<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 1-977
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WESTINGHOUSE ELECTRIC CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0877540
-------------- ------------
(State of Incorporation) (I.R.S. Employer Identification No.)
Westinghouse Building, 11 Stanwix Street, Pittsburgh, Pa. 15222-1384
----------------------------------------------------------------------
(Address of principal executive offices, zip code)
(412) 244-2000
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Common stock 359,180,913 shares outstanding at June 30, 1995
--------------------------------------------------------------
<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
INDEX
---------------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to the Condensed Consolidated
Financial Statements 6-14
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 14-29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 29-30
Item 4. Submission of Matters to a
Vote of Security Holders 31-32
Item 6. Exhibits and Reports on Form 8-K 32-33
SIGNATURE 34
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
(in millions except per share amounts) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales of products and services $ 2,296 $ 2,108 $ 4,320 $ 3,851
Costs of products and services (1,686) (1,568) (3,216) (2,917)
Provision for restructuring (note 2) (5) - (5) -
Marketing, administration and general
expenses (441) (386) (848) (715)
Other income and expenses, net (note 3) (2) 16 (4) 55
Interest expense (61) (45) (119) (92)
------- ------- ------- -------
Income from Continuing Operations before
income taxes and minority interest in
income of consolidated subsidiaries 101 125 128 182
Income taxes (39) (47) (49) (69)
Minority interest in (income) loss of
consolidated subsidiaries (3) (3) (5) (2)
------- ------- ------- -------
Net income $ 59 $ 75 $ 74 $ 111
======= ======= ======= =======
Earnings per common share $ 0.12 $ 0.16 $ 0.12 $ 0.23
======= ======= ======= =======
Cash dividends per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
======= ======= ======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 4
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in millions)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
ASSETS ------------- -----------------
------ (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 466 $ 338
Customer receivables 1,513 1,553
Inventories (note 4) 1,582 1,541
Uncompleted contracts costs over related billings 693 555
Deferred income taxes 494 524
Prepaid and other current assets 288 209
------- -------
Total current assets 5,036 4,720
Plant and equipment, net 1,737 1,898
Intangible and other noncurrent assets (note 5) 3,617 3,572
Net assets of Discontinued Operations (note 7) 434 434
------- -------
Total assets $10,824 $10,624
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving credit borrowings and
other short-term debt $ 773 $ 662
Current maturities of long-term debt 329 17
Accounts payable 732 831
Uncompleted contracts billings over related costs 417 473
Other current liabilities (note 6) 1,557 1,726
------- -------
Total current liabilities 3,808 3,709
Long-term debt 1,566 1,886
Other noncurrent liabilities (note 6) 3,596 3,207
------- -------
Total liabilities 8,970 8,802
------- -------
Contingent liabilities and commitments (note 8)
Minority interest in equity of consolidated
subsidiaries 34 30
Shareholders' equity (note 9):
Preferred stock, $1.00 par value (25 million
shares authorized):
Series A preferred (no shares issued) - -
Series B conversion preferred (8 million
shares issued) 8 8
Series C conversion preferred (4 million
shares issued) 4 4
Common stock, $1.00 par value (630 million
shares authorized, 393 million shares issued) 393 393
Capital in excess of par value 1,911 1,932
Common stock held in treasury (816) (870)
Other (995) (1,000)
Retained earnings 1,315 1,325
------- -------
Total shareholders' equity 1,820 1,792
------- -------
Total liabilities and shareholders' equity $10,824 $10,624
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 5
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1995 1994
---- ----
<S> <C> <C>
Cash provided (used) by operating activities
of Continuing Operations $ (90) $ 4
Cash used by operating activities
of Discontinued Operations (50) (175)
Cash flows from investing activities:
Business divestitures 65 50
Business acquisitions (37) (73)
Liquidation of assets of Discontinued Operations 159 1,578
Capital expenditures (97) (92)
Liquidation of trust investments 239 0
Other 0 (9)
------- -------
Cash provided by investing activities 329 1,454
------- -------
Cash flows from financing activities:
Bank revolver borrowings 508 150
Bank revolver repayments (460) (2,255)
Net change in other short-term debt (19) (72)
Repayments of long-term debt (44) (403)
Sale of equity securities 0 505
Treasury stock reissued 33 26
Dividends paid (84) (69)
Other 2 19
------- -------
Cash used by financing activities (64) (2,099)
------- -------
Increase (decrease) in cash and cash equivalents 125 (816)
Cash and cash equivalents at beginning of period 344 1,248
------- -------
Cash and cash equivalents at end of period $ 469 $ 432
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid -- Continuing Operations $ 118 $ 92
======= =======
Interest paid -- Discontinued Operations $ 44 $ 127
======= =======
Income taxes paid $ 47 $ 76
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 6
WESTINGHOUSE ELECTRIC CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------
1. GENERAL
The condensed consolidated financial statements include the accounts of
Westinghouse Electric Corporation (Westinghouse) and its subsidiary companies
(together, the Corporation) after elimination of intercompany accounts and
transactions.
In the opinion of the management of the Corporation, the Condensed Consolidated
Financial Statements include all material adjustments necessary to present
fairly the Corporation's financial position, results of operations and cash
flows. Such adjustments are of a normal recurring nature. The results for
this interim period are not necessarily indicative of results for the entire
year.
When reading the financial information contained in this Quarterly Report,
reference should be made to the financial statements, schedules and notes
contained in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994. Certain amounts pertaining to the six months ended June 30,
1994 and the year ended December 31, 1994 have been reclassified for
comparative purposes.
2. RESTRUCTURING
During the second quarter of 1995, management approved additional restructuring
projects with costs totalling $20 million generally for the separation of 338
additional employees. All of these employees have been notified of their
separation, although the effective dates may not occur for several months.
Certain amounts accrued for prior restructuring projects, primarily related to
the 1993 restructuring program, have been applied to these project costs to
reduce the required restructuring charge to $5 million.
The new restructuring initiatives involve 247 employee separations at the
Electronic Systems operation, 14 employee separations at Energy Systems, and 77
employee separations for corporate overhead functions. The costs for new
programs at Electronic Systems and the corporate headquarters essentially have
been offset by adjustments from prior programs. Restructuring costs of $5
million for Energy Systems include unfavorable adjustments from prior programs
as well as costs for the additional separations.
3. OTHER INCOME AND EXPENSES, NET (in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net gain (loss) on disposition of assets $ (1) $ 11 $ (8) $ 46
Miscellaneous, net (1) 5 4 9
----- ----- ----- -----
Other income (expenses), net $ (2) $ 16 $ (4) $ 55
===== ===== ===== =====
</TABLE>
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<PAGE> 7
The net gain on disposition of assets for the six months ended June 30, 1994
includes a first quarter gain of $32 million from the sale of two Sacramento
radio stations and a second quarter gain of $10 million from the sale of a WCI
investment in a shopping center development joint venture.
4. INVENTORIES (in millions)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 188 $ 158
Work in process 1,173 1,065
Finished goods 141 156
------- -------
1,502 1,379
Long-term contracts in process 1,051 877
Progress payments to subcontractors 107 97
Recoverable engineering and development costs 445 437
Less: Inventoried costs related to contracts
with progress billing terms (1,523) (1,249)
------- -------
Inventories $ 1,582 $ 1,541
======= =======
</TABLE>
5. INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
Deferred income taxes $ 1,462 $ 1,516
Goodwill and other intangible assets 1,008 1,119
Intangible pension asset 114 114
Undeveloped land 252 244
Joint ventures, affiliates, and other 210 100
Noncurrent receivables 139 147
Other 432 332
--------- ---------
Total intangible and other noncurrent assets $ 3,617 $ 3,572
========= =========
</TABLE>
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<PAGE> 8
6. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
Other current liabilities:
-------------------------
Accrued employee compensation $ 180 $ 198
Income taxes currently payable 122 241
Accrued product warranty 76 82
Accrued taxes, interest and insurance 301 270
Accrued restructuring costs 127 180
Liability for business dispositions 109 112
Other 642 643
--------- ---------
Total other current liabilities $ 1,557 $ 1,726
========= =========
Other noncurrent liabilities:
----------------------------
Postretirement and postemployment benefits $ 1,270 $ 1,265
Pension liability 1,475 1,174
Accrued restructuring costs 8 8
Liability for business dispositions 75 75
Other 768 685
--------- ---------
Total other noncurrent liabilities $ 3,596 $ 3,207
========= =========
</TABLE>
The increase in the pension liability reflects the current year's pension
accrual as well as the reclassification of certain trust assets. In June 1995,
the investments in a trust that was established to fund a nonqualified pension
plan were replaced with the Corporation's common stock. Because of the nature
of the trust, this stock is treated as treasury stock for financial statement
purposes.
