC consent to the Acquisition.
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FCC Approval Process
The FCC Rules provide an opportunity for persons who have standing to oppose
applications for transfers of control of FCC licensees or assignments of FCC
licenses to file with the FCC "petitions to deny" the applications. Persons
opposing such applications also may file informal objections with the FCC.
After reviewing such applications and any petitions to deny or informal
objections, the FCC either grants the applications--sometimes conditionally--
or denies them. The FCC's decisions may be appealed to the U.S. Court of
Appeals for the District of Columbia Circuit.
The Small Cable Business Association (the "SCBA") and a group including the
Office of Communication of the United Church of Christ (the "OC Petitioners")
have each filed petitions to deny. The SCBA has asked the FCC to disapprove
the FCC Applications principally on grounds relating to certain sales
practices of ESPN. The OC Petitioners have requested that any approval of the
FCC Applications be conditioned on Disney's agreeing to certain programming
commitments (particularly with respect to children's educational programming)
affecting the ABC Television Network. Further, if Disney does not accede to
their requests for such programming commitments, they have asked that any
approval of the FCC Applications include only (i) a 12-month waiver (rather
than the requested 18-month waiver) of the television duopoly rule with
respect to the proposed common ownership of KCAL-TV and KABC-TV in Los
Angeles, California and (ii) temporary waivers (rather than the requested
permanent waivers) of the newspaper/broadcast cross-ownership rule relating to
the proposed continued common ownership of radio stations and daily newspapers
in the Detroit and Dallas-Fort Worth markets. Both Disney and Capital Cities
believe that the petitions to deny filed by the SCBA and the OC Petitioners
are wholly without merit and are vigorously opposing them.
Disney and Capital Cities are hopeful that the FCC will approve the FCC
Applications, together with Disney's requests for waivers of the Multiple
Ownership Rules. Moreover, although Disney and Capital Cities believe that
there is a significant likelihood that the FCC will approve the FCC
Applications and the foregoing waiver requests, there can be no assurance that
such approvals will be forthcoming. It is possible that the FCC could deny one
or more of the FCC Applications, grant them subject to selective pre-
Acquisition or post-Acquisition divestiture requirements, or otherwise attach
conditions to its approvals. Disney and Capital Cities cannot predict the
timing or outcome of the FCC approval process, including the foregoing
challenges to the FCC Applications and Disney's requests for waivers of the
Multiple Ownership Rules.
Antitrust. Under the HSR Act and the rules promulgated thereunder by the
FTC, the Acquisition may not be consummated until notifications have been
given and certain information has been furnished to the Antitrust Division of
the United States Department of Justice and the FTC and specified waiting
period requirements have been satisfied. Disney and Capital Cities each filed
with the Antitrust Division and the FTC a Notification and Report Form (the
"Notification and Report Form") with respect to the Acquisition on August 10,
1995. The initial waiting period for each of these filings was scheduled to
expire at 11:59 p.m. on September 10, 1995.
On September 8, 1995, the Antitrust Division, which reviewed the
Notification and Report Form, made a request for additional information. Under
the HSR Act, the waiting period will be extended and will expire at 11:59
p.m., on the twentieth calendar day after the date of substantial compliance
by both parties with such request for additional information. Only one
extension of the waiting period pursuant to a request for additional
information is authorized by the HSR Act. Thereafter, such waiting period may
be extended only by court order or with the consent of the parties. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or
the FTC raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Acquisition. At any time before
or after the Special Meetings, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the Acquisition or seeking the
divestiture of substantial assets of Capital Cities or its subsidiaries or
Disney or its subsidiaries.
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In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the
consummation of the Acquisition or seeking divestiture of certain assets of
Disney or Capital Cities. New York and California authorities have indicated
that they will undertake an investigation of the Acquisition. Private parties
may also seek to take legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Acquisition
on antitrust grounds will not be made or, if such a challenge is made, of the
result thereof.
CERTAIN LITIGATION
Eleven class action complaints have been filed in the Supreme Court of the
State of New York, New York County, by persons claiming to represent the
shareholders of Capital Cities. The complaints name Capital Cities and each of
its directors as defendants; all but one of the complaints also name Disney as
a defendant. Six of those complaints were filed on July 31, 1995 (Plunkett v.
Capital Cities, Case No. 95-118809, Doniger v. Capital Cities, Case No. 95-
118819, Stack v. Capital Cities, Case No. 95-118820, Radwell v. Bauman, Case
No. 95-118835, Sloan v. Murphy, Case No. 95-118838, and Dicker v. Capital
Cities, Case No. 95-118929); two were filed on August 1, 1995 (Lewis v.
Capital Cities, Case No. 95-118975, and Luria v. Capital Cities, Case No. 95-
118961); two were filed on August 3, 1995 (Kendall Trust v. Capital Cities,
Case No. 95-119267, and Backer v. Capital Cities, Case No. 95-119336); and one
was filed on August 7, 1995 (Greenfield v. Capital Cities, Case No. 95-
119490). The complaints allege, among other things, that (i) Capital Cities
Board breached their fiduciary duties in considering and approving the
Reorganization Agreement; (ii) the consideration offered to Capital Cities
shareholders is inherently speculative because the value of Disney Common
Stock may vary and, should the value of the Disney Common Stock decrease,
Disney would be in a position to acquire Capital Cities for less than $19
billion; and (iii) even if the value of Disney's Common Stock remains
constant, the consideration that would be received by Capital Cities'
shareholders for sale of control of Capital Cities is inadequate.
Among other things, the complaints seek (i) preliminarily and permanently to
enjoin the Acquisition and any steps designed to facilitate the Acquisition or
to deter competing bids; (ii) to require the Capital Cities directors to
maximize shareholder value by seeking competitive bids; (iii) to rescind the
Acquisition should it be consummated prior to the resolution of the lawsuit;
and/or (iv) to recover unspecified damages and costs from the Capital Cities
directors for their alleged breach of their fiduciary duties. Management of
Capital Cities and Disney believe that the complaints are without merit and
intend vigorously to defend the actions. An Order of Consolidation has been
agreed to by all parties to the eleven class action complaints set forth
above. On October 16, 1995, such Order of Consolidation was entered by the
Supreme Court of the State of New York, New York County.
STOCK EXCHANGE LISTING
New Disney expects to apply for the listing of New Disney Common Stock on
the NYSE and the PSE under the symbol DIS. It is a condition to the
Acquisition that the shares of New Disney Common Stock to be issued to Capital
Cities shareholders in connection with the Capital Cities Merger shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of New Disney Common Stock received by Disney and Capital Cities
stockholders in the Acquisition will be freely transferable, except that
shares of New Disney Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Act) of Disney or Capital
Cities prior to the Acquisition may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Act (or
Rule 144 in the case of such persons who become affiliates of New Disney) or
as otherwise permitted under the Act. Persons who may be deemed to be
affiliates of Disney, Capital Cities or New Disney generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of
such party as well as principal stockholders of such party. The Reorganization
Agreement requires Capital Cities to use reasonable efforts to deliver or
cause to be delivered to New Disney, prior to the Closing Date, from each
Capital Cities Affiliate, a letter agreement to the
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effect that such person will not offer or sell or otherwise dispose of any of
the shares of New Disney Common Stock issued to such persons in or pursuant to
the Acquisition in violation of the Act or the rules and regulations
promulgated by the Commission thereunder.
As a condition to Capital Cities' obligation to effect the Mergers, New
Disney is required to execute the Registration Rights Agreement with Capital
Cities Affiliates, which provides that Capital Cities Affiliates will have,
subject to certain conditions, both "demand" and "piggyback" registration
rights to require New Disney to register all or any portion of New Disney
Common Stock then owned by them. See "THE REORGANIZATION AGREEMENT--
Registration Rights Agreement."
DISSENTERS' RIGHTS
Under the DGCL, holders of Disney Common Stock are not entitled to
dissenters' rights in connection with the Disney Merger because the Disney
Common Stock is listed on a national securities exchange and the consideration
which such holders will receive in the Disney Merger consists solely of New
Disney Common Stock which will also be listed on a national securities
exchange.
Holders of Capital Cities Common Stock who do not vote in favor of the
Capital Cities Proposal and who have properly complied with Section 623 of the
NYBCL ("Section 623") will be entitled to dissenters' rights.
Shareholders of Capital Cities who follow the procedures set forth in
Section 623 will be entitled to have their shares of Capital Cities Common
Stock appraised by a New York court and to receive payment of the "fair value"
of such shares as determined by that court. The shares of Capital Cities
Common Stock with respect to which the holder has perfected his demand for
dissenters' rights in accordance with Section 623 and has not effectively
withdrawn or lost his rights to such appraisal are referred to in this Joint
Proxy Statement/Prospectus as the "Dissenting Shares."
The following summary of the provisions of Section 623 is not intended to be
a complete statement of the method of compliance with such provisions and is
qualified in its entirety by reference to Section 623, the text of which is
attached as Appendix E to this Joint Proxy Statement/Prospectus.
A Capital Cities shareholder electing to enforce his right to receive
payment for his shares if the proposed Capital Cities Merger is consummated
must file with Capital Cities, prior to the Capital Cities Meeting, or at such
meeting but before the vote is taken on the Capital Cities Proposal, a written
objection to the Capital Cities Proposal (the "Notice of Election"). The
Notice of Election must include a notice of his election to dissent, his name
and residence address, the number of shares of Capital Cities Common Stock as
to which he dissents and a demand for payment of the fair value of his shares.
The Notice of Election must be in addition to and separate from any proxy or
vote against the Capital Cities Proposal. To preserve his dissenter's rights,
a Capital Cities shareholder must not vote in favor of the Capital Cities
Proposal. A properly executed proxy that is delivered to Capital Cities with
the vote left blank will, unless revoked, be voted FOR adoption of the Capital
Cities Proposal. Accordingly, in order to assure that a shareholder's shares
of Capital Cities Common Stock are not voted in favor of the Capital Cities
Proposal, a Capital Cities shareholder electing to exercise dissenters'
rights, who votes by proxy, must not leave the proxy blank but must (i) vote
AGAINST adoption of the Capital Cities Proposal or (ii) ABSTAIN from voting
for or against adoption of the Capital Cities Proposal. NEITHER A VOTE AGAINST
THE CAPITAL CITIES PROPOSAL NOR A PROXY DIRECTING SUCH VOTE NOR AN ABSTENTION
WILL SATISFY THE REQUIREMENT THAT A NOTICE OF ELECTION BE DELIVERED TO CAPITAL
CITIES BEFORE THE VOTE UPON SUCH PROPOSAL.
A Capital Cities shareholder may not dissent as to less than all of the
shares, as to which such shareholder has a right to dissent, held by such
shareholder of record or beneficially. A nominee or fiduciary may not dissent
on behalf of any beneficial owner as to less than all shares held of record by
such nominee or fiduciary on behalf of such owner and as to which such nominee
or fiduciary has a right to dissent. All Notices of Election should be
addressed to Capital Cities, 77 West 66th Street, New York, New York 10023,
Attention: Secretary. Because the written demand must be delivered before the
shareholder vote on the Capital Cities Proposal, it is recommended, although
not required, that a shareholder using the mails should use certified or
registered mail, return receipt requested, to confirm that he has made a
timely delivery.
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Within 10 days after the Capital Cities Meeting at which Capital Cities
shareholders approve the Capital Cities Proposal, Capital Cities must notify,
by registered mail, each shareholder of Capital Cities who filed a Notice of
Election, and who did not vote in favor of adoption of such proposal, that
such proposal has been approved.
After the Capital Cities Merger is consummated, each holder of Dissenting
Shares will cease to have any of the rights of a Capital Cities shareholder
except the right to be paid the fair value of his shares and any of the other
rights under Section 623. A Notice of Election may be withdrawn by a
shareholder of Capital Cities prior to his acceptance in writing of an offer
made by Capital Cities to pay for the value of such shareholder's shares (as
described below), except that a Notice of Election may not be withdrawn later
than 60 days following the Effective Time unless Capital Cities shall fail to
make a timely offer to pay for the value of the Dissenting Shares, in which
case such dissenting shareholder shall have 60 days from the date such offer
was made to withdraw his election. In either event, after such time, a Notice
of Election may not be withdrawn without the written consent of Capital
Cities. In order to be effective, withdrawal of a Notice of Election must be
accompanied by a return to Capital Cities of any advance payment made to the
Capital Cities shareholder by Capital Cities as described below.
If any Capital Cities shareholder who demands appraisal of his shares of
Capital Cities Common Stock under Section 623 effectively withdraws or loses
such right to appraisal, such shares of Capital Cities Common Stock will be
converted into the consideration to be paid in the Capital Cities Merger, and
such shareholder will be deemed to have made a Cash Election.
At the time of filing the Notice of Election, or within one month
thereafter, each Capital Cities shareholder asserting dissenters' rights must
submit the certificates representing their shares of Capital Cities Common
Stock to Capital Cities, or to its transfer agent. Capital Cities will note
conspicuously thereon that a Notice of Election has been filed and will return
the certificates to the shareholder. Any shareholder of Capital Cities who
fails to submit his or her certificates for such notation shall, at the option
of Capital Cities exercised by written notice to such shareholder within 45
days of the date of filing of such Notice of Election, lose his dissenter's
rights, unless a court, for good cause shown, otherwise directs.
Within 15 days after the expiration of the period within which shareholders
may file their Notice of Election, or within 15 days after the Capital Cities
Merger is consummated, whichever is later (but in no case later than 90 days
after the Capital Cities Meeting at which Capital Cities shareholders voted in
favor of the Capital Cities Proposal), Capital Cities must make a written
offer by registered mail to pay for the Dissenting Shares at a price which
Capital Cities considers to be their fair value. This offer must be
accompanied by a statement setting forth the aggregate number of shares of
Capital Cities Common Stock with respect to which Notices of Election to
dissent have been received and the aggregate number of holders of such shares.
If the Capital Cities Merger has been consummated at the time the offer is
made, the offer will be accompanied by (i) advance payment, to each dissenting
shareholder who had submitted his certificates for notation thereon of the
election to dissent, of an amount equal to 80% of such offer or (ii) a
statement that advance payment, to each dissenting shareholder who has not yet
submitted his certificates for notation thereon of the election to dissent, of
an amount equal to 80% of the amount of such offer will be made by Capital
Cities promptly upon the submission of his certificates. If the Capital Cities
Merger has not been consummated at the time of the making of such offer, such
advance payment or statement as to advance payment will be sent to each
shareholder entitled thereto upon consummation of the Capital Cities Merger.
Acceptance of such advance payment by a dissenting shareholder will not
constitute a waiver of his dissenters' rights. If the Capital Cities Merger is
not consummated within 90 days after approval of the Capital Cities Proposal
by Capital Cities shareholders, such offer may be conditioned upon the
consummation of the Capital Cities Merger. It currently is anticipated that
the Capital Cities Merger will be consummated during such 90-day period.
If Capital Cities fails to make an offer within the 15-day period described
above, or if it makes an offer but Capital Cities and a dissenting shareholder
do not agree within 30 days of the making of such offer upon the
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price to be paid for such shareholder's shares of Capital Cities Common Stock,
Capital Cities must, within 20 days, institute a special proceeding in the
appropriate court to determine the rights of dissenting shareholders and to
fix the fair value of their shares. However, if Capital Cities does not
institute such a proceeding within such 20-day period, any dissenting
shareholder may, within 30 days after such 20-day period, institute a
proceeding for the same purpose. If such proceeding is not instituted by the
dissenting shareholder within such 30-day period, all dissenters' rights shall
be lost, unless the court, for good cause shown, otherwise directs. All
dissenting shareholders, other than those who agreed with Capital Cities as to
the price to be paid for their shares, will be made parties to such
proceeding.
With respect to dissenting shareholders of Capital Cities who are determined
by the court to be entitled to payment, the court shall proceed to fix the
value of the shares of Capital Cities Common Stock, which shall be the fair
value as of the close of business on the day prior to the Capital Cities
Meeting. In fixing the fair value of the shares, the court will consider the
nature of the Capital Cities Merger and its effects on Capital Cities and its
shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable circumstances
and all other relevant factors. The court may fix the value of the shares as
higher or lower than the value of the consideration offered in the Capital
Cities Merger. The final order of the court will be entered against Capital
Cities in favor of each dissenting shareholder who is a party to the
proceeding and is entitled to the value of his shares. The final order will
include interest at a rate determined by the court and payable from the
Effective Time until the payment date, unless the court finds that the refusal
of any shareholder to accept the offer of payment was arbitrary, vexatious, or
otherwise not in good faith.
Each party to the proceeding is required to bear its own costs and expenses,
including the fees and expenses of its counsel. The court may, however, in its
discretion, assess any of the costs, fees and expenses incurred by Capital
Cities against Capital Cities shareholders who dissent, including those who
withdraw their Notice of Election, if the court finds that their refusal to
accept the offer of payment was arbitrary, vexatious or otherwise not in good
faith. Similarly the costs, fees and expenses incurred by a Capital Cities
shareholder may be assessed by the court, in its discretion, against Capital
Cities if the fair value of the shares as determined by the court materially
exceeds the amount which was offered, no offer or required advance payment was
made, the special proceeding was not instituted within the period specified,
or the action of Capital Cities in complying with its obligations under
Section 623 was arbitrary, vexatious or otherwise not in good faith.
Within 60 days after the final determination of the proceeding, Capital
Cities will pay to each dissenting shareholder the amount found to be due such
shareholder upon surrender of the certificates representing shares of Capital
Cities Common Stock.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 623 FOR PERFECTING
DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF THE
COMPLEXITY OF THE PROVISIONS OF SECTION 623, SHAREHOLDERS OF CAPITAL CITIES
WHO ARE CONSIDERING DISSENTING FROM THE CAPITAL CITIES PROPOSAL SHOULD CONSULT
THEIR OWN LEGAL ADVISORS.
FINANCING THE ACQUISITION
It is expected that the total cash to be paid to shareholders of Capital
Cities will be funded through the use of cash or cash equivalents and short-
term investments of Disney and Capital Cities available at the time such cash
is paid and through new borrowings. The amount of cash to be paid to each
shareholder of Capital Cities will depend on (i) the stated preferences of the
Capital Cities shareholders on the Election Forms, (ii) the proration
procedures to be applied if the Requested Stock Amount exceeds the Stock
Component or the Requested Cash Amount exceeds the Cash Component and (iii)
the level of the Maximum Cash Amount including any increase of the Maximum
Cash Amount by Disney, in its sole discretion. Therefore, the amount of cash
to be funded cannot now be determined. See "THE REORGANIZATION AGREEMENT--
Capital Cities Merger Consideration." It is currently expected that any new
borrowings to fund the cash to be paid to shareholders of Capital Cities will
be made through borrowings in the commercial paper market, bank borrowings,
borrowings from private or public lenders, or through a combination of the
foregoing.
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THE REORGANIZATION AGREEMENT
The following is a brief summary of the material provisions of the
Reorganization Agreement, a copy of which is attached as Appendix A-1 to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference. This
summary is qualified in its entirety by reference to the full and complete
text of the Reorganization Agreement.
THE MERGERS
Pursuant to the Reorganization Agreement and subject to the terms and
conditions thereof, DCA Merger Corp. and DCB Merger Corp. will be merged with
and into Disney and Capital Cities, respectively. As a result of the
Acquisition, Disney and Capital Cities will become wholly owned subsidiaries
of New Disney. As part of the Acquisition, stockholders of Disney and
shareholders of Capital Cities will receive the consideration described below.
Subject to the terms and conditions of the Reorganization Agreement, the
closing of the transactions contemplated thereby will take place on the later
of (i) January 3, 1996 and (ii) the first business day following the day on
which all conditions to the Reorganization Agreement are satisfied or waived
(such later day, the "Closing Date"). The Mergers will become effective upon
both the filing of a certificate of merger with the Secretary of State of the
State of Delaware with respect to the Disney Merger and the filing of a
certificate of merger by the Department of State of the State of New York
relating to the Capital Cities Merger. The time at which the Mergers become
effective is referred to as the Effective Time.
CONVERSION OF DISNEY COMMON STOCK
Upon consummation of the Disney Merger, pursuant to the Reorganization
Agreement and the Disney Merger Agreement, (i) each share of Disney Common
Stock, except for Disney Treasury Stock, issued and outstanding at the
Effective Time, will be converted into one share of New Disney Common Stock
and upon such conversion all shares of Disney Common Stock will be canceled
and cease to exist, and (ii) all shares of Disney Treasury Stock will be
canceled and retired without payment of any consideration therefor.
AT THE EFFECTIVE TIME, EACH CERTIFICATE REPRESENTING SHARES OF DISNEY COMMON
STOCK WILL, WITHOUT ANY ACTION ON THE PART OF THE HOLDER THEREOF, BE DEEMED TO
REPRESENT AN EQUAL NUMBER OF SHARES OF NEW DISNEY STOCK. HOLDERS OF DISNEY
COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING DISNEY COMMON STOCK
WITH THE ENCLOSED PROXY CARD.
Disney Stock Options. As provided in the Reorganization Agreement, at the
Effective Time, each Disney Option will, if agreed to by the holder of any
such Disney Option, be assumed by New Disney in such manner that it is
converted into an option to purchase shares of New Disney Common Stock, with
each such Disney Option to otherwise be exercisable upon the same terms and
conditions as then are applicable to such Disney Option, including the number
of shares and exercise price provided thereby. Each Disney Option assumed by
New Disney will have the same terms and conditions as then are applicable to
such Disney Option. At the Effective Time, New Disney will assume all rights
and obligations of Disney under Disney's stock option plans as in effect at
the Effective Time and will continue such plans in accordance with their
terms.
CAPITAL CITIES MERGER CONSIDERATION
Pursuant to the Reorganization Agreement and the Capital Cities Merger
Agreement, upon consummation of the Capital Cities Merger (i) each share of
Capital Cities Common Stock issued and outstanding immediately prior to the
Effective Time, except for Capital Cities Treasury Stock or Dissenting Shares,
will be converted, at the election of the holder thereof, into either (a) the
right to receive (the "Standard Election") one share of New Disney Common
Stock and $65 in cash (collectively, the "Standard Consideration"), (b) the
right to receive (subject to proration) New Disney Common Stock (the "Stock
Election") in an amount equal to one share of
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New Disney Common Stock plus a number of shares of New Disney Common Stock
equal to a fraction, the numerator of which is $65 and the denominator of
which is the average of the closing sales prices of Disney Common Stock on the
NYSE Composite Tape on each of the ten consecutive trading days immediately
preceding the second trading day prior to the Effective Time ("Disney Common
Stock Price") (collectively, the "Stock Consideration"), or (c) the right to
receive (subject to proration) an amount in cash (the "Cash Election"),
without interest, equal to $65 plus the Disney Common Stock Price
(collectively, the "Cash Consideration"), (ii) all such shares of Capital
Cities Common Stock will be canceled and cease to exist, and (iii) all Capital
Cities Treasury Stock will be canceled and retired without payment of any
consideration therefor.
Proration. The Reorganization Agreement provides that the maximum number of
shares of New Disney Common Stock that may be issued to holders of Capital
Cities Common Stock will equal the number of shares of Capital Cities Common
Stock outstanding immediately prior to the Effective Time (which is exclusive
of shares of Capital Cities Common Stock held in the Capital Cities treasury)
minus the number of Dissenting Shares (the "Outstanding Capital Cities
Shares"). In the event that the aggregate number of shares of New Disney
Common Stock requested by Capital Cities shareholders pursuant to effective
Stock Elections (the "Requested Stock Amount") exceeds the Stock Component (as
defined below), each holder making a Stock Election will receive, for each
share of Capital Cities Common Stock for which an effective Stock Election has
been made, (i) a number of shares of New Disney Common Stock equal to the
product of the Stock Consideration and a fraction, the numerator of which is
the Stock Component and the denominator of which is the Requested Stock Amount
(such product, the "Prorated Stock Amount") and (ii) cash in an amount equal
to the product of (a) the Stock Consideration minus the Prorated Stock Amount
and (b) the Disney Common Stock Price. The "Stock Component" is the number of
shares of New Disney Common Stock equal to the Outstanding Capital Cities
Shares minus the aggregate number of Outstanding Capital Cities Shares with
respect to which effective Standard Elections have been received by the
Exchange Agent. If the number of shares of New Disney Common Stock issued in
the Capital Cities Merger is less than the number of Outstanding Capital
Cities Shares, the percentage of New Disney Common Stock owned by the former
shareholders of Capital Cities following the Mergers will decrease relative to
the percentage of New Disney Common Stock owned by the former stockholders of
Disney following the Mergers.
The Reorganization Agreement also provides that the maximum amount of cash
to be paid to holders of the Outstanding Capital Cities Shares (the "Maximum
Cash Amount") will equal the product of $65 and the number of Outstanding
Capital Cities Shares, provided that Disney has the right, in its sole
discretion, to increase the Maximum Cash Amount at any time prior to the fifth
business day after the Election Deadline (as defined below) for Capital Cities
shareholders to submit their completed Election Forms to the Exchange Agent.
The Election Deadline will be no later than the 20th business day after the
Effective Time. In the event that the aggregate amount of cash payable to
Capital Cities shareholders pursuant to Cash Elections (including effective
Cash Elections received by the Exchange Agent and Cash Elections deemed to
have been made by holders of Capital Cities Common Stock who fail to submit
effective Election Forms) (the "Requested Cash Amount") exceeds the Cash
Component (as defined below), each holder making a Cash Election (and each
holder deemed to have made a Cash Election) will receive, for each share of
Capital Cities Common Stock for which a Cash Election has been made, (i) an
amount of cash equal to the product of the Cash Consideration and a fraction,
the numerator of which is the Cash Component and the denominator of which is
the Requested Cash Amount (such product, the "Prorated Cash Amount") and (ii)
a number of shares of New Disney Common Stock equal to a fraction, the
numerator of which is equal to the Cash Consideration minus the Prorated Cash
Amount, and the denominator of which is the Disney Common Stock Price. The
"Cash Component" is equal to the Maximum Cash Amount minus the product of (i)
the number of shares of Capital Cities Common Stock for which effective
Standard Elections have been made and (ii) $65.
As described above, the Maximum Cash Amount may be increased in Disney's
sole discretion at any time prior to the fifth business day after the Election
Deadline. The ability of Disney to increase the Maximum Cash Amount is a
factor that shareholders of Capital Cities may wish to consider in making an
election decision. As of the date of this Proxy Statement/Prospectus, Disney
has made no decisions regarding whether it will increase the Maximum Cash
Amount. It is anticipated that such decision will be made following the
Election Deadline
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based upon, among other things, the elections made by Capital Cities
shareholders, the Disney Common Stock Price, the impact, if any, on New
Disney's credit rating and borrowing costs of an increase in the amount of
cash consideration to be paid and interest rates and other conditions
prevailing in the financial markets at the time the decision is made. To the
extent that the Requested Cash Amount exceeds the Cash Component and Disney
increases the Maximum cash Amount, (i) Capital Cities shareholders making a
Cash Election will receive a greater portion of the merger consideration in
cash than would otherwise have been received by such shareholders and (ii) the
form of merger consideration to be received by Capital Cities shareholders
making a Stock Election or a Standard Election will not be effected. If the
Maximum Cash Amount is increased, the Prorated Cash Amount will increase and,
therefore, the amount of merger consideration to be paid in the form of New
Disney Common Stock to shareholders making a Cash Election will be
proportionately decreased. If the number of shares of New Disney Common Stock
issued in the Capital Cities Merger is less than the number of Outstanding
Capital Cities Shares, the percentage of New Disney Common Stock owned by the
former shareholders of Capital Cities following the Mergers will decrease
relative to the percentage of New Disney Common Stock owned by the former
stockholders of Disney following the Mergers. See "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS."
The number of shares of New Disney Common Stock and the amount of cash
distributed to Capital Cities shareholders that make an effective Standard
Election will not be affected in any way by the proration procedures.
Capital Cities Stock Options. As provided in the Reorganization Agreement,
at the Effective Time, each Capital Cities Option will, if agreed by the
holder thereof, be assumed by New Disney and converted into an option to
purchase New Disney Common Stock. Following the Effective Time, each such
Capital Cities Option will be exercisable on the same terms and conditions as
are then applicable to such Capital Cities Option, except that (i) each such
Capital Cities Option will be exercisable for a number of shares of New Disney
Common Stock equal to the product of (x) the number of shares of Capital
Cities Common Stock for which such Capital Cities Option was exercisable and
(y) the Stock Consideration (before proration) and (ii) the exercise price of
such Capital Cities Option will be equal to the exercise price of such Capital
Cities Option as of the date of the Reorganization Agreement, divided by the
Stock Consideration (before proration). In the alternative, at the election of
the holder of any Capital Cities Option, Capital Cities and the option holder
may amend such Capital Cities Option so that the holder may receive, in
settlement thereof, for each share of Capital Cities Common Stock subject to
such Capital Cities Option, an amount in cash equal to the Cash Consideration
(before proration) minus the per share exercise price of such Capital Cities
Option as of the date of the Reorganization Agreement. See "THE ACQUISITION--
Interests of Certain Persons in the Acquisition--Capital Cities--Employee
Stock Option Programs."
ELECTION PROCEDURE
Promptly after the Effective Time an Election Form will be mailed to each
person who was a holder of an Outstanding Capital Cities Share immediately
prior to the Effective Time. Each such holder will have the right to submit an
Election Form specifying the number of shares such person desires to have
converted into the right to receive a combination of New Disney Common Stock
and cash pursuant to the Standard Election, the number of shares of Capital
Cities Common Stock that such person desires to have converted into the right
(subject to proration) to receive New Disney Common Stock pursuant to the
Stock Election, and the number of shares that such person desires to have
converted into the right (subject to proration) to receive cash pursuant to
the Cash Election.
HOLDERS OF CAPITAL CITIES COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING CAPITAL CITIES COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE
TRANSACTION IS APPROVED, A LETTER OF TRANSMITTAL AND AN ELECTION FORM WILL BE
MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING
CAPITAL CITIES SHARES IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. CAPITAL CITIES
SHAREHOLDERS SHOULD SEND CERTIFICATES
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REPRESENTING CAPITAL CITIES COMMON STOCK TO THE EXCHANGE AGENT ONLY AFTER THEY
RECEIVE, AND IN ACCORDANCE WITH, THE INSTRUCTIONS CONTAINED IN THE LETTER OF
TRANSMITTAL AND THE ELECTION FORM.
Any holder of Capital Cities Common Stock who has made an election by
submitting an Election Form to the Exchange Agent may, at any time prior to
5:00 p.m., New York time, on a date to be agreed upon by Disney and Capital
Cities which is no later than the 20th business day after the Effective Time
(the "Election Deadline"), change such holder's election by submitting a
revised Election Form, properly completed and executed and received by the
Exchange Agent prior to the Election Deadline. Any holder of Capital Cities
Common Stock may at any time prior to the Election Deadline revoke his
election and withdraw his certificates representing shares of Capital Cities
Common Stock (the "Capital Cities Certificates") deposited with the Exchange
Agent by written notice to the Exchange Agent received by the close of
business on the day prior to the Election Deadline. As of the Election
Deadline, all holders of Capital Cities Common Stock immediately prior to the
Effective Time that shall not have submitted to the Exchange Agent or shall
have properly revoked an effective, properly completed Election Form shall be
deemed to have made a Cash Election.
Dividends. No dividends or other distributions declared after the Effective
Time on New Disney Common Stock shall be paid with respect to any shares of
Capital Cities Common Stock represented by a Capital Cities Certificate, until
such Capital Cities Certificate is surrendered for exchange according to the
procedures described above.
Fractional Shares. No fractional shares of New Disney Common Stock shall be
issued pursuant to the Capital Cities Merger. In lieu of the issuance of any
fractional shares of New Disney Common Stock, cash equal to the product of
such fractional amount and the Disney Common Stock Price will be paid to
holders in respect of any fractional share of New Disney Common Stock that
would otherwise be issuable.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Reorganization Agreement contains customary representations and
warranties by both Disney and Capital Cities as to, among other things: (i)
due organization and good standing; (ii) corporate authority to enter into the
Reorganization Agreement and related agreements; (iii) authorized capital
stock; (iv) ownership of subsidiaries; (v) the lack of certain investments or
interests; (vi) the compliance of the Acquisition with charters, bylaws and
the law; (vii) the absence of certain material defaults or violations; (viii)
the filing of certain documents with the Commission; (ix) the accuracy of
financial statements; (x) the absence of certain litigation; (xi) the absence
of material changes or events; (xii) tax matters; (xiii) the absence of
material liabilities related to employee benefit plans; (xiv) the absence of
material labor disputes; and (xv) fairness opinions.
CERTAIN COVENANTS
Conduct of Business Pending the Reorganization. Pursuant to the
Reorganization Agreement, Disney and Capital Cities have made various
customary covenants relating to the Acquisition. Capital Cities has agreed
that, prior to the Effective Time, Capital Cities and its significant
subsidiaries will conduct their operations according to their usual, regular
and ordinary course of business. Specifically, Capital Cities has agreed,
among other things: (i) to preserve intact its business organization,
relationships and goodwill and to keep available the services of its officers
and employees; (ii) not to materially amend its certificate of incorporation
or bylaws (other than in contemplation of this Reorganization Agreement);
(iii) not to grant, confer or award any bonuses or other forms of cash
incentives to any officer, director or key employee except consistent with
past practice or grant or confer any awards (other than those granted as of
the date of the Reorganization Agreement) under the Incentive Compensation
Plan of Capital Cities (as amended through December 9, 1993), not to increase
any compensation under any employment agreement with any of its present or
future officers, directors or employees, except for normal increases
consistent with past practice, grant any severance or termination pay to, or
enter into any employment or severance agreement with any officer or director
or amend any such agreement in any material respect other than severance
arrangements which are consistent with past practice with respect to employees
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terminated by Capital Cities, and not to adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect; (iv) not to issue
new Capital Cities capital stock (except pursuant to the exercise of
contractual rights existing prior to the execution of the Reorganization
Agreement), grant, confer, or award any option, warrant, conversion right, or
other right not existing on the date of the Reorganization Agreement, to
acquire any shares of its capital stock, effect a stock split or change its
current capitalization; (v) not to declare any dividends, other than regular
quarterly dividends not in excess of $0.05 per share, or make any
distributions with respect to its capital stock or redeem any of its capital
stock or stock of its subsidiaries; (vi) not to dispose of or acquire (nor
allow any subsidiary to dispose of or acquire) any asset, in each case, for an
amount exceeding $100,000,000; (vii) not to incur material indebtedness for
borrowed money, or issue or sell any debt securities other than in the
ordinary course of business, in each case, in an amount exceeding
$100,000,000; (viii) not to mortgage or encumber any Capital Cities properties
or assets except as would not be reasonably likely to have a material adverse
effect; (ix) not to change its accounting practices; (x) not to enter into any
program, production or distribution arrangement with a term greater than one
year without first consulting Disney; (xi) to take all necessary steps to
cause the dilution provisions of the Capital Cities Rights Agreement (as
defined below) to be inapplicable to the transactions contemplated by the
Reorganization Agreement; and (xii) not to authorize or make capital
expenditures in excess of $200,000,000 in the aggregate.
Disney has agreed that, prior to the Effective Time, it will, among other
things: (i) not effect any stock split or issue any shares of its capital
stock at less than fair market value; (ii) not amend its certificate of
incorporation (although Disney may issue up to $100,000,000 of its preferred
stock); (iii) not declare any dividends or make any distributions with respect
to its capital stock other than regular quarterly cash dividends including any
increases thereof consistent with past practice; and (iv) take all necessary
steps to cause the dilution provisions of the Disney Rights Agreement (as
defined below) to be inapplicable to the transactions contemplated by the
Reorganization Agreement.
Disney has agreed that it will cause New Disney and both DCA Merger Corp.
and DCB Merger Corp. to: (i) perform all of their respective obligations under
the Reorganization Agreement and the Merger Agreements in accordance with the
terms thereof; (ii) not incur any liabilities other than those appropriate for
the consummation of the transactions contemplated by the Reorganization
Agreement; (iii) not engage in any business or activities of any kind or enter
into any agreements or arrangements with any person or entity not contemplated
by the Reorganization Agreement or Merger Agreements; and (iv) not create any
encumbrances upon their respective properties or assets whether they may
attach prior to or after the Effective Time.
Alternative Proposals. Pursuant to the Reorganization Agreement, Capital
Cities has agreed that neither it, nor any of its subsidiaries, will permit
its respective officers, directors, employees, agents or representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) to initiate, solicit or encourage,
directly or indirectly, any inquiries, or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders), with respect to a merger, acquisition, consolidation or similar
transaction involving the purchase of (i) all or any significant portion of
the assets of Capital Cities and its subsidiaries taken as a whole, or any
subsidiary of Capital Cities which owns ESPN, Lifetime Television or A&E
Television Network, (ii) 25% or more of the outstanding shares of Capital
Cities Common Stock or (iii) 25% of the outstanding shares of the capital
stock of any Subsidiary of Capital Cities which owns or operates ESPN,
Lifetime Television or A&E Television Network (any such proposal or offer
being referred to as an "Alternative Proposal") or engage in any discussions
or negotiations concerning, or provide any confidential information or data to
any person, relating to an Alternative Proposal, or otherwise facilitate any
effort or attempt to make or implement an Alternative Proposal. Capital Cities
has further agreed that it will immediately inform Disney if any such
inquiries or proposals are received, any confidential information is
requested, or any negotiations or discussions are sought to be initiated with
Capital Cities. However, the Capital Cities Board is not prohibited from (a)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal and (b) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited bona fide offer if, and only if, (i)
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based upon the advice of outside counsel, the Capital Cities Board determines
in good faith that such action is required for the Capital Cities Board to
comply with its fiduciary duties to shareholders imposed by law, (ii) Capital
Cities provides written notice to Disney prior to furnishing any information
or entering into any negotiations, and (iii) Capital Cities keeps Disney
informed as to the status and all material information relating to any
discussions or negotiations. Capital Cities may not terminate the
Reorganization Agreement (except pursuant to the termination provisions
contained in the Reorganization Agreement), enter into any agreement with
respect to, or in any way facilitate, an Alternative Proposal while the
Reorganization Agreement remains in effect, or fail to comply with any of its
obligations under the Reorganization Agreement.
Employee Benefits. The Reorganization Agreement provides that Disney will
cause to remain in effect for the benefit of Capital Cities' employees for a
period of at least two years after the Effective Time all employee benefit
plans of Capital Cities and its subsidiaries (including Capital Cities'
existing severance policies and programs but excluding stock and incentive
compensation plans and those plans that are the subject of collective
bargaining) in effect on the date of the Reorganization Agreement and, with
respect to employees who are subject to collective bargaining, all benefits
that are required to be provided in accordance with the applicable collective
bargaining agreement; provided, however, that no severance payments will be
required to be made to any employee of Capital Cities or any of its
subsidiaries who is not terminated by Capital Cities or any of its
subsidiaries. No amendment shall be made to any such plan that materially and
adversely affects the rights or interests of the plan participants or
beneficiaries except to the extent required by law or to maintain tax
qualification. Disney has further agreed that if any employee of Capital
Cities or its subsidiaries is transferred to Disney or any of its affiliates
after the Effective Time or becomes a participant in any employee benefits
plan maintained by or contributed to by Disney or its affiliates, such
employee shall receive full credit for his prior service with Capital Cities
or its subsidiary under Disney's employee benefits plans to the extent such
service is recognized under the comparable plans of Capital Cities. However,
Disney may cause a reduction in benefits under any of its employee benefits
plans to avoid duplication of benefits with respect to the same covered matter
or years of service.
Meetings of Stockholders. Pursuant to the Reorganization Agreement, both
Disney and Capital Cities have agreed to take all necessary action, in
accordance with applicable law and its respective certificate of incorporation
and bylaws, to promptly convene the Special Meetings. The Disney Board and the
Capital Cities Board have agreed to recommend such approval and to take all
lawful action to solicit such approvals. However, either the Disney Board or
Capital Cities Board, in the exercise of its good faith judgment and based on
the advice of outside counsel as to its fiduciary duties to its stockholders
or its shareholders, as the case may be, imposed by law, may change its
recommendation or withdraw its solicitation.
Indemnification and Insurance. The Reorganization Agreement provides that,
after the Effective Time, New Disney will indemnify, to the fullest extent
that Capital Cities would have been permitted under applicable law, each
person who was, as of the date of the Reorganization Agreement, or has been at
any time prior to the date of the Reorganization Agreement, an officer or
director of Capital Cities, against all losses, claims, damages, liabilities,
costs or expenses (including attorney's fees), judgments, fines, penalties and
amounts paid in connection with any claims, suits, actions, proceedings or
investigations pertaining to acts or omissions or alleged acts or omissions
made by them in their capacities as such officers and directors. New Disney
will also cause the surviving corporation of the Capital Cities Merger to
maintain in effect (i) provisions in its certificate of incorporation and
bylaws regarding indemnification of officers and directors to the fullest
extent under applicable law, and (ii) officers' and directors' liability
insurance, on terms not substantially less advantageous, covering the officers
and directors who are currently covered by Capital Cities' existing officers'
and directors' liability insurance policy, for a period of not less than three
years after the Effective Time. However, New Disney shall not be required to
pay an annual premium more than one and one-half times the current premium
paid by Capital Cities for its existing coverage in order to meet its
obligation under this covenant.
Other Actions. Pursuant to the Reorganization Agreement, both Capital Cities
and Disney have agreed to use their reasonable efforts to take, or cause to be
taken, all other action and to do, or cause to be done, all other things
necessary, proper or appropriate to consummate the transactions contemplated
by the Reorganization
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Agreement. Both Disney and Capital Cities have acknowledged that, under
applicable rules and regulations of the FCC, certain assets currently held or
attributable to Disney or Capital Cities cannot be held or attributed to New
Disney after the Effective Time without an appropriate waiver being obtained.
If necessary in order to obtain the FCC's approval of the transactions
contemplated by the Reorganization Agreement, Disney and Capital Cities will
divest any or all assets and take any other such action as is required to
consummate such transactions. See "THE ACQUISITION--Regulatory Approvals--FCC
Approval Process."
Certain Other Covenants. Both Disney and Capital Cities have also agreed:
(i) to promptly make their respective filings, and any other submissions,
under the HSR Act and the FCC Act and obtain all other consents, approvals or
permits from the necessary Federal and state governments and regulatory
agencies (including any national securities exchange) prior to the Effective
Time; (ii) to consult with each other prior to issuing any press release or
public statement; (iii) subject to any applicable rules and regulations of the
FCC, to allow all designated officers, attorneys, accountants and
representatives of the other reasonable access to offices, records and files
(including information relating to commitments, contracts, titles and
financial position) and to instruct their respective employees, counsel and
financial advisors to cooperate with each other's investigation; (iv) to
cooperate in the filing of a registration statement on Form S-4 and obtain all
necessary state securities laws permits or approvals; (v) that Disney will
cause New Disney to submit listing applications to the NYSE and the PSE, and
will use reasonable efforts to obtain the approval of such applications prior
to the Effective Time; (vi) that Capital Cities will use all reasonable
efforts to deliver or cause to be delivered to Disney an affiliate letter, in
the form attached to the Reorganization Agreement, from each of the Capital
Cities Affiliates prior to the Closing Date; (vii) that Disney and Capital
Cities will cooperate in the filing of all returns, questionnaires,
applications or other documents relating to any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes or
fees which become payable in connection with the Acquisition; (viii) that New
Disney will pay, without deduction for withholding from any amount payable to
holders of Capital Cities Common Stock, any New York State Tax on Gains
Derived from Certain Real Property Transfers (the "Gains Tax"), New York State
Real Estate Transfer Tax, New York City Real Property Transfer Tax, New York
State Stock Transfer Tax, and any similar taxes imposed by any other state of
the United States (and any penalties and interest with respect to such taxes)
which become payable in connection with the Acquisition on behalf of the
shareholders of Capital Cities; and (ix) that Capital Cities and Disney will
cooperate in the determination of the portion of the consideration allocable
to the real property of Capital Cities and its subsidiaries in New York State
and City (or in any other applicable jurisdiction).
CONDITIONS TO THE ACQUISITION
The obligations of Disney and Capital Cities to consummate the Acquisition
are conditioned on the fulfillment of the following: (i) the effectiveness of
the Registration Statement and the absence of any stop order suspending the
effectiveness thereof and no proceeding for that purpose having been initiated
by the Commission; (ii) receipt of all necessary approvals under state
securities laws relating to the issuance or trading of the New Disney Common
Stock to be issued to Capital Cities shareholders; (iii) approval, in the
manner required by law or the applicable stock exchange or regulatory body, of
the stockholders of Disney and the shareholders of Capital Cities, of the
Reorganization Agreement and all transactions contemplated thereby; (iv)
expiration or termination of the applicable waiting period under the HSR Act;
(v) receipt of all orders of the FCC required in connection with the
consummation of the transactions contemplated by the Acquisition whether or
not any appeal or request for reconsideration is pending or whether the time
for filing any such appeal or request for reconsideration or for any sua
sponte action by the FCC has expired; (vi) the receipt of all consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body (other than the FCC)
required in connection with the execution, delivery and performance of the
Reorganization Agreement (except for those documents required to be filed
after the Effective Time and except where the failure to obtain such approval
or order would not have a material adverse effect); (vii) neither Capital
Cities nor Disney shall be subject to any order or injunction of a court of
competent jurisdiction which prohibits the consummation of the transaction
contemplated in the Reorganization Agreement, and in the event
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such order or injunction shall have been issued, each party will use its
reasonable efforts to have any such injunction lifted; and (viii) the listing
of the New Disney Common Stock on the NYSE, subject only to official notice of
issuance.
The obligation of Disney to consummate the Acquisition is conditioned on the
fulfillment of the following conditions: (i) the performance by Capital
Cities, in all material respects, of its obligations required to be performed
on or prior to the Closing Date and contained in the Reorganization Agreement;
(ii) the representations and warranties made by Capital Cities in the
Reorganization Agreement shall be true as of the Closing Date (except for
changes specifically permitted by the Reorganization Agreement); (iii) the
receipt by Disney of an opinion from tax counsel stating that the Disney
Merger will be treated as a reorganization described in Section 368(a) of the
Code and/or a transfer of property to New Disney by the holders of Disney
Common Stock governed by Section 351 of the Code; (iv) no material adverse
changes in the business, financial condition or operations of Capital Cities
shall have occurred; (v) the Stock Agreement has remained in effect through
the Effective Time; and (vi) after the Effective Time, no person will have the
right under any stock option plan (or option granted thereunder) to acquire
equity securities of Capital Cities.
The obligation of Capital Cities to consummate the Acquisition is
conditioned on the fulfillment of the following conditions: (i) the
performance by Disney, in all material respects, of its obligations required
to be performed on or prior to the Closing Date and contained in the
Reorganization Agreement; (ii) the representations and warranties made by
Disney in the Reorganization Agreement shall be true as of the Closing Date
(except for changes specifically permitted by the Reorganization Agreement);
(iii) the receipt by Capital Cities of an opinion from tax counsel stating
that the Capital Cities Merger will be treated as a transfer of property under
Section 351(a) or 351(b) of the Code; (iv) no material adverse changes in the
business, financial condition or operations of Disney shall have occurred; and
(v) New Disney shall have executed the Registration Rights Agreement.
TERMINATION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement is subject to termination at the option of
either Disney or Capital Cities if the Acquisition is not consummated on or
before October 1, 1996. In addition, prior to such time, the Reorganization
Agreement is subject to termination upon: (i) the disapproval of either the
Capital Cities Proposal or the Disney Proposal by the respective stockholders
voting thereon; (ii) the issuance by the FCC of an order or ruling denying
approval of the transactions contemplated by the Reorganization Agreement and
such order or ruling having become final and non-appealable; (iii) the
issuance by a United States Federal court or Federal governmental, regulatory
or administrative agency, or a state court of competent jurisdiction or state
governmental, regulatory or administrative agency or commission, of an order,
decree or ruling permanently restraining, enjoining or otherwise prohibiting
the consummation of the Acquisition, and such order, decree or ruling having
become final and non-appealable, provided that the party seeking to terminate
the Reorganization Agreement shall have used all reasonable efforts to remove
such injunction, order or decree; or (iv) the mutual consent of Disney and
Capital Cities.
The Reorganization Agreement may be terminated by the Capital Cities Board
at any time prior to the Effective Time if (i) in the good faith judgment of
the Capital Cities Board, as advised by outside counsel, its fiduciary duties
to its shareholders requires such termination by reason of an Alternative
Proposal being made, (ii) there has been a breach by Disney of any
representation or warranty in the Reorganization Agreement which would have,
or which would be reasonably likely to have, a material adverse effect on
Disney, (iii) there has been a material breach of any of the covenants or
agreements in the Reorganization Agreement on the part of Disney which is not
curable or not cured within 30 days after written notice of the breach by
Capital Cities or (iv) the Disney Board shall have withdrawn or modified, in a
manner materially adverse to Capital Cities, its approval or recommendation of
the Reorganization Agreement or the Mergers.
The Disney Board may terminate the Reorganization Agreement at any time
prior to the Effective Time if (i) the Capital Cities Board shall have
withdrawn or modified in a manner materially adverse to Disney its
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approval or recommendation of the Reorganization Agreement or the Mergers, or
shall have recommended an Alternative Proposal to the Capital Cities
shareholders, (ii) there has been a breach by Capital Cities of any
representation or warranty in the Reorganization Agreement which would have,
or which would be reasonably likely to have, a material adverse effect on
Capital Cities or (iii) there has been a material breach by Capital Cities of
any of the covenants or agreements in the Reorganization Agreement on the part
of Capital Cities which is not curable or not cured within 30 days of written
notice by Disney.
TERMINATION FEE
In the event that an Alternative Proposal for Capital Cities is made and
thereafter the Reorganization Agreement is terminated (i) (A) by action of the
Disney Board, if (a) the Capital Cities Board has withdrawn or modified in a
manner materially adverse to Disney its approval or recommendation of the
Reorganization Agreement or the Mergers or has recommended an Alternative
Proposal to the Capital Cities shareholders, or (b) there has been a breach by
Capital Cities of any representation or warranty in the Reorganization
Agreement which would have, or which would be reasonably likely to have, a
material adverse effect on Capital Cities, or (c) there has been a material
breach of any of the covenants or agreements in the Reorganization Agreement
which breach is not curable or not cured within 30 days after written notice
of the breach given by Disney to Capital Cities or (B) by Capital Cities in
the exercise of its fiduciary duties to its stockholders in regard to such
Alternative Proposal, or (ii) for any other reason (other than due to a
material breach by Disney or the disapproval of the Acquisition by Disney's
stockholders) and a definitive agreement with respect to such Alternative
Proposal is executed within one year of termination, then Capital Cities is
required to pay Disney a fee of $400 million payable by wire transfer of same
day funds. Moreover, neither party is precluded from seeking damages for
willful breach of the Reorganization Agreement, including, without limitation,
attorneys' fees and the right to pursue any remedy at law or in equity.
REGISTRATION RIGHTS AGREEMENT
As a condition to Capital Cities' obligation to effect the Mergers, New
Disney is required to execute the Registration Rights Agreement, which
provides that Capital Cities Affiliates who have signed an affiliate letter
will have the right to require New Disney to register all or any portion of
the New Disney Common Stock then owned by the respective Capital Cities
Affiliates (collectively, the "Registrable Securities"). Capital Cities
Affiliates holding at least 25% of the Registrable Securities may make a
written "demand" of New Disney to effect the registration of all or part of
such Capital Cities Affiliate's or Affiliates' Registrable Securities;
provided, however, that New Disney will not be required to take any action if,
among other things, three "demand" registrations have been previously effected
or the Registrable Securities requested to be registered have a then current
market value of less than $50 million, unless such demand is for registration
of all remaining Registrable Securities. Such demand registration is subject
to postponement by New Disney for a limited period (the "Blackout Period") if
such registration would interfere with any proposed offering of shares,
pending financing, acquisition, corporate reorganization or other significant
transaction involving New Disney.
If New Disney seeks to register, in a proposed offering for cash, any New
Disney Common Stock while this Registration Rights Agreement is in effect,
Capital Cities Affiliates have the right to request that New Disney include
any or all of their Registrable Securities in the proposed offering (a
"Piggyback Registration"). New Disney must provide each Capital Cities
Affiliate with at least 15 business days notice prior to the filing of the
registration statement. Such notice must specify the approximate date of the
proposed filing and advise the Capital Cities Affiliate of his right to have
any or all of his Registrable Securities included in the registration. A
Capital Cities Affiliate, in a written request given to New Disney at least
two business days prior to the proposed filing, may include his Registrable
Securities in such registration statement, subject to constraints of
marketability of the proposed offering, as determined in good faith by the
lead managing underwriter. In the event marketing constraints prevent the
registration of all Registrable Securities requested to be registered, such
Registrable Securities shall be registered, to the extent marketable, on a pro
rata basis relative to the respective Capital Cities Affiliate's holding of
Registrable Securities.
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In registering Registrable Securities, New Disney will make commercially
reasonable efforts, which include relevant filings with the SEC, relevant
notices and necessary disclosures to requesting parties, and customarily
required warranties and representations to underwriters.
The Capital Cities Affiliates will pay all underwriting discounts,
commissions and transfer taxes related to the Registrable Securities offered
for sale by the Capital Cities Affiliates as well as the fees and
disbursements of its counsel. All other fees and expenses in connection with
the registration of Registrable Securities will be borne by New Disney.
New Disney agrees to indemnify the Capital Cities Affiliates and the
prospective underwriters of registrations of Registrable Securities for
liabilities arising out of violations by New Disney of applicable laws
relating to the registration statement and for material misstatements and
omissions, not provided by the Capital Cities Affiliates, included in the
registration statement. Likewise, each Capital Cities Affiliate agrees to
indemnify New Disney, all other Capital Cities Affiliates or any underwriter
for liabilities arising out of violations of applicable laws relating to its
offer and sale of Registrable Securities and for material misstatements and
omissions made in the registration statement in reliance on information
provided to New Disney by such Capital Cities Affiliates. Contribution will
also be available to any of the above parties in relation to relative fault,
to the extent that indemnification from an indemnifying party to an
indemnified party is unavailable.
STOCK AGREEMENT
Concurrently with the execution by Capital Cities of the Reorganization
Agreement, Disney, Berkshire Hathaway and Thomas S. Murphy, Chairman and Chief
Executive Officer of Capital Cities, entered into the Stock Agreement relating
to the 20,000,000 shares of Capital Cities Common Stock owned (either
beneficially or of record) by the Berkshire Shareholders.
In the Stock Agreement, Berkshire Hathaway has agreed to cause each
Berkshire Shareholder to vote its shares (or to execute written consents with
respect to such shares) (i) in favor of adoption and approval of the Capital
Cities Proposal; (ii) against any Alternative Proposal; and (iii) in favor of
any other matter necessary to consummate the transactions contemplated by the
Reorganization Agreement. Berkshire Hathaway also agreed, until the close of
business on the date of the Capital Cities Meeting and except as otherwise
provided in the Stock Agreement, to prevent each Berkshire Shareholder from
(i) selling, pledging or otherwise disposing of any of its shares; (ii)
granting a proxy or entering into any voting trust, agreement or arrangement
with respect to its shares; or (iii) entering into any contract, option or
other arrangement or undertaking with respect to the direct or indirect
acquisition or sale or other disposition of any Capital Cities Common Stock.
Berkshire Hathaway further agreed to prohibit any Berkshire Shareholder, any
subsidiary of any Berkshire Shareholder, or any of their respective officers,
directors, employees, agents and representatives, from providing any
information regarding, or directly or indirectly engaging in, any initiation,
solicitation, negotiation, discussion or encouragement with respect to any
Alternative Proposal. Berkshire Hathaway further agreed to cause each
Berkshire Shareholder to notify Disney immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
Berkshire Hathaway.
To the extent necessary to comply with the Stock Agreement, Mr. Murphy
agreed to relinquish all rights with respect to, and release Berkshire
Shareholders from any further liability or obligation under, the proxies given
by Berkshire Shareholders pursuant to a July 2, 1986 agreement among Capital
Cities Communications, Inc. and each Berkshire Shareholder. The Stock
Agreement terminates automatically upon termination of the Reorganization
Agreement.
The shares of New Disney Common Stock that will be issued to Berkshire
Hathaway in connection with the Acquisition, if and to the extent that
Berkshire Hathaway makes a Standard Election or a Stock Election (or makes a
Cash Election and is prorated), will be registered pursuant to the
Registration Statement (as will the shares of New Disney Common Stock to be
issued to all other former shareholders of Capital Cities).
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Berkshire Hathaway, which is a Capital Cities Affiliate and will sign an
affiliate letter, will be a party to the Registration Rights Agreement.
Berkshire Hathaway has informed Disney and Capital Cities that it has not
determined as of the date of this Joint Proxy Statement/Prospectus whether it
will make a Standard Election, a Stock Election or a Cash Election with
respect to the shares of Capital Cities Common Stock beneficially owned by the
Berkshire Shareholders.
PROGRAMMING AGREEMENT
Capital Cities and Disney entered into the Programming Agreement
concurrently with the execution of the Reorganization Agreement. Pursuant to
the Programming Agreement, during each of the three Capital Cities programming
seasons commencing with the Fall 1996 Season, Disney agreed to provide to
Capital Cities, and Capital Cities agreed to present, subject to pre-existing
Capital Cities commitments, (i) a full slate of Saturday morning programming
designed for children, consisting of Disney-produced programs, including
animation, and programming acquired by Disney from third parties (at Disney's
option, these programs may not be provided to Capital Cities until the Fall
1997 Season); (ii) a weekly-one hour Disney-themed program to be run in a
prime-time slot (the time slot for which is to be determined by Capital Cities
after consultation with Disney); and (iii) three prime-time specials, each at
least 60 minutes in length, featuring Disney-themed materials (the time slot
for which is to be determined by Capital Cities after consultation with
Disney).
All programs provided to Capital Cities pursuant to the Programming
Agreement are subject to Capital Cities' ultimate creative approval of content
and industry standards for comparable programs. In the event that any Disney
program is disapproved, or a program series is canceled, Disney shall have the
right to provide, and Capital Cities shall present, substitute programming
subject to Capital Cities' approval.
The Programming Agreement is terminable by Capital Cities if the
Reorganization Agreement is terminated by Capital Cities and such termination
results from: (i) mutual consent of Disney and Capital Cities; (ii) failure to
consummate the Acquisition by October 1, 1996; (iii) the failure of the
stockholders of either Disney or Capital Cities to approve the transactions
contemplated by the Reorganization Agreement; (iv) the issuance by a United
States Federal court of competent jurisdiction or Federal governmental,
regulatory or administrative agency or commission, or a state court of
competent jurisdiction or state governmental, regulatory or administrative
agency or commission, of an order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the Acquisition, such
order, decree or ruling having become final and non-appealable, provided that
the party seeking to terminate the Reorganization Agreement shall have used
all reasonable efforts to remove such injunction, order or decree; (v) the
issuance by the FCC of an order or rule denying approval of the transactions
contemplated by the Reorganization Agreement and such order or rule having
become final and non-appealable; (vi) a breach by Disney of any representation
or warranty in the Reorganization Agreement which would have, or would be
reasonably likely to have, a material adverse effect on Disney; or (vii) a
material breach of any of the covenants or agreements in the Reorganization
Agreement on the part of Disney which is not curable or not cured within 30
days after written notice of the breach by Capital Cities. The Programming
Agreement may be terminated by Disney following any other termination of the
Reorganization Agreement.
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BUSINESS OF DISNEY
Disney is a diversified international entertainment company with operations
in three business segments: Filmed Entertainment, Theme Parks and Resorts, and
Consumer Products. Disney employs approximately 69,000 people.
In its Filmed Entertainment business segment, Disney produces and acquires
live-action and animated motion pictures for distribution to the theatrical,
television and home video markets. Disney also produces original television
programming for the network and first-run syndication markets. In addition,
Disney provides programming for and operates The Disney Channel, a pay
television programming service, and KCAL-TV, a Los Angeles, California
television station. See "SIGNIFICANT REGULATIONS APPLICABLE TO BROADCASTING
SERVICES." The success of all of Disney's theatrical motion pictures and
television programming is heavily dependent upon public taste, which is
unpredictable and subject to change without warning. In addition, filmed
entertainment operating results fluctuate due to the timing of theatrical and
home video releases. Release dates are determined by several factors,
including timing of vacation and holiday periods and competition in the
market.
The Theme Parks and Resorts business segment includes Disney's operation of
the Walt Disney World(R) destination resort in Florida and the Disneyland
Park(R) and the Disneyland Hotel in California. In addition, Disney earns
royalties on revenues generated by the Tokyo Disneyland theme park. All of the
theme parks and most of the associated resort facilities are operated on a
year-round basis. Historically, the theme parks and resorts business
experiences fluctuations in park attendance and resort occupancy resulting
from the nature of vacation travel. Peak attendance and resort occupancy
generally occur during the summer months when school vacations occur and
during early-winter and spring holiday periods.
Disney's Consumer Products business segment involves the licensing of the
name "Walt Disney," as well as Disney's characters, visual and literary
properties and songs and music, to various consumer manufacturers, retailers,
show promoters and publishers throughout the world. Disney also engages in
direct retail distribution through The Disney Stores and consumer catalogs,
and is a publisher of books, magazines and comics in the United States and
Europe. In addition, Disney produces audio and computer software for all
markets, as well as film and video products for the educational marketplace.
Operating results for the consumer products business are influenced by
seasonal consumer purchasing behavior and by the timing of animated theatrical
releases.
Additional information concerning Disney is included in the Disney Reports
incorporated by reference in this Joint Proxy Statement/Prospectus. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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BUSINESS OF CAPITAL CITIES
Capital Cities, directly or through its subsidiaries, operates the ABC
Television Network, ten television stations, the ABC Radio Networks and 21
radio stations, and provides programming for cable television. Capital Cities,
through joint ventures, is engaged in international broadcast/cable services
and television production and distribution. Capital Cities also publishes
daily and weekly newspapers, shopping guides, various specialized and business
periodicals and books, provides research services and also distributes
information from databases.
Capital Cities' assets include the ABC Television Network, which as of June
30, 1995 had 224 primary affiliated stations reaching 99.9% of all U.S.
television households. A number of secondary affiliated stations add to the
primary coverage. In addition, Capital Cities owns nine very high frequency
(VHF) television stations, one ultra high frequency (UHF) television station,
eleven standard (AM) radio stations and ten frequency modulation (FM) radio
stations. All but one television station are affiliated with the ABC
Television Network and all but four radio stations are affiliated with the ABC
Radio Networks.
Generally, Capital Cities pays the cost of producing its own programs or
acquiring broadcast rights from other producers for its network programming
and pays varying amounts of compensation to its affiliated stations for
broadcasting the programs and commercial announcements included therein.
Substantially all revenues from network operations are derived from the sale
to advertisers of time in network programs for commercial announcements.
Capital Cities' Cable and International Broadcast operations are principally
involved in the production and distribution of cable television programming,
in the licensing of programming to domestic and international markets and in
joint ventures in foreign-based television operations and television
production and distribution entities. The primary domestic cable programming
services are ESPN, A&E Television Network and Lifetime Television.
Capital Cities' publishing operations (i) publish seven daily newspapers
(five of which have Sunday editions); weekly community newspapers in four
states; shopping guides and real estate magazines in eleven states;
specialized publications that involve news and ideas for various industries;
and consumer, special interest, trade and agricultural publications; and (ii)
engage in research and database services.
Additional information concerning Capital Cities is included in the Capital
Cities Reports incorporated by reference in this Joint Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
BUSINESS OF NEW DISNEY
New Disney, a wholly owned subsidiary of Disney, has not conducted any
substantial business activities to date, other than those incident to its
formation, its execution of the Merger Agreements and related agreements and
its participation in the preparation of this Joint Proxy Statement/Prospectus.
In September 1995, Keystone, another wholly owned Disney subsidiary, was
merged with and into New Disney. Prior to the merger, Keystone's only business
was the acquisition and management of a small number of residential dwellings
in Burbank, California, used primarily in connection with the relocation of
Disney employees. Immediately following the consummation of the Acquisition,
New Disney will become a holding company for Disney and Capital Cities and
their respective subsidiaries. Accordingly, the business of New Disney,
through its wholly owned subsidiaries Disney and Capital Cities and their
respective subsidiaries, will be the businesses currently conducted by Disney
and Capital Cities and their respective subsidiaries. See "BUSINESS OF DISNEY"
and "BUSINESS OF CAPITAL CITIES."
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The Disney Common Stock is listed on the NYSE, the PSE, the Swiss Stock
Exchange and the Tokyo Stock Exchange under the symbol DIS. The Capital Cities
Common Stock is listed on the NYSE and the PSE under the symbol CCB.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sales prices of Disney Common Stock and Capital Cities
Common Stock as reported on the NYSE Composite Tape, in each case based on
published financial sources, and the dividends declared on such stock.
<TABLE>
<CAPTION>
DISNEY COMMON STOCK CAPITAL CITIES COMMON STOCK*
----------------------------- ---------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
----- ----- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter......... 47 7/8 41 3/4 0.063 53 1/8 47 5/8 0.005
Second Quarter........ 45 1/8 38 1/4 0.063 55 1/8 50 0.005
Third Quarter......... 41 3/8 36 0.063 57 3/4 49 0.005
Fourth Quarter........ 45 3/8 37 1/8 0.063 64 3/8 56 3/4 0.005
1994
First Quarter......... 48 5/8 40 7/8 0.075 71 7/8 60 1/4 0.005
Second Quarter........ 45 1/8 39 5/8 0.075 75 1/2 66 1/4 0.050
Third Quarter......... 44 1/4 38 3/4 0.075 85 3/8 71 1/8 0.050
Fourth Quarter........ 46 7/8 37 3/4 0.075 86 1/2 76 1/8 0.050
1995
First Quarter......... 56 1/4 45 0.090 91 3/4 82 3/4 0.050
Second Quarter........ 60 52 3/4 0.090 109 1/2 80 3/4 0.050
Third Quarter......... 62 7/8 50 1/2 0.090 121 95 1/2 0.050
Fourth Quarter
(through November 10,
1995)................ 59 3/4 55 5/8 0.090 121 7/8 115 1/4 --
</TABLE>
- --------
* Capital Cities Common Stock prices and dividends have been adjusted for a
10-for-1 stock split effective June 3, 1994.
On July 28, 1995, the last full trading day prior to the public announcement
of the proposed Acquisition, the closing price on the NYSE Composite Tape was
$57 3/8 per share of Disney Common Stock and $96 1/8 per share of Capital
Cities Common Stock. On November 10, 1995, the most recent practicable date
prior to the printing of this Joint Proxy Statement/Prospectus, the closing
price on the NYSE Composite Tape was $59 3/8 per share of Disney Common Stock
and $121 1/8 per share of Capital Cities Common Stock. Holders of Disney
Common Stock and Capital Cities Common Stock are urged to obtain current
market quotations prior to making any decision with respect to the
Acquisition.
The payment of future dividends on New Disney Common Stock will be a
business decision to be made by the Board of Directors of New Disney from time
to time based upon the results of operations and financial condition of New
Disney and such other factors as the New Disney Board of Directors considers
relevant.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Disney as of June 30,
1995 and Capital Cities as of July 2, 1995, and the pro forma capitalization
of New Disney after giving effect to the Acquisition. This table should be
read in conjunction with the "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS" included elsewhere in this Joint Proxy Statement/Prospectus and
the Disney and Capital Cities historical consolidated financial statements,
including the notes thereto, which are incorporated by reference in this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
---------------------------------------------
HISTORICAL PRO FORMA (A)
----------------------- ---------------------
SCENARIO 1 SCENARIO 2
MAXIMUM MAXIMUM
DISNEY CAPITAL CITIES STOCK (B) CASH (C)
-------- -------------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
BORROWINGS:
Existing Borrowings............ $3,362.2 $ 612.9 $ 3,975.1 $ 3,975.1
New Borrowings................. -- -- 7,965.1 16,794.4
-------- -------- --------- ---------
Total Borrowings............... 3,362.2 612.9 11,940.2 20,769.5
-------- -------- --------- ---------
Total Stockholders' Equity....... 6,374.1 4,603.9 15,203.4 6,374.1
-------- -------- --------- ---------
Total Capitalization............. $9,736.3 $5,216.8 $27,143.6 $27,143.6
======== ======== ========= =========
</TABLE>
- --------
(a) Upon consummation of the Capital Cities Merger, each outstanding share of
Capital Cities Common Stock will be converted into the right to receive
cash, shares of New Disney Common Stock or a combination of both cash and
New Disney Common Stock. The exact amount of cash and/or shares of New
Disney Common Stock to be received by each shareholder of Capital Cities
pursuant to the Capital Cities Merger is dependent upon, among other
things, (i) the stated preferences of Capital Cities shareholders on the
Election Forms, (ii) the proration procedures to be applied if the
Requested Stock Amount exceeds the Stock Component or the Requested Cash
Amount exceeds the Cash Component, and (iii) the level of the Maximum Cash
Amount, including any increase of the Maximum Cash Amount by Disney, in
its sole discretion. Accordingly, two alternative scenarios of unaudited
pro forma combined condensed financial statements are presented, which
give effect to the range of possible amounts of New Disney Common Stock
and/or cash to be received by Capital Cities shareholders upon
consummation of the Capital Cities Merger. Scenario 1 assumes that all
Capital Cities shareholders receive one share of New Disney Common Stock
and $65 in cash (Standard Consideration) for each outstanding share of
Capital Cities Common Stock, reflecting the maximum number of shares of
New Disney Common Stock which could be issued in connection with the
Acquisition. Scenario 2 assumes that all Capital Cities shareholders
receive solely cash (Cash Consideration) for each outstanding share of
Capital Cities Common Stock, without regard to the Cash Component. See
"THE REORGANIZATION AGREEMENT--Capital Cities Merger Consideration."
(b) Pro forma debt and equity capitalization reflect new borrowings to finance
a portion of the purchase consideration, and the issuance of 154.9 million
shares of New Disney Common Stock. Disney Treasury Stock and Capital
Cities shareholders' equity are eliminated in the Acquisition.
(c) Pro forma debt capitalization reflects new borrowings to finance a portion
of the consideration to be received by Capital Cities shareholders upon
consummation of the Capital Cities Merger. Disney Treasury Stock and
Capital Cities shareholders' equity are eliminated in the Acquisition.
68
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
DISNEY/CAPITAL CITIES COMBINED COMPANY
The following unaudited pro forma combined condensed financial statements
are based upon the consolidated financial statements of Disney and Capital
Cities, combined and adjusted to give effect to the Acquisition. Upon
consummation of the Capital Cities Merger, each outstanding share of Capital
Cities Common Stock will be converted into the right to receive cash, shares
of New Disney Common Stock or a combination of both cash and New Disney Common
Stock. The exact amount of cash and/or shares of New Disney Common Stock to be
received by each shareholder of Capital Cities pursuant to the Capital Cities
Merger is dependent upon, among other things, (i) the stated preferences of
the Capital Cities shareholders on the Election Forms, (ii) the proration
procedures to be applied if the Requested Stock Amount exceeds the Stock
Component or the Requested Cash Amount exceeds the Cash Component, and (iii)
the level of the Maximum Cash Amount, including any increase of the Maximum
Cash Amount by Disney, in its sole discretion. Accordingly, two alternative
scenarios of unaudited pro forma combined condensed financial statements are
presented, which give effect to the range of possible amounts of New Disney
Common Stock and/or cash to be received by Capital Cities shareholders upon
the consummation of the Capital Cities Merger. Scenario 1 assumes that all
Capital Cities shareholders receive one share of New Disney Common Stock and
$65 in cash (Standard Consideration) for each outstanding share of Capital
Cities Common Stock, reflecting the maximum number of shares of New Disney
Common Stock which could be issued in connection with the Acquisition.
Scenario 2 assumes that all Capital Cities shareholders receive solely cash
(Cash Consideration) for each outstanding share of Capital Cities Common
Stock, without regard to the Cash Component. See "THE REORGANIZATION
AGREEMENT--Capital Cities Merger Consideration."
The following unaudited pro forma combined condensed statements of income
for the nine months ended June 30, 1995 and for the year ended September 30,
1994 give effect to the Acquisition as if it had occurred at the beginning of
each period presented. The unaudited pro forma combined condensed statements
of income for the nine months ended June 30, 1995 were prepared based upon the
unaudited consolidated statements of income of Disney for the nine months
ended June 30, 1995 and of Capital Cities for the six months ended July 2,
1995 and the three months ended December 31, 1994. The unaudited pro forma
combined condensed statements of income for the year ended September 30, 1994
were prepared based upon the consolidated statements of income of Disney for
the year ended September 30, 1994 and of Capital Cities for the nine months
ended October 2, 1994 and the three months ended December 31, 1993.
The following unaudited pro forma combined condensed balance sheets at June
30, 1995 give effect to the Acquisition as if it had occurred on such date and
were prepared based upon the consolidated balance sheets of Disney as of June
30, 1995 and of Capital Cities as of July 2, 1995.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with the Disney and Capital Cities audited consolidated
financial statements and unaudited interim consolidated financial statements,
including the notes thereto, which are incorporated by reference in this Joint
Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the results of operations or financial position of
the combined company that would have occurred had the Acquisition occurred at
the beginning of each period presented or on the date indicated, nor are they
necessarily indicative of future operating results or financial position.
The unaudited pro forma adjustments are based upon information set forth in
this Joint Proxy Statement/Prospectus, and certain assumptions included in the
notes to the unaudited pro forma combined condensed financial statements.
Disney and Capital Cities believe the pro forma assumptions are reasonable
under the circumstances. In addition, as of the date of this Joint Proxy
Statement/Prospectus, Disney believes that the unaudited pro forma financial
statements reflect the impact on the operations and liquidity of New Disney of
all material events or changes expected to result from the Acquisition.
69
<PAGE>
The Acquisition will be accounted for by the purchase method of accounting.
Accordingly, New Disney's cost to acquire Capital Cities (the "Purchase
Consideration"), calculated to be $19.08 billion assuming a Disney Common
Stock Price of $57, will be allocated to the assets acquired and liabilities
assumed according to their respective fair values, with the excess Purchase
Consideration being allocated to goodwill. The total cost to acquire Capital
Cities is subject to change, to the extent that fluctuations in the market
value of Disney Common Stock cause the Disney Common Stock Price to change. A
change in the Disney Common Stock Price will result in a corresponding change
in goodwill and related amortization expense. The final allocation of the
Purchase Consideration is dependent upon certain valuations and other studies
that have not progressed to a stage where there is sufficient information to
make such an allocation in the accompanying unaudited pro forma combined
condensed financial statements. Accordingly, the purchase allocation
adjustments made in connection with the development of the unaudited pro forma
combined condensed financial statements are preliminary and have been made
solely for the purpose of developing such unaudited pro forma combined
condensed financial statements.
The $16.47 billion pro forma excess of Purchase Consideration over net
tangible assets acquired as of June 30, 1995 is being amortized over 40 years
at a rate of $411.7 million per year, in accordance with generally accepted
accounting principles, which require that acquired intangible assets be
amortized over lives not to exceed 40 years. New Disney believes that the
intangible assets acquired, representing principally the franchises and
trademarks of Capital Cities, represent scarce assets with indefinite lives,
which have historically appreciated in value over time. In addition, the
Acquisition will permit the continued expansion of current lines of business,
as well as the development of new businesses, via the cross promotion of the
well known franchises, trademarks and products of Disney and Capital Cities.
New Disney believes it will benefit from the Acquisition for an indeterminable
period of time of at least 40 years and, therefore, a 40-year amortization
period is appropriate. After consummation of the Acquisition, New Disney
anticipates completion of the valuations and other studies of the significant
assets, liabilities and business operations of Capital Cities. Using this
information, New Disney will make a final allocation of the Purchase
Consideration, including allocation to tangible assets and liabilities,
identifiable intangible assets and goodwill. New Disney believes that any
significant allocation of excess Purchase Consideration to assets other than
goodwill will be amortized over periods approximating 40 years.
New Disney will perform periodic reviews of the goodwill and other
intangible assets arising from the Acquisition, to ensure that they are
carried at recoverable amounts in light of current business conditions.
The future results of operations of New Disney will reflect increased
amortization of intangible assets, increased interest expense and a higher
effective income tax rate, since a significant portion of the consideration to
be received by Capital Cities shareholders upon the consummation of the
Capital Cities Merger will be non-deductible for tax purposes. The future
financial position of New Disney will reflect increased intangible assets as
described above, increased borrowings, and under Scenario 1, increased
stockholders' equity resulting from the issuance of New Disney Common Stock to
shareholders of Capital Cities. See "Notes to Unaudited Pro Forma Combined
Condensed Financial Statements."
70
<PAGE>
INDEX TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Scenario 1: Capital Cities shareholders receive the Standard Consideration
(maximum stock)
.Unaudited pro forma combined condensed statements of income:
--Nine months ended June 30, 1995
--Year ended September 30, 1994
.Unaudited pro forma combined condensed balance sheet as of June 30, 1995
Scenario 2: Capital Cities shareholders receive the Cash Consideration,
without regard to the Cash Component (maximum cash)
.Unaudited pro forma combined condensed statements of income:
--Nine months ended June 30, 1995
--Year ended September 30, 1994
.Unaudited pro forma combined condensed balance sheet as of June 30, 1995
Notes to unaudited pro forma combined condensed financial statements
71
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 1995
(SCENARIO 1: CAPITAL CITIES SHAREHOLDERS RECEIVE THE STANDARD CONSIDERATION
(MAXIMUM STOCK))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -----------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
-------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................... $8,988.5 $5,229.8 $14,218.3
Costs and Expenses......... 6,682.9 3,985.3 10,668.2
Depreciation............... 345.9 84.3 430.2
Amortization of Intangible
Assets.................... 48.1 $ 260.7 (a) 308.8
-------- -------- ------- ---------
Operating Income........... 1,959.7 1,112.1 (260.7) 2,811.1
General and Administrative
Expenses.................. 126.8 35.4 162.2
Interest Expense, Net...... 101.3 2.1 466.5 (b) 569.9
Other...................... 19.6 (3.7) 15.9
-------- -------- ------- ---------
Income Before Income Tax-
es........................ 1,712.0 1,078.3 (727.2) 2,063.1
Income Taxes............... 595.9 471.1 (181.9)(c) 885.1
-------- -------- ------- ---------
Net Income................. $1,116.1 $ 607.2 $(545.3) $ 1,178.0
======== ======== ======= =========
Earnings Per Share......... $ 2.11 $ 3.94 $ 1.72(d)
======== ======== =========
Average Number of Common
and Common Equivalent
Shares Outstanding........ 530.2 154.0 685.1(d)
======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
72
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1994
(SCENARIO 1: CAPITAL CITIES SHAREHOLDERS RECEIVE THE STANDARD CONSIDERATION
(MAXIMUM STOCK))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- ------------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
--------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................ $10,055.1 $6,160.1 $16,215.2
Costs and Expenses...... 7,679.7 4,849.8 12,529.5
Depreciation............ 409.7 105.3 515.0
Amortization of
Intangible Assets...... 62.8 $ 348.9 (a) 411.7
--------- -------- --------- ---------
Operating Income........ 1,965.7 1,142.2 (348.9) 2,759.0
General and
Administrative
Expenses............... 162.2 40.7 202.9
Interest Expense
(Income), Net.......... (10.0) 29.8 671.4 (b) 691.2
Other................... 110.4 110.4
--------- -------- --------- ---------
Income Before Income
Taxes.................. 1,703.1 1,071.7 (1,020.3) 1,754.5
Income Taxes............ 592.7 465.7 (261.8)(c) 796.6
--------- -------- --------- ---------
Net Income.............. $ 1,110.4 $ 606.0 $ (758.5) $ 957.9
========= ======== ========= =========
Earnings Per Share...... $ 2.04 $ 3.87 $ 1.37(d)
========= ======== =========
Average Number of Common
and Common Equivalent
Shares Outstanding..... 545.2 156.5 700.1(d)
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
73
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1995
(SCENARIO 1: CAPITAL CITIES SHAREHOLDERS RECEIVE THE STANDARD CONSIDERATION
(MAXIMUM STOCK))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ------------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
--------- -------------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents.. $ 956.7 $ 1,169.3 $(1,626.0)(a) $ 500.0
Investments................ 1,457.3 284.2 (1,000.0)(b) 741.5
Receivables................ 1,449.9 885.3 2,335.2
Inventories................ 727.9 727.9
Film and Television Costs.. 1,974.9 565.8 2,540.7
Theme Parks, Resorts and
Other Property, Net....... 6,131.9 1,286.4 7,418.3
Intangible Assets, Net..... 1,995.2 14,471.9 (c) 16,467.1
Other Assets............... 1,682.7 811.2 2,493.9
--------- --------- --------- ---------
$14,381.3 $ 6,997.4 $11,845.9 $33,224.6
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts Payable and Other
Accrued Liabilities....... $ 3,170.3 $ 1,205.9 $ (344.6)(d) $ 4,031.6
Borrowings................. 3,362.2 612.9 7,965.1 (e) 11,940.2
Other Liabilities.......... 1,474.7 574.7 2,049.4
Stockholders' Equity....... 6,374.1 4,603.9 4,225.4 (f) 15,203.4
--------- --------- --------- ---------
$14,381.3 $ 6,997.4 $11,845.9 $33,224.6
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
74
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 1995
(SCENARIO 2: CAPITAL CITIES SHAREHOLDERS RECEIVE THE CASH CONSIDERATION,
WITHOUT REGARD TO THE CASH COMPONENT (MAXIMUM CASH))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ------------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
-------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.................. $8,988.5 $5,229.8 $14,218.3
Costs and Expenses........ 6,682.9 3,985.3 10,668.2
Depreciation.............. 345.9 84.3 430.2
Amortization of Intangible
Assets................... 48.1 $ 260.7 (a) 308.8
-------- -------- --------- ---------
Operating Income.......... 1,959.7 1,112.1 (260.7) 2,811.1
General and Administrative
Expenses................. 126.8 35.4 162.2
Interest Expense, Net..... 101.3 2.1 896.9 (b) 1,000.3
Other..................... 19.6 (3.7) 15.9
-------- -------- --------- ---------
Income Before Income
Taxes.................... 1,712.0 1,078.3 (1,157.6) 1,632.7
Income Taxes.............. 595.9 471.1 (349.8)(c) 717.2
-------- -------- --------- ---------
Net Income................ $1,116.1 $ 607.2 $ (807.8) $ 915.5
======== ======== ========= =========
Earnings Per Share........ $ 2.11 $ 3.94 $ 1.73(d)
======== ======== =========
Average Number of Common
and Common Equivalent
Shares Outstanding....... 530.2 154.0 530.2(d)
======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
75
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1994
(SCENARIO 2: CAPITAL CITIES SHAREHOLDERS RECEIVE THE CASH CONSIDERATION,
WITHOUT REGARD TO THE CASH COMPONENT (MAXIMUM CASH))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- ------------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
--------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................ $10,055.1 $6,160.1 $16,215.2
Costs and Expenses...... 7,679.7 4,849.8 12,529.5
Depreciation............ 409.7 105.3 515.0
Amortization of
Intangible Assets...... 62.8 $ 348.9 (a) 411.7
--------- -------- --------- ---------
Operating Income........ 1,965.7 1,142.2 (348.9) 2,759.0
General and
Administrative
Expenses............... 162.2 40.7 202.9
Interest Expense
(Income), Net.......... (10.0) 29.8 1,245.3 (b) 1,265.1
Other................... 110.4 110.4
--------- -------- --------- ---------
Income Before Income
Taxes.................. 1,703.1 1,071.7 (1,594.2) 1,180.6
Income Taxes............ 592.7 465.7 (485.7)(c) 572.7
--------- -------- --------- ---------
Net Income.............. $ 1,110.4 $ 606.0 $(1,108.5) $ 607.9
========= ======== ========= =========
Earnings Per Share...... $ 2.04 $ 3.87 $ 1.12(d)
========= ======== =========
Average Number of Common
and Common Equivalent
Shares Outstanding..... 545.2 156.5 545.2(d)
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
76
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1995
(SCENARIO 2: CAPITAL CITIES SHAREHOLDERS RECEIVE THE CASH CONSIDERATION,
WITHOUT REGARD TO THE CASH COMPONENT (MAXIMUM CASH))
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ------------------------
DISNEY CAPITAL CITIES ADJUSTMENTS COMBINED
--------- -------------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents.. $ 956.7 $1,169.3 $(1,626.0)(a) $ 500.0
Investments................ 1,457.3 284.2 (1,000.0)(b) 741.5
Receivables................ 1,449.9 885.3 2,335.2
Inventories................ 727.9 727.9
Film and Television Costs.. 1,974.9 565.8 2,540.7
Theme Parks, Resorts and
Other Property, Net....... 6,131.9 1,286.4 7,418.3
Intangible Assets, Net..... 1,995.2 14,471.9 (c) 16,467.1
Other Assets............... 1,682.7 811.2 2,493.9
--------- -------- --------- ---------
$14,381.3 $6,997.4 $11,845.9 $33,224.6
========= ======== ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts Payable and Other
Accrued Liabilities....... $ 3,170.3 $1,205.9 $ (344.6)(d) $ 4,031.6
Borrowings................. 3,362.2 612.9 16,794.4 (e) 20,769.5
Other Liabilities.......... 1,474.7 574.7 2,049.4
Stockholders' Equity....... 6,374.1 4,603.9 (4,603.9)(f) 6,374.1
--------- -------- --------- ---------
$14,381.3 $6,997.4 $11,845.9 $33,224.6
========= ======== ========= =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
77
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma combined condensed financial statements reflect the
conversion of each outstanding share of Capital Cities Common Stock (154.9
million shares, representing 153.9 million shares outstanding as of July 2,
1995 plus an estimated 1.0 million shares expected to be issued through the
Effective Time in connection with the Capital Cities Employee Stock Purchase
Plan) into cash and/or shares of New Disney Common Stock as follows:
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2
MAXIMUM STOCK MAXIMUM CASH
------------- ------------
<S> <C> <C>
Consideration exchanged consists of the following:
Cash............................................. $10,068.5 $18,897.8
New Disney Common Stock.......................... 8,829.3 --
Settlement of certain benefit plans (1)............ 178.0 178.0
--------- ---------
Total Purchase Consideration....................... 19,075.8 19,075.8
Less: Capital Cities net tangible assets as of July
2, 1995........................................... 2,608.7 2,608.7
--------- ---------
Excess of Purchase Consideration over net tangible
assets acquired................................... $16,467.1 $16,467.1
========= =========
</TABLE>
- --------
(1) As a result of the Acquisition, certain Capital Cities benefit plans will
become fully vested and the related benefits will become immediately
payable in a single lump-sum distribution. In addition, the Acquisition
results in accelerated vesting of Capital Cities Options, which for
purposes of these pro forma combined condensed financial statements are
assumed to be settled in cash. The amount included in the Purchase
Consideration reflects total estimated payments of $522.6 million, less
related amounts accrued at July 2, 1995 of $207.0 million, and less
estimated income tax benefits of $137.6 million. See "THE ACQUISITION--
Interests of Certain Persons in the Acquisition."
Acquisition expenses, including debt issuance costs, are not expected to be
material and, accordingly, have not been included in the unaudited pro forma
combined condensed financial statements.
Transactions between Disney and Capital Cities have not been eliminated from
the unaudited pro forma combined condensed financial statements, as the
amounts are immaterial in each of the periods presented.
Certain reclassifications have been made to the Disney and Capital Cities
historical consolidated financial statements to set forth the unaudited pro
forma combined condensed financial statements of New Disney after giving
effect to the Acquisition.
Pro forma adjustments giving effect to the Acquisition in the unaudited pro
forma combined condensed statements of income reflect the following:
(a) Amortization of the excess of Purchase Consideration over net tangible
assets acquired on a straight-line basis over 40 years, net of
elimination of Capital Cities' historical amortization of excess
acquisition costs over the values assigned to net tangible assets
acquired in prior acquisitions.
(b) Increase in interest expense resulting from the use of new borrowings
to finance a portion of the Purchase Consideration and reduction in
investment and interest income, resulting from the use of certain
short-term investments and cash to fund partial payment of the Purchase
Consideration. The interest rate on new borrowings of $7.97 billion
under Scenario 1 and $16.79 billion under Scenario 2 is assumed to be
6.5%. A change of 1/8 of 1% in the assumed interest rate will change
annual interest expense by $10.0 million under Scenario 1 and $21.0
million under Scenario 2.
(c) Income tax effect of pro forma adjustments, excluding amortization of
the excess of Purchase Consideration over net tangible assets acquired,
which is non-deductible for tax purposes.
78
<PAGE>
(d) Earnings per share based upon the weighted average number of shares of
Disney Common Stock and common equivalent shares outstanding for each
period presented, including under Scenario 1, the shares of New Disney
Common Stock assumed to be issued in connection with the Acquisition,
as if they had been issued at the beginning of each period presented.
Pro forma adjustments giving effect to the Acquisition in the unaudited pro
forma combined condensed balance sheets reflect the following:
(a) Liquidation of certain cash balances to fund partial payment of the
Purchase Consideration.
(b) Liquidation of certain short-term investments to fund partial payment
of the Purchase Consideration.
(c) Excess of Purchase Consideration over net tangible assets acquired, net
of elimination of Capital Cities' historical excess of Purchase
Consideration over the values assigned to net tangible assets acquired
in prior acquisitions.
(d) Liquidation of accrued liabilities related to the cash settlement of
certain Capital Cities benefit plans and recording of income tax
benefits related to the distribution of accelerated benefits.
(e) New borrowings to finance the cash portion of the Purchase
Consideration and the cash settlement of certain Capital Cities benefit
plans.
(f) Cancellation of Disney Treasury Stock, elimination of Capital Cities
shareholders' equity, and under Scenario 1, issuance of 154.9 million
shares of New Disney Common Stock.
As more fully described elsewhere in this Joint Proxy Statement/Prospectus,
the amount of cash and/or shares of New Disney Common Stock to be received by
each shareholder of Capital Cities pursuant to the Capital Cities Merger is
dependent upon, among other things, (i) the stated preferences of the Capital
Cities shareholders on the Election Forms, (ii) the proration procedures to be
applied if the Requested Stock Amount exceeds the Stock Component or the
Requested Cash Amount exceeds the Cash Component, and (iii) the level of the
Maximum Cash Amount, including any increase of the Maximum Cash Amount by
Disney, in its sole discretion. The two scenarios of unaudited pro forma
combined condensed financial statements presented above give effect to the
range of possible amounts of New Disney Common Stock and/or cash to be
received by Capital Cities shareholders upon consummation of the Capital
Cities Merger. However, assuming a Disney Common Stock Price of $57 and final
Purchase Consideration of $14.50 billion in cash and $4.40 billion in Disney
Common Stock (77.2 million shares), representing a scenario whereby the
aggregate amount of cash payable to Capital Cities shareholders is set at a
point approximately halfway between its level under Scenario 1 and Scenario 2,
as defined above, unaudited pro forma combined earnings per share would be
$1.72 and $1.26 for the nine months ended June 30, 1995 and the year ended
September 30, 1994, respectively.