7. DISCONTINUED OPERATIONS
In November 1992, the Corporation announced a Plan (the Plan) that included
exiting the financial services business and the sales of the Distribution and
Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO).
In the first quarter of 1994, the Corporation completed the sales of DCBU and
WESCO for proceeds in excess of $1.1 billion and approximately $340 million,
respectively.
<TABLE>
<CAPTION>
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions) (unaudited) Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994*
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales of products and services
------------------------------
Financial Services $ 8 $ 11 $ 16 $ 25
DCBU and WESCO - - - 319
------ ------ ------ ------
Sales of products and services $ 8 $ 11 $ 16 $ 344
====== ====== ====== ======
Net earnings (losses)
---------------------
Financial Services $ (16) $ (47) $ (34) $ (116)
DCBU and WESCO - - - 4
------ ------ ------ ------
Net losses $ (16) $ (47) $ (34) $ (112)
====== ====== ====== ======
</TABLE>
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<PAGE> 9
*Operating results of Discontinued Operations for DCBU and WESCO for the six
months ended June 30, 1994 included the operating results of DCBU for the one
month ended January 31, 1994 and the operating results of WESCO for the two
months ended February 28, 1994, their respective dates of sale.
The assets and liabilities of Discontinued Operations have been separately
classified in the Condensed Consolidated Balance Sheet as net assets of
Discontinued Operations. A summary of these assets and liabilities follows:
<TABLE>
<CAPTION>
NET ASSETS OF DISCONTINUED OPERATIONS
(in millions) June 30, 1995 December 31, 1994*
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3 $ 6
Portfolio investments 1,043 1,230
Deferred income taxes 402 340
Other assets 168 221
------ ------
Total assets -- Discontinued Operations 1,616 1,797
------ ------
LIABILITIES:
Revolving credit facilities borrowings 295 374
Current maturities of long-term debt 413 230
Liability for estimated loss on disposal 70 145
Long-term debt 346 568
Other liabilities 58 46
------ ------
Total liabilities -- Discontinued Operations 1,182 1,363
------ ------
Net assets of Discontinued Operations $ 434 $ 434
====== ======
</TABLE>
*Certain amounts have been reclassified for comparative purposes.
Portfolio investments by category of investment and financing at June 30, 1995
and December 31, 1994 are summarized in the following table.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENTS
At June 30, 1995 (unaudited)
(in millions) ---------------------------------------
Real
Leasing Estate Corporate Total
------- ------ --------- -----
<S> <C> <C> <C> <C>
Receivables $ 868 $ 15 $ 1 $ 884
Other portfolio investments 38 120 1 159
----- ----- ----- ------
Portfolio investments $ 906 $ 135 $ 2 $1,043
===== ===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1994
---------------------------------------
Real
Leasing Estate Corporate Total
------- ------ --------- -----
<S> <C> <C> <C> <C>
Receivables $ 886 $ 18 $ 9 $ 913
Other portfolio investments 38 279 - 317
----- ----- ----- ------
Portfolio investments $ 924 $ 297 $ 9 $1,230
===== ===== ===== ======
</TABLE>
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<PAGE> 10
Other portfolio investments at June 30, 1995 and December 31, 1994 included the
Corporation's investment in LW Real Estate Investments, L.P. (LW) of $21
million and $133 million respectively, real estate properties of $76 million
and $88 million, respectively, and other investments of $62 million and $96
million, respectively, primarily consisting of investments in real estate and
leasing partnerships. The remaining portfolio investments, other than the
leasing assets, are expected to be substantially liquidated by the end of 1995.
The leasing portfolio is expected to liquidate through 2015 in accordance with
contractual terms.
Non-earning receivables at June 30, 1995 and December 31, 1994 totalled $22
million and $30 million, respectively. There were no reduced earning
receivables at either date.
Leasing receivables consist of direct financing and leveraged leases. At
June 30, 1995 and December 31, 1994, 82% and 81%, respectively, related to air-
craft and 17% and 18%, respectively, related to cogeneration facilities.
Certain leasing receivables classified as performing and totalling $137 million
at June 30, 1995 have been identified by management as potential problem
receivables. This amount consists primarily of leveraged leases related to
aircraft leased by major U.S. airlines. Such leasing receivables were current
as to payments and performing in accordance with contractual terms at June 30,
1995.
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL
The following table is a reconciliation of the liability for the estimated loss
on disposal of Discontinued Operations from December 31, 1994 to June 30, 1995:
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
(in millions)(unaudited)
<TABLE>
<CAPTION>
Financial DCBU & Restruc-
Services WESCO turing Total
--------- ------ -------- --------
<S> <C> <C> <C> <C>
December 31, 1994 $ 80 $ 60 $ 5 $ 145
Year-to-date activity (64) (10) (1) (75)
----- ----- ------ ------
June 30, 1995 $ 16 $ 50 $ 4 $ 70
===== ===== ====== ======
</TABLE>
The liability for estimated loss on disposal of financial services' assets is
shown net of expected gains on future asset liquidations. Management believes
that the total liability for the estimated loss on disposal of Discontinued
Operations is adequate. Any variances from estimates which may occur for one
Plan component will be considered in conjunction with those for other
components in determining whether an adjustment of the total liability is
necessary. The adequacy of this liability is evaluated each quarter.
8. CONTINGENT LIABILITIES AND COMMITMENTS
Uranium Settlements
-------------------
The Corporation had previously provided for the estimated future costs for the
resolution of all uranium supply contract suits and related litigation. The
remaining uranium reserve balance includes assets required for certain
settlement obligations and reserves for estimated future costs. The reserve
balance at June 30, 1995 is deemed adequate considering all facts and
circumstances known to management. The future obligations require providing
the remainder of the fuel deliveries running through 2013 and the supply of
equipment and services through approximately 1995. Variances from estimates
which may occur are considered in determining if an adjustment of the liability
is necessary.
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<PAGE> 11
Litigation
----------
Philippines
In December 1988, a 15-count lawsuit was filed against the Corporation alleging
bribery and other fraudulent conduct in connection with the construction of a
nuclear power plant in the Philippines. Of the 15 claims, 14 were stayed
pending arbitration before the International Chamber of Commerce (ICC). With
respect to the remaining count alleging bribery, a jury verdict was rendered in
favor of the Corporation on May 18, 1993 and was appealed by the Republic of
the Philippines on March 24, 1995. A similar finding was made by the ICC in
1991. Arbitration proceedings before the ICC on issues relating to the
construction of the plant were concluded in October 1994, and the parties await
a decision.
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components of
nuclear steam supply systems. Since 1993, settlement agreements have been
entered resolving seven litigation claims, including the recent settlement of a
claim by a co-plaintiff in a pending lawsuit. These agreements generally
involve providing certain products and services at prices discounted at varying
rates. Two cases were resolved in favor of the Corporation after trial or
arbitration, although an appeal has been filed in one of the cases. Four
lawsuits are pending.
The Corporation is also a party to six tolling agreements with utilities or
utility plant owners' groups. The tolling agreements delay initiation of any
litigation for various specified periods of time and permit the parties time to
engage in discussions.
Securities Class Actions - Financial Services
The Corporation is defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of Westinghouse common stock in
1991. The court dismissed both the derivative claim and the class action
claims in their entirety. These dismissals have been appealed.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in each of the foregoing cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation described above, and
management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
Environmental Matters
---------------------
Compliance with federal, state, and local laws and regulations relating to the
discharge of substances into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. While it is difficult to
estimate the timing and ultimate costs to be incurred in the future due to
uncertainties about the status of laws, regulations, technology and information
available for individual sites,
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<PAGE> 12
management has estimated the total probable and reasonably possible remediation
costs that could be incurred by the Corporation based on the facts and
circumstances currently known.
PRP Sites
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation
is either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at 54 sites. With regard to cleanup costs at these sites, in
many cases the Corporation will share these costs with other responsible
parties and the Corporation believes that any liability incurred will be
satisfied over a number of years. Management believes that the Corporation's
total remaining probable costs for remedial actions as of June 30, 1995 are
approximately $77 million, all of which has been accrued.
Bloomington Sites
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana. In the Consent Decree, the Corporation
agreed to construct and operate an incinerator, which would be permitted under
federal and state law, to burn excavated material. On February 8, 1994, the
Consent Decree parties filed with the court a status report advising of the
parties' intention to investigate alternatives. The Corporation believes it is
probable that the Consent Decree will be modified to an alternative remedial
action, which could include a combination of containment, treatment,
remediation, and monitoring. The parties also recognize that the Consent
Decree shall remain in full force and effect during this process.
In addition to the six sites covered by the Consent Decree, the Corporation has
responsibility for two additional sites in the Bloomington area, where material
had been previously excavated and stored. The Corporation has received
approval from the Environmental Protection Agency (EPA) to permanently move
material from one of the sites to a commercial hazardous waste landfill. The
removal of materials from this site commenced in the second quarter of 1995.
The Corporation has requested approval from the EPA for removal of materials
from the second site. If EPA approval is received, the Corporation anticipates
removal from the second site to commence in the third quarter of 1995.
The Corporation estimates that its total cost to implement the most reasonable
alternative for the eight Bloomington sites is approximately $70 million, all
of which has been accrued. Included in this amount is $52 million for site
construction and other related costs valued as of the year of expenditure. The
remaining $18 million is the present value, assuming a 5% discount rate, of
approximately $46 million of operating and maintenance costs that will be
incurred over a 30 year period. Other remediation alternatives, while
considered less likely, could cause the total costs to be as much as $125
million.
Other
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be insignificant.
The Corporation currently manages under contract several government-owned
facilities, which among other things are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with the willful misconduct or lack of good faith of
its managers or their failure to
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<PAGE> 13
exercise prudent business judgement. There are currently no material claims
for which the Corporation believes it is responsible.
The Corporation has or will have responsibilities for environmental closure
activities, such as dismantling incinerators or decommissioning nuclear
licensed sites. The Corporation has estimated the total potential cost to be
incurred for these actions to approximate $97 million, of which $29 million had
been accrued at June 30, 1995. The Corporation's policy is to accrue these
costs over the estimated life of the individual facilities, which in most cases
is approximately 20 years. The anticipated annual costs currently being
accrued are $5 million.
As part of the agreement for the sale of certain of its businesses or sites,
the Corporation has agreed to assume obligations for remediation of
contamination existing at these sites. The Corporation has provided for all
known environmental liabilities related to these agreements.
Management believes that the Corporation has adequately provided for its
present environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
Insurance Recoveries
--------------------
The Corporation has filed actions against over 100 of its insurance carriers
seeking recovery for environmental, product and property damage liabilities,
and certain other matters. The Corporation has settled with several of these
carriers and has received recoveries related to these actions. Amounts
received to date generally have been applied to cover obligations assumed
through the settlements or litigation costs. The Corporation has not accrued
for any future insurance recoveries.
Financing Commitments -- Continuing Operations
----------------------------------------------
WCI Communities, Inc. (WCI) was contingently liable at June 30, 1995 under
guarantees for $56 million of sewer and water district borrowings. The
proceeds of the borrowings were used for sewer and water improvements on
residential and commercial real estate projects of WCI.
In the ordinary course of business, standby letters of credit are issued by
commercial banks on behalf of the Corporation related to performance
obligations primarily under contracts with customers.
Financing Commitments -- Discontinued Operations
------------------------------------------------
Financial Services commitments with off-balance-sheet credit risk represent
financing commitments to provide funds, including loan or investment
commitments, guarantees, standby letters of credit and standby commitments,
generally in exchange for fees. The remaining commitments have fixed
expiration dates from 1995 through 2002.
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<PAGE> 14
At June 30, 1995, Financial Services commitments totalled $77 million compared
to $80 million at year-end 1994. Of this amount, $68 million were guarantees,
credit enhancements and other standby agreements, and $9 million were
commitments to extend credit. Of the $80 million of commitments at year-end
1994, $71 million were guarantees, credit enhancements and other standby
agreements and $9 million were commitments to extend credit. Management
expects the remaining commitments to either expire unfunded, be assumed by the
purchaser in asset dispositions or be funded with the resulting assets being
sold shortly after funding.
9. SHAREHOLDERS' EQUITY
In March 1994, the Corporation sold 36,000,000 depositary shares each
representing ownership of one-tenth of a share of the Corporation's Series C
Conversion Preferred Stock (Series C Preferred). Each depositary share will
automatically convert into one share of common stock on June 1, 1997 unless
called on May 30, 1997 by the Corporation or redeemed at any time prior to June
1 by the holder. In accordance with prevalent practice at the time of sale,
these shares were treated as outstanding common stock for the calculation of
earnings per share. If the Series C Preferred had been treated as common stock
equivalents for the calculation of earnings per share, the Corporation's
earnings per share for the second quarter and first six months of 1995 would
have been $.10 per share and $.07 per share, respectively, compared to $.14 per
share and $.21 per share, respectively, for the same periods last year.
10. SUBSEQUENT EVENTS
On July 24, 1995, the Corporation sold WCI in a transaction valued at $556
million plus the assumption by the buyer of $19 million of debt. The
Corporation received $430 million of cash and approximately $125 million in
mortgage receivables and securities. Concurrently, the Corporation invested
$48 million for a 24 percent equity interest in the new business. This equity
interest may be sold in the near term. The after-tax-loss on the sale of WCI
of approximately $75 million will be recognized in the third quarter.
On August 1, 1995, the Corporation entered into an agreement to acquire CBS,
Inc. (CBS) by means of a merger. Cash consideration would equal $81 per share
plus an amount equal to 6% per annum beginning on August 31, 1995, less any
dividends declared and paid by CBS for the period after August 1, 1995. The
total purchase price of approximately $5.4 billion is expected to be financed
through borrowings under bank credit facilities, the terms of which are
currently under negotiation.
The purchase is contingent on a number of factors including approval by a
majority of the CBS shareholders, approval by the Federal Communications
Commission, and completion of the bank financing. The transaction is expected
to be consummated in approximately four to six months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Orders in the second quarter of 1995 totalled $2.0 billion. Compared to the
same quarter last year, orders decreased 14 percent. The second quarter of
1994 included an exceptionally high volume of international orders for Power
Generation equipment. Orders for the six months of 1995 were $4.4 billion,
essentially flat compared to the same period last year. Backlog, compared to a
year ago, increased $316 million, or 3 percent, to $10.5 billion, led by Thermo
King, Power Generation, and Energy Systems.
-14-
<PAGE> 15
Revenues for the quarter increased $188 million, or 9 percent, to $2.3 billion.
Revenues for the first six months of 1995 rose $469 million, or 12 percent, to
$4.3 billion, led by Broadcasting, Electronic Systems, Thermo King, and Knoll.
Operating profit for the quarter increased $10 million to $164 million compared
to $154 million in the same quarter last year. Operating profit for the first
six months of 1995 was $251 million, up $32 million from the same period in
1994. The increase in operating profit was more than offset by a substantial
decrease in other income and higher interest expense.