79
<PAGE>
The unaudited pro forma combined condensed financial statements have been
prepared assuming a Disney Common Stock Price of $57. The Disney Common Stock
Price is not subject to a minimum or maximum amount and the actual Disney
Common Stock Price may vary to any degree. The following table sets forth the
impact of other Disney Common Stock Prices (representing a $5 variance (chosen
arbitrarily) from the assumed Disney Common Stock Price) on certain elements
of the Acquisition, including unaudited pro forma per share results:
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2
MAXIMUM STOCK MAXIMUM CASH
------------------- -------------------
<S> <C> <C> <C> <C>
Disney Common Stock Price............... $ 52 $ 62 $ 52 $ 62
New Disney shares issued (1)............ 154.9 154.9 -- --
Purchase consideration:
Cash.................................. $10,068.5 $10,068.5 $18,123.3 $19,672.3
Stock................................. 8,054.8 9,603.8 -- --
Settlement of certain benefit plans... 159.5 191.9 159.5 191.9
--------- --------- --------- ---------
Total............................... $18,282.8 $19,864.2 $18,282.8 $19,864.2
========= ========= ========= =========
Pro forma earnings per share:
Nine months ended June 30, 1995....... $ 1.74 $ 1.70 $ 1.80 $ 1.65
Year ended September 30, 1994......... $ 1.40 $ 1.34 $ 1.21 $ 1.02
</TABLE>
- --------
(1) Based upon 153.9 million shares of Capital Cities Common Stock outstanding
as of July 2, 1995, plus an estimated 1.0 million shares expected to be
issued through the Effective Time in connection with the Capital Cities
Employee Stock Purchase Plan.
COMPARISON OF STOCKHOLDERS' RIGHTS
At the Effective Time, the stockholders of Disney and shareholders of
Capital Cities will become stockholders of New Disney. As stockholders of New
Disney, their rights will be governed by the DGCL and New Disney's Certificate
of Incorporation (the "New Disney Certificate") and Bylaws (the "New Disney
Bylaws"). Following are summaries of certain differences between (i) the
rights of Disney stockholders and New Disney stockholders and (ii) the rights
of Capital Cities shareholders and New Disney stockholders.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO NEW DISNEY AND DISNEY
New Disney and Disney are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of Disney
Common Stock and New Disney Common Stock arise solely from differences in
their respective certificates of incorporation and bylaws. The New Disney
Certificate and New Disney Bylaws are substantially similar to the Disney
Certificate of Incorporation (the "Disney Certificate") and the Disney Bylaws,
respectively, except for certain matters as described herein.
Authorized Capital. The total number of authorized shares of capital stock
of Disney is 1,300,000,000, consisting of 1,200,000,000 shares of Disney
Common Stock, and 100,000,000 shares of preferred stock, par value $0.10 per
share (the "Disney Preferred Stock"). There is designated a Series R Preferred
Stock consisting of 1,800,000 shares, par value $0.10 per share (the "Series R
Preferred Stock"). The authorized capital of New Disney is set forth under
"DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Authorized Capital Stock."
Rights Plan. In November 1995, New Disney adopted a stockholders' rights
plan (the "New Disney Rights Plan") and in connection therewith entered into
the New Disney Rights Agreement. To implement the New Disney Rights Plan, the
New Disney Board of Directors authorized the issuance of one New Disney Right
for each share of New Disney Common Stock issued at or following the Effective
Time and until the earlier of the Distribution Date (as defined in the New
Disney Rights Agreement) or the date on which the New Disney Rights expire or
are redeemed. A description of the new Disney Rights is set forth under
"DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Preferred Stock Purchase Rights."
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The provisions of the New Disney Rights Plan are substantially identical to
those of the Disney stockholders' rights plan which was adopted by Disney in
June 1989. In connection therewith, Disney entered into a Rights Agreement,
dated as of June 21, 1989, between Disney and The Bank of New York (as
successor rights agent to Security Pacific National Bank), as rights agent
(the "Disney Rights Agreement"). Neither the execution of the Reorganization
Agreement nor the consummation of the transactions contemplated thereby will
result in the rights issued pursuant to the Disney Rights Agreement being
exercised, distributed or triggered.
COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO NEW DISNEY AND CAPITAL
CITIES
New Disney is organized under the laws of the State of Delaware and Capital
Cities is organized under the laws of the State of New York. The following
discussion summarizes certain differences between the New Disney Certificate
and the New Disney Bylaws and the Capital Cities Certificate of Incorporation
(the "Capital Cities Certificate") and the Capital Cities Bylaws (the "Capital
Cities Bylaws") and between certain provisions of the DGCL and the NYBCL
affecting stockholders' rights.
Authorized Capital. The total number of authorized shares of capital stock
of Capital Cities is 304,000,000, consisting of 300,000,000 shares of Capital
Cities Common Stock and 4,000,000 shares of preferred stock (the "Capital
Cities Preferred Stock"). There is designated a Series A Preferred Stock
consisting of 250,000 shares (the "Series A Preferred Stock"). The authorized
capital of New Disney is set forth under "DESCRIPTION OF NEW DISNEY CAPITAL
STOCK--Authorized Capital Stock."
Directors. The New Disney Certificate provides for not less than nine nor
more than 21 directors, which number shall be set by resolution of the New
Disney Board of Directors. Pursuant to the Capital Cities Certificate, the
Capital Cities Board may have no fewer than seven nor more than 21 directors.
The New Disney Board of Directors will be divided into three separate
classes, consisting, as nearly as possible, of equal numbers of directors. At
each annual meeting of stockholders, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. The Capital Cities Board is not divided into separate classes.
Amendment of Bylaws. Under the New Disney Certificate, the New Disney Bylaws
may be altered, amended or repealed, or new Bylaws may be adopted, by either
the holders of 66 2/3% of the outstanding capital stock entitled to vote
thereon or by the New Disney Board of Directors. The Capital Cities
Certificate provides that the Capital Cities Board has the power by vote of
the majority of the directors and without the assent of the shareholders to
make, alter, amend and rescind the Capital Cities Bylaws. In addition, the
NYBCL provides that bylaws of a New York corporation may be adopted, amended
or repealed by holders of a majority of the outstanding capital stock entitled
to vote for directors.
Amendment of Certificate. Under the DGCL and the NYBCL, the affirmative vote
of a majority of the outstanding shares entitled to vote is required to amend
a certificate of incorporation. In addition, amendments which make changes
relating to the capital stock by increasing or decreasing the par value or the
aggregate number of authorized shares of a class, or otherwise adversely
affecting the rights of such class, must be approved by the majority vote of
each class or series of stock affected, even if such stock would not otherwise
have such voting rights. The New Disney Certificate additionally requires a
four-fifths vote of the outstanding stock of New Disney entitled to vote
thereon to amend the article restricting certain transactions with an
Interested Person. See "DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Certain
Antitakeover Effects of New Disney Certificate, New Disney Bylaws and Delaware
Law--Supermajority Requirements."
Cumulative Voting. Neither the Capital Cities Certificate nor the New Disney
Certificate provides for cumulative voting for directors.
Removal of Directors. Under the New Disney Certificate and the DGCL, any or
all directors (other than those elected separately by the holders of a series
of Disney Preferred Stock) may be removed from office at any
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time, but only for cause and only by the affirmative vote of the holders of a
majority of the outstanding shares then entitled to vote generally in the
election of directors.
The NYBCL provides that any or all directors may be removed for cause by
vote of the holders of a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon. Additionally,
the NYBCL allows an action to procure a judgment removing a director for cause
to be brought by the attorney general or by the holders of 10% of the
outstanding shares whether or not entitled to vote.
Filling Vacancies on the Board of Directors. Pursuant to the New Disney
Certificate, any vacancy on the New Disney Board of Directors may be filled by
a majority of the directors then in office, even if less than a quorum, or by
a sole remaining director. Under the Capital Cities Bylaws, any vacancy in the
Board of Directors, whether by an increase in the number of directors, or by
reason of death, resignation, disqualification or for any other reason, may
only be filled for the unexpired portion of the term by the vote of a majority
of the remaining directors at any regular or special meeting of the Capital
Cities Board.
Stockholder Meetings and Provisions for Notices. The New Disney Certificate
provides that special meetings of stockholders may be called by the New Disney
Board of Directors, the Chairman of the Board or the President. Special
meetings of the stockholders may not be called by any other person or persons.
The Bylaws of Capital Cities provide that a special meeting of shareholders
may be called by the Chairman of the Board, or in his absence, by the
President or by the Board. Under the NYBCL, shareholders may not call a
special meeting unless there is a failure to elect a sufficient number of
directors to conduct the business of the corporation or unless specifically
authorized to do so by the corporation's certificate of incorporation or
bylaws. Neither the Capital Cities Certificate or Bylaws authorizes the
shareholders to call a special meeting.
Pursuant to the New Disney Bylaws, written notice of the annual meeting of
stockholders stating the place, date and hour of the annual meeting shall be
given to each stockholder entitled to vote at such meeting between 10 and 60
days before the date of such meeting. Written notice of a special meeting must
also include the purpose or purposes for which the meeting is called, and only
such business as is stated in such notice shall be acted upon thereat. Under
the Capital Cities Bylaws, notice of the time and place of annual or special
meetings of shareholders shall be mailed at least 10 days before the date of
such annual or special meeting by the Secretary of Capital Cities to each
shareholder as of the record date as determined by the Executive Committee of
the Capital Cities Board. In addition, the NYBCL provides that notice of any
shareholder meeting must be given no more than 50 days before the date of the
meeting.
Under the DGCL, a proxy is valid for three years from its date, unless the
proxy provides for a longer period. Under the NYBCL, a proxy is valid for 11
months from its date, unless the proxy provides otherwise.
Notice of Director Nominations and New Business. The New Disney Bylaws
provide that, with respect to an annual meeting of stockholders, nominations
of persons for election to the New Disney Board of Directors and the proposal
of business to be considered at the annual meeting must be either (i)
specified in the notice of annual meeting given by or at the direction of the
Board, (ii) otherwise brought before the annual meeting by or at the direction
of the Board, or (iii) otherwise brought before the annual meeting by a
stockholder who has complied with the advance notice procedures set forth in
the New Disney Bylaws.
The Capital Cities Bylaws provide that, with respect to an annual meeting of
shareholders, nominations of persons for election to the Capital Cities Board
and the proposal of business to be considered at the annual meeting must be
either (i) specified pursuant to Capital Cities' notice of annual meeting,
(ii) otherwise brought before the annual meeting by or at the direction of the
Board, or (iii) otherwise brought before the annual meeting by a shareholder
who was a shareholder of record at the time of giving of the notice of annual
meeting, who is entitled to vote at the annual meeting and who complied with
the advance notice procedures set forth in the Capital Cities Bylaws.
Quorum. Under the New Disney Bylaws, a quorum for the transaction of
business at any regular or special meeting of the New Disney Board of
Directors consists of a majority of the directors of the entire New Disney
Board of Directors. However, in an "emergency situation" (as defined by the
New Disney Bylaws) one-third of
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the directors who are "able" (as defined by the New Disney Bylaws) to perform
their duties constitutes a quorum. Under the Capital Cities Bylaws, a quorum
for the transaction of business at any regular or special meeting of the
Capital Cities Board consists of a majority of the directors of the entire
Capital Cities Board.
Under the New Disney Bylaws, a quorum for the transaction of business at any
stockholder meeting consists of a number of persons representing the majority
of the capital stock issued and outstanding and entitled to vote thereat
present in person or represented by proxy. Under the Capital Cities Bylaws, a
quorum for the transaction of business at any shareholder meeting consists of
a number of persons representing a majority of the shares of voting capital
stock issued and outstanding. However, the NYBCL provides that in the case of
a special meeting for the election of directors called by the shareholders,
the shareholders attending, in person or by proxy, and entitled to vote in an
election of directors, constitute a quorum solely for the purpose of electing
directors.
Preemptive Rights. Under the DGCL, stockholders have no preemptive rights
unless such rights are provided for in the certificate of incorporation. The
New Disney Certificate does not provide for preemptive rights. Under the
NYBCL, shareholders have preemptive rights, subject to certain limitations
expressed in the NYBCL, unless the certificate of incorporation provides
otherwise. The Capital Cities Certificate prohibits Capital Cities
shareholders from exercising preemptive rights.
Voting by Stockholders. Under the New Disney Bylaws, except as required by
law, the New Disney Certificate or New Disney Bylaws, action by New Disney
stockholders is taken by the vote of the holders of a majority of the stock
represented and entitled to vote at a meeting of stockholders at which a
quorum is present. However, the New Disney Certificate requires the vote of
four-fifths of the outstanding stock entitled to vote thereon for certain
significant transactions with an Interested Person (as defined in the New
Disney Certificate). See "DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Certain
Antitakeover Effects of New Disney Certificate, New Disney Bylaws and Delaware
Law--Supermajority Requirements." If the transaction with an Interested Person
is approved by resolution of the members of the New Disney Board of Directors
who were duly elected and acting members before the person, firm or
corporation became an Interested Person, then the vote of the holders of a
majority of the stock is required to approve the transaction.
Under the NYBCL, corporate action generally must be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares
entitled to vote thereon. The NYBCL provides that directors are elected by a
plurality of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote in such election. Additionally, the NYBCL requires the
vote of two-thirds of all outstanding shares entitled to vote thereon for a
plan of merger or consolidation adopted by the board of directors of a New
York corporation, a guarantee given by a New York corporation not in
furtherance of its corporate purposes, a disposition of substantially all the
assets of a New York corporation if not made in the usual course of business,
or a dissolution of a New York corporation.
Under the NYBCL, but not the DGCL, the issuance, by a corporation to its
directors, officers or employees of rights or options (other than substituted
rights or options issued in connection with a business combination) to
purchase from the corporation any of its shares, as an incentive to service or
continued service with the corporation, or the adoption of a plan providing
for such issuance, must be authorized by the vote of the holders of a majority
of all outstanding shares entitled to vote thereon.
The NYBCL prohibits a New York corporation from making loans to its
directors without authorization by vote of the shareholders (excluding from
such vote the affected director's shares). The DGCL has no comparable voting
requirement but instead permits loans to, and guarantees on behalf of,
officers and employees of a Delaware corporation, including those officers and
employees who are also directors of the corporation, if, in the judgment of
the board, such loan or guarantee may reasonably be expected to benefit the
corporation.
Merger Without Stockholder Approval. Under the DGCL, no vote of stockholders
of the surviving corporation in a merger is required (and no dissenters'
rights are available to such stockholders) if the agreement of merger does not
amend in any respect the certificate of incorporation of the surviving
corporation, there is no change in the outstanding shares of the surviving
corporation as a result of the merger, and the number of
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common shares issued or issuable in the merger does not exceed 20% of the
issuer common shares outstanding immediately prior to the merger. The DGCL
further provides that no stockholder approval is required in a merger of a
corporation with or into a single direct or indirect wholly-owned subsidiary
of such corporation for the purpose of effecting a holding company
reorganization, if certain conditions are met, including: (i) as a result of
the merger, the corporation or its successor becomes a direct or indirect
wholly-owned subsidiary of the new holding company; (ii) stockholders of the
corporation receive in the merger the same number of shares of the new holding
company as they owned in the corporation prior to the merger, which stock has
the same designations, rights, powers and preferences, and the qualifications,
limitations and restrictions thereof, with respect to the holding company as
such stock had with respect to the corporation prior to the merger; (iii) the
certificate of incorporation and bylaws of the new holding company contain
provisions identical to the certificate of incorporation and bylaws of the
corporation immediately prior to the effective time of the merger (except for
provisions that could have been amended or deleted without stockholder
approval); (iv) the directors of the new holding company will be the same as
the directors of the corporation immediately prior to the merger; (v) the
certificate of incorporation of the corporation or its successor immediately
following the merger is identical in all substantive respects to the
certificate of incorporation of the corporation immediately prior to the
merger, provided that the certificate of incorporation of the corporation or
its successor shall be amended in the merger to contain a provision requiring
that any act or transaction by or involving such corporation that requires for
its adoption under the DGCL or its certificate of incorporation the approval
of the stockholders of such corporation shall require, in addition, the
approval of the stockholders of the new holding company or any successor
thereto by merger; and (vi) the merger is tax-free for Federal income tax
purposes to the stockholders of the corporation. The NYBCL has no comparable
provisions.
Stockholder Action Without a Meeting. Under the New Disney Certificate, as
permitted by the DGCL, no action may be taken by the stockholders except at a
meeting. Under the NYBCL, shareholders may take any action on which they are
required or permitted to vote without a meeting by written consent of all
outstanding shares unless the certificate provides that the written consent of
less than all outstanding shares is sufficient for corporate action.
Rights Plan. In December 1989, the Board of Directors of Capital Cities
adopted a shareholder rights plan and in connection therewith entered into a
Rights Agreement, dated December 14, 1989, between Capital Cities and Harris
Trust Company of New York as rights agent (the "Capital Cities Rights
Agreement"). Series A Preferred Stock Purchase Rights (the "Capital Cities
Rights") were declared for the holders of Capital Cities Common Stock of
record on December 26, 1989, and Capital Cities Rights attach to all shares of
Capital Cities Common Stock then outstanding and issued thereafter until the
earlier of the Distribution Date (as defined therein) or on the date on which
the Capital Cities Rights expire or are redeemed. Each Capital Cities Right
entitles its registered holder to purchase from Capital Cities, after the
Distribution Date, one-hundredth of a share (subsequently adjusted to one-
thousandth of a share as a result of the ten-for-one stock split effective
June 3, 1994) of Series A Preferred Stock at an exercise price of $2,000
subject to adjustment. The Capital Cities Rights become exercisable only if a
person or group acquires 20% (or in the case of Berkshire Hathaway, 30%,
subject to upward adjustment by the Capital Cities Board (the "permitted
percentage")) or more of Capital Cities Common Stock or announces a tender
offer for 20% (or in the case of Berkshire Hathaway, the permitted percentage)
or more of Capital Cities Common Stock, subject to certain exceptions
specified in the Capital Cities Rights Agreement. Neither the execution of the
Reorganization Agreement nor the consummation of the transactions contemplated
thereby will result in the Capital Cities Rights being exercised, distributed
or triggered.
The Capital Cities Rights have certain anti-takeover effects. The Capital
Cities Rights will cause substantial dilution to a person or group that
attempts to acquire, or merge with, Capital Cities without conditioning the
offer on the Capital Cities Rights being rendered inapplicable.
In November 1995, New Disney adopted the New Disney Rights Plan. See "--
Comparison of Stockholders' Rights with Respect to New Disney and Disney--
Rights Plan." A description of the New Disney Rights is set forth under
"DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Preferred Stock Purchase Rights."
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Business Combinations. Under Section 203 of the DGCL ("Section 203"),
certain "business combinations" with "interested stockholders" (each as
defined in Section 203) of Delaware corporations are subject to a three-year
moratorium unless specified conditions are met. See "DESCRIPTION OF NEW DISNEY
CAPITAL STOCK--Certain Antitakeover Effects of New Disney Certificate, New
Disney Bylaws and Delaware Law--Business Combinations."
Under Section 912 of the NYBCL ("Section 912"), certain types of a "business
combination" with an "interested shareholder" (each as defined in Section 912)
of a New York corporation are subject to a five-year moratorium unless
specified conditions are met.
Indemnification and Limitation of Liability. Delaware and New York have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit,
with certain exceptions, corporations to adopt a provision in their
certificate of incorporation eliminating the liability of a director to the
corporation or its stockholders for monetary damages for breach of the
director's fiduciary duty of care. There are, nonetheless, certain differences
between the laws of the two states respecting indemnification and limitation
of liability.
The New Disney Certificate provides for indemnification of, and advancement
of expenses to, both directors and officers to the fullest extent permitted by
the DGCL, as such law currently exists or as such law may be amended in the
future. The New Disney Certificate provides that no director will be liable
for money damages for breach of fiduciary duties, except for liability for (a)
breaches of the director's duty of loyalty to the corporation or its
stockholders; (b) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (c) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (d) transactions in which the
director received an improper personal benefit.
The New Disney Bylaws provide that New Disney shall indemnify to the full
extent authorized or permitted by law any person made, or threatened to be
made, a defendant or witness to any action, suit or proceeding (whether civil
or criminal or otherwise) by reason of the fact that he, his testator or
intestate, is or was a director or officer of New Disney or by reason of the
fact that such director or officer, at the request of New Disney, is or was
serving such other organization in any capacity. The provisions of the New
Disney Bylaws do not affect any rights to indemnification to which employees
other than directors and officers may be entitled by law.
The DGCL authorizes a Delaware corporation to indemnify any person who is,
or is threatened to be made, a party in any civil, criminal, administrative or
investigative, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that he 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 entity, against judgments, fines, amounts paid in settlement
and expenses (including attorneys' fees), actually and reasonably incurred by
such person in connection with any threatened, pending or completed action,
suit or proceeding. With respect to actions by or in the right of the
corporation, the DGCL authorizes indemnification of such person against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit. To be
entitled to indemnification, a person must have acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful with respect to
actions taken by or in the right of the corporation. With respect to actions
by or in the right of the corporation, court approval is required as a
prerequisite to indemnification of expenses in respect of any claim as to
which a person has been adjudged liable to the corporation.
The DGCL requires indemnification against expenses actually and reasonably
incurred by any director, officer, employee or agent in connection with a
proceeding against such person for actions in such capacity to the extent that
the person has been successful on the merits or otherwise. Advancement of
expenses (i.e., payment prior to a determination on the merits) is permitted,
but not required, by the DGCL, which further requires that any director or
officer must undertake to repay such expenses if it is ultimately determined
that he is not entitled to indemnification. The disinterested members of the
board of directors (or independent legal counsel or the stockholders) must
determine, in each instance where indemnification is not required by the DGCL,
that such
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director, officer, employee or agent is entitled to indemnification. The DGCL
provides that the indemnification provided by statute is not exclusive.
The Capital Cities Certificate provides that the directors of Capital Cities
are not personally liable to the corporation for monetary damages for breach
of duty as a director, except where a court finds that the acts or omissions
that are the subject of the cause of action (i) were taken in bad faith, or
(ii) involved intentional misconduct or a knowing violation of law, or (iii)
resulted in the director personally obtaining a financial profit or advantage
to which the director was not legally entitled, or (iv) involved the
declaration of unlawful dividends, unlawful stock repurchases, unlawful
distribution of assets to shareholders after a dissolution or the making of
unlawful loans.
The Capital Cities Bylaws provides that Capital Cities shall, to the fullest
extent permitted by the NYBCL, indemnify any director or elected officer who
is or was made, or threatened to be made, a party to an action or proceeding,
whether civil or criminal, including an action by or in the right of the
corporation, by reason of the fact that he, his testator or intestate, is or
was a director or elected officer of Capital Cities or is serving or served
such other organization in any capacity, against judgments, fines, amounts
paid in settlement, and costs, charges and expenses, including attorneys'
fees, or any appeal therein. Employees of Capital Cities who are not directors
or executive officers shall be indemnified to the fullest extent as now or
hereafter provided by the NYBCL in connection with any actual or threatened
action or proceeding arising out of their service to Capital Cities or to
another organization at its request. Capital Cities may indemnify any other
person to whom Capital Cities is permitted to provide indemnification or the
advancement of expenses by applicable law.
The NYBCL authorizes a New York corporation to indemnify any person who is,
or is threatened to be made, a party in any civil or criminal proceeding
(other than an action by or in the right of the corporation) by reason of the
fact that he 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 entity, against judgments,
fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) actually and necessarily incurred by such person as a result
of such action or proceeding or any appeal therein.
With respect to actions by or in the rights of the corporation, the NYBCL
authorizes indemnification of such person against reasonable expenses
including attorneys' fees and amounts paid in settlement. To be entitled to
indemnification, a person must have acted in good faith, for a purpose which
he reasonably believed to be in, or in the case of service for another
organization, not opposed to, the best interests of the corporation and, with
respect to any criminal action or proceeding, in addition, had no reasonable
cause to believe his conduct was unlawful. Court approval is required as a
prerequisite to indemnification of expenses in respect of any claim as to
which a person has been adjudged liable to the corporation.
The NYBCL requires indemnification against expenses actually and reasonably
incurred by any director, officer, employee or agent in connection with a
proceeding against such person for action in such capacity to the extent that
the person has been successful on the merits or otherwise. Advancement of
expenses (i.e., payment prior to a determination on the merits) is permitted,
but not required, by the NYBCL, which further requires that any director or
officer must undertake to repay such expenses if it is ultimately determined
that he is not entitled to indemnification. The disinterested members of the
board of directors (or independent legal counsel or the shareholders) must
determine, in each instance where indemnification is not required by the
NYBCL, that such director, officer, employee or agent is entitled to
indemnification. The NYBCL provides that the indemnification provided by
statute is not exclusive.
Dissenters' Rights. Under the DGCL, a stockholder of a corporation who does
not vote in favor of certain merger transactions and who demands appraisal of
his shares in connection therewith may, under varying circumstances, be
entitled to dissenters' rights pursuant to which such stockholder may receive
cash in the amount of the fair value of his shares (as determined by a
Delaware court) in lieu of the consideration he would otherwise receive in the
transaction. Unless the corporation's certificate of incorporation provides
otherwise, such dissenters' rights are not available in certain circumstances,
including without limitation (a) the sale, lease or exchange of all or
substantially all of the assets of a corporation, (b) the merger or
consolidation by a corporation the shares of which are either listed on a
national securities exchange or the NASDAQ National Market or are
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held of record by more than 2,000 holders if such stockholders receive only
shares of the surviving corporation or shares of any other corporation which
are either listed on a national securities exchange or the NASDAQ National
Market or held of record by more than 2,000 holders, plus cash in lieu of
fractional shares or (c) to stockholders of a corporation surviving a merger
if no vote of the stockholders of the surviving corporation is required to
approve the merger because the merger agreement does not amend the existing
certificate of incorporation, each share of the surviving corporation
outstanding prior to the merger is an identical outstanding or treasury share
after the merger, and the number of shares to be issued in the merger does not
exceed 20% of the shares of the surviving corporation outstanding immediately
prior to the merger and if certain other conditions are met.
The NYBCL provides dissenters' rights to holders entitled to vote thereon
for (i) certain mergers and consolidations; (ii) dispositions of assets
requiring shareholder approval; and (iii) certain amendments to the
certificate of incorporation which adversely affect the rights of such
shareholders. The procedures for perfecting dissenters' rights are similar
under the DGCL and the NYBCL, except that the NYBCL provides a procedure for
the corporation to make a written offer prior to the commencement of
litigation (the "Offer") to each dissenting shareholder to pay cash for his or
her shares at a specified, uniform price which the corporation considers to be
the fair value of the shares. If the effective date of the corporate action
dissented from has occurred, the Offer must be accompanied by an 80% advance
payment of the Offer price to each dissenting shareholder who has submitted
his or her stock certificates. If the effective date has not yet occurred,
such advance payment shall be sent forthwith upon its occurrence. If the
corporation and a dissenting shareholder agree upon a price to be paid for
such dissenting shareholder's shares within 30 days after the making of the
Offer, payment in full must be made by the corporation within 60 days of the
date on which the Offer was made or within 60 days of the effective date,
whichever is later. If any dissenting shareholder fails to agree with the
corporation during the aforesaid 30-day period, or if an Offer is not made
within a specified period of time, only then may a proceeding for judicial
appraisal be commenced.
The concept of "fair value" in payment for shares upon exercise of
dissenters' rights is different under the DGCL and the NYBCL. Under the DGCL,
"fair value" must be determined exclusive of any element of value arising from
the accomplishment or expectation of the relevant transaction. The NYBCL does
not exclude such element of value but mandates that the court should consider
the nature of the transaction, its effect on the corporation and its
shareholders, and the concepts and methods of valuation then customary in the
relevant financial and securities markets.
The procedures for perfecting dissenters' rights under the NYBCL are set
forth in "THE ACQUISITION--Dissenters' Rights."
Dissolution. Under the DGCL, unless the board of directors approves the
proposal to dissolve, dissolution of the corporation must be approved by the
written consent of all stockholders entitled to vote thereon. Only if the
dissolution is initiated by the board of directors may it be approved by a
majority of the corporation's stockholders.
Under the DGCL, the Court of Chancery, upon application by any stockholder,
may appoint a custodian and, if the corporation is insolvent, a receiver if,
(a) the stockholders are so divided that they have failed to elect successors
to directors whose terms have expired, or (b) the business of the corporation
is suffering or is threatened with irreparable injury because of a deadlock of
directors or (c) the corporation has abandoned its business but has not
liquidated. Upon the order of the Court of Chancery or in the event of clause
(c) above, the corporation may be liquidated and its assets distributed.
Under the NYBCL, the attorney general of the State of New York may bring a
dissolution action if the corporation was fraudulently formed or subsequent to
formation, has acted or conducted business in an abusive, unlawful or
fraudulent manner.
The NYBCL also provides that either the corporation's board of directors or
its shareholders (at a shareholders' meeting called by the holders of at least
10% of all outstanding shares entitled to vote thereon) may adopt a resolution
stating that the corporation is insolvent or that dissolution would be
beneficial to the
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shareholders. If a majority of either the board or the shareholders of the
corporation adopt such a resolution, such adopting group may present a
petition for the judicial dissolution of the corporation.
The NYBCL further provides that shareholders entitled to cast at least 50%
of all the votes entitled to be cast in the election of directors may petition
for judicial dissolution of the corporation on the ground that (a) the
directors are so divided respecting the management of the corporation's
affairs that the votes required for action by the board cannot be obtained, or
(b) the shareholders are so divided that the votes required for the election
of directors cannot be obtained, or (c) that there is internal dissension and
two or more factions of shareholders are so divided that dissolution would be
beneficial to the shareholders. Any shareholder entitled to vote in the
election of directors of a corporation, may present a petition for dissolution
on the ground that the shareholders are so divided that they have failed, for
a period which includes at least two consecutive annual meeting dates, to
elect successors to directors whose terms have expired or would have expired
upon the election and qualification of their successors.
Dividends. The DGCL permits a corporation to declare and pay dividends out
of surplus or, if it has no surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, the DGCL generally
provides that a corporation may redeem or repurchase its shares if such
redemption or repurchase would not impair the capital of the corporation or if
it repurchases shares having a preference upon the distribution of any of its
assets and retires such shares upon acquisition (and provided, that after any
reduction in capital made in connection with such retirement of shares, the
corporation's remaining assets are sufficient to pay any debts for which
payment has not otherwise been provided).
Under the NYBCL, a corporation may declare and pay dividends, or make other
distributions in cash, its bonds or its property, on its outstanding shares
except when the corporation is insolvent or would thereby be made insolvent,
or when the declaration, payment or distribution would be contrary to any
restrictions contained in the certificate of incorporation. The Capital Cities
Certificate contains no such restrictions, except that Common Stock dividends
are subject to the preferential dividend right applicable to shares of any
series of Capital Cities Preferred Stock. In general, dividends may be
declared or paid and other distributions may be made out of surplus only, so
that the net assets of the corporation remaining after such declaration,
payment or distribution shall at least equal the amount of its stated capital.
Right to Examine Stockholder List. In compliance with the DGCL, the New
Disney Bylaws provide that stockholders have a right for a period of at least
ten days prior to any stockholder meeting and during such meeting, to examine
a list of stockholders of New Disney, arranged in alphabetical order and
showing the address and the number of shares held by such stockholder, for any
purpose germane to such meeting. Further, under the DGCL, any stockholder,
following a written request, has the right to inspect the corporation's books
and records, including the stockholder list, during usual business hours for a
proper purpose.
Under the NYBCL, any person who shall have been a shareholder for at least
six months preceding his demand, or any person holding, or thereunto
authorized in writing by the holders of, at least five percent of any class of
the outstanding shares, upon at least five days' written demand shall have the
right to examine, during usual business hours, the corporation's minutes of
proceedings of its shareholders and record of shareholders.
Interested Director Transactions. Under both the DGCL and the NYBCL, certain
contracts or transactions in which one or more of a corporation's directors
has an interest are not void or voidable solely by reason of such interest
provided that one of the following conditions is met: (i) such contract or
transaction is approved by the stockholders or by a majority of disinterested
members of the board of directors (under the NYBCL, if a quorum of the board
is not present at such time, a unanimous vote of the disinterested directors
is required) or, in certain circumstances, a committee thereof if the material
facts are disclosed (under the NYBCL, in good faith) or known thereto, or (ii)
the contract or transaction was fair (and, under the NYBCL, reasonable) to the
corporation at the time it was approved.
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DESCRIPTION OF NEW DISNEY CAPITAL STOCK
The summary of the terms of the stock of New Disney set forth below does not
purport to be complete and is subject to and qualified in its entirety by
reference to the New Disney Certificate and the New Disney Bylaws.
AUTHORIZED CAPITAL STOCK
Under the New Disney Certificate, the total number of shares of all classes
of stock that New Disney has authority to issue is 1,300,000,000 shares, of
which 1,200,000,000 are shares of New Disney Common Stock (par value $.01 per
share) and 100,000,000 are shares of New Disney Preferred Stock (par value
$.01 per share).
The additional shares of authorized stock available for issuance by New
Disney might be issued at such times and under such circumstances as to have a
dilutive effect on earnings per share and on the equity ownership of the
holders of New Disney Common Stock. The ability of the New Disney Board of
Directors to issue additional shares of stock could enhance the New Disney
Board of Directors' ability to negotiate on behalf of the stockholders in a
takeover situation and also could be used by the New Disney Board of Directors
to make a change in control more difficult, thereby denying stockholders the
potential to sell their shares at a premium and entrenching current
management.
COMMON STOCK
Holders of New Disney Common Stock will be entitled to one vote per share on
all matters voted on generally by the stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any series of New Disney Preferred Stock, the holders of such
shares will possess all voting power. The New Disney Certificate does not
provide for cumulative voting for the election of directors. Thus, under the
DGCL, the holders of more than one-half of the outstanding shares of New
Disney Common Stock generally will be able to elect all the directors of New
Disney then standing for election and holders of the remaining shares will not
be able to elect any director.
Subject to any preferential rights of any series of New Disney Preferred
Stock, holders of shares of New Disney Common Stock will be entitled to
receive dividends on such stock out of assets legally available for
distribution when, as and if authorized and declared by the New Disney Board
of Directors and to share ratably in the assets of New Disney legally
available for distribution to its stockholders in the event of its
liquidation, dissolution or winding up.
Holders of New Disney Common Stock will have no preferences, preemptive,
conversion or exchange rights.
PREFERRED STOCK
The New Disney Board of Directors is authorized to issue shares of New
Disney Preferred Stock, in one or more series, and to fix for each such series
the number of shares thereof and voting powers and such preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions as are permitted by the DGCL. The
New Disney Board of Directors could authorize the issuance of shares of New
Disney Preferred Stock with terms and conditions which could discourage a
takeover or other transaction that holders of some or a majority of shares of
New Disney Common Stock might believe to be in their best interests or in
which such holders might receive a premium for their shares of stock over the
then market price of such shares. As of the date hereof, no shares of New
Disney Preferred Stock are outstanding and the New Disney Board of Directors
has no present intention to issue any shares of New Disney Preferred Stock
after the Effective Time.
In connection with the New Disney Rights Plan, the New Disney Certificate
provides for the issuance of a series of shares of New Disney Preferred Stock
designated as the Series R Preferred Stock (the "Series R Preferred Stock"). A
description of the terms of the Series R Preferred Stock is set forth below
under "--Preferred Stock Purchase Rights."
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PREFERRED STOCK PURCHASE RIGHTS
In November 1995, New Disney adopted the New Disney Rights Plan and in
connection therewith entered into the New Disney Rights Agreement. To
implement the New Disney Rights Plan, the New Disney Board of Directors
authorized the issuance of one New Disney Right for each share of New Disney
Common Stock issued at or following the Effective Time and until the earlier
of the Distribution Date (as defined in the New Disney Rights Agreement), or
on the date on which the New Disney Rights expire or are redeemed.
Each New Disney Right entitles the registered holder to purchase from New
Disney one one-hundredth (1/100) of a share of Series R Preferred Stock at an
initial Purchase Price of $350.00, subject to adjustment. The terms and
conditions of the New Disney Rights are contained in the New Disney Rights
Agreement.
Until the close of business on the Distribution Date, which will occur on
the earlier of (i) the tenth day following a public announcement that a person
or group of affiliated or associated persons ("Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 25% or
more of the outstanding New Disney Common Stock (the "Stock Acquisition Date")
or (ii) a date fixed by the New Disney Board of Directors which is not later
than the nineteenth business day after the commencement by any person or group
of, or the first public announcement of the intent of any person or group to
commence, a tender or exchange offer which would result in that person or
group owning 25% or more of the outstanding New Disney Common Stock, the New
Disney Rights will be represented by and transferred only with the New Disney
Common Stock.
The New Disney Rights are not exercisable until the Distribution Date. The
New Disney Rights will expire at the close of business on June 30, 1999,
unless redeemed earlier as described below.
The Series R Preferred Stock will be nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of New Disney
Preferred Stock, subordinate to all other series of New Disney Preferred
Stock. The Series R Preferred Stock may not be issued except upon exercise of
the New Disney Rights. Each share of Series R Preferred Stock will be entitled
to receive, when, as and if declared, a quarterly dividend in an amount equal
to the greater of $1.00 per share or 100 times the quarterly cash dividend
declared on the New Disney Common Stock. In addition, the Series R Preferred
Stock is entitled to 100 times any non-cash dividends (other than dividends
payable in equity securities) declared on the New Disney Common Stock, in like
kind. In the event of liquidation, the holders of Series R Preferred Stock
will be entitled to receive a liquidation payment in an amount equal to the
greater of $100.00 per share or 100 times the liquidation payment made per
share of New Disney Common Stock. Each share of Series R Preferred Stock will
have 100 votes, subject to adjustment, voting together with the New Disney
Common Stock and not as a separate class unless otherwise required by law or
the New Disney Certificate. In the event of any merger, consolidation or other
transaction in which common shares are exchanged, each share of Series R
Preferred Stock will be entitled to receive 100 times the amount received per
share of New Disney Common Stock. The rights of the Series R Preferred Stock
as to dividends, voting rights and liquidation are protected by antidilution
provisions.
The Purchase Price payable and the number of shares of Series R Preferred
Stock or other securities or property issuable upon exercise of the New Disney
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series R Preferred Stock, (ii) upon the grant to
holders of the Series R Preferred Stock of certain rights or warrants to
subscribe for Series R Preferred Stock or convertible securities at less than
the current market price of the Series R Preferred Stock or (iii) upon the
distribution to holders of the Series R Preferred Stock of evidences of
indebtedness or assets (excluding regular cash dividends and dividends payable
in Series R Preferred Stock) or of subscription rights or warrants.
If (i) any person becomes the beneficial owner of 25% or more of the then
outstanding shares of New Disney Common Stock, other than pursuant to a
purchase or series of related purchases of shares of New Disney Common Stock
that the New Disney Board of Directors, taking into account the long-term
value of New Disney and all other factors that the New Disney Board of
Directors considers relevant, determines to be fair to and
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otherwise in the best interests of the holders of New Disney Common Stock (a
"Permitted Transaction"), or (ii) any Acquiring Person or any of its
affiliates or associates engages in one or more "self-dealing" transactions as
described in the New Disney Rights Agreement, then each holder of a New Disney
Right, other than the Acquiring Person, will have the right to receive, upon
payment of the Purchase Price, in lieu of Series R Preferred Stock, a number
of shares of New Disney Common Stock having a market value equal to twice the
Purchase Price. To the extent that insufficient shares of New Disney Common
Stock are available for the exercise in full of the New Disney Rights, holders
of New Disney Rights will receive upon exercise shares of New Disney Common
Stock to the extent available and then cash, property or other securities of
New Disney (which may be accompanied by a reduction in the Purchase Price), in
proportions determined by New Disney, so that the aggregate net value received
is equal to twice the Purchase Price. New Disney Rights are not exercisable
following the acquisition of shares of New Disney Common Stock by an Acquiring
Person as described in this paragraph until the expiration of the period
during which the New Disney Rights may be redeemed as described below.
Notwithstanding the foregoing, after the occurrence of an event described in
the first sentence of this paragraph, New Disney Rights that are (or, under
certain circumstances, New Disney Rights that were) beneficially owned by an
Acquiring Person will be null and void.
Unless the New Disney Rights are redeemed earlier, if, after the Stock
Acquisition Date, New Disney is acquired in a merger or other business
combination (in which New Disney is not the surviving corporation or in which
any shares of New Disney Common Stock are converted or exchanged) or more than
50% of the assets or earning power of New Disney and its subsidiaries (taken
as a whole) are sold or transferred in one or a series of related
transactions, the New Disney Rights Agreement provides that proper provision
shall be made so that each holder of record of a New Disney Right will from
and after that time have the right to receive, upon payment of the Purchase
Price, that number of shares of common stock of the acquiring company which
has a market value at the time of such transaction equal to twice the Purchase
Price.
Fractions of shares of Series R Preferred Stock may, at the election of New
Disney, be evidenced by depositary receipts. New Disney may also issue cash in
lieu of fractional shares of Series R Preferred Stock which are not integral
multiples of one one-hundredth of a share.
At any time until ten days following the Stock Acquisition Date (subject to
extension by the New Disney Board of Directors), the New Disney Board of
Directors may cause New Disney to redeem the New Disney Rights in whole, but
not in part, at a price of $.01 per New Disney Right, subject to adjustment to
reflect any stock split, stock dividend or similar transaction. Immediately
upon the action of the New Disney Board of Directors authorizing redemption of
the New Disney Rights, the right to exercise the New Disney Rights will
terminate, and the holders of the New Disney Rights will only be entitled to
receive the redemption price without any interest thereon.
As long as the New Disney Rights are redeemable, New Disney may, except with
respect to the redemption price, the number of one one-hundredths of a share
of Series R Preferred Stock for which a New Disney Right is exercisable, or
the date of expiration of the New Disney Rights, amend the New Disney Rights
in any manner, including an amendment to extend the time period in which the
New Disney Rights may be redeemed. At any time when the New Disney Rights are
not redeemable, New Disney may amend the New Disney Rights in any manner,
subject to the foregoing exceptions and except for the time period during
which the New Disney Rights may be redeemed, that does not adversely affect
the interests of holders of the New Disney Rights as such.
Until a New Disney Right is exercised, the holder, as such, will have no
rights as a stockholder of New Disney, including without limitation the right
to vote or to receive dividends.
The New Disney Rights have certain anti-takeover effects. The New Disney
Rights will cause substantial dilution to a person or group that attempts to
acquire, or merge with, New Disney without conditioning the offer on the New
Disney Rights being rendered inapplicable.
The foregoing description of the New Disney Rights does not purport to be
complete and is qualified in its entirety by reference to the New Disney
Rights Agreement, which is incorporated herein by reference.
TRANSFER AGENT AND REGISTRAR
The principal transfer agent and registrar for New Disney Common Stock will
be New Disney.
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CERTAIN ANTITAKEOVER EFFECTS OF NEW DISNEY CERTIFICATE, NEW DISNEY BYLAWS AND
DELAWARE LAW
General. Certain provisions of the New Disney Certificate, the New Disney
Bylaws and the DGCL may have the effect of impeding the acquisition of control
of New Disney by means of a tender offer, a proxy fight, open market purchases
or otherwise in a transaction not approved by the New Disney Board of
Directors.
The provisions of the New Disney Certificate, the New Disney Bylaws and the
DGCL described below are designed to reduce, or have the effect of reducing,
the vulnerability of New Disney to an unsolicited proposal for the
restructuring or sale of all or substantially all of the assets of New Disney
or an unsolicited takeover attempt which is unfair to New Disney stockholders.
The summary of such provisions set forth below does not purport to be complete
and is subject to and qualified in its entirety by reference to the New Disney
Certificate, the New Disney Bylaws and the DGCL.
Other than the adoption of a stockholder rights plan, the New Disney Board
of Directors has no present intention to introduce additional measures which
might have an antitakeover effect. The New Disney Board of Directors, however,
expressly reserves the right to introduce such measures in the future.
Classified Board; Removal of Directors. The New Disney Certificate provides
that its Board of Directors shall consist of not less than nine nor more than
21 directors, with the exact number of directors to be determined from time to
time by the New Disney Board of Directors. The New Disney Certificate further
provides that the New Disney Board of Directors be divided into three classes,
and, after an initial term, each director will be elected for a three-year
term. See "MANAGEMENT OF NEW DISNEY--Directors."
The New Disney Certificate provides that directors may only be removed for
cause upon the affirmative vote of the holders of a majority of the
outstanding shares of New Disney then entitled to vote generally in the
election of directors.
Business Combinations. Section 203 of the DGCL restricts a wide range of
transactions ("business combinations") between a corporation and an interested
stockholder. An "interested stockholder" is, generally, any person who
beneficially owns, directly or indirectly, 15% or more of the corporation's
outstanding voting stock. Business combinations are broadly defined to include
(i) mergers or consolidations with, (ii) sales or other dispositions of more
than 10% of the corporation's assets to, (iii) certain transactions resulting
in the issuance or transfer of any stock of the corporation or any subsidiary
to, (iv) certain transactions which would result in increasing the
proportionate share of stock of the corporation or any subsidiary owned by, or
(v) receipt of the benefit (other than proportionately as a stockholder) of
any loans, advances or other financial benefits by, an interested stockholder.
Section 203 provides that an interested stockholder may not engage in a
business combination with the corporation for a period of three years from the
time of becoming an interested stockholder unless (i) the board of directors
approved either the business combination or the transaction which resulted in
the person becoming an interested stockholder prior to the time such person
became an interested stockholder; (ii) upon consummation of the transaction
which resulted in the person becoming an interested stockholder, that person
owned at least 85% of the corporation's voting stock (excluding shares owned
by persons who are officers and also directors and shares owned by certain
employee stock plans); or (iii) the business combination is approved by the
board of directors and authorized by the affirmative vote of at least 66 2/3%
of the outstanding voting stock not owned by the interested stockholder. The
restrictions on business combinations with interested stockholders contained
in Section 203 do not apply to a corporation whose certificate of
incorporation contains a provision expressly electing not to be governed by
the statute. The New Disney Certificate does not contain a provision electing
to "opt-out" of Section 203.
Supermajority Requirements. In addition to the requirements of Section 203
of the DGCL, the New Disney Certificate provides that the affirmative vote of
four-fifths of the outstanding stock of New Disney entitled to vote shall be
required for (i) any merger or consolidation to which New Disney, or any of
its subsidiaries, and an Interested Person (as defined below) are parties;
(ii) any sale or other disposition by New Disney, or any of its subsidiaries,
of all or substantially all of its assets to an Interested Person; (iii) any
purchase or other acquisition by New Disney, or any of its subsidiaries, of
all or substantially all of the assets or stock of an
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Interested Person; and (iv) any other transaction with an Interested Person
which requires the approval of the stockholders of New Disney under the DGCL;
unless, in each case, any such transaction is authorized by a resolution of
the New Disney Board of Directors which is approved by board members, provided
that the majority of the members approving such transaction were duly elected
and acting members of the New Disney Board of Directors prior to the date that
the person, firm or corporation, or any group thereof, with whom such
transaction is proposed, became an Interested Person. An "Interested Person"
is any person, firm or corporation, or any group thereof, acting or intending
to act in concert, including any person directly or indirectly controlling or
controlled by or under direct or indirect common control with such person,
firm or corporation or group, which owns of record or beneficially, directly
or indirectly, five percent (5%) or more of any class of voting securities of
New Disney.
Special Meetings; Prohibition of Actions by Written Consent. Pursuant to the
DGCL, a special meeting of stockholders may be called by the board of
directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The New Disney Certificate provides that special
meetings of stockholders may only be called by the New Disney Board of
Directors, the Chairman of the New Disney Board of Directors, or the President
of New Disney. In addition, the New Disney Certificate provides that any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of the stockholders at an annual
or special meeting, and may not be taken by a written consent of the
stockholders.
Rights Plan. In November 1995, New Disney adopted the New Disney Rights
Plan. The New Disney Rights have certain anti-takeover effects. The New Disney
Rights will cause substantial dilution to a person or group that attempts to
acquire, or merge with, New Disney without conditioning the offer on the New
Disney Rights being rendered inapplicable. A description of the New Disney
Rights is set forth under "DESCRIPTION OF NEW DISNEY CAPITAL STOCK--Preferred
Stock Purchase Rights."
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MANAGEMENT OF NEW DISNEY
DIRECTORS
The following table sets forth information as to the persons who are expected
to serve as directors of New Disney following the Acquisition.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF DISNEY AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
Stephen F. Bollenbach.......... 53 Senior Executive Vice President and
(1995) Chief Financial Officer of Disney
since May 1, 1995. Mr. Bollenbach
served as Chief Executive Officer
and President of Host Marriott
Corporation from October 1993 until
he joined Disney. From March 1992
until October 1993, he served as the
Chief Financial Officer of Marriott
Corporation. During the two years
prior to joining Marriott
Corporation, Mr. Bollenbach was the
Chief Financial Officer of The Trump
Group. He served as Senior Vice
President and Chief Financial
Officer, as well as a member of the
Board of Directors, of Holiday
Corporation/Promus Companies prior
thereto. In addition, Mr. Bollenbach
is a member of the Board of
Directors of America West Airlines,
Inc.
Reveta F. Bowers............... 47 Head of School for the Center for
(1993) Early Education, an independent
school for pre-school through sixth
grade located in Los Angeles, since
1976. Mrs. Bowers is a member of the
Board of Directors of several non-
profit educational organizations,
including the National Association
of Independent Schools and
Educational Records Bureau, Inc. She
is also a trustee of Harvard-
Westlake School, an independent high
school located in Los Angeles.
Roy E. Disney.................. 65 Has been Vice Chairman of the Board
(June 1984) of Directors of Disney since 1984,
(1967-March 1984) and since November 1985 has also
served as head of Disney's animation
department. In addition, Mr. Disney
is Chairman of the Board of Shamrock
Holdings, Inc., which, through its
subsidiaries, is engaged in real
estate development and the making of
investments. Mr. Disney is a nephew
of the late Walt Disney.
Michael D. Eisner.............. 53 Chairman of the Board and Chief
(1984) Executive Officer of Disney. Prior
to joining Disney in September 1984,
Mr. Eisner was President and Chief
Operating Officer of Paramount
Pictures Corp., which was then a
wholly owned subsidiary of
Gulf+Western Industries, Inc. Prior
to joining Paramount in 1976, Mr.
Eisner was Senior Vice President,
Prime Time Programming, for ABC
Entertainment, a division of the
American Broadcasting Company, Inc.,
with responsibility for the
development and supervision of all
prime-time series programming,
limited series movies made for
television and the acquisition of
talent.
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF DISNEY AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
Stanley P. Gold................ 53 For more than the past five years,
(1987) (June 1984--September Mr. Gold has served as President and
1984) Chief Executive Officer of Shamrock
Holdings, Inc. Since January 1,
1990, Mr. Gold has been President of
Trefoil Investors, Inc., the general
partner of Trefoil Capital
Investors, L.P., an investment
partnership, as well as President of
Shamrock Capital Advisors, Inc.,
which acts as manager of the
partnership. Mr. Gold is also
Chairman of the Board of Directors
of L.A. Gear, Inc., a manufacturer
and distributor of athletic and
casual footwear.
Sanford M. Litvack............. 59 Senior Executive Vice President and
(1995) Chief of Corporate Operations of
Disney since August 1994. From April
1991 through November 1991, Mr.
Litvack served as Senior Vice
President--General Counsel of
Disney. From November 1991 through
June 1992, he served as General
Counsel and from June 1992 through
August 1994, as Executive Vice
President--Law and Human Resources
of Disney. Mr. Litvack was a
litigation partner with the law firm
of Dewey Ballantine from 1987 until
joining Disney in 1991.
Ignacio E. Lozano, Jr. ........ 68 Chairman and Editor-in-Chief of
(1981) Lozano Enterprises, which publishes
LA OPINION, the largest Spanish-
language newspaper in the Los
Angeles metropolitan area. Mr.
Lozano was Publisher and Editor of
LA OPINION from 1953 to 1986, except
for the period from 1976 through
1977 when he was the United States
Ambassador to El Salvador. Mr.
Lozano is a member of the Boards of
Directors of Bank America
Corporation, a bank holding company;
Bank of America N.T. & S.A.; Pacific
Enterprises, a holding company with
interests in a natural gas public
utility; Pacific Mutual Life
Insurance Company; and a number of
public service and charitable
organizations.
George J. Mitchell............. 62 Special Counsel to the law firm of
(1995) Verner, Liipfert, Bernhard,
McPherson and Hand in Washington,
D.C. Mr. Mitchell served as a United
States Senator for fifteen years
commencing in 1980, the last six
years of which he was the Senate
Majority Leader. Mr. Mitchell is a
member of the Boards of Directors of
UNUM Corporation, Federal Express
Corp. and Xerox Corporation. He also
serves as a special advisor to the
President and the Secretary of State
on United States investment and
trade opportunities in Ireland.
</TABLE>
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<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF DISNEY AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<S> <C> <C>
Thomas S. Murphy............... 69 Chairman of the Board and Chief Executive
(Director of Capital Cities Officer of Capital Cities. He was Chairman
since 1957) of the Board from 1990 to February 1994
and Chairman of the Board and Chief
Executive Officer prior thereto. He was
also a member of the Executive and Finance
Committees of Capital Cities. Mr. Murphy
serves as a director of Johnson & Johnson
and Texaco Inc. He is also Chairman of the
New York University Medical Center Board
of Trustees and a member of the Board of
Overseers of Harvard College.
Richard A. Nunis............... 63 Chairman of Walt Disney Attractions, a
(1981) principal business of Disney encompassing
Disney's theme parks and resorts, and a
senior executive of Disney or a subsidiary
thereof for more than the past five years.
He is also a member of the Boards of
Directors of Sun Banks, N.A. and Florida
Progress Corporation, a diversified
holding company whose interests include an
electric utility. Mr. Nunis is a member of
the Travel and Tourism Advisory Board of
the U.S. Department of Commerce and a
director or trustee of several
educational, civic and charitable
organizations, including the University of
Central Florida.
Michael Ovitz.................. 48 President of Disney beginning October 1,
1995. Mr. Ovitz co-founded Creative
Artists Agency in 1975, serving most
recently as its Chairman. Mr. Ovitz is a
member of the Board of Trustees of the
California Institute of the Arts, the
Sundance Institute and the Board of
Advisors of the UCLA School of Theater,
Film and Television. He also serves on the
Board of Advisors of the Ziff-Davis
Publishing Company and is a member of the
Council on Foreign Relations. Mr. Ovitz
also is a member of the boards of several
medical and charitable organizations,
including the Executive Board of the UCLA
Hospital and Medical Center, of which he
is chairman.
Sidney Poitier................. 68 Elected to the Board of Directors on
(1994) November 21, 1994 to fill the vacancy
created by the death of Frank G. Wells.
The actor, director and writer is the
Chief Executive Officer of Verdon-Cedric
Productions, a film production company,
and a member of the Boards of Directors of
SpectraVision, Inc., a designer and
operator of closed-circuit television
movie viewing systems, and Sarah Lawrence
College. Mr. Poitier has won many awards,
including the Academy Award for Best Actor
and the American Film Institute's Lifetime
Achievement Award. He belongs to numerous
civic
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF DISNEY AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
organizations, including the Children's
Defense Fund, the NAACP Legal Defense and
Education Fund and the Natural Resources
Defense Council.
Irwin E. Russell............... 69 An attorney engaged in private practice
(1987) specializing in the entertainment
industry. From 1989 to 1992 he served of
counsel to the law firm of Rudin, Appel &
Rosenfeld. From 1980 through September
1986, he was senior partner in the law
firm of Russell & Glickman. From 1971 to
1976, Mr. Russell was Executive Vice
President, Treasurer and Director of The
Wolper Organization, Inc., a film
production company. Mr. Russell serves as
an ad hoc arbitrator for the Federal
Mediation and Conciliation Service and the
American Arbitration Association.
Robert A.M. Stern.............. 56 Practicing architect, teacher and writer.
(1992) He is Senior Partner of Robert A.M. Stern
Architects of New York, which he founded,
and a Fellow of the American Institute of
Architects. Mr. Stern is also a professor
at the Graduate School of Architecture,
Planning and Preservation at Columbia
University in New York, where he is
Director of the Historic Preservation
Program. Mr. Stern was the architect of
the Yacht and Beach Club hotels and the
Casting Center at the Walt Disney World
Resort and the Newport Bay Club and the
Cheyenne Hotel at Disneyland Paris. He is
also the architect of Disney's Boardwalk
Hotel currently in design for the Walt
Disney World Resort and the Feature
Animation Building at Disney's
headquarters in Burbank, California.
E. Cardon Walker............... 78 Senior executive of Disney for more than
(1960) 25 years until 1984, serving as President
from 1971 to 1977 and Chairman of the
Board and Chief Executive Officer from
1980 to 1983. From 1984 through 1989, he
provided consulting and other services to
Disney.
Raymond L. Watson.............. 68 Chairman of the Executive Committee of
(1974) Disney's Board of Directors since
September 1984 and served as Chairman of
the Board of Disney from May 1983 to
September 1984. Since September 1986, Mr.
Watson has been Vice Chairman of the Board
of The Irvine Company, a land development
company. From 1985 to 1986, he was Regents
Professor in the Graduate School of
Management at the University of
California, Irvine. Mr. Watson is also a
member of the Boards of Directors of
Pacific Mutual Life Insurance Company;
Mitchell Energy & Development Co., a
company engaged in oil and gas
exploration, production, distribution and
land development; and Tejon Ranch Company.
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AND YEAR FIRST BECAME DURING THE PAST FIVE YEARS
A DIRECTOR OF DISNEY AGE AND OTHER INFORMATION
-------------------------- --- --------------------------
<C> <C> <S>
Gary L. Wilson................. 55 Co-Chairman of the Board of
(1985) Northwest Airlines Corporation. From
July 1985 through December 1989, he
was Executive Vice President and
Chief Financial Officer of Disney.
Prior to joining Disney, Mr. Wilson
was Executive Vice President and
Chief Financial Officer of Marriott
Corporation, a diversified company
involved in lodging, food service
and related businesses.
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are also full-time employees of New Disney receive no
additional compensation for their services as directors. Each non-employee
director will initially receive $30,000 annually for services on the New
Disney Board of Directors and $1,000 per meeting attended.
Any individual director receiving these fees may elect to defer payment of
all or any part of them pursuant to New Disney's Deferred Compensation Plan
for Outside Directors until, generally, after the termination of that
director's relationship with New Disney or until after that director attains a
specified age.
In addition, each non-employee director will be eligible to participate in
the 1995 Stock Option Plan for Non-Employee Directors. Pursuant to this plan,
options to purchase 2,000 shares of New Disney Common Stock will be granted
automatically to each of the non-employee directors annually. The options will
be granted at fair market value and become exercisable over five years
beginning on the first anniversary of the date of grant.
COMMITTEES OF THE BOARD OF DIRECTORS
The New Disney Board of Directors will have four standing committees:
Executive, Compensation, Audit Review and Nominating Committees.
Executive Committee. The Executive Committee is expected to be composed of
Messrs. Disney, Eisner, Nunis and Watson as Chairman. The Executive Committee
will possess all of the powers of the New Disney Board of Directors except the
power to issue stock, approve mergers with nonaffiliated corporations or
declare dividends (except at a rate or in a periodic amount or within a price
range established by the New Disney Board of Directors), and certain other
powers specifically reserved by Delaware law to the New Disney Board of
Directors.
Compensation Committee. The Compensation Committee is expected to be
composed of Messrs. Lozano, Poitier, Russell as Chairman and Watson. The
Compensation Committee's functions will be to review New Disney's general
compensation strategy; establish salaries and review benefit programs
(including pensions) for the Chief Executive Officer and those persons who
report directly to him; review, approve, recommend and administer New Disney's
incentive compensation and stock option plans and certain other compensation
plans; and approve certain employment contracts.
Audit Review Committee. The Audit Committee is expected to be composed of
Ms. Bowers and Messrs. Lozano as Chairman, Walker and Watson. The Audit Review
Committee will recommend the appointment of independent accountants; review
the arrangements for and scope of the audit by independent accountants; review
the independence of the independent accountants; consider the adequacy of the
system of internal accounting controls and review any proposed corrective
actions; review and monitor New Disney's policies regarding business ethics
and conflicts of interests; discuss with management and the independent
accountants New Disney's draft annual financial statements and key accounting
and/or reporting matters; and review the activities and recommendations of New
Disney's Management Audit Department.
98
<PAGE>
Nominating Committee. The Nominating Committee is expected to be composed of
Ms. Bowers and Messrs. Gold as Chairman, Mitchell and Wilson. The Nominating
Committee will solicit recommendations for candidates for the New Disney Board
of Directors; develop and review background information for candidates; make
recommendations to the New Disney Board of Directors regarding such
candidates; and review and make recommendations to the New Disney Board of
Directors for candidates for directors proposed by stockholders.
OFFICERS
Set forth below are the names and titles of certain of the persons who are
expected to serve as executive officers of New Disney following the
Acquisition.
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
BECAME AN EXECUTIVE OFFICER
OF DISNEY AGE OFFICE
--------------------------- --- ------
<C> <C> <S>
Michael D. Eisner.............. 53 Chairman of the Board and Chief
(1984) Executive Officer of Disney. Prior
to joining Disney in September
1984, Mr. Eisner was President and
Chief Operating Officer of
Paramount Pictures Corp., which was
then a wholly owned subsidiary of
Gulf+Western Industries, Inc. Prior
to joining Paramount in 1976, Mr.
Eisner was Senior Vice President,
Prime Time Programming, for ABC
Entertainment, a division of the
American Broadcasting Company,
Inc., with responsibility for the
development and supervision of all
prime-time series programming,
limited series movies made for
television and the acquisition of
talent.
Michael Ovitz.................. 48 President of Disney beginning
(1995) October 1, 1995. Mr. Ovitz co-
founded Creative Artists Agency in
1975, serving most recently as its
Chairman. Mr. Ovitz is a member of
the Board of Trustees of the
California Institute of the Arts,
the Sundance Institute and the
Board of Advisors of the UCLA
School of Theater, Film and
Television. He also serves on the
Board of Advisors of the Ziff-Davis
Publishing Company and is a member
of the Council on Foreign
Relations. Mr. Ovitz also is a
member of the boards of several
medical and charitable
organizations, including the
Executive Board of the UCLA
Hospital and Medical Center, of
which he is chairman.
Roy E. Disney.................. 65 Has been Vice Chairman of the Board
(1984) of Directors of Disney since 1984,
and since November 1985 has also
served as head of Disney's
animation department. In addition,
Mr. Disney is Chairman of the Board
of Shamrock Holdings, Inc., which,
through its subsidiaries, is
engaged in real estate development
and the making of investments.
Mr. Disney is a nephew of the late
Walt Disney.
Sanford M. Litvack............. 59 Senior Executive Vice President and
(1991) Chief of Corporate Operations of
Disney since August 1994. From
April 1991 through November 1991,
Mr. Litvack served as Senior Vice
President--General
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
NAME AND YEAR FIRST
BECAME AN EXECUTIVE OFFICER
OF DISNEY AGE OFFICE
--------------------------- --- ------
<C> <C> <S>
Counsel of Disney. From November
1991 through June 1992, he served
as General Counsel and from June
1992 through August 1994, as
Executive Vice President--Law and
Human Resources of Disney. Mr.
Litvack was a litigation partner
with the law firm of Dewey
Ballantine from 1987 until joining
Disney in 1991.
Stephen F. Bollenbach.......... 53 Senior Executive Vice President and
(1995) Chief Financial Officer of Disney
since May 1, 1995. Mr. Bollenbach
served as Chief Executive Officer
and President of Host Marriott
Corporation from October 1993 until
he joined Disney. From March 1992
until October 1993, he served as
the Chief Financial Officer
of Marriott Corporation. During the
two years prior to joining Marriott
Corporation, Mr. Bollenbach was the
Chief Financial Officer of The
Trump Group. He served as Senior
Vice President and Chief Financial
Officer, as well as a member of the
Board of Directors, of Holiday
Corporation/Promus Companies prior
thereto. In addition, Mr.
Bollenbach is a member of the Board
of Directors of America West
Airlines, Inc.
John F. Cooke.................. 53 Executive Vice President--Corporate
(1995) Affairs since February 1995. Prior
thereto Mr. Cooke was President of
The Disney Channel. Mr. Cooke is
Chairman of the Board of Governors
for the UCLA Center for
Communication Policy and serves on
the U.S. Advisory Council on the
National Information
Infrastructure.
Lawrence P. Murphy............. 43 Executive Vice President and Chief
(1985) Strategic Officer since February
1995. From November 1991 through
February 1995, Executive Vice
President--Strategic Planning and
Development. From February 1989
through November 1991, Senior Vice
President--Strategic Planning.
John J. Garand................. 48 Senior Vice President--Planning and
(1992) Control since June 1995. Vice
President--Planning and Control
from April 1992 through June 1995.
From April 1990 through March 1992,
Senior Vice President and Chief
Financial Officer for Morse Shoe
Inc.
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
New Disney has not yet paid any compensation to its Chief Executive Officer
or any of its other executive officers and the form and amount of such
compensation has not yet been determined. The New Disney Board of Directors
will rely on its Compensation Committee composed of non-employee New Disney
Board of Directors members to recommend the form and amount of compensation to
be paid to New Disney's executive officers.
It is anticipated that, when the Compensation Committee meets to determine
such compensation, which meeting is not expected to occur until after the
Effective Date, the Committee will generally adhere to compensation policies
which reflect the belief that (i) New Disney must attract and retain
individuals of outstanding ability and motivate and reward such individuals
for sustained performance, (ii) a substantial portion of an executive's
compensation should be at risk based upon that executive's performance and
that of the
100
<PAGE>
corporation, and (iii) within these parameters, levels of compensation should
generally be in line with that offered by comparable corporations. On an
ongoing basis, the type and amount of compensation to be paid by New Disney to
its officers will be entirely discretionary and within the subjective judgment
of the Compensation Committee.
For information concerning the compensation paid to the Chief Executive
Officers and the other four most highly compensated executive officers of each
of Disney and Capital Cities for the 1994 fiscal year, see the 1994 Proxy
Statement for Disney and the 1995 Proxy Statement for Capital Cities, the
relevant portions of which are incorporated by reference into the Disney Form
10-K and the Capital Cities Form 10-K, respectively. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
SECURITY OWNERSHIP OF NEW DISNEY
The following table sets forth the anticipated beneficial ownership of New
Disney Common Stock, after giving effect to the Acquisition, as to each person
expected to be (i) a New Disney director, (ii) the Chief Executive Officer of
New Disney, (iii) one of the four most highly compensated executive officers
of New Disney other than the Chief Executive Officer, calculated based upon
compensation of executive officers of Disney for fiscal year 1994 and (iv) all
persons expected to be New Disney directors and executive officers, as a
group.
BENEFICIAL OWNERSHIP OF NEW DISNEY
COMMON STOCK AFTER THE ACQUISITION
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES(1) PERCENT OF CLASS(2)
---- ------------------- -------------------
<S> <C> <C>
Stephen F. Bollenbach.................. 150,000 .02
Reveta F. Bowers....................... -- --
Roy E. Disney(4)(6)(7)(8)(9)........... 8,014,044 1.18
Michael D. Eisner(4)(5)(6)(7)(9)....... 9,050,780 1.33
Stanley P. Gold(4)(9).................. 2,936 (3)
Sanford M. Litvack(5)(6)(7)(9)......... 345,498 .05
Ignacio E. Lozano, Jr.(4)(9)........... 5,588 (3)
George J. Mitchell..................... 500 (3)
Lawrence P. Murphy(5)(6)(7)(9)......... 293,280 .04
Thomas S. Murphy(4)(10)................ 1,024,260 .15
Richard A. Nunis(4)(5)(6)(7)(9)........ 526,413 .08
Michael Ovitz(9)....................... 203,560 .03
Sidney Poitier......................... -- --
Irwin E. Russell....................... 4,000 (3)
Robert A.M. Stern...................... 140 (3)
E. Cardon Walker(9).................... 162,543 .02
Raymond L. Watson(9)................... 17,360 (3)
Gary L. Wilson......................... -- --
All New Disney directors and executive
officers as a group
(20 persons, including the foregoing)
(4)(5)(6)(7)(8)(9)(10)................ 19,818,902 2.92
</TABLE>
- --------
* Each director and executive officer has sole voting and investment power,
except as noted in footnote (9).
(1) Reflects beneficial ownership as of September 1, 1995, except that the
number of shares with respect to Thomas S. Murphy reflects beneficial
ownership as of October 31, 1995.
(2) The percentages reflected in this column are based on the 524,378,016
shares of Disney Common Stock (excluding Disney Treasury Stock) and
153,903,230 shares of Capital Cities Common Stock outstanding as of
November 7, 1995 and the assumption that the Requested Stock Amount is
equal to or in excess of the Stock Component.
(3) Less than .01%.
101
<PAGE>
(4) Certain of the directors and executive officers included in the table
disclaim beneficial ownership of some of these shares as follows: Mr.
Eisner--53,600 shares held by Mr. Eisner's wife directly and as custodian
for their children, 36,000 shares held in trust for the benefit of their
children and 1,600 shares held in a family trust; Mr. Disney--2,179,444
shares (see footnote (8) below); Mr. Gold--1,520 shares held by Mr. Gold's
wife and children and 416 shares held by Shamrock Holdings, Inc., of which
he is an officer and director; Mr. Lozano--440 shares that he holds as
custodian for the benefit of his child; Mr. Thomas Murphy--17,390 shares
held in trust for the benefit of a non-family member and 420 shares owned
by Mr. Murphy's wife; Mr. Nunis--3,070 shares held by a trust of which Mr.
Nunis is trustee for the benefit of his son; New Disney directors and
executive officers as a group--2,255,464 shares.
(5) Includes interests in shares held for the benefit of the following
individuals and for New Disney directors and executive officers as a group
in the Disney Salaried Savings and Investment Plan as of December 1, 1994,
with respect to which such persons have sole voting power but no
investment rights: Mr. Eisner--7,745 shares; Mr. Litvack--498 shares; Mr.
Lawrence Murphy--1,008 shares; Mr. Nunis--9,272 shares; and New Disney
directors and executive officers as a group--22,418 shares.
(6) Includes the number of shares that could be purchased by exercise of
options available as of September 1, 1995 or within 60 days thereafter
under the New Disney's stock option or stock incentive plan as follows:
Mr. Disney--160,000; Mr. Eisner--6,000,000; Mr. Litvack--345,000; Mr.
Lawrence Murphy--272,000; Mr. Nunis--400,000.
(7) Based on the number of shares outstanding at, or acquirable within 60 days
of, September 1, 1995.
(8) The shares listed in the table for Mr. Disney include 2,179,444 shares as
to which Mr. Disney disclaims beneficial ownership, consisting of
1,507,520 shares owned by Mr. Disney's wife; 256,320 shares held in trusts
for the benefit of his four children, of which Mr. Disney is the trustee;
381,856 shares held in trust for the benefit of one of his children, of
which Mr. Disney is the trustee; 33,332 shares held in trust for the
benefit of another of his children, of which Mr Disney is the trustee; and
416 shares owned by a subsidiary of Shamrock Holdings, Inc., of which both
Mr. Disney and his wife are officers and directors and the shares of which
are held by Mr. Disney, his wife, certain of his children, trusts for the
benefit of his children and custodial accounts for the benefit of certain
of his children and grandchildren.
(9) Includes shares of which holders claim shared voting and investment power
as follows: Mr. Disney--2,179,444; Mr. Eisner--98,945; Mr. Gold--1,936;
Mr. Litvack--498; Mr. Lozano--440; Mr. Lawrence Murphy--1,008; Mr. Nunis--
34,864; Mr. Ovitz--200,820; Mr. Walker--162,543; Mr. Watson--17,360; New
Disney directors and officers as a group--2,697,858 shares.
(10) The number of shares listed with respect to Mr. Thomas Murphy is based on
the assumption that Mr. Murphy elects to receive, for each of his shares
of Capital Cities Common Stock, the Standard Consideration.
SECURITY OWNERSHIP OF DISNEY
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
each person known to Disney to own more than 5% of the outstanding Disney
Common Stock as of September 1, 1995.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
------------------- ------------ -------
<S> <C> <C>
Bass Management Trust (1)............................... 31,125,578 5.95
2700 First City Bank Tower
201 Main Street
Fort Worth, Texas 76012
</TABLE>
- --------
(1) According to a Schedule 13D, amended through January 28, 1992, filed on
behalf of the Bass Management Trust (the "Trust"), Mr. Perry R. Bass may
also be deemed a beneficial owner of the shares held by the Trust by virtue
of his authority as Trustee and a trustor of the Trust, and Nancy L. Bass
may also be deemed a beneficial owner of such shares as a trustor of the
Trust.
102
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
For information regarding the beneficial ownership of Disney Common Stock as
of September 1, 1995 by directors of Disney, certain executive officers of
Disney and all directors and officers of Disney as a group, see "SECURITY
OWNERSHIP OF NEW DISNEY."
103
<PAGE>
SECURITY OWNERSHIP OF CAPITAL CITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At October 31, 1995, the only persons, as that term is used in Section
13(d)(3) of the Exchange Act, known to Capital Cities to be the beneficial
owners of more than 5% of the outstanding shares of Capital Cities Common
Stock are:
<TABLE>
<CAPTION>
CAPITAL CITIES
COMMON STOCK
BENEFICIALLY PERCENT
OWNED OF CLASS
-------------- --------
<S> <C> <C>
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131.............................. 20,000,000(1) 13.00
State Farm Mutual Automobile Insurance
Company and related entities
One State Farm Plaza
Bloomington, Illinois 61710........................ 9,041,000(2) 5.88
</TABLE>
- --------
(1) Berkshire Hathaway owns these shares through the Berkshire Shareholders.
Mr. Buffett owns directly or indirectly 43.25% of the outstanding stock of
Berkshire Hathaway and therefore may be deemed to control the stock of
Berkshire Hathaway and be the beneficial owner of these 20,000,000 shares.
While each of the Berkshire Shareholders owning the shares of Capital
Cities Common Stock has both voting and investment power with respect
thereto, Mr. Buffett, through his stock ownership of Berkshire Hathaway,
may be deemed to be in control of such Berkshire Shareholders and
therefore to direct the voting and investments of such subsidiaries.
However, pursuant to agreements dated March 18, 1985, January 2, 1986 and
October 29, 1993 (collectively, the "Stock Purchase Agreement"), Berkshire
Hathaway and each of such Berkshire Shareholders executed and delivered to
Capital Cities an irrevocable proxy to vote all shares of Capital Cities
Common Stock owned by them, and named as their attorney and proxy Thomas
S. Murphy so long as he shall be Chief Executive Officer of Capital
Cities, or Daniel B. Burke so long as he shall be Chief Executive Officer
of Capital Cities. Such proxies will expire upon such date as neither Mr.
Murphy nor Mr. Burke shall be Chief Executive Officer of Capital Cities,
or January 2, 1997, whichever shall first occur. In the Stock Agreement,
Berkshire Hathaway agreed to cause each of the Berkshire Shareholders to
vote its shares of Capital Cities Common Stock (a) in favor of the
adoption of the Capital Cities Proposal and the Reorganization Agreement,
(b) against any Alternative Proposal (as defined in the Reorganization
Agreement) and (c) in favor of any other matter necessary to consummation
of the transaction contemplated by the Reorganization Agreement that might
be considered and voted upon at the Capital Cities Meeting and Mr. Murphy
agreed, to the extent necessary to comply with the Stock Agreement, to (i)
relinquish all rights with respect to, and to not exercise any rights or
powers pursuant to, proxies given by each of the Berkshire Shareholders
pursuant to the Stock Purchase Agreement and (ii) release each Berkshire
Shareholder from any further liability or obligation under such proxies.
In the Stock Agreement, Berkshire Hathaway also agreed not to sell, pledge
or otherwise dispose of any of its shares of Capital Cities Common Stock.
See "THE STOCK AGREEMENT."
(2) As reported to Capital Cities on a Schedule 13G as of December 31, 1994,
State Farm Mutual Automobile Insurance Company and related entities have
sole voting and investment power with respect to all the shares
beneficially owned by them.
104
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of October 31, 1995, all shares of
Capital Cities Common Stock and units under Capital Cities's Incentive
Compensation Plan ("Shadow Stock Units") that were owned by directors of
Capital Cities, certain executive officers of Capital Cities, and all
directors and executive officers of Capital Cities as a group.
<TABLE>
<CAPTION>
CAPITAL CITIES
COMMON STOCK PERCENT SHADOW
BENEFICIALLY OF STOCK
OWNED(1) CLASS UNITS OWNED(2)
-------------- ------- -------------
<S> <C> <C> <C>
Robert P. Bauman.............. 2,000(2) (4) -0-
Nicholas F. Brady............. 4,000 (4) -0-
Warren E. Buffett............. 20,000,000(5) 13.00 -0-
Daniel B. Burke............... 413,630(6) .27 -0-
Frank T. Cary................. 3,000(3) (4) -0-
John B. Fairchild............. 131,290(3) .09 -0-
Leonard H. Goldenson.......... 10,000 (4) -0-
Robert A. Iger................ 20,301(6)(7) .01 145,000
Frank S. Jones................ 250 (4) -0-
Ann Dibble Jordan............. 1,000 (4) -0-
John H. Muller, Jr............ 2,000 (4) -0-
Thomas S. Murphy.............. 1,024,260(3)(5)(6)(8) .67 -0-
Wyndham Robertson............. 3,000(9) (4) -0-
M. Cabell Woodward, Jr........ 11,000(3) (4) -0-
Ronald J. Doerfler............ 114,270(3)(6) .07 110,000
Herbert A. Granath............ 10,997(6)(7) (4) 95,000
Michael P. Mallardi........... 22,831(6)(7) .01 120,000
Phillip J. Meek............... 107,700(6) .07 95,000
Stephen A. Weiswasser......... 12,000(6)(10) (4) 80,000
David Westin.................. 12,076(6)(7) (4) 60,000
Alan N. Braverman............. 148(7) (4) 20,000
Allan J. Edelson.............. 19,575(6) .01 53,000
David J. Vondrak.............. 10,179(6)(7) (4) 32,000
All directors and executive
officers as a group........... 21,935,507(6)(7) 14.25 810,000
</TABLE>
- --------
(1) Each director and executive officer has sole voting and investment power
with respect to the shares of Capital Cities Common Stock beneficially
owned, except as noted above regarding Mr. Buffett and Berkshire
Hathaway, and as noted in footnotes (7), (9) and (10) below.
(2) See "Interests of Certain Persons in the Acquisition" for a description
of the Shadow Stock Units under the Incentive Compensation Plan.
(3) Shares of Capital Cities Common Stock shown do not include the following
shares owned by or for the benefit of family members, as to which stock
the persons disclaim any beneficial ownership: Mr. Bauman, 4,000; Mr.
Cary, 1,020; Mr. Fairchild, 200; Mr. Murphy, 420; Mr. Woodward, 5,000;
and Mr. Doerfler, 300.
(4) Less than .01%.
(5) See above regarding Berkshire Hathaway and the voting of the 20,000,000
shares of Capital Cities Common Stock beneficially owned by Mr. Buffett.
(6) Shares of Capital Cities Common Stock shown include the following shares
subject to employee stock options exercisable within 60 days after
October 31, 1995. Mr. Burke, 75,000; Mr. Iger, 27,500; Mr. Doerfler,
12,500; Mr. Granath, 4,000; Mr. Mallardi, 10,000; Mr. Meek, 10,000; Mr.
Murphy, 25,000; Mr. Weiswasser, 10,000; Mr. Westin, 16,250; Mr. Edelson,
4,000; and Mr. Vondrak, 4,000.
(7) Includes shares of Capital Cities Common Stock equivalent to the value of
the interest credited to the respective participants' accounts in the
Capital Cities/ABC, Inc. Savings & Investment Plan. Information with
respect to these equivalent shares is as of October 31, 1995.
(8) Does not include 17,390 shares of Capital Cities Common Stock held by a
trust for the benefit of a non-family member, with respect to which stock
Mr. Murphy, in his capacity as trustee, shares voting power and
investment power (which may be exercised by him only with the approval of
another trustee) but as to which Mr. Murphy disclaims any beneficial
ownership.
(9) These shares of Capital Cities Common Stock are held by a trust of which
Ms. Robertson is beneficiary, but with respect to which stock she has no
voting or investment power.
(10) Mr. Weiswasser shares with his wife voting and investment power with
respect to 2,000 shares of Capital Cities Common Stock he beneficially
owns.
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BUSINESS RELATIONSHIPS BETWEEN DISNEY AND CAPITAL CITIES
Disney and Capital Cities have had business relationships in a variety of
areas for more than 40 years in connection with their respective business
operations. Disney each year develops television programming, including
series, specials and made-for-television motion pictures, that it seeks to
market to the television networks, including the ABC Network. Current Disney-
produced programming on the ABC Network includes the television series Home
Improvement, Ellen and Boy Meets World. Disney also licenses certain motion
pictures produced under Disney's motion picture banners for exhibition on the
ABC Network. During the 1994-1995 television season, Disney received
approximately $81 million in license fees from Capital Cities for all such
programming. All such programming is provided on market terms and conditions
negotiated at arm's length.
In addition, a Disney subsidiary and an ABC production company recently
undertook the joint development of the television series Thunder Alley. Disney
also licenses first-run and "off-network" syndicated programming, such as Live
with Regis and Kathie Lee, to individual stations and cable programming
services owned by Capital Cities, in each case on market terms and conditions
negotiated on an arm's-length basis. Revenues received by Disney from these
transactions totalled approximately $9 million during the 1994-1995 television
season.
Disney also routinely purchases advertising, particularly for its theme
parks, resort facilities and motion pictures, on the ABC Network, individual
television stations and cable programming services owned by Capital Cities,
the ABC Radio networks and print publications owned and operated by Capital
Cities. Advertising expenditures in all of these media by Disney during the
first nine months of Disney's 1995 fiscal year aggregated approximately $76
million. All such advertising purchases are on market terms and conditions
negotiated at arm's length.
Affiliates of the two companies also engage from time to time in other
business activities including, for example the development of an ESPN Sports
Bar under construction at the Boardwalk facility at the Walt Disney World
Resort. These transactions and other business relationships in the ordinary
course of the business of both companies are not material to either company.
DISNEY OPTION PLANS
On November 1, 1995, the Disney Board adopted, subject to approval by the
stockholders of Disney, the 1995 Plan. The Disney Board also adopted, subject
to approval by the stockholders of Disney, an amendment to the 1990 Plan to
conform the 1990 Plan to the proposed 1995 Plan.
The 1995 Plan is substantially similar to the original 1990 Plan as approved
by the stockholders of Disney at the 1991 Annual Meeting of Stockholders. The
material differences between the two Plans are described below. Certain of the
changes in the 1995 Plan and the Amended 1990 Plan are intended to satisfy
specific requirements of Section 162(m) of the Code (discussed below) for
grants of stock options, warrants and stock appreciation rights, and Rule 16b-
3 under the Exchange Act. If approved by the Disney stockholders, the 1995
Plan and the Amended 1990 Plan will have identical terms except with respect
to term and number of shares covered. The 1995 Plan, like the 1990 Plan, is
designed to provide long-term incentives and rewards to employees of Disney
and its Affiliates (as defined below), to assist Disney in attracting and
retaining employees with experience and/or ability on a basis competitive with
industry practices and to associate the interest of such employees with those
of the Disney stockholders. In adopting the 1995 Plan, the Board took into
consideration the expansion of the Disney employee base since 1990 and the
substantially larger employee base that would result from consummation of the
Acquisition.
Approval of the 1995 Plan and the Amended 1990 Plan is not contingent upon
approval or effectiveness of the Acquisition. However, if approved by the
stockholders of Disney, the 1995 Plan and Amended 1990 Plan will become plans
of New Disney upon the effectiveness of the Acquisition.
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DESCRIPTION OF THE 1995 PLAN AND AMENDED 1990 PLAN
The following summary description of the 1995 Plan and the conforming
amendments to the 1990 Plan is qualified in its entirety by reference to the
full texts of the 1995 Plan and the Amended 1990 Plan, which are set forth as
Appendices B-1 and B-2, respectively, to this Joint Proxy
Statement/Prospectus.
If approved by the Disney stockholders, the 1995 Plan and Amended 1990 Plan
will allow the Compensation Committee (or such other committee of the Disney
Board as may be directed by the Disney Board) (the "Committee") to provide for
awards to employees of Disney and its Affiliates from time to time, in its
sole discretion, of stock options (including incentive stock options
qualifying under Section 422 of the Code and nonqualified stock options which
do not so qualify), stock appreciation rights (including free-standing, tandem
and limited stock appreciation rights) ("SARs"), warrants, dividend
equivalents, stock awards, restricted stock, phantom stock, performance shares
or other securities or rights that the Committee determines to be consistent
with the objectives and limitations of the 1995 Plan and the Amended 1990
Plan. All employees of Disney or any of its Affiliates are eligible to
participate in the 1995 Plan and the Amended 1990 Plan. For purposes of the
1995 Plan and the Amended 1990 Plan, "Affiliate" shall mean any entity, as may
from time to time be designated by the Committee, that is a subsidiary
corporation of Disney (within the meaning of Section 424 of the Code), and any
other entity directly or indirectly controlling or controlled by or under
common control with Disney. For purposes of this definition, "control" means
the power to direct the management and policies of such entity whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meaning correlative to the foregoing. The
1995 Plan and the Amended 1990 Plan will expire, unless earlier terminated, on
November 1, 2005 and November 26, 2000, respectively.
An aggregate of 65,000,000 shares of Disney Common Stock will be subject to
the 1995 Plan. An aggregate of 7,416,292 shares remain subject to the 1990
Plan, as of the date of this Joint Proxy Statement/Prospectus, out of the
34,000,000 shares previously authorized. Shares subject to grants that
terminate unexercised will be available for future grants. The 1995 Plan and
the Amended 1990 Plan differ from the 1990 Plan by establishing 10,000,000
shares as a maximum number of shares subject to awards of stock options,
warrants and SARs, individually and in the aggregate, that may be granted
during any period of five consecutive calendar years to any one individual
under each of the 1995 Plan and the Amended 1990 Plan. The 1995 Plan and the
Amended 1990 Plan also establish 2,000,000 shares as the maximum number of
shares subject to awards of stock, restricted stock, phantom stock,
performance shares or other forms of award conveying a similar economic
benefit (but excluding options, warrants and stock appreciation rights) that
may be granted during any period of five consecutive calendar years to any one
individual and establish 10,000,000 shares as the total number of shares
subject to such awards that may be awarded to all participants during any
period of five consecutive calendar years under each of the 1995 Plan and the
Amended 1990 Plan, in each case on an individual and aggregate basis with
respect to each type of award. Employees of Disney or its Affiliates are
eligible to receive awards under both the 1995 Plan and the Amended 1990 Plan,
subject to the foregoing limits. Adjustments will be made in the number
(including the maximum number of shares awarded during any period of five
consecutive calendar years), kind and character of shares subject to existing
or future awards under the 1995 Plan and the Amended 1990 Plan (including by
substitution of shares of another corporation, including, without limitation,
any successor of Disney), and in the exercise, purchase or base price of an
outstanding award, in the event of any change in the outstanding shares of
Disney Common Stock by reason of a stock split or stock dividend,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares or other similar corporate change. Additional
limitations apply to the aggregate dollar value of shares granted under
incentive stock options in order to comply with Section 422 of the Code.
The exercise price of any stock option is determined by the Committee at the
time the option is awarded, but under the rules adopted with respect to the
1995 Plan and the Amended 1990 Plan, the option price may not be less than
100% of the fair market value of the Disney Common Stock on the date the
option is granted. The 1995 Plan and both the original 1990 Plan and the
Amended 1990 Plan provide that the Committee may, with the consent of the
affected participant, reprice options previously granted thereunder by
amending the terms of any stock option agreement evidencing such options to
reestablish the exercise price for shares remaining subject
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to such agreement at a price not less than 100% of the fair market value of
the Disney Common Stock on the effective date of the amendment. The 1995 Plan
and both the original 1990 Plan and the Amended 1990 Plan also provide that
the Committee may effectively reprice options previously granted thereunder or
under any other stock option, stock incentive or incentive compensation plan
of Disney by granting options under the 1995 Plan or the Amended 1990 Plan in
substitution for options previously granted.
Subject to limitations that may be imposed by the Committee under the 1995
Plan and both the original 1990 Plan and the Amended 1990 Plan, the option
price payable upon exercise of options must be paid in cash or by the
surrender, at the fair market value on the date on which the option is
exercised, of shares of Disney Common Stock, or by any combination of cash and
such shares. The purchase price for shares purchased upon exercise of non-
qualified options may also be paid in any other manner approved by the
Committee, including, without limitation, by delivery to Disney of (A) a cash
amount of not less than the par value of the Disney Common Stock multiplied by
the number of shares in respect of which the option is being exercised, and
(B) a binding, joint and several obligation of the employee participant and a
financial institution or broker approved by the Committee to pay the balance
of the exercise price upon such terms and conditions as may be specified from
time to time by the Committee.
Unless otherwise approved by the Committee, an option may not be exercised
during the first twelve months after the date of its grant. After such twelve-
month period, unless otherwise approved by the Committee, an option may not
become exercisable as to more than 20% of the shares optioned, and after the
expiration of each of the second, third, fourth and fifth years from the date
of the grant, the option may not become exercisable as to more than an
additional 20% per year of such shares.
Subject to earlier termination, as provided below, options granted under the
1995 Plan and both the 1990 Plan and the Amended 1990 Plan expire ten years
after the date on which the option is granted, unless the Committee provides
for a shorter or longer period. Except as provided in the 1995 Plan and the
Amended 1990 Plan, or as otherwise may be provided by the Committee, no option
may be exercised unless the holder is then an employee of Disney or one of its
Affiliates. Unless the Committee otherwise provides, the option of any
participant whose employment has terminated for any reason expires on the
earlier of (a) the expiration date of the option or (b) the expiration of a
specified period after termination of employment as determined by the
Committee, provided that such period may not be less than: (i) twelve months
if employment ceased due to permanent and total disability, (ii) eighteen
months if employment ceased at a time when the optionee is eligible to elect
immediate commencement of retirement benefits under a pension plan to which
Disney or any of its Affiliates has made contributions, (iii) eighteen months
if the participant died while employed by Disney or any of its Affiliates or
(iv) three months if employment ceased for any other reason, except
termination for cause. The 1990 Plan set a twenty-four month maximum
expiration period after termination of employment which has been eliminated
from the 1995 Plan and the Amended 1990 Plan. In the event an employee is
terminated for cause, as determined by the Committee in its sole discretion,
then, subject to the terms of the applicable stock option agreement, any
unexercised options shall terminate immediately. In addition, specific
limitations will apply to incentive stock options for maximum term and maximum
period of exercise following termination of employment in order to comply with
Section 422 of the Code.