Net income for the second quarter of 1995 was $59 million, or 12 cents per
share, compared to net income of $75 million, or 16 cents per share, for the
same period last year. Net income for the first six months of 1995 was $74
million, or 12 cents per share, compared to $111 million, or 23 cents per
share, during the first six months of 1994.
During the remainder of 1995, the Corporation will continue the divestitures of
its non-strategic businesses as well as explore strategic opportunities to
expand and grow its core businesses.
RECENT DEVELOPMENTS
On August 1, 1995, the Corporation entered into an agreement under which the
Corporation would acquire by means of a merger CBS, for cash consideration
totalling approximately $5.4 billion. The purchase price is expected to be
financed through bank credit facilities totalling $7.5 billion which, in
addition to providing funds for the acquisition, will replace the existing
revolving credit facility. To contribute to repayments under the new credit
facility, the Corporation may raise $1.5 billion to $2 billion through the sale
or joint venture of assets. The purchase of CBS, which is contingent on a
number of factors, is expected to be consummated in approximately four to six
months.
On July 24, 1995, the Corporation sold WCI in a transaction valued at $556
million plus the assumption by the buyer of $19 million of debt. The
Corporation received $430 million of cash and approximately $125 million in
mortgage receivables and securities. Concurrently, the Corporation invested
$48 million for a 24 percent equity interest in the new business. This equity
interest may be sold in the near term. The after-tax loss on the sale of WCI
of approximately $75 million will be recognized in the third quarter.
Of the proceeds from the sale of WCI, approximately $400 million of cash will
be used to reduce debt of Discontinued Operations. Mortgage receivables of
approximately $100 million also will be transferred to Discontinued Operations
and will reduce debt when monetized.
RESTRUCTURING ACTIONS
The Corporation is committed to strengthening its businesses and improving its
profitability through certain restructuring actions including changes in
business and product line strategies, as well as downsizing for process
reengineering and productivity improvements.
During the second quarter of 1995, management approved additional restructuring
projects with costs totalling $20 million generally for the separation of 338
additional employees. Although all of these employees have been notified of
their separation, the effective date may not occur for several months. Certain
amounts accrued for prior restructuring projects, primarily related to the 1993
restructuring program, have been applied to these project costs to reduce the
required restructuring charge to $5 million.
The new restructuring initiatives involve 247 employee separations at the
Electronic Systems operation, 14 employee separations at Energy Systems, and 77
employee separations for corporate overhead functions. The costs for new
programs at
-15-
<PAGE> 16
Electronic Systems and the corporate headquarters essentially have been offset
by adjustments from prior programs. Restructuring costs of $5 million for
Energy Systems include unfavorable adjustments from prior programs as well as
costs for the additional separations.
Progress continued on implementation of the Corporation's 1993 and 1994
restructuring programs. These programs included the involuntary separation of
approximately 4,600 employees by the end of 1995. At June 30, 1995,
approximately 90% of these employee separations had been completed. Of the 338
employees notified under the 1995 restructuring program, approximately 30% of
the separations had been completed. The remaining employees under all of these
programs are expected to be separated in the next several months.
Of the $448 million of expected costs for the 1993 and 1994 programs, $114
million remained to be spent as of June 30, 1995. Approximately half of these
remaining expenditures represent employee separation costs, which generally are
paid over a period of up to two years following separation. A significant
portion of the remaining half will be made by Knoll for the closedown of a
major product line discontinued June 30, 1995 and for lease termination costs
for several facilities. Of the $20 million of expected costs for the 1995
programs, less than $1 million had been spent as of June 30, 1995.
Savings resulting from implementing the 1993 and 1994 restructuring programs
are expected to total $170 million annually, primarily related to reduced
employment costs. During the second quarter of 1995, actual savings
approximated $35 million, bringing the year-to-date savings to approximately
$70 million. Savings resulting from implementing the 1995 restructuring
initiatives are expected to total $11 million annually, with only a small
portion expected to affect 1995 operations. Competitive pressures causing
price compression in certain of the Corporation's markets have absorbed a
significant portion of these savings.
The Corporation expects to continue to identify restructuring initiatives in an
ongoing effort to reduce its overall cost structure and improve its
competitiveness, especially in the near-term. In this regard, in July 1995,
Power Generation announced a restructuring program involving the separation of
over 500 employees. The costs for this program, which are expected to
approximate $25 million, will be recognized in the third quarter.
-16-
<PAGE> 17
RESULTS OF OPERATIONS
The following represents the segment results of the Corporation's Continuing
Operations for the three months and six months ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
Segment Results ($ in millions)(unaudited)
------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 % Change 1995 1994 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Broadcasting:
Orders $ 241.3 $ 228.3 5.7% $ 443.5 $ 418.8 5.9%
Backlog - - - - - -
Sales 241.3 228.3 5.7% 443.5 418.8 5.9%
Operating Profit (Loss) 64.6 57.6 12.2% 99.6 91.3 9.1%
Operating Profit Margin 26.8% 25.2% N/A 22.5% 21.8% N/A
Depreciation &
Amortization (D&A) 9.0 9.4 -4.3% 18.7 18.6 0.5%
Capital Expenditures 6.1 10.3 -40.8% 9.2 15.7 -41.4%
Electronic Systems:
Orders $ 543.9 $ 530.6 2.5% $ 1,096.9 $ 917.5 19.6%
Backlog 3,707.9 3,932.3 -5.7% 3,707.9 3,932.3 -5.7%
Sales 651.2 487.9 33.5% 1,258.6 937.8 34.2%
Operating Profit (Loss) 36.0 21.8 65.1% 72.7 61.2 18.8%
Operating Profit Margin 5.5% 4.5% N/A 5.8% 6.5% N/A
D&A 19.7 18.7 5.3% 41.4 37.3 11.0%
Capital Expenditures 8.6 11.7 -26.5% 14.6 18.9 -22.8%
Government and
Environmental Services:
Orders $ 64.7 $ 76.4 -15.3% $ 126.3 $ 144.0 -12.3%
Backlog 120.7 86.4 39.7% 120.7 86.4 39.7%
Sales 84.6 99.7 -15.1% 170.5 183.5 -7.1%
Operating Profit (Loss) 18.1 18.9 -4.2% 30.3 28.9 4.8%
Operating Profit Margin 21.4% 19.0% N/A 17.8% 15.7% N/A
D&A 2.2 5.4 -59.3% 7.1 11.0 -35.5%
Capital Expenditures 4.7 5.4 -13.0% 10.7 6.8 57.4%
Thermo King:
Orders $ 279.3 $ 241.2 15.8% $ 591.6 $ 489.2 20.9%
Backlog 307.3 237.4 29.4% 307.3 237.4 29.4%
Sales 284.1 225.6 25.9% 557.4 412.4 35.2%
Operating Profit (Loss) 45.4 34.8 30.5% 88.3 61.6 43.3%
Operating Profit Margin 16.0% 15.4% N/A 15.8% 14.9% N/A
D&A 4.2 4.0 5.0% 8.3 7.7 7.8%
Capital Expenditures 6.4 3.4 88.2% 12.0 7.2 66.7%
Energy Systems:
Orders $ 276.5 $ 332.8 -16.9% $ 653.6 $ 701.1 -6.8%
Backlog 2,773.4 2,615.4 6.0% 2,773.4 2,615.4 6.0%
Sales 311.0 323.9 -4.0% 562.5 559.9 0.5%
Operating Profit (Loss) 2.5 16.6 -84.9% (9.9) 8.3 -219.3%