Awards under the 1995 Plan and Amended 1990 Plan are not transferable except
in certain circumstances including (i) transfers by will or the laws of
descent and distribution or (ii) subject to the prior approval of the
Committee, transfers to members of a participant's immediate family,
charitable institutions, trusts whose beneficiaries are members of a
participant's immediate family and/or charitable institutions, or to such
other persons or entities approved by the Committee, in each case subject to
the condition that the Committee be satisfied that such transfer is being made
for tax and/or estate planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration) being received
therefor. The 1995 Plan and the Amended 1990 Plan differ from the 1990 Plan by
allowing the Committee the flexibility to provide for the foregoing limited
exceptions to the transfer restrictions.
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SARs may be granted under the 1995 Plan and the Amended 1990 Plan on a free-
standing basis (without regard to the grant of a stock option) or on a tandem
basis (related to the grant of an underlying stock option). SARs granted on a
free-standing basis may be awarded by the Committee for a number of shares, at
a base price, upon terms for vesting and exercise and upon such other terms
and conditions as are consistent with such comparable terms applicable to the
grant of stock options under the 1995 Plan and the Amended 1990 Plan. SARs
granted on a tandem basis in connection with any stock option granted under
the 1995 Plan and the Amended 1990 Plan shall be subject to the same terms and
conditions as the related stock option and shall be exercisable only to the
extent such option is exercisable. The SARs entitle the holder to receive,
subject to the provisions of the 1995 Plan and the Amended 1990 Plan and such
rules and regulations as may be established by the Committee, payment having
an aggregate value equal to the product of (i) the excess, if any, of the fair
market value on the exercise date of one share over the base price per share,
times (ii) the number of shares called for by the SAR or portion thereof which
is exercised. The exercise of a tandem SAR results in the surrender of a
number of shares of the underlying option equal to the number of SAR shares so
exercised. The Committee, in its discretion, determines whether payment upon
exercise of the SAR will be made in cash, shares or a combination thereof and
any limitations on timing of exercise which are required in order to comply
with Rule 16b-3 of the Exchange Act.
The only benefits determinable as of the date of this Joint Proxy
Statement/Prospectus that will be received under the 1995 Plan or the Amended
1990 Plan are stock options to purchase 5,000,000 shares of Disney Common
Stock, at an exercise price of $57, granted to Mr. Michael Ovitz, President of
Disney, under the Amended 1990 Plan, on October 16, 1995. Mr. Ovitz's options
vest at a rate of 20% a year over five years, commencing on the third
anniversary of the date of grant. Mr. Ovitz's options include provisions
relating to the period of exercise following termination of employment that
are subject to stockholder approval of this proposal with respect to the
Amended 1990 Plan. The dollar value of the options granted to Mr. Ovitz cannot
be accurately ascertained due to the vesting provisions of his stock option
agreement and the potential fluctuation in the Disney Common Stock price over
the term of the option. During fiscal 1995, the only grants made under
existing Disney employee stock incentive plans to Disney's five most highly
compensated executive officers (as determined on the basis of the most highly
compensated executive officers for fiscal 1994) were to Mr. Michael D. Eisner,
Chief Executive Officer and Chairman of the Board, for 60,618 shares of
restricted stock pursuant to his fiscal 1994 bonus, Mr. Roy E. Disney, Vice
Chairman of the Board, for options covering 200,000 shares at $46.562 per
share, and Mr. Lawrence P. Murphy, Executive Vice President and Chief
Strategic Officer of Disney, for options covering 150,000 shares at $55.25 per
share. For all fiscal 1995 executive officers as a group, such stock option
grants totaled 1,307,000 shares, at a weighted average exercise price of
$53.058 per share, and restricted stock grants totaled 210,618 shares. In
addition, stock option grants covering 7,928,490 shares were made to other
employees of Disney in fiscal 1995 at a weighted average exercise price of
$51.812 per share.
ADMINISTRATION
The 1995 Plan and the Amended 1990 Plan will be administered by the
Committee, which will be so constituted as to permit the 1995 Plan and the
Amended 1990 Plan to comply with the disinterested administration requirements
of Rule 16b-3 under the Exchange Act and the "outside director" requirement of
Section 162(m) of the Code.
Under the 1995 Plan and both the 1990 Plan and Amended 1990 Plan, the
Committee has authority to determine, within the limits of the express
provisions set forth therein, the individuals to whom awards will be granted,
the type, size and terms of such awards, the date of grant, the terms of
vesting and the dates of exercisability and payment of awards. The Committee
has the ability to amend awards previously granted and to determine the
objectives and conditions for earning such awards. The Committee also has the
power to terminate or amend each of the 1995 Plan and the Amended 1990 Plan
and the rules in whole or in part, but no such action may be taken which would
adversely affect any rights or obligations with respect to any awards that
have been made thereunder. In addition, no amendment may be made to the 1995
Plan or the Amended 1990 Plan which (i) increases the maximum number of shares
of stock subject to the Plan or the maximum awards that may be granted during
any period of five consecutive calendar years to any individual or (ii)
extends the
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maximum period during which awards may be granted, without the approval of
holders of at least a majority of the shares of Disney Common Stock present,
or represented, and entitled to vote at a meeting of stockholders. Except as
provided above, the 1995 Plan and the Amended 1990 Plan may be amended by the
Committee without further stockholder approval, and no guidelines have been
established relating to the nature of the amendments that may be made without
stockholder approval. Amendments made without stockholder approval could
increase the costs to Disney under the 1995 Plan and the Amended 1990 Plan,
although the amount of such costs is not determinable. The Committee will have
the power to adopt rules for all types of awards under each Plan and to amend
the rules established under either Plan as long as the amendments are within
the limits of the Plan. The rules described above for stock options and SARs
(which are not intended to govern warrants) may be amended by the Committee to
the same extent and subject to the same limitations as described above for the
Plans.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
A participant receiving a non-qualified stock option under the 1995 Plan or
the Amended 1990 Plan does not recognize taxable income on the date of grant
of the option. However, the participant must generally recognize ordinary
income when a non-qualified stock option is exercised in the amount of the
difference between the option exercise price and the fair market value of the
Disney Common Stock on the date of exercise. If a holder of a non-qualified
stock option pays the exercise price, in full or in part, with previously
acquired shares of Disney Common Stock, the holder will recognize ordinary
income in the amount by which the fair market value of the Disney Common Stock
received exceeds the exercise price. However, no capital gain or loss is
recognized upon the delivery of such previously acquired shares of Disney
Common Stock to Disney.
A participant who is granted an incentive stock option would not recognize
taxable income either on the date of grant or on the date of its timely
exercise, although the exercise of an incentive stock option would be an item
of tax preference income potentially subject to the alternative minimum tax.
Upon disposition of the Disney Common Stock acquired upon exercise of an
incentive stock option, capital gain or loss would be recognized in an amount
equal to the difference between the sales price and the option exercise price,
provided the participant has not disposed of the Disney Common Stock within
two years of the date of grant and within one year from the date of exercise.
When a participant exercises an incentive stock option, Disney would not
generally be entitled to a tax deduction. However, if the participant disposes
of stock acquired through exercise of such an option before meeting the
required holding period, the participant must generally recognize ordinary
income in the amount of the difference between the option exercise price and
the fair market value of the Disney Common Stock on the date of exercise, and
Disney would be entitled to a deduction equal to the amount of ordinary income
recognized by the participant. If the holder of an incentive stock option pays
the exercise price, in full or in part, with previously acquired shares of
Disney Common Stock, no capital gain or loss is recognized upon the surrender
of such shares.
Disney will not be entitled to a tax deduction upon the grant of an option
under the 1995 Plan or the Amended 1990 Plan. However, when a participant
exercises a non-qualified stock option, Disney will generally recognize a tax
deduction in the amount of the difference between the option exercise price
and the fair market value of the Disney Common Stock on the date of exercise.
The payment by the participant to Disney of the exercise price has no tax
consequences to Disney.
Notwithstanding any of the foregoing discussion with respect to the
deductibility of compensation under the 1995 Plan and Amended 1990 Plan,
Section 162(m) of the Code generally would render non-deductible to Disney
taxable compensation in excess of $1,000,000 paid in any calendar year to
certain executive officers of Disney unless such excess compensation is
considered "performance-based" under Section 162(m). The applicable conditions
for a performance-based compensation plan include, among others, a requirement
that the stockholders approve the material terms of the plan. Stock options,
SARs and warrants that may be granted to executive officers as contemplated by
the 1995 Plan and the Amended 1990 Plan are intended to qualify for the
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exemption for performance-based compensation under Section 162(m). Other types
of awards are not intended to be so qualified. In light of the ambiguities in
Section 162(m) and uncertainties regarding its ultimate interpretation and
application, no assurances can be given that compensation awarded under the
Plans, intended to be exempt under Section 162(m), paid to any covered
executive officer will in fact be deductible if it should, together with other
non-exempt compensation paid to such executive officer, exceed $1,000,000.
The Board of Directors recommends a vote "FOR" approval of the 1995 Stock
Incentive Plan and the conforming amendments to the 1990 Stock Incentive Plan.
SIGNIFICANT REGULATIONS APPLICABLE TO
BROADCASTING SERVICES
Television and radio broadcasting are subject to the jurisdiction of the FCC
under the Communications Act. The Communications Act empowers the FCC, among
other things, to issue, revoke or modify broadcasting licenses, determine the
location of stations, regulate the equipment used by stations, adopt such
regulations as may be necessary to carry out the provisions of the
Communications Act and impose certain penalties for violation of its
regulations. The following highlights some of the principal areas of FCC
regulation of the broadcast industry. For more detailed information, see the
Capital Cities Form 10-K and other Capital Cities Reports.
ALIEN OWNERSHIP
The Communications Act prohibits a broadcast licensee (as well as certain
other FCC licensees) from having any foreign national officers or directors
and from having more than 20% of its capital stock owned or voted by foreign
nationals. A company that directly or indirectly controls a licensee may not
have any foreign national officers, may not have more than 25% foreign
national directors, may not be organized under the laws of a foreign country
and may not have more than 25% of its capital stock owned or voted (directly
or indirectly) by foreign nationals or foreign governments if the FCC finds
that the public interest would be served by the refusal of a license to such
company. Disney and Capital Cities are now, and upon the closing of the
Acquisition New Disney will be, in compliance with these restrictions.
RENEWAL AND OWNERSHIP
Exercising its authority under the Communications Act, the FCC has
promulgated rules regarding renewal of broadcast licenses. Renewal of
broadcast licenses--which is required every five years for television
broadcast licenses and every seven years for radio broadcast licenses--
involves an application process wherein an incumbent broadcaster typically is
eligible to receive a "renewal expectancy" against new applicants who are
allowed to compete with the incumbent broadcaster. Petitions to deny renewal
and mutually exclusive competing applications for a license may also be filed.
Currently, applications for renewal of the following broadcast properties of
Capital Cities are pending before the FCC: KABC(AM) (Los Angeles), KLOS(FM)
(Los Angeles), KTRK-TV (Houston), KABC-TV (Los Angeles), KGO-TV (San
Francisco), KFSN-TV (Fresno), WABC-TV (New York City), WPVI-TV (Philadelphia),
WMAL(AM) (Washington, D.C.) and WRQX(FM) (Washington, D.C.). In the case of
KABC(AM), KLOS(FM), KABC-TV, KGO-TV, KFSN-TV, WABC-TV, WPVI-TV, WMAL(AM) and
WRQX(FM), the time to file competing applications and petitions to deny has
passed, and no such filings have been made against these stations. In the case
of KTRK-TV, there is one outstanding petition to deny. Capital Cities believes
the petition is without merit and is vigorously opposing it. Additionally, by
December 1, 1995, Capital Cities must file renewal applications for its three
radio stations in Georgia (WKHX(AM), WKHX-FM and WYAY(FM)), whose licenses
expire on April 1, 1996. Disney's application for renewal of KCAL-TV (Los
Angeles) also is pending. One petition to deny is outstanding in connection
with this renewal proceeding. Disney believes this petition is without merit
and is vigorously opposing it. For more detailed information on Capital Cities
license renewals, see the Capital Cities Form 10-K.
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In 1992 the U.S. District Court for the District of Columbia issued a
Memorandum Opinion and Order in Shepherd et al. v. American Broadcasting
Companies, Inc. et al., Civil Action No. 88-0954 (RCL), which entered a
default judgment against American Broadcasting Companies, Inc. and Capital
Cities on a complaint alleging discrimination in employment practices at the
ABC News Bureau in Washington, D.C., in violation of District of Columbia law.
The default was based on a conclusion that "the defendants impeded and
obstructed the litigation process by . . . destruction and alteration of a
crucial document and through the harassment of witnesses and filing false and
misleading affidavits." On June 13, 1994, the Court entered an Order and Final
Judgment awarding plaintiffs money damages against ABC. ABC appealed the
decision to the United States Court of Appeals for the District of Columbia
Circuit. On August 25, 1995, the Court of Appeals vacated the district court
decision and remanded the case for further proceedings. The policies of the
FCC call for the agency to evaluate whether an adjudication of misconduct of
the kind found by the district court in Shepherd should bear on the
qualifications of the licensee. Prior to the Court of Appeals decision,
Capital Cities had urged the FCC to find that it and its subsidiaries are
fully qualified to hold and transfer broadcast licenses even if the misconduct
finding were ultimately upheld. Capital Cities has filed an amendment to call
the FCC's attention to the Court of Appeals decision vacating the district
court findings.
The FCC's Multiple Ownership Rules (see "THE ACQUISITION--Regulatory
Approvals"), restrict ownership of "attributable interests" in broadcast
licensees on both the national and local level. Generally, ownership is
attributed to officers, directors and shareholders who own more than five
percent of the outstanding voting stock of a licensee (except for certain
institutional shareholders, who may own up to ten percent). Nationally, a
single entity is restricted as to the number of television stations and the
number of radio stations it may own, and is also limited as to the percentage
of the national audience that it may reach from its television broadcasting
activities. Locally, a single entity may not own certain combinations of media
interests (e.g., newspaper/broadcast cross-ownership, radio/television
combinations in a single market, cable/broadcast cross-ownership), or more
than one television station or two AM and two FM radio stations in a single
market. The Acquisition involves a number of these restrictions that are the
subject of permanent or temporary waiver requests--many of which are asking
the FCC to reaffirm existing waivers that have been granted to Capital Cities.
See the previous discussion under "THE ACQUISITION--Regulatory Approvals--
Ownership Restrictions."
The FCC is currently engaging in an extensive review of its attribution
rules and its Multiple Ownership Rules. While the FCC has tentatively
suggested that it might relax some of its ownership restrictions, it also has
intimated that certain of its attribution rules might be strengthened, such
that certain ownership interests that currently are not attributable would
become attributable. Disney and Capital Cities cannot predict what impact such
revisions, if adopted, will have on the operations of New Disney or its
subsidiaries.
ADVANCED TELEVISION
The FCC has begun adopting rules relating to advanced television service
("ATV"), which includes high-definition television systems. Such systems are
entirely digital broadcast systems that would improve the video and audio
quality of broadcast television. Current versions of these rules would allow
each existing broadcaster to acquire a second channel set aside exclusively
for ATV use. The rules would then require a gradual phasing-in of ATV service
and the return of one channel. This conversion process will require
considerable capital expenditures over a long period of time by existing
television broadcasters, including Capital Cities and New Disney. The FCC has
recently initiated a comprehensive rulemaking to reconsider all aspects of the
conversion to ATV service. Disney and Capital Cities cannot predict the final
form that FCC Rules implementing ATV service will take, or what impact such
FCC Rules or the implementation of ATV service will have on the business of
New Disney or its subsidiaries.
PRIME TIME ACCESS RULE
The FCC's prime time access rule ("PTAR") prohibits (with limited
exceptions) network-owned and network-affiliated commercial television
stations in the top 50 television markets--including those affiliated with
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the ABC Television Network--from devoting more than three hours of the four-
hour "prime time" period to the broadcast of network or off-network
programming. Because Disney is a major producer of television entertainment
programming, PTAR could restrict the ability of Disney to supply ABC
Television Network affiliates in the top 50 markets with programming in the
remaining one hour of the prime time period. On July 28, 1995, however, the
FCC repealed PTAR, to be effective on August 30, 1996. Accordingly, unless the
FCC's repeal of PTAR is reversed (which Disney and Capital Cities do not
expect), PTAR will restrict New Disney for only a brief period.
FINANCIAL INTEREST AND SYNDICATION RULES
The FCC's financial interest and syndication rules ("fin-syn rules")
preclude certain networks, including the ABC Television Network, from, among
other things, engaging in active first-run or "off-network" syndication of
programs to television stations in the United States, constrain the networks'
discretion to determine when programs owned by them will be made available for
syndication, and prevent the networks from acquiring interests in first-run
syndicated programs from independent producers. If the fin-syn rules are still
in effect upon the closing of the Acquisition, New Disney will not be in
compliance with certain of such rules if Disney's current syndication
activities are continued.
On September 6, 1995, the FCC issued a Report and Order (the "FCC Order")
repealing the fin-syn rules in their entirety effective upon the publication
of the FCC Order in the Federal Register. The FCC Order is subject to
administrative reconsideration or judicial review if sought by an interested
party. If the fin-syn rules are still in effect upon the closing of the
Acquisition, New Disney will attempt to bring itself into compliance with such
rules.
LEGISLATIVE REFORMS
Recently, the U.S. Senate and the House of Representatives each approved
bills that would substantially reform the Communications Act. The Senate bill,
S.652, was passed on June 15, 1995. The House bill, H.R.1555, was passed on
August 4, 1995. Differences between the bills are being considered in a joint
Senate--House Conference Committee which convened in October 1995. If the
Conference Committee is able to agree on a joint bill, the bill will be
subject to final Senate and House approval. If such a bill is adopted, it is
unclear whether the President will veto it, and if so, whether the Congress
will override his veto. As currently drafted, the Senate and House bills are
similar to each other in many respects. The following describes the provisions
of the bills that could be expected to most directly affect the operations of
New Disney and its subsidiaries if enacted into law.
License Renewals. Both bills contain provisions that would change the
process of licensing broadcast operations and the ownership of media
properties. Both bills would lengthen the terms of broadcast licenses--the
Senate bill would allow broadcast licenses to be granted for seven years,
while the House bill would allow ten-year terms. Both bills provide that, upon
expiration, the FCC may not consider applicants other than the incumbent
renewal applicant unless the FCC decides that the incumbent applicant does not
meet statutory requirements for renewal.
Ownership. While the House bill would loosen restrictions on cross-ownership
of different media properties in the same market (e.g., the one-to-a-market
rule (radio/television) and the newspaper/broadcast cross-ownership rule), the
Senate bill would not remove any cross-ownership restrictions other than a
prohibition on the cross-ownership of certain telephone and cable systems.
National and local ownership restrictions also would be changed by the current
versions of the bills. Both bills would lift the national audience restriction
on television broadcast ownership from 25 percent to 35 percent. Both bills
also would eliminate the absolute numerical limit on the ownership of
television stations and would substantially loosen or simply eliminate
restrictions on the ownership of multiple radio stations. Additionally, the
House bill would allow the FCC to determine whether a single party could own
two VHF television stations in a market or, under a less rigorous standard,
whether a party could own two UHF stations or a UHF-VHF combination in the
same market.
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Disney and Capital Cities cannot predict whether the bills as currently
drafted, a compromise bill or any other telecommunications reform bill
ultimately will become law, or what form that law would take. Also,
telecommunications reform, if enacted while the FCC Applications are pending,
could affect whatever decision the FCC may make with respect to such
Applications, including Disney's requests for various waivers of the Multiple
Ownership Rules. Capital Cities and Disney, however, cannot predict the impact
of any telecommunications legislation on the FCC approval process relating to
the FCC Applications and such waiver requests or on the operations of New
Disney and its subsidiaries following the Acquisition.
The information contained under this heading does not purport to be a
complete summary of all the provisions of the Communications Act, the FCC
Rules thereunder, or of pending proposals for other legislation regarding the
regulation of broadcasting and related activities. For a complete statement of
such provisions, reference is made to the Communications Act, and to the FCC
Rules and such pending proposals.
LEGAL MATTERS
The validity of the New Disney Common Stock to be issued in connection with
the Acquisition will be passed upon by Dewey Ballantine.
Dewey Ballantine, counsel for Disney, has delivered an opinion to the effect
that the description of the Federal income tax consequences to holders of
Disney Common Stock contained under the heading "THE ACQUISITION--Certain
Federal Income Tax Consequences--Treatment of Holders of Disney Common Stock"
(and the subheading thereof) and under the heading "THE ACQUISITION--Certain
Federal Income Tax Consequences--Reporting Requirements" correctly sets forth
the material Federal income tax consequences for such holders and has
confirmed its opinion set forth in the third paragraph under the heading "THE
ACQUISITION--Certain Federal Income Tax Consequences." Cravath, Swaine &
Moore, counsel for Capital Cities, has delivered an opinion to the effect that
the description of the Federal income tax consequences to holders of Capital
Cities Common Stock contained under the heading "THE ACQUISITION--Certain
Federal Income Tax Consequences--Treatment of Holders of Capital Cities Common
Stock" (and the subheadings thereof) and under the heading "THE ACQUISITION--
Certain Federal Income Tax Consequences--Reporting Requirements" correctly
sets forth the material Federal income tax consequences for such holders and
has confirmed its opinion set forth in the third paragraph under the heading
"THE ACQUISITION--Certain Federal Income Tax Consequences." In addition,
consummation of the Disney Merger and the Capital Cities Merger is conditioned
upon the receipt of the opinions of Dewey Ballantine and Cravath, Swaine &
Moore, respectively, described in the final sentence of the third paragraph
under the heading "THE ACQUISITION--Certain Federal Income Tax Consequences."
EXPERTS
The consolidated financial statements of Disney as of September 30, 1994 and
1993 and for each of the three years in the period ended September 30, 1994,
incorporated in this Joint Proxy Statement/Prospectus by reference to its
Annual Report on Form 10-K for the year ended September 30, 1994, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Capital Cities at December 31, 1994
and 1993 and for each of the three years in the period ended December 31,
1994, incorporated by reference in this Joint Proxy Statement/Prospectus,
which are referred to herein and made a part of the Registration Statement of
which this Joint Proxy Statement/Prospectus is a part, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
also incorporated herein by reference or included elsewhere herein. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
It is expected that representatives of Price Waterhouse LLP, Disney's
independent accountants, will be present at the Disney Meeting and
representatives of Ernst & Young LLP, Capital Cities' independent auditors,
will be present at the Capital Cities Meeting where they will have an
opportunity to respond to appropriate questions of stockholders and to make a
statement if they so desire.
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FUTURE STOCKHOLDER PROPOSALS
If the Acquisition is consummated, the first annual meeting of the public
stockholders of New Disney after such consummation is expected to be held
February 18, 1997. If the Acquisition is not consummated, the 1996 annual
meeting of the stockholders of Disney is expected to be held on or about March
7, 1996 and the 1996 annual meeting of the shareholders of Capital Cities is
expected to be held on or about May 3, 1996.
Subject to the foregoing, if any New Disney stockholder intends to present a
proposal at the 1997 New Disney annual meeting and wishes to have such
proposal considered for inclusion in the proxy materials for such meeting,
such holder must submit the proposal to the Secretary of New Disney in writing
so as to be received at the executive offices of New Disney by September 4,
1996. Such proposals must also meet the other requirements of the rules of the
Commission relating to stockholders' proposals. In the event the Acquisition
is not consummated, the only stockholder proposals eligible to be considered
for inclusion in the proxy materials for the 1996 annual meetings of Disney
and Capital Cities will be those which have been duly submitted to the
Secretary of Disney by September 6, 1995 or the Secretary of Capital Cities by
December 4, 1995, as the case may be, as provided in the respective 1995
Annual Meeting Proxy Statements of Disney and Capital Cities.
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APPENDIX A-1
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement"), dated as of July 31, 1995, between The Walt Disney Company, a
Delaware corporation (the "Purchaser") and Capital Cities/ABC, Inc., a New
York corporation (the "Company").
RECITALS
A. The Boards of Directors of the Purchaser and the Company have approved,
and deem it advisable and in the best interests of their respective companies
and stockholders to consummate the reorganization (the "Reorganization")
provided for herein, pursuant to which DC Holdco, Inc. ("Holding Company"),
the surviving corporation of a merger of Keystone Properties, Inc., a wholly
owned subsidiary of the Purchaser, with and into DC Holdco, Inc., a wholly
owned subsidiary of the Purchaser, will acquire all of the common stock of
each of the Purchaser and the Company through mergers of Subsidiaries (as
defined in Section 10.14) of Holding Company with and into each of the
Purchaser and the Company.
B. For federal income tax purposes, it is intended that (i) the Purchaser
Merger (as hereinafter defined) qualify as a reorganization under the
provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the "Code") and/or as an exchange under the provisions of
Section 351 of the Code and (ii) that the Company Merger (as hereinafter
defined) qualify as an exchange under the provisions of Section 351 of the
Code.
C. Concurrently with the execution hereof, in order to induce the Purchaser
to enter into this Agreement, the Purchaser is entering into a Stock Agreement
(the "Stock Agreement") with Berkshire Hathaway Inc. and Thomas S. Murphy
providing for certain voting and other restrictions with respect to the shares
of Company Common Stock (as defined in Section 4.4 herein) beneficially owned
by Berkshire Hathaway Inc. upon the terms and conditions specified therein.
D. The Purchaser and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1. Holding Company. The Certificate of Incorporation and By-Laws of
Holding Company shall be in such forms as shall be determined by Purchaser;
provided that the Certificate of Incorporation of Holding Company shall be
amended to be substantially in the form of the Certificate of Incorporation of
the Purchaser. The Certificate of Incorporation of Holding Company will
additionally be amended to provide that the authorized capital stock of
Holding Company shall consist initially of 1,200,000,000 shares of common
stock, $.01 par value (the "Holding Company Common Stock") and 100,000,000
shares of preferred stock, $.01 par value (the "Holding Company Preferred
Stock").
1.2. Directors and Officers of Holding Company. (i) The directors and
officers of Holding Company shall be designated by the Purchaser. Each such
officer and director shall remain in office until his or her successors are
elected.
1.3. Organization of Merger Subsidiaries. As promptly as practicable
following the execution of this Agreement, the Purchaser shall cause the
following companies (the "Merger Subsidiaries") to be organized for the sole
purpose of effectuating the Purchaser Merger and the Company Merger
contemplated herein:
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(i) DCA Merger Corp., a corporation organized under the laws of the State
of Delaware ("Merger Sub A"). The Certificate of Incorporation and By-laws
of Merger Sub A shall be in such forms as shall be determined by the
Purchaser as soon as practicable following the execution of this Agreement.
The authorized capital stock of Merger Sub A shall initially consist of 100
shares of common stock, par value $.01 per share, which shall be issued to
Holding Company at a price of $1.00 per share.
(ii) DCB Merger Corp., a corporation organized under the laws of the
State of New York ("Merger Sub B" and, together with Merger Sub A, the
"Merger Subsidiaries"). The Certificate of Incorporation and By-laws of
Merger Sub B shall be in such forms as shall be determined by the Purchaser
as soon as practicable following the execution of this Agreement. The
authorized capital stock of Merger Sub B shall initially consist of 100
shares of common stock, par value $.01 per share, which shall be issued to
Holding Company at a price of $1.00 per share.
1.4. Actions of Directors and Officers. As promptly as practicable following
the execution of this Agreement, the Purchaser shall designate the directors
and officers of Merger Sub A and Merger Sub B. The Purchaser shall cause (i)
Holding Company to elect the directors of the Merger Subsidiaries, (ii) the
directors of Merger Sub A and Merger Sub B to elect their respective officers,
(iii) the directors of Holding Company to ratify and approve this Agreement
and to approve the forms of the Merger Agreements (as defined in Section 2.1),
(iv) the Merger Agreements to be executed on behalf of the parties thereto,
and (v) the directors and officers of the Merger Subsidiaries to take such
steps as may be necessary or appropriate to complete the organization of the
Merger Subsidiaries and to approve the Merger Agreements.
1.5. Actions of Purchaser and Company. As promptly as practicable following
the execution of this Agreement, as the holders of all of the outstanding
shares of capital stock of Holding Company, the Purchaser shall cause Holding
Company to ratify and approve this Agreement, and shall cause Holding Company,
as the sole shareholder of each of the Merger Subsidiaries, to adopt the
Merger Agreements. The Purchaser shall cause Holding Company and the Merger
Subsidiaries to perform their respective obligations under this Agreement and
the Merger Agreements.
ARTICLE 2
THE MERGERS; CLOSING
2.1. The Mergers. Pursuant to Plans of Merger, in forms to be mutually
agreed upon by the Purchaser and the Company (sometimes hereinafter referred
to individually as the "Purchaser Merger Agreement" and the "Company Merger
Agreement", respectively, and collectively as the "Merger Agreements"), upon
the terms and subject to the conditions set forth in this Agreement and in the
Merger Agreements:
(a) Merger Sub A shall be merged with and into the Purchaser (the
"Purchaser Merger") in accordance with the applicable provisions of the
laws of the State of Delaware. Purchaser shall be the surviving corporation
in the Purchaser Merger and shall continue its corporate existence under
the laws of the State of Delaware. As a result of the Purchaser Merger,
Purchaser shall become a wholly owned Subsidiary of Holding Company. The
effects and consequences of the Purchaser Merger shall be as set forth in
the Purchaser Merger Agreement.
(b) Merger Sub B will be merged with and into the Company (the "Company
Merger"), in accordance with the applicable provisions of the laws of the
State of New York. The Company shall be the surviving corporation in the
Company Merger and shall continue its corporate existence under the laws of
the State of New York. As a result of the Company Merger, the Company shall
become a wholly owned Subsidiary of Holding Company. The effects and
consequences of the Company Merger shall be as set forth in the Company
Merger Agreement. The term "Mergers" shall mean the Purchaser Merger and
the Company Merger.
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(c) The term "Effective Time" shall mean the time and date which is (A)
the later of (i) the date and time of the filing of the certificate of
merger relating to the Purchaser Merger with the Secretary of State of the
State of Delaware (or such other date and time as may be specified in such
certificate as may be permitted by law) and (ii) the date and time of the
filing of a certificate of merger by the Department of State of the State
of New York with respect to the Company Merger (or such other date and time
as may be specified in such certificate as may be permitted by law) or (B)
such other time and date as the Purchaser and the Company may agree.
2.2. The Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement and the Merger
Agreements (the "Closing") shall take place (a) at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York, at 10:00 a.m.,
local time, on the later of (i) January 3, 1996 and (ii) the first business
day following the day on which the last to be fulfilled or waived of the
conditions set forth in Article 8 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as the Purchaser and the
Company may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
ARTICLE 3
DIRECTORS AND OFFICERS OF THE MERGER SUBSIDIARIES AND
SURVIVING CORPORATIONS
3.1. Directors. The directors of the Purchaser immediately prior to the
Effective Time shall be the directors of the surviving corporation of the
Purchaser Merger as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law. The directors of
Merger Sub B immediately prior to the Effective Time shall be the directors of
the surviving corporation of the Company Merger as of the Effective Time and
until their successors are duly appointed or elected in accordance with
applicable law.
3.2. Officers. The officers of the Purchaser and the Company immediately
prior to the Effective Time shall be the officers of the surviving
corporations of the Purchaser Merger and the Company Merger, respectively, as
of the Effective Time and until their successors are duly appointed or elected
in accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGERS ON SECURITIES OF
THE PURCHASER, THE COMPANY AND THE MERGER SUBSIDIARIES
4.1. Merger Sub Stock. At the Effective Time, each share of the common stock
of Merger Sub A outstanding immediately prior to the Effective Time shall be
converted into and shall become one share of common stock of the surviving
corporation of the Purchaser Merger. At the Effective Time, each share of the
common stock of Merger Sub B outstanding immediately prior to the Effective
Time shall be converted into and shall become one share of common stock of the
surviving corporation of the Company Merger.
4.2. Holding Company Capital Stock. At the Effective Time, each share of the
capital stock of Holding Company issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive in cash the
fair market value thereof as agreed upon by the Purchaser and the Holding
Company.
4.3. Conversion of Purchaser Stock. (a) Subject to Section 4.3(b), at the
Effective Time, each share of common stock, par value $0.025 per share, of the
Purchaser ("Purchaser Common Stock") issued and
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outstanding at the Effective Time shall be converted into one share of Holding
Company Common Stock. Upon such conversion, all such shares of Purchaser
Common Stock shall be cancelled and cease to exist, and each certificate
theretofore representing any such shares shall, without any action on the part
of the holder thereof, be deemed to represent an equivalent number of shares
of Holding Company Common Stock.
(b) At the Effective Time, each share of Purchaser Common Stock which is
held in the treasury of the Purchaser immediately prior to the Effective Time
shall, by virtue of the Mergers, cease to be outstanding and shall be
cancelled and retired without payment of any consideration therefor.
(c) At the Effective Time, each outstanding option or right to purchase
shares of Purchaser Common Stock ( a "Purchaser Option") shall, if agreed by
the holder of any such Purchaser Option, be assumed by the Holding Company in
such manner that it is converted into an option to purchase shares of Holding
Company Common Stock, with each such Purchaser Option to otherwise be
exercisable upon the same terms and conditions as then are applicable to such
Purchaser Option, including the number of shares and exercise price provided
thereby. At the Effective Time, the Holding Company shall assume all rights
and obligations of the Purchaser under the Purchaser's stock option plans as
in effect at the Effective Time and shall continue such plans in accordance
with their terms.
4.4. Conversion of Company Common Stock. (a) Except as otherwise provided in
Section 4.6 and subject to Sections 4.4(c) and 4.4(d), at the Effective Time
each issued and outstanding share of Common Stock, $.10 par value of the
Company (the "Company Common Stock"), shall be converted into at the election
of the holder thereof one of the following (as adjusted pursuant to Section
4.6, the "Merger Consideration"):
(i) for each such share of Company Common Stock with respect to which an
election to receive a combination of Holding Company Common Stock and cash
has been effectively made and not revoked or lost, pursuant to Sections
4.5(c), (d) and (e) (a "Standard Election"), the right to receive (x) one
share of Holding Company Common Stock plus (y) an amount in cash equal to
$65 (collectively, the "Standard Consideration");
(ii) for each such share of Company Common Stock with respect to which an
election to receive solely Holding Company Common Stock has been
effectively made and not revoked or lost pursuant to Sections 4.5(c), (d)
and (e) (a "Stock Election"), the right to receive (x) one share of Holding
Company Common Stock plus (y) a number of shares of Holding Company Common
Stock equal to a fraction, the numerator of which is $65 and the
denominator of which is the Purchaser Common Stock Price (collectively, the
"Stock Consideration"). The "Purchaser Common Stock Price" means an amount
equal to the average of the closing sales prices of Purchaser Common Stock
on the New York Stock Exchange Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior
to the date of the Effective Time; or
(iii) for each such share of Company Common Stock (other than shares as
to which a Standard Election or a Stock Election was made), the right to
receive in cash, without interest, an amount equal to $65 plus the
Purchaser Common Stock Price (collectively, the "Cash Consideration").
(b) As a result of the Company Merger and without any action on the part of
the holder thereof, at the Effective Time all shares of Company Common Stock
shall cease to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of shares of Company Common Stock shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive, without interest, the Merger
Consideration and cash for fractional shares of Holding Company Common Stock
in accordance with Sections 4.7(c) upon the surrender of a certificate
representing such shares of Company Common Stock (a "Company Certificate").
(c) Notwithstanding anything contained in this Section 4.4 to the contrary,
each share of Company Common Stock issued and held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Company
Merger, cease to be outstanding and shall be cancelled and retired without
payment of any consideration therefor.
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(d) Notwithstanding anything in this Section 4.4 to the contrary, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such
shares in favor of the Company Merger and who shall have properly exercised
their rights of appraisal for such shares in the manner provided by the New
York Business Corporation Law (the "NYBCL") (the "Dissenting Shares") shall
not be converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost his right to appraisal and payment,
as the case may be. If such holder shall have so failed to perfect or shall
have effectively withdrawn or lost such right, his shares shall thereupon be
deemed to have been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon. The Company shall give the Purchaser prompt notice of any
Dissenting Shares (and shall also give the Purchaser prompt notice of any
withdrawals of such demands for appraisal rights) and the Purchaser shall have
the right to direct all negotiations and proceedings with respect to any such
demands. Neither the Company nor the surviving corporation of the Company
Merger shall, except with the prior written consent of the Purchaser,
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for appraisal rights.
(e) At the Effective Time, each outstanding option or right to purchase
shares of Company Common Stock (a "Company Option") shall, if agreed by the
holder of any such Company Option, be assumed by Holding Company in such
manner that it is converted into an option to purchase shares of Holding
Company Common Stock, as provided below. Following the Effective Time, each
such Company Option shall be exercisable upon the same terms and conditions as
then are applicable to such Company Option, except that (i) each such Company
Option shall be exercisable for that number of shares of Holding Company
Common Stock equal to the product of (x) the number of shares of Company
Common Stock for which such Company Option was exercisable and (y) the Stock
Consideration specified in Section 4.4(a)(ii) (before adjustment pursuant to
Section 4.6(c)) and (ii) the exercise price of such option shall be equal to
the exercise price of such option as of the date hereof divided by the Stock
Consideration (before adjustment pursuant to Section 4.6(c)). It is the
intention of the parties that, to the extent that any such Company Option
constituted an "incentive stock option" (within the meaning of Section 422 of
the Code) immediately prior to the Effective Time, such option continue to
qualify as an incentive stock option to the maximum extent permitted by
Section 422 of the Code, and that the assumption of the Company Stock Options
provided by this Section 4.4(e) satisfy the conditions of Section 424(a) of
the Code. From and after the date of this Agreement, no additional options to
purchase shares of Company Common Stock shall be granted under the Company
stock option plans or otherwise (other than an aggregate of 75,000 options to
acquire Company Common Stock granted pursuant to the terms existing on the
date hereof of the Company's stock option plan). Notwithstanding the foregoing
provisions of this Section 4.4(e) or any other provision of this Agreement,
the Company and the holder of any Company Option may amend such Company Option
so that the holder of such Company Option (if it is outstanding at the
Effective Time) may elect to receive, in settlement thereof, for each share of
Company Common Stock subject to a Company Option an amount (subject to any
applicable withholding tax) in cash equal to the Cash Consideration (before
adjustment pursuant to Section 4.6(d)) minus the per share exercise or
purchase price of such Company Option as of the date hereof. Except as
otherwise agreed to by the parties, the Company shall use reasonable efforts
to ensure that no person shall have any right under any stock option plan (or
any option granted thereunder) or other plan, program or arrangement with
respect to, including any right to acquire, equity securities of the Company
following the Effective Time.
4.5. Company Common Stock Elections. (a) Each person who, at the Effective
Time, is a record holder of shares of Company Common Stock (other than holders
of shares of Company Common Stock to be cancelled as set forth in Section
4.4(c) or Dissenting Shares) shall have the right to submit an Election Form
(as defined in Section 4.5(c)) specifying the number of shares of Company
Common Stock that such person desires to have converted into the right to
receive Holding Company Common Stock and cash pursuant to the Standard
Election, the number of shares of Company Common Stock that such person
desires to have converted into the right to receive Holding Company Common
Stock pursuant to the Stock Election, and the number of shares of Company
Common Stock that such person desires to have converted into the right to
receive cash (a "Cash Election").
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(b) Promptly after the Allocation Determination (as defined in Section
4.5(d)), (i) Holding Company shall deposit (or cause to be deposited) with a
bank or trust company to be designated by Purchaser and reasonably acceptable
to the Company (the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Article
IV, cash in the amount sufficient to pay the aggregate cash portion of the
Merger Consideration and (ii) Holding Company shall deposit (or cause to be
deposited) with the Exchange Agent, for the benefit of the holders of shares
of Company Common Stock, certificates representing the shares of Holding
Company Common Stock ("Holding Company Certificates") for exchange in
accordance with this Article IV (the cash and shares deposited pursuant to
clauses (i) and (ii) being hereinafter referred to as the "Exchange Fund").
Holding Company Common Stock into which Purchaser Common Stock and Company
Common Stock shall be converted pursuant to the Mergers shall be deemed to
have been issued at the Effective Time.
(c) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of Company Common Stock immediately
prior to the Effective Time (excluding any shares of Company Common Stock
which will be cancelled pursuant to Section 4.4(c) or Dissenting Shares) (A) a
letter of transmittal (the "Company Letter of Transmittal") (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of such Company
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Purchaser shall specify), (B) instructions for use in
effecting the surrender of the Company Certificates in exchange for the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby, and (C) an election form (the "Election Form") providing
for such holders to make the Standard Election, the Cash Election or the Stock
Election. As of the Election Deadline (as hereinafter defined) all holders of
Company Common Stock immediately prior to the Effective Time that shall not
have submitted to the Exchange Agent or shall have properly revoked an
effective, properly completed Election Form shall be deemed to have made a
Cash Election.
(d) Any Cash Election (other than a deemed Cash Election), Standard
Election, or Stock Election shall have been validly made only if the Exchange
Agent shall have received by 5:00 p.m. New York, New York time on a date (the
"Election Deadline") to be mutually agreed upon by the Purchaser and the
Company (which date shall not be later than the twentieth business day after
the Effective Time), an Election Form properly completed and executed (with
the signature or signatures thereof guaranteed to the extent required by the
Election Form) by such holder accompanied by such holder's Company
Certificates, or by an appropriate guarantee of delivery of such Company
Certificates from a member of any registered national securities exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States as set forth in such Election Form. Any
holder of Company Common Stock who has made an election by submitting an
Election Form to the Exchange Agent may at any time prior to the Election
Deadline change such holder's election by submitting a revised Election Form,
properly completed and signed that is received by the Exchange Agent prior to
the Election Deadline. Any holder of Company Common Stock may at any time
prior to the Election Deadline revoke his election and withdraw his Company
Certificates deposited with the Exchange Agent by written notice to the
Exchange Agent received by the close of business on the day prior to the
Election Deadline. As soon as practicable after the determination by the
Purchaser regarding an increase in the Maximum Cash Amount pursuant to Section
4.6(b) hereof, the Exchange Agent shall determine the allocation of the cash
portion of the Merger Consideration and the stock portion of the Merger
Consideration and shall notify Holding Company of its determination (the
"Allocation Determination").
(e) Upon surrender of a Company Certificate for cancellation to the Exchange
Agent, together with the Company Letter of Transmittal, duly executed, and
such other documents as Purchaser or the Exchange Agent shall reasonably
request, the holder of such Company Certificate shall be entitled to receive
promptly after the Election Deadline in exchange therefor (A) a certified or
bank cashier's check in the amount equal to the cash, if any, which such
holder has the right to receive pursuant to the provisions of this Article IV
(including any cash in lieu of fractional shares of Holding Company Common
Stock pursuant to Section 4.8(c)), and (B) a Holding Company Certificate
representing that number of shares of Holding Company Common Stock, if any,
which such holder has the right to receive pursuant to this Article IV (in
each case less the amount of any required withholding taxes), and the Company
Certificate so surrendered shall forthwith be cancelled. Until surrendered
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as contemplated by this Section 4.5, each Company Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive
the Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby.
(f) Purchaser shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the validity of the Election Forms, the
manner and extent to which Standard Elections, Cash Elections or Stock
Elections are to be taken into account in making the determinations prescribed
by Section 4.6, the issuance and delivery of certificates for Holding Company
Common Stock into which shares of Company Common Stock or Purchaser Common
Stock are converted in the Mergers, and the payment of cash for shares of
Company Common Stock converted into the right to receive cash in the Company
Merger.
4.6. Proration. (a) As is more fully set forth below, the maximum number of
shares of Holding Company Common Stock to be issued to holders of Company
Common Stock shall not exceed the number of Outstanding Company Shares.
"Outstanding Company Shares" shall mean those shares of Company Common Stock
outstanding immediately prior to the Effective Time minus (x) shares of
Company Common Stock which will be cancelled pursuant to Section 4.4(c) and
(y) Dissenting Shares (as long as such remain Dissenting Shares).
(b) As is more fully set forth below, the aggregate amount of cash to be
paid to holders of Outstanding Company Shares (the "Maximum Cash Amount")
shall not exceed the product of (x) $65 and (y) the number of Outstanding
Company Shares; provided, however, that the Purchaser shall have the right, in
its sole discretion, to increase the Maximum Cash Amount at any time within
five (5) business days after the Election Deadline.
(c) In the event that the aggregate number of shares of Holding Company
Common Stock represented by the Stock Elections received by the Exchange Agent
(the "Requested Stock Amount") exceeds an amount equal to the number of
Outstanding Company Shares minus the aggregate number of Outstanding Company
Shares with respect to which effective Standard Elections have been received
by the Exchange Agent (such difference, the "Stock Cap"), each holder making a
Stock Election shall receive, for each share of Company Common Stock for which
a Stock Election has been made, (x) a number of shares of Holding Company
Common Stock equal to the product of the Stock Consideration and the Stock
Proration Factor (as defined below) (such product, the "Prorated Stock
Amount") and (y) cash in an amount equal to the product of (A) the Stock
Consideration minus the Prorated Stock Amount and (B) the Purchaser Common
Stock Price. The "Stock Proration Factor" shall be a fraction, the numerator
of which is the Stock Cap and the denominator of which is the Requested Stock
Amount.
(d) In the event that the aggregate amount of cash represented by the Cash
Elections received by the Exchange Agent (the "Requested Cash Amount") exceeds
the Maximum Cash Amount (as such amount may have been increased at Purchaser's
sole discretion pursuant to Section 4.6(b)) minus the aggregate amount of cash
represented by the Standard Elections received by the Exchange Agent (such
difference, the "Cash Cap"), each holder making a Cash Election (and each
holder who is deemed to have made a Cash Election pursuant to Section 4.5(c))
shall receive, for each share of Company Common Stock for which a Cash
Election has been made, (x) cash in an amount equal to the product of the Cash
Consideration and a fraction, the numerator of which is the Cash Cap and the
denominator of which is the Requested Cash Amount (such product, the "Prorated
Cash Amount") and (y) a number of shares of Holding Company Common Stock equal
to a fraction, the numerator of which is equal to the Cash Consideration minus
the Prorated Cash Amount and the denominator of which is the Purchaser Common
Stock Price.
4.7. Dividends, Fractional Shares, Etc. (a) Notwithstanding any other
provisions of this Agreement, no dividends or other distributions declared
after the Effective Time on Holding Company Common Stock shall be paid with
respect to any shares of Company Common Stock represented by a Company
Certificate, until such Company Certificate is surrendered for exchange as
provided herein. Subject to the effect of applicable laws, following surrender
of any such Company Certificate, there shall be paid to the holder of the
Holding Company Certificates issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of Holding Company Common Stock and not
paid, less the amount of any withholding taxes which may be required thereon,
and (ii) at the appropriate payment date, the amount of dividends or other
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distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Holding Company Common Stock, less the amount of any
withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no transfers on the stock
transfer books of the Purchaser or the Company of the shares of Purchaser
Common Stock or Company Common Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates representing
any such shares are presented to the surviving corporations of the Purchaser
Merger or the Company Merger, they shall be cancelled and exchanged for
certificates for the consideration, if any, deliverable in respect thereof
pursuant to this Agreement and the Merger Agreements in accordance with the
procedures set forth in this Article 4. Company Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged until the Purchaser has received a written
agreement from such person as provided in Section 7.10.
(c) No fractional shares of Holding Company Common Stock shall be issued
pursuant to the Company Merger. In lieu of the issuance of any fractional
share of Holding Company Common Stock pursuant to the Company Merger, cash
adjustments will be paid to holders in respect of any fractional share of
Holding Company Common Stock that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to the product of such fractional
amount and the Purchaser Common Stock Price.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Holding Company Common Stock) that
remains unclaimed by the former stockholders of the Purchaser and the Company
six months after the Effective Time shall be delivered to the Holding Company.
Any former stockholder of the Purchaser or the Company who has not theretofore
complied with this Article 4 shall thereafter look only to the applicable
surviving corporation for payment of the applicable merger consideration, cash
in lieu of fractional shares and unpaid dividends and distributions on the
Holding Company Common Stock deliverable in respect of each share of Purchaser
Common Stock or Company Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case without any interest thereon.
(e) None of the Purchaser, the Company, the Holding Company, the surviving
corporations of the Mergers, the Exchange Agent or any other person shall be
liable to any former holder of shares of Purchaser Common Stock or Company
Common Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(f) In the event that any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed and, if
required by Holding Company, the posting by such person of a bond in such
reasonable amount as Holding Company may direct as indemnity against any claim
that may be made against it with respect to such Company Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Company Certificate the applicable merger consideration, cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Holding
Company Common Stock as provided in Section 4.7, deliverable in respect
thereof pursuant to this Agreement and the Company Merger Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to the Purchaser (the "Company Disclosure Letter") or in the
Company Reports (as defined below), the Company represents and warrants to the
Purchaser as of the date of this Agreement as follows:
5.1. Existence; Good Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Company is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified or to be
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in good standing would not have a material adverse effect on the business,
results of operations or financial condition of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse Effect"). The
Company has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted. Each of the
Company's Significant Subsidiaries (as defined in Section 10.14 hereof) is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so
qualified or to be in good standing would not have a Company Material Adverse
Effect. The copies of the Company's Certificate of Incorporation and Bylaws
previously made available to the Purchaser are true and correct.
5.2. Authorization, Validity and Effect of Agreements. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of two-thirds of the outstanding shares of Company Common Stock, the
consummation by the Company of the transactions contemplated hereby has been
duly authorized by all requisite corporate action. This Agreement constitutes,
and all agreements and documents contemplated hereby (when executed and
delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
5.3. Capitalization. The authorized capital stock of the Company consists of
300,000,000 shares of Company Common Stock and 4,000,000 shares of preferred
stock, no par value (the "Company Preferred Stock"). As of July 15, 1995,
there were 154,061,655 shares of Company Common Stock, and no shares of
Company Preferred Stock, issued and outstanding, plus 29,873,305 shares of
Company Common Stock held in the Company's treasury. Since such date, (i) no
additional shares of capital stock of the Company have been issued, except
pursuant to the terms existing on the date hereof of the Company's stock
option and employee stock purchase plans and other similar employee benefit
plans (the "Company Stock Plans") and (ii) no options or other rights to
acquire shares of the Company's capital stock have been granted (other than an
aggregate of 75,000 options to acquire Company Common Stock granted pursuant
to the terms existing on the date hereof of the Company's stock option plan).
The Company has no outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter (other than the preferred stock purchase rights of
the Company (the "Rights") issued pursuant to the Rights Agreement, dated
December 14, 1989, between the Company and Harris Trust Company (the "Company
Rights Agreement")). All issued and outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. There are not at the date of this Agreement any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock of the
Company or any of its Subsidiaries (other than under the Company Stock Plans
and other than the Rights).
5.4. Subsidiaries. The Company owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Company Significant
Subsidiary) of each of the Company's Significant Subsidiaries. Each of the
outstanding shares of capital stock of each of the Company's Significant
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Company. Each of the outstanding
shares of capital stock of each Significant Subsidiary of the Company is
owned, directly or indirectly, by the Company free and clear of all liens,
pledges, security interests, claims or other encumbrances other than liens
imposed by local law which are not material. The following information for
each Significant Subsidiary of the Company has been previously provided to the
Purchaser, if applicable: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital
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stock or share capital; and (iii) the number of issued and outstanding shares
of capital stock or share capital. All of the Subsidiaries of the Company
other than the Significant Subsidiaries, when taken together, do not in the
aggregate constitute a Significant Subsidiary of the Company.
5.5. Other Interests. Except for interests in the Company Subsidiaries,
neither the Company nor any Company Significant Subsidiary owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
(i) non-controlling investments in the ordinary course of business and
corporate partnering, development, cooperative marketing and similar
undertakings, arrangements entered into in the ordinary course of business and
(ii) other investments of less than $100,000,000).
5.6. No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated hereby will not, (i) conflict with or
violate the certificate of incorporation or by-laws or equivalent
organizational documents of (x) the Company or (y) any Significant Subsidiary,
(ii) subject to making the filings and obtaining the approvals identified in
Section 5.6(b) hereof, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any Company Subsidiary
or by which any property or asset of the Company or any Company Subsidiary is
bound or affected, or (iii) subject to making the filings and obtaining the
approvals identified in Section 5.6(b) hereof, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of purchase or sale, or any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is bound or affected, except,
in the case of clauses (i)(y), (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay consummation of any of the transactions contemplated hereby in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated hereby will not,
result in any material breach of or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, result in the loss of a material benefit under, or give to others any
right of purchase or sale, or any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any property or asset of the Company or any
Company Subsidiary pursuant to, any Material Contract to which the Company or
any Company Subsidiary is a party or by which the Company or any Company
Subsidiary or any property or asset of the Company or any Company Subsidiary
is bound or affected. For the purposes hereof, "Material Contract" shall mean
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation that is material to the
ownership or operation of any of ESPN, Lifetime Television and A&E Television
Network (each a "Station"), or any network affiliate agreement.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), except (i) for (A) applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, (B) the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"),
(C) applicable approvals of the Federal Communications Commission (the "FCC")
pursuant to the Communications Act of 1934, as amended, and any regulations
promulgated thereunder (the "Communications Act"), (D) filing and recordation
of appropriate
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merger and similar documents as required by New York law and Delaware law and
(E) applicable requirements, if any, of the Code and state, local and foreign
tax laws, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of any of the transactions contemplated hereby
in any material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and would not,
individually or in the aggregate, have a Company Material Adverse Effect.
5.7. Compliance. Neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any Company Subsidiary
or by which any property or asset of the Company or any Company Subsidiary is
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which the
Company or any Company Subsidiary or any property or asset of the Company or
any Company Subsidiary is bound or affected, in each case except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and its
Subsidiaries have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations
in connection with their business as now conducted, where the failure to
obtain any such item or to take any such action would have, individually or in
the aggregate, a Company Material Adverse Effect. The Company and the Company
Subsidiaries that are FCC licensees are financially qualified, and to the best
of the Company's knowledge, are otherwise qualified to be FCC licensees. The
Company is not aware of any facts or circumstances that might prevent or delay
any necessary FCC approval of the transactions contemplated hereby.
5.8. SEC Documents. (a) The Company has filed all forms, reports and
documents required to be filed by it with the Securities and Exchange
Commission ("SEC") since December 31, 1992 (collectively, the "Company
Reports"). As of their respective dates, the Company Reports and any such
reports, forms and other documents filed by the Company with the SEC after the
date of this Agreement (i) complied, or will comply, as to form in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations thereunder and (ii) did not, or
will not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of the preceding
sentence shall not apply to any misstatement or omission in any Company Report
filed prior to the date of this Agreement which was superseded by a subsequent
Company Report filed prior to the date of this Agreement. No Company
Subsidiary is required to file any report, form or other document with the
SEC.
(b) Each of the consolidated balance sheets of Company included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
Company and the Company Subsidiaries as of its date, and each of the
consolidated statements of income, retained earnings and cash flows of Company
included in or incorporated by reference into the Company Reports (including
any related notes and schedules) fairly presents the results of operations,
retained earnings or cash flows, as the case may be, of Company and the
Company Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which would not
be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Neither Company nor any of the
Company Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of Company or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except for (i) liabilities or obligations
that were so reserved on, or reflected in (including the notes to), the
consolidated balance sheet of the Company as of December 31, 1994 or March 31,
1995; (ii) liabilities or obligations arising in the ordinary course of
business since March 31, 1995, (iii) liabilities or obligations which would
not, individually or in the aggregate, have a Company Material Adverse Effect
and (iv) payments required as a result of the Reorganization under the
acceleration provisions of the terms existing on the date hereof of the
Company's employee benefit plans, which acceleration provisions are referred
to in the Company Disclosure Letter.
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5.9. Litigation. There are no actions, suits or proceedings pending against
Company or the Company Subsidiaries or, to the actual knowledge of the
executive officers of Company, threatened against Company or the Company
Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that are reasonably
likely to have a Company Material Adverse Effect.
5.10. Absence of Certain Changes. Except as specifically contemplated by
this Agreement, since December 31, 1994, there has not been (i) any Company
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to its capital stock (other than
regular quarterly cash dividends not in excess of $.05 per share); or (iii)
any material change in its accounting principles, practices or methods.
5.11. Taxes. (a) Each of the Company and the Company Subsidiaries has filed
all material tax returns and reports required to be filed by it, or requests
for extensions to file such returns or reports have been timely filed and
granted and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to file,
have extensions granted that remain in effect or be complete and accurate in
all respects, as applicable, individually or in the aggregate, would not have
a Company Material Adverse Effect. The Company and each of the Company
Subsidiaries has paid (or the Company has paid on its behalf) all taxes shown
as due on such tax returns and reports. The most recent financial statements
contained in the Company Reports reflect an adequate reserve for all taxes
payable by the Company and the Company Subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial statements,
and no deficiencies for any taxes have been proposed, asserted or assessed
against the Company or any Company Subsidiary that are not adequately reserved
for, except for inadequately reserved taxes and inadequately reserved
deficiencies that would not, individually or in the aggregate, have a Company
Material Adverse Effect. No requests for waivers of the time to assess any
taxes against the Company or any Company Subsidiary have been granted or are
pending, except for requests with respect to such taxes that have been
adequately reserved for in the most recent financial statements contained in
the Company Reports, or, to the extent not adequately reserved, the assessment
of which would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(b) Neither the Company nor any Company Subsidiary has taken any action or
has any knowledge of any fact or circumstance that is reasonably likely to
prevent the Company Merger from qualifying as an exchange governed by Section
351(a) or Section 351(b) of the Code.
(c) As used in this Section 5.11 and in Section 6.11, "taxes" shall include
all Federal, state, local and foreign income, franchise, property, sales, use,
excise and other taxes, including obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
5.12. Employee Benefit Plans. Except as described in the Company Reports or
as would not have a Company Material Adverse Effect, (i) all employee benefit
plans or programs maintained for the benefit of the current or former
employees or directors of the Company or any Company Subsidiary that are
sponsored, maintained or contributed to by the Company or any Company
Subsidiary, or with respect to which the Company or any Company Subsidiary has
any liability, including without limitation any such plan that is an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), are in compliance with all applicable
requirements of law, including ERISA and the Code, and (ii) neither the
Company nor any Company Subsidiary has any liabilities or obligations with
respect to any such employee benefit plans or programs, whether accrued,
contingent or otherwise, nor to the knowledge of the executive officers of the
Company are any such liabilities or obligations expected to be incurred. The
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee. The only severance agreements or
severance policies applicable to the Company or its Subsidiaries are the
agreements and policies specifically referred to in the Company Disclosure
Letter.
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5.13. Labor Matters. There is no labor strike, labor dispute, work slowdown,
stoppage or lockout actually pending, or to the knowledge of the executive
officers of the Company, threatened against or affecting the Company or any
Company Subsidiary, except as would not, individually or in the aggregate,
have a Company Material Adverse Effect. There is no unfair labor practice or
labor arbitration proceeding pending or, to the knowledge of the executive
officers of the Company, threatened against the Company or its Subsidiaries
relating to their business, except for any such proceeding which would not
have a Company Material Adverse Effect.
5.14. No Brokers. The Company has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company or the Purchaser to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that the Company has retained Allen & Company Incorporated as its
financial advisor, the arrangements with which have been disclosed in writing
to the Purchaser prior to the date hereof. Other than the foregoing
arrangements, the Company is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. The Company has received the opinion of
Allen & Company Incorporated to the effect that, as of the date hereof, the
consideration to be received by the holders of the Company Common Stock in the
Company Merger is fair to such holders from a financial point of view.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to the Company (the "Purchaser Disclosure Letter") or in the
Purchaser Reports (as defined below), the Purchaser represents and warrants to
the Company as of the date of this Agreement as follows:
6.1. Existence; Good Standing; Corporate Authority. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Purchaser is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified or to be in good standing would not have a material adverse effect
on the business, results of operations or financial condition of the Purchaser
and its Subsidiaries taken as a whole (a "Purchaser Material Adverse Effect").
The Purchaser has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted. Each of
the Purchaser's Significant Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not have a Purchaser Material Adverse Effect. The copies of the
Purchaser's Certificate of Incorporation and Bylaws previously made available
to the Company are true and correct.
6.2. Authorization, Validity and Effect of Agreements. The Purchaser has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of Purchaser Common Stock, the
consummation by the Purchaser of the transactions contemplated hereby has been
duly authorized by all requisite corporate action. This Agreement constitutes,
and all agreements and documents contemplated hereby (when executed and
delivered pursuant
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hereto for value received) will constitute, the valid and legally binding
obligations of the Purchaser, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
6.3. Capitalization. The authorized capital stock of the Purchaser consists
of 1,200,000,000 shares of Purchaser Common Stock, and 100,000,000 shares of
preferred stock, $.10 par value (the "Purchaser Preferred Stock"). As of July
15, 1995, there were 522,526,566 shares of Purchaser Common Stock and no
shares of Purchaser Preferred Stock, issued and outstanding, plus 50,986,941
shares of Purchaser Common Stock held in the Purchaser's treasury. Since such
date, no additional shares of capital stock of the Purchaser have been issued
except pursuant to the Purchaser's stock option and employee stock purchase
plans, pension plans and other similar employee benefit plans (the "Purchaser
Stock Plans"). The Purchaser has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Purchaser on any matter (other than the preferred
stock purchase rights of the Purchaser (the "Purchaser Rights") issued
pursuant to the Rights Agreement, dated as of June 21, 1989, between the
Purchaser and Bank of America (the "Purchaser Rights Agreement")). All such
issued and outstanding shares of Purchaser Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
Except as contemplated by this Agreement, there are not at the date of this
Agreement any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Purchaser or any of its Subsidiaries to issue, transfer or sell any shares of
capital stock of the Purchaser or any of its Subsidiaries (other than under
the Purchaser Stock Plans and other than the Rights).
6.4. Subsidiaries. The Purchaser owns directly or indirectly each of the
outstanding shares of capital stock of each of the Purchaser's Significant
Subsidiaries (or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others performing similar
functions with respect to such Purchaser Significant Subsidiary). Each of the
outstanding shares of capital stock of each of the Purchaser's Significant
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Purchaser. Each of the
outstanding shares of capital stock of each Significant Subsidiary of the
Purchaser is owned, directly or indirectly, by the Purchaser free and clear of
all liens, pledges, security interests, claims or other encumbrances other
than liens imposed by local law which are not material. The following
information for each Significant Subsidiary of the Purchaser has been
previously made available to the Company, if requested and if applicable: (i)
its name and jurisdiction of incorporation or organization; (ii) its
authorized capital stock or share capital; and (iii) the number of issued and
outstanding shares of capital stock or share capital.
6.5. Other Interests. Except for interests in the Purchaser Subsidiaries,
neither the Purchaser nor any Purchaser Significant Subsidiary owns directly
or indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
(i) passive investments in securities in the ordinary course of business and
corporate partnering, development, cooperative marketing and similar
undertakings and arrangements entered into in the ordinary course of business
and (ii) other investments of less than $100,000,000).
6.6. No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by the Purchaser does not, and the consummation by
the Purchaser of the transactions contemplated hereby will not, (i) conflict
with or violate the certificate of incorporation or by-laws or equivalent
organizational documents of (x) the Purchaser or (y) any Significant
Subsidiary, (ii) subject to making the filings and obtaining the approvals
identified in Section 6.6(b) hereof, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Purchaser or any
Purchaser Subsidiary or by which any property or asset of the Purchaser or any
Purchaser Subsidiary is bound or affected, or (iii) subject to making the
filings and obtaining the approvals identified in Section 6.6(b) hereof,
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss of
a material benefit under,
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or give to others any right of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Purchaser or any Purchaser
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Purchaser or any Purchaser Subsidiary is a party or by which the
Purchaser or any Purchaser Subsidiary or any property or asset of the
Purchaser or any Purchaser Subsidiary is bound or affected, except, in the
case of clauses (i)(y), (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Purchaser from performing its obligations
under this Agreement in any material respect, and would not, individually or
in the aggregate, have a Purchaser Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Purchaser does not,
and the performance of this Agreement and the consummation of the transactions
contemplated hereby will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for (A) applicable requirements, if any, of the Exchange Act, the
Securities Act, Blue Sky Laws and state takeover laws, (B) the pre-merger
notification requirements of the HSR Act, (C) applicable approvals of the FCC
pursuant to the Communications Act, (D) filing and recordation of appropriate
merger and similar documents as required by New York law and Delaware law and
(E) applicable requirements, if any, of the Code and state, local and foreign
tax laws, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of any of the transactions contemplated hereby
in any material respect, or otherwise prevent the Purchaser or Merger Sub from
performing its obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Purchaser Material Adverse
Effect.
6.7. Compliance. Neither the Purchaser nor any Purchaser Subsidiary is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Purchaser or any Purchaser
Subsidiary or by which any property or asset of the Purchaser or any Purchaser
Subsidiary is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Purchaser or any Purchaser Subsidiary is a party or by
which the Purchaser or any Purchaser Subsidiary or any property or asset of
the Purchaser or any Purchaser Subsidiary is bound or affected, in each case
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
The Purchaser and its Subsidiaries have obtained all licenses, permits and
other authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action would
have, individually or in the aggregate, a Purchaser Material Adverse Effect.
The Purchaser and the Purchaser's Subsidiaries that are FCC licensees are
financially qualified, and to the best of the Purchaser's knowledge, are
otherwise qualified to be FCC licensees. The Purchaser is not aware of any
facts or circumstances that might prevent or delay any necessary FCC approval
of the transactions contemplated hereby.
6.8. SEC Documents. (a) The Purchaser has filed all forms, reports and
documents required to be filed by it with the SEC since September 30, 1992
(collectively, the "Purchaser Reports"). As of their respective dates, the
Purchaser Reports, and any such reports, forms and other documents filed by
the Purchaser with the SEC after the date of this Agreement (i) complied, or
will comply, as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
representation in clause (ii) of the preceding sentence shall not apply to any
misstatement or omission in any Purchaser Report filed prior to the date of
this Agreement which was superseded by a subsequent Purchaser Report filed
prior to the date of this Agreement. No Purchaser Subsidiary is required to
file any report, form or other document with the SEC.
(b) Each of the consolidated balance sheets included in or incorporated by
reference into the Purchaser Reports (including the related notes and
schedules) fairly presents the consolidated financial position of the
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<PAGE>
Purchaser and the Purchaser Subsidiaries as of its date, and each of the
consolidated statements of income, retained earnings and cash flows included
in or incorporated by reference into the Purchaser Reports (including any
related notes and schedules) fairly presents the results of operations,
retained earnings or cash flows, as the case may be, of the Purchaser and the
Purchaser Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which would not
be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Neither the Purchaser nor any of the
Purchaser Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of the Purchaser or
in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except for (i) liabilities and
obligations that were reserved on or reflected in (including the notes to),
the consolidated balance sheet of the Purchaser as of September 30, 1994 or
March 31, 1995, (ii) liabilities arising in the ordinary course of business
since March 31, 1995, (iii) liabilities or obligations which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect and
(iv) payments required as a result of the Reorganization under the
acceleration provisions of the terms of the Purchaser's employee benefit
plans.
6.9. Litigation. There are no actions, suits or proceedings pending against
the Purchaser or the Purchaser Subsidiaries or, to the actual knowledge of the
executive officers of the Purchaser, threatened against the Purchaser or the
Purchaser Subsidiaries, at law or in equity, or before or by any federal or
state commission, board, bureau, agency or instrumentality, that are
reasonably likely to have a Purchaser Material Adverse Effect.
6.10. Absence of Certain Changes. Except as specifically contemplated by
this Agreement, since December 31, 1994, there has not been (i) any Purchaser
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to its capital stock (other than
regular quarterly cash dividends including any increase thereof consistent
with past practice); or (iii) any material change in its accounting
principles, practices or methods.
6.11. Taxes. (a) Each of the Purchaser and the Purchaser Subsidiaries has
filed all material tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, and all tax returns and reports are complete
and accurate in all respects, except to the extent that such failures to file,
have extensions granted that remain in effect or be complete and accurate in
all respects, as applicable, individually or in the aggregate, would not have
a Purchaser Material Adverse Effect. The Purchaser and each of the Purchaser
Subsidiaries has paid (or the Purchaser has paid on its behalf) all taxes
shown as due on such tax returns and reports. The most recent financial
statements contained in the Purchaser Reports reflect an adequate reserve for
all taxes payable by the Purchaser and the Purchaser Subsidiaries for all
taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against the Purchaser or any Purchaser Subsidiary that
are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect. No requests for waivers
of the time to assess any taxes against the Purchaser or any Purchaser
Subsidiary have been granted or are pending, except for requests with respect
to such taxes that have been adequately reserved for in the most recent
financial statements contained in the Purchaser Reports, or, to the extent not
adequately reserved, the assessment of which would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
(b) Neither the Purchaser nor any Purchaser Subsidiary has taken any action
or has any knowledge of any fact or circumstance that is reasonably likely to
prevent the Purchaser Merger from qualifying as at least one of (i) a
reorganization described in Section 368(a) of the Code or (ii) an exchange
governed by Section 351 of the Code.
6.12. Employee Benefit Plans. Except as described in the Purchaser Reports
or as would not have a Purchaser Material Adverse Effect, (i) all employee
benefit plans or programs maintained for the benefit of the current or former
employees or directors of Purchaser or any Purchaser Subsidiary that are
sponsored, maintained or contributed to by Purchaser or any Purchaser
Subsidiary, or with respect to which Purchaser or any Purchaser
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<PAGE>
Subsidiary has any liability, including without limitation any such plan that
is an "employee benefit plan" as defined in Section 3(3) of ERISA, are in
compliance with all applicable requirements of law, including ERISA and the
Code, and (ii) neither Purchaser nor any Purchaser Subsidiary has any
liabilities or obligations with respect to any such employee benefit plans or
programs, whether accrued, contingent or otherwise, nor to the knowledge of
the executive officers of Purchaser are any such liabilities or obligations
expected to be incurred. Except as disclosed in the Purchaser Reports or
pursuant to the Disney Salaried Savings and Investment Plan, the execution of,
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement or agreement
or any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee.
6.13. Labor Matters. There is no labor strike, labor dispute, work slowdown,
stoppage or lockout actually pending, or to the knowledge of the executive
officers of the Purchaser, threatened against or affecting the Purchaser or
any Purchaser Subsidiary, except as would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
executive offices of the Purchaser, threatened against the Purchaser or its
Subsidiaries relating to their business, except for any such proceeding which
would not have a Purchaser Material Adverse Effect.
6.14. Opinion of Financial Advisor. The Purchaser has received the opinion
of Bear, Stearns & Co. Inc. to the effect that, as of the date hereof, the
Reorganization is fair to the holders of Purchaser Common Stock from a
financial point of view.
6.15. No Brokers. The Purchaser has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or the Purchaser to pay any finder's fee, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby except that the Purchaser has retained Bear, Stearns & Co.
Inc. and James D. Wolfensohn Incorporated as its financial advisors, the
arrangements with which have been disclosed in writing to the Company prior to
the date hereof. Other than the foregoing arrangements, the Company is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 7
COVENANTS
7.1. Alternative Proposals. Prior to the Effective Time, the Company agrees
(a) that neither it nor any of its Subsidiaries shall, nor shall it or any of
its Subsidiaries permit their respective officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, and
purchase of (i) all or any significant portion of the assets of the Company
and its Subsidiaries taken as a whole, or of any Subsidiary of the Company
which owns or operates any Station, (ii) 25% or more of the outstanding shares
of Company Common Stock or (iii) 25% of the outstanding shares of the capital
stock of any Subsidiary of the Company which owns or operates any Station (any
such proposal or offer being hereinafter referred to as an "Alternative
Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal (excluding the Mergers contemplated by
this Agreement), or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal; and (b) that it will notify the Purchaser
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be
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<PAGE>
initiated or continued with, it; provided, however, that nothing contained in
this Section 7.1 shall prohibit the Board of Directors of the Company from (i)
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Alternative Proposal,
if, and only to the extent that, (A) the Board of Directors of the Company,
based upon the advice of outside counsel, determines in good faith that such
action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to the Purchaser to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (C) the Company keeps the
Purchaser informed of the status and all material information with respect to
any such discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 7.1 shall (x) permit the Company
to terminate this Agreement (except as specifically provided in Article 9
hereof), (y) permit the Company to enter into any agreement with respect to an
Alternative Proposal for as long as this Agreement remains in effect (it being
agreed that for as long as this Agreement remains in effect, the Company shall
not enter into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality agreement
in customary form)), or (z) affect any other obligation of the Company under
this Agreement. Nothing contained in this Section 7.1 or any other provision
of this Agreement shall prohibit the Company or any of its Subsidiaries from
engaging in any discussions or providing any information or data, or entering
into any agreement with any person to the extent the Company or any of its
Subsidiaries is obligated to do so pursuant to the terms of any agreement
relating to a Station as in effect on the date hereof; provided that nothing
in this sentence shall be deemed to limit the Company's representation set
forth in Section 5.6.
7.2. Interim Operations. (a) Prior to the Effective Time, except as set
forth in the Company Disclosure Letter or as contemplated by any other
provision of this Agreement, unless the Purchaser has consented in writing
thereto, the Company:
(i) Shall, and shall cause each of its Significant Subsidiaries to,
conduct its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(ii) Shall use its reasonable efforts, and shall cause each of its
Significant Subsidiaries to use its reasonable efforts, to preserve intact
their business organizations and goodwill, keep available the services of
their respective officers and employees and maintain satisfactory
relationships with those persons having business relationships with them;
(iii) Shall not amend its Certificate of Incorporation or Bylaws or
comparable governing instruments (other than Bylaw amendments which are not
material to the Company or to the consummation of the transactions
contemplated by this Agreement);
(iv) Shall promptly notify the Purchaser of any breach of any
representation or warranty contained herein or any Company Material Adverse
Effect;
(v) Shall promptly deliver to the Purchaser true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date
of this Agreement;
(vi) Shall not (x) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof, (y) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire
any shares of its capital stock (other than an aggregate of 75,000 options
to acquire Company Common Stock pursuant to the terms existing on the date
hereof of the Company's stock option plan) or grant, confer or award any
bonuses or other forms of cash incentives to any officer, director or key
employee except consistent with past practice or grant or confer any awards
(other than those granted as of the date hereof) under the Incentive
Compensation Plan of the Company (as amended through December 9, 1993), (z)
increase any compensation under any employment agreement with any of its
present or future officers, directors or employees, except for normal
increases consistent with past practice, grant any severance or termination
pay to, or enter into any employment or severance agreement with any
officer or director or
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<PAGE>
amend any such agreement in any material respect other than severance
arrangements which are consistent with past practice with respect to
employees terminated by the Company, or (aa) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or
amend any existing employee benefit plan in any material respect;
(vii) Shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or other ownership interests (other than regular quarterly cash
dividends not in excess of $.05 per share) or (ii) directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of any of its Subsidiaries, or make any commitment for any
such action;
(viii) Shall not, and shall not permit any of its Subsidiaries to, sell,
lease or otherwise dispose of any of its assets (including capital stock of
Subsidiaries) except in the ordinary course of business, or to acquire any
business or assets, in each case for an amount exceeding $100,000,000;
(ix) Shall not incur any material amount of indebtedness for borrowed
money or make any loans, advances or capital contributions to, or
investments (other than non-controlling investments in the ordinary course
of business) in, any other person other than a wholly owned Company
Subsidiary, or issue or sell any debt securities, other than borrowings
under existing lines of credit in the ordinary course of business, in each
case in an amount exceeding $100,000,000;
(x) Shall not, except as previously approved by the Board of Directors of
the Company and identified to the Purchaser prior to the date hereof, or
except in the ordinary course of business, authorize or make capital
expenditures in excess of $200,000,000 in the aggregate;
(xi) Shall not mortgage or otherwise encumber or subject to any lien any
properties or assets except as would not be reasonably likely to have a
Company Material Adverse Effect;
(xii) Shall not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of
business of the Company or any of its Subsidiaries; and
(xiii) shall not, nor shall it permit any of its Subsidiaries to, enter
into any program production or distribution arrangements, including without
limitation joint venture arrangements, with a term in excess of one year
without consulting with the Purchaser prior thereto.
(b) Prior to the Effective Time, except as set forth in the Purchaser
Disclosure Letter or as contemplated by this Agreement, unless the Company has
consented in writing thereto, the Purchaser:
(i) shall not issue any shares of its capital stock at less than fair
market value (other than pursuant to any Purchaser Stock Plans) or effect
any stock split of its capital stock;
(ii) shall not amend its Certificate of Incorporation (provided that the
Purchaser may issue up to $100,000,000 of its preferred stock);
(iii) shall promptly notify the Company of any breach of any
representation or warranty contained herein or any Purchaser Material
Adverse Effect;
(iv) shall promptly deliver to the Company true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement; and
(v) shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests (other than regular quarterly cash dividends
including any increases thereof consistent with past practice).
7.3. Meetings of Stockholders. Each of the Purchaser and the Company will
take all action necessary in accordance with applicable law and its
Certificate of Incorporation and Bylaws to convene a meeting of its
stockholders as promptly as practicable to consider and vote upon (i) in the
case of the Purchaser, the approval
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of this Agreement, the Purchaser Merger Agreement and the Purchaser Merger and
(ii) in the case of the Company, the approval of this Agreement and the
Company Merger Agreement and the Company Merger. The Board of Directors of
each of the Purchaser and the Company shall recommend such approval and the
Purchaser and the Company shall each take all lawful action to solicit such
approval, including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 7.7); provided, however, that such
recommendation or solicitation is subject to any action (including any
withdrawal or change of its recommendation) taken by, or upon authority of,
the Board of Directors of the Purchaser or the Company, as the case may be, in
the exercise of its good faith judgment based upon the advice of outside
counsel as to its fiduciary duties to its stockholder imposed by law.
7.4. Filings, Other Action. Subject to the terms and conditions herein
provided, the Company and the Purchaser shall: (a) promptly make their
respective filings and thereafter make any other required submissions under
the HSR Act and the Communications Act; (b) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Effective Time
from, governmental or regulatory authorities of the United States, the several
states and foreign jurisdictions in connection with the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
and (ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; and (c) use all reasonable efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement. The parties hereto recognize
and acknowledge that under applicable rules and regulations of the FCC,
certain assets currently held by, or attributable to, the Purchaser, the
Company or their officers or directors cannot be held by, or be attributable
to, Holding Company or its officers and directors after the Effective Time,
unless appropriate waivers of such rules and regulations are obtained. In no
event shall the obtaining of permanent waivers with respect to assets of the
Purchaser or its officers or directors be a condition to consummation of the
Mergers. In no event shall a permanent waiver be sought without also seeking
in the alternative to obtain a temporary waiver to allow the consummation of
the Mergers including the divestiture of assets or other action required in
order to obtain such waiver. If necessary in order to obtain the FCC's
approval of the transactions contemplated hereby the Purchaser and the Company
will divest any or all of such assets and take such other actions prior to
consummation of the transactions contemplated hereby. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purpose of this Agreement, the proper officers and directors of the
Purchaser and the Company shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective Time, each
of the Company and the Purchaser shall, subject to any applicable rules and
regulations of the FCC, (i) allow all designated officers, attorneys,
accountants and other representatives of the other reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of the Company and the Purchaser and their respective Subsidiaries,
as the case may be, (ii) furnish to the other, the other's counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such persons may reasonably request
and (iii) instruct the employees, counsel and financial advisors of the
Company or the Purchaser, as the case may be, to cooperate with the other in
the other's investigation of the business of it and its Subsidiaries.
7.6. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter the Company and the Purchaser shall,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and
use reasonable efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
7.7. Registration Statement. The Purchaser and the Company shall cooperate
and promptly prepare and the Purchaser shall file with the SEC as soon as
practicable a Registration Statement on Form S-4 (the "Form
A-1-20
<PAGE>
S-4") under the Securities Act, with respect to the Holding Company Common
Stock issuable in the Mergers, a portion of which Registration Statement shall
also serve as the joint proxy statement with respect to the meetings of the
stockholders of the Company and of the Purchaser in connection with the
Mergers (the "Proxy Statement/Prospectus"). The respective parties will cause
the Proxy Statement/Prospectus and the Form S-4 to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder. The Purchaser shall use
all reasonable efforts, and the Company will cooperate with the Purchaser, to
have the Form S-4 declared effective by the SEC as promptly as practicable and
to keep the Form S-4 effective as long as is necessary to consummate the
Mergers. The Purchaser shall, as promptly as practicable, provide copies of
any written comments received from the SEC with respect to the Form S-4 to the
Company and advise the Company of any verbal comments with respect to the Form
S-4 received from the SEC. The Purchaser shall use its best efforts to obtain,
prior to the effective date of the Form S-4, all necessary state securities
law or "Blue Sky" permits or approvals required to carry out the transactions
contemplated by this Agreement and will pay all expenses incident thereto. The
Purchaser agrees that the Proxy Statement/Prospectus and each amendment or
supplement thereto at the time of mailing thereof and at the time of the
respective meetings of stockholders of the Company and the Purchaser, or, in
the case of the Form S-4 and each amendment or supplement thereto, at the time
it is filed or becomes effective, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
foregoing shall not apply to the extent that any such untrue statement of a
material fact or omission to state a material fact was made by the Purchaser
in reliance upon and in conformity with written information concerning the
Company furnished to the Purchaser by the Company specifically for use in the
Proxy Statement/Prospectus. The Company agrees that the written information
concerning the Company provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of stockholders of
the Company and the Purchaser, or, in the case of written information
concerning the Company provided by the Company for inclusion in the Form S-4
or any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Proxy Statement/Prospectus
will be made by the Purchaser or the Company without the approval of the other
party. The Purchaser will advise the Company, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Purchaser Common Stock issuable in
connection with the Mergers for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement/Prospectus or the Form
S-4 or comments thereon and responses thereto or requests by the SEC for
additional information.
7.8. Listing Application. The Purchaser shall promptly cause Holding Company
to prepare and submit to the NYSE and the Pacific Exchanges listing
applications covering the shares of Holding Company Common Stock issuable in
the Mergers, and shall use reasonable efforts to obtain, prior to the
Effective Time, approval for the listing of such Holding Company Common Stock,
subject to official notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Mergers.
7.10. Affiliate Letters. At least 30 days prior to the Closing Date, the
Company shall deliver to the Purchaser a list of names and addresses of those
persons who were, in the Company's reasonable judgment, at the record date for
its stockholders' meeting to approve the Mergers, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
use all reasonable efforts to deliver or cause to be delivered to the
Purchaser, prior to the Closing Date, from each of the Affiliates of the
Company identified in the foregoing list, an Affiliate Letter in the form
attached hereto as Exhibit A. Holding Company shall be entitled to place
legends as specified
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<PAGE>
in such Affiliate Letters on the certificates evidencing any Holding Company
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Holding Company Common Stock, consistent with the terms of such
Affiliate Letters.
7.11. Expenses. Whether or not the Mergers are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except
as expressly provided herein and except that (a) the filing fee in connection
with the HSR Act filing, (b) the filing fee in connection with the filing of
the Form S-4 or Proxy Statement/Prospectus with the SEC (c) the filing fees in
connection with necessary applications to the FCC and (d) the expenses
incurred in connection with printing and mailing the Form S-4 and the Proxy
Statement/Prospectus, shall be shared equally by the Company and the
Purchaser.
7.12. Insurance; Indemnity. (a) From and after the Effective Time, Holding
Company shall indemnify, defend and hold harmless to the fullest extent that
the Company would have been permitted under applicable law each person who is
now, or has been at any time prior to the date hereof, an officer or director
of the Company (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), against all losses, claims, damages, liabilities,
costs or expenses (including attorneys' fees), judgments, fines, penalties and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such occurring at
or prior to the Effective Time. In the event of any such claim, action, suit,
proceeding or investigation (an "Action"), (i) any Indemnified Party wishing
to claim indemnification shall promptly notify Holding Company thereof, (ii)
Holding Company shall pay the reasonable fees and expenses of counsel selected
by the Indemnified Party, which counsel shall be reasonably acceptable to
Holding Company, in advance of the final disposition of any such Action to the
full extent permitted by applicable law, upon receipt of any undertaking
required by applicable law, and (iii) the Holding Company will cooperate in
the defense of any such matter; provided, however, that Holding Company shall
not be liable for any settlement effected without its written consent and
provided, further, that Holding Company shall not be obligated pursuant to
this Section to pay the fees and disbursements of more than one counsel for
all Indemnified Parties in any single Action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such
Indemnified Parties have conflicting interests in the outcome of such action.
(b) Holding Company shall cause the surviving corporation of the Company
Merger to keep in effect provisions in its Certificate of Incorporation and
Bylaws providing for exculpation of director and officer liability and its
indemnification of the Indemnified Parties to the fullest extent permitted
under the NYBCL, which provisions shall not be amended except as required by
applicable law or except to make changes permitted by law that would enlarge
the Indemnified Parties' right of indemnification.
(c) For a period of three years after the Effective Time, Holding Company
shall cause to be maintained officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance;
provided, however, that Holding Company shall not be required in order to
maintain or procure such coverage to pay an annual premium in excess of one
and one-half times the current annual premium paid by the Company for its
existing coverage (the "Cap") (which current annual premium the Company
represents and warrants to be approximately $300,000); and provided, further,
that if equivalent coverage cannot be obtained, or can be obtained only by
paying an annual premium in excess of the Cap, Holding Company shall only be
required to obtain as much coverage as can be obtained by paying an annual
premium equal to the Cap.
(d) The provisions of this Section shall survive the consummation of the
Mergers and expressly are intended to benefit each of the Indemnified Parties.
7.13. Rights Agreements. Each of the Purchaser and the Company shall take
all necessary action prior to the Effective Time to cause the dilution
provisions of the Purchaser Rights Agreement and the Company Rights
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<PAGE>
Agreement, respectively, to be inapplicable to the transactions contemplated
by this Agreement, without any payment to holders of rights issued pursuant to
such Rights Agreements.
7.14. Takeover Statute. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby or the transactions
contemplated by the Stock Agreement, the Company and the members of the Board
of Directors of the Company shall grant such approvals and take such actions
as are reasonably necessary so that the transactions contemplated hereby and
the transactions contemplated by the Stock Agreement may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby and thereby.
7.15. Conduct of Business by Holding Company and the Merger Subsidiaries
Pending the Mergers. Prior to the Effective Time and subject to any applicable
regulatory approvals, the Purchaser and the Company shall cause Holding
Company and the Merger Subsidiaries to (a) perform their respective
obligations hereunder and under this Agreement and the Merger Agreements in
accordance with the terms hereof and thereof and take all other actions
necessary or appropriate for the consummation of the transactions contemplated
hereby and thereby, (b) not incur directly or indirectly any liabilities or
obligations except those incurred in connection with the consummation of this
Agreement and the Merger Agreements and the transactions contemplated hereby
and thereby, (c) not engage directly or indirectly in any business or
activities of any type or kind whatsoever and not enter into any agreements or
arrangements with any person or entity, or be subject to or be bound by any
obligation or undertaking which is not contemplated by this Agreement or the
Merger Agreements and (d) not create, grant or suffer to exist any lien upon
their respective properties or assets which would attach to any properties or
assets of the Purchaser or the Company after the Effective Time.
7.16. Employee Benefits. Purchaser will cause to remain in effect for the
benefit of the Company's employees for a period of at least two years after
the Effective Time all employee benefit plans of the Company and its
Subsidiaries (including the Company's existing severance policies and programs
but excluding stock and incentive compensation plans and those plans that are
the subject of collective bargaining) in effect on the date of this Agreement
and, with respect to employees who are subject to collective bargaining, all
benefits shall be provided in accordance with the applicable collective
bargaining agreement; provided, however, that no severance payments shall be
required to be made to any employee of the Company or any Company Subsidiary
who is not terminated by the Company or any Company Subsidiary. No amendment
shall be made to any such plan that materially adversely affects the rights or
interests of the plan participants or beneficiaries except to the extent
required by applicable law or to maintain tax qualifications. In the event
that any employee of the Company or its Subsidiaries is at any time after the
Effective Time transferred to the Purchaser or any affiliate of Purchaser or
becomes a participant in an employee benefit plan, program or arrangement
maintained by or contributed by the Purchaser or its affiliates, Purchaser
shall cause such plan, program or arrangement to treat the prior service of
such employee with the Company or its Subsidiaries, to the extent such prior
service is recognized under the comparable plan, program or arrangement of the
Company, as service rendered to the Purchaser or its affiliates, as the case
may be; provided, however, that in administering such plans, programs or
arrangements of Purchaser or its affiliates, Purchaser may cause a reduction
of benefits under any such plans, programs or arrangements to the extent
necessary to avoid duplication of benefits with respect to the same covered
matter or years of service.
7.17. Conveyance Taxes. The Company and the Purchaser shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement
that are required or permitted to be filed on or before the Effective Time.
7.18. Gains Tax. The Holding Company shall pay, without deduction or
withholding from any amount payable to the holders of Company Common Stock,
any New York State Tax on Gains Derived from Certain Real Property Transfers
(the "Gains Tax"), New York State Real Estate Transfer Tax, New York City Real
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<PAGE>
Property Transfer Tax and New York State Stock Transfer Tax (the "Transfer
Taxes") and any similar taxes imposed by any other State of the United States
(and any penalties and interest with respect to such taxes), which become
payable in connection with the transactions contemplated by this Agreement, on
behalf of the stockholders of the Company. The Company and the Purchaser shall
cooperate in the preparation, execution and filing of any required returns
with respect to such taxes (including returns on behalf of the stockholders of
the Company) and in the determination of the portion of the consideration
allocable to the real property of the Company and the Company Subsidiaries in
New York State and City (or in any other jurisdiction, if applicable). The
terms of the Proxy Statement/Prospectus shall provide that the stockholders of
the Company shall be deemed to have agreed to be bound by the allocation
established pursuant to this Section 7.18 in the preparation of any return
with respect to the Gains Tax and the Transfer Taxes and any similar taxes, if
applicable.
ARTICLE 8
CONDITIONS
8.1. Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved in the manner required by applicable law or by the applicable
regulations of any stock exchange or other regulatory body, as the case may
be, by the holders of the issued and outstanding shares of capital stock of
the Company and the Purchaser, respectively.
(b) The waiting period applicable to the consummation of the Mergers
under the HSR Act shall have expired or been terminated.
(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each party
agrees to use its reasonable efforts to have any such injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
S-4 shall have been issued, no action, suit, proceeding or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated and
be continuing, or, to the knowledge of the Purchaser or the Company,
threatened, and all necessary approvals under state securities laws
relating to the issuance or trading of the Holding Company Common Stock to
be issued to the Company stockholders in connection with the Mergers shall
have been received.