Operating Profit Margin 0.8% 5.1% N/A -1.8% 1.5% N/A
D&A 12.2 12.8 -4.7% 25.4 26.4 -3.8%
Capital Expenditures 8.2 7.7 6.5% 13.2 14.9 -11.4%
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
Segment Results ($ in millions)(unaudited)(continued)
-----------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 % Change 1995 1994 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Power Generation:
Orders $ 357.5 $ 657.4 -45.6% $ 936.6 $ 1,120.6 -16.4%
Backlog 2,844.2 2,436.4 16.7% 2,844.2 2,436.4 16.7%
Sales 440.0 395.1 11.4% 762.4 686.7 11.0%
Operating Profit (Loss) (18.2) 3.7 -591.9% (51.2) (22.2) -130.6%
Operating Profit Margin -4.1% 0.9% N/A -6.7% -3.2% N/A
D&A 11.4 11.9 -4.2% 22.6 23.8 -5.0%
Capital Expenditures 13.9 7.1 95.8% 18.1 14.9 21.5%
Knoll:
Orders $ 159.9 $ 144.3 10.8% $ 300.5 $ 261.6 14.9%
Backlog 85.7 105.9 -19.1% 85.7 105.9 -19.1%
Sales 158.6 143.7 10.4% 306.1 261.2 17.2%
Operating Profit (Loss) 10.0 (9.7) 203.1% 16.4 (24.7) 166.4%
Operating Profit Margin 6.3% -6.8% N/A 5.4% -9.5% N/A
D&A 6.8 7.1 -4.2% 13.7 14.4 -4.9%
Capital Expenditures 6.9 3.4 102.9% 9.1 4.6 97.8%
WCI:
Orders $ 51.5 $ 74.0 -30.4% $ 108.5 $ 130.2 -16.7%
Backlog - - - - - -
Sales 51.5 74.0 -30.4% 108.5 130.2 -16.7%
Operating Profit (Loss) 16.3 24.3 -32.9% 28.2 37.2 -24.2%
Operating Profit Margin 31.7% 32.8% N/A 26.0% 28.6% N/A
D&A 0.2 0.5 -60.0% 0.6 0.9 -33.3%
Capital Expenditures 0.0 1.3 -100.0% 0.7 1.5 -53.3%
Other Businesses:
Orders $ 67.4 $ 84.2 -20.0% $ 157.1 $ 212.5 -26.1%
Backlog 587.7 691.5 -15.0% 587.7 691.5 -15.0%
Sales 93.7 130.7 -28.3% 194.5 261.2 -25.5%
Operating Profit (Loss) (5.8) (9.2) N/A (10.2) (22.3) N/A
Operating Profit Margin -6.2% -7.0% N/A -5.2% -8.5% N/A
D&A 1.8 3.0 -40.0% 4.6 6.5 -29.2%
Capital Expenditures (0.1) 0.6 -116.7% 1.1 1.3 -15.4%
Corporate and Other:
Orders $ 15.0 $ 15.8 -5.1% $ 40.6 $ 41.2 -1.5%
Backlog 64.5 65.3 -1.2% 64.5 65.3 -1.2%
Sales 26.8 39.0 -31.3% 49.0 73.5 -33.3%
Operating Profit (Loss) (5.4) (5.3) N/A (13.4) (0.4) N/A
Operating Profit Margin -20.1% -13.6% N/A -27.3% -0.5% N/A
D&A 4.5 8.5 -47.1% 9.9 16.2 -38.9%
Capital Expenditures 4.5 5.6 -19.6% 8.4 5.8 44.8%
Intersegment:
Orders $ (42.1) $ (40.8) -3.2% $ (84.1) $ (78.8) -6.7%
Backlog (40.3) (35.7) -12.9% (40.3) (35.7) -12.9%
Sales (46.6) (39.5) -18.0% (93.1) (74.1) -25.6%
Total - Continuing Operations:
Orders $ 2,014.9 $ 2,344.2 -14.0% $ 4,371.1 $ 4,357.9 0.3%
Backlog 10,451.1 10,134.9 3.1% 10,451.1 10,134.9 3.1%
Sales 2,296.2 2,108.4 8.9% 4,319.9 3,851.1 12.2%
Operating Profit (Loss) 163.5 153.5 6.5% 250.8 218.9 14.6%
Operating Profit Margin 7.1% 7.3% N/A 5.8% 5.7% N/A
D&A 72.0 81.3 -11.4% 152.3 162.8 -6.4%
Capital Expenditures 59.2 56.5 4.8% 97.1 91.6 6.0%
</TABLE>
-18-
<PAGE> 19
Broadcasting
Broadcasting sales for the second quarter and first six months of 1995 were up
$13 million and $25 million, respectively, compared to the same periods last
year. Operating profit for the second quarter and first six months increased
$7 million and $8 million, respectively, compared to the same periods. Higher
television and radio advertising revenues, coupled with benefits from cost
containment initiatives, generated the increased Broadcasting profits during
these periods. Gains in the radio and television operations were partially
offset by operating losses for the production company. Increased costs for two
new television programs under development by the production company contributed
to these losses. Group W Satellite Communications also showed a slight
increase in revenues and operating profit for the quarter and first six months
despite the negative impact of the national baseball strike earlier in the
year.
Electronic Systems
Orders for the second quarter and first half of 1995 were up $13 million and
$179 million, respectively, over the same periods of 1994. A large marine
propulsion order, a space classified project, and the acquisition of Norden
Systems, the unit acquired from United Technologies in May 1994, were the
primary reasons for the increased order levels in 1995. Backlog at June 30,
1995 was $3.7 billion compared to $3.9 billion at June 30, 1994.
Increased revenues from core defense electronics operations, including Norden,
from air traffic control, and from mail processing systems generated an
increase in revenues of $163 million for the second quarter of 1995 and $321
million for the first six months of 1995 compared to the same periods last
year. Operating profit for the second quarter and first half of 1995 increased
$14 million and $12 million, respectively, compared to the same periods last
year. Increased revenues coupled with savings from restructuring initiatives
resulted in these higher operating profit levels.
Government and Environmental Services
Orders decreased $12 million for the second quarter and $18 million for the
first six months of 1995 compared to the same periods of 1994 primarily due to
the sale of the Aptus environmental services subsidiary in March 1995. Backlog
was up $34 million at June 30, 1995 compared to the same period last year due
to the buildup of container orders in late 1994, several government remediation
contracts, and a large material order for the U.S. Navy, partially offset by
the sale of Aptus.
Revenues for the second quarter and first six months of 1995 declined $15
million and $13 million, respectively, compared to the same periods last year
due to the sale of Aptus and the expiration in late 1994 of a contract to
manage a Department of Energy facility in Idaho. Despite lower revenues,
operating profit was flat in the second quarter and the first six months of
1995 as cost improvements from restructuring initiatives offset the lower
revenues.
Thermo King
Thermo King continued to post strong results. Orders rose $38 million for the
quarter and $102 million for the first half of 1995 compared to the same
periods in 1994. Backlog increased $70 million from June 30, 1994, reflecting
the strong truck and trailer market in Europe and the higher level of orders
for the North American truck and trailer and container markets.
Revenues increased $59 million for the quarter and $145 million for the first
six months with international revenues up over 60 percent for the first six
months of 1995 compared to the same period in 1994.
-19-
<PAGE> 20
The volume increases and the product cost improvement programs increased
operating profit $11 million for the quarter and $27 million for the first half
of 1995 compared to the same periods last year.
Energy Systems
Orders for the second quarter and first six months of 1995 declined $56 million
and $48 million, respectively, due to a large fuel order that was booked in the
second quarter of 1994. Backlog at June 30, 1995 was $2.8 billion, up $158
million over June 30, 1994.
Revenues for the second quarter of 1995 declined $13 million and were flat for
the first six months of 1995 compared to the same periods in 1994. The
quarterly fluctuations resulted from the timing of scheduled power plant
outages with utilities for services and fuel which occurred in the first
quarter of 1995 compared to the second quarter of 1994. Operating profit for
the second quarter decreased $14 million compared to the same quarter last year
due to the lower revenues and a $5 million charge for restructuring costs
consisting primarily of employee separation costs. Operating profit for the
first six months of 1995 decreased $18 million compared to 1994 as a result of
reduced licensee income, increased discounts, and the restructuring charge,
partially offset by cost savings from restructuring initiatives.