(e) All orders and approvals of the FCC required in connection with the
consummation of the transactions contemplated hereby shall have been
obtained or made, whether or not any appeal or request for reconsideration
of such order is pending, or whether the time for filing any such appeal or
request for reconsideration or for any sua sponte action by the FCC has
expired.
(f) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory
body (other than the FCC) required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or
made, except for filings in connection with the Mergers and any other
documents required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration would not have a material adverse
effect on the business, results of operations or financial condition of the
Purchaser and the Company (and their respective Subsidiaries), taken as a
whole, following the Effective Time.
(g) The Holding Company Common Stock to be issued to the Company
stockholders in connection with the Mergers shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
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<PAGE>
8.2. Conditions to Obligation of Company to Effect the Mergers. The
obligation of the Company to effect the Mergers shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Purchaser shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of the Purchaser
and Merger Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct as of the Closing Date,
except (i) for changes specifically permitted by this Agreement and (ii)
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, and the
Company shall have received a certificate of the President or a Vice
President of the Purchaser, dated the Closing Date, certifying to such
effect.
(b) The Company shall have received the opinion of Cravath, Swaine &
Moore, special counsel to the Company, based upon reasonably requested
representation letters and dated the Closing Date, to the effect that the
Company Merger will be treated as a transfer of property to Holding Company
by the holders of Company Common Stock governed by Section 351(a) or
Section 351(b) of the Code.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of the Purchaser and its Subsidiaries, taken as a whole, that
would have or would be reasonably likely to have a Purchaser Material
Adverse Effect.
(d) The Holding Company shall have executed a Registration Rights
Agreement substantially in the form attached hereto as Exhibit B.
8.3. Conditions to Obligation of Purchaser to Effect the Mergers. The
obligation of the Purchaser to effect the Mergers shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of the Company
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, except (i) for
changes specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, and the
Purchaser shall have received a certificate of the President or a Vice
President of the Company, dated the Closing Date, certifying to such
effect.
(b) The Purchaser shall have received the opinion of Dewey Ballantine,
special counsel to the Purchaser, based upon reasonably requested
representation letters and dated the Closing Date, to the effect that the
Purchaser Merger will be treated as a reorganization described in Section
368(a) of the Code and/or as a transfer of property to Holding Company by
holders of Purchaser Common Stock governed by Section 351 of the Code.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of the Company and its Subsidiaries, taken as a whole, that
would have or would be reasonably likely to have a Company Material Adverse
Effect.
(d) The Stock Agreement shall have remained in full force and effect
through the Effective Time.
(e) After the Effective Time, no person shall have any right under any
stock option plan (or any option granted thereunder) or other plan, program
or arrangement to acquire any equity securities of the Company.
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<PAGE>
ARTICLE 9
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of the Purchaser or
the Company, by the mutual consent of the Purchaser and the Company.
9.2. Termination by Either Purchaser or Company. This Agreement may be
terminated and the Mergers may be abandoned by action of the Board of
Directors of either the Purchaser or the Company if (a) the Mergers shall not
have been consummated by October 1, 1996, or (b) the approval of the Company's
stockholders required by Section 8.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof, or (c) the
approval of the Purchaser's stockholders required by Section 8.1(a) shall not
have been obtained at a meeting duly convened therefor or at any adjournment
thereof, (d) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (d) shall
have used all reasonable efforts to remove such injunction, order or decree;
and provided, in the case of a termination pursuant to clause (a) above, that
the terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Mergers by October 1, 1996 or (e)
the FCC shall have issued an order or ruling or taken other action denying
approval of the transactions contemplated by this Agreement, and such order,
ruling or other action shall have become final and non-appealable.
9.3. Termination by Company. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the stockholders of the Company referred to
in Section 8.1(a), by action of the Board of Directors of the Company, if (a)
in the exercise of its good faith judgment as to fiduciary duties to its
stockholders imposed by law, as advised by outside counsel, the Board of
Directors of the Company determines that such termination is required by
reason of an Alternative Proposal being made; provided that the Company shall
notify the Purchaser promptly of its intention to terminate this Agreement or
enter into a definitive agreement with respect to any Alternative Proposal,
but in no event shall such notice be given less than 48 hours prior to the
public announcement of the Company's termination of this Agreement; or (b)
there has been a breach by the Purchaser of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Purchaser Material Adverse Effect; or (c) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on
the part of the Purchaser, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by the
Company to the Purchaser; or (d) the Board of Directors of the Purchaser shall
have withdrawn or modified in a manner materially adverse to the Company its
approval or recommendation of this Agreement or the Mergers. Notwithstanding
the foregoing, the Company's ability to terminate this Agreement pursuant to
Section 9.2 or this 9.3 is conditioned upon the prior payment by the Company
of any amounts owed by it pursuant to Section 9.5(a)(i).
9.4. Termination by Purchaser. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the Effective Time, before or
after the approval by the stockholders of the Purchaser referred to in Section
8.1(a), by action of the Board of Directors of the Purchaser, if (a) the Board
of Directors of the Company shall have withdrawn or modified in a manner
materially adverse to the Purchaser its approval or recommendation of this
Agreement or the Mergers or shall have recommended an Alternative Proposal to
the Company stockholders, or (b) there has been a breach by the Company of any
representation or warranty contained in this Agreement which would have or
would be reasonably likely to have a Company Material Adverse Effect, or (c)
there has been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by the Purchaser to the Company.
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<PAGE>
9.5. Effect of Termination and Abandonment. (a) In the event that any person
shall have made an Alternative Proposal for the Company and thereafter (i)
this Agreement is terminated pursuant to Section 9.3(a) or Section 9.4 or (ii)
this Agreement is terminated for any other reason (other than the breach of
this Agreement by the Purchaser and other than pursuant to Section 9.2(c))
and, in the case of this clause (ii) only, a definitive agreement with respect
to such Alternative Proposal is executed within one year after such
termination, then the Company shall pay the Purchaser a fee of $400,000,000,
which amount shall be payable by wire transfer of same day funds either on the
date contemplated in the last sentence of Section 9.3 if applicable or,
otherwise, within two business days after such amount becomes due. The Company
acknowledges that the agreements contained in this Section 9.5(a) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, the Purchaser would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 9.5(a), and, in order to obtain such payment, the Purchaser
commences a suit which results in a judgment against the Company for the fee
set forth in this Section 9.5(a), the Company shall pay to the Purchaser its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement and the abandonment of the
Mergers pursuant to this Article 9, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this
Section 9.5 and Section 7.11 and except for the provisions of Sections 10.3,
10.4, 10.6, 10.8, 10.9, 10.12, 10.13 and 10.14. Moreover, in the event of
termination of this Agreement pursuant to Section 9.3 or 9.4, nothing herein
shall prejudice the ability of the non-breaching party from seeking damages
from any other party for any willful breach of this Agreement, including
without limitation, attorneys' fees and the right to pursue any remedy at law
or in equity.
9.6. Extension, Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE 10
GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Mergers and shall not
survive the Mergers, provided, however, that the agreements contained in
Article 4, Section 7.12, Section 7.16 and this Article 10 shall survive the
Mergers and Section 9.5 shall survive termination.
10.2. Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:
If to the Purchaser: If to the Company:
The Walt Disney Company Capital Cities/ABC, Inc.
500 South Buena Vista Street 77 West 66th Street
Burbank, CA 91521 New York, NY 10023
Attention: Attention:
Sanford M. Litvack Alan N. Braverman
Telecopier No.: Telecopier No.:
(818) 563-4160 (212)456-6908
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<PAGE>
With copies to: With copies to:
Dewey Ballantine Cravath, Swaine & Moore
1301 Avenue of the Americas Worldwide Plaza
New York, NY 10019 825 Eighth Avenue
Attention: New York, NY 10019
Morton A. Pierce Attention:
Mark R. Baker Samuel C. Butler
Telecopier No.: Telecopier No.:
(212) 259-6333 (212) 474-3700
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
10.3. Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 7.12 and Section 7.16, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
10.4. Entire Agreement. This Agreement, the Exhibits, the Company Disclosure
Letter, the Purchaser Disclosure Letter, the Confidentiality Agreement dated
July 29, 1995, between the Company and the Purchaser and any documents
delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Mergers by the
stockholders of the Company and the Purchaser, but after any such stockholder
approval, no amendment shall be made which by law requires the further
approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws, except that the provisions of Article 2 and Article 4
with respect to the Company Merger shall be governed by and construed in
accordance with the laws of the State of New York.
10.7. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
10.8. Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
A-1-28
<PAGE>
10.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.11. Incorporation of Exhibits. The Company Disclosure Letter, the
Purchaser Disclosure Letter and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
10.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.13. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Delaware Court, this being
in addition to any other remedy to which they are entitled at law or in
equity.
10.14. Subsidiaries. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such
party is a general partner. When a reference is made in this Agreement to
Significant Subsidiaries, the words "Significant Subsidiaries" shall refer to
Subsidiaries (as defined above) which constitute "significant subsidiaries"
under Rule 405 promulgated by the SEC under the Securities Act.
A-1-29
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: THE WALT DISNEY COMPANY
By: /s/ David K. Thompson By: /s/ Michael D. Eisner
------------------------------------ ----------------------------------
DAVID K. THOMPSON MICHAEL D. EISNER
SENIOR VICE PRESIDENT CHAIRMAN OF THE BOARD
ASSISTANT GENERAL COUNSEL AND CHIEF EXECUTIVE OFFICER
ATTEST: CAPITAL CITIES/ABC, INC.
By: /s/ Alan N. Braverman By: /s/ Thomas S. Murphy
------------------------------------ ----------------------------------
ALAN N. BRAVERMAN THOMAS S. MURPHY
VICE PRESIDENT AND CHAIRMAN OF THE BOARD
GENERAL COUNSEL AND CHIEF EXECUTIVE OFFICER
A-1-30
<PAGE>
EXHIBIT A
TO REORGANIZATION
AGREEMENT
FORM OF AFFILIATE LETTER
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Capital Cities/ABC, Inc., a New York corporation (the
"Company"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), or (ii) used in and
for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Amended and Restated Agreement and
Plan of Reorganization dated as of July 31, 1995 (the "Agreement"), between
The Walt Disney Company, a Delaware corporation (the "Purchaser") and the
Company, the Company will be merged with and into Merger Sub B (as defined in
the Agreement) (the "Merger").
As a result of the Merger, I may receive shares of Common Stock, par value
$. per share, of the Holding Company (as defined in the Agreement) (the
"Holding Company Securities") in exchange for shares owned by me of Common
Stock, par value $.10 per share, of the Company.
I represent, warrant and covenant to the Purchaser that in the event I
receive any Holding Company Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Holding Company Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Purchaser Securities
to the extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Holding Company Securities to
me pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of
the Company and the distribution by me of the Holding Company Securities
has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the Holding Company Securities issued to me in the
Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to the
Holding Company, or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that, except as may be provided in any registration
rights agreement entered into by the Holding Company and the undersigned,
the Holding Company is under no obligation to register the sale, transfer
or other disposition of the Holding Company Securities by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
A-1-31
<PAGE>
E. I also understand that stop transfer instructions will be given to the
Holding Company's transfer agents with respect to the Holding Company
Securities and that there will be placed on the certificates for the
Holding Company Securities issued to me, or any substitutions therefor, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
, BETWEEN THE REGISTERED HOLDER HEREOF AND
, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF ."
F. I also understand that unless the transfer by me of my Holding Company
Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, the Holding Company reserves
the right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have elapsed from the
date the undersigned acquired the Securities received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) three
years shall have elapsed from the date the undersigned acquired the Holding
Company Securities received in the Merger and the provisions of Rule 145(d)(3)
are then available to the undersigned, or (iii) the Holding Company has
received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Holding Company, or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect
that the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
A-1-32
<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
-------------------------------------
NAME:
Accepted this day of
, 199 by
THE WALT DISNEY COMPANY
By:
---------------------------------
NAME:
TITLE:
A-1-33
<PAGE>
APPENDIX A-2
PURCHASER MERGER AGREEMENT
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan of Merger"), dated as
of , 1995, by and among DC Holdco, Inc., a Delaware corporation (the
"Holding Company"), The Walt Disney Company, a Delaware corporation (the
"Purchaser"), and DCA Merger Corp., a Delaware corporation and a wholly-owned
subsidiary of the Holding Company ("Merger Sub A"). The Purchaser and Merger
Sub A are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
This Agreement and Plan of Merger is being entered into pursuant to an
Amended and Restated Agreement and Plan of Reorganization, dated as of July
31, 1995 (the "Reorganization Agreement"), by and between the Purchaser and
Capital Cities/ABC, Inc., a New York corporation (the "Company"). The
Reorganization Agreement provides for, among other things, the merger of
Merger Sub A with and into the Purchaser and for the merger of DCB Merger
Corp., a New York corporation and a wholly-owned subsidiary of the Holding
Company, with and into the Company (the "Company Merger").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. In accordance with the provisions of this Agreement
and Plan of Merger and the Delaware General Corporation Law (the "DGCL"), at
the Effective Time (as defined in Section 1.4 hereof), Merger Sub A shall be
merged with and into the Purchaser (the "Purchaser Merger") and the separate
corporate existence of Merger Sub A shall cease. The Purchaser shall be the
surviving corporation in the Purchaser Merger (hereinafter sometimes referred
to as the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Delaware. The name of the Surviving Corporation
shall be "Disney Enterprises, Inc." The Purchaser Merger shall have the
effects set forth in the DGCL.
Section 1.2. Certificate of Incorporation and By-Laws. (a) The Certificate
of Incorporation of the Purchaser shall be amended at the Effective Time to
read in its entirety as set forth in Exhibit A.
(b) The By-Laws of Merger Sub A immediately prior to the Effective Time
shall be the By-Laws of the Surviving Corporation (the "By-Laws") immediately
after the Effective Time.
Section 1.3. Directors and Officers. (a) The directors of the Purchaser
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation as of the Effective Time and until their successors are
duly appointed or elected in accordance with applicable law.
(b) The officers of the Purchaser immediately prior to the Effective Time
shall be the officers of the Surviving Corporation as of the Effective Time
and until their successors are duly appointed or elected in accordance with
applicable law.
Section 1.4. Effective Time; Conditions. Upon the later of (i) January 3,
1996 and (ii) the first business day following the day on which the last to be
fulfilled or waived of the conditions set forth in Article 8 of the
A-2-1
<PAGE>
Reorganization Agreement shall have been fulfilled or waived or at such other
time as the Purchaser and the Company may agree, and provided that this
Agreement and Plan of Merger is not terminated under Section 3.1 hereof, a
certificate of merger complying with the DGCL shall be filed with the
Secretary of State of the State of Delaware in accordance with the DGCL. The
Purchaser Merger shall become effective at the time and date of the filing of
the certificate of merger relating to the Purchaser Merger with the Secretary
of State of Delaware or at such later time and date as provided for in such
certificate of merger as may be permitted by the DGCL (such time and date is
herein referred to as the "Effective Time").
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Merger Sub A Common Stock. Each share of common stock, par
value $.01 per share, of Merger Sub A (the "Merger Sub A Common Stock")
outstanding immediately prior to the Effective Time shall, by virtue of the
Purchaser Merger and without any further action by the holder thereof, be
converted into and become one share of common stock, par value $.01 per share,
of the Surviving Corporation (the "Surviving Corporation Common Stock"). Each
certificate which immediately prior to the Effective Time represented
outstanding shares of Merger Sub A Common Stock shall, on and after the
Effective Time, be deemed for all purposes to represent the number of shares
of Surviving Corporation Common Stock into which the shares of Merger Sub A
Common Stock represented by such certificate shall have been converted
pursuant to this Section 2.1.
Section 2.2. Holding Company Capital Stock. At the earlier of the effective
time of the Company Merger and the Effective Time, each share of the capital
stock of the Holding Company issued and outstanding immediately prior to such
time shall be converted into the right to receive in cash the fair market
value thereof, as agreed upon by the Purchaser and the Holding Company.
Section 2.3. Conversion of Purchaser Stock. (a) At the Effective Time, each
share of common stock, par value $.025 per share, of the Purchaser (the
"Purchaser Common Stock"), issued and outstanding at the Effective Time shall
be converted into one share of common stock, $0.01 par value, of the Holding
Company (the "Holding Company Common Stock"). Upon such conversion, all such
shares of Purchaser Common Stock shall be cancelled and cease to exist, and
each certificate theretofore representing any such shares shall, without any
action on the part of the holder thereof, be deemed to represent an equivalent
number of shares of Holding Company Common Stock.
(b) At the Effective Time, each share of Purchaser Common Stock which is
held in the treasury of the Purchaser immediately prior to the Effective Time
shall, by virtue of the Purchaser Merger, cease to be outstanding and shall be
cancelled and retired without payment of any consideration therefor.
ARTICLE III
TERMINATION AND AMENDMENT
Section 3.1. Termination. Notwithstanding the approval and adoption of this
Agreement and Plan of Merger by the stockholders of the Constituent
Corporations, this Agreement and Plan of Merger shall terminate forthwith in
the event that the Reorganization Agreement shall be terminated as therein
provided. In the event of the termination of this Agreement and Plan of Merger
as provided above, this Agreement and Plan of Merger shall forthwith become
void and there shall be no liability on the part of any of the parties hereto
except as otherwise provided in the Reorganization Agreement.
Section 3.2. Amendment. This Agreement and Plan of Merger shall not be
amended other than pursuant to an amendment to the Reorganization Agreement
approved in the manner therein provided. If any
A-2-2
<PAGE>
such amendment to the Reorganization Agreement is so approved, any amendment
to this Agreement and Plan of Merger required by such amendment to the
Reorganization Agreement shall be effected by the parties hereto by action
taken by their respective Boards of Directors.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Governing Law. This Agreement and Plan of Merger shall be
governed by the laws of the State of Delaware.
Section 4.2. Counterparts. This Agreement and Plan of Merger may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized
as of the date first written above.
THE WALT DISNEY COMPANY,
By: _________________________
NAME:
TITLE:
DC HOLDCO, INC.,
By: _________________________
NAME:
TITLE:
DCA MERGER CORP.,
By: _________________________
NAME:
TITLE:
A-2-3
<PAGE>
APPENDIX A-3
COMPANY MERGER AGREEMENT
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan of Merger"), dated as
of , 1995, by and among DC Holdco, Inc., a Delaware corporation (the
"Holding Company"), Capital Cities/ABC, Inc., a New York corporation (the
"Company") and DCB Merger Corp., a New York corporation and a wholly-owned
subsidiary of the Holding Company ("Merger Sub B"). The Company and Merger Sub
B are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
This Agreement and Plan of Merger is being entered into pursuant to an
Amended and Restated Agreement and Plan of Reorganization, dated as of July
31, 1995 (the "Reorganization Agreement") by and between the Company and The
Walt Disney Company, a Delaware corporation (the "Purchaser"). The
Reorganization Agreement provides for, among other things, the merger of
Merger Sub B with and into the Company and for the merger of DCA Merger Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Holding Company,
with and into the Purchaser (the "Purchaser Merger"). All defined terms that
are used herein which are not otherwise defined herein shall have the meaning
ascribed to such term in the Reorganization Agreement.
The number of outstanding shares of the common stock, par value $.10 per
share, of the Company (the "Company Common Stock") is , all of which
shares are of one class and all of which shares are entitled to vote. The
number of outstanding shares of the common stock, par value $.01 per share, of
Merger Sub B (the "Merger Sub B Common Stock") is , all of which shares
are of one class and all of which shares are entitled to vote.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. In accordance with the provisions of this
Agreement and Plan of Merger and the New York Business Corporation Law (the
"NYBCL"), at the Effective Time (as defined in Section 1.4 hereof), Merger Sub
B shall be merged with and into the Company (the "Company Merger") and the
separate corporate existence of Merger Sub B shall cease. The Company shall be
the surviving corporation in the Company Merger (hereinafter sometimes
referred to as the "Surviving Corporation") and shall continue its corporate
existence under the laws of the State of New York. The name of the Surviving
Corporation shall continue to be "Capital Cities/ABC, Inc." The Company Merger
shall have the effects set forth in the NYBCL.
Section 1.2. Certificate of Incorporation and By-Laws. (a) The Certificate
of Incorporation of Merger Sub B as in effect immediately prior to the
Effective Time (the "Certificate") shall be the Certificate of Incorporation
of the Surviving Corporation immediately after the Effective Time.
(b) The By-Laws of Merger Sub B as in effect immediately prior to the
Effective Time (the "By-Laws") shall be the By-Laws of the Surviving
Corporation immediately after the Effective Time.
Section 1.3. Directors and Officers. (a) The directors of Merger Sub B
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation as of the Effective Time and until their successors are
duly appointed or elected in accordance with applicable law.
A-3-1
<PAGE>
(b) The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation as of the Effective Time
until their successors are duly appointed or elected in accordance with
applicable law.
Section 1.4. Effective Time; Conditions. Upon the later of (i) January 3,
1996 and (ii) the first business day following the day on which the last to be
fulfilled or waived of the conditions set forth in Article 8 of the
Reorganization Agreement shall have been fulfilled or waived or at such other
time as the Purchaser and the Company may agree, and provided that this
Agreement and Plan of Merger is not terminated under Section 3.1 hereof, a
certificate of merger complying with the NYBCL shall be filed with the
Secretary of State of the State of New York in accordance with the NYBCL. The
Company Merger shall become effective at the time and date of the filing of a
certificate of merger by the Department of State of the State of New York or
at such later time and date as provided for in such certificate of merger as
may be permitted by the NYBCL (such time and date is herein referred to as the
"Effective Time").
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Merger Sub B Common Stock. Each share of Merger Sub B Common
Stock outstanding immediately prior to the Effective Time shall, by virtue of
the Company Merger and without any further action by the holder thereof, be
converted into one share of common stock, par value $.01 per share, of the
Surviving Corporation (the "Surviving Corporation Common Stock"). Each
certificate which immediately prior to the Effective Time represented
outstanding shares of Merger Sub B Common Stock shall, on and after the
Effective Time, be deemed for all purposes to represent the number of shares
of Surviving Corporation Common Stock into which the shares of Merger Sub B
Common Stock represented by such certificate shall have been converted
pursuant to this Section 2.1.
Section 2.2 Holding Company Capital Stock. At the earlier of the effective
time of the Purchaser Merger and the Effective Time, each share of the capital
stock of the Holding Company issued and outstanding immediately prior to such
time shall be converted into the right to receive in cash the fair market
value thereof as agreed upon by the Purchaser and the Holding Company.
Section 2.3. Conversion of Company Common Stock. (a) Except as otherwise
provided in Section 2.5 and subject to Sections 2.3(c) and 2.3(d), at the
Effective Time each issued and outstanding share of Company Common Stock at
the election of the holder thereof shall be converted into one of the
following (as adjusted pursuant to Section 2.5, the "Merger Consideration"):
(i) for each such share of Company Common Stock with respect to which an
election to receive a combination of Holding Company Common Stock and cash
has been effectively made and not revoked or lost, pursuant to Sections
2.4(c), (d) and (e) (a "Standard Election"), the right to receive (x) one
share of Holding Company Common Stock plus (y) an amount in cash equal to
$65 (collectively, the "Standard Consideration");
(ii) for each such share of Company Common Stock with respect to which an
election to receive Holding Company Common Stock has been effectively made
and not revoked or lost, pursuant to Sections 2.4(c), (d) and (e) (a "Stock
Election"), the right to receive (x) one share of Holding Company Common
Stock plus (y) a number of shares of Holding Company Common Stock equal to
a fraction, the numerator of which is $65 and the denominator of which is
the Purchaser Common Stock Price (collectively, the "Stock Consideration").
The "Purchaser Common Stock Price" means an amount equal to the average of
the closing sales prices of Purchaser Common Stock on the New York Stock
Exchange Composite Tape on each of the ten consecutive trading days
immediately preceding the second trading day prior to the Effective Time of
the Purchaser Merger; or
A-3-2
<PAGE>
(iii) for each such share of Company Common Stock (other than shares as
to which a Standard Election or a Stock Election was made), the right to
receive in cash, without interest, an amount equal to $65 plus the
Purchaser Common Stock Price (collectively, the "Cash Consideration").
(b) As a result of the Company Merger and without any action on the part of
the holder thereof, at the Effective Time all shares of Company Common Stock
shall cease to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of shares of Company Common Stock shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive, without interest, the Merger
Consideration and cash for fractional shares of Holding Company Common Stock
in accordance with Sections 2.6(c) upon the surrender of a certificate
representing such shares of Company Common Stock (a "Company Certificate").
(c) Notwithstanding anything contained in this Section 2.3 to the contrary,
each share of Company Common Stock issued and held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Merger, cease
to be outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) Notwithstanding anything in this Section 2.3 to the contrary, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such
shares in favor of the Company Merger and who shall have properly exercised
their rights of appraisal for such shares in the manner provided by the NYBCL
(the "Dissenting Shares") shall not be converted into or be exchangeable for
the right to receive the Merger Consideration, unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost his
right to appraisal and payment, as the case may be. If such holder shall have
so failed to perfect or shall have effectively withdrawn or lost such right,
his shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the
Merger Consideration, without any interest thereon.
Section 2.4 Company Common Stock Elections. (a) Each person who, at the
Effective Time, is a record holder of shares of Company Common Stock (other
than holders of shares of Company Common Stock to be cancelled as set forth in
Section 2.3(c) or Dissenting Shares) shall have the right to submit an
Election Form (as defined in Section 2.4(c)) specifying the number of shares
of Company Common Stock that such person desires to have converted into the
right to receive Holding Company Common Stock and cash pursuant to a Standard
Election, the number of shares of Company Common Stock that such person
desires to have converted into the right to receive Holding Company Common
Stock pursuant to a Stock Election, and the number of shares of Company Common
Stock that such person desires to have converted into the right to receive the
Cash Consideration (a "Cash Election").
(b) Promptly after the Allocation Determination (as defined in Section
2.4(d)), (i) the Holding Company shall deposit (or cause to be deposited) with
a bank or trust company to be designated by the Purchaser and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with
this Article II, cash in the amount sufficient to pay the aggregate cash
portion of the Merger Consideration and (ii) the Holding Company shall deposit
(or cause to be deposited) with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock, certificates representing the
shares of Holding Company Common Stock ("Holding Company Certificates") for
exchange in accordance with this Article II (the cash and shares deposited
pursuant to clauses (i) and (ii) being hereinafter referred to as the
"Exchange Fund"). Holding Company Common Stock into which Company Common Stock
shall be converted pursuant to the transactions contemplated hereby shall be
deemed to have been issued at the Effective Time.
(c) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of Company Common Stock immediately
prior to the Effective Time (excluding any shares of Company Common Stock
which will be cancelled pursuant to Section 2.3(c) or Dissenting Shares) (A) a
letter of transmittal (the "Company Letter of Transmittal") (which shall
specify that delivery shall be effected, and
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risk of loss and title to the Company Certificates shall pass, only upon
delivery of the such Company Certificates to the Exchange Agent and shall be
in such form and have such other provisions as the Purchaser shall specify),
(B) instructions for use in effecting the surrender of the Company
Certificates in exchange for the Merger Consideration with respect to the
shares of Company Common Stock formerly represented thereby, and (C) an
election form (the "Election Form") providing for such holders to make the
Standard Election, the Cash Election or the Stock Election. As of the Election
Deadline (as hereinafter defined) all holders of Company Common Stock
immediately prior to the Effective Time that shall not have submitted to the
Exchange Agent an effective, properly completed Election Form shall be deemed
to have made a Cash Election.
(d) Any Standard Election, Cash Election (other than a deemed Cash
Election), or Stock Election shall have been validly made only if the Exchange
Agent shall have received by 5:00 p.m. New York, New York time on a date (the
"Election Deadline") to be mutually agreed upon by the Purchaser and the
Company (which date shall not be later than the twentieth business day after
the Effective Time), an Election Form properly completed and executed (with
the signature or signatures thereof guaranteed to the extent required by the
Election Form) by such holder accompanied by such holder's Company
Certificates, or by an appropriate guarantee of delivery of such Company
Certificates from a member of any registered national securities exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States as set forth in such Election Form. Any
holder of Company Common Stock who has made an election by submitting an
Election Form to the Exchange Agent may at any time prior to the Election
Deadline change such holder's election by submitting a revised Election Form,
properly completed and signed that is received by the Exchange Agent prior to
the Election Deadline. Any holder of Company Common Stock may at any time
prior to the Election Deadline revoke his election and withdraw his Company
Certificates deposited with the Exchange Agent by written notice to the
Exchange Agent received by the close of business on the day prior to the
Election Deadline. As soon as practicable after the determination by the
Purchaser regarding an increase in the Maximum Cash Amount pursuant to Section
2.5(b) hereof, the Exchange Agent shall determine the allocation of the cash
portion of the Merger Consideration and the stock portion of the Merger
Consideration and shall notify the Holding Company of its determination (the
"Allocation Determination").
(e) Upon surrender of a Company Certificate for cancellation to the Exchange
Agent, together with the Company Letter of Transmittal, duly executed, and
such other documents as the Purchaser or the Exchange Agent shall reasonably
request, the holder of such Company Certificate shall be entitled to receive
promptly after the Election Deadline in exchange therefor (A) a certified or
bank cashier's check in the amount equal to the cash, if any, which such
holder has the right to receive pursuant to the provisions of this Article II
(including any cash in lieu of fractional shares of Holding Company Common
Stock pursuant to Section 2.6(c)), and (B) a Holding Company Certificate
representing that number of shares of Holding Company Common Stock, if any,
which such holder has the right to receive pursuant to this Article II, and
the Company Certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 2.4, each Company Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive the Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby.
(f) The Purchaser shall have the right to make rules, not inconsistent with
the terms of this Agreement and Plan of Merger and the Reorganization
Agreement, governing the validity of the Election Forms, the manner and extent
to which Standard Elections, Cash Elections, or Stock Elections are to be
taken into account in making the determinations prescribed by Section 2.5, the
issuance and delivery of certificates for Holding Company Common Stock into
which shares of Company Common Stock are converted in the Company Merger, and
the payment of cash for shares of Company Common Stock converted into the
right to receive cash in the Company Merger.
Section 2.5 Proration. (a) As is more fully set forth below, the maximum
number of shares of Holding Company Common Stock to be issued to holders of
Company Common Stock shall not exceed the number of Outstanding Company
Shares. "Outstanding Company Shares" shall mean those shares of Company Common
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Stock outstanding immediately prior to the Effective Time minus (x) shares of
Company Common Stock which will be cancelled pursuant to Section 2.3(c) and
(y) Dissenting Shares (as long as such remain Dissenting Shares).
(b) As is more fully set forth below, the aggregate amount of cash to be
paid to holders of Outstanding Company Shares (the "Maximum Cash Amount")
shall not exceed the product of (x) $65 and (y) the number of Outstanding
Company Shares; provided, however, that the Purchaser shall have the right, in
its sole discretion, to increase the Maximum Cash Amount at any time within
five (5) business days after the Election Deadline.
(c) In the event that the aggregate number of shares of Holding Company
Common Stock represented by the Stock Elections received by the Exchange Agent
(the "Requested Stock Amount") exceeds an amount equal to the number of
Outstanding Company Shares minus the aggregate number of Outstanding Company
Shares with respect to which effective Standard Elections have been received
by the Exchange Agent (such difference, the "Stock Cap"), each holder making a
Stock Election shall receive, for each share of Company Common Stock for which
a Stock Election has been made, (x) a number of shares of Holding Company
Common Stock equal to the product of the Stock Consideration and the Stock
Proration Factor (as defined below) (such product, the "Prorated Stock
Amount") and (y) cash in an amount equal to the product of (A) the Stock
Consideration minus the Prorated Stock Amount and (B) the Purchaser Common
Stock Price. The "Stock Proration Factor" shall be a fraction, the numerator
of which is the Stock Cap and the denominator of which is the Requested Stock
Amount.
(d) In the event that the aggregate amount of cash represented by the Cash
Elections received by the Exchange Agent (the "Requested Cash Amount") exceeds
the Maximum Cash Amount (as such amount may have been increased at the
Purchaser's sole discretion pursuant to Section 2.5(b)) minus the aggregate
amount of cash represented by the Standard Elections that have been received
by the Exchange Agent (such difference, the "Cash Cap"), each holder making a
Cash Election (and each holder who is deemed to have made a Cash Election
pursuant to Section 2.4(c)) shall receive, for each share of Company Common
Stock for which a Cash Election has been made, (x) cash in an amount equal to
the product of the Cash Consideration and a fraction, the numerator of which
is the Cash Cap and the denominator or which is the Requested Cash Amount
(such product, the "Prorated Cash Amount") and (y) a number of shares of
Holding Company Common Stock equal to a fraction, the numerator of which is
equal to the Cash Consideration minus the Prorated Cash Amount and the
denominator of which is the Purchaser Common Stock Price.
Section 2.6 Dividends, Fractional Shares, Etc. (a) Notwithstanding any other
provisions of this Agreement and Plan of Merger and the Reorganization
Agreement, no dividends or other distributions declared after the Effective
Time on Holding Company Common Stock shall be paid with respect to any shares
of Company Common Stock represented by a Company Certificate, until such
Company Certificate is surrendered for exchange as provided herein. Subject to
the effect of applicable laws, following surrender of any such Company
Certificate, there shall be paid to the holder of the Holding Company
Certificates issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to such whole
shares of Holding Company Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Holding
Company Common Stock, less the amount of any withholding taxes which may be
required thereon.
(b) At or after the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates representing any such shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates for the
consideration, if any, deliverable in respect thereof pursuant to this
Agreement and Plan of Merger and the Reorganization Agreement in accordance
with the procedures set forth in this Article II. Company Certificates
surrendered for exchange by any person constituting
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an "affiliate" of the Company for purposes of Rule 145(c) under the Securities
Act of 1933, as amended, shall not be exchanged until the Purchaser has
received a written agreement from such person pursuant to Section 7.10 of the
Reorganization Agreement.
(c) No fractional shares of Holding Company Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Holding
Company Common Stock pursuant to Section 2.3(a), cash adjustments will be paid
to holders in respect of any fractional share of Holding Company Common Stock
that would otherwise be issuable, and the amount of such cash adjustment shall
be equal to the product of such fractional amount and the Purchaser Common
Stock Price.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Holding Company Common Stock) that
remains unclaimed by the former stockholders of the Company six months after
the Effective Time shall be delivered to the Holding Company. Any former
shareholders of the Company who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation for payment
of the Merger Consideration, cash in lieu of fractional shares and unpaid
dividends and distributions on the Holding Company Common Stock deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement and Plan of Merger and the
Reorganization Agreement, in each case, without any interest thereon.
(e) None of the Purchaser, the Company, the Holding Company, the Surviving
Corporation, the Exchange Agent or any other person shall be liable to any
former holder of shares of Company Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) In the event that any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed and, if
required by the Holding Company, the posting by such person of a bond in such
reasonable amount as the Holding Company may direct as indemnity against any
claim that may be made against it with respect to such Company Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Company Certificate the Merger Consideration, cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Holding Company
Common Stock as provided in Section 2.6(a), deliverable in respect thereof
pursuant to this Agreement and Plan of Merger Agreement and the Reorganization
Agreement.
ARTICLE III
AMENDMENT AND TERMINATION
Section 3.1. Termination. Notwithstanding the approval and adoption of this
Agreement and Plan of Merger by the shareholders of the Constituent
Corporations, this Agreement and Plan of Merger shall terminate forthwith in
the event that the Reorganization Agreement shall be terminated as therein
provided. In the event of the termination of this Agreement and Plan of Merger
as provided above, this Agreement and Plan of Merger shall forthwith become
void and there shall be no liability on the part of any of the parties hereto
except as otherwise provided in the Reorganization Agreement.
Section 3.2. Amendment. This Agreement and Plan of Merger shall not be
amended other than pursuant to an amendment to the Reorganization Agreement
approved in the manner therein provided. If any such amendment to the
Reorganization Agreement is so approved, any amendment to this Agreement and
Plan of Merger required by such amendment to the Reorganization Agreement
shall be effected by the parties hereto by action taken by their respective
Boards of Directors.
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ARTICLE IV
MISCELLANEOUS
Section 4.1. Governing Law. This Agreement and Plan of Merger shall be
governed by the laws of the State of New York.
Section 4.2. Counterparts. This Agreement and Plan of Merger may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized
as of the date first written above.
CAPITAL CITIES/ABC, INC.,
By: _________________________________
NAME:
TITLE:
DC HOLDCO, INC.,
By: _________________________________
NAME:
TITLE:
DCB MERGER CORP.,
By: _________________________________
NAME:
TITLE:
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APPENDIX B-1
THE WALT DISNEY COMPANY
1995 STOCK INCENTIVE PLAN
1. PURPOSES.
The purposes of the 1995 Stock Incentive Plan (the "Plan") are to provide
long-term incentives and rewards to employees of The Walt Disney Company
("Disney") and its Affiliates (as defined below) to assist Disney in
attracting and retaining employees with experience and/or ability on a basis
competitive with industry practices and to associate the interests of such
employees with those of Disney's stockholders.
2. EFFECTIVE DATE.
The Plan is effective as of the date it is adopted by the Board of Directors
of Disney, subject to the approval of the Plan by the holders of at least a
majority of the outstanding shares of Disney common stock present, or
represented, and entitled to vote at the 1996 Special Meeting of Stockholders.
Awards may be made under the Plan on and after its effective date subject to
stockholder approval of the Plan as provided above. In the event such approval
of the stockholders is not obtained, all awards granted under the Plan shall
be null and void.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation Committee of the Board of
Directors of Disney, or such other committee of the Board as may be directed
by the Board (any such committee shall hereinafter be referred to as the
"Committee"), and the Committee shall be so constituted as to permit the Plan
to comply with the disinterested administration requirements under Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the "outside director" requirement of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Members of the Committee shall serve at
the pleasure of the Board of Directors of Disney.
The Committee shall have all the powers vested in it by the terms of the
Plan, such powers to include exclusive authority (within the limitations
described herein) to select the employees to be granted awards under the Plan,
to determine the type, size and terms of awards to be made to each employee
selected, to determine the time when awards will be granted, when they will
vest, when they may be exercised and when they will be paid, to amend awards
previously granted and to establish objectives and conditions, if any, for
earning awards and whether awards will be paid after the end of the award
period. The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and for the
conduct of its business as the Committee deems necessary or advisable and to
interpret same. The Committee's interpretation of the Plan, and all actions
taken and determinations made by the Committee pursuant to the powers vested
in it hereunder, shall be conclusive and binding on all parties concerned,
including Disney, its Affiliates, stockholders, any participants in the Plan
and any other employee of Disney or any of its Affiliates.
All employees of Disney and all employees of Disney's Affiliates shall be
eligible to participate in the Plan. The Committee, in its sole discretion,
shall from time to time designate from among the eligible employees those
individuals who are to receive awards under and thereby become participants in
the Plan. For purposes of the Plan, "Affiliate" shall mean any entity, as may
from time to time be designated by the Committee, that is a subsidiary
corporation of Disney (within the meaning of Section 424 of the Code), and
each other entity directly or indirectly controlling or controlled by or under
common control with Disney. For purposes of this definition, "control" means
the power to direct the management and policies of such entity, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meaning correlative to the
foregoing.
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4. AWARDS.
(a) Types. Awards under the Plan shall be made with reference to shares of
Disney common stock and may include, but need not be limited to, stock options
(including nonqualified stock options and incentive stock options qualifying
under Section 422 of the Code), stock appreciation rights (including free-
standing, tandem and limited stock appreciation rights), warrants, dividend
equivalents, stock awards, restricted stock, phantom stock, performance shares
or other securities or rights that the Committee determines to be consistent
with the objectives and limitations of the Plan. The Committee may provide for
the issuance of shares of Disney common stock as a stock award for no
consideration other than services rendered or, to the extent permitted by
applicable state law, to be rendered. In the event of an award under which
shares of Disney common stock are or may in the future be issued for any other
type of consideration, the amount of such consideration shall (i) be equal or
greater than to the amount (such as the par value of such shares) required to
be received by Disney in order to assure compliance with applicable state law
and (ii) to the extent necessary to comply with Rule 16b-3 of the Exchange
Act, be equal to or greater than 50% of the fair market value of such shares
on the date of grant of such award. The Committee may make any other type of
award which it shall determine is consistent with the objectives and
limitations of the Plan.
(b) Performance Goals. The Committee may, but need not, establish
performance goals to be achieved within such performance periods as may be
selected by it in its sole discretion, using such measures of the performance
of Disney and/or its Affiliates as it may select.
(c) Rules and Policies. The Committee may adopt from time to time written
rules and policies implementing the Plan. Such rules and policies may include,
but need not be limited to, the type, size and term of awards to be made to
participants and the conditions for the exercise or payment of such awards.
Rules relating to stock options and free-standing and tandem stock
appreciation rights (as distinguished from all other awards, including,
without limitation, warrants), attached hereto as Exhibit A, have been
approved by the Committee, subject to the approval of the Disney stockholders.
The rules set forth in Exhibit A may be amended by the Committee in accordance
with the provisions and subject to the limitations set forth in Section 10 of
the Plan. The Committee shall determine, in its sole discretion, the extent to
which rules and policies that it may adopt in the future shall be subject to
the approval of the Disney stockholders and/or limitations on the Committee's
authority to amend such rules or policies.
(d) Maximum Awards. An employee may be granted multiple awards under the
Plan. The maximum number of shares of Disney common stock subject to awards of
stock options, warrants and stock appreciation rights under the Plan, both
individually and in the aggregate with respect to each such type of award,
that may be granted during any period of five consecutive calendar years to
any one individual shall be limited to 10,000,000. To the extent required by
Section 162(m) of the Code, awards subject to the foregoing limit that are
cancelled or repriced shall not again be available for award under this limit.
With respect to awards of stock, restricted stock, phantom stock, performance
shares or other forms of award conveying a similar economic benefit (but
excluding options, warrants and stock appreciation rights), the maximum number
of shares of Disney common stock that may be awarded during any period of five
consecutive calendar years to any one individual shall be 2,000,000, and the
maximum number of shares of that may be awarded to all participants under the
Plan shall be 10,000,000, in each such case on an individual and aggregate
basis with respect to each of such types of award.
5. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be delivered or purchased or used for reference purposes
under the Plan shall not exceed an aggregate of 65,000,000 shares of Disney
common stock. Any shares subject to an award which for any reason expires or
is terminated unexercised as to such shares shall again be available for
issuance under the Plan.
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6. PAYMENT OF AWARDS.
The Committee shall determine the extent to which awards shall be payable in
cash, shares of Disney common stock or any combination thereof. The Committee
may determine that all or a portion of a payment to a participant under the
Plan, whether it is to be made in cash, shares of Disney common stock or a
combination thereof shall be deferred. Deferrals shall be for such periods and
upon such terms as the Committee may determine in its sole discretion.
7. VESTING.
The Committee may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of Disney
common stock or a combination thereof, shall be vested at such times and upon
such terms as may be selected by it in its sole discretion.
8. DILUTION AND OTHER ADJUSTMENT.
In the event of any change in the outstanding shares of Disney common stock
by reason of any split, stock dividend, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares or
other similar corporate change, such equitable adjustments shall be made in
the Plan and the awards thereunder as the Committee determines are necessary
or appropriate, including, if necessary, any adjustments in the number, kind
or character of shares that may be subject to existing or future awards under
the Plan (including by substitution of shares of another corporation
including, without limitation, any successor of Disney), adjustments in the
exercise, purchase or base price of an outstanding award and any adjustments
in the maximum numbers of shares referred to in Section 4 or Section 5 of the
Plan. All such adjustments shall be conclusive and binding for all purposes of
the Plan.
9. MISCELLANEOUS PROVISIONS.
(a) Rights as Stockholder. A participant under the Plan shall have no rights
as a holder of Disney common stock with respect to awards hereunder, unless
and until certificates for shares of such stock are issued to the participant.
(b) Assignment or Transfer. No award under this Plan shall be transferrable
by the participant or shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance or charge (other than by or to
Disney), except (i) by will or the laws of descent and distribution (with all
references herein to the rights or duties of holders or participants to be
deemed to include such beneficiaries or legal representatives of the holder or
participant unless the context otherwise expressly requires); or (ii) subject
to the prior approval of the Committee, for transfers to members of the
participant's immediate family, charitable institutions, trusts whose
beneficiaries are members of the participant's immediate family and/or
charitable institutions, or to such other persons or entities as may be
approved by the Committee, in each case subject to the condition that the
Committee be satisfied that such transfer is being made for estate and/or tax
planning purposes on a gratuitous or donative basis and without consideration
(other than nominal consideration) being received therefor. Except as provided
above, during the lifetime of a participant, awards hereunder are exercisable
only by, and payable only to, the participant. Notwithstanding anything to the
contrary contained herein, until the expiration of the phase-in period under
new Rule 16b-3 under the Exchange Act (as generally effective May 1, 1991, and
amendments thereto), any derivative security the grant of which is intended to
be exempt from Section 16(b) under the Exchange Act shall not be transferable
or exercisable other than as permitted by former Rule 16b-3(d)(1)(ii) under
the Exchange Act.
(c) Agreements. All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall adopt.
(d) Compliance with Legal Regulations. During the term of the Plan and the
term of any awards granted under the Plan, Disney will at all times reserve
and keep available such number of shares as may be issuable
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under the Plan, and will seek to obtain from any regulatory body having
jurisdiction, any requisite authority required in the opinion of counsel for
Disney in order to grant shares of Disney common stock, or options to purchase
such stock or other awards hereunder, and transfer, issue or sell such number
of shares of common stock as shall be sufficient to satisfy the requirements
of any options or other awards. If in the opinion of counsel for Disney the
transfer, issue or sale of any shares of its stock under the Plan shall not be
lawful for any reason, including the inability of Disney to obtain from any
regulatory body having jurisdiction authority deemed by such counsel to be
necessary to such transfer, issuance or sale, Disney shall not be obligated to
transfer, issue or sell any such shares. In any event, Disney shall not be
obligated to transfer, issue or sell any shares to any participant unless a
registration statement which complies with the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), is in effect at the time with
respect to such shares or other appropriate action has been taken under and
pursuant to the terms and provisions of the Securities Act and any other
applicable securities laws, or Disney receives evidence satisfactory to the
Committee that the transfer, issuance or sale of such shares, in the absence
of an effective registration statement or other appropriate action, would not
constitute a violation of the terms and provisions of the Securities Act.
Disney's obligation to issue shares upon the exercise of any award granted
under the Plan shall in any case be subject to Disney being satisfied that the
shares purchased are being purchased for investment and not with a view to the
distribution thereof, if at the time of such exercise a resale of such shares
would otherwise violate the Securities Act in the absence of an effective
registration statement relating to such shares.
(e) Withholding Taxes. Disney shall have the right to deduct from all awards
hereunder paid in cash any federal, state, local or foreign taxes required by
law to be withheld with respect to such awards and, with respect to awards
paid in stock, to require the payment (through withholding from the
participant's salary or otherwise) of any such taxes. The obligation of Disney
to make delivery of awards in cash or Disney common stock shall be subject to
currency or other restrictions imposed by any government.
(f) No Rights to Award. No employee or other person shall have any right to
be granted an award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained
in the employ of Disney or any of its subsidiaries or shall interfere with or
restrict in any way the rights of Disney or any of its subsidiaries, which are
hereby reserved, to discharge the employee at any time for any reason
whatsoever, with or without good cause.
(g) Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by Disney and not charged to any award nor to any employee
receiving an award.
(h) Funding of Plan. The Plan shall be unfunded. Disney shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any award under the Plan.
10. AMENDMENTS AND TERMINATION.
(a) Amendments. The Committee may at any time terminate or from time to time
amend the Plan in whole or in part, but no such action shall adversely affect
any rights or obligations with respect to any awards theretofore made under
the Plan.
Unless the holders of at least a majority of the outstanding shares of
Disney common stock present, or represented, and entitled to vote at a meeting
of stockholders shall have first approved thereof, no amendment of the Plan
shall be effective which would (i) increase the maximum number of shares
referred to in section 5 of the Plan or the maximum awards that may be granted
pursuant to section 4(d) of the Plan to any one individual or (ii) extend the
maximum period during which awards may be granted under the Plan. For purposes
of this section 10 (a), any (A) cancellation and reissuance or (B) repricing
of any awards made under the Plan at a new option price as provided in Exhibit
A hereto shall not constitute an amendment of this Plan.
With the consent of the employee adversely affected, the Committee may amend
outstanding agreements evidencing awards under the Plan in a manner not
inconsistent with the terms of the Plan.
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(b) Termination. Unless the Plan shall theretofore have been terminated as
above provided, the Plan (but not the awards theretofore granted under the
Plan) shall terminate on and no awards shall be granted after November 1,
2005.
11. GOVERNING LAW.
The validity and construction of the Plan and any agreements entered into
thereunder shall be governed by the laws of the State of Delaware.
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EXHIBIT A
THE WALT DISNEY COMPANY
1995 STOCK INCENTIVE PLAN
RULES RELATING TO STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Pursuant to section 3 of the Plan and authority granted by the Board of
Directors of Disney as of November 1, 1995, and subject to the approval of the
Plan (including this Exhibit A) by the holders of at least a majority of the
outstanding shares of Disney common stock present, or represented, and
entitled to vote at the 1996 Special Meeting of Stockholders, the Committee
herein sets forth rules under which stock options and stock appreciation
rights may be granted to employees of Disney or its Affiliates under the Plan.
All such grants are subject to the terms and provisions of the Plan. Defined
terms used herein and not otherwise defined shall have the meanings set forth
in the Plan.
1. AWARD OF OPTIONS.
Subject to the provisions of the Plan, the Committee may from time to time,
in its sole discretion, award to participants in the Plan stock options to
purchase shares of common stock of Disney. In connection therewith, the
Committee shall have full and final authority, inter alia, in its discretion,
subject to the provisions of the Plan, (a) to determine the participants to
whom options are to be awarded, (b) in the case of each option awarded, to
determine whether the same shall be an incentive stock option pursuant to
Section 422 of the Code (an "incentive stock option"), or an option which does
not qualify under such Section 422 (a "non-qualified option"), (c) to
determine the number of shares subject to each option, (d) to determine the
time or times at which options will be awarded, (e) to determine the option
price of the shares subject to each option, which price shall not be less than
the minimum specified in section 2 hereof, (f) to determine the time or times
when each option becomes exercisable and to determine the duration of the
exercise period and (g) to prescribe the form or forms of the instruments
evidencing any options awarded under the Plan and the manner in which, and the
form of consideration for which, the option price should be paid.
2. OPTION PRICE.
The option price shall be determined by the Committee at the time any option
is awarded and shall not be less than 100% of the fair market value of the
common stock of Disney on the date on which the option is granted or the Stock
Option Agreement (as described in section 9 hereof) is amended pursuant to
section 10 hereof. Subject to certain limitations that may be imposed by the
Committee to comply with the requirements for exemption under Rule 16b-3 of
the Exchange Act or any other applicable rule, regulation or guideline, the
option price shall be paid in cash (whether or not such cash is loaned by
Disney to the participant for such purpose) or by the surrender, at the fair
market value on the date on which the option is exercised, of shares of common
stock of Disney, or by any combination of cash and such shares. The purchase
price for shares being purchased upon exercise of non-qualified options may
also be paid in any other manner approved by the Committee, including, without
limitation, by delivery to Disney of (a) a cash amount which shall not be less
than the par value of the common stock of Disney multiplied by the number of
shares being purchased and (b) a binding, joint and several obligation of the
participant and a financial institution or broker approved by the Committee,
to pay the balance of the purchase price upon such terms and conditions as may
be specified from time to time by the Committee. For purposes of this Exhibit
A, the "fair market value" of a share of Disney common stock shall be the
average of the highest and lowest of the New York Stock Exchange composite
tape market prices at which the stock shall have been sold regular way on the
date as of which fair market value is to be determined or, if there shall be
no such sale on such date, the next preceding day on which such a sale shall
have occurred.
3. DURATION AND PERIOD FOR EXERCISE OF OPTIONS.
Subject to earlier termination as provided in section 4 hereof, an option
granted under the Plan shall expire ten years after the date the option is
granted, unless otherwise provided by the Committee. The Committee shall
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specify at the time each option is granted, and shall state in the Stock
Option Agreement, the time or times at which, and in what proportions, that
option may be exercised prior to its expiration or earlier termination. Except
as otherwise provided (a) by the Committee in the Stock Option Agreement or
any amendment thereto or (b) in section 4 hereof: (i) no option may be
exercised during the first year from the date it is granted; (ii) after one
year from the date an option is granted, it may be exercised as to not more
than 20% of the shares optioned; and (iii) after the expiration of the second,
third, fourth and fifth years from the date the option is granted, it may be
exercised as to no more than an additional 20% of such shares plus any shares
as to which the option might theretofore have been exercised but shall not
have been exercised; provided that the participant is employed with Disney or
an Affiliate on each such vesting date or on a date no more than three months
prior to such vesting date. The Committee shall also determine at the time
each option is granted, and shall state in the Stock Option Agreement whether
that option is to be treated as an incentive stock option.
4. CONDITIONS TO EXERCISE OF OPTIONS.
Except as provided in section 3 and this section 4 or as otherwise may be
provided by the Committee, no option may be exercised at any time unless the
participant is then an employee of Disney or one of its Affiliates.
The option of any participant whose employment by Disney or one of its
Affiliates is terminated for any reason, shall terminate on the earlier of (a)
the date that the option expires in accordance with its terms (including any
terms required under Section 422 of the Code if the option is an incentive
stock option) or (b) the expiration of such period after termination of
employment as the Committee shall specify in the Stock Option Agreement,
provided that such period shall not be less than: (i) twelve months if
employment ceased due to permanent and total disability, (ii) eighteen months
if employment ceased at a time when the optionee is eligible to elect
immediate commencement of retirement benefits under a pension plan to which
Disney or any of its Affiliates had made contributions, (iii) eighteen months
if the participant died while employed by Disney or any of its Affiliates, or
(iv) three months if employment ceased for any other reason, except
termination for cause (as described below). During such period as described
above, except as otherwise specified in the Stock Option Agreement or in the
event employment was terminated by the death of the participant, the option
may be exercised by such participant in respect of the same number of shares,
in the same manner, and to the same extent as if he had continued as an
employee during the first three months of such period; but no additional
rights shall vest after such three months. Notwithstanding the preceding two
sentences and the second to last sentence of section 3 hereof, in the event of
termination of employment or discharge of a participant for cause, as
determined by the Committee in its sole discretion, the basis for which may,
but need not be, specified in the Stock Option Agreement, then, subject to the
terms of the Stock Option Agreement, any option or options held by such
participant under the Plan, not theretofore exercised, shall terminate
immediately upon such termination or discharge and may not be exercised
thereafter. The Committee shall have authority to determine in each case
whether an authorized leave of absence shall be deemed a termination of
employment.
Except as otherwise provided by the Committee, the option of any participant
who died while employed by Disney or any of its Affiliates may be exercised by
a legatee or legatees of that option under the participant's last will, or by
such participant's executors, personal representatives or distributees, in
respect of all or any part of the total number of shares under option to such
participant under the Plan at the time of such participant's death (whether or
not, at the time of death, the deceased participant would have been entitled,
pursuant to the provisions of section 3 hereof, to exercise such option to the
extent of all or any of the shares covered thereby). However, in the event of
the death of the participant after the date of termination of employment with
Disney or any of its Affiliates, then such deceased participant's option shall
expire in accordance with its terms, the same as if such participant had not
died. Except as otherwise provided by the Committee, prior to its expiration,
the option of a participant who died after he severed employment with Disney
or any of its Affiliates may be exercised by a legatee or legatees of that
option under the participant's last will, or by such participant's executors,
personal representatives, or distributees in respect to the same number of
shares, in the same manner and to the same extent as if such participant were
then living. The Committee may accelerate vesting and exercisability or waive
exercisability or vesting conditions in such other circumstances as it deems
appropriate.
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For purposes hereof, the Committee shall have the sole power to make all
determinations regarding the termination of any participant's employment,
including, but not limited to, the effective time thereof for the purposes of
this Plan, the cause(s) therefor and the consequences thereof. Unless
otherwise provided by the Committee, if an entity ceases to be an Affiliate of
Disney or otherwise ceases to be qualified under the Plan or if all or
substantially all of the assets of an Affiliate of Disney are conveyed (other
than by encumbrance), such cessation or action, as the case may be, shall be
deemed for purposes hereof to be a termination of the employment of each
employee of that entity.
5. METHOD OF EXERCISING OPTIONS.
Any option granted under the Plan may be exercised by the participant, by a
legatee or legatees of such option under such participant's last will, or by
such participant's executors, personal representatives or distributees or such
other persons as may be approved by the Committee by delivering to Disney at
its main office (attention of its Secretary) written notice of the number of
shares with respect to which the option is being exercised accompanied by full
payment to Disney of the purchase price of the shares being purchased in
accordance with section 2 hereof. Notwithstanding anything to the contrary
contained herein, until the expiration of the phase-in period under new Rule
16b-3 under the Exchange Act (as generally effective May 1, 1991, and
amendments thereto) any option granted under the Plan may be exercised during
the participant's lifetime only by the participant or by such participant's
guardian or legal representative.
6. INCENTIVE STOCK OPTIONS.
(a) Award of ISOs. Incentive stock options may be granted only to those
persons who are employees of Disney or any subsidiary corporation or parent
corporation of Disney, within the meaning of Section 424 of the Code.
Notwithstanding the foregoing, an incentive stock option shall not be granted
to any such person if immediately after such grant he is the owner or would be
deemed in accordance with Section 424 of the Code to be the owner of more than
10% of the total combined voting power or value of all classes of stock of
Disney or any of its subsidiary or parent corporations.
(b) Annual Limits. No incentive stock option shall be granted to a
participant if as a result of which the aggregate fair market value
(determined as of the date of grant) of the stock with respect to which
incentive stock options are exercisable for the first time in any calendar
year under the Plan, and any other stock option plans of Disney or any
subsidiary or any parent corporation, would exceed $100,000, determined in
accordance with Section 422 of the Code. This limitation shall be applied by
taking options into account in the order in which granted.
(c) Terms and Conditions; Nontransferability. Any incentive stock option
granted under the Plan shall contain such terms and conditions, not
inconsistent with the terms of the Plan, as are deemed necessary or desirable
by the Committee. Such terms, together with the terms of this Plan, shall be
intended and interpreted to cause such incentive stock option to qualify as an
"incentive stock option" under Section 422 of the Code. Such terms shall
include a term of exercise of the option which is not greater than ten years
from the date of grant, and additional limitations on the period of exercise
of the option following termination of employment. An incentive stock option
shall by its terms be nontransferable otherwise than by will or by the laws of
descent and distribution, and shall be exercisable, during the lifetime of a
participant, only by such participant.
(d) Disqualifying Dispositions. If shares of Disney common stock acquired by
exercise of an incentive stock option are disposed of within two years
following the date of grant or one year following the transfer of such shares
to the participant upon exercise, the participant shall be required, within 30
days after such disposition, to notify Disney in writing of the date and terms
of such disposition and provide such other information regarding the
disposition as the Committee may reasonably require.
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7. GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS ("SARS").
(a) Award of SARs. The Committee may grant SARs to such optionees as the
Committee may select from time to time, either on a free-standing basis
(without regard to the grant of a stock option) or on a tandem basis (related
to the grant of an underlying stock option). SARs granted on a free-standing
basis may be awarded by the Committee for a number of shares, at a base price,
upon terms for vesting and exercise and upon such other terms and conditions
as are consistent with such comparable terms applicable to the grant of stock
options under the Plan (including this Exhibit A), except to the extent
specifically provided herein with respect to SARs. SARs granted on a tandem
basis in connection with any stock option granted under the Plan (either at
the time such option is granted or thereafter at any time prior to the
exercise, termination or expiration of such option) shall be subject to the
same terms and conditions as the related stock option and shall be exercisable
only to the extent such option is exercisable. Upon exercise of a tandem SAR
and surrender of a related stock option, the number of shares to be charged
against the number of shares referred to in section 5 of the Plan shall be the
number of shares subject to the surrendered stock options, and the number of
shares shall be reduced accordingly. Upon exercise of a freestanding SAR, the
number of shares to be charged against the number of shares referred to in
section 5 of the Plan shall be the number of shares subject to the
freestanding SARs so exercised, and the number of shares shall be reduced
accordingly.
(b) Amount of Payment Upon Exercise of SARs. An SAR shall entitle the
recipient thereof to receive, subject to the provisions of the Plan and such
rules and regulations as may be established by the Committee, a payment having
an aggregate value equal to the product of (i) the excess of (A) the fair
market value on the exercise date of one share over (B) the base price per
share, times (ii) the number of shares called for by the SAR, or portion
thereof, which is exercised. In the case of exercise of a tandem SAR, such
payment shall be made in exchange for the surrender of the unexercised related
stock option (or any portion or portions thereof which the recipient from time
to time determines to surrender for this purpose).
(c) Form of Payment Upon Exercise of SARs. The Committee shall, in its sole
discretion, determine whether the payment upon exercise of an SAR shall be
made in the form of all cash, all shares, or any combination thereof. The
Committee may impose such restrictions upon the forms of payment upon exercise
of an SAR as it may deem necessary or appropriate to comply with the
requirements for exemption under Rule 16b-3 of the Exchange Act. If upon
settlement of the exercise of an SAR a participant is to receive a portion of
such payment in shares of Disney common stock, the number of shares shall be
determined by dividing such portion by the fair market value of a share of
Disney common stock on the exercise date. No fractional shares will be issued
and the Committee shall determine whether cash shall be given in lieu of such
fractional shares or whether such fractional shares shall be eliminated.
With respect to tandem SARs granted in connection with previously granted
stock options, the Committee shall provide that such SARs shall not be
exercisable until the recipient completes six (6) months (or such longer
period as the Committee shall determine) of service with Disney or any of its
Affiliates immediately following the date of the SAR grant, except in the case
of the death or disability of the recipient.
8. TRANSFERABILITY OF OPTIONS AND SARS.
The Committee may provide, in the Stock Option or SAR Agreement, or any
amendment thereto, evidencing the award, the extent to which a stock option or
SAR granted under the Plan shall be transferable by the participant during his
lifetime or upon his death. The terms and conditions of any such
transferability shall be established by the Committee in accordance with the
requirements of section 9(b) of the Plan. Incentive stock options shall not be
transferable except as provided in section 6 hereof.
9. STOCK OPTION AND SAR AGREEMENTS.
Each option or SAR awarded under the Plan shall be evidenced by a Stock
Option Agreement or SAR Agreement (which need not be identical with other
Stock Option or SAR Agreements) executed on behalf of
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Disney by a member of the Committee or by an officer designated by the
Committee and by the optionee which shall set forth the terms and conditions
of the option and SAR, if any (including, in the case of incentive stock
options, such terms as shall be requisite in the judgment of the Committee
pursuant to Section 422 of the Code), either expressly or by reference to the
Plan and which may contain other provisions provided they are neither
inconsistent with nor prohibited by the Plan. No modification of any Stock
Option or SAR Agreement shall be effective unless explicitly set forth in a
written instrument executed on behalf of Disney by a member of the Committee
or by an officer designated by the Committee and, if adverse to the optionee,
by the optionee. Except as provided in the immediately preceding sentence, no
statement, undertaking or representation purporting to confer or affect any
rights under the Plan, whether oral or written, made by any director, officer
or employee of Disney or any Affiliate shall modify the terms of any Stock
Option or SAR Agreement or constitute a grant of additional options or rights
under the Plan.
10. GRANT OF OPTIONS IN SUBSTITUTION FOR PREVIOUSLY GRANTED OPTIONS; REPRICING
OF PREVIOUSLY GRANTED OPTIONS.
(a) Substitution of Options. Options may be granted in the discretion of the
Committee in substitution for options previously granted pursuant to the Plan
or any other stock option, stock incentive or incentive compensation plan of
Disney, provided that any option so granted shall be exercisable at a new
price which is not less than 100% of the fair market value of the common stock
of Disney on the date on which the replacement options are granted. The Stock
Option Agreement evidencing the replacement options may, in the discretion of
the Committee, contain the same terms and conditions, including, without
limitation, the same vesting schedule as the agreement evidencing the original
award.
(b) Repricing of Options. The Committee may, in its discretion, amend the
terms of any Stock Option Agreement, with the consent of the affected
participant, to provide that the option price of the shares remaining subject
to the original award shall be reestablished at a price not less than 100% of
the fair market value of the common stock of Disney on the effective date of
the amendment. No modification of any other term or provision of any Stock
Option Agreement which is amended in accordance with the foregoing shall be
required, although the Committee may, in its discretion, make such further
modifications of any such Stock Option Agreement as are not inconsistent with
or prohibited by the Plan.
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APPENDIX B-2
THE WALT DISNEY COMPANY
AMENDED AND RESTATED 1990 STOCK INCENTIVE PLAN
1. PURPOSES.
The purposes of the Amended and Restated 1990 Stock Incentive Plan (the
"Plan") are to provide long-term incentives and rewards to employees of The
Walt Disney Company ("Disney") and its Affiliates (as defined below) to assist
Disney in attracting and retaining employees with experience and/or ability on
a basis competitive with industry practices and to associate the interests of
such employees with those of Disney's stockholders.
2. EFFECTIVE DATE.
The Plan is effective as of the date it is adopted by the Board of Directors
of Disney, subject to the approval of the Plan by the holders of at least a
majority of the outstanding shares of Disney common stock present, or
represented, and entitled to vote at the 1996 Special Meeting of Stockholders.
Awards may be made under the Plan on and after its effective date subject to
stockholder approval of the Plan as provided above. In the event such approval
of the stockholders is not obtained, all awards granted under the Plan shall
be null and void.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation Committee of the Board of
Directors of Disney, or such other committee of the Board as may be directed
by the Board (any such committee shall hereinafter be referred to as the
"Committee"), and the Committee shall be so constituted as to permit the Plan
to comply with the disinterested administration requirements under Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the "outside director" requirement of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Members of the Committee shall serve at
the pleasure of the Board of Directors of Disney.
The Committee shall have all the powers vested in it by the terms of the
Plan, such powers to include exclusive authority (within the limitations
described herein) to select the employees to be granted awards under the Plan,
to determine the type, size and terms of awards to be made to each employee
selected, to determine the time when awards will be granted, when they will
vest, when they may be exercised and when they will be paid, to amend awards
previously granted and to establish objectives and conditions, if any, for
earning awards and whether awards will be paid after the end of the award
period. The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and for the
conduct of its business as the Committee deems necessary or advisable and to
interpret same. The Committee's interpretation of the Plan, and all actions
taken and determinations made by the Committee pursuant to the powers vested
in it hereunder, shall be conclusive and binding on all parties concerned,
including Disney, its Affiliates, stockholders, any participants in the Plan
and any other employee of Disney or any of its Affiliates.
All employees of Disney and all employees of Disney's Affiliates shall be
eligible to participate in the Plan. The Committee, in its sole discretion,
shall from time to time designate from among the eligible employees those
individuals who are to receive awards under and thereby become participants in
the Plan. For purposes of the Plan, "Affiliate" shall mean any entity, as may
from time to time be designated by the Committee, that is a subsidiary
corporation of Disney (within the meaning of Section 424 of the Code), and
each other entity directly or indirectly controlling or controlled by or under
common control with Disney. For purposes of this definition, "control" means
the power to direct the management and policies of such entity, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meaning correlative to the
foregoing.
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4. AWARDS.
(a) Types. Awards under the Plan shall be made with reference to shares of
Disney common stock and may include, but need not be limited to, stock options
(including nonqualified stock options and incentive stock options qualifying
under Section 422 of the Code), stock appreciation rights (including free-
standing, tandem and limited stock appreciation rights), warrants, dividend
equivalents, stock awards, restricted stock, phantom stock, performance shares
or other securities or rights that the Committee determines to be consistent
with the objectives and limitations of the Plan. The Committee may provide for
the issuance of shares of Disney common stock as a stock award for no
consideration other than services rendered or, to the extent permitted by
applicable state law, to be rendered. In the event of an award under which
shares of Disney common stock are or may in the future be issued for any other
type of consideration, the amount of such consideration shall (i) be equal or
greater than to the amount (such as the par value of such shares) required to
be received by Disney in order to assure compliance with applicable state law
and (ii) to the extent necessary to comply with Rule 16b-3 of the Exchange
Act, be equal to or greater than 50% of the fair market value of such shares
on the date of grant of such award. The Committee may make any other type of
award which it shall determine is consistent with the objectives and
limitations of the Plan.
(b) Performance Goals. The Committee may, but need not, establish
performance goals to be achieved within such performance periods as may be
selected by it in its sole discretion, using such measures of the performance
of Disney and/or its Affiliates as it may select.
(c) Rules and Policies. The Committee may adopt from time to time written
rules and policies implementing the Plan. Such rules and policies may include,
but need not be limited to, the type, size and term of awards to be made to
participants and the conditions for the exercise or payment of such awards.
Rules relating to stock options and free-standing and tandem stock
appreciation rights (as distinguished from all other awards, including,
without limitation, warrants), attached hereto as Exhibit A, have been
approved by the Committee, subject to the approval of the Disney stockholders.
The rules set forth in Exhibit A may be amended by the Committee in accordance
with the provisions and subject to the limitations set forth in Section 10 of
the Plan. The Committee shall determine, in its sole discretion, the extent to
which rules and policies that it may adopt in the future shall be subject to
the approval of the Disney stockholders and/or limitations on the Committee's
authority to amend such rules or policies.
(d) Maximum Awards. An employee may be granted multiple awards under the
Plan. The maximum number of shares of Disney common stock subject to awards of
stock options, warrants and stock appreciation rights under the Plan, both
individually and in the aggregate with respect to each such type of award,
that may be granted during any period of five consecutive calendar years to
any one individual shall be limited to 10,000,000. To the extent required by
Section 162(m) of the Code, awards subject to the foregoing limit that are
cancelled or repriced shall not again be available for award under this limit.
With respect to awards of stock, restricted stock, phantom stock, performance
shares or other forms of award conveying a similar economic benefit (but
excluding options, warrants and stock appreciation rights), the maximum number
of shares of Disney common stock that may be awarded during any period of five
consecutive calendar years to any one individual shall be 2,000,000, and the
maximum number of shares of that may be awarded to all participants under the
Plan shall be 10,000,000, in each such case on an individual and aggregate
basis with respect to each of such types of award.
5. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be delivered or purchased or used for reference purposes
under the Plan shall not exceed an aggregate of 34,000,000 shares of Disney
common stock. Any shares subject to an award which for any reason expires or
is terminated unexercised as to such shares shall again be available for
issuance under the Plan.
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6. PAYMENT OF AWARDS.
The Committee shall determine the extent to which awards shall be payable in
cash, shares of Disney common stock or any combination thereof. The Committee
may determine that all or a portion of a payment to a participant under the
Plan, whether it is to be made in cash, shares of Disney common stock or a
combination thereof shall be deferred. Deferrals shall be for such periods and
upon such terms as the Committee may determine in its sole discretion.
7. VESTING.
The Committee may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of Disney
common stock or a combination thereof, shall be vested at such times and upon
such terms as may be selected by it in its sole discretion.
8. DILUTION AND OTHER ADJUSTMENT.
In the event of any change in the outstanding shares of Disney common stock
by reason of any split, stock dividend, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares or
other similar corporate change, such equitable adjustments shall be made in
the Plan and the awards thereunder as the Committee determines are necessary
or appropriate, including, if necessary, any adjustments in the number, kind
or character of shares that may be subject to existing or future awards under
the Plan (including by substitution of shares of another corporation
including, without limitation, any successor of Disney), adjustments in the
exercise, purchase or base price of an outstanding award and any adjustments
in the maximum numbers of shares referred to in Section 4 or Section 5 of the
Plan. All such adjustments shall be conclusive and binding for all purposes of
the Plan.
9. MISCELLANEOUS PROVISIONS.
(a) Rights as Stockholder. A participant under the Plan shall have no rights
as a holder of Disney common stock with respect to awards hereunder, unless
and until certificates for shares of such stock are issued to the participant.
(b) Assignment or Transfer. No award under this Plan shall be transferrable
by the participant or shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance or charge (other than by or to
Disney), except (i) by will or the laws of descent and distribution (with all
references herein to the rights or duties of holders or participants to be
deemed to include such beneficiaries or legal representatives of the holder or
participant unless the context otherwise expressly requires); or (ii) subject
to the prior approval of the Committee, for transfers to members of the
participant's immediate family, charitable institutions, trusts whose
beneficiaries are members of the participant's immediate family and/or
charitable institutions, or to such other persons or entities as may be
approved by the Committee, in each case subject to the condition that the
Committee be satisfied that such transfer is being made for estate and/or tax
planning purposes on a gratuitous or donative basis and without consideration
(other than nominal consideration) being received therefor. Except as provided
above, during the lifetime of a participant, awards hereunder are exercisable
only by, and payable only to, the participant. Notwithstanding anything to the
contrary contained herein, until the expiration of the phase-in period under
new Rule 16b-3 under the Exchange Act (as generally effective May 1, 1991, and
amendments thereto), any derivative security the grant of which is intended to
be exempt from Section 16(b) under the Exchange Act shall not be transferable
or exercisable other than as permitted by former Rule 16b-3(d)(1)(ii) under
the Exchange Act.
(c) Agreements. All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall adopt.
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(d) Compliance with Legal Regulations. During the term of the Plan and the
term of any awards granted under the Plan, Disney will at all times reserve
and keep available such number of shares as may be issuable under the Plan,
and will seek to obtain from any regulatory body having jurisdiction, any
requisite authority required in the opinion of counsel for Disney in order to
grant shares of Disney common stock, or options to purchase such stock or
other awards hereunder, and transfer, issue or sell such number of shares of
common stock as shall be sufficient to satisfy the requirements of any options
or other awards. If in the opinion of counsel for Disney the transfer, issue
or sale of any shares of its stock under the Plan shall not be lawful for any
reason, including the inability of Disney to obtain from any regulatory body
having jurisdiction authority deemed by such counsel to be necessary to such
transfer, issuance or sale, Disney shall not be obligated to transfer, issue
or sell any such shares. In any event, Disney shall not be obligated to
transfer, issue or sell any shares to any participant unless a registration
statement which complies with the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), is in effect at the time with respect to such
shares or other appropriate action has been taken under and pursuant to the
terms and provisions of the Securities Act and any other applicable securities
laws, or Disney receives evidence satisfactory to the Committee that the
transfer, issuance or sale of such shares, in the absence of an effective
registration statement or other appropriate action, would not constitute a
violation of the terms and provisions of the Securities Act. Disney's
obligation to issue shares upon the exercise of any award granted under the
Plan shall in any case be subject to Disney being satisfied that the shares
purchased are being purchased for investment and not with a view to the
distribution thereof, if at the time of such exercise a resale of such shares
would otherwise violate the Securities Act in the absence of an effective
registration statement relating to such shares.
(e) Withholding Taxes. Disney shall have the right to deduct from all awards
hereunder paid in cash any federal, state, local or foreign taxes required by
law to be withheld with respect to such awards and, with respect to awards
paid in stock, to require the payment (through withholding from the
participant's salary or otherwise) of any such taxes. The obligation of Disney
to make delivery of awards in cash or Disney common stock shall be subject to
currency or other restrictions imposed by any government.
(f) No Rights to Award. No employee or other person shall have any right to
be granted an award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained
in the employ of Disney or any of its subsidiaries or shall interfere with or
restrict in any way the rights of Disney or any of its subsidiaries, which are
hereby reserved, to discharge the employee at any time for any reason
whatsoever, with or without good cause.
(g) Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by Disney and not charged to any award nor to any employee
receiving an award.
(h) Funding of Plan. The Plan shall be unfunded. Disney shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any award under the Plan.
10. AMENDMENTS AND TERMINATION.
(a) Amendments. The Committee may at any time terminate or from time to time
amend the Plan in whole or in part, but no such action shall adversely affect
any rights or obligations with respect to any awards theretofore made under
the Plan.
Unless the holders of at least a majority of the outstanding shares of
Disney common stock present, or represented, and entitled to vote at a meeting
of stockholders shall have first approved thereof, no amendment of the Plan
shall be effective which would (i) increase the maximum number of shares
referred to in section 5 of the Plan or the maximum awards that may be granted
pursuant to section 4(d) of the Plan to any one individual or (ii) extend the
maximum period during which awards may be granted under the Plan. For purposes
of this section 10 (a), any (A) cancellation and reissuance or (B) repricing
of any awards made under the Plan at a new option price as provided in Exhibit
A hereto shall not constitute an amendment of this Plan.
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With the consent of the employee adversely affected, the Committee may amend
outstanding agreements evidencing awards under the Plan in a manner not
inconsistent with the terms of the Plan.
(b) Termination. Unless the Plan shall theretofore have been terminated as
above provided, the Plan (but not the awards theretofore granted under the
Plan) shall terminate on and no awards shall be granted after November 26,
2000.
11. GOVERNING LAW.
The validity and construction of the Plan and any agreements entered into
thereunder shall be governed by the laws of the State of Delaware.
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EXHIBIT A
THE WALT DISNEY COMPANY
AMENDED AND RESTATED 1990 STOCK INCENTIVE PLAN
RULES RELATING TO STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Pursuant to section 3 of the Plan and authority granted by the Board of
Directors of Disney as of November 1, 1995, and subject to the approval of the
Plan (including this Exhibit A) by the holders of at least a majority of the
outstanding shares of Disney common stock present, or represented, and
entitled to vote at the 1996 Special Meeting of Stockholders, the Committee
herein sets forth rules under which stock options and stock appreciation
rights may be granted to employees of Disney or its Affiliates under the Plan.
All such grants are subject to the terms and provisions of the Plan. Defined
terms used herein and not otherwise defined shall have the meanings set forth
in the Plan.
1. AWARD OF OPTIONS.
Subject to the provisions of the Plan, the Committee may from time to time,
in its sole discretion, award to participants in the Plan stock options to
purchase shares of common stock of Disney. In connection therewith, the
Committee shall have full and final authority, inter alia, in its discretion,
subject to the provisions of the Plan, (a) to determine the participants to
whom options are to be awarded, (b) in the case of each option awarded, to
determine whether the same shall be an incentive stock option pursuant to
Section 422 of the Code (an "incentive stock option"), or an option which does
not qualify under such Section 422 (a "non-qualified option"), (c) to
determine the number of shares subject to each option, (d) to determine the
time or times at which options will be awarded, (e) to determine the option
price of the shares subject to each option, which price shall not be less than
the minimum specified in section 2 hereof, (f) to determine the time or times
when each option becomes exercisable and to determine the duration of the
exercise period and (g) to prescribe the form or forms of the instruments
evidencing any options awarded under the Plan and the manner in which, and the
form of consideration for which, the option price should be paid.
2. OPTION PRICE.
The option price shall be determined by the Committee at the time any option
is awarded and shall not be less than 100% of the fair market value of the
common stock of Disney on the date on which the option is granted or the Stock
Option Agreement (as described in section 9 hereof) is amended pursuant to
section 10 hereof. Subject to certain limitations that may be imposed by the
Committee to comply with the requirements for exemption under Rule 16b-3 of
the Exchange Act or any other applicable rule, regulation or guideline, the
option price shall be paid in cash (whether or not such cash is loaned by
Disney to the participant for such purpose) or by the surrender, at the fair
market value on the date on which the option is exercised, of shares of common
stock of Disney, or by any combination of cash and such shares. The purchase
price for shares being purchased upon exercise of non-qualified options may
also be paid in any other manner approved by the Committee, including, without
limitation, by delivery to Disney of (a) a cash amount which shall not be less
than the par value of the common stock of Disney multiplied by the number of
shares being purchased and (b) a binding, joint and several obligation of the
participant and a financial institution or broker approved by the Committee,
to pay the balance of the purchase price upon such terms and conditions as may
be specified from time to time by the Committee. For purposes of this Exhibit
A, the "fair market value" of a share of Disney common stock shall be the
average of the highest and lowest of the New York Stock Exchange composite
tape market prices at which the stock shall have been sold regular way on the
date as of which fair market value is to be determined or, if there shall be
no such sale on such date, the next preceding day on which such a sale shall
have occurred.
3. DURATION AND PERIOD FOR EXERCISE OF OPTIONS.
Subject to earlier termination as provided in section 4 hereof, an option
granted under the Plan shall expire ten years after the date the option is
granted, unless otherwise provided by the Committee. The Committee shall
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specify at the time each option is granted, and shall state in the Stock
Option Agreement, the time or times at which, and in what proportions, that
option may be exercised prior to its expiration or earlier termination. Except
as otherwise provided (a) by the Committee in the Stock Option Agreement or
any amendment thereto or (b) in section 4 hereof: (i) no option may be
exercised during the first year from the date it is granted; (ii) after one
year from the date an option is granted, it may be exercised as to not more
than 20% of the shares optioned; and (iii) after the expiration of the second,
third, fourth and fifth years from the date the option is granted, it may be
exercised as to no more than an additional 20% of such shares plus any shares
as to which the option might theretofore have been exercised but shall not
have been exercised; provided that the participant is employed with Disney or
an Affiliate on each such vesting date or on a date no more than three months
prior to such vesting date. The Committee shall also determine at the time
each option is granted, and shall state in the Stock Option Agreement whether
that option is to be treated as an incentive stock option.
4. CONDITIONS TO EXERCISE OF OPTIONS.
Except as provided in section 3 and this section 4 or as otherwise may be
provided by the Committee, no option may be exercised at any time unless the
participant is then an employee of Disney or one of its Affiliates.
The option of any participant whose employment by Disney or one of its
Affiliates is terminated for any reason, shall terminate on the earlier of (a)
the date that the option expires in accordance with its terms (including any
terms required under Section 422 of the Code if the option is an incentive
stock option) or (b) the expiration of such period after termination of
employment as the Committee shall specify in the Stock Option Agreement,
provided that such period shall not be less than: (i) twelve months if
employment ceased due to permanent and total disability, (ii) eighteen months
if employment ceased at a time when the optionee is eligible to elect
immediate commencement of retirement benefits under a pension plan to which
Disney or any of its Affiliates had made contributions, (iii) eighteen months
if the participant died while employed by Disney or any of its Affiliates, or
(iv) three months if employment ceased for any other reason, except
termination for cause (as described below). During such period as described
above, except as otherwise specified in the Stock Option Agreement or in the
event employment was terminated by the death of the participant, the option
may be exercised by such participant in respect of the same number of shares,
in the same manner, and to the same extent as if he had continued as an
employee during the first three months of such period; but no additional
rights shall vest after such three months. Notwithstanding the preceding two
sentences and the second to last sentence of section 3 hereof, in the event of
termination of employment or discharge of a participant for cause, as
determined by the Committee in its sole discretion, the basis for which may,
but need not be, specified in the Stock Option Agreement, then, subject to the
terms of the Stock Option Agreement, any option or options held by such
participant under the Plan, not theretofore exercised, shall terminate
immediately upon such termination or discharge and may not be exercised
thereafter. The Committee shall have authority to determine in each case
whether an authorized leave of absence shall be deemed a termination of
employment.
Except as otherwise provided by the Committee, the option of any participant
who died while employed by Disney or any of its Affiliates may be exercised by
a legatee or legatees of that option under the participant's last will, or by
such participant's executors, personal representatives or distributees, in
respect of all or any part of the total number of shares under option to such
participant under the Plan at the time of such participant's death (whether or
not, at the time of death, the deceased participant would have been entitled,
pursuant to the provisions of section 3 hereof, to exercise such option to the
extent of all or any of the shares covered thereby). However, in the event of
the death of the participant after the date of termination of employment with
Disney or any of its Affiliates, then such deceased participant's option shall
expire in accordance with its terms, the same as if such participant had not
died. Except as otherwise provided by the Committee, prior to its expiration,
the option of a participant who died after he severed employment with Disney
or any of its Affiliates may be exercised by a legatee or legatees of that
option under the participant's last will, or by such participant's executors,
personal representatives, or distributees in respect to the same number of
shares, in the same manner and to the same extent as if such participant were
then living. The Committee may accelerate vesting and exercisability or waive
exercisability or vesting conditions in such other circumstances as it deems
appropriate.
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For purposes hereof, the Committee shall have the sole power to make all
determinations regarding the termination of any participant's employment,
including, but not limited to, the effective time thereof for the purposes of
this Plan, the cause(s) therefor and the consequences thereof. Unless
otherwise provided by the Committee, if an entity ceases to be an Affiliate of
Disney or otherwise ceases to be qualified under the Plan or if all or
substantially all of the assets of an Affiliate of Disney are conveyed (other
than by encumbrance), such cessation or action, as the case may be, shall be
deemed for purposes hereof to be a termination of the employment of each
employee of that entity.
5. METHOD OF EXERCISING OPTIONS.
Any option granted under the Plan may be exercised by the participant, by a
legatee or legatees of such option under such participant's last will, or by
such participant's executors, personal representatives or distributees or such
other persons as may be approved by the Committee by delivering to Disney at
its main office (attention of its Secretary) written notice of the number of
shares with respect to which the option is being exercised accompanied by full
payment to Disney of the purchase price of the shares being purchased in
accordance with section 2 hereof. Notwithstanding anything to the contrary
contained herein, until the expiration of the phase-in period under new Rule
16b-3 under the Exchange Act (as generally effective May 1, 1991, and
amendments thereto) any option granted under the Plan may be exercised during
the participant's lifetime only by the participant or by such participant's
guardian or legal representative.
6. INCENTIVE STOCK OPTIONS.
(a) Award of ISOs. Incentive stock options may be granted only to those
persons who are employees of Disney or any subsidiary corporation or parent
corporation of Disney, within the meaning of Section 424 of the Code.
Notwithstanding the foregoing, an incentive stock option shall not be granted
to any such person if immediately after such grant he is the owner or would be
deemed in accordance with Section 424 of the Code to be the owner of more than
10% of the total combined voting power or value of all classes of stock of
Disney or any of its subsidiary or parent corporations.
(b) Annual Limits. No incentive stock option shall be granted to a
participant if as a result of which the aggregate fair market value
(determined as of the date of grant) of the stock with respect to which
incentive stock options are exercisable for the first time in any calendar
year under the Plan, and any other stock option plans of Disney or any
subsidiary or any parent corporation, would exceed $100,000, determined in
accordance with Section 422 of the Code. This limitation shall be applied by
taking options into account in the order in which granted.
(c) Terms and Conditions; Nontransferability. Any incentive stock option
granted under the Plan shall contain such terms and conditions, not
inconsistent with the terms of the Plan, as are deemed necessary or desirable
by the Committee. Such terms, together with the terms of this Plan, shall be
intended and interpreted to cause such incentive stock option to qualify as an
"incentive stock option" under Section 422 of the Code. Such terms shall
include a term of exercise of the option which is not greater than ten years
from the date of grant, and additional limitations on the period of exercise
of the option following termination of employment. An incentive stock option
shall by its terms be nontransferable otherwise than by will or by the laws of
descent and distribution, and shall be exercisable, during the lifetime of a
participant, only by such participant.
(d) Disqualifying Dispositions. If shares of Disney common stock acquired by
exercise of an incentive stock option are disposed of within two years
following the date of grant or one year following the transfer of such shares
to the participant upon exercise, the participant shall be required, within 30
days after such disposition, to notify Disney in writing of the date and terms
of such disposition and provide such other information regarding the
disposition as the Committee may reasonably require.
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7. GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS ("SARS").
(a) Award of SARs. The Committee may grant SARs to such optionees as the
Committee may select from time to time, either on a free-standing basis
(without regard to the grant of a stock option) or on a tandem basis (related
to the grant of an underlying stock option). SARs granted on a free-standing
basis may be awarded by the Committee for a number of shares, at a base price,
upon terms for vesting and exercise and upon such other terms and conditions
as are consistent with such comparable terms applicable to the grant of stock
options under the Plan (including this Exhibit A), except to the extent
specifically provided herein with respect to SARs. SARs granted on a tandem
basis in connection with any stock option granted under the Plan (either at
the time such option is granted or thereafter at any time prior to the
exercise, termination or expiration of such option) shall be subject to the
same terms and conditions as the related stock option and shall be exercisable
only to the extent such option is exercisable. Upon exercise of a tandem SAR
and surrender of a related stock option, the number of shares to be charged
against the number of shares referred to in section 5 of the Plan shall be the
number of shares subject to the surrendered stock options, and the number of
shares shall be reduced accordingly. Upon exercise of a freestanding SAR, the
number of shares to be charged against the number of shares referred to in
section 5 of the Plan shall be the number of shares subject to the
freestanding SARs so exercised, and the number of shares shall be reduced
accordingly.
(b) Amount of Payment Upon Exercise of SARs. An SAR shall entitle the
recipient thereof to receive, subject to the provisions of the Plan and such
rules and regulations as may be established by the Committee, a payment having
an aggregate value equal to the product of (i) the excess of (A) the fair
market value on the exercise date of one share over (B) the base price per
share, times (ii) the number of shares called for by the SAR, or portion
thereof, which is exercised. In the case of exercise of a tandem SAR, such
payment shall be made in exchange for the surrender of the unexercised related
stock option (or any portion or portions thereof which the recipient from time
to time determines to surrender for this purpose).
(c) Form of Payment Upon Exercise of SARs. The Committee shall, in its sole
discretion, determine whether the payment upon exercise of an SAR shall be
made in the form of all cash, all shares, or any combination thereof. The
Committee may impose such restrictions upon the forms of payment upon exercise
of an SAR as it may deem necessary or appropriate to comply with the
requirements for exemption under Rule 16b-3 of the Exchange Act. If upon
settlement of the exercise of an SAR a participant is to receive a portion of
such payment in shares of Disney common stock, the number of shares shall be
determined by dividing such portion by the fair market value of a share of
Disney common stock on the exercise date. No fractional shares will be issued
and the Committee shall determine whether cash shall be given in lieu of such
fractional shares or whether such fractional shares shall be eliminated.
With respect to tandem SARs granted in connection with previously granted
stock options, the Committee shall provide that such SARs shall not be
exercisable until the recipient completes six (6) months (or such longer
period as the Committee shall determine) of service with Disney or any of its
Affiliates immediately following the date of the SAR grant, except in the case
of the death or disability of the recipient.
8. TRANSFERABILITY OF OPTIONS AND SARS.
The Committee shall provide, in the Stock Option or SAR Agreement, or any
amendment thereto, evidencing the award, the extent to which a stock option or
SAR granted under the Plan shall be transferable by the participant during his
lifetime or upon his death. The terms and conditions of any such
transferability shall be established by the Committee in accordance with the
requirements of section 9(b) of the Plan. Incentive stock options shall not be
transferable except as provided in section 6 hereof.
9. STOCK OPTION AND SAR AGREEMENTS.
Each option or SAR awarded under the Plan shall be evidenced by a Stock
Option Agreement or SAR Agreement (which need not be identical with other
Stock Option or SAR Agreements) executed on behalf of
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Disney by a member of the Committee or by an officer designated by the
Committee and by the optionee which shall set forth the terms and conditions
of the option and SAR, if any (including, in the case of incentive stock
options, such terms as shall be requisite in the judgment of the Committee
pursuant to Section 422 of the Code), either expressly or by reference to the
Plan and which may contain other provisions provided they are neither
inconsistent with nor prohibited by the Plan. No modification of any Stock
Option or SAR Agreement shall be effective unless explicitly set forth in a
written instrument executed on behalf of Disney by a member of the Committee
or by an officer designated by the Committee and, if adverse to the optionee,
by the optionee. Except as provided in the immediately preceding sentence, no
statement, undertaking or representation purporting to confer or affect any
rights under the Plan, whether oral or written, made by any director, officer
or employee of Disney or any Affiliate shall modify the terms of any Stock
Option or SAR Agreement or constitute a grant of additional options or rights
under the Plan.
10. GRANT OF OPTIONS IN SUBSTITUTION FOR PREVIOUSLY GRANTED OPTIONS; REPRICING
OF PREVIOUSLY GRANTED OPTIONS.
(a) Substitution of Options. Options may be granted in the discretion of the
Committee in substitution for options previously granted pursuant to the Plan
or any other stock option, stock incentive or incentive compensation plan of
Disney, provided that any option so granted shall be exercisable at a new
price which is not less than 100% of the fair market value of the common stock
of Disney on the date on which the replacement options are granted. The Stock
Option Agreement evidencing the replacement options may, in the discretion of
the Committee, contain the same terms and conditions, including, without
limitation, the same vesting schedule as the agreement evidencing the original
award.
(b) Repricing of Options. The Committee may, in its discretion, amend the
terms of any Stock Option Agreement, with the consent of the affected
participant, to provide that the option price of the shares remaining subject
to the original award shall be reestablished at a price not less than 100% of
the fair market value of the common stock of Disney on the effective date of
the amendment. No modification of any other term or provision of any Stock
Option Agreement which is amended in accordance with the foregoing shall be
required, although the Committee may, in its discretion, make such further
modifications of any such Stock Option Agreement as are not inconsistent with
or prohibited by the Plan.
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APPENDIX C
November 13, 1995
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Dear Sirs:
We understand that The Walt Disney Company ("Disney") and Capital
Cities/ABC, Inc. ("CapCities/ABC") have entered into an Amended and
Restated Agreement and Plan of Reorganization, dated as of July 31,
1995, (the "Reorganization Agreement") pursuant to which (i) a new
holding company will be formed, which will be renamed "The Walt Disney
Company" ("New Disney"), (ii) newly formed subsidiaries of New Disney
will be merged with and into each of Disney and CapCities/ABC, (iii)
each share of Disney common stock will be converted into one share of
New Disney common stock and (iv) each share of CapCities/ABC common
stock will be converted into either New Disney common stock or cash, or
a combination thereof, based on each stockholder's election and subject
to certain proration provisions, such that in the aggregate
CapCities/ABC stockholders will receive the value equivalent of one
share of Disney common stock, plus $65 in cash per share of
CapCities/ABC (the "Transaction"). You have provided us with the Joint
Proxy Statement/Prospectus, which includes the Reorganization Agreement,
in substantially the form to be sent to the shareholders of Disney and
CapCities/ABC, respectively (the "Proxy Statement").
You have asked us to render our opinion as to whether the Transaction
is fair, from a financial point of view, to the stockholders of Disney.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Proxy Statement;
2. reviewed CapCities/ABC's Annual Reports to Shareholders and
Annual Reports on Form 10-K for the fiscal years ended December 31,
1992 through 1994, and its Quarterly Reports on Form 10-Q for the
periods ended April 2, July 2, and October 1, 1995;
3. reviewed certain historical financial statements and certain
budget financial statements by business segments of CapCities/ABC,
provided to us by CapCities/ABC management;
4. reviewed Disney's Annual Reports to Stockholders and Annual
Reports on Form 10-K for the fiscal years ended September 30, 1992
through 1994, and its Quarterly Reports on Form 10-Q for the periods
ended December 31, 1994, and March 31 and June 30, 1995;
5. reviewed certain operating and financial information, provided
to us by Disney management relating to Disney's and CapCities/ABC's
businesses and prospects, including financial forecasts of Disney
and CapCities/ABC, respectively, prepared by Disney management;
6. met with CapCities/ABC's Chief Financial Officer to discuss
CapCities/ABC's historical and certain budget financial statements by
business segment;
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7. met with certain members of Disney's senior management to discuss its
operations, historical financial statements and future prospects;
8. reviewed the pro forma financial impact of the Transaction on the
stockholders of Disney;
9. reviewed the historical prices and trading volumes of the common
stock of CapCities/ABC and Disney;
10. reviewed certain publicly available financial data and stock market
performance data of companies which we deemed generally comparable to
CapCities/ABC and/or Disney;
11. reviewed the terms of certain other recent acquisitions of companies
and businesses which we deemed generally comparable to CapCities/ABC and
its component businesses; and
12. conducted such other studies, analyses, inquiries and investigations
as we deemed appropriate.
In the course of our review, we have relied upon and assumed without
independent verification the accuracy and completeness of the financial and
other information provided to us by CapCities/ABC and Disney, as well as the
SEC filings of CapCities/ABC and Disney respectively. With respect to the
financial forecasts provided to us by CapCities/ABC and Disney, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of CapCities/ABC and
Disney as to the expected future performance of CapCities/ABC and Disney,
respectively. We have not assumed any responsibility for the information or
financial forecasts provided to us and we have further relied upon the
assurances of the managements of CapCities/ABC and Disney that they are unaware
of any facts that would make the information or financial forecasts provided to
us incomplete or misleading. In arriving at our opinion, we have not performed
or obtained any appraisals of the assets of CapCities/ABC or Disney and, except
as described in paragraphs 3, 5 and 6 above, we have not had discussions with
management or employees of CapCities/ABC regarding CapCities/ABC's operations,
historical financial statements and future prospects or had access to financial
forecasts of CapCities/ABC prepared by CapCities/ABC. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.
Based on the foregoing, it is our opinion that, as of this date, the
Transaction is fair, from a financial point of view, to the stockholders of
Disney.
We have acted as financial advisor to Disney in connection with the
Transaction and will receive a fee for such services.
Very truly yours,
Bear, Stearns & Co. Inc.
/s/ David H. Glaser
By __________________________________
Managing Director
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APPENDIX D
[LETTERHEAD OF ALLEN & COMPANY INCORPORATED]
July 31, 1995
Members of the Board of Directors
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023-6298
Ladies and Gentlemen:
You have requested our opinion, as of this date, as to the fairness, from a
financial point of view, to the holders of the outstanding shares of Common
Stock, par value $0.10 per share (the "Company's Common Stock"), of Capital
Cities/ABC, Inc., a New York corporation (the "Company"), of the consideration
to be received by such holders in connection with the Proposed Transaction
hereinafter referred to.
Pursuant to the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), to be entered into as of July 31, 1995, by and between the
Company and The Walt Disney Company, a Delaware corporation (the "Purchaser"),
the Company will enter into a business combination transaction pursuant to
which a newly-formed holding company (the "Holding Company") will acquire all
of the common stock of each of the Company and the Purchaser (the "Proposed
Transaction"). Unless otherwise specifically defined herein, all capitalized
terms used herein shall have the meanings ascribed to such terms in the
Reorganization Agreement.
Pursuant to the terms, and subject to the conditions contained in, the
Reorganization Agreement, among other things, (i) each share of the
Purchasers's common stock issued and outstanding as of the Effective Time will
be converted into one share of common stock of the Holding Company (the
"Holding Company's Common Stock") and (ii) each share of the Company's Common
Stock issued and outstanding as of the Effective Time will be converted into
the right to receive, subject to proration, consideration in the form of cash
(the "Cash Consideration") and/or shares of the Holding Company's Common Stock
(the "Stock Consideration"). The Reorganization Agreement provides the
Company's stockholders with the ability to elect to receive either the Cash
Consideration or the Stock Consideration, subject to proration. We understand
that the aggregate Cash Consideration and Stock Consideration to be issued to
the holders of the Company's Common Stock in connection with the Proposed
Transaction will be the product of (i) $65.00 plus one share of the Holding
Company's Common Stock and (ii) the number of shares of the Company's Common
Stock outstanding as of the Effective Time, subject to an increase in the Cash
Consideration component in certain events at the election of the Purchaser as
described in the Reorganization Agreement.
We understand that all approvals required for the consummation of the
Proposed Transaction have been or, prior to consummation of the Proposed
Transaction, will be obtained. As you know Allen & Company Incorporated will
receive a fee for its services to the Company pursuant to the Engagement
Letter Agreement dated July 30, 1995 by and between the Company and Allen &
Company Incorporated.
In arriving at our opinion, we have among other things:
(i) reviewed the terms and conditions of the Reorganization Agreement
(which prior to the delivery of this opinion has not been executed by the
parties);
(ii) analyzed publicly available historical business and financial
information relating to the Company, as presented in documents filed with
the Securities and Exchange Commission, including the Company's
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Annual Report to Stockholders and Annual Report on Form 10-K for its fiscal
year ended December 31, 1994 and the Company's Quarterly Report on Form 10-
Q for its quarter ended April 2, 1995;
(iii) analyzed publicly available historical business and financial
information relating to the Purchaser as presented in documents filed with
the Securities and Exchange Commission, including the Purchaser's Annual
Report to Stockholders and Annual Report on Form 10-K for its fiscal year
ended September 30, 1994 and the Purchaser's Quarterly Report on Form 10-Q
for its quarter ended March 31, 1995;
(iv) reviewed drafts of the Company's and the Purchaser's Quarterly
Reports on Form 10-Q for their respective fiscal quarters ended June 30,
1995;
(v) reviewed certain financial forecasts and other data provided to us by
the Company and the Purchaser relating to their respective businesses for
their fiscal years ending December 31, 1995 and September 30, 1995,
respectively;
(vi) conducted discussions with certain members of the senior management
of the Company and the Purchaser with respect to the financial condition,
business, operations, strategic objectives and prospects of the Company and
the Purchaser, respectively;
(vii) reviewed and analyzed public information, including certain stock
market data and financial information relating to selected public companies
which we deemed generally comparable to the Company and the Purchaser;
(viii) reviewed the trading history of the Company's Common Stock and the
Purchaser's common stock, including each company's respective performance
in comparison to market indices and to selected companies in comparable
businesses;
(ix) reviewed public financial and transaction information relating to
merger and acquisition transactions we deemed to be comparable to the
Proposed Transaction; and
(x) conducted such other financial analyses and investigations as we
deemed necessary or appropriate for the purposes of the opinion expressed
herein.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information respecting the Company and
the Purchaser and any other information provided to us, and we have not
assumed any responsibility for any independent verification of such
information or any independent valuation or appraisal of any of the assets of
the Company. With respect to the financial forecasts referred to above, we
have assumed that they have been reasonably prepared on a basis reflecting the
best currently available judgments of the management of the Company and the
Purchaser as to the future financial performance of the Company and the
Purchaser, respectively.
In addition to our review and analysis of the specific information set forth
above, our opinion herein reflects and gives effect to our assessment of
general economic, monetary and market conditions existing as of the date
hereof as they may affect the business and prospects of the Company.
In connection with the preparation of this opinion, we have not been
authorized by the Company or its Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or
any part of the Company. Furthermore, the opinion rendered herein does not
constitute a recommendation of the Proposed Transaction over any other
alternative transactions which may be available to the Company.
The opinion rendered herein does not constitute a recommendation by our firm
that any stockholder of the Company accept the Cash Consideration over the
Stock Consideration or any other alternative consideration which may be
available pursuant to the Reorganization Agreement. We have not specifically
analyzed the impact on any individual Company stockholder of exercising the
election contemplated by the Reorganization Agreement to receive either form
of consideration because we believe that selling stockholders would make such
election only after appropriate consultation with their respective tax
planning advisors with respect to a detailed analysis of specific tax
consequences of electing any blend of consideration made available by the
Reorganization Agreement.
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Based on and subject to the foregoing, we are of the opinion that, as of
this date, the consideration to be received by the holders of the Company's
Common Stock pursuant to the Proposed Transaction is fair to such holders from
a financial point of view.
Very truly yours,
ALLEN & COMPANY INCORPORATED
/s/ Enrique F. Senior
By: _________________________________
ENRIQUE F. SENIOR
MANAGING DIRECTOR
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APPENDIX E
NEW YORK BUSINESS CORPORATION LAW
Section 623. PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR
SHARES.
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the
meeting of shareholders at which the action is submitted to a vote, or at such
meeting but before the vote, written objection to the action. The objection
shall include a notice of his election to dissent, his name and residence
address, the number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares if the action is taken. Such
objection is not required from any shareholder to whom the corporation did not
give notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders without a
meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall
give written notice of such authorization or consent by registered mail to
each shareholder who filed written objection or from whom written objection
was not required, excepting any shareholder who voted for or consented in
writing to the proposed action and who thereby is deemed to have elected not
to enforce his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he
dissents and a demand for payment of the fair value of his shares. Any
shareholder who elects to dissent from a merger under section 905 (Merger of
subsidiary corporation) or paragraph (c) of section 907 (Merger or
consolidation of domestic and foreign corporations) or from a share exchange
under paragraph (g) of section 913 (Share exchanges) shall file a written
notice of such election to dissent within twenty days after the giving to him
of a copy of the plan of merger or exchange or an outline of the material
features thereof under section 905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has right to dissent, held of record by such nominee
or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the
fair value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his
acceptance in writing of an offer made by the corporation, as provided in
paragraph (g), but in no case later than sixty days from the date of
consummation of the corporate action except that if the corporation fails to
make a timely offer, as provided in paragraph (g), the time for withdrawing a
notice of election shall be extended until sixty days from the date an offer
is made. Upon expiration of such time, withdrawal of a notice of election
shall require the written consent of the corporation. In order to be
effective, withdrawal of a notice of election must be accompanied by the
return to the corporation of any advance payment made to the shareholder as
provided in paragraph (g). If a notice of election is withdrawn, or the
corporate action is rescinded, or a court shall determine that the shareholder
is not entitled to receive payment for his shares, or the shareholder shall
otherwise lose his dissenter's rights, he shall not have the right to receive
payment for his shares and he shall be reinstated to all his rights as a
shareholder as of the consummation of the corporate action, including any
intervening preemptive rights and the right to payment of any intervening
dividend or other distribution or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu
thereof, at the election of the corporation, the fair value thereof in cash as
determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
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(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the
shareholder or other person who submitted them on his behalf. Any shareholder
of shares represented by certificates who fails to submit his certificates for
such notation as herein specified shall, at the option of the corporation
exercised by written notice to him within forty-five days from the date of
filing of such notice of election to dissent, lose his dissenter's rights
unless a court, for good cause shown, shall otherwise direct. Upon transfer of
a certificate bearing such notation, each new certificate issued therefor
shall bear a similar notation together with the name of the original
dissenting holders of the shares and a transferee shall acquire no rights in
the corporation except those which the original dissenting shareholder had at
the time of the transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later
(but in no case later than ninety days from the shareholders' authorization
date), the corporation or, in the case of a merger or consolidation, the
surviving or new corporation, shall make a written offer by registered mail to
each shareholder who has filed such notice of election to pay for his shares
at a specified price which the corporation considers to be their fair value.
Such offer shall be accompanied by a statement setting forth the aggregate
number of shares with respect to which notices of election to dissent have
been received and the aggregate number of holders of such shares. If the
corporate action has been consummated, such offer shall also be accompanied by
(1) advance payment to each such shareholder who has submitted the
certificates representing his shares to the corporation, as provided in
paragraph (f), of an amount equal to eighty percent the amount of such offer,
or (2) as to each shareholder who has not yet submitted his certificates a
statement that advance payment to him of an amount equal to eighty percent of
the amount of such offer will be made by the corporation promptly upon
submission of his certificates. If the corporate action has not been
consummated at the time of the making of the offer, such advance payment or
statement as to advance payment shall be sent to each shareholder entitled
thereto forthwith upon consummation of the corporate action. Every advance
payment or statement as to advance payment shall include advice to the
shareholder to the effect that acceptance of such payment does not constitute
a waiver of any dissenters' rights. If the corporate action has not been
consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the
making of such offer, and a profit and loss statement or statements for not
less than a twelve month period ended on the date of such balance sheet or, if
the corporation was not in existence throughout such twelve month period, for
the portion thereof during which it was in existence. Notwithstanding the
foregoing, the corporation shall not be required to furnish a balance sheet or
profit and loss statement or statements to any shareholder to whom such
balance sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders' authorization
for or consent to the proposed corporate action the shareholder were furnished
with a proxy or information statement, which included financial statements,
pursuant to Regulation 14A or Regulation 14C of the United States Securities
and Exchange Commission. If within thirty days after the making of such offer,
the corporation making the offer and any shareholder agree upon the price to
be paid for his shares, payment therefor shall be made within sixty days after
the making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and
any dissenting shareholder or shareholders fail to agree with it within the
period of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is
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a foreign corporation without an office in this state, such proceeding
shall be brought in the county where the office of the domestic
corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each nonresident
dissenting shareholder either by registered mail and publication, or in
such other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value as
of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the shareholder's
right to receive payment for shares and its effects on the corporation and
its shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law
and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date of the corporate action
was consummated to the date of payment. In determining the rate of
interest, the court shall consider all relevant factors, including the rate
of interest which the corporation would have had to pay to borrow money
during the pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for his shares
was arbitrary, vexatious or otherwise not in good faith, no interest shall
be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any party of the costs, expenses and fees
incurred by any or all of the dissenting shareholder who are parties to the
proceeding against the corporation if the court finds any of the following:
(A) that the fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay; (B) that no offer or required
advance payment was made by the corporation; (C) that the corporation
failed to institute the special proceeding within the period specified
therefor; or (D) that the action of the corporation in complying with its
obligations as provided in this section was arbitrary, vexatious or
otherwise not in good faith. In making any determination as provided in
clause (A), the court
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may consider the dollar amount of the percentage, or both, by which the
fair value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificate for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section
515 (Reacquired shares), except that, in the case of a merger or
consolidation, they may be held and disposed of as the plan of merger or
consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event to be
deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is
not liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this
paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option by written notice given
to him within twenty days after the expiration of such period of thirty
days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except
that this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify its directors, officers, employees and
agents under certain circumstances. New Disney's Certificate of Incorporation
(the "Certificate") and bylaws (the "Bylaws") provide that New Disney shall
indemnify, to the full extent authorized or permitted by law (as now or
hereafter in effect), any person made, or threatened to be made, a defendant
or a witness to any action, suit or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his testator or intestate, is or was
a director or officer of New Disney or by reason of the fact that such
director or officer, at the request of New Disney is or was serving any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. The Certificate and Bylaws further provide that
New Disney may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of New Disney or is serving at
the request of New Disney as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not New
Disney would have the power to indemnify him against such liability under the
provisions of law. In addition, the Certificate and the Bylaws provide that
New Disney may create a trust fund, grant a security interest and/or use other
means (including, without limitation, letters of credit, surety bonds and/or
similar arrangements), as well as enter into contracts providing for
indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any and all of the
foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere. Moreover, the
Certificate further provides that no director of New Disney shall be
personally liable to New Disney or its stockholders for monetary damages for
any breach of fiduciary duty as a director, except a director shall be liable
to the extent provided by applicable law (i) for any breach of the director's
duty of loyalty to New Disney or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for liability under Section 174 of the DGCL (involving
certain unlawful dividends or stock repurchases); or (iv) any transaction from
which the director derived an improper personal benefit.
New Disney maintains an officer's and director's liability insurance policy
insuring its officers and directors against certain liabilities and expenses
incurred by them in their capacities as such, and insuring New Disney under
certain circumstances, in the event that indemnification payments are made by
New Disney to such officers and directors.
New Disney expects to enter into indemnification agreements (the
"Indemnification Agreements") with certain of its directors and officers
(individually, the "Indemnitee"). The Indemnification Agreements, among other
things, provide for indemnification to the fullest extent permitted by law
against any and all expenses, judgements, fines, penalties and amounts paid in
settlement of any claim. The Indemnification Agreements provide for the prompt
advancement of all expenses to the Indemnitee and for reimbursement to New
Disney if it is found that such Indemnitee is not entitled to such
indemnification under applicable law. The Indemnification Agreements also
provide that after a Change in Control (as defined in the Indemnification
Agreements) of New Disney which is not approved by the New Disney Board of
Directors, all determinations regarding a right to indemnity and the right to
advancement of expenses shall be made by independent legal counsel selected by
the Indemnitee and approved by the Board of Directors. In addition, in the
event of a Potential Change In Control (as defined in the Indemnification
Agreements), the Indemnitee may require New Disney to establish a trust for
his or her benefit and to fund such trust in amounts reasonably anticipated or
proposed to be paid to satisfy New Disney's indemnification obligations under
the Indemnification Agreements.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Amended and Restated Plan of Reorganization, dated as of July 31,
1995, among The Walt Disney Company and Capital Cities/ABC, Inc.
(attached as Appendix A-1 to the Joint Proxy Statement/Prospectus
included in this Registration Statement).
2.2 Form of Plan and Agreement of Merger among The Walt Disney Company,
DCA Merger Corp. and the Registrant (attached as Appendix A-2 to the
Joint Proxy Statement/Prospectus included in this Registration
Statement).
2.3 Form of Plan and Agreement of Merger among Capital Cities/ABC, Inc.,
DCB Merger Corp. and the Registrant (attached as Appendix A-3 to the
Joint Proxy Statement/Prospectus included in this Registration
Statement).
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 Amended Bylaws of the Registrant.
4.1 Form of Registration Rights Agreement entered into or to be entered
into with certain stockholders of the Registrant. Incorporated by
reference from the Current Report on Form 8-K of The Walt Disney
Company dated July 31, 1995 (File No. 1-4083).
4.2 Rights Agreement dated as of November 8, 1995 between New Disney and
The Bank of New York, as rights agent.
4.3 364-Day Credit Agreement, dated as of October 31, 1995, among New
Disney, as Borrower, Citicorp USA, Inc., as Administrative Agent,
Credit Suisse, as Co-Administrative Agent and the Financial
Institutions named therein.
4.4 Five-Year Credit Agreement, dated as of October 31, 1995, among New
Disney, as Borrower, Citicorp USA, Inc., as Administrative Agent,
Credit Suisse, as Co-Administrative Agent and the Financial
Institutions named therein.
5.1 Opinion of Dewey Ballantine as to the legality of the securities.
8.1 Opinion of Dewey Ballantine regarding certain Federal income tax
matters.
8.2 Opinion of Cravath, Swaine & Moore regarding certain Federal income
tax matters.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Bear, Stearns & Co., Inc.
23.4 Consent of Allen & Company Incorporated.
23.5 Consent of Dewey Ballantine (included in its opinions filed as
Exhibits 5.1 and 8.1).
23.6 Consent of Cravath, Swaine & Moore (included in its opinion filed as
Exhibit 8.2).
23.7 Consent of Reveta F. Bowers.
23.8 Consent of Roy E. Disney.
23.9 Consent of Michael D. Eisner.
23.10 Consent of Stanley P. Gold.
23.11 Consent of Ignacio E. Lozano, Jr.
23.12 Consent of George J. Mitchell.
23.13 Consent of Thomas S. Murphy.
23.14 Consent of Richard A. Nunis.
23.15 Consent of Michael Ovitz.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.16 Consent of Sidney Poitier.
23.17 Consent of Irwin E. Russell.
23.18 Consent of Robert A.M. Stern.
23.19 Consent of E. Cardon Walker.
23.20 Consent of Raymond L. Watson.
23.21 Consent of Gary L. Wilson.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 Form of Proxy for holders of The Walt Disney Company Common Stock.
99.2 Form of Proxy for participants in The Walt Disney Company Salaried
Savings and Investment Plan.
99.3 Form of Proxy for holders of Capital Cities/ABC, Inc. Common Stock.
99.4 Form of Letter to Stockholders of The Walt Disney Company.
99.5 Form of Notice of Special Meeting of Stockholders to the holders of
The Walt Disney Company Common Stock.
99.6 Form of Letter to Shareholders of Capital Cities/ABC, Inc.
99.7 Form of Notice of Special Meeting of Shareholders to the holders of
Capital Cities/ABC, Inc. Common Stock.
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will
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contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(6) That, every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415 thereunder, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Sanford
M. Litvack, Stephen F. Bollenbach and David K. Thompson his or her true and
lawful attorney-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, each acting alone, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, each acting alone, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BURBANK, STATE OF
CALIFORNIA, ON THE 13TH DAY OF NOVEMBER, 1995.
DC HOLDCO, INC.
/s/ Sanford M. Litvack
By___________________________________
SANFORD M. LITVACK
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Sanford M. Litvack President and a November 13, 1995
- ----------------------------- Director
SANFORD M. LITVACK
/s/ Stephen F. Bollenbach Senior Executive November 13, 1995
- ----------------------------- Vice President and
STEPHEN F. BOLLENBACH Chief Financial
Officer
/s/ John J. Garand Senior Vice November 13, 1995
- ----------------------------- President--Planning
JOHN J. GARAND and Control (Chief
Accounting Officer)
/s/ David K. Thompson Director November 13, 1995
- -----------------------------
DAVID K. THOMPSON
/s/ Marsha L. Reed Director November 13, 1995
- -----------------------------
MARSHA L. REED
II-5
<PAGE>
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
DC HOLDCO, INC.
The undersigned, Sanford M. Litvack, certifies that he is the
President of DC Holdco, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), and hereby further certifies
as follows:
1. The name of the Corporation is DC Holdco, Inc., the name under
which it was originally incorporated.
2. The original Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on July
28, 1995.
3. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the Corporation
hereby is restated and amended to read in its entirety as follows:
FIRST: The name of the Corporation is DC Holdco, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code, as in effect from time to time (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,300,000,000, consisting of 1,200,000,000
shares of common stock, par value $0.01 per share ("Common Stock"), and
100,000,000 shares of preferred stock, par value $0.01 per share ("Preferred
Stock").
Shares of the Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation, number of shares, or title as shall be
fixed by the Board of Directors of the Corporation (the "Board of Directors")
prior to the issuance of any shares thereof. Each such class or series of
Preferred Stock shall consist of such number of shares, and have such voting
powers, full or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such class or series of Preferred Stock
as may be adopted from time to time by the Board of Directors prior to the
issuance of any shares thereof pursuant to the authority hereby expressly vested
in it, all in accordance with the laws of the State of Delaware.
<PAGE>
FIFTH: The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than three
directors nor more than twenty-one directors, the exact number of directors to
be determined from time to time solely by resolution adopted by the Board of
Directors. The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The term of the initial Class I directors shall terminate
on the date of the first annual meeting of stockholders; the term of the initial
Class II directors shall terminate on the date of the second annual meeting of
stockholders; and the term of the initial Class III directors shall terminate on
the date of the third annual meeting of stockholders. At each annual meeting of
stockholders, beginning with the first annual meeting of stockholders,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a term expiring at the third succeeding annual meeting of
stockholders. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional directors of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the Board
of Directors, howsoever resulting, may be filled solely by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy shall hold office for a term
that shall coincide with the term of the class to which such director shall have
been elected.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or 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
terms of this Restated Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to Article FOURTH
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless expressly provided by such terms.
SIXTH: Subject to the rights, if any, of the holders of shares of Preferred
Stock then outstanding, from and after the time that shares of Common Stock are
first issued, any or all of the directors of the Corporation may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of a majority of the outstanding shares of the Corporation then entitled
to vote generally in the election of directors, considered for purposes of this
Article SIXTH as one class.
SEVENTH: Elections of directors at an annual or special meeting of
stockholders shall be by written ballot unless the Bylaws of the Corporation
shall otherwise provide.
EIGHTH: Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
NINTH: A. Except as set forth in Section B of this Article NINTH, the
affirmative vote of the holders of four-fifths (4/5) of the outstanding stock of
the Corporation entitled to vote shall be required for:
2
<PAGE>
(i) any merger or consolidation to which the Corporation, or any of its
subsidiaries, and an Interested Person (as hereinafter defined) are parties;
(ii) any sale or other disposition by the Corporation, or any of its
subsidiaries, of all or substantially all of its assets to an Interested Person;
(iii) any purchase or other acquisition by the Corporation, or any of its
subsidiaries, of all or substantially all of the assets or stock of an
Interested Person; and
(iv) any other transaction with an Interested Person which requires the
approval of the stockholders of the Corporation under the GCL.
B. The provisions of Section A of this Article NINTH shall not be applicable
to any transaction described therein if (i) such transaction is approved by
resolution of the Corporation's Board of Directors, provided that a majority of
the members of the Board of Directors voting for the approval of such
transaction were duly elected and acting members of the Board of Directors prior
to the date that the person, firm or corporation, or any group thereof, with
whom such transaction is proposed, became an Interested Person, or (ii) the
provision of a vote in excess of that required by the GCL for such transaction
violates the express provisions of the GCL.
C. As used in this Article NINTH, the term "Interested Person" shall mean any
person, firm or corporation, or any group thereof, acting or intending to act in
concert, including any person directly or indirectly controlling or controlled
by or under direct or indirect common control with such person, firm or
corporation or group, which owns of record or beneficially, directly or
indirectly, five percent (5%) or more of any class of voting securities of the
Corporation.
D. The affirmative vote of the owners of four-fifths (4/5) of the outstanding
stock of the Corporation entitled to vote shall be required to amend, alter or
repeal this Article NINTH.
TENTH: The officers of the Corporation shall be chosen in such a manner,
shall hold their offices for such terms and shall carry out such duties as are
determined solely by the Board of Directors, subject to the right of the Board
of Directors to remove any officer or officers at any time with or without
cause.
ELEVENTH: A. The Corporation shall indemnify to the full extent authorized
or permitted by law (as now or hereinafter in effect) any person made, or
threatened to be made, a defendant or witness to any action, suit or proceeding
(whether civil or criminal or otherwise) by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Corporation or by
reason of the fact that such director or officer, at the request of the
Corporation, is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in any capacity.
Nothing contained herein shall affect any rights to indemnification to which
employees other than directors and officers may be entitled by law. No
amendment or repeal of this Section A of Article ELEVENTH shall apply to or have
any effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
B. A director of this Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
3
<PAGE>
C. In furtherance and not in limitation of the powers conferred by statute:
(i) the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of law; and
(ii) the Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or other similar arrangements), as well as enter into contracts
providing indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the foregoing
to ensure the payment of such amounts as may become necessary to effect
indemnification as provided therein, or elsewhere.
TWELFTH: 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 Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
outstanding stock of the Corporation entitled to vote thereon.
THIRTEENTH: The Corporation reserves the right to repeal, alter, amend or
rescind any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, DC Holdco, Inc. has caused its corporate seal to be
hereunto affixed and this Restated Certificate of Incorporation to be signed by
Sanford M. Litvack, its President, this 21st day of September, 1995.
DC HOLDCO, INC.
/s/ Sanford M. Litvack
_______________________________
Sanford M. Litvack
President
4
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF THE SERIES R
PREFERRED STOCK
($.01 Par Value Per Share)
OF
DC HOLDCO, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned hereby certifies that a resolution setting forth the
Certificate of the Voting Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations or Restrictions Thereof, of the Series R Preferred Stock ($.01 Par
Value Per Share) of DC HOLDCO, INC. (the "Certificate of Designation of the
Series R Preferred Stock") was duly adopted in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware (the
"General Corporation Law") by the Board of Directors of DC Holdco, Inc.,
corporation organized under and by virtue of the General Corporation Law (the
"Corporation"), on November 8, 1995. The resolution is as follows:
RESOLVED, that pursuant to authority conferred on the Board of Directors of
the Corporation by its Restated Certificate of Incorporation, a Series R
Preferred Stock of the Corporation is created and the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
or other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated Series R Preferred Stock ("Series R Preferred Stock") and the number
of shares constituting such series shall be 8,000,000. Shares of Series R
Preferred Stock shall have a par value of $.01 per share.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series R Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 100 times the aggregate per share amount of all cash
dividends declared or paid on the Common Stock of the Corporation and (ii) a
preferential cash dividend (a "Preferential Dividend"), if any, on the fifteenth
day of January, April, July and October of each year (each a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series R Preferred
Stock, in an amount equal to $1.00 per share of Series R Preferred Stock less
the per share amount of all cash dividends declared on the Series R Preferred
Stock pursuant to clause (i) of this sentence since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series R Preferred Stock. In the event the Corporation shall, at any time after
the issuance of any share or fraction of a share of Series R Preferred Stock,
make any distribution on the shares of Common Stock, whether by way of a
dividend or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Corporation or otherwise, which is payable in cash or
any debt security, debt instrument, real or personal property or any other
property (other than cash dividends subject to clause (i) of the immediately
preceding sentence and other than a distribution of shares of Common Stock or
other
<PAGE>
capital stock of the Corporation and other than a distribution of rights
or warrants to acquire any such share, including any debt security convertible
into or exchangeable for any such share, at a price less than the Current Market
Price of such share), then and in each such event the Corporation shall
simultaneously pay on each then outstanding share of Series R Preferred Stock of
the Corporation a distribution, in like kind, of 100 times (subject to the
provisions for adjustment hereinafter set forth) such distribution paid on a
share of Common Stock. The dividends and distributions on the Series R Preferred
Stock to which holders thereof are entitled pursuant to clause (i) of the first
sentence of this paragraph and the second sentence of this paragraph are
hereinafter referred to as "Participating Dividends," and the multiple of cash
and non-cash dividends on the Common Stock applicable to the determination of
the Participating Dividends, which shall be 100 subject to adjustment
from time to time as hereinafter provided, is hereinafter referred to as the
"Dividend Multiple." In the event the Corporation shall at any time declare or
pay any dividend or make any distribution on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination, consolidation
or reverse split of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, then in each such event the Dividend
Multiple thereafter applicable to the determination of the amount of
Participating Dividends which holders of shares of Series R Preferred Stock
shall be entitled to receive shall be the Dividend Multiple applicable
immediately prior to such event multiplied by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare each Participating Dividend at the same
time it declares any cash or non-cash dividend or distribution on the Common
Stock in respect of which a Participating Dividend is required to be paid. No
cash or non-cash dividend or distribution on the Common Stock in respect of
which a Participating Dividend is required shall be paid or set aside for
payment on the Common Stock unless a Participating Dividend in respect of such
dividend or distribution on the Common Stock shall be simultaneously paid or set
aside for payment on the Series R Preferred Stock.
(C) Preferential Dividends shall begin to accumulate on outstanding shares
of Series R Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series R Preferred Stock.
Accumulated but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series R Preferred Stock
in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series R Preferred
-------------
Stock shall have the following voting rights:
(A) Each share of Series R Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. The number of votes which a holder of Series R Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the
event the Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series R Preferred Stock
shall be entitled after such event shall be the Vote Multiple immediately prior
to such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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<PAGE>
(B) Except as otherwise provided herein or by law, the holders of shares of
Series R Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) If at the time of any annual meeting of stockholders for the election
of directors a default in preference dividends on the Series R Preferred Stock
shall exist, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two, and the holders of the Series R Preferred
Stock, together with the holders of any other series of Preferred Stock of the
Corporation who shall have been granted voting rights to elect directors upon a
default in the payment of dividends by the Corporation (collectively with the
holders of the Series R Preferred Stock, the "Preferred Stockholders"), shall
have the right at such meeting, voting together as a single class without regard
to series, to the exclusion of the holders of Common Stock, to elect two
directors of the Corporation to fill such newly created directorships. Such
right shall continue until there are no dividends in arrears upon the Series R
Preferred Stock. Each director elected by the Preferred Stockholders (herein
called a "Preferred Director") shall continue to serve as such director for the
full term for which he shall have been elected, notwithstanding that prior to
the end of such term a default in preference dividends shall cease to exist. Any
Preferred Director may be removed by, and shall not be removed without cause
except by, the vote of the Preferred Stockholders, voting together as a single
class without regard to series, at a meeting of the stockholders, or of the
Preferred Stockholders, called for the purpose. So long as a default in any
preference dividends on the Series R Preferred Stock shall exist (i) any vacancy
in the office of a Preferred Director may be filled (except as provided in the
following clause (ii)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (ii) in case of the
removal of any Preferred Director, the vacancy may be filed by the vote of the
Preferred Stockholders, voting together as a single class without regard to
series, at the same meeting at which such removal shall be voted. Each director
appointed as aforesaid by the remaining Preferred Director shall be deemed, for
all purposes hereof, to be a Preferred Director. Whenever the term of office of
the Preferred Directors shall end and a default in preference dividends shall no
longer exist, the number of directors constituting the Board of Directors shall
be reduced by two. For the purposes hereof, a "default in preference dividends"
on the Series R Preferred Stock shall be deemed to have occurred whenever the
amount of accrued dividends upon the Series R Preferred Stock shall be
equivalent to six full quarter-yearly dividends or more and, having so occurred,
such default shall be deemed to exist thereafter until, but only until, all
accrued dividends on all shares of Series R Preferred Stock then outstanding
shall have been paid to the end of the last preceding quarterly dividend period.
(D) Except as otherwise required by law or set forth herein, holders of
Series R Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for the taking of any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever Preferential Dividends or Participating Dividends are in
arrears or the Corporation shall be in default in payment thereof, thereafter
and until all accumulated and unpaid Preferential Dividends and Participating
Dividends, whether or not declared, on shares of Series R Preferred Stock
outstanding shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of Series R
Preferred Stock may have in such circumstances, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series R Preferred Stock;
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<PAGE>
(ii) declare or pay dividends or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Series R
Preferred Stock, unless dividends are paid ratably on the Series R
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) except as permitted by subparagraph (iv) of this paragraph (A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series R Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon liquidation,
dissolution or winding up) to the Series R Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
R Preferred Stock, or any shares of stock ranking on a parity with the Series R
Preferred Stock (either as to dividends or upon liquidation, dissolution or
winding up), except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
(C) The Corporation shall not issue any shares of Series R Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of November 8, 1995 between the Corporation and The Bank of
New York (the "Rights Agreement"), a copy of which is on file at the principal
executive office of the Corporation and shall be made available to holders of
record of Common Stock or Series R Preferred Stock without charge upon written
request therefor addressed to the Secretary of the Corporation. Notwithstanding
the foregoing sentence, nothing contained in the provisions hereof shall
prohibit or restrict the Corporation from issuing for any purpose any series of
Preferred Stock with rights and privileges similar to, different from, or
greater than those of the Series R Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series R Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. The
Corporation shall cause all such shares upon their retirement and cancellation
to become authorized but unissued shares of Preferred Stock, without designation
as to series, and such shares may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary
--------------------------------------
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock ranking junior
to the Series R Preferred Stock (upon liquidation, dissolution or winding up)
unless the holders of shares of Series R Preferred Stock shall have received,
subject to adjustment as hereinafter provided, the greater of either (A) $100.00
per share plus an amount equal to accumulated and unpaid dividends and
distributions thereon, whether or not declared, to the date of
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<PAGE>
such payment, or (B) the amount equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (ii) to the holders of
stock ranking on a parity upon liquidation, dissolution or winding up with the
Series R Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Series R Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of shares of
Series R Preferred Stock are entitled under clause (i) (A) of this sentence and
to which the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Series R
Preferred Stock shall be entitled upon liquidation, dissolution or winding up of
the Corporation pursuant to clause (i) (B) of the foregoing sentence is
hereinafter referred to as the "Participating Liquidation Amount," and the
multiple of the amount to be distributed to holders of shares of Common Stock
upon the liquidation, dissolution or winding up of the Corporation applicable
pursuant to said clause to the determination of the Participating Liquidation
Amount, which shall be 100 subject to adjustment from time to time as
hereinafter provided, is hereinafter referred to as the "Liquidation Multiple."
In the event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or split
or a combination, consolidation or reverse split of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock, then in
each such case the Liquidation Multiple thereafter applicable to the
determination of the Participating Liquidation Amount to which holders of Series
R Preferred Stock shall be entitled after such event shall be the Liquidation
Multiple applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Certain Reclassification and Other Events.
-----------------------------------------
(A) In the event that holders of shares of Common Stock receive in
respect of their shares of Common Stock any share of capital stock of the
Corporation (other than any share of Common Stock of the Corporation), whether
by way of reclassification, recapitalization, reorganization, dividend or other
distribution or otherwise ("Transaction"), then in each such event the dividend
rights, rights upon the liquidation, dissolution or winding up of the
Corporation and voting rights of the shares of Series R Preferred Stock shall be
adjusted so that after such event the holders of Series R Preferred Stock shall
be entitled, in respect of each share of Series R Preferred Stock held, in
addition to such rights in respect thereof to which such holder was entitled
immediately prior to such adjustment, to (i) such additional dividends as equal
the Dividend Multiple in effect immediately prior to such Transaction multiplied
by the additional dividends which the holder of a share of Common Stock shall be
entitled to receive by virtue of the receipt in the Transaction of such capital
stock, (ii) such additional distributions upon liquidation, dissolution or
winding up of the Corporation as equal the Liquidation Multiple in effect
immediately prior to such Transaction multiplied by the additional amount which
the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Corporation by virtue of the
receipt in the Transaction of such capital stock, as the case may be, all as
provided by the terms of such capital stock and (iii) such additional voting
rights as equal the Vote Multiple in effect immediately prior to such
Transaction multiplied by the additional voting rights which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock.
(B) In the event that holders of shares of Common Stock receive in
respect of their shares of Common Stock any right or warrant to purchase Common
Stock (including as such a right, for all purposes of this paragraph, any
security convertible into or exchangeable for Common Stock) at a purchase price
per share less than the Current Market Price (as hereinafter defined) of a share
of Common Stock on the date of issuance of such right or warrant, then in each
such event the dividend rights, rights upon the liquidation, dissolution or
winding up of the Corporation and voting rights of the shares of Series R
Preferred Stock shall each be adjusted so that after such event the Dividend
Multiple and the Liquidation Multiple and the Vote Multiple shall each be the
product of the Dividend
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<PAGE>
Multiple, the Liquidation Multiple and the Vote Multiple, as the case may be, in
effect immediately prior to such event multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the maximum number of shares of
Common Stock which could be acquired upon exercise in full of all such rights or
warrants and the denominator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants plus
the number of shares of Common Stock which could be purchased, at the Current
Market Price of the Common Stock at the time of such issuance, by the maximum
aggregate consideration payable upon exercise in full of all such rights or
warrants.
(C) In the event that holders of shares of Common Stock receive in
respect of their shares of Common Stock any right or warrant to purchase capital
stock of the Corporation (other than shares of Common Stock), including as such
a right, for all purposes of this paragraph, any security convertible into or
exchangeable for capital stock of the Corporation (other than Common Stock), at
a purchase price per share less than the Current Market Price of such shares of
capital stock on the date of issuance of such right or warrant, then in each
such event the dividend rights, rights upon liquidation, dissolution or winding
up of the Corporation and the voting rights of the shares of Series R Preferred
Stock shall each be adjusted so that after such event each holder of a share of
Series R Preferred Stock shall be entitled, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Common Stock shall be entitled upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction (as
hereinafter defined), (ii) such additional distributions upon liquidation,
dissolution or winding up of the Corporation as equal the Liquidation Multiple
in effect immediately prior to such event multiplied, first, by the additional
amount which the holder of a share of Common Stock shall be entitled to receive
upon liquidation, dissolution or winding up of the Corporation upon exercise of
such right or warrant by virtue of the capital stock which could be acquired
upon such exercise and multiplied again by the Discount Fraction and (iii) such
additional voting rights as equal the Vote Multiple in effect immediately prior
to such event multiplied, first, by the additional voting rights to which the
holder of a share of Common Stock shall be entitled upon exercise of such right
or warrant by virtue of the capital stock which could be acquired upon such
exercise and multipled again by the Discount Fraction. For purposes of this
paragraph, the "Discount Fraction" shall be a fraction the numerator of which
shall be the difference between the Current Market Price (as hereinafter
defined) of a share of the capital stock subject to a right or warrant
distributed to holders of shares of Common Stock as contemplated by this
paragraph immediately after the distribution thereof and the purchase price per
share for such share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Current Market Price of a share of such
capital stock immediately after the distribution of such right or warrant.
(D) For purposes of this Section 7, the "Current Market Price" of a
share of capital stock of the Corporation (including a share of Common Stock) on
any date shall be deemed to be the average of the daily closing prices per share
thereof over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, provided that in the event that such
Current Market Price of any such share of capital stock is determined during a
period which includes any date that is within 30 Trading Days after the ex-
dividend date for (i) a dividend or distribution on stock payable in shares of
such stock or securities convertible into shares of such stock or (ii) any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then in each such event, the Current Market
Price shall be appropriately adjusted by the Board of Directors to reflect the
Current Market Price of such stock to take into account ex-dividend trading. The
closing price for any day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
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trading on the New York Stock Exchange or, if the shares are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or if on any such
date the shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the shares selected by the Board of Directors. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the shares are listed or admitted to trading is open for the transaction
of business or, if the shares are not listed or admitted to trading on any
national securities exchange, on which the New York Stock Exchange or such other
national securities exchange as may be selected by the Board of Directors is
open. If the shares are not publicly held or not so listed or traded on any day
within the period of 30 Trading Days applicable to the determination of Current
Market Price thereof as aforesaid, "Current Market Price" shall mean the fair
market value thereof per share as determined in good faith by the Board of
Directors. In either case referred to in the foregoing sentence, the
determination of Current Market Price shall be described in a statement filed
with the Secretary of the Corporation.
Section 8. Consolidation, Merger, etc. In the event that the
--------------------------
Corporation shall enter into any consolidation, merger, combination or other
transaction in which shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any such
event each outstanding share of Series R Preferred Stock shall at the same time
be similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and other property (payable in like kind), as the case may be,
for which or into which each share of Common Stock is changed or exchanged
multiplied by the higher of the Dividend Multiple, the Liquidation Multiple or
the Vote Multiple in effect immediately prior to such event.
Section 9. Effective Time of Adjustments.
-----------------------------
(A) Adjustments to the Series R Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(B) The Corporation shall give prompt written notice to each holder of
a share of Series R Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights or rights upon liquidation, dissolution or
winding up of the Corporation required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give such notice shall
not affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Series R Preferred Stock
-------------
shall not be redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Corporation may
acquire shares of Series R Preferred Stock in any other manner permitted by law,
or the provisions hereof.
Section 11. Banking. Unless otherwise provided in the Restated
-------
Certificate of Incorporation or a Certificate of Designation relating to a
subsequent series of Preferred Stock of the Corporation, the Series R Preferred
Stock shall rank junior to all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. After the Distribution Date (as defined in the
---------
Rights Agreement), the provisions hereof and of the Restated Certificate of
incorporation shall not be amended in any manner which would materially affect
the rights, privileges or powers of the Series R Preferred Stock without, in
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addition to any other vote of stockholders required by law, the affirmative vote
of the holders of 80% or more of the outstanding shares of Series R Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Sanford M. Litvack, its President, this 9th day of November, 1995.
DC HOLDCO, INC.
/s/ Sanford M. Litvack
- --------------------------
Sanford M. Litvack
President
<PAGE>
EXHIBIT 3.2
AMENDED AS OF
SEPTEMBER 20, 1995
AMENDED BYLAWS
OF
DC HOLDCO, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation
--------- -----------------
shall be in the City of Wilmington, County of New Castle, Delaware.
Section 2. Principal Place of Business. The principal place of business
--------- ---------------------------
of the Corporation is hereby fixed and located at 500 South Buena Vista Street,
Burbank, California 91521.
Section 3. Other Offices. The Corporation may also have offices at such
--------- -------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
--------- -----------------
election of directors or for any other purpose shall be held at 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 in the case of a special
meeting, by the Board of Directors or the person calling the special meeting as
authorized by Section 3 of this Article II) and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
--------- ---------------
held on such date and at such time and place as may be fixed by the Board of
Directors and stated in the notice of the meeting, for the purpose of electing
directors and for the transaction of such other business as is properly brought
before the meeting in accordance with these Bylaws.
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To be properly brought before the Annual Meeting, business must be either
(i) specified in the notice of Annual Meeting (or any supplement or amendment
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
brought before the Annual Meeting by or at the direction of the Board of
Directors, or (iii) otherwise (a) properly be requested to be brought before the
Annual Meeting by a stockholder of record entitled to vote in the election of
directors generally, and (b) constitute a proper subject to be brought before
such meeting. In addition to any other applicable requirements, for business to
be properly brought before an Annual Meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at 500 South Buena Vista Street, Burbank, California 91521,
not less than 50 days nor more than 75 days prior to the meeting; provided,
however, that in the event that less than 65 days' notice or prior public
disclosure of the date of the Annual Meeting is given or made to stockholders,
notice by a stockholder to be timely must be so received not later than the
close of business on the 12th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the Annual Meeting
(i) a brief description of the business desired to be brought before the Annual
Meeting and the reasons for conducting such business at the Annual Meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class, series and number of shares of the Corporation which are beneficially
owned by the stockholder, and (iv) any material interest of the stockholder in
such business. Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at the Annual Meeting except in accordance with the
procedures set forth in this Article II, Section 2. The person presiding at an
Annual Meeting shall, if the facts warrant, determine and declare to the Annual
Meeting that business was not properly brought before the Annual Meeting in
accordance with the provisions of this Article II, Section 2, and if he should
so determine, he shall so declare to the Annual Meeting and any such business
not properly brought before the meeting shall not be transacted. Written notice
of the Annual Meeting stating the place, date and hour of the Annual Meeting
shall be given to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for any
--------- ----------------
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board of Directors, or the President. Special meetings of stockholders may
not be called by any other person or persons. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than 10 nor
more than 60 days before the date of the meeting to
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<PAGE>
each stockholder entitled to vote at such meeting, and only such business as is
stated in such notice shall be acted upon thereat. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (a) by or at the direction of the Board of Directors, or (b)
by a stockholder of the Corporation who is entitled to vote at the meeting and
who complies with the notice provisions contained in Section 2 of this Article
II.
Section 4. Quorum. Except as may be otherwise provided by law or by the
--------- ------
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, a minority of
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have 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. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate of
--------- ------
Incorporation or these Bylaws, (i) at all meetings of stockholders for the
election of directors, a plurality of votes cast shall be sufficient to elect,
and (ii) any other question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereon. Unless otherwise provided in the Certificate of
Incorporation, each stockholder represented at a meeting of stockholders shall
be entitled to cast one vote for each share of the capital stock entitled to
vote thereat held by such stockholder. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
Section 6. Organization. All meetings of the stockholders shall be
--------- ------------
presided over by the Chairman of the Board of Directors or, if he is not
present, by the Vice Chairman of the Board of Directors, and if he is not
present, by such officer or director as is designated by the Board of Directors.
The Secretary of the Corporation or, if he is not present, any Assistant
Secretary or other person designated by the presiding officer shall act as
secretary of the meeting.
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<PAGE>
Section 7. List of Stockholders Entitled to Vote. The officer of the
--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least 10 days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. 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 10 days prior to the meeting,
either at a place within the city 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 8. Stock Ledger. The stock ledger of the Corporation shall be the
--------- ------------
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 9. Inspectors of Election. Before any meeting of stockholders,
--------- ----------------------
the Board of Directors shall appoint one or more inspectors to act at the
meeting and make a written report thereof. The Board of Directors may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
The inspectors shall:
(a) ascertain the number of shares outstanding and the voting power of
each,
(b) determine the shares represented at the meeting and the validity of
proxies and ballots,
(c) count all votes and ballots,
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination made by the inspectors,
and
(e) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots.
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<PAGE>
The inspectors may appoint or retain other persons or entities to assist
the inspectors in the performance of the duties of the inspectors. In
determining the validity and counting of proxies and ballots, the inspectors
shall act in accordance with applicable law.
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. Subject to the rights, if
--------- --------------------------------
any, of holders of preferred stock of the Corporation to elect directors of the
Corporation, the Board of Directors shall consist of not less than three nor
more than 21 members with the exact number of directors to be determined from
time to time solely by resolution duly adopted by the Board of Directors.
Directors shall be elected by a plurality of the votes cast at Annual Meetings
of stockholders, and each director so elected shall hold office as provided by
Article FIFTH of the Certificate of Incorporation. A director may be removed
from office only as provided by Article SIXTH of the Certificate of
Incorporation. Any director may resign at any time effective upon giving
written notice to the Corporation, unless the notice specifies a later time for
the effectiveness of such resignation. Directors need not be stockholders.
Section 2. Nomination of Directors. Only persons who are nominated in
--------- -----------------------
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation at the Annual Meeting may be made at such meeting by or at the
direction of the Board of Directors, by any committee or persons appointed by
the Board of Directors or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 2. Such nominations by any
stockholder shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; provided, however,
that in the event that less than 65 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the person, and
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<PAGE>
(d) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to the
Rules and Regulations of the Securities and Exchange Commission under Section 14
of the Securities Exchange Act of 1934, as amended; and (ii) as to the
stockholder giving the notice (a) the name and record address of the stockholder
and (b) the class and number of shares of capital stock of the Corporation which
are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a director of the Corporation. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth herein. The officer of the Corporation presiding at an
Annual Meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors, howsoever
--------- ---------
resulting, may be filled by a majority of the directors then in office, even if
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy shall hold office for a term that shall coincide with the term of
the class to which such director shall have been elected.
Section 4. Duties and Powers. The business of the Corporation shall be
--------- -----------------
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 5. Meetings. The Board of Directors of the Corporation may hold
--------- --------
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the President, or by a majority of the
Board of Directors. Notice thereof, stating the place, date and hour of the
meeting, shall be given to each director either by mail not less than four days
before the date of the meeting, or personally or by telephone, telegram, telex
or similar means of communication on 12 hours notice, or on such shorter notice
as the person or persons calling such meeting may deem necessary or appropriate
in the circumstances.
Section 6. Quorum; Action of Board of Directors. Except as may be
--------- ------------------------------------
otherwise specifically provided by law, the Certificate of Incorporation or
these Bylaws, at all meetings of the Board of Directors, a majority of the
entire Board of Directors shall
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<PAGE>
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 7. Action by Written Consent. Any action required or permitted to
--------- -------------------------
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 8. Meetings by Means of Conference Telephone. Members of the Board
--------- -----------------------------------------
of Directors of the Corporation, or any committee designated by the Board of
Directors, 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,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
Section 9. Committees. The Board of Directors may, by resolution passed
--------- ----------
by a majority of the whole Board of Directors, designate one or more committees,
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 any such committee. In the absence or disqualification of a member
of a committee, and in the absence of a designation by the Board of Directors of
an alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided
in the resolution establishing such committee, 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. The Board of Directors shall have the
power to prescribe the manner in which proceedings of any such committee shall
be conducted. In the absence of any such prescription, such committee shall
have the power to prescribe the manner in which its proceedings shall be
conducted. Unless the Board of Directors or such committee shall otherwise
provide, regular and special meetings and other actions of any such committee
shall be governed by the provisions of this Article III applicable to meetings
and actions of the Board of Directors. Each committee shall keep regular
minutes and report to the Board of Directors when required.
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<PAGE>
Section 10. 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.
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be chosen by
--------- -------
the Board of Directors and shall be a Chairman of the Board of Directors (who
must be a director), a President, a Secretary and a Treasurer. The Board of
Directors, in its sole discretion, may also choose a Vice Chairman of the Board
of Directors (who must be a director), one or more Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these Bylaws.
Section 2. Election. The Board of Directors at its first meeting held
--------- --------
after each Annual Meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time solely
by the Board of Directors, which determination may be by resolution of the Board
of Directors or in any bylaw provision duly adopted or approved by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the Board of Directors with or without cause. Any vacancy occurring in
any office of the Corporation may be filled only by the Board of Directors.
Section 3. Chairman of the Board of Directors. The Chairman of the Board
--------- ----------------------------------
of Directors shall be the Chief Executive Officer of the Corporation, shall
preside at all meetings of the Board of Directors and of stockholders and shall,
subject to the provisions of the Bylaws and the control of the Board of
Directors, have general and active management, direction, and supervision over
the business of the Corporation and over its officers. He shall be a member ex
--
officio of all committees created by the Board of Directors, excluding the Audit
- -------
Review Committee and any committee to which he has been designated a regular
member by the Board of Directors. He shall perform all duties incident to the
office of chief executive and such other duties as from time to time may be
assigned to him by the Board of Directors. He shall have the right to delegate
any of his powers to any other officer or employee.
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<PAGE>
Section 4. President. The President shall report and be responsible to the
--------- ---------
Chairman of the Board. The President shall have such powers and perform such
duties as from time to time may be assigned or delegated to him by the Board of
Directors or are incident to the office of President.
During the absence, disability, or at the request of the Chairman of the
Board of Directors, the President shall perform the duties and exercise the
powers of the Chairman of the Board of Directors. In the absence or disability
of both the President and the Chairman of the Board of Directors, the person
designated by the Board of Directors shall perform the duties and exercise the
powers of the President, and unless otherwise determined by the Board, the
duties and powers of the Chairman.
Section 5. Executive Vice Presidents. The Executive Vice Presidents shall
--------- -------------------------
have such powers and perform such duties as from time to time may be prescribed
for them respectively by the Board of Directors or are incident to the office of
Executive Vice President.
Section 6. Senior Vice Presidents. The Senior Vice Presidents shall have
--------- ----------------------
such powers and perform such duties as from time to time may be prescribed for
them respectively by the Board of Directors or are incident to the office of
Senior Vice President.
Section 7. Vice Presidents. The Vice Presidents shall have such powers
--------- ---------------
and perform such duties as from time to time may be prescribed for them
respectively by the Board of Directors or are incident to the office of Vice
President.
Section 8. Secretary. The Secretary shall keep or cause to be kept, at
--------- ---------
the principal executive office or such other place as the Board of Directors may
order, a book of minutes of all meetings of stockholders, the Board of Directors
and its committees, with the time and place of holding, whether regular or
special, and if special, how authorized, the notice thereof given, the names of
those present at Board of Directors and committee meetings, the number of shares
present or represented at
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<PAGE>
stockholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, a copy of the Bylaws of the Corporation at the principal
executive office or business office of the Corporation.
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the Corporation's transfer agent or registrar, if one
be appointed, a stock register, or a duplicate stock register, showing the names
of the stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors and any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities of the Corporation and shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation, and shall send or cause
to be sent to the stockholders of the Corporation such financial statements and
reports as are by law or these Bylaws required to be sent to them.
The Treasurer shall deposit all moneys and valuables in the name and to the
credit of the Corporation with such depositaries as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all transactions and of the
financial condition of the Corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors.
Section 10. Other Officers. Such other officers or assistant 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 other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
Section 11. Execution of Contracts and Other Documents. Each officer of
---------- ------------------------------------------
the Corporation may execute, affix the corporate seal and/or deliver, in the
name and on behalf of the Corporation, deeds, mortgages, notes, bonds,
contracts, agreements, powers of attorney, guarantees, settlements, releases,
evidences of
-10-
<PAGE>
indebtedness, conveyances, or any other document or instrument which is
authorized by the Board of Directors or is required to be executed in the
ordinary course of business, except in cases where the execution, affixation of
the corporate seal and/or delivery thereof shall be expressly and exclusively
delegated by the Board of Directors to some other officer or agent of the
Corporation.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the Corporation
--------- --------------------
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman or Vice Chairman of the Board of Directors, the President or
any Executive Vice President, Senior Vice President or Vice President and (ii)
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
--------- ----------
transfer agent or (ii) a registrar, any other signature on the certificate may
be a facsimile. 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 he
were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
--------- -----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
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 his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Transfers of shares of capital stock of the
--------- ---------
Corporation shall be made only on the stock record of the Corporation by the
holder of record thereof or by his attorney thereunto authorized by the power of
attorney duly executed and filed with the Secretary of the Corporation or the
transfer agent thereof, and only on surrender of the certificate or certificates
representing such shares, properly endorsed or accompanied by a
-11-
<PAGE>
duly executed stock transfer power. The Board of Directors may make such
additional rules and regulations as it may deem expedient concerning the issue
and transfer of certificates representing shares of the capital stock of the
Corporation.
Section 5. 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 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 60 days nor less than 10 days before the date
of such meeting, nor more than 60 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 6. Beneficial Owners. The Corporation shall be entitled to
--------- -----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
--------- -------
Certificate of Incorporation or these Bylaws, to be given to any director or
stockholder, such notice may be given by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex, cable or facsimile
transmission followed, if required by law, by deposit in the United States mail,
with postage prepaid.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
--------- -----------------
Certificate of Incorporation or these Bylaws, to be given to any director or
stockholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
-12-
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Disbursements. All checks or demands for money and notes
--------- -------------
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
--------- -----------
fixed by resolution of the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
--------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board of Directors or
the President or any other officer or officers authorized by the Board of
Directors, the Chairman of the Board of Directors or the President, and any such
officer may, in the name of and on behalf of the Corporation, vote, represent
and exercise on behalf of the Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of the
Corporation and take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any corporation
in which the Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from time to time confer like powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. General. The Corporation shall indemnify to the full
--------- -------
extent authorized or permitted by law (as now or hereafter in effect) any person
made, or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
he, his testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this Section 1 shall apply to or
have any effect on any right to indemnification provided hereunder with respect
to any acts or omissions occurring prior to such amendment or repeal.
-13-
<PAGE>
Section 2. Further Assurance. In furtherance and not in limitation
--------- -----------------
of the powers conferred by statute:
(a) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of law; and
(b) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter into
contracts providing indemnification to the full extent authorized or permitted
by law and including as part thereof provisions with respect to any or all of
the foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
ARTICLE IX
AMENDMENTS
----------
Section 1. General. These Bylaws may be altered, amended or
--------- -------
repealed, in whole or in part, or new Bylaws may be adopted by either the
holders of 66-2/3% of the outstanding capital stock entitled to vote thereon or
by the Board of Directors.
ARTICLE X
EMERGENCY PROVISIONS
--------------------
Section 1. General. The provisions of this Article X shall be
--------- -------
operative only during a national emergency declared by the President of the
United States or the person performing the President's functions, or in the
event of a nuclear, atomic or other attack on the United States or a disaster
making it impossible or impracticable for the Corporation to conduct its
business without recourse to the provisions of this Article X. Said provisions
in such event shall override all other Bylaws of the Corporation in conflict
with any provisions of this Article X, and shall remain operative so long as it
remains impossible or impracticable to continue the business of the Corporation
otherwise, but thereafter shall be inoperative; provided that all actions taken
in good faith pursuant to such provisions shall thereafter remain in full force
and effect unless and until revoked
-14-
<PAGE>
by action taken pursuant to the provisions of the Bylaws other than those
contained in this Article X.
Section 2. Unavailable Directors. All directors of the Corporation
--------- ---------------------
who are not available to perform their duties as directors by reason of physical
or mental incapacity or for any other reason or who are unwilling to perform
their duties or whose whereabouts are unknown shall automatically cease to be
directors, with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
Section 3. Authorized Number of Directors. The authorized number of
--------- ------------------------------
directors shall be the number of directors remaining after eliminating those who
have ceased to be directors pursuant to Section 2 of this Article X, or the
minimum number required by law, whichever number is greater.
Section 4. Quorum. The number of directors necessary to constitute a
--------- ------
quorum shall be one-third of the authorized number of directors as specified in
Section 3 of this Article X, or such other minimum number as, pursuant to the
law or lawful decree then in force, it is possible for the Bylaws of a
Corporation to specify.
Section 5. Creation of Emergency Committee. In the event the number
--------- -------------------------------
of directors remaining after eliminating those who have ceased to be directors
pursuant to Section 2 of this Article X is less than the minimum number of
authorized directors required by law, then until the appointment of additional
directors to make up such required minimum, all the powers and authorities which
the Board of Directors could by law delegate including all powers and
authorities which the Board of Directors could delegate to a committee, shall be
automatically vested in an emergency committee, and the emergency committee
shall thereafter manage the affairs of the Corporation pursuant to such powers
and authorities and shall have all other powers and authorities as may by law or
lawful decree be conferred on any person or body of persons during a period of
emergency.
Section 6. Constitution of Emergency Committee. The emergency
--------- -----------------------------------
committee shall consist of all the directors remaining after eliminating those
who have ceased to be directors pursuant to Section 2 of this Article X,
provided that such remaining directors are not less than three in number. In
the event such remaining directors are less than three in number, the emergency
committee shall consist of three persons, who shall be the remaining director or
directors and either one or two officers or employees of the Corporation, as the
remaining director or directors may in writing designate. If there is no
remaining director, the emergency committee shall consist of the three most
senior officers of the Corporation who are available to serve, and if and to the
extent that officers are not available, the most senior employees of the
Corporation. Seniority shall be determined in accordance with any
-15-
<PAGE>
designation of seniority in the minutes of the proceedings of the Board, and in
the absence of such designation, shall be determined by rate of remuneration.
In the event that there are no remaining directors and no officers or employees
of the Corporation available, the emergency committee shall consist of three
persons designated in writing by the stockholder owning the largest number of
shares of record as of the date of the last record date.
Section 7. Powers of Emergency Committee. The emergency committee,
--------- -----------------------------
once appointed, shall govern its own procedures and shall have power to increase
the number of members thereof beyond the original number, and in the event of a
vacancy or vacancies therein, arising at any time, the remaining member or
members of the emergency committee shall have the power to fill such vacancy or
vacancies. In the event at any time after its appointment all members of the
emergency committee shall die or resign or become unavailable to act for any
reason whatsoever, a new emergency committee shall be appointed in accordance
with the foregoing provisions of this Article X.
Section 8. Directors Becoming Available. Any person who has ceased
--------- ----------------------------
to be a director pursuant to the provisions of Section 2 of this Article X and
who thereafter becomes available to serve as a director shall automatically
become a member of the emergency committee.
Section 9. Election of Board of Directors. The emergency committee
--------- ------------------------------
shall, as soon after its appointment as is practicable, take all requisite
action to secure the election of a board of directors, and upon such election
all the powers and authorities of the emergency committee shall cease.
Section 10. Termination of Emergency Committee. In the event, after
---------- ----------------------------------
the appointment of an emergency committee, a sufficient number of persons who
ceased to be directors pursuant to Section 2 of this Article X become available
to serve as directors, so that if they had not ceased to be directors as
aforesaid, there would be enough directors to constitute the minimum number of
directors required by law, then all such persons shall automatically be deemed
to be reappointed as directors and the powers and authorities of the emergency
committee shall be at an end.
-16-
<PAGE>
EXHIBIT 4.2
=================================================================
DC HOLDCO, INC.
and
THE BANK OF NEW YORK
as Rights Agent
____________________________
Rights Agreement
Dated as of November 8, 1995
____________________________
=================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Section l. Certain Definitions. . . . . . . . . . . . . . . . . . . . . 2
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . 10
Section 3. Issuance of Right Certificates . . . . . . . . . . . . . . . 10
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . 14
Section 5. Countersignature and Registration. . . . . . . . . . . . . . 16
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates. . . . . . . . . . . . . . . . . . 17
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8. Cancellation and Destruction of Right Certificates . . . . . 22
Section 9. Reservation and Availability of Shares of Series R
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 23
Section 10. Series R Preferred Stock Record Date . . . . . . . . . . . . 26
Section 11. Adjustments to Number and Kind of Shares, Number of
Rights or Purchase Price.. . . . . . . . . . . . . . . . . . 26
Section 12. Certification of Adjustments . . . . . . . . . . . . . . . . 52
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power . . . . . . . . . . . . . . . . . . . . . . 53
Section 14. Fractional Rights and Fractional Shares. . . . . . . . . . . 61
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . 63
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . 64
Section 17. Right Certificate Holder Not Deemed a Shareholder . . . . . 66
Section 18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . 66
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
<PAGE>
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . 69
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . 73
Section 22. Issuance of New Right Certificates . . . . . . . . . . . . . 75
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 24. Notice of Proposed Actions . . . . . . . . . . . . . . . . . 77
Section 25. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 26. Supplements and Amendments . . . . . . . . . . . . . . . . . 80
Section 27. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 28. Benefits of this Rights Agreement. . . . . . . . . . . . . . 82
Section 29. Delaware Contract. . . . . . . . . . . . . . . . . . . . . . 83
Section 30. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 31. Descriptive Headings . . . . . . . . . . . . . . . . . . . . 83
Section 32. Determination and Actions by the Board of Directors,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 33. Severability . . . . . . . . . . . . . . . . . . . . . . . . 84
Exhibit A -- Form of Certificate of Designation
Exhibit B -- Form of Right Certificate
Exhibit C -- Summary of Rights
<PAGE>
RIGHTS AGREEMENT
----------------
Agreement ("Rights Agreement"), dated as of November 8, 1995,
between DC Holdco, Inc., a Delaware corporation (the
"Corporation"), and The Bank of New York (the "Rights Agent").
W I T N E S S E T H :
WHEREAS, on November 8, 1995 the Board of Directors of the
Corporation (i) authorized the issuance and declared a dividend of
one right (a "Right") for each share of the Common Stock, $.01 par
value per share ("Common Stock"), of the Corporation outstanding as
of the close of business on November 8, 1995 (the "Record Date"),
each Right representing the right to purchase, on the terms and
conditions contained herein, one one-hundredth of a share (subject
to adjustment) of Preferred Stock, $.01 par value per share
("Series R Preferred Stock"), of the Corporation having the rights
and preferences set forth in the form of Certificate of Designation
attached hereto as Exhibit A, and (ii) further authorized the
issuance of one Right (subject to adjustment) with respect to each
share of Common Stock that shall become outstanding (whether
originally issued or delivered from the Corporation's treasury)
between the Record Date and the Distribution Date (as defined
herein);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, the parties agree as follows:
<PAGE>
2
Section l. Certain Definitions. For purposes of this Rights
-------------------
Agreement, the following terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 25% or more
of the outstanding Common Stock, provided that an
--------
Acquiring Person shall not include an Exempt Person.
Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as a result of an acquisition of
shares of Common Stock by the Corporation which, by
reducing the number of such shares outstanding, increases
the proportionate number of shares beneficially owned by
such person to 25% or more of the outstanding Common
Stock, provided that if a Person (other than an Exempt
Person) becomes the Beneficial Owner of 25% or more of
the outstanding Common Stock by reason of share
acquisitions by the Corporation and, after such share
acquisitions by the Corporation, becomes the Beneficial
Owner of any additional shares of Common Stock, such
Person shall be deemed to be an "Acquiring Person." The
word "outstanding," when used with reference to a
Person's Beneficial Ownership of shares of Common Stock
of the Corporation, shall mean the number of such shares
then issued and outstanding together with the number of
such shares not then issued
<PAGE>
3
and outstanding which such Person would be deemed to own
beneficially hereunder.
(b) "Adjustment Shares" shall have the meaning set
forth in Section 11(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
in effect on the date of this Rights Agreement.
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any shares
of Common Stock:
(i) which such Person or any of such
Person's Affiliates or Associates beneficially
owns, directly or indirectly;
(ii) which such Person or any of such
Person's Affiliates or Associates has (A) the
right to acquire (whether such right is
exercisable immediately or only after the
passage of time) pursuant to any agreement,
arrangement or understanding, whether or not
in writing, or upon the exercise of conversion
rights, exchange rights, rights, warrants or
options, or otherwise, provided that a Person
<PAGE>
4
shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (1) securities
tendered pursuant to a tender or exchange
offer made by such Person or any of such
Person's Affiliates or Associates until such
tendered securities are accepted for purchase
or exchange or (2) securities which such
Person has a right to acquire on the exercise
of Rights at any time prior to the occurrence
of a Section 11(a) (ii) Event or a Section 13
Event or (3) securities issuable upon exercise
of Rights from and after the occurrence of a
Section 11(a) (ii) Event or a Section 13 Event
if such Rights were acquired by such Person or
any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("original
Rights") or pursuant to Section 11(i) with
respect to an adjustment to original Rights;
or (B) the right to vote pursuant to any
agreement, arrangement or understanding
(whether or not in writing), provided that
a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own", any
securities if the agreement, arrangement or
<PAGE>
5
understanding to vote such security (1) arises
solely from a revocable proxy or consent given
in response to a public proxy or consent
solicitation made pursuant to, and in
accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not
also then reportable by such Person on
Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned,
directly or indirectly, by any other Person
with which such Person or any of such Person's
Affiliates or Associates has any agreement,
arrangement or understanding, whether or not
in writing, for the purpose of acquiring,
holding, voting (except as described in clause
(B) of subparagraph (ii) of this paragraph
(d)) or disposing of any securities of the
Corporation.
Notwithstanding anything in this paragraph (d) to the contrary, a
Person engaged in the business of underwriting securities shall not
be deemed the "Beneficial Owner" of, or to "beneficially own," any
securities acquired in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such
acquisition.
<PAGE>
6
(e) "Board of Directors" shall mean the Board of
Directors of the Corporation or any duly authorized
committee thereof.
(f) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day of which banking institutions
in the City of New York are authorized or obligated by
law or executive order to close.
(g) "close of business" on any given date shall
mean 5:00 P.M., New York City time, on such date,
provided that if such date is not a Business Day it shall
mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(h) "Common Stock" when used with reference to the
Corporation shall mean the Common Stock (currently $.01
par value per share) of the Corporation. "Common Stock"
when used with reference to any Person other than the
Corporation which shall be organized in corporate form
shall mean the capital stock or other equity security
with the greatest per share voting power of such Person.
"Common Stock" when used with reference to any Person
other than the Corporation which shall not be organized
in corporate form shall mean units of beneficial interest
which shall represent the right to participate in
profits, losses, deductions and credits of such Person
and which shall be entitled to exercise the
<PAGE>
7
greatest voting power per unit of such Person.
(i) "Common Stock equivalents" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(j) "Current Market Price" shall have the meaning
set forth in Section 11(d) hereof.
(k) "Current Value" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(l) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
(m) "equivalent Series R Preferred Stock" shall
have the meaning set forth in Section 11(b) hereof.
(n) "Exchange Act" shall have the meaning set forth
in Section 1(c) hereof.
(o) "Exempt Person" shall mean the Corporation, any
Subsidiary or parent of the Corporation, any employee benefit
plan or employee stock plan of the Corporation or of any
Subsidiary of the Corporation, or any person or entity
organized, appointed, established or holding Common Stock
for or pursuant to the terms of any such plan.
(p) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(q) "Final Expiration Date" shall have the meaning
set forth in Section 7(a) hereof.
(r) "invalidation time" shall have the meaning set
forth in Section 11(a)(ii) hereof.
<PAGE>
8
(s) NASDAQ shall have the meaning set forth in
Section 11 (d)(i) hereof.
(t) "NYSE" shall mean the New York Stock Exchange.
(u) "Permitted Transaction" shall mean a purchase
or series of related purchases of shares of Common Stock
of the Corporation that the Board of Directors, taking
into account the long-term value of the Corporation and
all other factors that the Board of Directors considers
relevant, determines to be fair to and otherwise in the
best interests of the holders of shares of Common Stock.
(v) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(w) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(x) "Purchase Price" shall have the meaning set
forth in Section 4(a) hereof.
(y) "Redemption Price" shall have the meaning set
forth in Section 23(a) hereof.
(z) "Right Certificate" shall have the meaning set
forth in Section 3(a) hereof.
(aa) "Section 11(a) (ii) Event" shall mean any event
described in Section 11(a)(ii) (A), (B) or (C) hereof.
(bb) "Section ll(a) (ii) Trigger Date" shall have the
meaning set forth in Section 11(a) (iii) hereof.
<PAGE>
9
(cc) "Section 13 Event" shall mean any event described in
clause (i), (ii) or (iii) of Section 13(a)
(dd)"Securities Act" shall mean the Securities Act of 1933,
as amended.
(ee) "Stock Acquisition Date" shall mean the first date of
public announcement by the Corporation or an Acquiring
Person that an Acquiring Person has become such or such
earlier date as a majority of the Board of Directors
shall become aware of the existence of an acquiring
person.
(ff) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(gg) "Subsidiary" of a Person shall mean any corporation
or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a
majority of the board of directors or other persons performing
similar functions are beneficially owned, directly or
indirectly, by such Person and any corporation or other entity
that is otherwise controlled by such Person.
(hh) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(ii) "Trading Day" shall have the meaning set forth in Section
11(d) hereof.
(jj) "Triggering Event" shall mean any Section 11(a) (ii)
Event or Section 13 Event.
<PAGE>
10
Any determination required by the definitions contained or referred
to in this Section l shall be made by the Board of Directors in
good faith, and any such determination shall be binding on the
Rights Agent and the holders of the Rights.
Section 2. Appointment of Rights Agent. The Corporation hereby
---------------------------
appoints the Rights Agent to act as agent for the Corporation in
accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Corporation may from
time to time appoint one or more Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Right Certificates.
------------------------------
(a) Until the close of business on the day (the "Distribution
Date") which is the earlier of (i) the tenth day after the Stock
Acquisition Date or (ii) such date as the Board of Directors may
fix following the commencement by any Person (other than an Exempt
Person) of, or the first public announcement of the intent of any
Person (other than an Exempt Person) to commence, a tender or
exchange offer upon the successful consummation of which such
Person, together with its Affiliates and Associates, would be the
Beneficial Owner of 25% or more of the outstanding Common Stock
(irrespective of whether any shares are actually purchased pursuant
to any such offer), provided that such date fixed by the Board of
Directors shall not be later than the nineteenth Business Day after
<PAGE>
11
the date of such commencement or public announcement (the date
specified in clauses (i) and (ii) being subject to extension by the
Board of Directors pursuant to Section 26 hereof), (x) the Rights
will be evidenced (subject to the provisions of Section 3(c)
hereof) by the certificates for the Common Stock registered in the
names of the holders of the Common Stock and not by separate Right
Certificates, and (y) each Right will be transferable only in
connection with the transfer of a share (subject to adjustment as
hereinafter provided) of Common Stock, provided that if the
Distribution Date would be prior to the Record Date, the Record
Date shall be the Distribution Date, and provided, further, that if
a tender or exchange offer referred to in clause (ii) above is
cancelled or withdrawn prior to the Distribution Date, such offer
shall be deemed, for purposes of this Rights Agreement, never to
have been made. As soon as practicable after the Distribution
Date, the Rights Agent will mail, by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the close of
business on the Distribution Date, as shown by the records of the
Corporation, at the address of such holder shown on such records,
a Right Certificate in substantially the form of Exhibit B hereto
("Right Certificate") evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the
time of distribution of the Right Certificates, the Corporation
<PAGE>
12
shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Right Certificates
representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the
Distribution Date the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date or as soon as practicable thereafter,
the Corporation will send a copy of a Summary of Rights to Purchase
Series R Preferred Stock, substantially in the form attached hereto
as Exhibit C ("Summary of Rights"), by first-class, postage prepaid
mail, to each record holder of Common Stock as of the close of
business on the Record Date, at the address of such holder shown
on the records of the Corporation.
(c) With respect to certificates for Common Stock outstanding
as of the Record Date, until the Distribution Date (or, if earlier,
the Expiration Date), the Rights will be evidenced by such
certificates for Common Stock registered in the names of the
holders thereof together with a copy of the Summary of Rights.
Until the Distribution Date (or, if earlier, the Expiration Date),
the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the surrender for transfer
of the Rights associated with the Common Stock represented thereby.
(d) Rights shall be issued in respect of all shares of Common
Stock that become outstanding after the Record Date but prior to
<PAGE>
13
the earlier of the Distribution Date or the Expiration Date and, in
certain circumstances provided for in Section 22 hereof, may be
issued in respect of shares of Common Stock that become outstanding
after the Distribution Date. Certificates issued for Common Stock
(including, without limitation, certificates issued upon original
issuance, disposition from the Corporation's treasury or transfer
or exchange of Common Stock) after the Record Date but prior to the
earlier of the Distribution Date, the Expiration Date or the Final
Expiration Date (or, in certain circumstances as provided in
Section 22 hereof, after the Distribution Date) shall have
impressed on, printed on, written on or otherwise affixed to them
the following legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Rights
Agreement between DC Holdco, Inc. and The Bank of New
York, as Rights Agent, dated as of November 8, 1995 (the
"Rights Agreement"), the terms of which are incorporated
herein by reference and a copy of which is on file at the
principal executive office of DC Holdco, Inc. Under
certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. DC Holdco, Inc. will mail to the holder of
this certificate a copy of the Rights Agreement without
charge within five days after receipt by it of a written
request therefor. Under certain circumstances as provided
in the Rights Agreement, Rights issued to or beneficially
owned by Acquiring Persons or their Associates or
Affiliates (as such terms are defined in the Rights
Agreement) or any subsequent holder of such Rights may
become null and void as provided in Section 11(a) (ii) of
the Rights Agreement.
With respect to such certificates containing the foregoing legend,
the Rights associated with the Common Stock represented by such
<PAGE>
14
certificates shall, until the Distribution Date, be evidenced by
such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the surrender for transfer of the
Rights associated with the Common Stock represented thereby.
Section 4. Form of Right Certificates.
--------------------------
(a) The Right Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse
thereof), when, as and if issued, shall be substantially in the
form set forth in Exhibit B attached hereto and may have such marks
of identification or designation and such legends, summaries or
endorsements printed thereon as the Corporation may deem
appropriate and as are not inconsistent with the provisions of this
Rights Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule
or regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the
provisions of Sections 11 and 22 hereof, the Right Certificates,
whenever issued, shall be dated as of the Record Date, and on their
face Right Certificates shall entitle the holders thereof to
purchase one one-hundredth (1/100) of one share of Series R
Preferred Stock, or other securities or property as provided
herein, as the same may from time to time be adjusted as provided
herein, at the price per one one-hundredth of a share set forth
therein, as the same may from time to time be adjusted as provided
<PAGE>
15
herein (the "Purchase Price").
(b) Notwithstanding any other provision of this Rights
Agreement, any Right Certificate that represents Rights that are
beneficially owned by (i) an Acquiring Person or any Affiliate or
Associate thereof, (ii) a transferee of an Acquiring Person (or any
such Affiliate or Associate) who becomes a transferee after the
Acquiring Person became such or (iii) a transferee of an Acquiring
Person (or any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person's
becoming such pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (or any such Affiliate or
Associate) to holders of its equity securities or to any Person
with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer
(whether or not for consideration) which the Board of Directors has
determined is part of a plan, arrangement or understanding which
has the purpose or effect of avoiding the provisions of Section
11(a) (ii) hereof, and subsequent transferees of such Persons (or
of any transferee of such Rights), and any Right Certificates
issued pursuant to Section 6 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred
to in this sentence, shall have impressed on, printed on, written
on or otherwise affixed to it (if the Corporation or the Rights
Agent has knowledge that such Person is an Acquiring Person or an
Associate or Affiliate thereof or transferee of such Persons or a
<PAGE>
16
nominee of any of the foregoing) the following legend:
The beneficial owner of the Rights represented by this
Right Certificate is an Acquiring Person or an Affiliate
or Associate (as defined in the Rights Agreement) of an
Acquiring Person or a subsequent holder of such Right
Certificates beneficially owned by such Persons.
Accordingly, under certain circumstances as provided in
the Rights Agreement, this Right Certificate and the
Rights represented hereby may become null and void as
provided in Section 11(a) (ii) of the Rights Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the
Corporation by its Chairman or Vice-Chairman of the Board, its
President or any Executive Vice President, Senior Vice President or
Vice President, either manually or by facsimile signature, and have
affixed thereto the Corporation's seal or a facsimile thereof which
shall be attested by the Secretary or an Assistant Secretary of the
Corporation, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent
and shall not be valid for any purpose unless so countersigned. In
case any officer of the Corporation who shall have signed any of
the Right Certificates shall cease to be such officer of the
Corporation before countersignature by the Rights Agent and
issuance and delivery by the Corporation, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, issued and
delivered with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of
the Corporation; and any Right Certificate may be signed on behalf
<PAGE>
17
of the Corporation by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of
the Corporation to sign such Right Certificate, although was not
such an officer at the date of the execution of this Rights
Agreement.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office, books for
registration and transfer of the Right Certificates Issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates, the date
of each of the Right Certificates, and the certificate numbers for
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
-----------------------------------------------
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
- --------------------------------------------------------------
Certificates.
- ------------
(a) Subject to the provisions hereof, at any time after the
close of business on the Distribution Date and at or prior to the
close of business on the Expiration Date, any Right Certificate or
Certificates may be (i) transferred or (ii) split up, combined or
exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one
one-hundredths of a share of Series R Preferred Stock as the Right
Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer any
<PAGE>
18
Right Certificate shall surrender the Right Certificate at the
shareholder services office of the Rights Agent with the form of
assignment on the reverse side thereof duly endorsed (or enclose
with such Right Certificate a written instrument of transfer in
form satisfactory to the Corporation and the Rights Agent), duly
executed by the registered holder thereof or his attorney duly
authorized in writing, and with such signature duly guaranteed. Any
registered holder desiring to split up, combine or exchange any
Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be split up, combined or exchanged at the
shareholder services office of the Rights Agent. Thereupon the
Rights Agent, subject to the provisions hereof, shall countersign
(by manual signature) and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so
requested. The Corporation may require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Corporation and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, if requested by the Corporation,
reimbursement to the Corporation of all reasonable expenses
<PAGE>
19
incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Corporation
will execute and deliver a new Right Certificate of like tenor to
the Rights Agent for delivery to the registered owner in lieu of
the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
----------------------------------------------
Date of Rights.
--------------
(a) Except as otherwise provided herein, the Rights shall
become exercisable at the close of business on the Distribution
Date, and may be exercised to purchase Series R Preferred Stock,
except as otherwise provided herein, in whole or in part at any
time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse
side thereof duly executed (with such signature duly guaranteed),
to the Rights Agent at its principal office, together with payment
of the aggregate Purchase Price, subject to adjustment as
hereinafter provided, with respect to the number of one one-
hundredths of a share of Series R Preferred Stock (except as
otherwise provided herein) as to which such surrendered Rights are
then being exercised, at or prior to the close of business on the
date (the "Expiration Date") which is the earlier of (i) June 30,
1999 (the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof.
(b) The Purchase Price shall initially be $350.00 for each
one one-hundredth (1/100) of a share of Series R Preferred Stock
<PAGE>
20
issued pursuant to the exercise of a Right. The Purchase Price and
the number of one one-hundredths of a share of Series R Preferred
Stock or other securities to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof. The Purchase Price shall be payable in
lawful money of the United States of America, in accordance with
Section 7(c) hereof.
(c) Except as provided in Section 7(d) hereof, upon receipt
of a Right Certificate representing exercisable Rights with the
form of election to purchase duly executed, accompanied by payment
of the aggregate Purchase Price for the number of one one-
hundredths of a share to be purchased and an amount equal to any
applicable transfer tax, by cash, certified or official bank check
or money order payable to the order of the Corporation or the
Rights Agent, the Rights Agent shall, subject to Section 20(j)
hereof, thereupon promptly (i) requisition from any transfer agent
of the Series R Preferred Stock certificates for the number of
shares of Series R Preferred Stock so elected to be purchased
(and/or requisition from the depository agent depository receipts
representing such number of fractional shares of Series R Preferred
Stock as are to be purchased, in which case certificates for the
fractional shares of Series R Preferred Stock so represented shall
be deposited with the depository agent) and the Corporation will
comply and hereby authorizes and directs such transfer agent (and
any such depository agent) to comply with all such requests, (ii)
<PAGE>
21
requisition from the Corporation the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section
14(b) hereof, and (iii) promptly after receipt of such Series R
Preferred Stock certificates cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such
holder, and, when appropriate, after receipt promptly deliver such
depository receipts and cash to or upon the order of the registered
holder of such Right Certificate, provided that in the case of a
purchase of securities, other than Series R Preferred Stock,
pursuant to Section 13 hereof, the Rights Agent shall promptly take
the appropriate actions corresponding to the foregoing clauses (i)
through (iii). In the event that the Corporation is obligated to
issue other securities of the Corporation, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other
securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
<PAGE>
22
contrary, neither the Rights Agent nor the Corporation shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the
Corporation shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
All Right Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange shall, if
surrendered to the Corporation or to any of its agents, be
delivered to the Rights Agent for cancellation or in cancelled form
or, if surrendered to the Rights Agent, shall be cancelled by it,
and no Right Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Rights
Agreement. The Corporation shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel
and retire, any Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the
Corporation or shall, at the written request of the Corporation,
<PAGE>
23
destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Corporation.
Section 9. Reservation and Availability of Shares of Series R
--------------------------------------------------
Preferred Stock.
- ---------------
(a) The Corporation covenants and agrees that at all times it
will cause to be reserved and kept available, out of and to the
extent of its authorized and unissued shares of Series R Preferred
Stock not reserved for another purpose (and, following the
occurrence of a Triggering Event, shares of Common Stock and other
securities) or shares of Series R Preferred Stock (and, following
the occurrence of a Triggering Event, shares of Common Stock and
other securities) held in its treasury, the number of shares of
Series R Preferred Stock (and, following the occurrence of a
Triggering Event, shares of Common Stock and other securities)
that, as provided in this Agreement, including Section 11(a) (iii)
hereof, will be sufficient to permit the exercise in full of all
outstanding Rights, provided that the Corporation shall not be
required to reserve and keep available shares of Common Stock or
other securities sufficient to permit the exercise in full of all
outstanding Rights pursuant to the adjustments set forth in Section
11(a) (ii), Section 11(a) (iii) or Section 13 hereof unless the
Rights become exercisable pursuant to such adjustments, and then
only to the extent the Rights become exercisable pursuant to such
adjustments.
(b) So long as the shares of Series R Preferred Stock (and,
<PAGE>
24
following the occurrence of a Triggering Event, shares of Common
Stock and other securities) issuable and deliverable upon the
exercise of Rights may be listed on any national securities
exchange, the Corporation shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) Upon the Rights becoming exercisable, the Corporation
shall use its best efforts to, if then necessary to permit the
offer and issuance of shares of Series R Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common
Stock and other securities) upon the exercise of Rights, register
and qualify such shares of Series R Preferred Stock (and, following
the occurrence of a Triggering Event, shares of Common Stock and
other securities) under the Securities Act and any applicable state
securities or "blue sky" laws (to the extent exemptions therefrom
are not available), cause such registration statement and
qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective
until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Expiration Date of the
Rights. The Corporation may temporarily suspend, for a period of
time not to exceed ninety days, the Exercisability of the Rights in
order to prepare and file a registration statement under the
Securities Act and permit it to become effective. Upon any such
<PAGE>
25
suspension, the Corporation shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained and until a registration
statement under the Securities Act (if required) shall have been
declared effective.
(d) The Corporation covenants and agrees that it will take
all such action as may be necessary to insure that all shares of
Series R Preferred Stock (and following the occurrence of a
Triggering Event, shares of Common Stock and other securities)
delivered upon exercise of Rights shall, to the extent applicable,
at the time of delivery of the certificates for such shares
(subject to payment of the aggregate Purchase Price in respect
thereof), be duly and validly authorized and issued and fully paid
and nonassessable shares in accordance with applicable law.