Power Generation
Orders declined $300 million in the second quarter of 1995 and $184 million in
the first six months of 1995 compared to the same periods in 1994 due to
several significant orders for China and England in the second quarter of 1994.
Power Generation's backlog at June 30, 1995 of $2.8 billion was up $408
million, or 17 percent, compared to the same period last year. International
orders represent more than 40 percent of the total backlog at June 30, 1995.
For the second quarter and first six months of 1995, higher field service and
new apparatus sales, partially offset by lower factory service sales, increased
revenues $45 million and $76 million, respectively, compared to the same
periods last year. Although volume and revenues improved, the operating losses
for the quarter and first half increased $22 million and $29 million,
respectively, compared to the same periods in 1994. Lower price realization on
new apparatus has had a major impact on operating profits in recent periods.
Cost savings from restructuring initiatives partially offset the deteriorations
in price. Further actions to align the cost base through workforce reductions
and other cost reductions were initiated in July 1995 by the announcement of a
restructuring program for the separation of over 500 employees. The costs for
this program, which are expected to approximate $25 million, will be recognized
in the third quarter.
Knoll
Continued strength in the North American market and an improved European market
increased orders for the second quarter and first half of 1995 by $16 million
and $39 million, respectively, compared to the same periods last year. Backlog
decreased $20 million compared to June 30, 1994 due to several large project
orders that were completed during 1994.
Revenues increased $15 million for the second quarter of 1995 and $45 million
for the first half of 1995 compared to the same periods last year. New
products, strong sales across all product lines, and improved quick delivery
programs contributed to this increase.
-20-
<PAGE> 21
The increased volume in North America and Europe and aggressive cost reduction
programs begun in 1994 resulted in an operating profit increase of $20 million
for the second quarter and $41 million for the first six months of 1995
compared to the same periods in 1994.
The strong orders, revenues, and improvements in operating profit are
indicative of the dramatic turnaround Knoll began late last year.
WCI
Revenues were down approximately $22 million for the second quarter and first
six months of 1995 compared to the same periods last year. Operating profit
declined $8 million for the second quarter and $9 million for the first half of
1995 compared to the same periods in 1994. Timing of homesite sales between
the second quarter and third quarter of 1994 caused these variances. In July
1995, the Corporation sold WCI and acquired a 24 percent equity interest in the
new business.
Other Businesses
The sale of Controlmatic in May 1994, Gladwin in December 1994, and
Westinghouse Motor Company in April 1995 caused revenues for the second quarter
and first half of 1995 to decline $37 million and $67 million, respectively,
compared to the same periods in 1994.
The operating losses for the same periods decreased $3 million and $12 million,
respectively, primarily due to the Controlmatic divestiture. Progress
continues toward divesting the remainder of these businesses.
DISCONTINUED OPERATIONS
In November 1992, the Corporation announced a Plan (the Plan) that included
exiting the financial services business and selling both DCBU and WESCO. The
portfolio investments of Financial Services have decreased from $8,967 million
at year-end 1992, to $1,043 million at June 30, 1995, a decrease of $7,924
million. The Corporation completed the sales of DCBU and WESCO during the
first quarter of 1994.
The liability for the estimated loss on the disposal of Discontinued Operations
was established in November 1992. In the fourth quarter of 1993, the
Corporation recorded an additional provision for loss based on changes in
various estimates.
A summary of the changes in the liability for the estimated loss on the
disposal of Discontinued Operations during the first six months of 1995 is
presented in the following table:
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
(in millions)(unaudited)
<TABLE>
<CAPTION>
Financial DCBU & Restruc-
Services WESCO turing Total
--------- ------ -------- --------
<S> <C> <C> <C> <C>
December 31, 1994 $ 80 $ 60 $ 5 $ 145
Year-to-date activity (64) (10) (1) (75)
--------- ------ -------- --------
June 30, 1995 $ 16 $ 50 $ 4 $ 70
========= ====== ======== ========
</TABLE>
The liability for estimated loss on disposal of financial services' assets is
shown net of expected gains on future asset liquidations. Future disposition
costs relating to the sales of DCBU and WESCO include product warranty claims,
medical claims, employee separation costs and potential environmental
remediation costs. Management believes that the total liability for the
estimated loss on disposal of Discontinued Operations is adequate. Any
variances from estimates which may occur
-21-
<PAGE> 22
for one Plan component will be considered in conjunction with those for other
components in determining whether an adjustment of the total liability is
necessary. The adequacy of this liability is evaluated each quarter.
A summary of changes in net debt of Discontinued Operations for the first six
months of 1995 is presented in the table below:
CHANGES IN NET DEBT OF DISCONTINUED OPERATIONS
(in millions) (unaudited)
<TABLE>
<S> <C>
Net Debt at December 31, 1994 $ 1,166
Liquidation of Discontinued Operations assets (159)
Cash used in operating activities of Discontinued Operations 50
Net cash received from Continuing Operations (6)
-------
Net Debt at June 30, 1995 $ 1,051
=======
</TABLE>
Of the remaining net debt of Discontinued Operations at June 30, 1995,
approximately $550 million is expected to be repaid during the remainder of
1995. Approximately $150 million is expected to be repaid through the
liquidation of portfolio investments of Financial Services. The remaining 1995
debt repayment of $400 million is expected to occur when cash is received from
Continuing Operations in conjunction with the sale of WCI.
Noncash proceeds from the sale of WCI of approximately $100 million of mortgage
receivables also are expected to be received from Continuing Operations. The
Corporation believes that the debt of Discontinued Operations at year-end 1995
will be supportable by the assets of Discontinued Operations and can be repaid
as the portfolio liquidates over its contractual terms.
DISPOSITION OF NON-STRATEGIC BUSINESSES
During the fourth quarter of 1993, the Corporation identified certain
businesses as non-strategic and provided for the cost of their disposition.
Non-strategic businesses generally included parts of the former Environmental
Services business unit and all of the businesses in the Industrial Products and
Services business unit. During 1994, the Corporation completed the sales of
Controlmatic and Gladwin Corporation. On March 31, 1995, the sale of Aptus,
Inc., an environmental services subsidiary, was completed. On April 12, 1995,
the Corporation completed the transfer of its 75 percent equity interest in the
Westinghouse Motor Company to TECO Electric & Machinery Co., Ltd. Also in the
second quarter, the Corporation signed agreements to sell three plants and
announced its intentions to close another. The Corporation continues to pursue
the disposition of the remaining non-strategic businesses.
Activity relating to the liability for disposition of non-strategic businesses
for the first six months of 1995 is summarized below:
LIABILITY FOR DISPOSITION OF NON-STRATEGIC BUSINESSES
(in millions)(unaudited)
<TABLE>
<S> <C>
Balance at December 31, 1994 $187
Additional provision 7
Disposal of businesses (10)
------
Balance at June 30, 1995 $184
======
</TABLE>
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<PAGE> 23
OTHER INCOME AND EXPENSES
Other income and expenses represents a net expense of $2 million for the second
quarter of 1995 compared to income of $16 million for the second quarter of
1994. For the first six months of 1995, other income and expenses represents a
net expense of $4 million compared to a $55 million income for the first six
months of 1994. The 1994 periods include gains on dispositions of assets,
principally two Sacramento radio stations in the first quarter and a WCI
investment in a shopping center development joint venture in the second
quarter.
INTEREST EXPENSE
Interest expense for Continuing Operations for the second quarter of 1995 was
$16 million higher than the same period of 1994. For the first six months of
1995, interest expense was $27 million higher than the same period of 1994.
These increases reflected the fourth quarter 1994 transfer of debt to
Continuing Operations from Discontinued Operations. Although combined average
debt outstanding under the revolving credit facilities decreased, Continuing
Operations' average debt outstanding increased over $450 million for the first
six months of 1995 compared to the same period of 1994. Average interest rates
for short-term debt outstanding also increased significantly over the prior
year's six-month period.
By December 31, 1995, the Corporation expects to reduce the existing debt of
Continuing Operations by up to $300 million compared to year-end 1994 debt
levels.
INCOME TAXES
The Corporation's effective income tax rate for the first six months of both
1995 and 1994 was 38%. This rate is consistent with management's expectations
for the year.
At June 30, 1995, the Corporation had recorded net deferred income tax benefits
totalling $2,358 million compared to $2,380 million at December 31, 1994.
Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Corporation manages its liquidity as a consolidated enterprise without
regard to whether assets or debt are classified for balance sheet purposes as
part of Continuing Operations or Discontinued Operations. As a result, the
discussion below focuses on the Corporation's consolidated cash flows and
capital structure.
In recent years, the Corporation has taken several actions to reduce its
leverage and rebuild its capital structure. As a result, in 1994, net debt
(total debt less cash and cash equivalents) was reduced by $1.7 billion. The
Corporation intends to continue to reduce its existing consolidated net debt by
up to $1 billion in 1995. Of this reduction, $700 million is expected to be
debt of Discontinued Operations and will result from the continued liquidation
of portfolio investments and from the sale of WCI. The debt of Continuing
Operations is expected to be reduced up to $300 million primarily through the
sale of non-strategic businesses.
-23-
<PAGE> 24
Management expects that cash from Continuing Operations and availability under
its revolving credit facility will continue to be sufficient to meet ordinary
future business needs. Other sources of liquidity generally available to the
Corporation include cash and cash equivalents, proceeds from sales of
non-strategic assets and borrowings from other sources, including funds from
the capital markets. Management continually reviews the Corporation's capital
structure and associated interest costs.
The acquisition of CBS will have a significant near-term impact on the
Corporation's leverage, given that the total purchase price of $5.4 billion is
expected to be financed by bank borrowings. However, management believes that
this higher financial leverage is supportable by the significant level of cash
flows generated by CBS in addition to the operating cash flows provided by the
Corporation. Additionally, the Corporation may sell or joint venture assets to
repay $1.5 billion to $2 billion of debt.
Operating Activities
The following table provides a reconciliation of net income to cash provided by
operating activities of Continuing Operations for the six months ended June 30,
1995 and 1994:
RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------------------
(in millions) (unaudited) 1995 1994
---- ----
<S> <C> <C>
Net income from Continuing Operations $ 74 $ 111
Noncash items included in income:
Depreciation and amortization 152 163
Losses (gains) on asset dispositions 8 (46)
Change in assets and liabilities, net of effects
of acquisitions and divestitures of businesses:
Receivables, current and noncurrent 27 187
Inventories (50) (68)
Progress payments net of costs on uncompleted
contracts (194) (208)
Accounts payable (92) (65)
Deferred and current income taxes 18 (3)
Accrued restructuring costs (34) (96)
Other assets and liabilities 1 29
------ ------
Cash provided (used) by operating activities
of Continuing Operations $ (90) $ 4
====== ======
</TABLE>
The operating activities of Continuing Operations used $90 million of cash
during the first six months of 1995 compared to $4 million of cash provided for
the same period of 1994. The increase in operating cash requirements during
the first six months of 1995 was primarily attributable to increased levels of
receivables compared to the same period of 1994 offset somewhat by lower
restructuring expenditures. Customers continue to demand more favorable
payment terms under major contracts, increasing the Corporation's investment in
uncompleted contracts. Management continues to focus significant effort in
this area and expects to substantially reduce working capital requirements by
year-end 1995.
Savings from the Corporation's restructuring activities are expected to
essentially offset related cash expenditures in 1995.
Management expects to contribute approximately $300 million in cash to the
Corporation's pension plans in 1995 which is consistent with the 1994 cash
contribution level. No contributions were made in the first six months of
either period.
-24-
<PAGE> 25
The operating activities of Discontinued Operations used $50 million of cash
during the first six months of 1995 compared to cash used of $175 million for
the same period of 1994. The decrease in operating cash requirements during
the first six months of 1995 was primarily attributable to lower interest
expense resulting from lower levels of outstanding debt, as well as lower
expenditures for the divestitures of DCBU and WESCO. The future operating cash
requirements of Discontinued Operations will be attributable primarily to
interest costs on debt, operating costs, and disposition costs related to DCBU
and WESCO.
Investing Activities
Investing activities provided $329 million of cash during the first six months
of 1995 compared to $1,454 million of cash provided during the same period of
1994. In the first six months of 1995, the Corporation completed the sale of
Aptus, Inc., an environmental services subsidiary, and the transfer of its 75
percent interest in the Westinghouse Motor Company. The majority of the
proceeds for these transactions consisted of cash and notes. In addition, the
Corporation purchased the Plant Services Division of Vectra Technologies, Inc.,
a provider of chemical decontamination and cleaning services for approximately
$15 million and paid an additional $22 million in connection with the 1994
acquisition of Norden Systems. During the second quarter of 1995, the
Corporation also received cash proceeds of $239 million from the sale of
investments held in two trusts established to fund employee benefit plans and
replaced the trust investments with Westinghouse common stock.
In the first six months of 1994, the Corporation sold its DCBU and WESCO
businesses as well as two Sacramento radio stations generating cash proceeds of
$1.4 billion and $50 million, respectively. In addition, the Corporation
purchased Norden for cash of approximately $73 million. Liquidations of
Financial Services portfolio investments generated $159 million in the first
six months of 1995 compared to cash generated of $220 million for the same
period of 1994.
Capital expenditures were $97 million for the first six months of 1995, an
increase of $5 million over the same period of 1994. Capital spending in 1995
is expected to approximate the 1994 level.
During the remainder of 1995, the Corporation expects to generate substantial
cash proceeds through the continued liquidation of portfolio investments of
Discontinued Operations, sales of non-strategic businesses, and the sale of
WCI.
Financing Activities
Cash used by financing activities during the first six months of 1995 totalled
$64 million compared to cash used of $2,099 million during the same period of
1994. The decrease in the financing cash outflows was primarily attributable
to significantly lower repayments under the revolving credit facilities.
Net debt of the Corporation decreased $140 million at June 30, 1995 to $3,253
million from $3,393 million at December 31, 1994, primarily reflecting debt
repaid from the liquidation of assets and sale of non-strategic businesses
during the first six months of 1995. Total debt of the Corporation was $3,722
million at June 30, 1995, a decrease of $15 million from $3,737 million at
December 31, 1994. Repayment of $750 million to $1 billion of debt, in total,
is expected in 1995.
Two new revolving credit agreements with more favorable terms and conditions
than the previous facility were executed in August 1994 (see Revolving Credit
Facilities). Total borrowings under the revolvers were $967 million at June
30, 1995. These borrowings carried a composite interest rate of 6.5% at June
30, 1995 and were based on the London Interbank Offer Rate (LIBOR). The
Corporation allowed one facility with a commitment level of $500 million to
expire on August 4, 1995.
-25-
<PAGE> 26
In March 1994, the Corporation sold in a private placement depositary shares
representing 3,600,000 shares of Series C preferred stock for net proceeds of
$505 million. These shares will convert to 36,000,000 common shares in June
1997. The Series B preferred stock, sold in June 1992, will convert to
32,890,000 shares of common stock on September 1, 1995.
Dividends paid in the 1995 first six months included approximately $23 million
for dividends for the Series C preferred stock issued in March 1994 and $25
million for the Series B preferred shares. The remainder represented common
stock dividends of 5 cents per share for both quarters.
On August 26, 1992, the Corporation filed a registration statement on Form S-3
for the issuance of up to $1 billion of debt securities. At June 30, 1995,
$400 million of this shelf registration remained unused.