(e) The Corporation further covenants and agrees that it will
pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the Issuance
or delivery of the Right Certificates or of any shares of Series R
Preferred Stock (or other securities, as the case may be) upon the
exercise of Rights. The Corporation shall not, however, be required
to pay any transfer tax which may be payable in respect of any
<PAGE>
26
transfer or delivery of Right Certificates to a Person other than,
or the issuance or delivery of certificates for Series R Preferred
Stock (or other securities, as the case may be) upon exercise of
Rights in a name other than that of, the registered holder of the
Right Certificate, and the Corporation shall not be required to
issue or deliver a Right Certificate or certificate for Series R
Preferred Stock (or other securities, as the case may be) to a
person other than such registered holder until any such tax shall
have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been
established to the Corporation's satisfaction that no such tax is
due.
Section 10. Series R Preferred Stock Record Date.
------------------------------------
Each Person in whose name any certificate for shares of Series
R Preferred Stock (or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the Series R Preferred Stock
(or other securities, as the case may be) represented thereby on,
and such certificate shall be dated, the date upon which the Right
Certificate evidencing such rights was duly surrendered and payment
of the Purchase Price (and any applicable transfer taxes) was made.
Section 11. Adjustments to Number and Kind of Shares, Number
------------------------------------------------
of Rights or Purchase Price.
- ---------------------------
The number and kind of shares subject to purchase upon the
<PAGE>
27
exercise of each Right, the number of Rights outstanding and the
Purchase Price are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event that the Corporation shall at any time
after the Record Date (A) declare or pay any dividend on Series R
Preferred Stock payable in shares of Series R Preferred Stock, (B)
subdivide or split the outstanding shares of Series R Preferred
Stock into a greater number of shares, (C) combine or consolidate
the outstanding shares of Series R Preferred Stock into a smaller
number of shares or effect a reverse split of the outstanding
shares of Series R Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Series R Preferred Stock
(including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
or surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect immediately prior to
the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the
number and kind of shares of Series R Preferred Stock or capital
stock, as the case may be, issuable upon exercise of a Right on
such date, shall be proportionately adjusted so that the holder of
any Right exercised after such time shall be entitled to receive,
upon payment of an amount equal to (x) the Purchase Price in effect
immediately prior to the record date or effective date of such
dividend, subdivision, combination or reclassification multiplied
<PAGE>
28
by (y) the number of one one-hundredths of a share of Series R
Preferred Stock, or shares of capital stock, as the case may be, as
to which a Right was exercisable immediately prior to such date,
the aggregate number and kind of shares of Series R Preferred Stock
or capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such date, the holder thereof would
have owned upon such exercise and been entitled to receive, or
would be deemed to have owned, by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event, at any time after the date of this
Agreement
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, directly or
indirectly, other than pursuant to any transaction set
forth in Section 13(a) hereof, (1) shall merge with and
into the Corporation or any of its Subsidiaries or
otherwise combine with the Corporation or any of its
Subsidiaries and the Corporation or such Subsidiary shall
be the continuing or surviving corporation of such merger
or combination and the Common Stock of the Corporation
shall remain outstanding and no shares
<PAGE>
29
thereof shall be changed into or exchanged for stock or other
securities of the Corporation or of any other Person or cash
or any other property, or (2) shall, in one or more
transactions, other than in connection with the exercise
of a Right or Rights and other than in connection with
the exercise or conversion of securities exercisable for
or convertible into securities of the Corporation or of
any Subsidiary of the Corporation (which securities were
outstanding prior to the time the Acquiring Person became
such), transfer any assets or property to the Corporation
or any of its Subsidiaries in exchange (in whole or in
part) for any shares of any class of capital stock of the
Corporation or any of its Subsidiaries or any securities
exercisable for or convertible into shares of any class
of capital stock of the Corporation or any of its
Subsidiaries, or otherwise obtain from the Corporation or
any of its Subsidiaries, with or without consideration,
any additional shares of any class of capital stock of
the Corporation or any of its Subsidiaries or any
securities exercisable for or convertible into shares of
any class of capital stock of the Corporation or any of
its Subsidiaries (other than as part of a pro rata offer
or distribution by the Corporation or such Subsidiary to
all holders of such shares), or (3) shall sell, purchase,
lease, exchange,
<PAGE>
30
mortgage, pledge, transfer or otherwise acquire (other than
as a pro rata dividend) or dispose, in one transaction or a
series of transactions, to, from or with, as the case may be,
the Corporation or any of its Subsidiaries, assets (including
securities) on terms and conditions less favorable to the
Corporation or such Subsidiary than the Corporation or such
Subsidiary would be able to obtain in arm s length negotiation
with an unaffiliated third party, or (4) shall receive any
compensation from the Corporation or any of its
Subsidiaries for services other than compensation for
employment as a regular or part time employee, or fees
for serving as a director, at rates in accordance with
the Corporation s (or its Subsidiaries ) past practices,
or (5) shall receive the benefit, directly or indirectly
(except proportionately as a shareholder), or any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or tax advantage provided
by the Corporation or any of its Subsidiaries, or (6)
shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire (other than as a pro rata
dividend ) or dispose, in one transaction or a series of
transactions, to from or with, as the case may be, the
Corporation or any of its Subsidiaries (other than in
connection with the lines of business, if any, engaged
<PAGE>
31
in between the Corporation and the Acquiring Person or
Associate or Affiliate thereof prior to the time and the
Acquiring Person became such) assets having an aggregate
fair market value or more than $250,000,000; or
(B) any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring
Person, other than pursuant to a Permitted Transaction
or;
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities
(including any reverse stock split), or any
recapitalization of the Corporation or any merger or
consolidation of the Corporation with any of its
Subsidiaries or any other transaction or series of
transactions involving the Corporation or any of its
Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person or any Affiliate or
Associate of such Acquiring Person) which has the effect,
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any
class of equity securities of the Corporation or any of
its Subsidiaries, or securities exercisable for or
convertible into equity securities of the Corporation or
any of its Subsidiaries, which is directly or indirectly
beneficially owned by any
<PAGE>
32
Acquiring Person or any Affiliate or Associate of any
Acquiring Person;
then, subject to the last sentence of Section 23(a) hereof, and
except as otherwise provided in this Section 11, each holder of a
Right shall thereafter have the right to receive, upon exercise of
a Right in accordance with the terms of this Rights Agreement and
payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share of Series R Preferred Stock
for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, in lieu of Series R
Preferred Stock, such number of shares of Common Stock of the
Corporation as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the number of one one-hundredths
of a share of Series R Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a) (ii) Event, and (y) dividing that product by 50% of the
Current Market Price per share of Common Stock on the date of such
first occurrence (such number of shares is herein called the
"Adjustment Shares"), provided that the number of Adjustment Shares
shall be further appropriately adjusted to reflect any events of
the type described in Sections 11(a)(i),(b) or (c) hereof occurring
in respect of the Common Stock after the date of such first
occurrence; and provided, further, that if the transaction that
would otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then only the
<PAGE>
33
provisions of Section l3 hereof shall apply and no adjustment shall
be made pursuant to this Section 11(a)(ii).
Notwithstanding anything in this Rights Agreement to the
contrary, from and after the time (the "invalidation time") when
(A) any Person first becomes an Acquiring Person, other than
through a Permitted Transaction or (B) there occurs any event
described in Section 11(a)(ii) (A) or (C) in respect of any
Acquiring Person who became such through a Permitted Transaction,
any Rights that are beneficially owned by (x) such Acquiring Person
(or any Associate or Affiliate of such Acquiring Person), (y) a
transferee of such Acquiring Person (or any such Associate or
Affiliate) who becomes a transferee after the invalidation time or
(z) a transferee of such Acquiring Person (or any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with
the invalidation time pursuant to either (I) a transfer from the
Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred rights or (II) a transfer
which the Board of Directors has determined is part of a plan,
arrangement or understanding which has the purpose or effect of
avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further
action and any holder of such Rights shall thereafter have no
rights whatsoever with respect to such Rights under any provision
of this Rights Agreement. The Corporation shall use all reasonable
<PAGE>
34
effort to ensure that the provisions of this Section 11(a)(ii) and
of Section 4(b) hereof are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees
hereunder. No Right Certificate shall be issued pursuant to Section
3 hereof that represents Rights beneficially owned by an Acquiring
Person whose Rights would be void pursuant to the provisions of
this paragraph or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any
Rights to an Acquiring Person whose Rights would be void pursuant
to the provisions of this paragraph or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person whose Rights
would be void pursuant to the provisions of this paragraph shall be
cancelled.
(iii) In the event that the number of shares of Common
Stock which are authorized by the Corporation s Restated
Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii) and the Rights shall become so
exercisable, the Corporation shall, to the extent permitted by
applicable law and any material agreements in effect on the date
hereof to which the Corporation is a party, (A) determine the value
of the Adjustment Shares issuable upon the exercise of a Right,
<PAGE>
35
upon exercise of such Right, issue shares of Common Stock to the
extent available for the exercise in full of such Right and, to the
extent shares of Common Stock are not so available, make adequate
provision to substitute for the Adjustment Shares not received upon
exercise of such Right (1) cash, (2) other equity securities of the
Corporation (including, without limitation, shares, or units of
shares, of preferred stock which, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of
the Common Stock, are deemed in good faith by the Board of
Directors to have substantially the same value as shares of Common
Stock (such shares or units of shares of preferred stock are herein
called "Common Stock equivalents")), (3) debt securities of the
Corporation, (4) other assets, (5) a reduction of the Purchase
Price or (6) any combination of the foregoing, having a value
which, when added to the value of the shares of Common Stock
actually issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value, where such aggregate
value has been determined in good faith by the Board of Directors
based upon the advice of a nationally recognized independent
investment banking firm selected in good faith by the Board of
Directors, provided that if the Corporation shall not have made
adequate provision to deliver value pursuant to clause (B) above
within thirty days following the date (the "Section 11(a) (ii)
Trigger Date") which is the later of (x) the first occurrence of a
Section 11(a) (ii) Event and (y) the date on which the
<PAGE>
36
Corporation's right of redemption pursuant to Section 23(a)
expires, then the Corporation shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment
of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and cash have
an aggregate value equal to the excess of (x) the Current Value
over (y) the Purchase Price times the number of one one-hundredths
of a share of Series R Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a) (ii) Event. If the Board of Directors shall determine in good
faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the
Rights, the thirty day period set forth above may be extended to
the extent necessary, but not more than ninety days after the
Section 11(a) (ii) Trigger Date, in order that the Corporation may
seek shareholder approval for the authorization of such additional
shares (such thirty day period, as it may be extended, is herein
called the "Substitution Period"). To the extent that the
Corporation determines that some action must be taken pursuant to
the first or second sentence of this Section 11(a) (iii), the
Corporation (x) shall provide, subject to Section 11(a) (ii) hereof
and the last sentence of this Section 11(a) (iii), that such action
shall apply uniformly to all outstanding Rights and (y) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of
<PAGE>
37
additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension,
the Corporation shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the Current Market Price per
share of the Common Stock on the Section 11(a)(ii) Trigger Date and
the per share or per unit value of any "Common Stock equivalent"
shall be deemed to equal the Current Market Price per share of the
Common Stock on such date. The Board of Directors may, but shall
not be required to, establish procedures to allocate the right to
receive Common Stock upon the exercise of the Rights among holders
of Rights pursuant to this Section 11(a)(iii).
(b) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants to all holders of Series R
Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five calendar days after such record
date) Series R Preferred Stock, shares having the same rights,
privileges and preferences as the Series R Preferred Stock
("equivalent Series R Preferred Stock") or securities convertible
into Series R Preferred Stock or equivalent Series R Preferred
Stock at a price per share of Series R Preferred Stock or
equivalent Series R Preferred Stock (or having a conversion price
<PAGE>
38
per share, if a security convertible into Series R Preferred Stock
or equivalent Series R Preferred Stock) less than the Current
Market Price per share of Series R Preferred Stock on such record
date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator
of which shall be the number of shares of Series R Preferred Stock
outstanding on such record date, plus the number of shares of
Series R Preferred Stock which the aggregate offering price of the
total number of shares of Series R Preferred Stock and equivalent
Series R Preferred Stock (and the aggregate initial conversion
price of the convertible securities so to be offered, including the
price required to be paid to purchase such convertible security)
would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Series R Preferred Stock
outstanding on such record date, plus the number of additional
shares of Series R Preferred Stock or equivalent Series R Preferred
Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible).
In case such subscription price may be paid by delivery of
consideration part or all of which may be in a form other than
cash, the value of such non-cash consideration shall be as
determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the
Rights Agent. Shares of Series R Preferred Stock owned by or held
<PAGE>
39
for the account of the Corporation shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) In case the Corporation shall fix a record date for a
distribution to all holders of Series R Preferred Stock (including
any such distribution made in connection with a consolidation or
merger in which the Corporation is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the
Corporation), assets (other than a dividend payable in Series R
Preferred Stock, but including any dividend payable in stock other
than Series R Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the
Current Market Price per share of Series R Preferred Stock on such
record date, less the fair market value (as determined in good
faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or
<PAGE>
40
warrants applicable to a share of Series R Preferred Stock and the
denominator of which shall be such Current Market Price per share
of Series R Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event
that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder
(including computations pursuant to Section 14 hereof), other than
computations made pursuant to Section 11(a) (iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share
of such stock for the thirty consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date, and for
purpose of computations made pursuant to Section 11(a) (iii)
hereof, the "Current Market Price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices
per share of such stock for the ten consecutive Trading Days
immediately following such date provided that in the event that the
Current Market Price per share of Common Stock is determined during
a period following the announcement by the issuer of such stock of
(x) any dividend or distribution on such stock (other than a
regular quarterly cash dividend) or (y) any subdivision,
combination or reclassification of the stock, and prior to the
expiration of the requisite thirty Trading Day or ten Trading Day
<PAGE>
41
period, as set forth above, the ex-dividend date for such dividend
or distribution, or the effective date of such subdivision,
combination or reclassification occurs, then, and in each such
case, the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if the
shares of Common Stock are not listed or admitted to trading on the
NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or
such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in such stock selected by
the Board of Directors. If on any such date no market maker is
<PAGE>
42
making a market in the Common Stock, the fair value of such shares
on such date as determined in good faith by the Board of Directors
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange in which the shares of
Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange,
a Business Day. If the Common Stock is not publicly held or not so
listed or traded, "Current Market Price" per share shall mean the
fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share of Series R Preferred Stock shall
be determined in the same manner as set fourth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the current market price per share of Series
R Preferred Stock cannot be determined in the manner provided above
or if the Series R Preferred Stock is not publicly held or listed
or traded in a manner described in clause (i) of this Section
11(d), the "Current Market Price" per share of Series R Preferred
Stock shall be conclusively deemed to be an amount equal to one
hundred (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalization with
<PAGE>
43
respect to the Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share of the
Common Stock. If neither the Common Stock nor the Series R
Preferred Stock is publicly held or so listed or traded, "Current
Market Price" per share of the Series R Preferred Stock shall mean
the fair value per share as determined in good faith by the Board
of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Rights Agreement, the "Current
Market Price" of one one-hundredth of a share of Series R Preferred
Stock shall be equal to the "Current Market Price" of one share of
Series R Preferred Stock divided by one hundred.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one
percent in the Purchase Price, provided that any adjustments which
by reason of this Section 11(e) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest one ten-thousandth of a share,
as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three years from the date of
the transaction which mandates such adjustment or (ii) one month
prior to the Expiration Date.
<PAGE>
44
(f) If as a result of an adjustment made pursuant to Section
11(a)(i) or (ii) or Section 13(a) hereof, the holder of any Right
thereafter exercised shall become entitled to receive any shares of
capital stock other than Series R Preferred Stock, thereafter the
number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the applicable provisions with respect to the shares
of Series R Preferred Stock contained in Sections 7, 9, 10, 11, 13
and 14 hereof, and such provisions shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Corporation
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase
Price, the number of one one-hundredths of a share of Series R
Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Corporation shall have exercised its election
as provided in Section 11(i) hereof, upon each adjustment of the
Purchase Price as a result of the calculations made in Sections
11(b) and (c) hereof, each Right outstanding immediately prior to
the making of such adjustment shall thereafter evidence the right
to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a share of Series R Preferred Stock (calculated
<PAGE>
45
to the nearest ten-thousandth) obtained by (i) multiplying (x) the
number of one one-hundredths of a share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price
and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
(i) The Corporation may elect, on or after the date of any
adjustment of the Purchase Price, to adjust the number of Rights,
in addition to the adjustment provided in Section 11(p) hereof.
Each of the Rights outstanding after the adjustment in the number
of Rights shall be exercisable for a number of one one-hundredths
of a share of Series R Preferred Stock equal to the number of one
one-hundredths of a share of Series R Preferred Stock for which a
Right was exercisable immediately prior to such adjustment
multiplied by a fraction, the numerator of which shall be the total
number of Rights outstanding immediately prior to such adjustment
and the denominator of which shall be the total number of Rights
outstanding immediately following such adjustment. The Corporation
shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten days later than the date of the
public announcement. If Right Certificates have been issued, upon
<PAGE>
46
each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to
be distributed to holders of record of Right Certificates on such
record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the
Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates
held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Corporation, new Right
Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the
manner provided for herein (and may bear, at the option of the
Corporation, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Series R
Preferred Stock issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one one-hundredths of
a share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
<PAGE>
47
reducing the Purchase Price below one one-hundredth of the then par
value of a share of Series R Preferred Stock issuable upon exercise
of the Rights, the Corporation shall take any corporate action,
including using its best efforts to obtain any required shareholder
approvals, which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Series R Preferred Stock.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Corporation may elect to
defer until the occurrence of such event the issuance to the holder
of any Right exercised after much record date the shares of Series
R Preferred Stock and cash, other capital stock or securities of
the Corporation, if any, issuable upon such exercise over and above
the shares of Series R Preferred Stock and cash, other capital
stock or securities of the Corporation, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such
adjustment, provided that the Corporation shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Series R
Preferred Stock and cash, other capital stock or securities upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Corporation shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments
<PAGE>
48
expressly required by this Section 11, as and to the extent that in
their good faith judgment the Board of Directors shall determine to
be advisable in order that any (i) consolidation or subdivision of
the Series R Preferred Stock, (ii) issuance for cash of any shares
of Series R Preferred Stock at less than the current market price,
(iii) issuance for cash of shares of Series R Preferred Stock or
securities which by their terms are convertible into or
exchangeable for shares of Series R Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred
to in this Section 11, hereafter made by the Corporation shall not
be taxable to holders of its Series R Preferred Stock.
(n) The Corporation covenants and agrees that it shall not,
at any time after the earlier of the Distribution Date or the Stock
Acquisition Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person or (iii) sell or transfer (or permit
any Subsidiary to sell or transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Corporation and its
Subsidiaries (taken as a whole) to, any other Person or Persons if
(x) at the time of or immediately after such consolidation, merger,
sale or other transaction there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which
would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (y) prior to, simultaneously
with or immediately after such consolidation, merger, sale or other
<PAGE>
49
transaction, the shareholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates or (z) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the
Rights.
(o) The Corporation covenants and agrees that, after the
earlier of the Distribution Date or the Stock Acquisition Date, it
will not, except as permitted by Sections 23 or 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will
diminish substantially or eliminate the benefits intended to be
afforded by the Rights.
(p) Anything in this Rights Agreement to the contrary
notwithstanding, in the event that the Corporation shall at any
time after the Record Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights
associated with each share of Common Stock then outstanding, or
issued or delivered thereafter, shall be proportionately adjusted
so that the number of Rights thereafter associated with each share
of Common Stock following any such event shall equal the result
<PAGE>
50
obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction
the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certification of Adjustments. Whenever an
----------------------------
adjustment is made as provided in Sections 11 and 13 hereof, the
Corporation shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts giving rise to
such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Common Stock a copy of such certificate
and (c) mail a brief summary thereof to each record holder of a
Right (or, if prior to the Distribution Date, to each holder of
Common Stock) in accordance with Section 25 hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give such
notice shall not affect the validity of or the force or effect of
or the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any certificate prepared by the
Corporation pursuant to Sections 11 and 13 hereof and on any
adjustment therein contained.
<PAGE>
51
Section 13. Consolidation, Merger or Sale or Transfer of
--------------------------------------------
Assets or Earning Power.
- -----------------------
(a) In the event that, at any time on or after the Stock
Acquisition Date, directly or indirectly, (i) the Corporation shall
consolidate with any other Person or Persons or shall merge with
and into any other Person or Persons (other than a Subsidiary of
the Corporation in a transaction that complies with Section 11(o)
hereof) and the Corporation shall not be the surviving or
continuing corporation of such merger, or (ii) any Person or
Persons other than Subsidiary of the Corporation in a transaction
that complies with Section 11(o) hereof) shall merge with and into
the Corporation, and the Corporation shall be the continuing or
surviving corporation of such merger and, in connection with such
merger, all or part of the outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any
other Person or of the Corporation or cash or any other property,
or (iii) the Corporation or one or more of its Subsidiaries shall
sell or otherwise transfer to any other Person (other than a
Subsidiary of the Corporation in a transaction that complies with
Section 11(o) hereof) or any Affiliate or Associate of such Person,
in one or more transactions, or the Corporation or one or more of
its Subsidiaries shall sell or otherwise transfer to any Person
(other than a Subsidiary of the Corporation in a transaction that
complies with Section 11(o) hereof) in one or a series of related
transactions, assets or earning power aggregating more than 50% of
<PAGE>
52
the assets or earning power of the Corporation and its Subsidiaries
(taken as a whole), then, on the first occurrence of any such
event, except as may be contemplated by Section 13(d), proper
provision shall be made so that (A) each holder of record of a
Right, other than as provided in Section 11(a) (ii) hereof, shall
thereafter have the right to receive, upon the exercise thereof and
payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section
13 Event (or, if earlier, the first occurrence of a Section 11(a)
(ii) Event) in accordance with the terms of this Rights Agreement,
such number of shares of validly issued, fully paid and non-
assessable and freely tradeable Common Stock of the Principal Party
(as defined herein) not subject to any liens, encumbrances, rights
of first refusal or other adverse claims, as shall be equal to the
result obtained by (1) multiplying the then current Purchase Price
by the number of one one-hundredths of a share of Series R
Preferred Stock for which a Right was exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if earlier, the
first occurrence of a Section 11(a) (ii) Event), and (2) dividing
that product by 50% of the Current Market Price (determined as
provided in Section 11(d) hereof with respect to the Common Stock)
per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event, provided that the
Purchase Price and the number of shares of Common Stock of such
<PAGE>
53
Principal Party issuable upon exercise of each Right shall be
further adjusted as provided in this Rights Agreement to reflect
any events occurring after the date of the first occurrence of a
Section 13 Event, (B) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Corporation pursuant to this
Rights Agreement, (C) the term "Corporation" for all purposes of
this Rights Agreement shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions
of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event, and (D) such
Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares of its Common
Stock in accordance with Section 9 hereof) in connection with the
consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as
nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights,
provided that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets,
recapitalization, reclassification of shares, reorganization or
other extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Purchase Price, such cash,
shares, rights, warrants and other property which such holder would
<PAGE>
54
have been entitled to receive had he, at the time of such
transaction, owned the shares of Common Stock of the Principal
Party purchasable upon the exercise of a Right, and such Principal
Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights in accordance with the terms
hereof for such cash, shares, rights, warrants and other property
and (E) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
(i) or (ii) of the first sentence of Section 13(a)
hereof: (A) the Person that is the issuer of the
securities into which shares of Common Stock of the
Corporation are converted in such merger or
consolidation, or, if there is bore than one such issuer,
the issuer the Common Stock of which has the greatest
aggregate market value of shares outstanding or (B) if no
securities are so issued, (x) the Person that is the
other party to the merger, such Person survives said
merger, or, if there is more than one such Person, the
Person the Common Stock of which has the greatest
aggregate market value of shares outstanding or (y) if
the Person that is the other party to the merger does not
survive the merger, the Person that does survive the
<PAGE>
55
merger (including the Corporation if it survives) or (z)
the Person resulting from the consolidation; and
(ii) in the case of any transaction described in
(iii) of the first sentence in Section 13(a)
hereof, the Person that is the party receiving the
greatest portion of the assets or earning power
transferred pursuant to such transaction or
transactions, or, if each Person that is a party
to such transaction or transactions receives the
same portion of the assets or earning power so
transferred or if the Person receiving the
greatest portion of the assets or earning power
cannot be determined, whichever of such Persons as
is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding;
provided that in any such case described in the foregoing clause
- --------
(b)(i) or (b)(ii), if the Common Stock of such Person is not at
such time or has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and (1) if
such Person is a direct or indirect Subsidiary of another Person
the Common Stock of which is and has been so registered, the term
"Principal Party" shall refer to such other Person, or (2) if such
Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of
<PAGE>
56
such Persons is the issuer of the Common Stock having the greatest
aggregate market value of shares outstanding, or (3) if such Person
is owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in clauses (1) and (2) above shall
apply to each of the owners having an interest in the venture as if
the Person owned by the joint venture was a Subsidiary of both or
all of such joint venturers, and the Principal Party in each such
case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of
such interests.
(c) The Corporation shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) hereof unless
prior thereto the Corporation and the Principal Party involved
therein shall have executed and delivered to the Rights Agent an
agreement confirming that the requirements of Sections 13(a) and
(b) hereof shall promptly be performed in accordance with their
terms and that such consolidation, merger, sale or transfer of
assets shall not result in a default by the Principal Party under
this Rights Agreement as the same shall have been assumed by the
Principal Party pursuant to Sections 13(a) and (b) hereof and
providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement
under the Securities Act, if necessary, with respect to
<PAGE>
57
the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, use its best
efforts to cause such registration statement to become
effective as soon as practicable after such filing and
use its best efforts to cause such registration statement
to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the
Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts, if the Common Stock of
the Principal Party shall become listed on a national
securities exchange, to list (or continue the listing of)
the Rights and the securities purchasable upon exercise
of the Rights on such securities exchange and, if the
Common Stock of the Principal Party shall not be listed
on a national securities exchange, to cause the Rights
and the securities purchasable upon exercise of the
Rights to be reported by NASDAQ or such other system then
in use;
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply
in all respects with the requirements for registration on
Form 10 (or any successor form) under the Exchange Act;
and
(iv) obtain waivers of any rights of first refusal
<PAGE>
58
or preemptive rights in respect of the shares of Common
Stock of the Principal Party subject to purchase upon
exercise of outstanding Rights.
In the event that any of the transactions described in Section
13(a) hereof shall occur at any time after the occurrence of a
transaction described in Section 11(a) (ii) hereof, the Rights
which have not theretofore been exercised shall thereafter be
exercisable in the manner described in Section 13(a) hereof.
(d) Furthermore, in case the Principal Party which is to be
a party to a transaction referred to in this Section 13 has
provision in any of its authorized securities or in its Certificate
of Incorporation or By-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in
this Section 13, shares of Common Stock of such Principal Party at
less than the then Current Market Price per share (determined
pursuant to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than
such then Current Market Price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special
payment, tax or similar provisions in connection with the issuance
of the Common Stock of such Principal Party pursuant to the
provisions of Section 13, then, in such event, the Corporation
hereby agrees with each holder of Rights that it shall not
<PAGE>
59
consummate any such transaction unless prior thereto the
Corporation and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have
been cancelled, waived or amended, or that the authorized
securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Corporation shall not be required to issue fractions
of Rights or to distribute Right Certificates which evidence
fractional Rights. If the Corporation shall not issue fractions of
Rights, in lieu of such fractional Rights, there shall be paid to
the holders of record of the Right Certificates with regard to
which such fractional Rights would otherwise be issuable an amount
in cash equal to the same fraction of the then current market value
of a whole Right. For the purposes of this Section 14(a), the then
current market value of a Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which
fractional Rights would have been issuable, determined in the same
manner as the closing price of a share of Common Stock shall be
determined pursuant to Section 11(d) hereof.
(b) The Corporation shall not be required to issue fractions
of shares of Series R Preferred Stock or other securities of the
<PAGE>
60
Corporation upon exercise of the Rights (other than fractions of
shares of Series R Preferred Stock which are integral multiples of
one one-hundredth of a share) or to distribute certificates which
evidence fractional shares (other than fractions of shares of
Series R Preferred Stock which are integral multiples of one one-
hundredth of a share); provided that in lieu of issuing fractions
of shares of Series R Preferred Stock, the Corporation may, at its
election, deliver depositary receipts evidencing fractions of
shares pursuant to an appropriate agreement between the Corporation
and a depositary selected by it, but only if such agreement shall
provide that the holders of such depositary receipts shall have all
of the rights, privileges and preferences to which they would be
entitled as beneficial owners of the Series R Preferred Stock. With
respect to fractional shares that are not integral multiples of one
one-hundredth of a share, if the Corporation does not issue such
fractional shares or deliver depositary receipts in lieu thereof,
there shall be paid to the holders of record of Right Certificates
at the time such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction of the then
current market value of a share of Series R Preferred Stock or
other securities of the Corporation. For purposes of this Section
14(b), the then current market value of a share of Series R
Preferred Stock or other securities of the Corporation shall be the
closing price thereof for the Trading Day immediately prior to the
date of such exercise, as determined pursuant to Section 11(d) (ii)
<PAGE>
61
hereof or in the same manner as the closing price of a share of
Series R Preferred Stock shall be determined pursuant to Section
11(d) (ii) hereof, as the case may be.
(c) Following the occurrence of a Triggering Event, the
Corporation shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, the Corporation may pay
to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one share of
Common Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock shall be the closing
price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of a Right
expressly waives his right to receive any fractional Right or any
fractional shares of Series R Preferred Stock or other securities
of the Corporation upon exercise of a Right, except as provided by
this Section 14.
Section 15. Rights of Action. All rights of action in respect
of this Rights Agreement are vested in the respective holders of
record of the Right Certificates (and, prior to the Distribution
<PAGE>
62
Date, the holders of record of the Common Stock); and any holder of
record of any Right Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent
or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and
for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Corporation or any other
Person to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Rights
Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for any
breach of this Rights Agreement and, accordingly, that they will be
entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Rights Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right by accepting the same consents and agrees with the
Corporation and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will not be
evidenced by a Right Certificate and will be transferable only in
connection with the transfer of Common Stock;
<PAGE>
63
(b) after the Distribution Date, the Right Certificates will
be transferable only on the registry books of the Rights Agent if
surrendered at the designated office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer;
(c) the Corporation and the Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificate or the associated Common Stock
certificate made by anyone other than the Corporation or the Rights
Agent or the transfer agent of the Common Stock) for all purposes
whatsoever, and neither the Corporation nor the Rights Agent shall
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Rights Agreement to the
contrary, neither the Corporation nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result
of its inability to perform any of its obligations under this
Rights Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation, provided that the Corporation must
<PAGE>
64
use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder.
-------------------------------------------------
No holder of a Right Certificate, as such, shall be entitled
to vote, receive dividends in respect of or be deemed for any
purpose to be the holder of Series R Preferred Stock or any other
securities of the Corporation which may at any time be issuable
upon the exercise of the Rights, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a
shareholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to shareholders
at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions
affecting shareholders, or to receive dividends or subscription
rights in respect of any such stock or securities, or otherwise,
until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Corporation agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
<PAGE>
65
incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder.
The Corporation also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability or expense
incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent for anything done or omitted to be done by
the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the cost and
expenses of defending against any claim of liability in the
premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Rights
Agreement in reliance upon any Right Certificate, certificate for
Series R Preferred Stock or other securities of the Corporation,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to
be genuine and to be signed, executed and, where necessary,
guaranteed, verified or acknowledged, by the proper Person or
Persons.
Section 19. Merger or Consolidation or Change of Name of
--------------------------------------------
Rights Agent.
- ------------
(a) Any corporation into which the Rights Agent or any
<PAGE>
66
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Rights Agreement without the execution or filing
of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Rights Agreement, any
of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned, and in case at that time any
of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates
either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent, and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt
<PAGE>
67
the countersignature under its prior name and deliver such Right
Certificates so countersigned; and in case at that time any of the
Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior
name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
----------------------
undertakes the duties and obligations imposed by this Rights
Agreement upon the following terms and conditions, by all of which
the Corporation and the holders of Right Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Corporation), and the opinion of such
counsel shall be full and complete authorization and protection to
the Rights Agent as to any action taken or omitted to be taken by
it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Rights Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the
Corporation prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by the Chairman of the
<PAGE>
68
Board, the President, any Vice Chairman, any Senior Executive Vice
President, any Executive Vice President, any Senior Vice President
or the Secretary or any Assistant Secretary of the Corporation and
delivered to the Rights Agent, and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Rights
Agreement or in the Right Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the
Corporation only.
(e) The Rights Agent shall not (i) be responsible for (A) the
validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or the
validity or execution of any Right Certificate (except its
countersignature thereof), (B) any breach by the Corporation of any
covenant or condition contained in this Rights Agreement or in any
Right Certificate, (C) any adjustment required under the provisions
of Section 11 or 13 hereof or (D) the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the
<PAGE>
69
exercise of Rights evidenced by Right Certificates after actual
notice of any such adjustment) or (ii) by any act hereunder be
deemed to make any representation or warranty as to the
authorization or reservation of any shares of Series R Preferred
Stock to be issued pursuant to this Rights Agreement or any Right
Certificate or as to whether any shares of Series R Preferred Stock
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent
of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice
Chairman, any Senior Executive Vice President, any Executive Vice
President, any Senior Vice President or the Secretary or any
Assistant Secretary of the Corporation, and to apply to such
officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any shareholder, director, officer
<PAGE>
70
or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Corporation or become pecuniarily
interested in any transaction in which the Corporation may be
interested, or contract with or lend money to the Corporation or
otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the
Corporation or for any other entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or
for any loss to the Corporation resulting from any such act,
default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate
contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has
either not been completed or indicates an affirmative response to
clause l or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without
first consulting with the Corporation.
<PAGE>
71
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties
under this Rights Agreement upon thirty days' notice in writing
mailed to the Corporation and to each transfer agent of the Common
Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Corporation may remove
the Rights Agent or any successor Rights Agent (with or without
cause) upon thirty days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock by registered or certified mail,
and to the holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Corporation shall appoint a
successor to the Rights Agent. Notwithstanding the foregoing
provisions of this Section 21, in no event shall the resignation or
removal of a Rights Agent be effective until a successor Rights
Agent shall have been appointed and have accepted such appointment.
If the Corporation shall fail to make such appointment within a
period of thirty days after such removal or after it has been
notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Corporation), then the incumbent
Rights Agent or the holder of record of any Right Certificate may
apply to any court of competent jurisdiction for the appointment of
<PAGE>
72
a new Rights Agent. Any successor Rights Agent, whether appointed
by the Corporation or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or
any State thereof, in good standing, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority
and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an
Affiliate controlled by a corporation described in clause (a) of
this sentence. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further
act or deed, but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the
Corporation shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common
Stock, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
<PAGE>
73
Section 22. Issuance of New Right Certificates.
----------------------------------
Notwithstanding any of the provisions of this Rights Agreement or
of the Rights to the contrary, the Corporation may, at its option,
issue new Right Certificates evidencing Rights in such form as may
be approved by the Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of
shares of stock or other securities or property purchasable under
the Right Certificates made in accordance with the provisions of
this Rights Agreement. In addition, in connection with the Issuance
or sale of shares of Common Stock following the Distribution Date
and prior to the redemption or expiration of the Rights, the
Corporation may, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereafter issued by the Corporation, or in
any other case, if deemed necessary or appropriate by the Board of
Directors, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale, provided
that (i) no such Right Certificate shall be issued if, and to the
extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax
consequences to the Corporation or the Person to whom such Rights
Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
<PAGE>
74
Section 23. Redemption.
----------
(a) The Board of Directors may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date, subject to extension by the
Board of Directors as provided in Section 26 hereof, or (ii) the
close of business on the Final Expiration Date, cause the
Corporation to redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.01 per Right, as
such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the
date hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). Notwithstanding anything contained in this
Rights Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of any Section 11(a) (ii)
Event until such time as the Board of Directors' right of
redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights, and without any further
action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of
Rights shall be to receive the Redemption Price, without any
interest thereon. Within ten days after the action of the Board of
Directors ordering the redemption of the Rights, the Corporation
shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at
<PAGE>
75
their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent of the Common Stock. Any notice which
is mailed in the manner provided herein shall be deemed given,
whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the
Redemption Price will be made and the time for such payment. The
failure to give notice required by this Section 23(b) or any defect
therein shall not affect the legality or validity of the action
taken by the Corporation.
Section 24. Notice of Proposed Actions.
--------------------------
(a) In case the Corporation, after the earlier of the
Distribution Date or the Stock Acquisition Date, shall propose (i)
to effect any of the transactions referred to in Section 11(a) (i)
hereof or to pay any dividend to the holders of record of its
Series R Preferred Stock payable in stock of any class or to make
any other distribution to the holders of record of its Series R
Preferred Stock (other than a regular quarterly cash dividend), or
(ii) to offer to the holders of record of its Series R Preferred
Stock options, warrants, or other rights to subscribe for or to
purchase shares of Series R Preferred Stock (including any security
convertible into or exchangeable for Series R Preferred Stock) or
shares of stock of any class or any other securities, options,
warrants, convertible or exchangeable securities or other rights,
<PAGE>
76
or (iii) to effect any reclassification of its Series R Preferred
Stock or any recapitalization or reorganization of the Corporation,
or (iv) to effect the liquidation, dissolution or winding up of the
Corporation, then, in each such case, the Corporation shall give to
each holder of record of a Right Certificate, in accordance with
Section 25 hereof, notice of such proposed action, which shall
specify the record date for the purposes of such transaction
referred to in Section ll(a)(i), or such dividend or distribution,
or the date on which such reclassification, recapitalization,
reorganization, liquidation, dissolution or winding up is to take
place and the record date for determining participation therein by
the holders of record of Series R Preferred Stock, if any such date
is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least ten days
prior to the record date for determining holders of record of
Series R Preferred Stock for purposes of such action, and in the
case of any such other action, at least ten days prior to the date
of the taking of such proposed action or the date of participation
therein by the holders of record of Series R Preferred Stock,
whichever shall be the earlier. The failure to give notice required
by this Section 24 or any defect therein shall not affect the
legality or validity of the action taken by the Corporation or the
vote upon any such action.
(b) In case any of the transactions referred to in Section
11(a)(ii) (A) or (C) or Section 13 of this Rights Agreement are
<PAGE>
77
proposed after the earlier of the Distribution Date or the Stock
Acquisition Date, then, in any such case, (i) the Corporation shall
give to each holder of Rights, in accordance with Section 25
hereof, notice of the proposal of such transaction at least ten
days prior to consummating such transaction, which notice shall
specify the proposed event and the consequences of the event to
holders of Rights under Section 11(a) (ii) (A) or (C) or Section 13
hereof, as the case may be, and, upon consummating such
transaction, shall similarly give notice thereof to each holder of
Rights and (ii) all references in the preceding paragraph (a) to
Series R Preferred Stock shall be deemed thereafter to refer to
Common Stock or other securities, as appropriate.
Section 25. Notices. Notices or demands authorized by this
-------
Rights Agreement to be given or made by the Rights Agent or by the
holder of record of any Right Certificate or Right to or on behalf
of the Corporation shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
DC Holdco, Inc.
500 South Buena Vista Street
Burbank, California 91521
Attention: David K. Thompson
Senior Vice President -
Assistant General Counsel
Subject to the provisions of Section 21 hereof, any notice or
<PAGE>
78
demand authorized by this Rights Agreement to be given or made by
the Corporation or by the holder of record of any Right Certificate
or Right to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Corporation) as
follows:
The Bank of New York
Stock Transfer Administration
12th Floor West
101 Barclay Street
New York, New York
Attention: Jeannine Jeffers
Assistant Treasurer
Notices or demands authorized by this Rights Agreement to be given
or made by the Corporation or the Rights Agent to the holder of
record of any Right Certificate or Right shall be sufficiently
given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as it
appears upon the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the Transfer Agent.
Section 26. Supplements and Amendments. For as long as the
--------------------------
Rights are then redeemable and except as provided in the
penultimate sentence of this Section 26, the Corporation may in its
sole and absolute discretion, and the Rights Agent shall if the
Corporation so directs, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights or the
Common Stock. At any time when the Rights are not then redeemable
<PAGE>
79
and except as provided in the penultimate sentence of this Section
26, the Corporation may, and the Rights Agent shall if the
Corporation so directs, supplement or amend this Agreement without
the approval of any holders of Rights Certificates in order (a) to
cure any ambiguity, (b) to correct or supplement any provision
contained herein which may be defective or inconsistent with any
other provisions herein, (c) to shorten or lengthen any time period
hereunder or (d) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or
desirable; provided, that no such supplement or amendment shall
--------
adversely affect the interests of the holders of Right
Certificates as such (other than any Acquiring Person who became
such other than pursuant to a Permitted Transaction or an Affiliate
or Associate of such an Acquiring Person); provided, further, that
-----------------
this Rights Agreement may not be supplemented or amended to
lengthen, pursuant to clause (c) of this sentence, (i) a time
period relating to when the Rights may be redeemed or this
Agreement amended at the sole and absolute discretion of the
Corporation at such time as the Rights are not then redeemable or
(ii) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, or
the benefits to, the holders of Rights as such (other than any
Acquiring Person who became such other than pursuant to a Permitted
Transaction or an Affiliate or Associate of such an Acquiring
Person). Upon the delivery of a certificate from an appropriate
<PAGE>
80
officer of the Corporation which states that the proposed
supplement or amendment is in compliance with the terms of this
Section 26, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date or,
except as contemplated herein, the number of one one-hundredths of
a share of Series R Preferred Stock for which a Right is
exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of
the holders of Common Stock.
Section 27. Successors. All of the covenants and provisions of
----------
this Rights Agreement by or for the benefit of the Corporation or
the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 28. Benefits of this Rights Agreement. Nothing in this
---------------------------------
Rights Agreement shall be construed to give to any person or
corporation other than the Corporation, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Stock) any legal or equitable right,
remedy or claim under this Rights Agreement, and this Rights
Agreement shall be for the sole and exclusive benefit of the
Corporation, the Rights Agent and the holders of record of the
<PAGE>
81
Right Certificates (and, prior to the Distribution Date, the Common
Stock).
Section 29. Delaware Contract. This Rights Agreement and each
-----------------
Right Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of
such state applicable to contracts to be made and performed
entirely within such state.
Section 30. Counterparts. This Rights Agreement may be
------------
executed in any number of counterparts, each of such counterparts
shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
Section 31. Descriptive Headings. Descriptive headings of the
--------------------
several sections of this Rights Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 32. Determination and Actions by the Board of
-----------------------------------------
Directors, Etc.
- --------------
For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular
<PAGE>
82
time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with
the provisions of Rule l3d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the
Corporation shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors or the Corporation
or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration
of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for
purpose of clause (ii) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall
(i) be final, conclusive and binding on the Corporation, the Rights
Agent, the holders of the Right Certificates and all other parties,
and (ii) not subject the Board of Directors to any liability to the
holders of the Right Certificates.
Section 33. Severability. If any term, provision,
------------
covenant or restriction of this Rights Agreement is held by a court
of competent jurisdiction or other authority to be invalid,
illegal, or unenforceable, the remainder of the terms, provisions,
<PAGE>
83
covenants and restrictions of this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this
Rights Agreement to be duly executed, all as of the day and year
first above written.
Attest: DC HOLDCO, INC.
By: /s/ Marsha L. Reed By: /s/ David K. Thompson
---------------------- ----------------------------
Name: Marsha L. Reed Name: David K. Thompson
Title: Corporate Secretary Title: Senior Vice President
Assistant General Counsel
Attest: THE BANK OF NEW YORK
By: /s/ Kevin M. Brennnan By: /s/ Patrick Falciglia
--------------------- ---------------------
Name: Kevin M. Brennan Name: Patrick Falciglia
Title: Vice President Title: Vice President
<PAGE>
EXHIBIT A
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET
FORTH IN THE RESTATED CERTIFICATE OF
INCORPORATION OR IN ANY AMENDMENT
THERETO, OF THE SERIES R
PREFERRED STOCK
($.01 Par Value Per Share)
OF
DC HOLDCO, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned hereby certifies that the following resolution was adopted
by the Board of Directors of DC Holdco, Inc., a Delaware corporation (the
"Corporation"), on November 8, 1995:
RESOLVED, that pursuant to authority conferred on the Board of Directors of
the Corporation by its Restated Certificate of Incorporation, a Series R
Preferred Stock of the Corporation is created and the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
or other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated "Series R Preferred Stock" ("Series R
<PAGE>
2
Preferred Stock") and the number of shares constituting such series shall be
8,000,000. Shares of Series R Preferred Stock shall have a par value of $.01
per share.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series R Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 100 times the aggregate per share amount of all cash
dividends declared or paid on the Common Stock, $.01 par value per share, of the
Corporation ("Common Stock") and (ii) a preferential cash dividend (a
"Preferential Dividend"), if any, on the fifteenth day of January, April, July
and October of each year (each a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series R Preferred Stock, in an amount equal to $1.00
per share of Series R Preferred Stock less the per share amount of all cash
dividends declared on the Series R Preferred Stock pursuant to clause (i) of
this sentence since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series R Preferred Stock. In
the event the Corporation shall, at any time
<PAGE>
3
after the issuance of any share or fraction of a share of series R Preferred
Stock, make any distribution on the shares of Common Stock, whether by way of a
dividend or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Corporation or otherwise, which is payable in cash or
any debt security, debt instrument, real or personal property or any other
property (other than cash dividends subject to clause (i) of the immediately
preceding sentence and other than a distribution of shares of Common Stock or
other capital stock of the Corporation and other than a distribution of rights
or warrants to acquire any such share, including any debt security convertible
into or exchangeable for any such share, at a price less than the Current Market
Price of such share), then and in each such event the Corporation shall
simultaneously pay on each then outstanding share of Series R Preferred Stock of
the Corporation a distribution, in like kind, of 100 times (subject to the
provisions for adjustment hereinafter set forth) such distribution paid on a
share of Common Stock. The dividends and distributions on the Series R Preferred
Stock to which holders thereof are entitled pursuant to clause (i) of the first
sentence of this paragraph and the second sentence of this paragraph are
hereinafter referred to as "Participating Dividends," and the multiple of cash
and non-cash dividends on the Common Stock applicable to the determination of
the Participating Dividends, which shall be 100 initially but shall be adjusted
from time to time as hereinafter provided, is hereinafter referred to as the
<PAGE>
4
"Dividend Multiple." In the event the Corporation shall at any time after
November 8, 1995 declare or pay any dividend or make any distribution on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such event the Dividend Multiple thereafter applicable to the determination of
the amount of Participating Dividends which holders of shares of Series R
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare each Participating Dividend at the same
time it declares any cash or non-cash dividend or distribution on the Common
Stock in respect of which a Participating Dividend is required to be paid. No
cash or non-cash dividend or distribution on the Common Stock in respect of
which a Participating Dividend is required shall be paid or set aside for
payment on the Common Stock unless a Participating Dividend in respect of such
dividend or distribution on the Common Stock shall be simultaneously paid or set
aside for payment on the Series R Preferred Stock.
<PAGE>
5
(C) Preferential Dividends shall begin to accumulate on outstanding shares
of Series R Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series R Preferred Stock.
Accumulated but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series R Preferred Stock
in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series R Preferred
-------------
Stock shall have the following voting rights:
(A) Each share of Series R Preferred Stock shall entitle the holder thereof
to one hundred votes on all matters submitted to a vote of the stockholders of
the Corporation. The number of votes which a holder of Series R Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple". In the
event the Corporation shall at any time after November 8, 1995 declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Vote Multiple thereafter applicable to
the determination of the number
<PAGE>
6
of votes per share to which holders of shares of Series R Preferred Stock shall
be entitled after such event shall be the Vote Multiple immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series R Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) If at the time of any annual meeting of stockholders for the election
of directors a default in preference dividends on the Series R Preferred Stock
shall exist, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two, and the holders of the Series R Preferred
Stock, together with the holders of any other series of Preferred Stock of the
Corporation who shall have been granted voting rights to elect directors upon a
default in the payment of dividends by the Corporation (collectively with the
holders of the Series R Preferred Stock, the "Preferred Stockholders"), shall
have the right at such meeting, voting together as a single class without regard
to series, to the exclusion of the holders of Common Stock, to elect two
directors of the Corporation to fill such newly created directorships. Such
right shall continue until there are no dividends in arrears upon
<PAGE>
7
the Series R Preferred Stock. Each director elected by the Preferred
Stockholders (herein called a "Preferred Director") shall continue to serve as
such director for the full term for which he shall have been elected,
notwithstanding that prior to the end of such term a default in preference
dividends shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed without cause except by, the vote of the Preferred
Stockholders, voting together as a single class without regard to series, at a
meeting of the stockholders, or of the Preferred Stockholders, called for the
purpose. So long as a default in any preference dividends on the Series R
Preferred Stock shall exist (i) any vacancy in the office of a Preferred
Director may be filled (except as provided in the following clause (ii)) by an
instrument in writing signed by the remaining Preferred Director and filed with
the Corporation and (ii) in case of the removal of any Preferred Director, the
vacancy may be filed by the vote of the Preferred Stockholders, voting together
as a single class without regard to series, at the same meeting at which such
removal shall be voted. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred Directors shall end and a
default in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors shall be reduced by two. For the purposes
hereof, a "default in preference dividends" on the Series R Preferred Stock
shall be deemed to have occurred
<PAGE>
8
whenever the amount of accrued dividends upon the Series R Preferred Stock shall
be equivalent to six full quarter-yearly dividends or more and, having so
occurred, such default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all shares of Series R Preferred Stock then
outstanding shall have been paid to the end of the last preceding quarterly
dividend period.
(D) Except as otherwise required by law or set forth herein, holders of
Series R Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for the taking of any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever Preferential Dividends or Participating Dividends are in
arrears or the Corporation shall be in default in payment thereof, thereafter
and until all accumulated and unpaid Preferential Dividends and Participating
Dividends, whether or not declared, on shares of Series R Preferred Stock
outstanding shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of Series R
Preferred Stock may have in such circumstances, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking
<PAGE>
9
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series R Preferred Stock;
(ii) declare or pay dividends or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Series R
Preferred Stock, unless dividends are paid ratably on the Series R
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) except as permitted by subparagraph (iv) of this paragraph (A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series R Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon liquidation,
dissolution or winding up) to the Series R Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
R Preferred Stock, or any shares of stock ranking on a parity with the
Series R Preferred Stock (either as to dividends or
<PAGE>
10
upon liquidation, dissolution or winding up), except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
(C) The Corporation shall not issue any shares of Series R Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of November 8, 1995 between the Corporation and The Bank of
New York (the "Rights Agreement"), a copy of which is on file at the principal
executive office of the Corporation and shall be made available to holders of
record of Common Stock or Series R Preferred Stock without charge upon written
request there for addressed to the Secretary of the Corporation. Notwithstanding
the foregoing sentence, nothing contained in the provisions hereof shall
<PAGE>
11
prohibit or restrict the Corporation from issuing for any purpose any series of
Preferred Stock with rights and privileges similar to, different from, or
greater than those of the Series R Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series R Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. The
Corporation shall cause all such shares upon their retirement and cancellation
to become authorized but unissued shares of Preferred Stock, without designation
as to series, and such shares may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary
--------------------------------------
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock ranking junior
to the Series R Preferred Stock (upon liquidation, dissolution or winding up)
unless the holders of shares of Series R Preferred Stock shall have received,
subject to adjustment as hereinafter provided, the greater of either (A) $100.00
per share plus an amount equal to accumulated and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, or
(B) the
<PAGE>
12
amount equal to 100 times the aggregate amount to be distributed per share to
holders of Common Stock, or (ii) to the holders of stock ranking on a parity
upon liquidation, dissolution or winding up with the Series R Preferred Stock,
unless simultaneously therewith distributions are made ratably on the Series R
Preferred Stock and all other shares of such parity stock in proportion to the
total amounts to which the holders of shares of Series R Preferred Stock are
entitled under clause (i) (A) of this sentence and to which the holders of such
parity shares are entitled, in each case upon such liquidation, dissolution or
winding up. The amount to which holders of Series R Preferred Stock shall be
entitled upon liquidation, dissolution or winding up of the Corporation pursuant
to clause (i) (B) of the foregoing sentence is hereinafter referred to as the
"Participating Liquidation Amount," and the multiple of the amount to be
distributed to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the Corporation applicable pursuant to said clause
to the determination of the Participating Liquidation Amount, which shall be 100
initially but shall be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Liquidation Multiple." In the event the
Corporation shall at any time after November 8, 1995 declare or pay any dividend
on Common Stock payable in shares of Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding shares
of Common Stock into a greater or
<PAGE>
13
lesser number of shares of Common Stock, then in each such case the Liquidation
Multiple thereafter applicable to the determination of the Participating
Liquidation Amount to which holders of Series R Preferred Stock shall be
entitled after such event shall be the Liquidation Multiple applicable
immediately prior to such event multiplied by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Certain Reclassification and Other Events.
-----------------------------------------
(A) In the event that holders of shares of Common Stock receive after
November 8, 1995 in respect of their shares of Common Stock any share of capital
stock of the Corporation (other than any share of Common Stock of the
Corporation), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise ("Transaction"),
then in each such event the dividend rights, rights upon the liquidation,
dissolution or winding up of the Corporation and voting rights of the shares of
Series R Preferred Stock shall be adjusted so that after such event the holders
of Series R Preferred Stock shall be entitled, in respect of each share of
Series R Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such adjustment, to (i) such
additional
<PAGE>
14
dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional distributions upon
liquidation, dissolution or winding up of the Corporation as equal the
Liquidation Multiple in effect immediately prior to such Transaction multiplied
by the additional amount which the holder of a share of Common Stock shall be
entitled to receive upon liquidation, dissolution or winding up of the
Corporation by virtue of the receipt in the Transaction of such capital stock,
as the case may be, all as provided by the terms of such capital stock and (iii)
such additional voting rights as equal the Vote Multiple in effect immediately
prior to such Transaction multiplied by the additional voting rights which the
holder of a share of Common Stock shall be entitled to receive by virtue of the
receipt in the Transaction of such capital stock.
(B) In the event that holders of shares of Common Stock receive after
November 8, 1995 in respect of their shares of Common Stock any right or warrant
to purchase Common Stock (including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for Common Stock) at a
purchase price per share less than the Current Market Price (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then in each such event the dividend rights, rights upon the
liquidation, dissolution or
<PAGE>
15
winding up of the Corporation and voting rights of the shares of Series R
Preferred Stock shall each be adjusted so that after such event the Dividend
Multiple and the Liquidation Multiple and the Vote Multiple shall each be the
product of the Dividend Multiple, the Liquidation Multiple and the Vote
Multiple, as the case may be, in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired upon
exercise in full of all such rights or warrants and the denominator of which
shall be the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the number of shares of Common Stock
which could be purchased, at the Current Market Price of the Common Stock at the
time of such issuance, by the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock receive after
November 8, 1995 in respect of their shares of Common Stock any right or warrant
to purchase capital stock of the Corporation (other than shares of Common
Stock), including as such a right, for all purposes of this paragraph, any
security convertible into or exchangeable for capital stock of the Corporation
(other than Common Stock), at a purchase price per share less than the Current
Market Price of such shares of capital stock on the date of issuance of such
right or warrant,
<PAGE>
16
then in each such event the dividend rights, rights upon liquidation,
dissolution or winding up of the Corporation and the voting rights of the shares
of Series R Preferred Stock shall each be adjusted so that after such event each
holder of a share of Series R Preferred Stock shall be entitled, in addition
to such rights in respect thereof to which such holder was entitled immediately
prior to such event, to receive (i) such additional dividends as equal the
Dividend Multiple in effect immediately prior to such event multiplied, first,
by the additional dividends to which the holder of a share of Common Stock shall
be entitled upon exercise of such right or warrant by virtue of the capital
stock which could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined), (ii) such additional distributions
upon liquidation, dissolution or winding up of the Corporation as equal the
Liquidation Multiple in effect immediately prior to such event multiplied,
first, by the additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or winding up of the
Corporation upon exercise of such right or warrant by virtue of the capital
stock which could be acquired upon such exercise and multiplied again by the
Discount Fraction and (iii) such additional voting rights as equal the Vote
Multiple in effect immediately prior to such event multiplied, first, by the
additional voting rights to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
<PAGE>
17
which could be acquired upon such exercise and multipled again by the Discount
Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a
fraction the numerator of which shall be the difference between the Current
Market Price (as hereinafter defined) of a share of the capital stock subject to
a right or warrant distributed to holders of shares of Common Stock as
contemplated by this paragraph immediately after the distribution thereof and
the purchase price per share for such share of capital stock pursuant to such
right or warrant and the denominator of which shall be the Current Market Price
of a share of such capital stock immediately after the distribution of such
right or warrant.
(D) For purposes of this Section 7, the "Current Market Price" of a
share of capital stock of the Corporation (including a share of Common Stock) on
any date shall be deemed to be the average of the daily closing prices per share
thereof over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, provided that in the event that such
Current Market Price of any such share of capital stock is determined during a
period which includes any date that is within 30 Trading Days after the ex-
dividend date for (i) a dividend or distribution on stock payable in shares of
such stock or securities convertible into shares of such stock or (ii) any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then in each such event, the Current Market
Price shall be appropriately adjusted by the
<PAGE>
18
Board of Directors to reflect the Current Market Price of such stock to take
into account ex-dividend trading. The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares selected by the Board of
Directors. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not listed
or admitted to trading on any national securities
<PAGE>
19
exchange, on which the New York Stock Exchange or such other national securities
exchange as may be selected by the Board of Directors is open. If the shares are
not publicly held or not so listed or traded on any day within the period of 30
Trading Days applicable to the determination of Current Market Price thereof as
aforesaid, "Current Market Price" shall mean the fair market value thereof per
share as determined in good faith by the Board of Directors. in either case
referred to in the foregoing sentence, the determination of Current Market Price
shall be described in a statement filed with the Secretary of the Corporation.
Section 8. Consolidation, Merger, etc. In the event that the
--------------------------
Corporation shall enter into any consolidation, merger, combination or other
transaction in which shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any such
event each outstanding share of Series R Preferred Stock shall at the same time
be similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and other property (payable in like kind), as the case may be,
for which or into which each share of Common Stock is changed or exchanged
multiplied by the higher of the Dividend Multiple, the Liquidation Multiple or
the Vote Multiple in effect immediately prior to such event.
<PAGE>
20
Section 9. Effective Time of Adjustments.
-----------------------------
(A) Adjustments to the Series R Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(B) The Corporation shall give prompt written notice to each holder of
a share of Series R Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights or rights upon liquidation, dissolution or
winding up of the Corporation required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give such notice shall
not affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Series R Preferred Stock
-------------
shall not be redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Corporation may
acquire shares of Series R Preferred Stock in any other manner permitted by law,
the provisions of this Certificate of Designation and the Restated Certificate
of Incorporation.
Section 11. Banking. Unless otherwise provided in the Restated
-------
Certificate of Incorporation or a Certificate of Designation relating to a
subsequent series of Preferred Stock of the Corporation, the Series R Preferred
Stock shall rank junior to all other series of the Corporation's Preferred Stock
as to
<PAGE>
21
the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. After the Distribution Date (as defined in the
---------
Rights Agreement), the provisions hereof and of the Restated Certificate of
incorporation shall not be amended in any manner which would materially affect
the rights, privileges or powers of the Series R Preferred Stock without, in
addition to any other vote of stockholders required by law, the affirmative vote
of the holders of 80% or more of the outstanding shares of Series R Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, DC Holdco, Inc. has caused this Certificate to be
signed and attested on November 8, 1995.
By:_____________________________
Name: David K. Thompson
Title: Senior Vice President
Assistant General Counsel
ATTEST:
By__________________________
Name: Marsha L. Reed
Title: Corporate Secretary
<PAGE>
EXHIBIT B
(Form of Right Certificate)
Certificate No. _______ Rights
NOT EXERCISABLE AFTER JUNE 30, 1999 OR EARLIER IF REDEEMED. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION, AT $0.01
PER RIGHT (SUBJECT TO ADJUSTMENT) ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. IF THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO
A PERSON WHO IS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON OR A TRANSFEREE OF THE RIGHTS PREVIOUSLY OWNED BY
SUCH PERSONS, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
11(a) (ii) OF THE RIGHTS AGREEMENT.
Right Certificate
DC HOLDCO, INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of November 8, 1995 ("Rights Agreement") between DC Holdco,
Inc., a Delaware corporation (the "Corporation"), and The Bank of New York (the
"Rights Agent"), to purchase from the Corporation at any time after the
Distribution Date (as that term is defined in the Rights Agreement) and prior to
5:00 P.M. (New York City time) on June 30, 1999 at the principal office of the
Rights Agent, or its successors as Rights Agent, in New York, New York, one one-
hundredth (1/100) of a fully paid and nonassessable
<PAGE>
2
share of Series R Preferred Stock, $.01 par value per share, ("Series R
Preferred Stock") of the Corporation at a purchase price of $350.00 per one one-
hundredth of a share; as the same may from time to time be adjusted in
accordance with the Rights Agreement (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
duly executed.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-hundredth of a share of Series R Preferred Stock which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events
and, upon the happening of certain events, securities other than shares of
Series R Preferred Stock, or other property, may be acquired upon exercise of
the Rights evidenced by this Right Certificate, as provided by the Rights
Agreement.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
incorporated herein by reference and in and a part hereof, and reference to the
Rights Agreement is made for a full description of the rights, limitations of
rights, obligations, duties and immunities of the Rights Agent, the Corporation
and the holders of record of Right Certificates. Copies of the Rights Agreement
are on file at the principal executive office of the Corporation.
<PAGE>
3
This Right Certificate, with or without other Right Certificates, upon
surrender at the shareholder services office of the Rights Agent designated for
that purpose, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder of
record to purchase the same aggregate number of shares of Series R Preferred
Stock as the Rights evidenced by the Right Certificate or Right Certificates
surrendered entitled that holder to purchase. If the Right Certificate is
exercised in part, the holder shall be entitled to receive, upon surrender
hereof, another Right Certificate or Right Certificates for the number of whole
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this of Directors at its option at a redemption price of
Certificate may be redeemed by the Corporation by action of the Board $0.01 per
Right at any time prior to the earlier of the close of business on (i) the tenth
day following the Stock Acquisition Date (as that time period may be extended
pursuant to the Rights Agreement) and (ii) the Final Expiration date.
No fractional shares of Series R Preferred Stock or other securities
of the Corporation are required to be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions of shares of Series R Preferred
Stock which are integral multiples of one one-hundredth of a share), and in lieu
thereof, as provided in the Rights Agreement, a cash payment may
<PAGE>
4
be made. As provided in the Rights Agreement, fractions of shares of Series R
Preferred Stock may, at the election of the Corporation, be evidenced by
depositary receipts.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Series R Preferred
Stock or of any other securities of the Corporation which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action or to
receive notice of meetings or other actions affecting shareholders or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
<PAGE>
5
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal. Dated as of ___________ __, 19__.
ATTEST: DC HOLDCO, INC.
_____________________ By: _____________________
Secretary Title:
Countersigned:
THE BANK OF NEW YORK,
as Rights Agent
By: _____________________
Authorized signature
<PAGE>
(Form of Reverse Side of Right Certificate)
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if that holder desires to transfer the
Rights represented by the Right Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and
transfers unto ________________________
___________________________________________________
(Please print name and address of transferee)
___________________________________________________
__________ Rights evidenced by this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
Attorney to transfer this Right Certificate on the books of DC Holdco, Inc. with
full power of substitution.
Dated:_____________ __, 19__
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
those terms are defined in the Rights Agreement);
<PAGE>
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any transferee of such Persons.
Dated: , 19
___________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of this Right Certificate in every particular, without alteration,
enlargement or any other change.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder if that holder desires to exercise the
Rights represented by the Right Certificate)
To: DC Holdco, Inc.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Right Certificate to purchase the shares of Series R
Preferred Stock issuable upon the exercise of those Rights and requests that
certificates for those share(s) be issued in the name:
Please insert social security
or other identifying number
_____________________________________________________
(Please print name and address)
_____________________________________________________
If the number of Rights exercised does not constitute all of the Rights
evidenced by this Right Certificate, a new Right Certificate for the balance of
Rights remaining shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
____________________________________________________
(Please print name and address)
____________________________________________________
Dated: ____________ __, 19__
_______________________
Signature
Signature must conform in all respects to
name of holder as specified on the face of this Right Certificate)
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as those terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any transferee of such Persons.
Dated: , 19 _______________________
Signature
Signature Guaranteed:
<PAGE>
EXHIBIT C
DC HOLDCO, INC.
SUMMARY OF RIGHTS TO PURCHASE
SERIES R PREFERRED STOCK
On November 8, 1995, the Board of Directors of DC Holdco., Inc. (the
"Corporation") declared a dividend of one Right for each outstanding share of
Common Stock of the Corporation (the "Common Stock"). The dividend is payable on
November 8, 1995 to holders of record of Common Stock at the close of business
on that date. Each Right entitles the registered holder to purchase from the
Corporation one one-hundredth (1/100) of a share of Series R Preferred Stock at
an initial Purchase Price of $350.00, subject to adjustment. The terms and
conditions of the Rights are contained in a Rights Agreement between the
Corporation and The Bank of New York, as Rights Agent.
As discussed below, initially the Rights will not be exercisable,
-----------------------------------------------------------------
certificates for the Rights will not be issued, and the Rights will
- -------------------------------------------------------------------
automatically trade with the Common Stock.
- -----------------------------------------
Until the close of business on the Distribution Date, which will occur
on the earlier of (i) the tenth day following a public announcement that a
person or group of affiliated or associated persons ("Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 25% or more
of the outstanding Common Stock (the "Stock Acquisition Date") or (ii) a date
fixed by the Board of Directors which is not later than the nineteenth business
day after the commencement by any person or group of, or the first public
announcement of the intent of any person or group to commence, a tender or
exchange offer which would result in that person or group owning 25% or more of
the outstanding Common Stock, the Rights will be represented by and transferred
only with the Common Stock. With respect to certificates for Common Stock
outstanding as of November 8, 1995, until the Distribution Date, the Rights will
be evidenced by such certificates and this Summary. Until the Distribution Date,
new certificates issued for Common Stock after November 8, 1995 will contain a
legend incorporating the Rights Agreement by reference. The surrender for
transfer of any of the Corporation's Common Stock certificates, with or without
this Summary, will also constitute the transfer of the Rights associated with
the Common Stock represented by those certificates. As soon as practicable
following the Distribution Date, separate Right Certificates will be mailed to
holders of record of Common Stock at the close of business on the Distribution
Date, and thereafter the Right Certificates alone will evidence the Rights.
<PAGE>
2
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on June 30, 1999, unless redeemed earlier
as described below.
The Series R Preferred Stock will be nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, subordinate to all other series of the Corporation's preferred
stock. The Series R Preferred Stock may not be issued except upon exercise of
the Rights. Each share of Series R Preferred Stock will be entitled to receive,
when, as and if declared, a quarterly dividend in an amount equal to the greater
of $1.00 per share or 100 times the quarterly cash dividend declared on the
Corporation's Common Stock. In addition, the Series R Preferred Stock is
entitled to 100 times any non-cash dividends (other than dividends payable in
equity securities) declared on the Common Stock, in like kind. In the event of
liquidation, the holders of Series R Preferred Stock will be entitled to receive
a liquidation payment in an amount equal to the greater of $100.00 per share or
100 times the liquidation payment made per share of Common Stock. Each share of
Series R Preferred Stock will have 100 votes, subject to adjustment, voting
together with the Common Stock and not as a separate class unless otherwise
required by law or the Corporation's Restated Certificate of Incorporation. In
the event of any merger, consolidation or other transaction in which common
shares are exchanged, each share of Series R Preferred Stock will be entitled to
receive 100 times the amount received per share of Common Stock. The rights of
the Series R Preferred Stock as to dividends, voting rights and liquidation are
protected by antidilution provisions.
The Purchase Price payable and the number of shares of Series R
Preferred Stock or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series R Preferred Stock, (ii) upon the grant to
holders of the Series R Preferred Stock of certain rights or warrants to
subscribe for Series R Preferred Stock or convertible securities at less than
the current market price of the Series R Preferred Stock or (iii) upon the
distribution to holders of the Series R Preferred Stock of evidences of
indebtedness or assets (excluding regular cash dividends and dividends payable
in Series R Preferred Stock) or of subscription rights or warrants.
If (i) any person becomes the beneficial owner of 25% or more of the
then outstanding shares of Common Stock, other than pursuant to a purchase or
series of related purchases of shares of Common Stock that the Board of
Directors, taking into account the long-term value of the Corporation and all
other factors that the Board of Directors considers relevant, determines to be
fair to and otherwise in the best interests of
<PAGE>
3
the holders of Common Stock (a "Permitted Transaction"), or (ii) any Acquiring
Person or any of its affiliates or associates engages in one or more "self-
dealing" transactions as described in the Rights Agreement, then each holder of
a Right, other than the Acquiring Person, will have the right to receive, upon
payment of the Purchase Price, in lieu of Series R Preferred Stock, a number of
shares of Common Stock having a market value equal to twice the Purchase Price.
To the extent that insufficient shares of Common Stock are available for the
exercise in full of the Rights, holders of Rights will receive upon exercise
shares of Common Stock to the extent available and then cash, property or other
securities of the Corporation (which may be accompanied by a reduction in the
Purchase Price), in proportions determined by the Corporation, so that the
aggregate net value received is equal to twice the Purchase Price. Rights are
not exercisable following the acquisition of shares of Common Stock by an
Acquiring Person as described in this paragraph until the expiration of the
period during which the Rights may be redeemed as described below.
Notwithstanding the foregoing, after the occurrence of an event described in the
first sentence of this paragraph, Rights that are (or, under certain
circumstances, Rights that were) beneficially owned by an Acquiring Person will
be null and void.
Unless the Rights are redeemed earlier, if, after the Stock
Acquisition Date, the Corporation is acquired in a merger or other business
combination (in which the Corporation is not the surviving corporation or in
which any shares of Common Stock are converted or exchanged) or more than 50% of
the assets or earning power of the Corporation and its subsidiaries (taken as a
whole) are sold or transferred in one or a series of related transactions, the
Rights Agreement provides that proper provision shall be made so that each
holder of record of a Right will from and after that time have the right to
receive, upon payment of the Purchase Price, that number of shares of common
stock of the acquiring company which has a market value at the time of such
transaction equal to twice the Purchase Price.
Fractions of shares of Series R Preferred Stock may, at the election
of the Corporation, be evidenced by depositary receipts. The Corporation may
also issue cash in lieu of fractional shares of Series R Preferred Stock which
are not integral multiples of one one-hundredth of a share.
At any time until ten days following the Stock Acquisition Date
(subject to extension by the Board of Directors), the Board of Directors may
cause the Corporation to redeem the Rights in whole, but not in part, at a price
of $.01 per Right, subject to adjustment to reflect any stock split, stock
dividend or similar transaction. Immediately upon the action of the Board of
Directors authorizing redemption of the Rights, the right to exercise the Rights
will terminate, and the
<PAGE>
4
holders of Rights will only be entitled to receive the redemption price without
any interest thereon.
As long as the Rights are redeemable, the Corporation may, except with
respect to the redemption price, the number of one one-hundredths of a share of
Series R Preferred Stock for which a Right is exercisable, or the date of
expiration of the Rights, amend the Rights in any manner, including an amendment
to extend the time period in which the Rights may be redeemed. At any time when
the Rights are not redeemable, the Corporation may amend the Rights in any
manner that does not adversely affect the interests of holders of the Rights as
such.
Until a Right is exercised, the holder, as such, will have no rights
as a stockholder of the Corporation, including without limitation the right to
vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Corporation,
500 South Buena Vista Street, Burbank, California 91521, Attention: Vice
President - Corporate and Stockholder Affairs. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated in this summary
description by reference.
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
--------------
================================================================================
364-DAY CREDIT AGREEMENT
Dated as of October 31, 1995
Among
DC HOLDCO, INC.
as Borrower
-----------
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
----------
and
CITICORP USA, INC.
as Administrative Agent
-----------------------
and
CREDIT SUISSE
as Co-Administrative Agent
--------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms ............................ 2
SECTION 1.02. Computation of Time Periods ...................... 12
SECTION 1.03. Accounting Terms ................................. 12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances ..................................... 12
SECTION 2.02. Making the Advances .............................. 12
SECTION 2.03. Facility Fee ..................................... 14
SECTION 2.04. Reduction of the Commitments ..................... 14
SECTION 2.05. Repayment of Advances ............................ 14
SECTION 2.06. Interest on Advances ............................. 14
SECTION 2.07. Additional Interest on Eurodollar Rate Advances .. 15
SECTION 2.08. Interest Rate Determination ...................... 15
SECTION 2.09. Optional Conversion of Advances .................. 16
SECTION 2.10. Prepayments of Advances .......................... 17
SECTION 2.11. Increased Costs .................................. 17
SECTION 2.12. Illegality ....................................... 18
SECTION 2.13. Payments and Computations ........................ 19
SECTION 2.14. Taxes ............................................ 20
SECTION 2.15. Sharing of Payments, Etc ......................... 22
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation ..... 22
SECTION 2.17. Evidence of Debt ................................. 23
SECTION 2.18. Use of Proceeds .................................. 24
SECTION 2.19. Extension of Termination Date .................... 24
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness
of Section 2.01 ................................ 26
SECTION 3.02. Conditions Precedent to Each Borrowing ........... 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower ... 28
SECTION 4.02. Additional Representations and Warranties of
the Borrower as of Each Extension Date ......... 29
<PAGE>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants ............................ 30
SECTION 5.02. Negative Convenant ............................... 32
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default ................................ 33
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action ......................... 34
SECTION 7.02. Administrative Agent's Reliance, Etc. ............ 35
SECTION 7.03. CUSA and Affiliates .............................. 35
SECTION 7.04. Lender Credit Decision ........................... 35
SECTION 7.05. Indemnification .................................. 36
SECTION 7.06. Successor Administrative Agent ................... 36
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. ................................ 36
SECTION 8.02. Notices, Etc. ................................... 37
SECTION 8.03. No Waiver; Remedies ............................. 38
SECTION 8.04. Costs and Expenses .............................. 38
SECTION 8.05. Right of Set-off ................................ 38
SECTION 8.06. Binding Effect .................................. 39
SECTION 8.07. Assignments and Participations .................. 39
SECTION 8.08. Indemnification ................................. 41
SECTION 8.09. Confidentiality ................................. 42
SECTION 8.10. Consent to Jurisdiction and Service of Process .. 42
SECTION 8.11. Governing Law ................................... 43
SECTION 8.12. Execution in Counterparts ....................... 43
<PAGE>
364-DAY CREDIT AGREEMENT
DATED AS OF OCTOBER 31, 1995
DC HOLDCO, INC., a Delaware corporation (the "BORROWER"), the banks,
financial institutions and other institutional lenders (the "INITIAL LENDERS")
listed on the signature pages hereof under the heading "The Initial Lenders",
CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrative agent
(together with any successor Administrative Agent appointed pursuant to Article
VII, the "ADMINISTRATIVE AGENT") for the Lenders (as hereinafter defined)
hereunder, and CREDIT SUISSE, a Swiss banking corporation ("CREDIT SUISSE"), as
co-administrative agent (the "CO-ADMINISTRATIVE AGENT") for the Lenders
hereunder.
PRELIMINARY STATEMENTS
(1) The Walt Disney Company, a Delaware corporation ("DISNEY"), and Capital
Cities/ABC, Inc., a New York corporation ("CAPITAL CITIES/ABC"), have entered
into an Amended and Restated Agreement and Plan of Reorganization dated as of
July 31, 1995 (as amended, supplemented or otherwise modified through the date
hereof, the "REORGANIZATION AGREEMENT"), pursuant to which Disney has formed (a)
the Borrower, (b) a subsidiary of the Borrower incorporated in the State of
Delaware, which shall be merged with and into Disney (the "DISNEY MERGER"), with
Disney being the surviving corporation, and (c) a subsidiary of the Borrower
incorporated in the State of New York, which shall be merged with and into
Capital Cities/ABC (the "CAPITAL CITIES/ABC MERGER" and, together with the
Disney Merger, the "MERGERS"), with Capital Cities/ABC being the surviving
corporation.
(2) Upon the effectiveness of the Mergers, (a) each outstanding share of
common stock of Disney (together with the rights associated therewith) shall be
converted, without any further action by the holder thereof (the "DISNEY SHARE
CONVERSION"), into one share of common stock of the Borrower and (b) each
outstanding share of common stock of Capital Cities/ABC shall be converted, at
the election of the holder thereof (the "CAPITAL CITIES/ABC SHARE CONVERSION"
and, together with the Disney Share Conversion, the "SHARE CONVERSIONS"), into
cash, shares of common stock of the Borrower or a combination of cash and shares
of common stock of the Borrower. The Mergers and the Share Conversions are
herein collectively referred to as the "TRANSACTION". Immediately after the
consummation of the Transaction, each of Disney and Capital Cities/ABC will be a
wholly owned subsidiary of the Borrower, and the Borrower will be renamed "The
Walt Disney Company".
(3) The Borrower has requested that the Lenders agree to extend credit to
it from time to time in an aggregate principal amount of up to $7,000,000,000 in
order to support the obligations of the Borrower in respect of commercial paper
issued by the Borrower, to finance in part the Transaction, to pay fees and
expenses incurred in connection with the consummation of the Transaction, and/or
for other general corporate purposes of the Borrower and its subsidiaries. The
Lenders have indicated their willingness to agree to extend credit from time to
time in such amount on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto hereby agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . 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):
"ADMINISTRATIVE AGENT" has the meaning specified in the recital of parties
to this Agreement.
"ADMINISTRATIVE AGENT'S ACCOUNT" means such account of the Administrative
Agent maintained by the Administrative Agent at the office of Citibank at
399 Park Avenue, New York, New York 10043, as the Administrative Agent
shall notify the Borrower and the Lenders from time to time.
"ADVANCE" means an advance by a Lender to the Borrower as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,
each of which shall be a "Type" of Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person.
"AGREEMENT" means this 364-Day Credit Agreement, as it may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 8.01.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee, and accepted by the Administrative
Agent and the Borrower, in substantially the form of Exhibit B hereto.
"ASSUMING LENDER" has the meaning specified in Section 2.19(c).
"ASSUMPTION AGREEMENT" has the meaning specified in Section 2.19(c).
"BASE RATE" means, for each day in any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum
shall at all times for such day during such period be equal to the highest
of:
(a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time, as Citibank's base rate in effect for such
day;
<PAGE>
3
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one percent) of
(i) 0.50%, (ii) the rate obtained by dividing (A) the latest three-
week moving average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major United
States money market banks, such three-week moving average (adjusted on
the basis of a year of 365 or 366 days, as the case may be) being
determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of
the Federal Reserve System (or any successor thereto) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among
other liabilities) three-month U.S. dollar nonpersonal time deposits
in the United States, and (iii) the average during such three-week
period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor thereto)
for insuring U.S. dollar deposits of Citibank in the United States;
and
(c) 0.50% per annum above the Federal Funds Rate for such day.
"BASE RATE ADVANCE" means an Advance which bears interest as provided in
Section 2.06(a)(i).
"BORROWING" means a borrowing consisting of simultaneous Advances of the
same Type made by each of the Lenders pursuant to Section 2.01.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Los Angeles, California, or New York City, New York,
or San Francisco, California, or, if the applicable Business Day relates to
any Eurodollar Rate Advances, on which dealings are carried on in the
London interbank market.
"CAPITAL CITIES/ABC" has the meaning specified in the Preliminary
Statements to this Agreement.
"CAPITAL CITIES/ABC MERGER" has the meaning specified in the Preliminary
Statements to this Agreement.
"CAPITAL CITIES/ABC SHARE CONVERSION" has the meaning specified in the
Preliminary Statements to this Agreement.
"CITIBANK" means Citibank, N.A., a national banking association.
<PAGE>
4
"CO-ADMINISTRATIVE AGENT" has the meaning specified in the recital of
parties to this Agreement.
"COMMITMENT" has the meaning specified in Section 2.01.
"CONSENTING LENDER" has the meaning specified in Section 2.19(b).
"CONVERT", "CONVERSION" and "CONVERTED" each refer to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.08
or 2.09.
"CREDIT SUISSE" has the meaning specified in the recital of parties to this
Agreement.
"CUSA" has the meaning specified in the recital of parties to this
Agreement.
"DEBT" means, with respect to any Person: (a) indebtedness for borrowed
money, (b) obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) obligations to pay the deferred purchase price of
property or services (other than trade payables incurred in the ordinary
course of business), (d) obligations as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital leases
and (e) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of any other Person of the kinds referred to in clauses (a)
through (d) above.
"DISNEY" has the meaning specified in the Preliminary Statements to this
Agreement.
"DISNEY MERGER" has the meaning specified in the Preliminary Statements to
this Agreement.
"DISNEY SHARE CONVERSION" has the meaning specified in the Preliminary
Statements to this Agreement.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Assumption Agreement or the Assignment and
Acceptance, as the case may be, pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent for such purpose.
"EFFECTIVE DATE" has the meaning specified in Section 3.01.
"ELIGIBLE ASSIGNEE" means (a) a Lender or any Affiliate of a Lender, and
(b) any bank or other financial institution, or any other Person, which has
been approved in writing by the Borrower and the Administrative Agent as an
Eligible Assignee for purposes of this Agreement; provided, however, that
neither the Borrower's approval nor the Administrative Agent's approval
shall be unreasonably withheld; and provided further, however, that the
Borrower may withhold its approval if the Borrower reasonably believes that
an assignment to such Eligible Assignee
<PAGE>
5
pursuant to Section 8.07 will result in the incurrence of increased costs
payable by the Borrower pursuant to Section 2.11 or 2.14.
"ENVIRONMENTAL CLAIM" means any administrative, regulatory or judicial
action, suit, demand, claim, lien, notice or proceeding relating to any
Environmental Law or any Environmental Permit.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code or duly promulgated policy or rule of common
law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any order,
consent decree or judgment, relating to the environment, health, safety or
any Hazardous Material.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title IV of ERISA
is a member of the Borrower's controlled group, or under common control
with the Borrower, within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended.
"ERISA EVENT" means: (a) (i) the occurrence with respect to a Plan of a
reportable event, within the meaning of Section 4043 of ERISA, unless the
30-day notice requirement with respect thereto has been waived by the
Pension Benefit Guaranty Corporation or (ii) the provisions of paragraph
(1) of Section 4043(b) of ERISA (without regard to paragraph (2) of such
Section) are applicable with respect to a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA could
reasonably be expected to occur with respect to such Plan within the
following 30 days; (b) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (c) the cessation of operations by the
Borrower or any ERISA Affiliate at a facility in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by the Borrower
or any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (e) the failure by the Borrower or any ERISA Affiliate to make a
payment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) the
adoption of an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the
Pension Benefit Guaranty Corporation of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition which is reasonably likely to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, a Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
<PAGE>
6
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto or in the Assumption Agreement or the Assignment
and Acceptance, as the case may be, pursuant to which it became a Lender
(or, if no such office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to time specify to
the Borrower and the Administrative Agent for such purpose.
"EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing, an interest rate per annum
equal to the average (rounded upward to the nearest whole multiple of 1/16
of 1% per annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the principal office
of each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period for a period equal to such
Interest Period and in an amount substantially equal to such Reference
Bank's (or in the case of Citibank, CUSA's) Eurodollar Rate Advance
comprising part of such Borrowing. The Eurodollar Rate for any Interest
Period for each Eurodollar Rate Advance comprising part of the same
Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from
the Reference Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.08.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as provided
in Section 2.06(a)(ii).
"EURODOLLAR RATE MARGIN" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
=================================================
PUBLIC DEBT RATING
S&P/MOODY'S APPLICABLE MARGIN
<S> <C>
Level 1
- -------
AA-/Aa3 or above 0.140%
- -------------------------- ------
Level 2
- -------
Lower than AA-/Aa3 but
at least A/A2 0.145%
- -------------------------- ------
Level 3
- -------
Lower than A/A2 but
at least A-/A3 0.160%
- -------------------------- ------
Level 4
- -------
Lower than A-/A3 or no
Public Debt Rating in effect 0.180%
- -------------------------- ------
</TABLE>
=================================================
<PAGE>
7
"EURODOLLAR RATE RESERVE PERCENTAGE" means, with respect to any Lender for
any Interest Period for any Eurodollar Rate Advance, the reserve percentage
applicable during such Interest Period (or, if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage
shall be so applicable) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor thereto)
for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to
such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXISTING CREDIT AGREEMENTS" means, collectively, (a) the Second Amended
and Restated Credit Agreement dated as of April 12, 1995 among Disney, the
financial institutions party thereto and CUSA, as agent thereunder, as
amended, supplemented or otherwise modified to the Effective Date, and (b)
the Revolving Credit Agreement dated as of January 3, 1986 among Capital
Cities/ABC, the financial institutions party thereto and Chemical Bank, as
agent thereunder, as amended, supplemented or otherwise modified to the
Effective Date.
"EXTENSION DATE" has the meaning specified in Section 2.19(b).
"FACILITY FEE PERCENTAGE" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
PUBLIC DEBT RATING
S&P/MOODY'S APPLICABLE MARGIN
=================================================
<S> <C>
Level 1
- -------
AA-/Aa3 or above 0.040%
- ----------------------------- ------
Level 2
- -------
Lower than AA-/Aa3 but
at least A/A2 0.050%
- ----------------------------- ------
Level 3
- -------
Lower than A/A2 but 0.060%
at least A-/A3
- ----------------------------- ------
Level 4
- -------
Lower than A-/A3 or no
Public Debt Rating in effect 0.070%
- ----------------------------- ------
</TABLE>
=================================================
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to 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 for such day
(or, if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for
<PAGE>
8
any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by the Administrative
Agent.
"FIVE-YEAR CREDIT AGREEMENT" means the Five-Year Credit Agreement being
entered into on the date of this Agreement among the Borrower, the banks,
financial institutions and other institutional lenders party thereto, CUSA,
as the administrative agent thereunder, and Credit Suisse, as the co-
administrative agent thereunder, as such agreement may be amended,
supplemented or otherwise modified hereafter from time to time.
"GAAP" means generally accepted accounting principles consistent with those
applied in the preparation of the audited financial statements referred to
in Section 4.01(c)(i) dated September 30, 1994.
"HAZARDOUS MATERIAL" means (a) any petroleum or petroleum product, natural
or synthetic gas, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, or radon gas, (b) any substance defined
as or included in the definition of "hazardous substances", hazardous
wastes", hazardous materials", "toxic substances", "contaminants" or
"pollutants", or words of similar import, under any applicable
Environmental Law or (c) any other substance to which exposure is regulated
by any governmental or regulatory authority.
"INDEMNIFIED MATTERS" has the meaning specified in Section 8.08.
"INDEMNIFIED PARTY" has the meaning specified in Section 8.08.
"INFORMED PARTIES" has the meaning specified in Section 8.09.
"INITIAL LENDER" has the meaning specified in the recital of parties to
this Agreement.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar
Rate Advance or on the date of the Conversion of any Base Rate Advance into
such Eurodollar Rate Advance and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and, thereafter,
each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period selected
by the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three, six or, if generally available to
all of the Lenders, twelve months as the Borrower may, upon notice received
by the Administrative Agent not later than 1:00 P.M. (New York City time)
on the third Business Day prior to the first day of such Interest Period,
select; provided, however, that:
(i) Interest Periods commencing on the same date for Eurodollar Rate
Advances comprising part of the same Borrowing shall be of the same
duration;
(ii) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension
<PAGE>
9
would cause the last day of such Interest Period to occur in the next
succeeding calendar month, the last day of such Interest Period shall
occur on the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a day of an
initial calendar month for which there is no numerically corresponding
day in the calendar month that succeeds such initial calendar month by
the number of months equal to the number of months in such Interest
Period, such Interest Period shall end on the last Business Day of
such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any Interest Period which
ends after the scheduled Revolver Termination Date then in effect or,
if the Advances have been converted to a term loan pursuant to Section
2.05 prior to the time of such selection, which ends after the
Maturity Date.
"IRS" has the meaning specified in Section 2.14(e).
"LENDERS" means, collectively, each Initial Lender, each Assuming Lender
that shall become a party hereto pursuant to Section 2.19 and each Eligible
Assignee that shall become a party hereto pursuant to Section 8.07;
provided, however, that for purposes of any determination to be made under
Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, in its capacity
as a Lender, the term "Lender" shall be deemed to include Citibank.
"LIEN" means any lien, security interest or other charge or encumbrance of
any kind, or any other type of preferential arrangement which has the same
effect as a lien or security interest.
"MAJORITY LENDERS" means, at any time, Lenders owed at least a majority in
interest of the aggregate unpaid principal amount of the Advances owing to
Lenders at such time, or, if no such principal amount is outstanding at
such time, Lenders having at least a majority in interest of the
Commitments at such time; provided, however, that neither the Borrower nor
any of its Affiliates, if a Lender, shall be included in the determination
of Majority Lenders at any time.
"MATERIAL SUBSIDIARY" means, at any date of determination, a subsidiary of
the Borrower that, either individually or together with its subsidiaries,
taken as a whole, has total assets exceeding $100,000,000 on such date.
"MATURITY DATE" means the earlier of (a) the second anniversary of the
Revolver Termination Date and (b) the date of termination in whole of the
aggregate Commitments pursuant to Section 2.04 or 6.01.
"MEASUREMENT PERIOD" means, at any date of determination, the most recently
completed four consecutive fiscal quarters of the Borrower on or
immediately prior to such date or, if less than four consecutive fiscal
quarters of the Borrower have been completed since the Effective Date, the
fiscal quarters of the Borrower that have been completed since the
Effective Date.
"MERGER" has the meaning specified in the Preliminary Statements to this
Agreement.
<PAGE>
10
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (ii) was so maintained and in respect
of which the Borrower or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"NON-CONSENTING LENDER" has the meaning specified in Section 2.19(b).
"NOTE" has the meaning specified in Section 2.17.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02(a).
"OTHER TAXES" has the meaning specified in Section 2.14(b).
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PUBLIC DEBT RATING" means, as of any date of determination, the higher
rating that has been most recently announced by either S&P or Moody's, as
the case may be, for any class of non-credit enhanced long-term senior
unsecured public debt issued by the Borrower or, if and during such time
prior to October 1, 1996 as the Borrower has not issued any non-credit
enhanced long-term senior unsecured public debt that is rated by S&P or
Moody's and has not issued any commercial paper that is rated by S&P or
Moody's, by Disney; provided, however, that from and after the Effective
Date to and including September 30, 1996, if the Borrower has not issued
any non-credit enhanced long-term senior unsecured public debt that is
rated by S&P or Moody's and the rating of any commercial paper issued by
the Borrower is below P-1 by Moody's or A-1 by S&P, the Eurodollar Rate
Margin and the Facility Fee Percentage will be set in accordance with Level
3 under the definition of "Eurodollar Rate Margin" or "Facility Fee
Percentage", as the case may be. For purposes of the foregoing, (a) if
only one of S&P and Moody's shall have in effect a Public Debt Rating, the
Eurodollar Rate Margin and the Facility Fee Percentage shall be determined
by reference to the available rating; (b) if, at any time prior to October
1, 1996, neither S&P nor Moody's shall have in effect a Public Debt Rating
of Disney, or, if on or at any time after October 1, 1996, neither S&P nor
Moody's shall have in effect a Public Debt Rating of the Borrower, the
Eurodollar Rate Margin and the Facility Fee Percentage will be set in
accordance with Level 4 under the definition of "Eurodollar Rate Margin" or
"Facility Fee Percentage", as the case may be; (c) if the ratings
established by S&P
<PAGE>
11
and Moody's shall fall within different levels, the Eurodollar Rate Margin
and the Facility Fee Percentage shall be based upon the higher rating; (d)
if any rating established by S&P or Moody's shall be changed, such change
shall be effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (e) if S&P or Moody's
shall change the basis on which ratings are established, each reference to
the Public Debt Rating announced by S&P or Moody's, as the case may be,
shall refer to the then equivalent rating by S&P or Moody's, as the case
may be.
"REFERENCE BANKS" means Citibank, Credit Suisse, Bank of America NT&SA,
Bankers Trust Company and Chemical Bank, or, in the event that less than
two of such banks remain Lenders hereunder at any time, any other
commercial bank designated by the Borrower and approved by the Majority
Lenders as constituting a "Reference Bank" hereunder.
"REGISTER" has the meaning specified in Section 8.07(c).
"REORGANIZATION AGREEMENT" has the meaning specified in the Preliminary
Statements to this Agreement.
"REVOLVER TERMINATION DATE" means the earlier of (a) October 29, 1996,
subject to the extension thereof pursuant to Section 2.19, and (b) the date
of termination in whole of the aggregate Commitments pursuant to Section
2.04 or 6.01; provided, however, that the Revolver Termination Date of any
Lender that is a Non-Consenting Lender to any requested extension pursuant
to Section 2.19 shall be the Revolver Termination Date in effect
immediately prior to the applicable Extension Date for all purposes of this
Agreement.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(d)(i).
"SHARE CONVERSIONS" has the meaning specified in the Preliminary Statements
to this Agreement.
"SIGNIFICANT SUBSIDIARY" means any subsidiary of the Borrower or any of its
subsidiaries that constitutes a "significant subsidiary" under Rule 405
promulgated by the SEC under the Securities Act of 1933, as amended.
"SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower
or an ERISA Affiliate and no Person other than the Borrower and the ERISA
Affiliates or (ii) was so maintained and in respect of which the Borrower
or an ERISA Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"TAXES" has the meaning specified in Section 2.14(a).
"TERM LOAN CONVERSION DATE" means the Revolver Termination Date on which
all Advances outstanding on such date are converted into a term loan
pursuant to Section 2.05.
<PAGE>
12
"TERM LOAN ELECTION" has the meaning specified in Section 2.05.
"TRANSACTION" has the meaning specified in the Preliminary Statements to
this Agreement.
"TYPE" has the meaning specified in the definition of "Advance".
"UNITED STATES" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods . In this Agreement in the
----------------------------
computation of periods of time from a specified date to a later specified date,
the word "FROM" means "from and including" and the words "TO" and "UNTIL" each
means "to but excluding".
SECTION 1.03. Accounting Terms . All accounting terms not specifically
-----------------
defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances . Each Lender severally agrees, on the terms
-------------
and conditions hereinafter set forth, to make Advances to the Borrower from time
to time on any Business Day during the period from the Effective Date until the
Revolver Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof or, if such Lender has become a Lender hereunder pursuant to an
Assumption Agreement, the amount set forth as the Commitment of such Lender in
such Assumption Agreement or, if such Lender has entered into an Assignment and
Acceptance, the amount set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 8.07(c), as such amount may be
reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"). Each Borrowing
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Advances of the same Type made
on the same day by the Lenders ratably according to their respective
Commitments. Within the limits of each Lender's Commitment, the Borrower from
time to time may borrow under this Section 2.01, prepay pursuant to Section 2.10
and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances . (a) Each Borrowing shall be made on
--------------------
notice, given not later than 11:00 A.M. (New York City time) on the same
Business Day as the date of a proposed Borrowing comprised of Base Rate Advances
and not later than 1:00 P.M. (New York City time) on the third Business Day
prior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Borrowing
(a "NOTICE OF BORROWING") shall be by telecopier or telex, or by telephone,
confirmed immediately by telecopier or telex, in substantially the form of
Exhibit A hereto, specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day), (ii) Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a
Borrowing comprised of Eurodollar Rate Advances, initial Interest Period for
each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on
the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such
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13
Borrowing. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower at the
office where the Administrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than $20,000,000 or
if the obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that any Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender agrees to pay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid
to the Administrative Agent, at the Federal Funds Rate; provided, however, that
(i) within two Business Days after any Lender shall fail to make such ratable
portion available to the Administrative Agent, the Administrative Agent shall
notify the Borrower of such failure and (ii) if such Lender shall not have paid
such corresponding amount to the Administrative Agent within two Business Days
after such demand is made of such Lender by the Administrative Agent, the
Borrower agrees to repay to the Administrative Agent forthwith, upon demand by
the Administrative Agent to the Borrower, such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative
Agent, at the interest rate applicable at the time to Advances comprising such
Borrowing. If and to the extent such corresponding amount shall be paid by such
Lender to the Administrative Agent in accordance with this Section 2.02(d), such
amount so paid shall constitute such Lender's Advance as part of such Borrowing
for all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
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14
SECTION 2.03. Facility Fee . The Borrower agrees to pay to each Lender a
-------------
facility fee on the average daily amount (whether used or unused) of such
Lender's Commitment from (a) the earlier of (i) December 11, 1995 and (ii) the
first date on which all necessary approvals of the Mergers by the shareholders
of Disney and the stockholders of Capital Cities/ABC have been obtained, in the
case of each Initial Lender and (b) the later of (i) December 11, 1995 and (ii)
the effective date specified in the Assumption Agreement or the Assignment and
Acceptance pursuant to which it became a Lender, in the case of each other
Lender until, in each case, the Revolver Termination Date or, if the Borrower
has made the Term Loan Election pursuant to Section 2.05 on or prior to such
date, the Maturity Date, payable quarterly in arrears on the first Business Day
of each April, July, October and January during the term of such Lender's
Commitment, commencing January 2, 1996, and on the Revolver Termination Date or,
if the Borrower has made the Term Loan Election pursuant to Section 2.05 on or
prior to such date, the Maturity Date, at the rate per annum equal to the
Facility Fee Percentage in effect from time to time.
SECTION 2.04. Reduction of the Commitments . (a) Optional. The Borrower
----------------------------- --------
shall have the right, upon at least three Business Days' notice to the
Administrative Agent, to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Lenders, provided that each
partial reduction shall be in the aggregate amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof.
(b) Mandatory. On the Revolver Termination Date, if the Borrower has made
---------
the Term Loan Election in accordance with Section 2.05 prior to such date, and
from time to time thereafter upon each prepayment of the Advances, the aggregate
Commitments of the Lenders under this Agreement shall be automatically and
permanently reduced on a pro rata basis by an amount equal to the amount by
which the aggregate Commitments of the Lenders under this Agreement immediately
prior to such reduction exceeds the aggregate unpaid principal amount of the
Advances outstanding at such time.
SECTION 2.05. Repayment of Advances . The Borrower shall, subject to the
----------------------
next succeeding sentence, repay to each Lender on the Revolver Termination Date
the aggregate principal amount of the Advances owing to such Lender on such
date. The Borrower may, upon not less than 15 days notice to the Administrative
Agent, elect (the "TERM LOAN ELECTION") to convert all of the Advances
outstanding on the Revolver Termination Date in effect at such time into a term
loan which the Borrower shall repay in full ratably to the Lenders on the
Maturity Date; provided that no Event of Default, or event that with the giving
of notice or passage of time or both would constitute an Event of Default, has
occurred and is continuing on the date of notice of the Term Loan Election or on
the Term Loan Conversion Date on which such election is to be effected.
SECTION 2.06. Interest on Advances . (a) Scheduled Interest. The
--------------------- ------------------
Borrower shall pay to each Lender interest on the unpaid principal amount of
each Advance owing to such Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base Rate
------------------
Advance, a rate per annum equal at all times to the remainder of (A) the
Base Rate in effect from time to time minus (B) the Facility Fee Percentage
in effect from time to time, payable quarterly in arrears on the first
Business Day of each April, July, October and January during such periods
and on the date such Base Rate Advance shall be Converted or paid in full.
<PAGE>
15
(ii) Eurodollar Rate Advances. During such periods as such Advance is a
------------------------
Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance and (B) the Eurodollar Rate Margin in
effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more than
three months, on the date which occurs three months and, if applicable, six
months, nine months and twelve months after the first day of such Interest
Period and on the date such Eurodollar Rate Advance shall be Converted or
paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid
----------------
principal amount of each Advance that is not paid when due and on the unpaid
amount of all interest, fees and other amounts payable hereunder that is not
paid when due, payable on demand, at a rate per annum equal at all times to (i)
in the case of any amount of principal, the greater of (x) 2% per annum above
the rate per annum required to be paid on such Advance immediately prior to the
date on which such amount became due and (y) 2% per annum above the Base Rate in
effect from time to time and (ii) to the fullest extent permitted by law, in the
case of all other amounts, 2% per annum above the Base Rate in effect from time
to time.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances . The
------------------------------------------------
Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the applicable Interest Period for such Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified in
reasonable detail to the Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determination . (a) Each Reference Bank
----------------------------
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrower and
the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.06(a)(i) or (a)(ii), and the rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information to the
Administrative Agent for purposes of determining the Eurodollar Rate for any
Eurodollar Rate Advances, (i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot be determined for
such Eurodollar Rate Advances, (ii) each such Advance will automatically, on
<PAGE>
16
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a
Base Rate Advance), and (iii) the obligation of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Majority Lenders
(which cost each such Majority Lender reasonably determines in good faith is
material) of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Administrative Agent shall forthwith so
notify the Borrower and the Lenders, whereupon, unless the Eurodollar Rate
Margin shall be increased to reflect such costs as determined by such Majority
Lenders and as agreed by the Borrower, (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended
until the Majority Lenders shall notify the Administrative Agent, and the
Administrative Agent shall in turn notify the Borrower and the Lenders, that the
circumstances causing such suspension no longer exist. The Administrative Agent
shall use reasonable efforts to determine from time to time whether the
circumstances causing such suspension no longer exist and, promptly after the
Administrative Agent knows that the circumstances causing such suspension no
longer exist, the Administrative Agent shall so notify the Borrower and the
Lenders.
(e) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $20,000,000, such Eurodollar Rate
Advances shall automatically Convert into Base Rate Advances and, on and after
such date, the right of the Borrower to Convert such Advances into Eurodollar
Rate Advances shall terminate; provided, however, that if and so long as each
such Eurodollar Rate Advance shall have the same Interest Period as Eurodollar
Rate Advances comprising another Borrowing or Borrowings, and the aggregate
unpaid principal amount of all such Eurodollar Rate Advances shall equal or
exceed $20,000,000, the Borrower shall have the right to continue all such
Eurodollar Rate Advances as, or to Convert all such Advances into, Eurodollar
Rate Advances having such Interest Period.
(g) Upon the occurrence and during the continuance of any Event of Default
under Section 6.01(a), (i) each Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance and (ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances . The Borrower may on any
--------------------------------
Business Day, upon notice given to the Administrative Agent not later than 11:00
A.M. (New York City time) on the same Business Day as the date of the proposed
Conversion in the case of a Conversion of Eurodollar
<PAGE>
17
Rate Advances into Base Rate Advances, and not later than 1:00 P.M. (New York
City time) on the third Business Day prior to the date of the proposed
Conversion in the case of a Conversion of Base Rate Advances into Eurodollar
Rate Advances or of Eurodollar Rate Advances of one Interest Period into
Eurodollar Rate Advances of another Interest Period, as the case may be, and
subject to the provisions of Sections 2.08, 2.09 and 2.12, Convert all Advances
of one Type comprising the same Borrowing into Advances of the other Type;
provided, however, that any Conversion of any Eurodollar Rate Advances into Base
Rate Advances or into Eurodollar Rate Advances of another Interest Period shall
be made on, and only on, the last day of an Interest Period for such Eurodollar
Rate Advances. Promptly upon receipt from the Borrower of a notice of a proposed
Conversion hereunder, the Administrative Agent shall give notice of such
proposed Conversion to each Lender. Each such notice of a Conversion shall,
within the restrictions set forth above, specify (i) the date of such Conversion
(which shall be a Business Day), (ii) the Advances to be Converted, and (iii) if
such Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. The Borrower may Convert all Eurodollar
Rate Advances of any one Lender into Base Rate Advances of such Lender in
accordance with the provisions of Section 2.12 by complying with the procedures
set forth therein and in this Section 2.09 as though each reference in this
Section 2.09 to Advances of any Type was to such Advances of such Lender. Each
such notice of Conversion shall, subject to the provisions of Sections 2.08 and
2.12, be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Advances . The Borrower may, upon not less
------------------------
than the same Business Day's notice to the Administrative Agent received not
later than 11:00 A.M. (New York City time) in the case of Borrowings consisting
of Base Rate Advances and upon at least three Business Days' notice to the
Administrative Agent received not later than 1:00 P.M. (New York City time) in
the case of Borrowings consisting of Eurodollar Rate Advances, stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the Advances constituting part of the same Borrowings in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (a) each partial prepayment
shall be in an aggregate principal amount of $1,000,000 or an integral multiple
of $1,000,000 in excess thereof, and (b) in the case of any such prepayment of
Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(b).
SECTION 2.11. Increased Costs . (a) If after the date hereof, due to
----------------
either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or (ii)
the compliance with any hereafter promulgated guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost (excluding any allocation of
corporate overhead) to any Lender (which cost such Lender reasonably determines
in good faith is material) of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then such Lender shall so notify the Borrower promptly
after such Lender knows of such increased cost and determines that such cost is
material and the Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate of
such Lender as to the amount of such increased cost in reasonable detail and
stating the basis upon which such amount has been calculated and certifying that
such Lender's method of allocating such costs is fair and reasonable and that
such Lender's demand for
<PAGE>
18
payment of such costs hereunder is not inconsistent with its treatment of other
borrowers which, as a credit matter, are substantially similar to the Borrower
and which are subject to similar provisions, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error .
(b) If, after the date hereof, either (i) the introduction of or change in
or in the interpretation of any law or regulation or (ii) the compliance by any
Lender with any hereafter promulgated guideline or request from any central bank
or other governmental authority (whether or not having the force of law) affects
or would affect the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and the amount of such
capital is materially increased by or based upon the existence of such Lender's
commitment to lend hereunder and other commitments of this type, then, such
Lender shall so notify the Borrower promptly after such Lender makes such
determination and, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to such Lender within five days
from the date of such demand, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder. A certificate of such Lender as to such
amount in reasonable detail and stating the basis upon which such amount has
been calculated and certifying that such Lender's method of allocating such
increase of capital is fair and reasonable and that such Lender's demand for
payment of such increase of capital hereunder is not inconsistent with its
treatment of other borrowers which, as a credit matter, are substantially
similar to the Borrower and which are subject to similar provisions, submitted
to the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under this Section 2.11 any
amounts which relate to costs or increases of capital incurred prior to the 12
months immediately preceding the date of demand for payment of such amounts,
unless the applicable law, regulation, guideline or request resulting in such
costs or increases of capital is imposed retroactively. In the case of any law,
regulation, guideline or request which is imposed retroactively, the Lender
making demand for payment of any amount under this Section 2.11 shall notify the
Borrower not later than 12 months from the date that such Lender should
reasonably have known of such law, regulation, guideline or request and the
Borrower's obligation to compensate such Lender for such amount is contingent
upon such Lender's so notifying the Borrower; provided, however, that any
failure by such Lender to provide such notice shall not affect the Borrower's
obligations under this Section 2.11 with respect to amounts resulting from costs
or increases of capital incurred after the date which occurs 12 months
immediately preceding the date on which such Lender notified the Borrower of
such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other than from the
Borrower) for which such Lender has theretofore been compensated by the Borrower
under this Section 2.11, such Lender shall remit to the Borrower an amount equal
to the amount of such recoupment. Amounts required to be paid by the Borrower
pursuant to this Section 2.11 shall be paid in addition to, and without
duplication of, any amounts required to be paid pursuant to Section 2.14.
SECTION 2.12. Illegality . Notwithstanding any other provision of this
-----------
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the
<PAGE>
19
interpretation of any law or regulation after the date hereof makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) the obligation of such Lender to make, or to
Convert Base Rate Advances into, Eurodollar Rate Advances shall be suspended
until such Lender shall notify the Administrative Agent, and the Administrative
Agent shall notify the Borrower and the other Lenders (which notice shall be
given promptly after the Administrative Agent knows that the circumstances
causing such suspension no longer exist), that the circumstances causing such
suspension no longer exist and (ii) the Borrower shall forthwith prepay in full
all Eurodollar Rate Advances of such Lender then outstanding, together with
interest accrued thereon, unless the Borrower, within five Business Days of
notice from the Administrative Agent or, if permitted by law, on and as of the
last day of the then existing Interest Period for such Eurodollar Rate Advances,
Converts all Eurodollar Rate Advances of such Lender then outstanding into Base
Rate Advances in accordance with Section 2.09.
SECTION 2.13. Payments and Computations . (a) The Borrower shall make
--------------------------
each payment hereunder and under the Notes, if any, not later than 11:00 A.M.
(New York City time) on the day when due in U.S. dollars to the Administrative
Agent at the Administrative Agent's Account in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or facility fees ratably (other
than amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and 8.08) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon any Assuming
Lender becoming a Lender hereunder as a result of an extension of the Revolver
Termination Date pursuant to Section 2.19, and upon Administrative Agent's
receipt of such Lender's Assumption Agreement and recording of the information
contained therein in the Register, from and after the applicable Extension Date,
the Administrative Agent shall make all payments hereunder and under any Notes
issued in connection therewith in respect of the interest assumed thereby to the
Assuming Lender. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date specified in such Assignment
and Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes, if any, issued in connection therewith in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the Base Rate shall be made by
the Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Eurodollar Rate or the
Federal Funds Rate and of facility fees shall be made by the Administrative
Agent, and all computations of additional interest pursuant to Section 2.07
shall be made by a Lender, on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or facility fees are payable.
Each determination by the Administrative Agent (or, in the case of Section 2.07,
by a Lender) of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.
<PAGE>
20
(c) Whenever any payment hereunder or under the Notes, if any, shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fees, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the immediately
preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the
Borrower shall not have so made such payment in full to the Administrative
Agent, each Lender shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal Funds
Rate.
SECTION 2.14. Taxes . (a) Any and all payments by the Borrower hereunder
------
or under the Notes, if any, shall be made, in accordance with Section 2.13, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Administrative
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender or the Administrative Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof or by any other jurisdiction in which such Lender
or the Administrative Agent is doing business that is unrelated to this
Agreement (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Administrative Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.14) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes, if any,
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Notes, if any (hereinafter referred to as "OTHER
TAXES").
(c) The Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.14) paid by such Lender or the
<PAGE>
21
Administrative Agent (as the case may be) and any liability (including penalties
to the extent not imposed as a result of such Lender's or the Administrative
Agent's (as the case may be) gross negligence or willful misconduct, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Lender or the Administrative
Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing payment thereof.
(e) Each Lender that is not created or organized under the laws of the
United States or a political subdivision thereof shall deliver to the Borrower
and the Administrative Agent on or prior to the date of its execution and
delivery of this Agreement, and each such Lender that is not a party hereto on
the date hereof shall deliver to the Borrower and the Administrative Agent on or
prior to the date on which such Lender becomes a Lender pursuant to Section 2.19
or 8.07 (as the case may be), a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender in substantially the form
set out in Exhibit D-1 or D-2 hereto, as applicable, to the effect that such
Lender is eligible under the provisions of an applicable tax treaty concluded by
the United States (in which case the certificate shall be accompanied by two
executed copies of Form 1001 (or any successor or substitute form or forms) of
the Internal Revenue Service (the "IRS") of the United States), or under Section
1441(c) or 1442 of the Internal Revenue Code (in which case the certificate
shall be accompanied by two copies of IRS Form 4224 (or any successor or
substitute form or forms of the IRS) to receive, as of the date hereof or as of
the date such party becomes a Lender hereto pursuant to Section 2.19 or 8.07 (as
the case may be), as appropriate, payments hereunder without deduction or
withholding of United States federal income tax. Each such Lender further
agrees to deliver to the Borrower and the Administrative Agent from time to
time, as reasonably requested by the Borrower or the Administrative Agent, and
in any case before or promptly upon the occurrence of any events requiring a
change in the most recent certificate previously delivered pursuant to this
Section 2.14(e), a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender in substantially the form set out in Exhibit
D-1 or D-2 hereto, as applicable. Further, each Lender that delivers a
certificate in the form set out in Exhibit D-1 hereto agrees, to the extent
permitted by law, to deliver to the Borrower and the Administrative Agent within
15 days prior to every third anniversary of the date of delivery of the initial
IRS Form 1001 by such Lender (or more often if required by law) on which this
Agreement is still in effect, two accurate and complete original signed copies
of IRS Form 1001 (or any successor or substitute form or forms required under
the Internal Revenue Code or the applicable regulations promulgated thereunder)
and a certificate in the form set out in such Exhibit D-1, and each Lender that
delivers a certificate in the form set out in Exhibit D-2 hereto agrees to
deliver to the Borrower and the Administrative Agent, to the extent permitted by
law, within 15 days prior to the beginning of each subsequent taxable year of
such Lender (or more often if required by law) during which this Agreement is
still in effect, two accurate and complete original signed copies of IRS Form
4224 (or any successor or substitute form or forms required under the Internal
Revenue Code or the applicable regulations promulgated thereunder) and a
certificate in the form of such Exhibit D-2. Each such certificate shall
certify as to one of the following:
<PAGE>
22
(i) that such Lender is eligible to receive payments hereunder without
deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunder without
deduction or withholding of United States federal income tax as specified
therein but does not require additional payments therefor pursuant to
Section 2.14(a) or (c) because it is eligible and able to recover the full
amount of any such deduction or withholding from a source other than the
Borrower; or
(iii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein and that it is not eligible and able to recover the full
amount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by IRS Form 1001 or 4224,
that any Lender reasonably considers to be confidential, such Lender promptly
shall give notice thereof to the Borrower and the Administrative Agent and shall
not be obligated to include in such form or document such confidential
information; provided that such Lender certifies to the Borrower that the
failure to disclose such confidential information does not increase the
obligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of principal and interest on
all Advances and the termination of this Agreement until such date as all
applicable statutes of limitations (including any extensions thereof) have
expired with respect to such agreements and obligations of the Borrower
contained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratable
share of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any
---------------------------------------------
Lender requests from the Borrower either payment of additional interest on
Eurodollar Rate Advances pursuant
<PAGE>
23
to Section 2.07, or reimbursement for increased costs pursuant to Section 2.11,
or payment of or reimbursement for Taxes pursuant to Section 2.14, or if any
Lender notifies the Administrative Agent that it is unlawful for such Lender or
its Eurodollar Lending Office to perform its obligations hereunder pursuant to
Section 2.12, (i) such Lender will, upon three Business Days' notice by the
Borrower to such Lender and the Administrative Agent, to the extent not
inconsistent with such Lender's internal policies and applicable legal and
regulatory restrictions, use reasonable efforts to make, fund or maintain its
Eurodollar Rate Advances through another Eurodollar Lending Office of such
Lender if (A) as a result thereof the additional amounts required to be paid
pursuant to Section 2.07, 2.11 or 2.14, as applicable, in respect of such
Eurodollar Rate Advances would be materially reduced or the provisions of
Section 2.12 would not apply to such Lender, as applicable, and (B) as
determined by such Lender in good faith but in its sole discretion, the making
or maintaining of such Eurodollar Rate Advances through such other Eurodollar
Lending Office would not otherwise materially and adversely affect such
Eurodollar Rate Advances or such Lender and (ii) unless such Lender has
theretofore taken steps to remove or cure, and has removed or cured, the
conditions creating such obligation to pay such additional amounts or the
circumstances described in Section 2.12, the Borrower may designate an Eligible
Assignee to purchase for cash (pursuant to an Assignment and Acceptance) all,
but not less than all, of the Advances then owing to such Lender and all, but
not less than all, of such Lender's rights and obligations hereunder, without
recourse to or warranty by, or expense to, such Lender, for a purchase price
equal to the outstanding principal amount of each such Advance then owing to
such Lender plus any accrued but unpaid interest thereon and any accrued but
unpaid facility fees owing thereto and, in addition, all additional costs
reimbursements, expense reimbursements and indemnities, if any, owing in respect
of such Lender's Commitment hereunder at such time shall be paid to such Lender.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in
-----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower
agrees that upon notice by any Lender to the Borrower (with a copy of such
notice to the Administrative Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Advances owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a promissory note or other evidence
of indebtedness, in form and substance reasonably satisfactory to the Borrower
and such Lender (each a "NOTE"), payable to the order of such Lender in a
principal amount equal to the Commitment of such Lender; provided, however, that
the execution and delivery of such promissory note or other evidence of
indebtedness shall not be a condition precedent to the making of any Advance
under this Agreement.
(b) The Register maintained by the Administrative Agent pursuant to Section
8.07(c) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assumption Agreement and each Assignment and Acceptance delivered
to and accepted by it, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder,
and (iv) the amount of any sum received by the Administrative Agent from the
Borrower hereunder and each Lender's share thereof.
<PAGE>
24
(c) Entries made in good faith by the Administrative Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent or such Lender
to make an entry, or any finding that an entry is incorrect, in the Register or
such account or accounts shall not limit or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be
----------------
available (and the Borrower agrees that it shall use such proceeds) to support
the obligations of the Borrower in respect of commercial paper issued by the
Borrower, to finance in part the Transaction, to pay fees and expenses incurred
in connection with the consummation of the Transaction, and/or for other general
corporate purposes of the Borrower and its subsidiaries.
SECTION 2.19. Extension of Termination Date. (a) At least 45 days but
------------------------------
not more than 60 days prior to the Revolver Termination Date in effect at any
time, the Borrower, by written notice to the Administrative Agent, may request
an extension of the Revolver Termination Date in effect at such time for a
period of 364 days from its then scheduled expiration; provided, however, that
the Borrower shall not have made the Term Loan Election for Advances outstanding
on such Revolver Termination Date prior to the then scheduled Revolver
Termination Date. The Administrative Agent shall promptly notify each Lender of
such request, and each Lender shall in turn, in its sole discretion, not earlier
than 30 days but at least 20 days prior to such Revolver Termination Date,
notify the Borrower and the Administrative Agent in writing as to whether such
Lender will consent to such extension. If any Lender shall fail to notify the
Administrative Agent and the Borrower in writing of its consent to any such
request for extension of the Revolver Termination Date at least 20 days prior to
the scheduled occurrence thereof at such time, such Lender shall be deemed to be
a Non-Consenting Lender with respect to such request. The Administrative Agent
shall notify the Borrower not later than 15 days prior to the scheduled Revolver
Termination Date in effect at such time of the decision of the Lenders regarding
the Borrower's request for an extension of the Revolver Termination Date.
(b) If all of the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Revolver Termination
Date shall, effective as at the Revolver Termination Date otherwise in effect at
such time (the "EXTENSION DATE"), be extended for a period of 364 days from such
Extension Date; provided that on each Extension Date, no Event of Default, or
event that with the giving of notice or passage of time or both would constitute
an Event of Default, shall have occurred and be continuing, or shall occur as a
consequence thereof. If Lenders holding at least a majority in interest of the
aggregate Commitments at such time consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Revolver Termination
Date in effect at such time shall, effective as at the applicable Extension
Date, be extended as to those Lenders that so consented (each a "CONSENTING
LENDER") but shall not be extended as to any other Lender (each a "NON-
CONSENTING LENDER"). To the extent that the Revolver Termination Date is not
extended as to any Lender pursuant to this Section 2.19 and the Commitment of
such Lender is not assumed in accordance with subsection (c) of this Section
2.19 on or prior to the applicable Extension Date, the Commitment of such Non-
Consenting Lender shall automatically terminate in whole on such unextended
Revolver Termination Date without any further notice or other action by the
Borrower, such Lender or any other Person;
<PAGE>
25
provided that such Non-Consenting Lender's rights under Sections 2.11, 2.14,
8.04 and 8.08, and its obligations under Section 7.05, shall survive the
Revolver Termination Date for such Lender as to matters occurring prior to such
date. It is understood and agreed that no Lender shall have any obligation
whatsoever to agree to any request made by the Borrower for any requested
extension of the Revolver Termination Date.
(c) If Lenders holding at least a majority in interest of the aggregate
Commitments at any time consent to any such request pursuant to subsection (a)
of this Section 2.19, the Borrower may arrange for one or more Consenting
Lenders or other Eligible Assignees (each such Eligible Assignee that accepts an
offer to assume a Non-Consenting Lender's Commitment as of the applicable
Extension Date being an "ASSUMING LENDER") to assume, effective as of the
Extension Date, any Non-Consenting Lender's Commitment and all of the
obligations of such Non-Consenting Lender under this Agreement thereafter
arising, without recourse to or warranty by, or expense to, such Non-Consenting
Lender; provided, however, that the amount of the Commitment of any such
Assuming Lender as a result of such substitution shall in no event be less than
$25,000,000 unless the amount of the Commitment of such Non-Consenting Lender is
less than $25,000,000, in which case such Assuming Lender shall assume all of
such lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paid to such
Non-Consenting Lender (A) the aggregate principal amount of, and any
interest accrued and unpaid to the effective date of the assignment on, the
outstanding Advances, if any, of such Non-Consenting Lender plus (B) any
accrued but unpaid facility fees owing to such Non-Consenting Lender as of
the effective date of such assignment;
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable processing
and recordation fee required under Section 8.07(a) for such assignment
shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Administrative
Agent an assumption agreement, in form and substance satisfactory to the
Borrower and the Administrative Agent (an "ASSUMPTION AGREEMENT"), duly executed
by such Assuming Lender, such Non-Consenting Lender, the Borrower and the
Administrative Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Administrative
Agent as to the increase in the amount of its Commitment and (C) each Non-
Consenting Lender being replaced pursuant to this Section 2.19 shall have
delivered to the Administrative Agent any Note or Notes held by such Non-
Consenting Lender. Upon the payment or prepayment of all amounts referred to in
clauses (i), (ii) and (iii) of the immediately preceding sentence, each such
Consenting Lender or Assuming Lender, as of the Extension Date, will be
substituted for such Non-Consenting Lender under this Agreement and shall be a
Lender for all purposes of this Agreement, without any further acknowledgment by
or the consent of
<PAGE>
26
the other Lenders, and the obligations of each such Non-Consenting Lender
hereunder shall, by the provisions hereof, be released and discharged.
(d) If all of the Lenders (after giving effect to any assignments pursuant
to subsection (b) of this Section 2.19) consent in writing to a requested
extension (whether by execution or delivery of an Assumption Agreement or
otherwise) not later than one Business Day prior to such Extension Date, the
Administrative Agent shall so notify the Borrower, and, so long as no Event of
Default, or event that with the giving of notice or passage of time or both
would constitute an Event of Default, shall have occurred and be continuing as
of such Extension Date, or shall occur as a consequence thereof, the Revolver
Termination Date then in effect shall be extended for the 364-day period
described in subsection (a) of this Section 2.19, and all references in this
Agreement, and in the Notes, if any, to the " Revolver Termination Date" shall,
with respect to each Consenting Lender and each Assuming Lender for such
Extension Date, refer to the Revolver Termination Date as so extended. Promptly
following each Extension Date, the Administrative Agent shall notify the Lenders
(including, without limitation, each Assuming Lender) of the extension of the
scheduled Revolver Termination Date in effect immediately prior thereto and
shall thereupon record in the Register the relevant information with respect to
each such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of Section 2.01.
----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "EFFECTIVE DATE") on which all of the following conditions precedent
have been satisfied or waived in accordance with Section 8.01:
(a) the Administrative Agent shall have received on or before the Effective
Date the following, each dated the Effective Date, in form and substance
satisfactory to the Administrative Agent: (i) certified copies of the
resolutions of the Board of Directors of the Borrower or the Executive
Committee of such Board authorizing the execution and delivery of this
Agreement, and approving all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement
and the Transaction; (ii) a certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the name and true signature of the
officer of the Borrower executing this Agreement on its behalf; (iii) a
copy of the Joint Proxy Statement most recently mailed to the shareholders
of Disney and the stockholders of Capital Cities/ABC; (iv) the Disney
Agreement, in substantially the form of Exhibit E hereto, duly executed and
delivered by Disney and the Borrower; (v) an opinion of David K. Thompson,
Esq., Senior Vice President-Assistant General Counsel of the Borrower and
Disney, in substantially the form of Exhibit C-1 hereto; (vi) an opinion of
Dewey Ballantine, special counsel for Disney in connection with the
Transaction, in substantially the form of Exhibit C-2 hereto; and (vii) an
opinion of Shearman & Sterling, counsel for the Administrative Agent.
(b) each of the Mergers shall have been consummated substantially in
accordance with the terms of the Reorganization Agreement and in compliance
with all applicable laws.
<PAGE>
27
(c) all consents and approvals of any governmental or regulatory authority
and any other third party necessary in connection with this Agreement or
the consummation of the Transaction shall have been obtained; all related
material filings required to be made prior to the consummation of the
Transaction shall have been made and, in each case, shall remain in effect;
and all applicable waiting periods in connection with the consummation of
the Transaction shall have expired without any adverse action being taken
by any competent governmental or regulatory authority that could reasonably
be expected to have a material adverse effect on the business, financial
condition or operations of the Borrower and its subsidiaries, taken as a
whole.
(d) there shall have occurred no material adverse change in the business,
financial condition or operations of Disney and its subsidiaries, taken as
a whole, since September 30, 1994, except as disclosed in periodic or other
reports filed by Disney and its subsidiaries during the period from
September 30, 1994 to the date of this Agreement pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended, copies of which have been
furnished to the Lenders prior to the date of this Agreement.
(e) each of Disney and Capital Cities/ABC shall have paid or prepaid all
amounts owing under the Existing Credit Agreement to which it is a party,
and all commitments of the lenders thereunder shall have been terminated.
(f) all of the representations and warranties contained in Section 4.01
shall be correct in all material respects on and as of the Effective Date,
before and after giving effect to such date, as though made on and as of
the Effective Date (except to the extent that such representations and
warranties relate to an earlier date, which representations and warranties
shall have been correct in all material respects on and as of such earlier
date).
(g) no event shall have occurred and be continuing, or shall result from
the occurrence of the Effective Date, that constitutes an Event of Default
or would constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation of
---------------------------------------
each Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that the
Effective Date shall have occurred and on the date of such Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of the date of such Borrowing,
before and after giving effect to such Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date (except to
the extent that such representations and warranties relate to an earlier
date, which representations and warranties were correct in all material
respects on and as of such earlier date); and
<PAGE>
28
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
-----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to time
thereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Borrower and
each of the Significant Subsidiaries are duly qualified and in good
standing as foreign corporations authorized to do business in each
jurisdiction (other than the jurisdiction of its incorporation) in which
the nature of their respective activities or the character of the
properties they own or lease make such qualification necessary and in which
the failure so to qualify would have a material adverse effect on the
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each of the Notes, if any, delivered hereunder are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or by-
laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any material contractual restriction
binding on or affecting the Borrower, Disney or Capital Cities/ABC; no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due
execution, delivery and performance by the Borrower of this Agreement; and
this Agreement is and each of the Notes, when delivered hereunder, will be
the legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and general principles of
equity.
(c) (i) At any time prior to the date on which the Borrower first delivers
the audited financial statements of the Borrower and its subsidiaries
pursuant to Section 5.01(d)(ii), Disney's most recent annual report on Form
10-K containing the consolidated balance sheet of Disney and its
subsidiaries, and the related consolidated statements of income and of cash
flows of Disney and its subsidiaries, copies of which have been furnished
to each Lender prior to the Effective Date, fairly present the consolidated
financial condition of Disney and its subsidiaries as at the date of such
balance sheet and the consolidated results of operations of Disney and its
subsidiaries for the fiscal year ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and (ii) at
any time thereafter, the Borrower's most recent annual report on Form 10-K
containing the consolidated balance sheet of the Borrower and its
subsidiaries, and the related consolidated statements of income and of cash
flows of the Borrower and its subsidiaries, copies of which have been
furnished to each Lender pursuant to Section
<PAGE>
29
5.01(d)(ii), fairly present the consolidated financial condition of the
Borrower and its subsidiaries as at the date of such balance sheet and the
consolidated results of operations of the Borrower and its subsidiaries for
the fiscal year ended on such date, all in accordance with generally
accepted accounting principles consistently applied.
(d) There is no pending or, to the Borrower's knowledge, threatened claim,
action or proceeding affecting the Borrower or any of its subsidiaries
which could reasonably be expected to adversely affect the financial
condition or operations of the Borrower and its subsidiaries, taken as a
whole, or which could reasonably be expected to affect the legality,
validity or enforceability of this Agreement; and to the Borrower's
knowledge, the Borrower and each of its subsidiaries have complied, and are
in compliance, with all applicable laws, rules, regulations, permits,
orders, consent decrees and judgments, except for any such matters which
have not had, and would not reasonably be expected to have, a material
adverse effect on the financial condition or operations of the Borrower and
its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and are not
reasonably expected to incur any material liability in connection with
their Single Employer Plans or Multiple Employer Plans, other than ordinary
liabilities for benefits; neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any material withdrawal
liability (as defined in Part I of Subtitle E of Title IV of ERISA) to any
Multiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISA
Affiliate is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the Borrower as
------------------------------------------------------------
of Each Extension Date. The Borrower represents and warrants on each Extension
- -----------------------
Date (and at no other time) that, as of each such date, the following statements
shall be true:
(a) there has been no material adverse change in the business, financial
condition or operations of (i) Disney and its subsidiaries, taken as a
whole, since September 30, 1994 (except as disclosed in periodic or other
reports filed by Disney and its subsidiaries pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, during the period from
September 30, 1994 to the date of the request for an extension of the
Revolver Termination Date then in effect related to such Extension Date),
in the case of any Extension Date occurring prior to the first delivery of
financial statements of the Borrower and its subsidiaries pursuant to
Section 5.01(d)(ii), or (ii) the Borrower and its subsidiaries, taken as a
whole, since the date of the most recently delivered audited financial
statements of the Borrower and its subsidiaries pursuant to Section
5.01(d)(ii) (except as disclosed in periodic or other reports filed by the
Borrower and its subsidiaries pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, during the period from the date of the
most recently delivered audited financial statements of the Borrower and
its subsidiaries pursuant to Section 5.01(d)(ii) to the date of the request
for an extension of the Revolver Termination Date then in effect related to
such Extension Date), in the case of each Extension Date occurring at any
time thereafter; and
(b) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of such date, as though made on
and as of such date (except to the
<PAGE>
30
extent that such representations and warranties relate to an earlier date,
which representations and warranties were correct in all material respects
on and as of such earlier date).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants . So long as any Advance shall remain
----------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its subsidiaries
-------------------------
to comply, in all material respects with all applicable laws, rules,
regulations, permits, orders, consent decrees and judgments binding on the
Borrower and its subsidiaries the failure with which to comply would have a
material adverse effect on the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,
if the failure to so pay and discharge would have a material adverse effect
on the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property, and (ii) all lawful
claims which, if unpaid, will by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its subsidiaries
shall be required to pay or discharge any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained in
accordance with GAAP.
(c) Preservation of Corporate Existence, Etc. Subject to Section 5.02(a),
----------------------------------------
preserve and maintain, and cause each of Disney and Capital Cities/ABC to
preserve and maintain, its corporate existence, rights (charter and
statutory) and franchises; provided, however, that none of the Borrower,
Disney or Capital Cities/ABC shall be required to preserve any right or
franchise if the loss thereof would not have a material adverse effect on
the business, financial condition or operations of the Borrower and its
subsidiaries, taken as a whole; and provided further, however, that neither
Disney nor Capital Cities/ABC shall be required to preserve its corporate
existence if the loss thereof would not have a material adverse effect on
the business, financial condition or operations of the Borrower and its
subsidiaries, taken as a whole.
(d) Reporting Requirements. Furnish to the Administrative Agent, on behalf
----------------------
of the Lenders:
(i) as soon as available and in any event within 50 days after the end of
each of the first three quarters of each fiscal year of the Borrower,
the Borrower's quarterly report to shareholders on Form 10-Q as filed
with the Securities and Exchange Commission (the "SEC") or, if the
Borrower is not filing such quarterly report with the SEC at such
time, each of Disney's and (as soon as available thereafter) Capital
Cities/ABC's quarterly report to shareholders on Form 10-Q as and only
to the extent
<PAGE>
31
otherwise filed with the SEC, in each case containing a consolidated
balance sheet of the Borrower and its subsidiaries (or Disney and its
subsidiaries and Capital Cities/ABC and its subsidiaries, as the case
may be) as of the end of such quarter and consolidated statements of
income and of cash flows of the Borrower and its subsidiaries (or
Disney and its subsidiaries and Capital Cities/ABC and its
subsidiaries, as the case may be) for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter,
and a certificate of any of the Borrower's Chairman of the Board of
Directors, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller stating that no Event of Default, or event
that with the giving of notice or passage of time or both, would
constitute an Event of Default, has occurred and is continuing;
(ii) as soon as soon as available and in any event within 100 days after
the end of each fiscal year of the Borrower, a copy of the Borrower's
annual report to shareholders on Form 10-K as filed with the SEC or,
if the Borrower is not filing such annual report with the SEC at such
time, each of Disney's and (as soon as available thereafter) Capital
Cities/ABC's annual report to shareholders on Form 10-K as and only to
the extent otherwise filed with the SEC, in each case containing
consolidated financial statements of the Borrower and its subsidiaries
(or Disney and its subsidiaries and Capital Cities/ABC and its
subsidiaries, as the case may be) for such year and a certificate of
any of the Borrower's Chairman of the Board of Directors, President,
Chief Financial Officer, Treasurer, Assistant Treasurer or Controller
stating that no Event of Default, or event that with the giving of
notice or passage of time or both would constitute an Event of
Default, has occurred and is continuing;
(iii) promptly after the Borrower obtains actual knowledge of the
occurrence of each Event of Default, and each event that with the
giving of notice or passage of time or both would constitute an Event
of Default, a statement of any of the Borrower's Chairman of the Board
of Directors, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller setting forth details of such Event of Default
or event continuing on the date of such statement, and the action
which the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the commencement thereof, notice of any actions, suits
and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any of its subsidiaries of the type
described in Section 4.01(d);
(v) promptly after the Borrower obtains actual knowledge thereof, written
notice of any pending or threatened Environmental Claim against the
Borrower or any of its subsidiaries or any of their respective
properties which could reasonably be expected to materially and
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole;
(vi) promptly after the Borrower obtains actual knowledge of the occurrence
of any ERISA Event which could reasonably be expected to materially
and adversely
<PAGE>
32
affect the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, a statement of any of the Borrower's
Chairman of the Board of Directors, President, Chief Financial
Officer, Treasurer, Assistant Treasurer or Controller describing such
ERISA Event and the action, if any, which the Borrower has taken and
proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, a copy of each
notice received by the Borrower or any ERISA Affiliate concerning (A)
the imposition of withdrawal liability (as defined in Part I of
Subtitle E of Title IV of ERISA) by a Multiemployer Plan, which
withdrawal liability could reasonably be expected to materially and
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan, which reorganization or termination could
reasonably be expected to materially adversely affect the financial
condition or operations of the Borrower and its subsidiaries, taken as
a whole, or (C) the amount of liability incurred, or which may be
incurred, by the Borrower or any ERISA Affiliate in connection with
any event described in subclause (A) or (B) above; and
(viii) such other material information reasonably related to any Lender's
credit analysis of the Borrower or any of its subsidiaries as any
Lender through the Administrative Agent may from time to time
reasonably request.
SECTION 5.02. Negative Covenant. So long as any Advance shall remain
------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey, transfer,
------------
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of the assets of the Borrower and
its subsidiaries, taken as a whole (whether now owned or hereafter
acquired), to, any Person, or permit any of its subsidiaries to do so,
unless immediately after giving effect to such proposed transaction, no
Event of Default or event that with the giving of notice or lapse of time
or both would constitute an Event of Default, would exist and, in the case
of any such merger to which the Borrower is a party, the Borrower is the
surviving corporation or the Person into which the Borrower shall be merged
or formed by any such consolidation shall be a corporation organized and
existing under the laws of the United States or any State thereof and shall
assume the Borrower's obligations hereunder and under the Notes, if any, in
an agreement or instrument reasonably satisfactory in form and substance to
the Majority Lenders.
<PAGE>
33
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("EVENTS OF
------------------
DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when the
same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or any fee or other amount payable under this
Agreement, in each case within three Business Days after such interest, fee
or other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) delivered in writing and identified as
delivered in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenant contained in
Section 5.01(d)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement on its part to be performed or
observed if the failure to perform or observe such other term, covenant or
agreement shall remain unremedied for 30 days after written notice thereof
shall have been given to the Borrower by the Administrative Agent or any
Lender; or
(e) The Borrower or any of its subsidiaries shall fail to pay any principal
of or premium or interest on any Debt which is outstanding in a principal
amount of at least $250,000,000 in the aggregate (but excluding Debt
arising hereunder) of the Borrower or such subsidiary (as the case may be),
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure
(i) shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt and (ii) shall not have
been cured or waived; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Borrower or any Material Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
<PAGE>
34
a receiver, trustee, custodian or other similar official for it or for
substantially all of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Borrower or any Material Subsidiary shall
take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(g) Any money judgment, writ or warrant of attachment or similar process
against the Borrower, any Material Subsidiary or any of their respective
assets involving in any case an amount in excess of $100,000,000 is entered
and shall remain undischarged, unvacated, unbonded or unstayed for a period
of 30 days or, in any case, within five days of any pending sale or
disposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. (a) Each Lender hereby appoints
-------------------------
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement of this Agreement or
collection of the Advances), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The Administrative Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
<PAGE>
35
(b) The Co-Administrative Agent shall have no duties under this Agreement
other than those afforded to it in its capacity as a Lender, and each Lender
hereby acknowledges that the Co-Administrative Agent has no liability under this
Agreement other than those assumed by it in its capacity as a Lender.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable to any Lender for any action taken or omitted to be taken by it
or them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent: (i) may treat the Lender which made any
Advance as the holder of the Debt resulting therefrom until the Administrative
Agent receives and accepts an Assumption Agreement entered into by an Assuming
Lender as provided in Section 2.19, or an Assignment and Acceptance entered into
by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided
in Section 8.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement; (iv) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of the Borrower
or to inspect the property (including the books and records) of the Borrower;
(v) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment and
--------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its respective Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from, and generally engage in any kind of business with, the
Borrower, any of its subsidiaries and any Person who may do business with or own
securities of the Borrower or any such subsidiary, all as if CUSA was not the
Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it
-----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(c)(i) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
<PAGE>
36
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
----------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of Advances then owing to each of
them (or if no Advances are at the time outstanding or if any Advances are then
owing to Persons which are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal or
bankruptcy proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent
-------------------------------
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and such resignation shall be effective upon the appointment of a
successor Administrative Agent as provided herein. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days after
the retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent. Any successor Administrative Agent appointed hereunder
shall be a commercial bank organized or licensed under the laws of the United
States or of any State thereof, or an Affiliate of any such commercial bank,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Borrower or any of its Affiliates, if
a Lender, at the time of any such amendment, waiver
<PAGE>
37
or consent), do any of the following: (a) waive any of the conditions specified
in Section 3.01 or 3.02, (b) increase the Commitments of the Lenders or subject
the Lenders to any additional obligations, (c) reduce the principal of, or
interest on, the Advances or the facility fees payable hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the Advances
(other than as provided in Sections 2.05 and 2.19), (e) change the percentage of
the Commitments or of the aggregate unpaid principal amount of Advances, or the
number of Lenders, which shall be required for the Lenders or any of them to
take any action hereunder or (f) amend this Section 8.01; and provided, further,
that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications
------------
provided for hereunder shall be, except as otherwise expressly provided for
herein, in writing (including telecopier, telegraphic or telex communication)
and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower,
at its address at:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Edward Philip
Telecopy Number: (818) 563-1682;
if to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assumption Agreement or the Assignment and Acceptance
pursuant to which it became a Lender, as the case may be; and if to the
Administrative Agent, at its address at:
Citicorp USA, Inc.
One Court Square
Long Island City, New York 11120
Attention: Kim Coley
Telecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.
One Sansome Street
San Francisco, California 94104
Attention: Mark Wilson
Telecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telecopied, telegraphed or telexed, be effective when
deposited in the mails, telecopied, delivered to the telegraph company or
confirmed by telex answerback, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II or VII shall
not be effective until received by the
<PAGE>
38
Administrative Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
(b) If any notice required under this Agreement is permitted to be
made, and is made, by telephone, actions taken or omitted to be taken in
reliance thereon by the Administrative Agent or any Lender shall be binding upon
the Borrower notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to the
Administrative Agent or such Lender; provided that any such action taken or
omitted to be taken by the Administrative Agent or such Lender shall have been
in good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies No failure on the part of any
--------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay
-------------------
within five Business Days of demand all actual and reasonable costs and
expenses, if any (including, without limitation, actual and reasonable counsel
fees and expenses), of the Administrative Agent and each Lender in connection
with the enforcement (whether through legal proceedings or otherwise) of this
Agreement and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.08(f) or
2.10 or acceleration of the maturity of the Advances pursuant to Section 6.01 or
for any other reason (other than by reason of a payment pursuant to Section
2.12), the Borrower shall, within five Business Days of demand by any Lender
(with a copy of such demand to the Administrative Agent), pay to such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during
-----------------
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, but excluding trust accounts) at any time
held and other indebtedness at any time owing by such Lender (and, in the case
of CUSA, Citibank) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter existing under
this Agreement, whether or not such Lender shall have made any demand under this
Agreement. Each Lender agrees promptly to notify the Borrower after any such
set-off and application made by such Lender (and, in the case of CUSA,
Citibank); provided that the failure to give
<PAGE>
39
such notice shall not affect the validity of such set-off and application. The
rights of each Lender (and, in the case of CUSA, Citibank) under this Section
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
---------------
(other than Section 2.01, which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower, the Administrative Agent and the Co-Administrative
Agent and when the Administrative Agent shall have been notified by each Initial
Lender that such Initial Lender has executed it and, thereafter, shall be
binding upon and inure to the benefit of the Borrower, the Administrative Agent
and the Co-Administrative Agent and each Lender and their respective successors
and permitted assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may
-------------------------------
and, if requested by the Borrower upon notice by the Borrower delivered to such
Lender and the Administrative Agent pursuant to clause (ii) of Section 2.16,
will, assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) the sum of (A) the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment and (B) the amount of the
commitment of the Person that is such assigning Lender being contemporaneously
assigned under the Five-Year Credit Agreement (in both cases determined as of
the date of the Assignment and Acceptance or similar agreement with respect to
such assignments) shall in no event be less than $25,000,000 in the aggregate,
provided, however, that if the aggregate amount of the Commitment of such
assigning Lender hereunder and its commitment under the Five-Year Credit
Agreement is less than $25,000,000 on the date of such proposed assignments,
such assigning Lender may assign all, but not less than all of, its remaining
rights and obligations under this Agreement and the Five-Year Credit Agreement,
(iii) each such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment (other than the Borrower) shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (other than any rights such
Lender assignor may have under Sections 2.11, 2.14 and 8.08) and 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 Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity,
<PAGE>
40
enforceability, genuineness, sufficiency or value of this Agreement or any
instrument or document furnished pursuant hereto; (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or any of its subsidiaries or the
performance or observance by the Borrower or Disney of any of its obligations
under this Agreement or any instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section
4.01(c)(i) and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Advances owing
to, each Lender from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee
and, if applicable, the Borrower, together with any Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit B hereto, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and (iv) such Lender shall not agree in any
participation agreement with any participant or proposed participant to obtain
the consent of such participant before agreeing to the amendment, modification
or waiver of any of the terms of this Agreement or any Note, before consenting
to any action or failure to act by the Borrower or any other party hereunder or
under any Note, or before exercising any rights it may have in respect thereof,
unless such amendment, modification, waiver, consent or exercise would (A)
increase the amount of such participant's portion of such Lender's
<PAGE>
41
Commitment, (B) reduce the principal amount of or rate of interest on the
Advances or any fee or other amounts payable hereunder to which such participant
would be entitled to receive a share under such participation agreement, or (C)
postpone any date fixed for any payment of principal of or interest on the
Advances or any fee or other amounts payable hereunder to which such participant
would be entitled to receive a share under such participation agreement.
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower in writing and directly related to the transactions contemplated
hereunder; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in
violation of the Securities Act of 1933, as amended from time to time, or any
applicable state securities laws, and each Lender hereby represents that it will
make any Advance for its own account in the ordinary course of its business and
not with a view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and any Note issued to it hereunder) in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System (or any successor regulation thereto) and the applicable operating
circular of such Federal Reserve Bank.
SECTION 8.08. Indemnification . The Borrower agrees to indemnify and
----------------
hold harmless the Administrative Agent, the Co-Administrative Agent and each
Lender and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each an "INDEMNIFIED PARTY") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding (whether or not an
Indemnified Party is a party thereto) arising out of, related to or in
connection with the Commitments hereunder or the Advances made pursuant hereto
or any transactions done in connection herewith, including, without limitation,
any transaction in which any proceeds of the Advances are, or are proposed, to
be applied (collectively, the "INDEMNIFIED MATTERS"); provided that the Borrower
shall have no obligation to any Indemnified Party under this Section 8.08 with
respect to (i) matters for which such Indemnified Party has been reimbursed by
or on behalf of the Borrower pursuant to any other provision of this Agreement,
but only to the extent of such reimbursement, or (ii) Indemnified Matters found
by a court of competent jurisdiction to have resulted from the willful
misconduct or gross negligence of such Indemnified Party. If any action is
brought against any Indemnified Party, such Indemnified Party shall promptly
notify the Borrower in writing of the institution of such action and the
Borrower shall thereupon have the right, at its option, to elect to assume the
defense of such action; provided, however, that the Borrower shall not, in
assuming the defense of any Indemnified Party in any Indemnified Matter, agree
to any dismissal or settlement of such Indemnified Matter without the prior
written consent of such Indemnified Party, which consent shall not be
unreasonably withheld, if such dismissal or settlement (A) would require any
<PAGE>
42
admission or acknowledgement of culpability or wrongdoing by such Indemnified
Party or (B) would provide for any nonmonetary relief to any Person to be
performed by such Indemnified Party. If the Borrower so elects, it shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such Indemnified Party) and payment of expenses.
Such Indemnified Party shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (1) the employment of such counsel
shall have been authorized in writing by the Borrower in connection with the
defense of such action or (2) the Borrower shall not have properly employed
counsel reasonably satisfactory to such Indemnified Party to have charge of the
defense of such action, in which case such fees and expenses shall be paid by
the Borrower. If an Indemnified Party shall have reasonably concluded (based
upon the advice of counsel) that the representation by one counsel of such
Indemnified Party and the Borrower creates a conflict of interest for such
counsel, the reasonable fees and expenses of such counsel shall be borne by the
Borrower and the Borrower shall not have the right to direct the defense of such
action on behalf of such Indemnified Party (but shall retain the right to direct
the defense of such action on behalf of the Borrower). Anything in this Section
8.08 to the contrary notwithstanding, the Borrower shall not be liable for the
fees and expenses of more than one counsel for any Indemnified Party in any
jurisdiction as to any Indemnified Matter or, except as specified in the second
sentence of this Section 8.08, for any settlement of any Indemnified Matter
effected without its written consent. All obligations of the Borrower under
this Section 8.08 shall survive the making and repayment of the Advances and the
termination of this Agreement.
SECTION 8.09. Confidentiality . Subject to the provisions of Section
----------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,
assigns, advisors, officers, employees, directors, agents, legal counsel and
other professional advisors (the "INFORMED PARTIES") to, hold all nonpublic
information obtained pursuant to this Agreement in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide transferee or participant in
connection with the contemplated transfer or participation or to another Lender
or an Informed Party agreeing to hold such nonpublic information as confidential
or as required or requested by law or to any governmental authority or
representative thereof or pursuant to legal process; provided that unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental authority or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
authority) for disclosure of any such nonpublic information prior to disclosure
of such information; and further provided that in no event shall any Lender be
obligated or required to return any materials furnished by the Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process . All
-----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreement
or any instrument or other documents delivered hereunder may be brought in any
state or federal court in the Borough of Manhattan in the State of New York, and
by execution and delivery of this Agreement, the Borrower accepts, for itself
and in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Agreement
or any instrument or other document delivered hereunder from which no appeal has
been taken or is available. The Borrower agrees to receive service of process
in any such proceeding in any such court at its office at 114 Fifth Avenue, New
York, New York 10011 (or at such other address in the Borough of Manhattan in
the State of New York as the Borrower shall notify the Administrative
<PAGE>
43
Agent from time to time) and, if the Borrower ever ceases to maintain such
office in the Borough of Manhattan, irrevocably designates and appoints CT
Corporation System, 1633 Broadway, New York, New York 10019, or any other
address in the State of New York communicated by CT Corporation System to the
Administrative Agent, as its agent to receive on its behalf service of all
process in any such proceeding in any such court, such service being hereby
acknowledged by the Borrower to be effective and binding service in every
respect.
SECTION 8.11. Governing Law . This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts . This Agreement may be
--------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement. A full set of executed counterparts of this
Agreement shall be lodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE BORROWER
------------
DC HOLDCO, INC.
By:_________________________________________
Title:______________________________________
THE ADMINISTRATIVE AGENT
------------------------
CITICORP USA, INC.,
as Administrative Agent
By:_________________________________________
Title:______________________________________
THE CO-ADMINISTRATIVE AGENT
---------------------------
CREDIT SUISSE,
as Co-Administrative Agent
By:_________________________________________
Title:______________________________________
<PAGE>
44
THE INITIAL LENDERS
-------------------
Commitment
- ----------
$189,583,333.40 CITICORP USA, INC.
By:_________________________________________
Title:______________________________________
$189,583,333.40 CREDIT SUISSE
By:_________________________________________
Title:______________________________________
$180,833,333.33 ABN AMRO N.V.
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$180,833,333.33 BANKERS TRUST COMPANY
By:_________________________________________
Title:______________________________________
$180,833,333.33 BANK OF AMERICA NT&SA
By:_________________________________________
Title:______________________________________
$180,833,333.33 BANK OF MONTREAL
By:_________________________________________
Title:______________________________________
<PAGE>
45
$180,833,333.33 THE BANK OF NEW YORK
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE BANK OF NOVA SCOTIA
By:_________________________________________
Title:______________________________________
$180,833,333.33 BANQUE NATIONALE DE PARIS
By:_________________________________________
Title:______________________________________
$180,833,333.33 BANQUE PARIBAS
By:_________________________________________
Title:______________________________________
$180,833,333.33 BARCLAYS BANK PLC
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE CHASE MANHATTAN BANK, N.A.
By:_________________________________________
Title:______________________________________
$180,833,333.33 CHEMICAL BANK
By:_________________________________________
Title:______________________________________
<PAGE>
46
$180,833,333.33 COMMERZBANK AG, LOS ANGELES
BRANCH
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$180,833,333.33 DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLAND BRANCHES
By:_________________________________________
Title:______________________________________
$180,833,333.33 FIRST INTERSTATE BANK OF
CALIFORNIA
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE FIRST NATIONAL BANK
OF CHICAGO
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
<PAGE>
47
$180,833,333.33 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$180,833,333.33 MELLON BANK, N.A.
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE MITSUBISHI BANK, LTD.,
LOS ANGELES BRANCH
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE MITSUI TRUST & BANKING CO., LTD.
By:_________________________________________
Title:______________________________________
$180,833,333.33 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_________________________________________
Title:______________________________________
$180,833,333.33 NATIONSBANK OF TEXAS, N.A.
By:_________________________________________
Title:______________________________________
<PAGE>
48
$180,833,333.33 ROYAL BANK OF CANADA
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE SAKURA BANK, LIMITED
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE SANWA BANK, LIMITED
By:_________________________________________
Title:______________________________________
$180,833,333.33 SOCIETE GENERALE
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE SUMITOMO BANK, LIMITED
By:_________________________________________
Title:______________________________________
$180,833,333.33 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$180,833,333.33 SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By:_________________________________________
Title:______________________________________
<PAGE>
49
$180,833,333.33 SWISS BANK CORPORATION,
SAN FRANCISCO BRANCH
By:_________________________________________
Title:______________________________________
$180,833,333.33 TORONTO DOMINION (TEXAS), INC.
By:_________________________________________
Title:______________________________________
$180,833,333.33 UNION BANK
By:_________________________________________
Title:______________________________________
$180,833,333.33 UNION BANK OF SWITZERLAND,
LOS ANGELES BRANCH
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$58,333,333.33 BARNETT BANK OF CENTRAL
FLORIDA, N.A.
By:_________________________________________
Title:______________________________________
$58,333,333.33 THE DAIWA BANK, LTD.,
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$58,333,333.33 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:_________________________________________
Title:______________________________________
<PAGE>
50
$58,333,333.33 WACHOVIA BANK OF GEORGIA, N.A.
By:_________________________________________
Title:______________________________________
$58,333,333.33 THE YASUDA TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$7,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
--------------
================================================================================
FIVE-YEAR CREDIT AGREEMENT
Dated as of October 31, 1995
Among
DC HOLDCO, INC.
as Borrower
-----------
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
----------
and
CITICORP USA, INC.
as Administrative Agent
-----------------------
and
CREDIT SUISSE
as Co-Administrative Agent
--------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms ........................... 2
SECTION 1.02. Computation of Time Periods ..................... 12
SECTION 1.03. Accounting Terms ................................ 12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances .................................... 13
SECTION 2.02. Making the Advances ............................. 13
SECTION 2.03. Facility Fee .................................... 14
SECTION 2.04. Reduction of the Commitments .................... 14
SECTION 2.05. Repayment of Advances ........................... 15
SECTION 2.06. Interest on Advances ............................ 15
SECTION 2.07. Additional Interest on Eurodollar Rate Advances . 15
SECTION 2.08. Interest Rate Determination ..................... 16
SECTION 2.09. Optional Conversion of Advances ................. 17
SECTION 2.10. Prepayments of Advances ......................... 17
SECTION 2.11. Increased Costs ................................. 18
SECTION 2.12. Illegality ...................................... 19
SECTION 2.13. Payments and Computations ....................... 19
SECTION 2.14. Taxes ........................................... 20
SECTION 2.15. Sharing of Payments, Etc. ....................... 22
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation .... 23
SECTION 2.17. Evidence of Debt ................................ 23
SECTION 2.18. Use of Proceeds ................................. 24
SECTION 2.19. Increase in the Aggregate Commitments ........... 24
SECTION 2.20. Extension of Termination Date ................... 25
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness
of Section 2.01. ............................. 27
SECTION 3.02. Conditions Precedent to Each Borrowing .......... 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower .. 29
SECTION 4.02. Additional Representations and Warranties of
the Borrower as of Each Increase Date and
Each Extension Date .......................... 30
<PAGE>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants ........................... 31
SECTION 5.02. Negative Covenant ............................... 34
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default ............................... 34
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action ........................ 36
SECTION 7.02. Administrative Agent's Reliance, Etc. ........... 36
SECTION 7.03. CUSA and Affiliates ............................. 37
SECTION 7.04. Lender Credit Decision .......................... 37
SECTION 7.05. Indemnification ................................. 37
SECTION 7.06. Successor Administrative Agent .................. 37
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. ................................ 38
SECTION 8.02. Notices, Etc. ................................... 38
SECTION 8.03. No Waiver; Remedies ............................. 39
SECTION 8.04. Costs and Expenses .............................. 39
SECTION 8.05. Right of Set-off ................................ 40
SECTION 8.06. Binding Effect .................................. 40
SECTION 8.07. Assignments and Participations .................. 40
SECTION 8.08. Indemnification ................................. 42
SECTION 8.09. Confidentiality ................................. 43
SECTION 8.10. Consent to Jurisdiction and Service of Process .. 44
SECTION 8.11. Governing Law ................................... 44
SECTION 8.12. Execution in Counterparts ....................... 44
<PAGE>
FIVE-YEAR CREDIT AGREEMENT
DATED AS OF OCTOBER 31, 1995
DC HOLDCO, INC., a Delaware corporation (the "BORROWER"), the banks,
financial institutions and other institutional lenders (the "INITIAL LENDERS")
listed on the signature pages hereof under the heading "The Initial Lenders",
CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrative agent
(together with any successor Administrative Agent appointed pursuant to Article
VII, the "ADMINISTRATIVE AGENT") for the Lenders (as hereinafter defined)
hereunder, and CREDIT SUISSE, a Swiss banking corporation ("CREDIT SUISSE"), as
co-administrative agent (the "CO-ADMINISTRATIVE AGENT") for the Lenders
hereunder.
PRELIMINARY STATEMENTS
(1) The Walt Disney Company, a Delaware corporation ("DISNEY"), and Capital
Cities/ABC, Inc., a New York corporation ("CAPITAL CITIES/ABC"), have entered
into an Amended and Restated Agreement and Plan of Reorganization dated as of
July 31, 1995 (as amended, supplemented or otherwise modified through the date
hereof, the "REORGANIZATION AGREEMENT"), pursuant to which Disney has formed (a)
the Borrower, (b) a subsidiary of the Borrower incorporated in the State of
Delaware, which shall be merged with and into Disney (the "DISNEY MERGER"), with
Disney being the surviving corporation, and (c) a subsidiary of the Borrower
incorporated in the State of New York, which shall be merged with and into
Capital Cities/ABC (the "CAPITAL CITIES/ABC MERGER" and, together with the
Disney Merger, the "MERGERS"), with Capital Cities/ABC being the surviving
corporation.
(2) Upon the effectiveness of the Mergers, (a) each outstanding share of
common stock of Disney (together with the rights associated therewith) shall be
converted, without any further action by the holder thereof (the "DISNEY SHARE
CONVERSION"), into one share of common stock of the Borrower and (b) each
outstanding share of common stock of Capital Cities/ABC shall be converted, at
the election of the holder thereof (the "CAPITAL CITIES/ABC SHARE CONVERSION"
and, together with the Disney Share Conversion, the "SHARE CONVERSIONS"), into
cash, shares of common stock of the Borrower or a combination of cash and shares
of common stock of the Borrower. The Mergers and the Share Conversions are
herein collectively referred to as the "TRANSACTION". Immediately after the
consummation of the Transaction, each of Disney and Capital Cities/ABC will be a
wholly owned subsidiary of the Borrower, and the Borrower will be renamed "The
Walt Disney Company".
(3) The Borrower has requested that the Lenders agree to extend credit to
it from time to time in an aggregate principal amount of up to $5,000,000,000 in
order to support the obligations of the Borrower in respect of commercial paper
issued by the Borrower, to finance in part the Transaction, to pay fees and
expenses incurred in connection with the consummation of the Transaction, and/or
for other general corporate purposes of the Borrower and its subsidiaries. The
Lenders have indicated their willingness to agree to extend credit from time to
time in such amount on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto hereby agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . 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):
"ADMINISTRATIVE AGENT" has the meaning specified in the recital of parties
to this Agreement.
"ADMINISTRATIVE AGENT'S ACCOUNT" means such account of the Administrative
Agent maintained by the Administrative Agent at the office of Citibank at
399 Park Avenue, New York, New York 10043, as the Administrative Agent
shall notify the Borrower and the Lenders from time to time.
"ADVANCE" means an advance by a Lender to the Borrower as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,
each of which shall be a "Type" of Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person.
"AGREEMENT" means this Five-Year Credit Agreement, as it may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 8.01.
"ANNIVERSARY DATE" means February 15, 1997 and February 15 in each
succeeding calendar year occurring during the term of this Agreement.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee, and accepted by the Administrative
Agent and the Borrower, in substantially the form of Exhibit B hereto.
"ASSUMING LENDER" has the meaning specified in Section 2.19(d).
"ASSUMPTION AGREEMENT" has the meaning specified in Section 2.19(d)(ii).
"BASE RATE" means, for each day in any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum
shall at all times for such day during such period be equal to the highest
of:
<PAGE>
3
(a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time, as Citibank's base rate in effect for such
day;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one percent) of
(i) 0.50%, (ii) the rate obtained by dividing (A) the latest three-
week moving average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major United
States money market banks, such three-week moving average (adjusted on
the basis of a year of 365 or 366 days, as the case may be) being
determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of
the Federal Reserve System (or any successor thereto) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among
other liabilities) three-month U.S. dollar nonpersonal time deposits
in the United States, and (iii) the average during such three-week
period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor thereto)
for insuring U.S. dollar deposits of Citibank in the United States;
and
(c) 0.50% per annum above the Federal Funds Rate for such day.
"BASE RATE ADVANCE" means an Advance which bears interest as provided in
Section 2.06(a)(i).
"BORROWING" means a borrowing consisting of simultaneous Advances of the
same Type made by each of the Lenders pursuant to Section 2.01.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Los Angeles, California, or New York City, New York,
or San Francisco, California, or, if the applicable Business Day relates to
any Eurodollar Rate Advances, on which dealings are carried on in the
London interbank market.
"CAPITAL CITIES/ABC" has the meaning specified in the Preliminary
Statements to this Agreement.
"CAPITAL CITIES/ABC MERGER" has the meaning specified in the Preliminary
Statements to this Agreement.
<PAGE>
4
"CAPITAL CITIES/ABC SHARE CONVERSION" has the meaning specified in the
Preliminary Statements to this Agreement.
"CITIBANK" means Citibank, N.A., a national banking association.
"CO-ADMINISTRATIVE AGENT" has the meaning specified in the recital of
parties to this Agreement.
"COMMITMENT" has the meaning specified in Section 2.01.
"COMMITMENT DATE" has the meaning specified in Section 2.19(b).
"COMMITMENT INCREASE" has the meaning specified in Section 2.19(a).
"CONSENTING LENDER" has the meaning specified in Section 2.20(b).
"CONSOLIDATED EBITDA" means, for any period, (a) net income or net loss, as
the case may be, of the Borrower and its subsidiaries on a consolidated
basis for such period, as determined in accordance with GAAP for such
period, plus (b) the sum of all amounts which, in the determination of such
consolidated net income or net loss, as the case may be, for such period,
have been deducted for (i) Consolidated Interest Expense, (ii) consolidated
income tax expense, (iii) consolidated depreciation expense, and (iv)
consolidated amortization expense, in each case determined in accordance
with GAAP for such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest
expense of the Borrower and its subsidiaries with respect to all
outstanding Debt of the Borrower and its subsidiaries during such period,
all as determined on a consolidated basis for such period and in accordance
with GAAP for such period.
"CONVERT", "CONVERSION" and "CONVERTED" each refer to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.08
or 2.09.
"CREDIT SUISSE" has the meaning specified in the recital of parties to this
Agreement.
"CUSA" has the meaning specified in the recital of parties to this
Agreement.
"DEBT" means, with respect to any Person: (a) indebtedness for borrowed
money, (b) obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) obligations to pay the deferred purchase price of
property or services (other than trade payables incurred in the ordinary
course of business), (d) obligations as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital leases
and (e) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of any other Person of the kinds referred to in clauses (a)
through (d) above.
"DISNEY" has the meaning specified in the Preliminary Statements to this
Agreement.
<PAGE>
5
"DISNEY MERGER" has the meaning specified in the Preliminary Statements to
this Agreement.
"DISNEY SHARE CONVERSION" has the meaning specified in the Preliminary
Statements to this Agreement.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Assumption Agreement or the Assignment and
Acceptance, as the case may be, pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent for such purpose.
"EFFECTIVE DATE" has the meaning specified in Section 3.01.
"ELIGIBLE ASSIGNEE" means (a) a Lender or any Affiliate of a Lender, and
(b) any bank or other financial institution, or any other Person, which has
been approved in writing by the Borrower and the Administrative Agent as an
Eligible Assignee for purposes of this Agreement; provided, however, that
neither the Borrower's approval nor the Administrative Agent's approval
shall be unreasonably withheld; and provided further, however, that the
Borrower may withhold its approval if the Borrower reasonably believes that
an assignment to such Eligible Assignee pursuant to Section 8.07 will
result in the incurrence of increased costs payable by the Borrower
pursuant to Section 2.11 or 2.14.
"ENVIRONMENTAL CLAIM" means any administrative, regulatory or judicial
action, suit, demand, claim, lien, notice or proceeding relating to any
Environmental Law or any Environmental Permit.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code or duly promulgated policy or rule of common
law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any order,
consent decree or judgment, relating to the environment, health, safety or
any Hazardous Material.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title IV of ERISA
is a member of the Borrower's controlled group, or under common control
with the Borrower, within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended.
"ERISA EVENT" means: (a) (i) the occurrence with respect to a Plan of a
reportable event, within the meaning of Section 4043 of ERISA, unless the
30-day notice requirement with respect thereto has been waived by the
Pension Benefit Guaranty Corporation or (ii) the provisions of
<PAGE>
6
paragraph (1) of Section 4043(b) of ERISA (without regard to paragraph (2)
of such Section) are applicable with respect to a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described
in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA
could reasonably be expected to occur with respect to such Plan within the
following 30 days; (b) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (c) the cessation of operations by the
Borrower or any ERISA Affiliate at a facility in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by the Borrower
or any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (e) the failure by the Borrower or any ERISA Affiliate to make a
payment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) the
adoption of an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the
Pension Benefit Guaranty Corporation of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition which is reasonably likely to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, a Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto or in the Assumption Agreement or the Assignment
and Acceptance, as the case may be, pursuant to which it became a Lender
(or, if no such office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to time specify to
the Borrower and the Administrative Agent for such purpose.
"EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing, an interest rate per annum
equal to the average (rounded upward to the nearest whole multiple of 1/16
of 1% per annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the principal office
of each of the Reference Banks in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period for a period equal to such
Interest Period and in an amount substantially equal to such Reference
Bank's (or in the case of Citibank, CUSA's) Eurodollar Rate Advance
comprising part of such Borrowing. The Eurodollar Rate for any Interest
Period for each Eurodollar Rate Advance comprising part of the same
Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from
the Reference Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.08.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as provided
in Section 2.06(a)(ii).
<PAGE>
7
"EURODOLLAR RATE MARGIN" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
=================================================
PUBLIC DEBT RATING
S&P/MOODY'S APPLICABLE MARGIN
=================================================
<S> <C>
Level 1
- -------
AA-/Aa3 or above 0.120%
- ------------------------------ ------
Level 2
- -------
Lower than AA-/Aa3 but
at least A/A2 0.125%
- ------------------------------ ------
Level 3
- -------
Lower than A/A2 but
at least A-/A3 0.140%
- ------------------------------ ------
Level 4
- -------
Lower than A-/A3 or no
Public Debt Rating in effect 0.160%
</TABLE> ------
=================================================
"EURODOLLAR RATE RESERVE PERCENTAGE" means, with respect to any Lender for
any Interest Period for any Eurodollar Rate Advance, the reserve percentage
applicable during such Interest Period (or, if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage
shall be so applicable) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor thereto)
for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to
such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXISTING CREDIT AGREEMENTS" means, collectively, (a) the Second Amended
and Restated Credit Agreement dated as of April 12, 1995 among Disney, the
financial institutions party thereto and CUSA, as agent thereunder, as
amended, supplemented or otherwise modified to the Effective Date, and (b)
the Revolving Credit Agreement dated as of January 3, 1986 among Capital
Cities/ABC, the financial institutions party thereto and Chemical Bank, as
agent thereunder, as amended, supplemented or otherwise modified to the
Effective Date.
"EXTENSION DATE" has the meaning specified in Section 2.20(b).
"FACILITY FEE PERCENTAGE" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<PAGE>
8
<TABLE>
<CAPTION>
=================================================
PUBLIC DEBT RATING
S&P/MOODY'S APPLICABLE MARGIN
=================================================
<S> <C>
Level 1
- -------
AA-/Aa3 or above 0.060%
- ------------------------------
Level 2
- -------
Lower than AA-/Aa3 but
at least A/A2 0.070%
- ------------------------------
Level 3
- -------
Lower than A/A2 but
at least A-/A3 0.080%
- ------------------------------
Level 4
- -------
Lower than A-/A3 or no
Public Debt Rating in effect 0.090%
</TABLE>
==============================================
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to 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 for such day
(or, if such day is not a Business Day, for the immediately preceding
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 such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by
the Administrative Agent.
"GAAP" means generally accepted accounting principles consistent with those
applied in the preparation of the audited financial statements referred to
in Section 4.01(c)(i) dated September 30, 1994, subject, however, to the
provisions of Section 1.03.
"HAZARDOUS MATERIAL" means (a) any petroleum or petroleum product, natural
or synthetic gas, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, or radon gas, (b) any substance defined
as or included in the definition of "hazardous substances", hazardous
wastes", hazardous materials", "toxic substances", "contaminants" or
"pollutants", or words of similar import, under any applicable
Environmental Law or (c) any other substance to which exposure is regulated
by any governmental or regulatory authority.
"INCREASE DATE" has the meaning specified in Section 2.19(a).
"INCREASING LENDER" has the meaning specified in Section 2.19(b).
"INDEMNIFIED MATTERS" has the meaning specified in Section 8.08.
"INDEMNIFIED PARTY" has the meaning specified in Section 8.08.
"INFORMED PARTIES" has the meaning specified in Section 8.09.
<PAGE>
9
"INITIAL LENDER" has the meaning specified in the recital of parties to
this Agreement.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar
Rate Advance or on the date of the Conversion of any Base Rate Advance into
such Eurodollar Rate Advance and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and, thereafter,
each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period selected
by the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three, six or, if generally available to
all of the Lenders, twelve months as the Borrower may, upon notice received
by the Administrative Agent not later than 1:00 P.M. (New York City time)
on the third Business Day prior to the first day of such Interest Period,
select; provided, however, that:
(i) Interest Periods commencing on the same date for Eurodollar Rate
Advances comprising part of the same Borrowing shall be of the same
duration;
(ii) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of
such Interest Period to occur in the next succeeding calendar month,
the last day of such Interest Period shall occur on the immediately
preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a day of an
initial calendar month for which there is no numerically corresponding
day in the calendar month that succeeds such initial calendar month by
the number of months equal to the number of months in such Interest
Period, such Interest Period shall end on the last Business Day of
such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any Interest Period which
ends after the scheduled Termination Date then in effect.
"IRS" has the meaning specified in Section 2.14(e).
"LENDERS" means, collectively, each Initial Lender, each Assuming Lender
that shall become a party hereto pursuant to Section 2.19 or 2.20 and each
Eligible Assignee that shall become a party hereto pursuant to Section
8.07; provided, however, that for purposes of any determination to be made
under Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, in its
capacity as a Lender, the term "Lender" shall be deemed to include
Citibank.
"LIEN" means any lien, security interest or other charge or encumbrance of
any kind, or any other type of preferential arrangement which has the same
effect as a lien or security interest.
"MAJORITY LENDERS" means, at any time, Lenders owed at least a majority in
interest of the aggregate unpaid principal amount of the Advances owing to
Lenders at such time, or, if no such principal amount is outstanding at
such time, Lenders having at least a majority in interest
<PAGE>
10
of the Commitments at such time; provided, however, that neither the
Borrower nor any of its Affiliates, if a Lender, shall be included in the
determination of Majority Lenders at any time.
"MATERIAL SUBSIDIARY" means, at any date of determination, a subsidiary of
the Borrower that, either individually or together with its subsidiaries,
taken as a whole, has total assets exceeding $100,000,000 on such date.
"MEASUREMENT PERIOD" means, at any date of determination, the most recently
completed four consecutive fiscal quarters of the Borrower on or
immediately prior to such date or, if less than four consecutive fiscal
quarters of the Borrower have been completed since the Effective Date, the
fiscal quarters of the Borrower that have been completed since the
Effective Date.
"MERGER" has the meaning specified in the Preliminary Statements to this
Agreement.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (ii) was so maintained and in respect
of which the Borrower or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"NON-CONSENTING LENDER" has the meaning specified in Section 2.20(b).
"NOTE" has the meaning specified in Section 2.17.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02(a).
"OTHER TAXES" has the meaning specified in Section 2.14(b).
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PUBLIC DEBT RATING" means, as of any date of determination, the higher
rating that has been most recently announced by either S&P or Moody's, as
the case may be, for any class of non-credit enhanced long-term senior
unsecured public debt issued by the Borrower or, if and during such time
prior to October 1, 1996 as the Borrower has not issued any non-credit
enhanced long-term senior unsecured public debt that is rated by S&P or
Moody's and has not
<PAGE>
11
issued any commercial paper that is rated by S&P or Moody's, by Disney;
provided, however, that from and after the Effective Date to and including
September 30, 1996, if the Borrower has not issued any non-credit enhanced
long-term senior unsecured public debt that is rated by S&P or Moody's and
the rating of any commercial paper issued by the Borrower is below P-1 by
Moody's or A-1 by S&P, the Eurodollar Rate Margin and the Facility Fee
Percentage will be set in accordance with Level 3 under the definition of
"Eurodollar Rate Margin" or "Facility Fee Percentage", as the case may be.
For purposes of the foregoing, (a) if only one of S&P and Moody's shall
have in effect a Public Debt Rating, the Eurodollar Rate Margin and the
Facility Fee Percentage shall be determined by reference to the available
rating; (b) if, at any time prior to October 1, 1996, neither S&P nor
Moody's shall have in effect a Public Debt Rating of Disney, or, if on or
at any time after October 1, 1996, neither S&P nor Moody's shall have in
effect a Public Debt Rating of the Borrower, the Eurodollar Rate Margin and
the Facility Fee Percentage will be set in accordance with Level 4 under
the definition of "Eurodollar Rate Margin" or "Facility Fee Percentage", as
the case may be; (c) if the ratings established by S&P and Moody's shall
fall within different levels, the Eurodollar Rate Margin and the Facility
Fee Percentage shall be based upon the higher rating; (d) if any rating
established by S&P or Moody's shall be changed, such change shall be
effective as of the date on which such change is first announced publicly
by the rating agency making such change; and (e) if S&P or Moody's shall
change the basis on which ratings are established, each reference to the
Public Debt Rating announced by S&P or Moody's, as the case may be, shall
refer to the then equivalent rating by S&P or Moody's, as the case may be.
"REFERENCE BANKS" means Citibank, Credit Suisse, Bank of America NT&SA,
Bankers Trust Company and Chemical Bank, or, in the event that less than
two of such banks remain Lenders hereunder at any time, any other
commercial bank designated by the Borrower and approved by the Majority
Lenders as constituting a "Reference Bank" hereunder.
"REGISTER" has the meaning specified in Section 8.07(c).
"REORGANIZATION AGREEMENT" has the meaning specified in the Preliminary
Statements to this Agreement.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(e)(i).
"SHARE CONVERSIONS" has the meaning specified in the Preliminary Statements
to this Agreement.
"SIGNIFICANT SUBSIDIARY" means any subsidiary of the Borrower or any of its
subsidiaries that constitutes a "significant subsidiary" under Rule 405
promulgated by the SEC under the Securities Act of 1933, as amended.
"SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower
or an ERISA Affiliate and no Person other than the Borrower and the ERISA
Affiliates or (ii) was so maintained and in respect
<PAGE>
12
of which the Borrower or an ERISA Affiliate could have liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"TAXES" has the meaning specified in Section 2.14(a).
"TERMINATION DATE" means the earlier of (a) February 15, 2001, subject to
the extension thereof pursuant to Section 2.20, and (b) the date of
termination in whole of the aggregate Commitments pursuant to Section 2.04
or 6.01; provided, however, that the Termination Date of any Lender that is
a Non-Consenting Lender to any requested extension pursuant to Section 2.20
shall be the Termination Date in effect immediately prior to the applicable
Extension Date for all purposes of this Agreement.
"364-DAY CREDIT AGREEMENT" means the 364-Day Credit Agreement being entered
into on the date of this Agreement among the Borrower, the banks, financial
institutions and other institutional lenders party thereto, CUSA, as the
administrative agent thereunder, and Credit Suisse, as the co-
administrative agent thereunder, as such agreement may be amended,
supplemented or otherwise modified hereafter from time to time.
"TRANSACTION" has the meaning specified in the Preliminary Statements to
this Agreement.
"TYPE" has the meaning specified in the definition of "Advance".
"UNITED STATES" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
----------------------------
computation of periods of time from a specified date to a later specified date,
the word "FROM" means "from and including" and the words "TO" and "UNTIL" each
means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
-----------------
defined herein shall be construed in accordance with GAAP; provided, however,
that if any changes in accounting principles from those used in the preparation
of the financial statements referred to in Section 4.01(c)(i) dated September
30, 1994 hereafter occur by reason of the promulgation of rules, regulations,
pronouncements, opinions or other requirements of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and result in a change in
the method of calculation of financial covenants or the terms related thereto
contained in this Agreement, the Borrower shall, at its option, (i) furnish to
the Administrative Agent, together with each delivery of the consolidated
financial statements of the Borrower and its subsidiaries required to be
delivered pursuant to Section 5.01(e), a written reconciliation setting forth
the differences that would have resulted if such financial statements had been
prepared utilizing accounting principles and policies in conformity with those
used to prepare the financial statements referred to in Section 4.01(c)(i) dated
September 30, 1994 or (ii) enter into negotiations with the Administrative Agent
and the Lenders to amend such financial covenants or terms equitably to reflect
such changes so that the criteria for evaluating the financial condition of the
Borrower and its subsidiaries shall be the same after such changes as if such
changes had not been made; provided, however, that at all times in the case of
clause (i) above, and in the case of clause (ii) above until the amendment
referred to in such clause (ii)
<PAGE>
13
becomes effective, all covenants and related calculations under this Agreement
shall be performed, observed and determined as though no such changes in
accounting principles had been made.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the terms
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and conditions hereinafter set forth, to make Advances to the Borrower from time
to time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
the amount set forth opposite such Lender's name on the signature pages hereof
or, if such Lender has become a Lender hereunder pursuant to an Assumption
Agreement, the amount set forth as the Commitment of such Lender in such
Assumption Agreement or, if such Lender has entered into an Assignment and
Acceptance, the amount set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 8.07(c), as such amount may be
reduced pursuant to Section 2.04 or increased pursuant to Section 2.19 (such
Lender's "COMMITMENT"). Each Borrowing shall be in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably
according to their respective Commitments. Within the limits of each Lender's
Commitment, the Borrower from time to time may borrow under this Section 2.01,
prepay pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
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notice, given not later than 11:00 A.M. (New York City time) on the same
Business Day as the date of a proposed Borrowing comprised of Base Rate Advances
and not later than 1:00 P.M. (New York City time) on the third Business Day
prior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Borrowing
(a "NOTICE OF BORROWING") shall be by telecopier or telex, or by telephone,
confirmed immediately by telecopier or telex, in substantially the form of
Exhibit A hereto, specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day), (ii) Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a
Borrowing comprised of Eurodollar Rate Advances, initial Interest Period for
each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on
the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower at the office where the
Administrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than $20,000,000 or
if the obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of
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14
Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for such
Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that any Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender agrees to pay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid
to the Administrative Agent, at the Federal Funds Rate; provided, however, that
(i) within two Business Days after any Lender shall fail to make such ratable
portion available to the Administrative Agent, the Administrative Agent shall
notify the Borrower of such failure and (ii) if such Lender shall not have paid
such corresponding amount to the Administrative Agent within two Business Days
after such demand is made of such Lender by the Administrative Agent, the
Borrower agrees to repay to the Administrative Agent forthwith, upon demand by
the Administrative Agent to the Borrower, such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative
Agent, at the interest rate applicable at the time to Advances comprising such
Borrowing. If and to the extent such corresponding amount shall be paid by such
Lender to the Administrative Agent in accordance with this Section 2.02(d), such
amount so paid shall constitute such Lender's Advance as part of such Borrowing
for all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to each Lender a
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facility fee on the average daily amount (whether used or unused) of such
Lender's Commitment from (a) the earlier of (i) December 11, 1995 and (ii) the
first date on which all necessary approvals of the Mergers by the shareholders
of Disney and the stockholders of Capital Cities/ABC have been obtained, in the
case of each Initial Lender and (b) the later of (i) December 11, 1995 and (ii)
the effective date specified in the Assumption Agreement or the Assignment and
Acceptance pursuant to which it became a Lender, in the case of each other
Lender until, in each case, the Termination Date, payable quarterly in arrears
on the first Business Day of each April, July, October and January during the
term of such Lender's Commitment, commencing January 2, 1996, and on the
Termination Date, at the rate per annum equal to the Facility Fee Percentage in
effect from time to time.
SECTION 2.04. Reduction of the Commitments. The Borrower shall have the
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right, upon at least three Business Days' notice to the Administrative Agent, to
terminate in whole or reduce
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15
ratably in part the unused portions of the respective Commitments of the
Lenders, provided that each partial reduction shall be in the aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.05. Repayment of Advances. The Borrower shall repay to each
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Lender on the Termination Date the aggregate principal amount of the Advances
owing to such Lender on such date.
SECTION 2.06. Interest on Advances. (a) Scheduled Interest. The
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Borrower shall pay to each Lender interest on the unpaid principal amount of
each Advance owing to such Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base Rate
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Advance, a rate per annum equal at all times to the remainder of (A) the
Base Rate in effect from time to time minus (B) the Facility Fee Percentage
in effect from time to time, payable quarterly in arrears on the first
Business Day of each April, July, October and January during such periods
and on the date such Base Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is a
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Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance and (B) the Eurodollar Rate Margin in
effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more than
three months, on the date which occurs three months and, if applicable, six
months, nine months and twelve months after the first day of such Interest
Period and on the date such Eurodollar Rate Advance shall be Converted or
paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid
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principal amount of each Advance that is not paid when due and on the unpaid
amount of all interest, fees and other amounts payable hereunder that is not
paid when due, payable on demand, at a rate per annum equal at all times to (i)
in the case of any amount of principal, the greater of (x) 2% per annum above
the rate per annum required to be paid on such Advance immediately prior to the
date on which such amount became due and (y) 2% per annum above the Base Rate in
effect from time to time and (ii) to the fullest extent permitted by law, in the
case of all other amounts, 2% per annum above the Base Rate in effect from time
to time.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The
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Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the applicable Interest Period for such Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified in
reasonable detail to the Borrower through the Administrative Agent.
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16
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
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agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrower and
the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.06(a)(i) or (a)(ii), and the rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information to the
Administrative Agent for purposes of determining the Eurodollar Rate for any
Eurodollar Rate Advances, (i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot be determined for
such Eurodollar Rate Advances, (ii) each such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance (or if such Advance is then a Base Rate Advance, will continue as a Base
Rate Advance), and (iii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Majority Lenders
(which cost each such Majority Lender reasonably determines in good faith is
material) of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Administrative Agent shall forthwith so
notify the Borrower and the Lenders, whereupon, unless the Eurodollar Rate
Margin shall be increased to reflect such costs as determined by such Majority
Lenders and as agreed by the Borrower, (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended
until the Majority Lenders shall notify the Administrative Agent, and the
Administrative Agent shall in turn notify the Borrower and the Lenders, that the
circumstances causing such suspension no longer exist. The Administrative Agent
shall use reasonable efforts to determine from time to time whether the
circumstances causing such suspension no longer exist and, promptly after the
Administrative Agent knows that the circumstances causing such suspension no
longer exist, the Administrative Agent shall so notify the Borrower and the
Lenders.
(e) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $20,000,000, such Eurodollar Rate
Advances shall automatically Convert into Base Rate Advances
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and, on and after such date, the right of the Borrower to Convert such Advances
into Eurodollar Rate Advances shall terminate; provided, however, that if and so
long as each such Eurodollar Rate Advance shall have the same Interest Period as
Eurodollar Rate Advances comprising another Borrowing or Borrowings, and the
aggregate unpaid principal amount of all such Eurodollar Rate Advances shall
equal or exceed $20,000,000, the Borrower shall have the right to continue all
such Eurodollar Rate Advances as, or to Convert all such Advances into,
Eurodollar Rate Advances having such Interest Period.
(g) Upon the occurrence and during the continuance of any Event of Default
under Section 6.01(a), (i) each Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance and (ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The Borrower may on any
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Business Day, upon notice given to the Administrative Agent not later than 11:00
A.M. (New York City time) on the same Business Day as the date of the proposed
Conversion in the case of a Conversion of Eurodollar Rate Advances into Base
Rate Advances, and not later than 1:00 P.M. (New York City time) on the third
Business Day prior to the date of the proposed Conversion in the case of a
Conversion of Base Rate Advances into Eurodollar Rate Advances or of Eurodollar
Rate Advances of one Interest Period into Eurodollar Rate Advances of another
Interest Period, as the case may be, and subject to the provisions of Sections
2.08, 2.09 and 2.12, Convert all Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of any Eurodollar Rate Advances into Base Rate Advances or into
Eurodollar Rate Advances of another Interest Period shall be made on, and only
on, the last day of an Interest Period for such Eurodollar Rate Advances.
Promptly upon receipt from the Borrower of a notice of a proposed Conversion
hereunder, the Administrative Agent shall give notice of such proposed
Conversion to each Lender. Each such notice of a Conversion shall, within the
restrictions set forth above, specify (i) the date of such Conversion (which
shall be a Business Day), (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. The Borrower may Convert all Eurodollar
Rate Advances of any one Lender into Base Rate Advances of such Lender in
accordance with the provisions of Section 2.12 by complying with the procedures
set forth therein and in this Section 2.09 as though each reference in this
Section 2.09 to Advances of any Type was to such Advances of such Lender. Each
such notice of Conversion shall, subject to the provisions of Sections 2.08 and
2.12, be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Advances. The Borrower may, upon not less
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than the same Business Day's notice to the Administrative Agent received not
later than 11:00 A.M. (New York City time) in the case of Borrowings consisting
of Base Rate Advances and upon at least three Business Days' notice to the
Administrative Agent received not later than 1:00 P.M. (New York City time) in
the case of Borrowings consisting of Eurodollar Rate Advances, stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the Advances constituting part of the same Borrowings in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (a) each partial prepayment
shall be in an aggregate principal amount of $1,000,000 or an integral multiple
of $1,000,000 in excess thereof, and (b) in the case of any such prepayment of
Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(b).
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18
SECTION 2.11. Increased Costs. (a) If after the date hereof, due to
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either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or (ii)
the compliance with any hereafter promulgated guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost (excluding any allocation of
corporate overhead) to any Lender (which cost such Lender reasonably determines
in good faith is material) of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then such Lender shall so notify the Borrower promptly
after such Lender knows of such increased cost and determines that such cost is
material and the Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate of
such Lender as to the amount of such increased cost in reasonable detail and
stating the basis upon which such amount has been calculated and certifying that
such Lender's method of allocating such costs is fair and reasonable and that
such Lender's demand for payment of such costs hereunder is not inconsistent
with its treatment of other borrowers which, as a credit matter, are
substantially similar to the Borrower and which are subject to similar
provisions, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If, after the date hereof, either (i) the introduction of or change in
or in the interpretation of any law or regulation or (ii) the compliance by any
Lender with any hereafter promulgated guideline or request from any central bank
or other governmental authority (whether or not having the force of law) affects
or would affect the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender and the amount of such
capital is materially increased by or based upon the existence of such Lender's
commitment to lend hereunder and other commitments of this type, then, such
Lender shall so notify the Borrower promptly after such Lender makes such
determination and, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to such Lender within five days
from the date of such demand, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder. A certificate of such Lender as to such
amount in reasonable detail and stating the basis upon which such amount has
been calculated and certifying that such Lender's method of allocating such
increase of capital is fair and reasonable and that such Lender's demand for
payment of such increase of capital hereunder is not inconsistent with its
treatment of other borrowers which, as a credit matter, are substantially
similar to the Borrower and which are subject to similar provisions, submitted
to the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under this Section 2.11 any
amounts which relate to costs or increases of capital incurred prior to the 12
months immediately preceding the date of demand for payment of such amounts,
unless the applicable law, regulation, guideline or request resulting in such
costs or increases of capital is imposed retroactively. In the case of any law,
regulation, guideline or request which is imposed retroactively, the Lender
making demand for payment of any amount under this Section 2.11 shall notify the
Borrower not later than 12 months from the date that such Lender should
reasonably have known of such law, regulation, guideline or request and the
Borrower's obligation to compensate such Lender for such amount is contingent
upon such Lender's so notifying the
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Borrower; provided, however, that any failure by such Lender to provide such
notice shall not affect the Borrower's obligations under this Section 2.11 with
respect to amounts resulting from costs or increases of capital incurred after
the date which occurs 12 months immediately preceding the date on which such
Lender notified the Borrower of such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other than from the
Borrower) for which such Lender has theretofore been compensated by the Borrower
under this Section 2.11, such Lender shall remit to the Borrower an amount equal
to the amount of such recoupment. Amounts required to be paid by the Borrower
pursuant to this Section 2.11 shall be paid in addition to, and without
duplication of, any amounts required to be paid pursuant to Section 2.14.
SECTION 2.12. Illegality. Notwithstanding any other provision of this
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Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) the obligation of such Lender to make, or to Convert Base Rate
Advances into, Eurodollar Rate Advances shall be suspended until such Lender
shall notify the Administrative Agent, and the Administrative Agent shall notify
the Borrower and the other Lenders (which notice shall be given promptly after
the Administrative Agent knows that the circumstances causing such suspension no
longer exist), that the circumstances causing such suspension no longer exist
and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate
Advances of such Lender then outstanding, together with interest accrued
thereon, unless the Borrower, within five Business Days of notice from the
Administrative Agent or, if permitted by law, on and as of the last day of the
then existing Interest Period for such Eurodollar Rate Advances, Converts all
Eurodollar Rate Advances of such Lender then outstanding into Base Rate Advances
in accordance with Section 2.09.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
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each payment hereunder and under the Notes, if any, not later than 11:00 A.M.
(New York City time) on the day when due in U.S. dollars to the Administrative
Agent at the Administrative Agent's Account in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or facility fees ratably (other
than amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and 8.08) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon any Assuming
Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant
to Section 2.19 or an extension of the Termination Date pursuant to Section
2.20, and upon Administrative Agent's receipt of such Lender's Assumption
Agreement and recording of the information contained therein in the Register,
from and after the applicable Increase Date or Extension Date, as the case may
be, the Administrative Agent shall make all payments hereunder and under any
Notes issued in connection therewith in respect of the interest assumed thereby
to the Assuming Lender. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date specified in such Assignment
and Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes, if any, issued in connection therewith in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
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(b) All computations of interest based on the Base Rate shall be made by
the Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Eurodollar Rate or the
Federal Funds Rate and of facility fees shall be made by the Administrative
Agent, and all computations of additional interest pursuant to Section 2.07
shall be made by a Lender, on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or facility fees are payable.
Each determination by the Administrative Agent (or, in the case of Section 2.07,
by a Lender) of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes, if any, shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fees, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the immediately
preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the
Borrower shall not have so made such payment in full to the Administrative
Agent, each Lender shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal Funds
Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder
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or under the Notes, if any, shall be made, in accordance with Section 2.13, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Administrative
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender or the Administrative Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof or by any other jurisdiction in which such Lender
or the Administrative Agent is doing business that is unrelated to this
Agreement (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Administrative Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.14) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
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(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes, if any,
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Notes, if any (hereinafter referred to as "OTHER
TAXES").
(c) The Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.14) paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties to the extent not imposed as a result
of such Lender's or the Administrative Agent's (as the case may be) gross
negligence or willful misconduct, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Administrative Agent (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing payment thereof.
(e) Each Lender that is not created or organized under the laws of the
United States or a political subdivision thereof shall deliver to the Borrower
and the Administrative Agent on or prior to the date of its execution and
delivery of this Agreement, and each such Lender that is not a party hereto on
the date hereof shall deliver to the Borrower and the Administrative Agent on or
prior to the date on which such Lender becomes a Lender pursuant to Section
2.19, 2.20 or 8.07 (as the case may be), a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender in
substantially the form set out in Exhibit D-1 or D-2 hereto, as applicable, to
the effect that such Lender is eligible under the provisions of an applicable
tax treaty concluded by the United States (in which case the certificate shall
be accompanied by two executed copies of Form 1001 (or any successor or
substitute form or forms) of the Internal Revenue Service (the "IRS") of the
United States), or under Section 1441(c) or 1442 of the Internal Revenue Code
(in which case the certificate shall be accompanied by two copies of IRS Form
4224 (or any successor or substitute form or forms of the IRS) to receive, as of
the date hereof or as of the date such party becomes a Lender hereto pursuant to
Section 2.19, 2.20 or 8.07 (as the case may be), as appropriate, payments
hereunder without deduction or withholding of United States federal income tax.
Each such Lender further agrees to deliver to the Borrower and the
Administrative Agent from time to time, as reasonably requested by the Borrower
or the Administrative Agent, and in any case before or promptly upon the
occurrence of any events requiring a change in the most recent certificate
previously delivered pursuant to this Section 2.14(e), a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender in
substantially the form set out in Exhibit D-1 or D-2 hereto, as applicable.
Further, each Lender that delivers a certificate in the form set out in Exhibit
D-1 hereto agrees, to the extent permitted by law, to deliver to the Borrower
and the Administrative Agent within 15 days prior to every third anniversary of
the date of delivery of the initial IRS Form 1001 by such Lender (or more often
if required by law) on which this Agreement is still in effect, two accurate and
complete original signed copies of IRS Form 1001 (or any successor or substitute
form or forms required under the Internal Revenue Code or the applicable
regulations promulgated thereunder) and a certificate in the form set out in
such Exhibit D-1, and each Lender that delivers a
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22
certificate in the form set out in Exhibit D-2 hereto agrees to deliver to the
Borrower and the Administrative Agent, to the extent permitted by law, within 15
days prior to the beginning of each subsequent taxable year of such Lender (or
more often if required by law) during which this Agreement is still in effect,
two accurate and complete original signed copies of IRS Form 4224 (or any
successor or substitute form or forms required under the Internal Revenue Code
or the applicable regulations promulgated thereunder) and a certificate in the
form of such Exhibit D-2. Each such certificate shall certify as to one of the
following:
(i) that such Lender is eligible to receive payments hereunder without
deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunder without
deduction or withholding of United States federal income tax as specified
therein but does not require additional payments therefor pursuant to
Section 2.14(a) or (c) because it is eligible and able to recover the full
amount of any such deduction or withholding from a source other than the
Borrower; or
(iii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein and that it is not eligible and able to recover the full
amount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by IRS Form 1001 or 4224,
that any Lender reasonably considers to be confidential, such Lender promptly
shall give notice thereof to the Borrower and the Administrative Agent and shall
not be obligated to include in such form or document such confidential
information; provided that such Lender certifies to the Borrower that the
failure to disclose such confidential information does not increase the
obligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of principal and interest on
all Advances and the termination of this Agreement until such date as all
applicable statutes of limitations (including any extensions thereof) have
expired with respect to such agreements and obligations of the Borrower
contained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratable
share of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The
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23
Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any
---------------------------------------------
Lender requests from the Borrower either payment of additional interest on
Eurodollar Rate Advances pursuant to Section 2.07, or reimbursement for
increased costs pursuant to Section 2.11, or payment of or reimbursement for
Taxes pursuant to Section 2.14, or if any Lender notifies the Administrative
Agent that it is unlawful for such Lender or its Eurodollar Lending Office to
perform its obligations hereunder pursuant to Section 2.12, (i) such Lender
will, upon three Business Days' notice by the Borrower to such Lender and the
Administrative Agent, to the extent not inconsistent with such Lender's internal
policies and applicable legal and regulatory restrictions, use reasonable
efforts to make, fund or maintain its Eurodollar Rate Advances through another
Eurodollar Lending Office of such Lender if (A) as a result thereof the
additional amounts required to be paid pursuant to Section 2.07, 2.11 or 2.14,
as applicable, in respect of such Eurodollar Rate Advances would be materially
reduced or the provisions of Section 2.12 would not apply to such Lender, as
applicable, and (B) as determined by such Lender in good faith but in its sole
discretion, the making or maintaining of such Eurodollar Rate Advances through
such other Eurodollar Lending Office would not otherwise materially and
adversely affect such Eurodollar Rate Advances or such Lender and (ii) unless
such Lender has theretofore taken steps to remove or cure, and has removed or
cured, the conditions creating such obligation to pay such additional amounts or
the circumstances described in Section 2.12, the Borrower may designate an
Eligible Assignee to purchase for cash (pursuant to an Assignment and
Acceptance) all, but not less than all, of the Advances then owing to such
Lender and all, but not less than all, of such Lender's rights and obligations
hereunder, without recourse to or warranty by, or expense to, such Lender, for a
purchase price equal to the outstanding principal amount of each such Advance
then owing to such Lender plus any accrued but unpaid interest thereon and any
accrued but unpaid facility fees owing thereto and, in addition, all additional
costs reimbursements, expense reimbursements and indemnities, if any, owing in
respect of such Lender's Commitment hereunder at such time shall be paid to such
Lender.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in
-----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower
agrees that upon notice by any Lender to the Borrower (with a copy of such
notice to the Administrative Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Advances owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a promissory note or other evidence
of indebtedness, in form and substance reasonably satisfactory to the Borrower
and such Lender (each a "NOTE"), payable to the order of such Lender in a
principal amount equal to the Commitment of such Lender; provided, however, that
the execution and delivery of such promissory note or other evidence of
indebtedness shall not be a condition precedent to the making of any Advance
under this Agreement.
(b) The Register maintained by the Administrative Agent pursuant to Section
8.07(c) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken
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24
together) shall be recorded (i) the date and amount of each Borrowing made
hereunder, the Type of Advances comprising such Borrowing and, if appropriate,
the Interest Period applicable thereto, (ii) the terms of each Assumption
Agreement and each Assignment and Acceptance delivered to and accepted by it,
(iii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder, and (iv) the amount of
any sum received by the Administrative Agent from the Borrower hereunder and
each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent or such Lender
to make an entry, or any finding that an entry is incorrect, in the Register or
such account or accounts shall not limit or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be
----------------
available (and the Borrower agrees that it shall use such proceeds) to support
the obligations of the Borrower in respect of commercial paper issued by the
Borrower, to finance in part the Transaction, to pay fees and expenses incurred
in connection with the consummation of the Transaction, and/or for other general
corporate purposes of the Borrower and its subsidiaries.
SECTION 2.19. Increase in the Aggregate Commitments. (a) The Borrower
--------------------------------------
may, at any time but in any event not more than once in any calendar year prior
to the Termination Date, by notice to the Administrative Agent, request that the
aggregate amount of the Commitments be increased by an amount of $100,000,000 or
an integral multiple of $5,000,000 in excess thereof (each a "COMMITMENT
INCREASE") to be effective as of a date that is at least 90 days prior to the
scheduled Termination Date then in effect (the "INCREASE DATE") as specified in
the related notice to the Administrative Agent; provided, however, that (i) in
no event shall the aggregate amount of the Commitments at any time exceed
$6,000,000,000, (ii) on the date of any request by the Borrower for a Commitment
Increase and at all times thereafter to and including the related Increase Date,
the Public Debt Rating shall be at least A- by S&P and at least A3 by Moody's
and (iii) no Event of Default, or event that with the giving of notice or
passage of time or both would constitute an Event of Default, shall have
occurred and be continuing as of the date of such request or as of the
applicable Increase Date, or shall occur as a result thereof.
(b) The Administrative Agent shall promptly notify the Lenders of a request
by the Borrower for a Commitment Increase, which notice shall include (i) the
proposed amount of such requested Commitment Increase, (ii) the proposed
Increase Date and (iii) the date by which Lenders wishing to participate in the
Commitment Increase must commit to an increase in the amount of their respective
Commitments (the "COMMITMENT DATE"). Each Lender that is willing to participate
in such requested Commitment Increase (each an "INCREASING LENDER") shall give
written notice to the Administrative Agent on or prior to the Commitment Date of
the amount by which it is willing to increase its Commitment. If the Lenders
notify the Administrative Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the
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25
Lenders willing to participate therein in such amounts as are agreed between the
Borrower and the Administrative Agent.
(c) Promptly following each Commitment Date, the Administrative Agent shall
notify the Borrower as to the amount, if any, by which the Lenders are willing
to participate in the requested Commitment Increase. If the aggregate amount by
which the Lenders are willing to participate in any requested Commitment
Increase on any such Commitment Date is less than the requested Commitment
Increase, then the Borrower may extend offers to one or more Eligible Assignees
to participate in any portion of the requested Commitment Increase that has not
been committed to by the Lenders as of the applicable Commitment Date; provided,
however, that the Commitment of each such Eligible Assignee shall be in an
amount of $25,000,000 or an integral multiple of $1,000,000 in excess thereof.
(d) On each Increase Date, each Eligible Assignee that accepts an offer to
participate in a requested Commitment Increase in accordance with Section
2.19(c) (each such Eligible Assignee and each Eligible Assignee that agrees to
an extension of the Termination Date in accordance with Section 2.20(c), an
"ASSUMING LENDER") shall become a Lender party to this Agreement as of such
Increase Date and the Commitment of each Increasing Lender for such requested
Commitment Increase shall be so increased by such amount (or by the amount
allocated to such Lender pursuant to the last sentence of Section 2.19(b)) as of
such Increase Date; provided, however, that the Administrative Agent shall have
received on or before such Increase Date the following, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directors of the
Borrower or the Executive Committee of such Board approving the Commitment
Increase and the corresponding modifications to this Agreement and (B) an
opinion of counsel for the Borrower (which may be in-house counsel), in
substantially the form of Exhibit C-1 hereto;
(ii) an assumption agreement from each Assuming Lender, if any, in form and
substance satisfactory to the Borrower and the Administrative Agent (each
an "ASSUMPTION AGREEMENT"), duly executed by such Eligible Assignee, the
Administrative Agent and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase in the
amount of its Commitment in a writing satisfactory to the Borrower and the
Administrative Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.19(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier or
telex, of the occurrence of the Commitment Increase to be effected on such
Increase Date and shall record in the Register the relevant information with
respect to each Increasing Lender and each Assuming Lender on such date.
SECTION 2.20. Extension of Termination Date. (a) At least 45 days but
------------------------------
not more than 75 days prior to the next Anniversary Date, the Borrower, by
written notice to the Administrative Agent, may request an extension of the
Termination Date in effect at such time by one calendar year from its then
scheduled expiration; provided, however, that, if the Borrower does not request
an extension of the Termination Date in a timely manner prior to any Anniversary
Date, it, may, but shall not be obligated
<PAGE>
26
to, request that the Termination Date be extended for two consecutive calendar
years from its then scheduled expiration by making a request therefor in a
timely manner prior to the next succeeding Anniversary Date. The Administrative
Agent shall promptly notify each Lender of such request, and each Lender shall
in turn, in its sole discretion, not later than 30 days prior to such next
Anniversary Date, notify the Borrower and the Administrative Agent in writing as
to whether such Lender will consent to such extension. If any Lender shall fail
to notify the Administrative Agent and the Borrower in writing of its consent to
any such request for extension of the Termination Date at least 30 days prior to
the next Anniversary Date, such Lender shall be deemed to be a Non-Consenting
Lender with respect to such request. The Administrative Agent shall notify the
Borrower not later than 25 days prior to such next Anniversary Date of the
decision of the Lenders regarding the Borrower's request for an extension of the
Termination Date.
(b) If all of the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.20, the Termination Date in
effect at such time shall, effective as at such next Anniversary Date (the
"EXTENSION DATE"), be extended for one calendar year or two calendar years, as
properly requested; provided that on each Extension Date, no Event of Default,
or event that with the giving of notice or passage of time or both would
constitute an Event of Default, shall have occurred and be continuing, or shall
occur as a consequence thereof. If less than all of the Lenders consent in
writing to any such request in accordance with subsection (a) of this Section
2.20, the Termination Date in effect at such time shall, effective as at the
applicable Extension Date, be extended as to those Lenders that so consented
(each a "CONSENTING LENDER") but shall not be extended as to any other Lender
(each a "NON-CONSENTING LENDER"). To the extent that the Termination Date is
not extended as to any Lender pursuant to this Section 2.20 and the Commitment
of such Lender is not assumed in accordance with subsection (c) of this Section
2.20 on or prior to the applicable Extension Date, the Commitment of such Non-
Consenting Lender shall automatically terminate in whole on such unextended
Termination Date without any further notice or other action by the Borrower,
such Lender or any other Person; provided that such Non-Consenting Lender's
rights under Sections 2.11, 2.14, 8.04 and 8.08, and its obligations under
Section 7.05, shall survive the Termination Date for such Lender as to matters
occurring prior to such date. It is understood and agreed that no Lender shall
have any obligation whatsoever to agree to any request made by the Borrower for
any requested extension of the Termination Date.
(c) If less than all of the Lenders consent to any such request pursuant to
subsection (a) of this Section 2.20, the Borrower may arrange for one or more
Consenting Lenders or other Eligible Assignees as Assuming Lenders to assume,
effective as of the Extension Date, any Non-Consenting Lender's Commitment and
all of the obligations of such Non-Consenting Lender under this Agreement
thereafter arising, without recourse to or warranty by, or expense to, such Non-
Consenting Lender; provided, however, that the amount of the Commitment of any
such Assuming Lender as a result of such substitution shall in no event be less
than $25,000,000 unless the amount of the Commitment of such Non-Consenting
Lender is less than $25,000,000, in which case such Assuming Lender shall assume
all of such lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paid to such
Non-Consenting Lender (A) the aggregate principal amount of, and any
interest accrued and unpaid to the effective date of the assignment on, the
outstanding Advances, if any, of such Non-Consenting Lender plus (B) any
accrued but unpaid facility fees owing to such Non-Consenting Lender as of
the effective date of such assignment;
<PAGE>
27
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable processing
and recordation fee required under Section 8.07(a) for such assignment
shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Administrative
Agent an Assumption Agreement, duly executed by such Assuming Lender, such Non-
Consenting Lender, the Borrower and the Administrative Agent, (B) any such
Consenting Lender shall have delivered confirmation in writing satisfactory to
the Borrower and the Administrative Agent as to the increase in the amount of
its Commitment and (C) each Non-Consenting Lender being replaced pursuant to
this Section 2.20 shall have delivered to the Administrative Agent any Note or
Notes held by such Non-Consenting Lender. Upon the payment or prepayment of all
amounts referred to in clauses (i), (ii) and (iii) of the immediately preceding
sentence, each such Consenting Lender or Assuming Lender, as of the Extension
Date, will be substituted for such Non-Consenting Lender under this Agreement
and shall be a Lender for all purposes of this Agreement, without any further
acknowledgment by or the consent of the other Lenders, and the obligations of
each such Non-Consenting Lender hereunder shall, by the provisions hereof, be
released and discharged.
(d) If all of the Lenders (after giving effect to any assignments pursuant
to subsection (b) of this Section 2.20) consent in writing to a requested
extension (whether by execution or delivery of an Assumption Agreement or
otherwise) not later than one Business Day prior to such Extension Date, the
Administrative Agent shall so notify the Borrower, and, so long as no Event of
Default, or event that with the giving of notice or passage of time or both
would constitute an Event of Default, shall have occurred and be continuing as
of such Extension Date, or shall occur as a consequence thereof, the Termination
Date then in effect shall be extended for the additional one-year period or two-
year period, as the case may be, as described in subsection (a) of this Section
2.20, and all references in this Agreement, and in the Notes, if any, to the
"Termination Date" shall, with respect to each Consenting Lender and each
Assuming Lender for such Extension Date, refer to the Termination Date as so
extended. Promptly following each Extension Date, the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
of the extension of the scheduled Termination Date in effect immediately prior
thereto and shall thereupon record in the Register the relevant information with
respect to each such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of Section 2.01.
----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "EFFECTIVE DATE") on which all of the following conditions precedent
have been satisfied or waived in accordance with Section 8.01:
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28
(a) the Administrative Agent shall have received on or before the Effective
Date the following, each dated the Effective Date, in form and substance
satisfactory to the Administrative Agent: (i) certified copies of the
resolutions of the Board of Directors of the Borrower or the Executive
Committee of such Board authorizing the execution and delivery of this
Agreement, and approving all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement
and the Transaction; (ii) a certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the name and true signature of the
officer of the Borrower executing this Agreement on its behalf; (iii) a
copy of the Joint Proxy Statement most recently mailed to the shareholders
of Disney and the stockholders of Capital Cities/ABC; (iv) the Disney
Agreement, in substantially the form of Exhibit E hereto, duly executed and
delivered by Disney and the Borrower; (v) an opinion of David K. Thompson,
Esq., Senior Vice President-Assistant General Counsel of the Borrower and
Disney, in substantially the form of Exhibit C-1 hereto; (vi) an opinion of
Dewey Ballantine, special counsel for Disney in connection with the
Transaction, in substantially the form of Exhibit C-2 hereto; and (vii) an
opinion of Shearman & Sterling, counsel for the Administrative Agent.
(b) each of the Mergers shall have been consummated substantially in
accordance with the terms of the Reorganization Agreement and in compliance
with all applicable laws.
(c) all consents and approvals of any governmental or regulatory authority
and any other third party necessary in connection with this Agreement or
the consummation of the Transaction shall have been obtained; all related
material filings required to be made prior to the consummation of the
Transaction shall have been made and, in each case, shall remain in effect;
and all applicable waiting periods in connection with the consummation of
the Transaction shall have expired without any adverse action being taken
by any competent governmental or regulatory authority that could reasonably
be expected to have a material adverse effect on the business, financial
condition or operations of the Borrower and its subsidiaries, taken as a
whole.
(d) there shall have occurred no material adverse change in the business,
financial condition or operations of Disney and its subsidiaries, taken as
a whole, since September 30, 1994, except as disclosed in periodic or other
reports filed by Disney and its subsidiaries during the period from
September 30, 1994 to the date of this Agreement pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended, copies of which have been
furnished to the Lenders prior to the date of this Agreement.
(e) each of Disney and Capital Cities/ABC shall have paid or prepaid all
amounts owing under the Existing Credit Agreement to which it is a party,
and all commitments of the lenders thereunder shall have been terminated.
(f) all of the representations and warranties contained in Section 4.01
shall be correct in all material respects on and as of the Effective Date,
before and after giving effect to such date, as though made on and as of
the Effective Date (except to the extent that such representations and
warranties relate to an earlier date, which representations and warranties
shall have been correct in all material respects on and as of such earlier
date).
<PAGE>
29
(g) no event shall have occurred and be continuing, or shall result from
the occurrence of the Effective Date, that constitutes an Event of Default
or would constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation of
---------------------------------------
each Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that the
Effective Date shall have occurred and on the date of such Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of the date of such Borrowing,
before and after giving effect to such Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date (except to
the extent that such representations and warranties relate to an earlier
date, which representations and warranties were correct in all material
respects on and as of such earlier date); and
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
-----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to time
thereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Borrower and
each of the Significant Subsidiaries are duly qualified and in good
standing as foreign corporations authorized to do business in each
jurisdiction (other than the jurisdiction of its incorporation) in which
the nature of their respective activities or the character of the
properties they own or lease make such qualification necessary and in which
the failure so to qualify would have a material adverse effect on the
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each of the Notes, if any, delivered hereunder are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or by-
laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any material contractual restriction
binding on or affecting the Borrower, Disney or Capital Cities/ABC; no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due
<PAGE>
30
execution, delivery and performance by the Borrower of this Agreement; and
this Agreement is and each of the Notes, when delivered hereunder, will be
the legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and general principles of
equity.
(c) (i) At any time prior to the date on which the Borrower first delivers
the audited financial statements of the Borrower and its subsidiaries
pursuant to Section 5.01(e)(ii), Disney's most recent annual report on Form
10-K containing the consolidated balance sheet of Disney and its
subsidiaries, and the related consolidated statements of income and of cash
flows of Disney and its subsidiaries, copies of which have been furnished
to each Lender prior to the Effective Date, fairly present the consolidated
financial condition of Disney and its subsidiaries as at the date of such
balance sheet and the consolidated results of operations of Disney and its
subsidiaries for the fiscal year ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and (ii) at
any time thereafter, the Borrower's most recent annual report on Form 10-K
containing the consolidated balance sheet of the Borrower and its
subsidiaries, and the related consolidated statements of income and of cash
flows of the Borrower and its subsidiaries, copies of which have been
furnished to each Lender pursuant to Section 5.01(e)(ii), fairly present
the consolidated financial condition of the Borrower and its subsidiaries
as at the date of such balance sheet and the consolidated results of
operations of the Borrower and its subsidiaries for the fiscal year ended
on such date, all in accordance with generally accepted accounting
principles consistently applied.
(d) There is no pending or, to the Borrower's knowledge, threatened claim,
action or proceeding affecting the Borrower or any of its subsidiaries
which could reasonably be expected to adversely affect the financial
condition or operations of the Borrower and its subsidiaries, taken as a
whole, or which could reasonably be expected to affect the legality,
validity or enforceability of this Agreement; and to the Borrower's
knowledge, the Borrower and each of its subsidiaries have complied, and are
in compliance, with all applicable laws, rules, regulations, permits,
orders, consent decrees and judgments, except for any such matters which
have not had, and would not reasonably be expected to have, a material
adverse effect on the financial condition or operations of the Borrower and
its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and are not
reasonably expected to incur any material liability in connection with
their Single Employer Plans or Multiple Employer Plans, other than ordinary
liabilities for benefits; neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any material withdrawal
liability (as defined in Part I of Subtitle E of Title IV of ERISA) to any
Multiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISA
Affiliate is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the Borrower as
------------------------------------------------------------
of Each Increase Date and Each Extension Date. The Borrower represents and
- ----------------------------------------------
warrants on each Increase Date and each Extension Date (and at no other time)
that, as of each such date, the following statements shall be true:
<PAGE>
31
(a) there has been no material adverse change in the business, financial
condition or operations of (i) Disney and its subsidiaries, taken as a
whole, since September 30, 1994 (except as disclosed in periodic or other
reports filed by Disney and its subsidiaries pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended during the period from
September 30, 1994 to the date of the request for an increase in the
aggregate Commitments related to such Increase Date), in the case of any
such Increase Date occurring prior to the first delivery of financial
statements of the Borrower and its subsidiaries pursuant to Section
5.01(e)(ii), or (ii) the Borrower and its subsidiaries, taken as a whole,
since the date of the most recently delivered audited financial statements
of the Borrower and its subsidiaries pursuant to Section 5.01(e)(ii)
(except as disclosed in periodic or other reports filed by the Borrower and
its subsidiaries pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, during the period from the date of the most recently
delivered audited financial statements of the Borrower and its subsidiaries
pursuant to Section 5.01(e)(ii) to the date of the request for an increase
in the aggregate Commitments related to such Increase Date or for an
extension of the Termination Date then in effect related to such Extension
Date, as the case may be), in the case of each such Increase Date and each
such Extension Date occurring at any time thereafter; and
(b) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of such date, as though made on
and as of such date (except to the extent that such representations and
warranties relate to an earlier date, which representations and warranties
were correct in all material respects on and as of such earlier date).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain
----------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its subsidiaries
-------------------------
to comply, in all material respects with all applicable laws, rules,
regulations, permits, orders, consent decrees and judgments binding on the
Borrower and its subsidiaries the failure with which to comply would have a
material adverse effect on the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,
if the failure to so pay and discharge would have a material adverse effect
on the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property, and (ii) all lawful
claims which, if unpaid, will by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its subsidiaries
shall be required to pay or discharge any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained in
accordance with GAAP.
<PAGE>
32
(c) Preservation of Corporate Existence, Etc. Subject to Section 5.02(a),
----------------------------------------
preserve and maintain, and cause each of Disney and Capital Cities/ABC to
preserve and maintain, its corporate existence, rights (charter and
statutory) and franchises; provided, however, that none of the Borrower,
Disney or Capital Cities/ABC shall be required to preserve any right or
franchise if the loss thereof would not have a material adverse effect on
the business, financial condition or operations of the Borrower and its
subsidiaries, taken as a whole; and provided further, however, that neither
Disney nor Capital Cities/ABC shall be required to preserve its corporate
existence if the loss thereof would not have a material adverse effect on
the business, financial condition or operations of the Borrower and its
subsidiaries, taken as a whole.
(d) Maintenance of Interest Coverage Ratio. Maintain as of the last day of
--------------------------------------
each fiscal quarter of the Borrower, commencing with the first full fiscal
quarter of the Borrower following the Effective Date, a ratio of (i)
Consolidated EBITDA for the Measurement Period ending on such day to (ii)
Consolidated Interest Expense for the Measurement Period ending on such
day, of not less than 3 to 1.
(e) Reporting Requirements. Furnish to the Administrative Agent, on behalf
----------------------
of the Lenders:
(i) as soon as available and in any event within 50 days after the end of
each of the first three quarters of each fiscal year of the Borrower,
the Borrower's quarterly report to shareholders on Form 10-Q as filed
with the Securities and Exchange Commission (the "SEC") or, if the
Borrower is not filing such quarterly report with the SEC at such
time, each of Disney's and (as soon as available thereafter) Capital
Cities/ABC's quarterly report to shareholders on Form 10-Q as and only
to the extent otherwise filed with the SEC, in each case containing a
consolidated balance sheet of the Borrower and its subsidiaries (or
Disney and its subsidiaries and Capital Cities/ABC and its
subsidiaries, as the case may be) as of the end of such quarter and
consolidated statements of income and of cash flows of the Borrower
and its subsidiaries (or Disney and its subsidiaries and Capital
Cities/ABC and its subsidiaries, as the case may be) for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, and a certificate of any of the Borrower's
Chairman of the Board of Directors, President, Chief Financial
Officer, Treasurer, Assistant Treasurer or Controller (A) stating that
no Event of Default, or event that with the giving of notice or
passage of time or both would constitute an Event of Default, has
occurred and is continuing and (B) containing a schedule which shall
set forth the computations used by the Borrower in determining
compliance with the covenant contained in Section 5.01(d);
(ii) as soon as soon as available and in any event within 100 days after
the end of each fiscal year of the Borrower, a copy of the Borrower's
annual report to shareholders on Form 10-K as filed with the SEC or,
if the Borrower is not filing such annual report with the SEC at such
time, each of Disney's and (as soon as available thereafter) Capital
Cities/ABC's annual report to shareholders on Form 10-K as and only to
the extent otherwise filed with the SEC, in each case containing
consolidated financial statements of the Borrower and its subsidiaries
(or Disney and its subsidiaries and Capital Cities/ABC and its
subsidiaries, as the case may be) for such year and a certificate of
any
<PAGE>
33
of the Borrower's Chairman of the Board of Directors, President,
Chief Financial Officer, Treasurer, Assistant Treasurer or Controller
(A) stating that no Event of Default, or event that with the giving of
notice or passage of time or both would constitute an Event of
Default, has occurred and is continuing and (B) containing a schedule
which shall set forth the computations used by the Borrower in
determining compliance with the covenant contained in Section 5.01(d);
(iii) promptly after the Borrower obtains actual knowledge of the
occurrence of each Event of Default, and each event that with the
giving of notice or passage of time or both would constitute an Event
of Default, a statement of any of the Borrower's Chairman of the Board
of Directors, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller setting forth details of such Event of Default
or event continuing on the date of such statement, and the action
which the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the commencement thereof, notice of any actions, suits
and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any of its subsidiaries of the type
described in Section 4.01(d);
(v) promptly after the Borrower obtains actual knowledge thereof, written
notice of any pending or threatened Environmental Claim against the
Borrower or any of its subsidiaries or any of their respective
properties which could reasonably be expected to materially and
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole;
(vi) promptly after the Borrower obtains actual knowledge of the occurrence
of any ERISA Event which could reasonably be expected to materially
and adversely affect the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole, a statement of any of
the Borrower's Chairman of the Board of Directors, President, Chief
Financial Officer, Treasurer, Assistant Treasurer or Controller
describing such ERISA Event and the action, if any, which the Borrower
has taken and proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, a copy of each
notice received by the Borrower or any ERISA Affiliate concerning (A)
the imposition of withdrawal liability (as defined in Part I of
Subtitle E of Title IV of ERISA) by a Multiemployer Plan, which
withdrawal liability could reasonably be expected to materially and
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan, which reorganization or termination could
reasonably be expected to materially adversely affect the financial
condition or operations of the Borrower and its subsidiaries, taken as
a whole, or (C) the amount of liability incurred, or which may be
incurred, by the Borrower or any ERISA Affiliate in connection with
any event described in subclause (A) or (B) above; and
<PAGE>
34
(viii) such other material information reasonably related to any Lender's
credit analysis of the Borrower or any of its subsidiaries as any
Lender through the Administrative Agent may from time to time
reasonably request.
SECTION 5.02. Negative Covenant . So long as any Advance shall remain
------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey, transfer,
------------
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of the assets of the Borrower and
its subsidiaries, taken as a whole (whether now owned or hereafter
acquired), to, any Person, or permit any of its subsidiaries to do so,
unless immediately after giving effect to such proposed transaction, no
Event of Default or event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Default would exist and, in the
case of any such merger to which the Borrower is a party, the Borrower is
the surviving corporation or the Person into which the Borrower shall be
merged or formed by any such consolidation shall be a corporation organized
and existing under the laws of the United States or any State thereof and
shall assume the Borrower's obligations hereunder and under the Notes, if
any, in an agreement or instrument reasonably satisfactory in form and
substance to the Majority Lenders.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default . If any of the following events ("EVENTS
------------------
OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when the
same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or any fee or other amount payable under this
Agreement, in each case within three Business Days after such interest, fee
or other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) delivered in writing and identified as
delivered in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenant contained in
Section 5.01(d), Section 5.01(e)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement on its part to be performed or
observed if the failure to perform or observe such other term, covenant or
agreement shall remain unremedied for 30 days after written notice thereof
shall have been given to the Borrower by the Administrative Agent or any
Lender; or
<PAGE>
35
(e) The Borrower or any of its subsidiaries shall fail to pay any principal
of or premium or interest on any Debt which is outstanding in a principal
amount of at least $250,000,000 in the aggregate (but excluding Debt
arising hereunder) of the Borrower or such subsidiary (as the case may be),
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure
(i) shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt and (ii) shall not have
been cured or waived; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Borrower or any Material Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for it or for
substantially all of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Borrower or any Material Subsidiary shall
take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(g) Any money judgment, writ or warrant of attachment or similar process
against the Borrower, any Material Subsidiary or any of their respective
assets involving in any case an amount in excess of $100,000,000 is entered
and shall remain undischarged, unvacated, unbonded or unstayed for a period
of 30 days or, in any case, within five days of any pending sale or
disposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
<PAGE>
36
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action . (a) Each Lender hereby appoints
-------------------------
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement of this Agreement or
collection of the Advances), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The Administrative Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
(b) The Co-Administrative Agent shall have no duties under this Agreement
other than those afforded to it in its capacity as a Lender, and each Lender
hereby acknowledges that the Co-Administrative Agent has no liability under this
Agreement other than those assumed by it in its capacity as a Lender.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable to any Lender for any action taken or omitted to be taken by it
or them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent: (i) may treat the Lender which made any
Advance as the holder of the Debt resulting therefrom until the Administrative
Agent receives and accepts an Assumption Agreement entered into by an Assuming
Lender as provided in Section 2.19 or 2.20, as the case may be, or an Assignment
and Acceptance entered into by such Lender, as assignor, and an Eligible
Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Lender and shall not be responsible to any Lender for any statements,
warranties or representations (whether written or oral) made in or in connection
with this Agreement; (iv) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement on the part of the Borrower or to inspect the property (including
the books and records) of the Borrower; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
<PAGE>
37
SECTION 7.03. CUSA and Affiliates . With respect to its Commitment and
--------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its respective Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from, and generally engage in any kind of business with, the
Borrower, any of its subsidiaries and any Person who may do business with or own
securities of the Borrower or any such subsidiary, all as if CUSA was not the
Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision . Each Lender acknowledges that it
-----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(c)(i) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
SECTION 7.05. Indemnification . The Lenders agree to indemnify the
----------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of Advances then owing to each of
them (or if no Advances are at the time outstanding or if any Advances are then
owing to Persons which are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal or
bankruptcy proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent . The Administrative Agent
-------------------------------
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and such resignation shall be effective upon the appointment of a
successor Administrative Agent as provided herein. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days after
the retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent. Any successor Administrative Agent appointed hereunder
shall be a commercial bank organized or licensed under the laws of the United
States or of any State thereof, or an Affiliate of any such commercial bank,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent,
<PAGE>
38
such successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, discretion, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Borrower or any of its Affiliates, if
a Lender, at the time of any such amendment, waiver or consent), do any of the
following: (a) waive any of the conditions specified in Section 3.01 or 3.02,
(b) increase the Commitments of the Lenders (other than as provided in Section
2.19) or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Advances or the facility fees payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Advances (other than as provided in Section 2.20), (e) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
Advances, or the number of Lenders, which shall be required for the Lenders or
any of them to take any action hereunder or (f) amend this Section 8.01; and
provided, further, that no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Lenders required above
to take such action, affect the rights or duties of the Administrative Agent
under this Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications
------------
provided for hereunder shall, except as otherwise expressly provided for herein,
be in writing (including telecopier, telegraphic or telex communication) and
mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, at
its address at:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Edward Philip
Telecopy Number: (818) 563-1682;
if to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assumption Agreement or the Assignment and Acceptance
pursuant to which it became a Lender, as the case may be; and if to the
Administrative Agent, at its address at:
<PAGE>
39
Citicorp USA, Inc.
One Court Square
Long Island City, New York 11120
Attention: Kim Coley
Telecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.
One Sansome Street
San Francisco, California 94104
Attention: Mark Wilson
Telecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telecopied, telegraphed or telexed, be effective when
deposited in the mails, telecopied, delivered to the telegraph company or
confirmed by telex answerback, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II or VII shall
not be effective until received by the Administrative Agent. Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or of any Exhibit hereto to be executed and
delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof.
(b) If any notice required under this Agreement is permitted to be
made, and is made, by telephone, actions taken or omitted to be taken in
reliance thereon by the Administrative Agent or any Lender shall be binding upon
the Borrower notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to the
Administrative Agent or such Lender; provided that any such action taken or
omitted to be taken by the Administrative Agent or such Lender shall have been
in good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies . No failure on the part of any
--------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses . (a) The Borrower agrees to pay
-------------------
within five Business Days of demand all actual and reasonable costs and
expenses, if any (including, without limitation, actual and reasonable counsel
fees and expenses), of the Administrative Agent and each Lender in connection
with the enforcement (whether through legal proceedings or otherwise) of this
Agreement and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.08(f) or
2.10 or acceleration of the maturity of the Advances pursuant
<PAGE>
40
to Section 6.01 or for any other reason (other than by reason of a payment
pursuant to Section 2.12), the Borrower shall, within five Business Days of
demand by any Lender (with a copy of such demand to the Administrative Agent),
pay to such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment or Conversion, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off . Upon (i) the occurrence and during
-----------------
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, but excluding trust accounts) at any time
held and other indebtedness at any time owing by such Lender (and, in the case
of CUSA, Citibank) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter existing under
this Agreement, whether or not such Lender shall have made any demand under this
Agreement. Each Lender agrees promptly to notify the Borrower after any such
set-off and application made by such Lender (and, in the case of CUSA,
Citibank); provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender (and, in
the case of CUSA, Citibank) under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender may have.
SECTION 8.06. Binding Effect . This Agreement shall become effective
---------------
(other than Section 2.01, which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower, the Administrative Agent and the Co-Administrative
Agent and when the Administrative Agent shall have been notified by each Initial
Lender that such Initial Lender has executed it and, thereafter, shall be
binding upon and inure to the benefit of the Borrower, the Administrative Agent
and the Co-Administrative Agent and each Lender and their respective successors
and permitted assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 8.07. Assignments and Participations . (a) Each Lender may
-------------------------------
and, if requested by the Borrower upon notice by the Borrower delivered to such
Lender and the Administrative Agent pursuant to clause (ii) of Section 2.16,
will, assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) the sum of (A) the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment and (B) the amount of the
commitment of the Person that is such assigning Lender being contemporaneously
assigned under the 364-Day Credit Agreement (in both cases determined as of the
date of the Assignment and Acceptance or similar agreement with respect to such
assignments) shall in no event be less than $25,000,000 in the aggregate,
provided, however, that if the aggregate amount of the Commitment of such
assigning Lender hereunder and its commitment under the 364-Day Credit Agreement
is less than $25,000,000 on the date of such proposed assignments, such
assigning Lender may assign all, but not less than all of, its remaining rights
and obligations under this Agreement and the 364-Day Credit Agreement, (iii)
each such assignment shall be to an Eligible Assignee, and (iv) the parties to
each such assignment (other than the Borrower) shall execute and deliver
<PAGE>
41
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with a processing and recordation fee of
$3,000. Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than any rights such Lender assignor may have under
Sections 2.11, 2.14 and 8.08) and 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 Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its subsidiaries or the performance or observance by the Borrower or Disney of
any of its obligations under this Agreement or any instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01(c)(i) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Advances owing
to, each Lender from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee
and, if applicable, the Borrower, together with any Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit B hereto, (i)
accept such
<PAGE>
42
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and (iv) such Lender shall not agree in any
participation agreement with any participant or proposed participant to obtain
the consent of such participant before agreeing to the amendment, modification
or waiver of any of the terms of this Agreement or any Note, before consenting
to any action or failure to act by the Borrower or any other party hereunder or
under any Note, or before exercising any rights it may have in respect thereof,
unless such amendment, modification, waiver, consent or exercise would (A)
increase the amount of such participant's portion of such Lender's Commitment,
(B) reduce the principal amount of or rate of interest on the Advances or any
fee or other amounts payable hereunder to which such participant would be
entitled to receive a share under such participation agreement, or (C )
postpone any date fixed for any payment of principal of or interest on the
Advances or any fee or other amounts payable hereunder to which such participant
would be entitled to receive a share under such participation agreement.
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower in writing and directly related to the transactions contemplated
hereunder; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in
violation of the Securities Act of 1933, as amended from time to time, or any
applicable state securities laws, and each Lender hereby represents that it will
make any Advance for its own account in the ordinary course of its business and
not with a view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and any Note issued to it hereunder) in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System (or any successor regulation thereto) and the applicable operating
circular of such Federal Reserve Bank.
SECTION 8.08. Indemnification . The Borrower agrees to indemnify and
----------------
hold harmless the Administrative Agent, the Co-Administrative Agent and each
Lender and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each an "INDEMNIFIED PARTY") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with the
<PAGE>
43
preparation for a defense of, any investigation, litigation or proceeding
(whether or not an Indemnified Party is a party thereto) arising out of, related
to or in connection with the Commitments hereunder or the Advances made pursuant
hereto or any transactions done in connection herewith, including, without
limitation, any transaction in which any proceeds of the Advances are, or are
proposed, to be applied (collectively, the "INDEMNIFIED MATTERS"); provided that
the Borrower shall have no obligation to any Indemnified Party under this
Section 8.08 with respect to (i) matters for which such Indemnified Party has
been reimbursed by or on behalf of the Borrower pursuant to any other provision
of this Agreement, but only to the extent of such reimbursement, or (ii)
Indemnified Matters found by a court of competent jurisdiction to have resulted
from the willful misconduct or gross negligence of such Indemnified Party. If
any action is brought against any Indemnified Party, such Indemnified Party
shall promptly notify the Borrower in writing of the institution of such action
and the Borrower shall thereupon have the right, at its option, to elect to
assume the defense of such action; provided, however, that the Borrower shall
not, in assuming the defense of any Indemnified Party in any Indemnified Matter,
agree to any dismissal or settlement of such Indemnified Matter without the
prior written consent of such Indemnified Party, which consent shall not be
unreasonably withheld, if such dismissal or settlement (A) would require any
admission or acknowledgement of culpability or wrongdoing by such Indemnified
Party or (B) would provide for any nonmonetary relief to any Person to be
performed by such Indemnified Party. If the Borrower so elects, it shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such Indemnified Party) and payment of expenses.
Such Indemnified Party shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (1) the employment of such counsel
shall have been authorized in writing by the Borrower in connection with the
defense of such action or (2) the Borrower shall not have properly employed
counsel reasonably satisfactory to such Indemnified Party to have charge of the
defense of such action, in which case such fees and expenses shall be paid by
the Borrower. If an Indemnified Party shall have reasonably concluded (based
upon the advice of counsel) that the representation by one counsel of such
Indemnified Party and the Borrower creates a conflict of interest for such
counsel, the reasonable fees and expenses of such counsel shall be borne by the
Borrower and the Borrower shall not have the right to direct the defense of such
action on behalf of such Indemnified Party (but shall retain the right to direct
the defense of such action on behalf of the Borrower). Anything in this Section
8.08 to the contrary notwithstanding, the Borrower shall not be liable for the
fees and expenses of more than one counsel for any Indemnified Party in any
jurisdiction as to any Indemnified Matter or, except as specified in the second
sentence of this Section 8.08, for any settlement of any Indemnified Matter
effected without its written consent. All obligations of the Borrower under this
Section 8.08 shall survive the making and repayment of the Advances and the
termination of this Agreement.
SECTION 8.09. Confidentiality . Subject to the provisions of Section
----------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,
assigns, advisors, officers, employees, directors, agents, legal counsel and
other professional advisors (the "INFORMED PARTIES") to, hold all nonpublic
information obtained pursuant to this Agreement in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide transferee or participant in
connection with the contemplated transfer or participation or to another Lender
or an Informed Party agreeing to hold such nonpublic information as confidential
or as required or requested by law or to any governmental authority or
representative thereof or pursuant to legal process; provided that unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any
<PAGE>
44
governmental authority or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental authority) for disclosure of any such nonpublic information prior
to disclosure of such information; and further provided that in no event shall
any Lender be obligated or required to return any materials furnished by the
Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process . All
-----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreement
or any instrument or other documents delivered hereunder may be brought in any
state or federal court in the Borough of Manhattan in the State of New York, and
by execution and delivery of this Agreement, the Borrower accepts, for itself
and in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Agreement
or any instrument or other document delivered hereunder from which no appeal has
been taken or is available. The Borrower agrees to receive service of process
in any such proceeding in any such court at its office at 114 Fifth Avenue, New
York, New York 10011 (or at such other address in the Borough of Manhattan in
the State of New York as the Borrower shall notify the Administrative Agent from
time to time) and, if the Borrower ever ceases to maintain such office in the
Borough of Manhattan, irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, New York 10019, or any other address in the State of
New York communicated by CT Corporation System to the Administrative Agent, as
its agent to receive on its behalf service of all process in any such proceeding
in any such court, such service being hereby acknowledged by the Borrower to be
effective and binding service in every respect.
SECTION 8.11. Governing Law . This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts . This Agreement may be
--------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
<PAGE>
45
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement. A full set of executed counterparts of this
Agreement shall be lodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE BORROWER
------------
DC HOLDCO, INC.
By:_________________________________________
Title:______________________________________
THE ADMINISTRATIVE AGENT
------------------------
CITICORP USA, INC.,
as Administrative Agent
By:_________________________________________
Title:______________________________________
THE CO-ADMINISTRATIVE AGENT
---------------------------
CREDIT SUISSE,
as Co-Administrative Agent
By:_________________________________________
Title:______________________________________
THE INITIAL LENDERS
-------------------
Commitment
- ----------
$135,416,666.60 CITICORP USA, INC.
By:_________________________________________
Title:______________________________________
<PAGE>
46
$135,416,666.60 CREDIT SUISSE
By:_________________________________________
Title:______________________________________
$129,166,666.67 ABN AMRO N.V.
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$129,166,666.67 BANKERS TRUST COMPANY
By:_________________________________________
Title:______________________________________
$129,166,666.67 BANK OF AMERICA NT&SA
By:_________________________________________
Title:______________________________________
$129,166,666.67 BANK OF MONTREAL
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE BANK OF NEW YORK
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE BANK OF NOVA SCOTIA
By:_________________________________________
Title:______________________________________
<PAGE>
47
$129,166,666.67 BANQUE NATIONALE DE PARIS
By:_________________________________________
Title:______________________________________
$129,166,666.67 BANQUE PARIBAS
By:_________________________________________
Title:______________________________________
$129,166,666.67 BARCLAYS BANK PLC
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE CHASE MANHATTAN BANK, N.A.
By:_________________________________________
Title:______________________________________
$129,166,666.67 CHEMICAL BANK
By:_________________________________________
Title:______________________________________
$129,166,666.67 COMMERZBANK AG,
LOS ANGELES BRANCH
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
<PAGE>
48
$129,166,666.67 DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLAND BRANCHES
By:_________________________________________
Title:______________________________________
$129,166,666.67 FIRST INTERSTATE BANK OF
CALIFORNIA
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE FIRST NATIONAL BANK
OF CHICAGO
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
<PAGE>
49
$129,166,666.67 MELLON BANK, N.A.
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE MITSUBISHI BANK, LTD.,
LOS ANGELES BRANCH
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE MITSUI TRUST & BANKING CO., LTD.
By:_________________________________________
Title:______________________________________
$129,166,666.67 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_________________________________________
Title:______________________________________
$129,166,666.67 NATIONSBANK OF TEXAS,
N.A.
By:_________________________________________
Title:______________________________________
$129,166,666.67 ROYAL BANK OF CANADA
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE SAKURA BANK, LIMITED
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
<PAGE>
50
$129,166,666.67 THE SANWA BANK, LIMITED
By:_________________________________________
Title:______________________________________
$129,166,666.67 SOCIETE GENERALE
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE SUMITOMO BANK, LIMITED
By:_________________________________________
Title:______________________________________
$129,166,666.67 THE SUMITOMO TRUST &
BANKING
CO., LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$129,166,666.67 SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By:_________________________________________
Title:______________________________________
$129,166,666.67 SWISS BANK CORPORATION,
SAN FRANCISCO BRANCH
By:_________________________________________
Title:______________________________________
$129,166,666.67 TORONTO DOMINION
(TEXAS), INC.
By:_________________________________________
Title:______________________________________
<PAGE>
51
$129,166,666.67 UNION BANK
By:_________________________________________
Title:______________________________________
$129,166,666.67 UNION BANK OF SWITZERLAND,
LOS ANGELES BRANCH
By:_________________________________________
Title:______________________________________
By:_________________________________________
Title:______________________________________
$41,666,666.67 BARNETT BANK OF CENTRAL
FLORIDA, N.A.
By:_________________________________________
Title:______________________________________
$41,666,666.67 THE DAIWA BANK, LTD.,
LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$41,666,666.67 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:_________________________________________
Title:______________________________________
$41,666,666.67 WACHOVIA BANK OF GEORGIA, N.A.
By:_________________________________________
Title:______________________________________
<PAGE>
52
$41,666,666.67 THE YASUDA TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:_________________________________________
Title:______________________________________
$5,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
EXHIBIT 5.1
[Letterhead of Dewey Ballantine]
November 13, 1995
DC Holdco, Inc.
500 South Buena Vista Street
Burbank, California 91521
Re: DC Holdco, Inc.
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We are acting as counsel to DC Holdco, Inc., a Delaware corporation
(the "Corporation"), in connection with the filing of the above-referenced
Registration Statement on Form S-4 (the "Registration Statement") for the
registration of up to 694,244,639 shares of Common Stock, par value $0.01 per
share, including the preferred stock purchase rights associated therewith
(the "Common Shares"), of the Corporation under the Securities Exchange Act
of 1933, as amended (the "Act"). As such counsel, we have been requested to
render this opinion.
For the purpose of rendering the opinion set forth herein, we have
been furnished with and examined such certificates and other documents as we
deemed necessary or advisable for the purpose of expressing the opinion
contained herein, including, without limitation, the following:
1. The Certificate of Incorporation of the Corporation as filed
as an exhibit to the Registration Statement;
2. The Bylaws of the Corporation as filed as an exhibit to the
Registration Statement;
3. The Registration Statement; and
4. Records of proceedings of the Board of Directors of the
Corporation pertaining to the authorization of the issuance of the Common
Shares.
<PAGE>
DC Holdco, Inc.
November 13, 1995
Page 2
With respect to all of the documents reviewed, we have assumed,
without investigation, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to originals of
all documents submitted to us as certified or reproduced copies. In
rendering our opinion set forth below, we have relied as to factual matters
upon information obtained from the Corporation, its officers and
representatives and public officials.
We are admitted to the Bar of the State of New York and express no
opinion as to the laws of any other jurisdiction other than the General
Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that
the Common Shares to be issued in connection with the merger of (i) The Walt
Disney Company with DCA Merger Corp. and (ii) Capital Cities/ABC, Inc. with
DCB Merger Corp. are duly authorized and, upon the filing of the Certificates
of Merger with the Secretary of State of the State of Delaware and the
Department of State of the State of New York, respectively, will, when
issued, be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this Firm under the
caption "Legal Matters" in the Joint Proxy Statement/Prospectus constituting
a part of the Registration Statement. In giving this consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/Dewey Ballantine
<PAGE>
EXHIBIT 8.1
[Letterhead of Dewey Ballantine]
November 13, 1995
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Dear Sirs:
We have acted as your counsel in connection with the proposed acquisition
(the "Acquisition") by The Walt Disney Company, a Delaware corporation
("Disney"), of Capital Cities/ABC, Inc., a New York corporation ("Capital
Cities"), pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of July 31, 1995 (the "Reorganization Agreement"). In
that connection we have participated in the preparation of a registration
statement under the Securities Act of 1933 on Form S-4 (the "Registration
Statement"), including a Joint Proxy Statement/Prospectus (the "Proxy
Statement").
We have examined the Reorganization Agreement, the Proxy Statement, the
representation letters of Disney and Capital Cities delivered to us for purposes
of this opinion, and such other documents and corporate records as we have
deemed necessary or appropriate for purposes of this opinion. In addition, we
have assumed (i) the Acquisition will be consummated in the manner contemplated
in the Proxy Statement and in accordance with the provisions of the
Reorganization Agreement, (ii) the statements concerning the Acquisition set
forth in the Proxy Statement are accurate and complete and (iii) the
representations made to us by Disney and Capital Cities in their respective
representation letters to us are accurate and complete.
Based upon the foregoing, it is our opinion that the description of the
Federal income tax consequences to certain holders of outstanding shares of
Disney Common Stock, par value $0.025 per share, contained in the Proxy
Statement under the heading "THE ACQUISITION--Certain Federal Income Tax
Consequences--Treatment of Holders of Disney Common Stock" (and the subheading
thereof) and under the heading "THE ACQUISITION--Certain Federal Income Tax
Consequences--Reporting Requirements"
<PAGE>
correctly sets forth the material Federal income tax consequences for such
holders.
In addition, based upon the foregoing, we confirm our opinion set forth in
the third paragraph under the heading "THE ACQUISTION--Certain Federal Income
Tax Consequences" in the Proxy Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this Firm in the sections
captioned "THE ACQUISITION--Certain Federal Income Tax Consequences" and "LEGAL
MATTERS" in the Proxy Statement constituting a part of the Registration
Statement. In giving this consent we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Dewey Ballantine
2
<PAGE>
EXHIBIT 8.2
[Letterhead of]
Cravath, Swaine & Moore
November 13, 1995
Capital Cities/ABC, Inc.
------------------------
Dear Sirs:
We have acted as your counsel in connection with the proposed acquisition
(the "Acquisition") by The Walt Disney Company, a Delaware corporation
("Disney"), of Capital Cities/ABC, Inc., a New York corporation ("Capital
Cities"), pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of July 31, 1995 (the "Reorganization Agreement"). In
that connection we have participated in the preparation of a registration
statement under the Securities Act of 1933 on Form S-4 (the "Registration
Statement"), including a Joint Proxy Statement/Prospectus (the "Proxy
Statement").
We have examined the Reorganization Agreement, the Proxy Statement, the
representation letters of Disney and Capital Cities delivered to us for purposes
of this opinion, and such other documents and corporate records as we have
deemed necessary or appropriate for purposes of this opinion. In addition, we
have assumed (i) the Acquisition will be consummated in the manner contemplated
in the Proxy Statement and in accordance with the provisions of the
Reorganization Agreement, (ii) the statements concerning the Acquisition set
forth in the Proxy Statement are accurate and complete and (iii) the
representations made to us by Disney and Capital Cities in their respective
representation letters to us are accurate and complete.
Based upon the foregoing, it is our opinion that the description of the
Federal income tax consequences to certain holders of outstanding shares of
Capital Cities
<PAGE>
2
Common Stock, par value $0.10 per share, contained in the Proxy Statement under
the heading "THE ACQUISITION--Certain Federal Income Tax Consequences--Treatment
of Holders of Capital Cities Common Stock" (and the subheadings thereof) and
under the heading "THE ACQUISITION--Certain Federal Income Tax Consequences--
Reporting Requirements" correctly sets forth the material Federal income tax
consequences for such holders.
In addition, based upon the foregoing, we confirm our opinion set forth in
the third paragraph under the heading "THE ACQUISITION--Certain Federal Income
Tax Consequences" in the Proxy Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this Firm in the sections
captioned "THE ACQUISITION--Certain Federal Income Tax Consequences" and "LEGAL
MATTERS" in the Proxy Statement constituting a part of the Registration
Statement. In giving this consent we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/S/ CRAVATH, SWAINE & MOORE
Capital Cities/ABC, Inc.
77 West 66th Street
New York, NY 10023
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
November 21, 1994, appearing on page 25 of The Walt Disney Company's Annual
Report on Form 10-K for the year ended September 30, 1994. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
November 9, 1995
<PAGE>
EXHIBIT 23.2
Consent Of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement of The Walt Disney Company and Capital Cities/ABC, Inc. which is
included in the Registration Statement (Form S-4) and the related Prospectus of
DC Holdco, Inc. and to the incorporation by reference therein of our reports
dated February 28, 1995, with respect to the consolidated financial statements
and schedule of Capital Cities/ABC, Inc. included in its Annual Report and Form
10-K for the year ended December 31, 1994, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
November 9, 1995
<PAGE>
EXHIBIT 23.3
[Bear, Stearns & Co. Inc. Letterhead]
Consent of Bear, Stearns & Co. Inc.
We hereby consent to the inclusion in the Joint Prospectus/Proxy Solicitation
Statement forming part of this Registration Statement on Form S-4 of The Walt
Disney Company and Capital Cities / ABC, Inc. of our opinion attached as
Appendix C thereto and to the reference to such opinion and to our firm therein.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
and the rules and regulations of the Securities and Exchange Commission issued
thereunder.
Bear, Stearns & Co. Inc.
By: /S/ David H. Glaser
-------------------------------
Managing Director
Dated: November 13, 1995
<PAGE>
EXHIBIT 23.4
[Allen & Company Incorporated Letterhead]
November 13, 1995
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023
Dear Sirs:
We hereby consent to the inclusion of our opinion dated July 31, 1995 to the
Board of Directors of Capital Cities/ABC, Inc., a New York corporation (the
"Company"), in the Joint Proxy Statement/Prospectus constituting part of the
Registration Statement on Form S-4 to be filed by the Company with the
Securities and Exchange Commission on or about November 13, 1995.
Sincerely,
ALLEN & COMPANY INCORPORATED
By:/s/ James W. Quinn
---------------------------
James W. Quinn
Chief Financial Officer and
Vice President
<PAGE>
EXHIBIT 23.7
Consent of Reveta F. Bowers
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/S/ Reveta F. Bowers
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.8
Consent of Roy E. Disney
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Roy E. Disney
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.9
Consent of Michael D. Eisner
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Michael D. Eisner
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.10
Consent of Stanley P. Gold
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Stanley P. Gold
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.11
Consent of Ignacio E. Lozano, Jr.
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Ignacio E. Lozano, Jr.
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.12
Consent of George J. Mitchell
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ George J. Mitchell
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.13
Consent of Thomas S. Murphy
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Thomas S. Murphy
Signature: ___________________________
Date: November 7, 1995
<PAGE>
EXHIBIT 23.14
Consent of Richard A. Nunis
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Richard A. Nunis
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.15
Consent of Michael Ovitz
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Michael Ovitz
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.16
Consent of Sidney Poitier
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Sidney Poitier
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.17
Consent of Irwin E. Russell
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Irwin E. Russell
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.18
Consent of Robert A.M. Stern
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Robert A.M. Stern
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.19
Consent of E. Cardon Walker
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ E. Cardon Walker
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.20
Consent of Raymond L. Watson
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Raymond L. Watson
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 23.21
Consent of Gary L. Wilson
The undersigned hereby consents to the inclusion of his/her name in this
registration statement as a person to become a director of DC Holdco, Inc. upon
the consummation of the mergers of (i) The Walt Disney Company and DCA Merger
Corp. and (ii) Capital Cities/ABC, Inc. and DCB Merger Corp.
/s/ Gary L. Wilson
Signature: ___________________________
Date: November 9, 1995
<PAGE>
EXHIBIT 99.1
Dear Stockholder:
A Special Meeting of Stockholders of The Walt Disney Company will be held at
The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York on January 4,
1996 at 10:00 a.m., Eastern Standard Time. At the special meeting,
stockholders will act to consider and vote upon a proposal regarding the
acquisition by The Walt Disney Company of Capital Cities/ABC, Inc. In addition
you will be asked to consider and vote upon the adoption of the 1995 Stock
Incentive Plan and an amendment to the 1990 Stock Incentive Plan.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, please
review the enclosed proxy statement, complete the proxy form below and return
it promptly in the envelope provided.
If you do plan to attend the special meeting in person, please note that
complimentary theme park passes will not be distributed and, due to space
limitations, attendance at the meeting will be limited to stockholders only.
Sincerely,
Marsha L. Reed
Corporate Secretary
- -------------------------------------------------------------------------------
SPECIAL MEETING OF STOCKHOLDERS -- TO BE HELD JANUARY 4, 1996
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned hereby (1) acknowledges receipt of the Notice of Special
Meeting of Stockholders (the "Special Meeting") of The Walt Disney Company, a
Delaware corporation ("Disney"), and the Joint Proxy Statement/Prospectus in
connection therewith and (2) appoints SANFORD M. LITVACK, STEPHEN F.
BOLLENBACH, DAVID K. THOMPSON, and each of them, his proxies with full power
of substitution for and in the name, place and stead of the undersigned, to
vote upon and act with respect to all of the shares of Common Stock, par value
$0.025 (the "Common Stock"), of Disney standing in the name of the
undersigned, or with respect to which the undersigned is entitled to vote and
act, at the Special Meeting and at any adjournment or postponement thereof.
The proxies of the undersigned may vote according to their discretion on any
other matter that may properly come before the Special Meeting or any
adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE. IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED FOR BOTH PROPOSALS.
Please date this proxy and sign your name exactly as it appears hereon and
mail this proxy in the enclosed envelope. No postage is required. Where there
is more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add your title as such.
If executed by a corporation, the proxy should be signed by a duly authorized
officer.
Continued and to be voted and signed on reverse
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR items (1) and (2) listed below.
Items (1) and (2) below are not conditioned on one another.
(1) To approve and adopt the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 1995, by and between Disney and
Capital Cities/ABC, Inc. and the related Agreement and Plan of Merger
among DC Holdco, Inc., Disney and DCA Merger Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
(2) To approve and adopt the 1995 Stock Incentive Plan and the rules relating
thereto (the "1995 Plan") and an amendment to the 1990 Stock Incentive
Plan and the rules relating thereto (the "1990 Plan') to conform the 1990
Plan to the proposed 1995 Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
PLEASE MARK ALL
CHOICES LIKE THIS [X]
Signature _____________________ Date ________________
Signature _____________________ Date ________________
<PAGE>
EXHIBIT 99.2
Dear Stockholder:
A Special Meeting of Stockholders of The Walt Disney Company will be held at
The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York, on January 4,
1996 at 10:00 a.m., Eastern Standard Time. At the special meeting,
stockholders will act to consider and vote upon a proposal regarding the
acquisition by The Walt Disney Company of Capital Cities/ABC, Inc. In addition
you will be asked to consider and vote upon the adoption of the 1995 Stock
Incentive Plan and an amendment to the 1990 Stock Incentive Plan.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, please
review the enclosed proxy statement, complete the proxy form below and return
it promptly in the envelope provided.
If you do plan to attend the special meeting in person, please note that
complimentary theme park passes will not be distributed and, due to space
limitations, attendance at the meeting will be limited to stockholders only.
Sincerely,
Marsha L. Reed
Corporate Secretary
- -------------------------------------------------------------------------------
SPECIAL MEETING OF STOCKHOLDERS -- TO BE HELD JANUARY 4, 1996
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned participant in the Disney Salaried Savings & Investment Plan
(the "Plan") hereby (1) acknowledges receipt of the Notice of Special Meeting
of Stockholders (the "Special Meeting") of The Walt Disney Company, a Delaware
corporation ("Disney") and the Joint Proxy Statement/Prospectus in connection
therewith and (2) directs the Trustee to vote (in person or by proxy) the
number of shares of Company stock credited to the undersigned's account under
the Plan at the Special Meeting of Stockholders and at any adjournment
thereof, as indicated on the reverse side of this card. In the Trustee's
discretion, it may vote upon such other matters as may properly come before
the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE.
Continued and to be voted on reverse
Date __________________________
Signature _____________________
Please date this proxy and sign your name exactly as it appears hereon and
mail this proxy in the enclosed envelope. No postage is required. When signing
as an attorney, administrator, executor, guardian or trustee, please add your
title as such.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR items (1) and (2) listed below.
Items (1) and (2) below are not conditioned on one another.
1) To approve and adopt the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 1995, by and between Disney and
Capital Cities/ABC, Inc. and the related Agreement and Plan of Merger among
DC Holdco, Inc., Disney and DCA Merger Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
2) To approve and adopt the 1995 Stock Incentive Plan and the rules relating
thereto (the "1995 Plan") and an amendment to the 1990 Stock Incentive Plan
and the rules relating thereto (the "1990 Plan') to conform the 1990 Plan
to the proposed 1995 Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
PLEASE MARK ALL
CHOICES LIKE THIS [X]
<PAGE>
EXHIBIT 99.3
CAPITAL CITIES/ABC, INC.
SHAREHOLDER'S PROXY AND VOTING INSTRUCTION CARD SOLICITED BY
THE BOARD OF DIRECTORS OF CAPITAL CITIES/ABC, INC.
TO: CAPITAL CITIES/ABC, INC.
I appoint Thomas S. Murphy, Ronald J. Doerfler and Alan N. Braverman,
individually and together, as my proxies, with power of substitution, to vote
all Capital Cities/ABC, Inc. common stock registered in my name or credited to
my account at the Special Meeting of Shareholders of Capital Cities/ABC, Inc.
to be held on January 4, 1996, at 10:00 a.m. and at any adjournment or
postponement of the meeting.
This card also provides voting instructions to the Trustee, Fidelity
Management Trust Company, for the Capital Cities/ABC, Inc. Savings & Investment
Plan (the "SIP") for the number of equivalent shares credited to the account of
the undersigned, if any, in the SIP, as more fully described on page 21 of the
accompanying Joint Proxy Statement/Prospectus.
I HAVE FILLED IN THE APPROPRIATE BOXES ON THE OTHER SIDE OF THIS CARD, BUT IN
THE ABSENCE OF ANY INSTRUCTIONS FROM ME, WHEN PROPERLY EXECUTED AND TIMELY
RECEIVED MY PROXIES WILL VOTE "FOR" ITEM 1. MY PROXIES MAY VOTE ACCORDING TO
THEIR DISCRETION ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. I MAY REVOKE THIS PROXY PRIOR TO
ITS EXERCISE.
PLEASE MARK, SIGN AND DATE THE OTHER SIDE OF THIS CARD.
(Please fill in the appropriate boxes on the other side)
- --------------------------------------------------------------------------------
(Continued from the other side)
CAPITAL CITIES/ABC, INC.
PLEASE MARK YOUR CHOICES LIKE THIS [_] IN BLUE OR BLACK INK
[_]
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEM 1
. Item No. 1--Approval and adoption of the Amended and Restated Agreement and
Plan of Reorganization, dated as of July 31, 1995, by and between The Walt
Disney Company and Capital Cities/ABC, Inc. and the Agreement and Plan of
Merger among DC Holdco, Inc., Capital Cities/ABC, Inc. and DCB Merger Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------
-- -- Date
----------------------
--------------------------------------
Signature
-- --
--------------------------------------
Signature
PLEASE SIGN EXACTLY AS NAME(S)
APPEAR(S) TO THE LEFT. IF ACTING AS
AN EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC., YOU SHOULD
SO INDICATE IN SIGNING. IF THE
SHAREHOLDER IS A CORPORATION,
PLEASE SIGN THE FULL CORPORATE
NAME, BY DULY AUTHORIZED OFFICER.
IF SHARES ARE HELD JOINTLY, EACH
SHAREHOLDER NAMED SHOULD SIGN. DATE
AND PROMPTLY RETURN THE CARD IN THE
ENVELOPE PROVIDED.
<PAGE>
EXHIBIT 99.4
[LOGO OF THE WALT DISNEY COMPANY APPEARS HERE]
November 13, 1995
Dear Disney Owner:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of The Walt Disney Company ("Disney") to be held on January
4, 1996, at 10:00 a.m., local time, at The Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York.
At the Special Meeting, you will be asked to approve the acquisition by
Disney of Capital Cities/ABC, Inc. ("Capital Cities") pursuant to an Amended
and Restated Agreement and Plan of Reorganization (the "Reorganization
Agreement") dated as of July 31, 1995.
Upon completion of this acquisition:
. Disney and Capital Cities will become wholly owned subsidiaries of a new
holding company to be renamed "The Walt Disney Company" ("New Disney");
. each outstanding share of Disney Common Stock will be converted into one
share of New Disney Common Stock; and
. each outstanding share of Capital Cities Common Stock will be converted
into the right to receive one share of New Disney Common Stock plus $65
in cash or, at the shareholder's election (and subject to proration)
either cash or shares of New Disney Common Stock with a value equal to
the value of $65 plus one share of Disney Common Stock (calculated over a
ten trading day period preceding the effective time of the acquisition).
The maximum amount of cash to be paid as merger consideration to Capital
Cities shareholders may be increased in Disney's sole discretion at any
time prior to the fifth business day following the deadline for
submission of elections by Capital Cities shareholders. See "THE
REORGANIZATION AGREEMENT--Capital Cities Merger Consideration" in the
accompanying Joint Proxy Statement/Prospectus.
A detailed description of the Reorganization Agreement and the proposed
acquisition of Capital Cities is set forth in the accompanying Joint Proxy
Statement/Prospectus, which you should read carefully.
After careful consideration, your Board of Directors has determined that the
transactions contemplated by the Reorganization Agreement are in the best
interests of the stockholders of Disney. Accordingly, the Board has approved
the Reorganization Agreement and recommends that all Disney stockholders vote
for its approval. I firmly believe--as does your entire Board of Directors--
that combining the complementary production and distribution capabilities,
management and financial resources of Disney and Capital Cities will create a
company that is even better positioned to meet the increased challenges of a
rapidly changing entertainment and media industry.
At the Special Meeting, you also will be asked to consider and approve the
adoption of the 1995 Stock Incentive Plan and the rules relating thereto (the
"1995 Plan"), and an amendment to the 1990 Stock Incentive Plan and the rules
relating thereto (the "1990 Plan"), to conform the 1990 Plan (the "Amended
1990 Plan") to the proposed 1995 Plan (collectively, the "Disney Option
Proposal"). The terms of the 1995 Plan and the Amended 1990 Plan are described
in the accompanying Joint Proxy Statement/Prospectus, which you should read
carefully. Your Board of Directors also recommends that all Disney
stockholders vote for the Disney Option Proposal.
<PAGE>
Your vote is important. FAILURE TO VOTE OR TO RETURN YOUR PROXY CARD WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE ACQUISITION. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON AND REGARDLESS OF THE
NUMBER OF SHARES YOU OWN, I URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE AS SOON AS POSSIBLE.
You may, of course, attend the Special Meeting and vote in person, even if you
have previously returned your proxy card.
Sincerely yours,
/s/ Michael D. Eisner
Michael D. Eisner
Chairman of the Board and Chief
Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
EXHIBIT 99.5
The Walt Disney Company
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JANUARY 4, 1996
----------------
A Special Meeting of Stockholders (the "Disney Meeting") of The Walt Disney
Company, a Delaware corporation ("Disney"), will be held starting at 10:00
a.m., local time, on January 4, 1996, at The Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York. Attendance at the Special Meeting will be limited
to stockholders of record on November 10, 1995, or their proxies, beneficial
owners having evidence of ownership on that date and invited guests of Disney.
The purposes of the meeting are:
1. To consider and vote upon a proposal (the "Disney Proposal") to
approve and adopt (i) an Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 1995, (the "Reorganization
Agreement"), by and between Disney and Capital Cities/ABC, Inc., a New York
corporation ("Capital Cities"), and (ii) an Agreement and Plan of Merger
among DC Holdco, Inc., a Delaware corporation ("New Disney"), Disney and
DCA Merger Corp., a Delaware corporation and a wholly owned subsidiary of
New Disney ("DCA Merger Corp."). The Reorganization Agreement contemplates,
among other things, that (a) DCA Merger Corp. will be merged with and into
Disney and DCB Merger Corp., a New York corporation and a wholly owned
subsidiary of New Disney, will be merged with and into Capital Cities, with
the result that Disney and Capital Cities will become wholly owned
subsidiaries of New Disney, (b) each outstanding share of Disney common
stock, par value $0.025 per share ("Disney Common Stock"), will be
converted into one share of New Disney common stock, par value $0.01 per
share ("New Disney Common Stock"), (c) each outstanding share of Capital
Cities common stock, par value $0.10 per share, at the election of each
Capital Cities shareholder and subject to certain limitations, will be
converted into the right to receive (i) one share of New Disney Common
Stock and cash in the amount of $65, (ii) one share of New Disney Common
Stock plus a number of shares of New Disney Common Stock equal to a
fraction, the numerator of which is $65 and the denominator of which is an
amount equal to the average of the closing sales prices of Disney Common
Stock on the New York Stock Exchange Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior
to the date of the Effective Time (as defined in the Joint Proxy
Statement/Prospectus attached to this Notice) (the "Disney Common Stock
Price"), or (iii) cash in an amount equal to $65 plus the Disney Common
Stock Price;
2. To consider and vote upon a proposal to adopt the 1995 Stock Incentive
Plan and the rules relating thereto (the "1995 Plan"), and an amendment to
the 1990 Stock Incentive Plan and the rules relating thereto (the "1990
Plan"), to conform the 1990 Plan to the proposed 1995 Plan (collectively,
the "Disney Option Proposal"); and
3. To transact such other business as may properly come before the Disney
Meeting or at any adjournments or postponements thereof.
The maximum amount of cash to be paid as merger consideration to Capital
Cities shareholders may be increased in Disney's sole discretion at any time
prior to the fifth business day following the deadline for submission of
elections by Capital Cities shareholders. See "THE REORGANIZATION AGREEMENT--
Capital Cities Merger Consideration" in the accompanying Joint Proxy
Statement/Prospectus.
<PAGE>
The terms of the Disney Proposal and the New Disney Common Stock to be
issued in connection therewith, as well as the Disney Option Proposal, are
described in detail in the accompanying Joint Proxy Statement/Prospectus. To
ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you plan to attend the Disney Meeting. You may revoke
your proxy in the manner described in the accompanying Joint Proxy
Statement/Prospectus at any time before it is voted at the Disney Meeting.
In the event that there are not sufficient votes to approve the Disney
Proposal, it is expected that the Disney Meeting will be postponed or
adjourned in order to permit further solicitation of proxies by Disney.
Holders of record of shares of Disney Common Stock at the close of business
on November 10, 1995, the record date for the Disney Meeting, are entitled to
notice of and to vote at the Disney Meeting or at any postponements or
adjournments thereof. The affirmative vote of the holders of a majority of the
outstanding shares of Disney Common Stock is required to approve the Disney
Proposal. The affirmative vote of a majority of the shares of Disney Common
Stock represented in person or by proxy and entitled to vote on the Disney
Option Proposal is required to approve the Disney Option Proposal.
By Order of the Board of Directors
/s/ Marsha L. Reed
Marsha L. Reed
Corporate Secretary
Burbank, California
November 13, 1995
IMPORTANT
Whether or not you plan to attend the Disney Meeting in person, please
complete, sign, date and return the enclosed Proxy Card as soon as possible. A
return envelope is provided for your convenience. You may revoke your Proxy at
any time before it is voted by delivering to the Corporate Secretary of Disney
at 500 South Buena Vista Street, Burbank, California 91521 a signed notice of
revocation or a later dated signed Proxy Card or by attending the Disney
Meeting and voting in person.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
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<PAGE>
EXHIBIT 99.6
CAPTIAL CITIES/ABC, INC.
77 WEST 66th STREET . NEW YORK, NEW YORK 10023-6298
456-7777
AREA CODE 212
November 17, 1995
To the Shareholders of Capital Cities/ABC, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders of
Capital Cities/ABC, Inc. to be held at 10:00 a.m. on January 4, 1996, in
Studio TV-1 at 7 West 66th Street, New York, New York.
As described in the enclosed Joint Proxy Statement/Prospectus, at the
Special Meeting you will be asked to consider and vote upon a proposal to
approve and adopt an Amended and Restated Agreement and Plan of Reorganization
dated as of July 31, 1995 (the "Reorganization Agreement"), between The Walt
Disney Company ("Disney") and Capital Cities/ABC, Inc. ("Capital Cities") and
an Agreement and Plan of Merger among Capital Cities, DC Holdco, Inc. ("New
Disney"), a holding company that will hold the common stock of Disney and
Capital Cities following the transaction, and DCB Merger Corp., a newly formed
subsidiary of New Disney. Under the Reorganization Agreement, Capital Cities
will merge with DCB Merger Corp. (the "Capital Cities Merger") and become a
wholly owned subsidiary of New Disney. In the Capital Cities Merger, each
outstanding share of Capital Cities common stock will be converted into the
right to receive one share of common stock of New Disney plus $65 in cash or,
at the shareholder's election (and subject to proration) either cash or shares
of common stock of New Disney with a value equal to the value of one share of
common stock of Disney (calculated over a ten trading day period preceding the
effective time of the transaction) plus $65. Tax consequences to a shareholder
of Capital Cities will differ depending upon whether cash, stock or a
combination of cash and stock is received. The maximum amount of cash to be
paid as merger consideration to Capital Cities shareholders may be increased
in Disney's sole discretion at any time prior to the fifth business day
following the deadline for submission of elections by Capital Cities
shareholders. See "THE REORGANIZATION AGREEMENT--Capital Cities Merger
Consideration" in the accompanying Joint Proxy Statement/Prospectus.
Your Board of Directors has determined that the Capital Cities Merger is in
the best interests of Capital Cities and its shareholders and has unanimously
approved the Reorganization Agreement and the Capital Cities Merger. THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE
REORGANIZATION AGREEMENT AND THE CAPITAL CITIES MERGER.
Berkshire Hathaway Inc. has agreed to vote its shares of Capital Cities
common stock (representing, as of October 31, 1995, approximately 13% of the
outstanding shares of Capital Cities common stock) in favor of the
Reorganization Agreement and the Capital Cities Merger.
Consummation of the Capital Cities Merger is subject to certain conditions,
including approval and adoption of the Reorganization Agreement and the
Capital Cities Merger by the affirmative vote of the holders of two-thirds of
the outstanding shares of Capital Cities common stock and the receipt of
certain approvals from regulatory authorities.
You are urged to read the accompanying Joint Proxy Statement/Prospectus
which provides you with a description of the terms of the proposed
transaction. A copy of the Reorganization Agreement is included as Appendix A
to the enclosed Joint Proxy Statement/Prospectus.
It is very important that your shares be represented at the Special Meeting.
Whether or not you plan to attend the Special Meeting, you are requested to
complete, date, sign and return the proxy card in the enclosed postage-
<PAGE>
paid envelope. Failure to return a properly executed proxy card or vote at the
Special Meeting would have the same effect as a vote against the Reorganization
Agreement and the Capital Cities Merger. Please do not send in your stock
certificates at this time. In the event the Capital Cities Merger is
consummated, you will be sent a letter of transmittal for that purpose promptly
thereafter.
Sincerely,
/s/ Thomas S. Murphy
Thomas S. Murphy
Chairman of the Board and Chief
Executive Officer
<PAGE>
EXHIBIT 99.7
CAPITAL CITIES/ABC, INC.
77 WEST 66th STREET . NEW YORK, NEW YORK 10023-6298
456-7777
AREA CODE 212
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Capital
Cities/ABC, Inc. (the "Special Meeting") will be held on January 4, 1996, at
10:00 a.m., in Studio TV-1 at 7 West 66th Street, New York, New York, for the
following purposes:
(i) To consider and vote upon a proposal (the "Capital Cities Proposal")
to approve and adopt (i) an Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 1995 (the "Reorganization Agreement"),
by and between The Walt Disney Company, a Delaware corporation ("Disney"),
and Capital Cities/ABC, Inc., a New York corporation ("Capital Cities"),
and (ii) an Agreement and Plan of Merger among DC Holdco, Inc., a Delaware
corporation ("New Disney"), Capital Cities and DCB Merger Corp., a New York
corporation and a wholly owned subsidiary of New Disney ("DCB Merger
Corp."). The Reorganization Agreement contemplates, among other things,
that (a) DCB Merger Corp. will be merged with and into Capital Cities (the
"Capital Cities Merger") and DCA Merger Corp., a Delaware corporation and a
wholly owned subsidiary of New Disney, will be merged with and into Disney
(the "Disney Merger", together with the Capital Cities Merger, the
"Mergers"), with the result that Disney and Capital Cities will become
wholly owned subsidiaries of New Disney, (b) each outstanding share of
common stock, par value $0.10 per share, of Capital Cities ("Capital Cities
Common Stock"), at the election of the holder thereof and subject to
certain limitations including proration, will be converted into the right
to receive (i) one share of common stock, par value $0.01 per share, of New
Disney ("New Disney Common Stock") and $65 in cash, (ii) one share of New
Disney Common Stock plus a number of shares of New Disney Common Stock
equal to a fraction, the numerator of which is $65 and the denominator of
which is an amount equal to the average of the closing sales prices of the
common stock, par value $0.025 per share, of Disney ("Disney Common Stock")
on the New York Stock Exchange Composite Tape on each of the ten
consecutive trading days immediately preceding the second trading day prior
to the date of the effective time of the Mergers (the "Disney Common Stock
Price") or (iii) cash in an amount equal to $65 plus the Disney Common
Stock Price and (c) each outstanding share of Disney Common Stock will be
converted into one share of New Disney Common Stock; and
(ii) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Tax consequences to a shareholder of Capital Cities will differ depending
upon whether cash, stock or a combination of cash and stock is received. The
maximum amount of cash to be paid as merger consideration to Capital Cities
shareholders may be increased in Disney's sole discretion at any time prior to
the fifth business day following the deadline for submission of elections by
Capital Cities shareholders. See "THE REORGANIZATION AGREEMENT--Capital Cities
Merger Consideration" in the accompanying Joint Proxy Statement/Prospectus.
The Board of Directors has fixed the close of business on November 15, 1995,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting. Only holders of Capital Cities Common
Stock of record at the close of business on that date will be entitled to
notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
<PAGE>
The accompanying Joint Proxy Statement/Prospectus describes the
Reorganization Agreement, the proposed Mergers and the actions to be taken in
connection with the Mergers. To ensure that your vote will be counted, please
complete, date and sign the enclosed proxy card and return it promptly in the
enclosed postage-paid envelope, whether or not you plan to attend the Special
Meeting. You may revoke your proxy in the manner described in the accompanying
Joint Proxy Statement/Prospectus at any time before it is voted at the Special
Meeting.
In the event that there are not sufficient votes to approve the Capital
Cities Proposal, it is expected that the Special Meeting will be postponed or
adjourned in order to permit further solicitation of proxies by Capital
Cities.
If the Capital Cities Merger is consummated, holders of Capital Cities
Common Stock who file written objections to the Capital Cities Merger prior to
the Special Meeting, or at the Special Meeting but before the vote, who do not
vote in favor of approval of the Reorganization Agreement and the Capital
Cities Merger and who otherwise comply with the requirements of Section 623 of
the New York Business Corporation Law will be entitled to statutory
dissenters' rights.
By Order of the Board of Directors
/s/ Philip R. Farnsworth
Philip R. Farnsworth
Secretary
New York, New York
November 17, 1995
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE REORGANIZATION AGREEMENT AND THE CAPITAL CITIES
MERGER.
THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES
OF COMMON STOCK ENTITLED TO VOTE THEREON IS REQUIRED TO APPROVE AND ADOPT
THE REORGANIZATION AGREEMENT AND THE CAPITAL CITIES MERGER. WE URGE YOU TO
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE THE PROXY AT ANY
TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED JOINT
PROXY STATEMENT/PROSPECTUS. ANY SHAREHOLDER PRESENT AT THE SPECIAL
MEETING, INCLUDING ANY ADJOURNMENT OR POSTPONEMENT THEREOF, MAY REVOKE
SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE REORGANIZATION AGREEMENT
AND THE CAPITAL CITIES MERGER AT THE SPECIAL MEETING.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
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