Securities Ratings
On July 18, 1995, Standard and Poor's placed the Corporation's senior debt on
CreditWatch for possible downgrade and attributed the action to wide-spread
press reports of a possible acquisition of CBS. On August 1, 1995, Moody's
Investors Service placed the Corporation's credit ratings under review for
possible downgrade following the Corporation's announcement regarding the
acquisition of CBS in a cash transaction for $5.4 billion. Also, in light of
the announcement, on August 2, 1995, Fitch Investors Service, Inc. placed the
Corporation's senior debt on FitchAlert with negative implications.
Revolving Credit Facilities
On August 5, 1994, the Corporation replaced its December 1991 revolver with two
revolving credit agreements (revolvers). These facilities had a combined
commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997
(three-year revolver) and $500 million maturing on August 4, 1995. The $500
million facility was allowed to expire on August 4, 1995 as the Corporation's
liquidity position had improved, making this facility unnecessary. Borrowings
under the revolver are used for general corporate purposes, including the
repayment of maturing long-term debt. The interest rates for borrowings under
the revolver are determined at the time of each borrowing and are based on one
of a variety of floating rate indices plus a margin based on the Corporation's
long-term debt ratings.
Unused capacity under the revolvers equalled $1,533 million at June 30, 1995.
Borrowing availability is subject to compliance with certain covenants,
representations and warranties. At June 30, 1995, the Corporation was in
compliance with these covenants.
The Corporation is currently negotiating three new bank credit facilities, the
commitments under which are expected to total $7.5 billion. Borrowings under
the facilities will be used to finance the purchase of CBS and replace the
existing revolver. Borrowings under the new facilities will not occur until
the consummation of the merger.
Hedging Activities
Prior to the adoption of the Plan, Financial Services entered into interest
rate and currency exchange agreements to manage the interest rate and currency
risk associated with various debt instruments. No transactions were
speculative or leveraged. Given their nature, these agreements have been
accounted for as hedging transactions. A summary of notional amounts
outstanding at June 30, 1995 is presented in the table below:
-26-
<PAGE> 27
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS-NOTIONAL AMOUNTS OUTSTANDING
(in millions)(unaudited)
<TABLE>
<CAPTION>
Short-Term Long-Term
At June 30, 1995 Debt Debt Total
---------- --------- -----
<S> <C> <C> <C>
Continuing Operations $ 209 $ - $ 209
Discontinued Operations - 374 374
----- ----- -----
Notional amounts $ 209 $ 374 $ 583
===== ===== =====
</TABLE>
The average remaining maturity of interest rate and currency exchange
agreements was 13 months at June 30, 1995.
Of the total notional amount outstanding at June 30, 1995, $359 million relates
to interest rate swaps with rate and maturity characteristics set forth in the
table below:
CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)(unaudited)
<TABLE>
<CAPTION>
Twelve months ended June 30, Total 1996 1997 1998 1999 2000
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed rate swaps (pay fixed):
Notional amount $209 $ 75 $ 4 $ 50 $ 30 $ 50
Wtd. avg. fixed rate paid 8.83% 8.45% 13.02% 8.73% 8.92% 9.08%
Floating rate swaps (pay floating):
Notional amount $150 $150 - - - -
Wtd. avg. fixed rate received 8.74% 8.74% - - - -
</TABLE>
Under the majority of the swap agreements, the floating rate received or paid
is based on the average 30-day commercial paper rate for the relevant period.
This rate was 6.1% on June 30, 1995. The floating rate received or paid on the
remaining agreements is based on six month LIBOR and is set on dates specified
in the agreements. This rate was 6.0% on June 30, 1995.
The remaining $224 million notional amount outstanding at June 30, 1995
consists of a $150 million interest rate floor agreement and a $74 million
interest rate and currency swap.
The Corporation's credit exposure under interest rate and currency exchange
agreements is limited to the cost of replacing an agreement in the event of
non-performance by its counterparty. To minimize this risk, Financial Services
selected high credit quality counterparties. At June 30, 1995, the aggregate
credit exposure to counterparties totalled approximately $94 million. This
exposure resulted primarily from an interest rate and currency swap with a
counterparty rated A+. The contract matures in February 1996.
In the first six months of 1995, outstanding interest rate exchange agreements
resulted in a net increase in the average borrowing rate for Continuing
Operations of approximately 0.2% and a net decrease for Discontinued Operations
of 0.2%. These agreements resulted in a net increase in interest expense of
Continuing Operations of approximately $3 million and a net decrease in
interest expense of Discontinued Operations of approximately $1 million.
The Corporation continually monitors its economic exposure to changes in
foreign exchange rates and enters into foreign exchange forward or option
contracts to hedge its transaction exposure when appropriate. As a result, the
Corporation's unhedged foreign exchange exposure is not significant.
Furthermore, changes in foreign exchange rates whether favorable or unfavorable
are not expected to have a significant impact on the Corporation's financial
results or operating activities.
-27-
<PAGE> 28
With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52,
"Foreign Currency Translation," the combined total sales for those operations
were less than 0.5% of the Corporation's sales for the first six months of
1995. Any translation adjustments resulting from converting the local currency
balance sheets and income statements of designated hyperinflationary
subsidiaries into U.S. dollars are recorded as period costs in accordance with
SFAS No. 52.
OTHER MATTERS
Environmental Matters
Compliance with federal, state, and local laws and regulations relating to the
discharge of substances into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. While it is difficult to
estimate the timing and ultimate costs to be incurred in the future due to
uncertainties about the status of laws, regulations, technology and information
available for individual sites, management has estimated the total probable and
reasonably possible remediation costs that could be incurred by the Corporation
based on the facts and circumstances currently known. See note 8 to the
financial statements.
At June 30, 1995, the Corporation had accrued liabilities totalling $77 million
for sites where it has been either named a potentially responsible party (PRP)
or has other remedial responsibilities, $70 million for the Bloomington sites
and $29 million for decommissioning costs at facilities where the Corporation
has ongoing operations. In conjunction with the sales of certain of its
businesses, the Corporation has also provided for remediation costs related to
past operations of such sites.
Management believes that the Corporation has adequately provided for its
present environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
Legal Matters
The Corporation is defending a number of lawsuits on various matters. See note
8 to the financial statements. Costs to defend these lawsuits are charged to
operations in the period in which the services are rendered.
Since 1993, the Corporation has entered into agreements to resolve seven
litigation claims, including the recent settlement of a claim by a co-plaintiff
in a pending lawsuit. These litigation claims are in connection with alleged
tube degradation in steam generators sold by the Corporation as components for
nuclear steam supply systems. These agreements generally involve providing
certain products and services at prices discounted at varying rates. The
future impact of these discounts on operating results will be incurred over the
next 15 years with the greatest impact occurring during the next nine years.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in certain of these cases and although
management believes a significant adverse judgment is unlikely, any such
judgments could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation referenced in
note 8, and management believes that the litigation should not have a
material adverse effect on the financial condition of the Corporation.
-28-
<PAGE> 29
Insurance Recoveries
The Corporation has filed actions against more than 100 of its insurance
carriers seeking recovery for environmental, product and property damage
liabilities, and certain other matters. The Corporation has settled with
several of these carriers and has received recoveries related to these actions.
Amounts received to date generally have been applied to cover obligations
assumed through the settlements or litigation costs. The Corporation has not
accrued for any future insurance recoveries.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a) As previously reported, the Corporation is defending an action in
Matagorda County, Texas initiated by Houston Lighting and Power Company and
its co-owners seeking damages of approximately $780 million for alleged breach
of contract, misrepresentation, state law violations and violations of the
Texas Deceptive Trade Practices Act arising out of the Corporation's supply of
nuclear steam supply systems for the South Texas Project. Trial commenced in
this action on July 5, 1995.
b) As previously reported, the Corporation is defending an action in the
Western District of Pennsylvania involving claims by Portland General Electric
Company and the Eugene Water & Electric Board ("Eugene Board") for breach of
contract, negligence, fraud, negligent misrepresentation and violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO") arising out of the
Corporation's design, manufacture and installation of steam generators at the
Trojan Nuclear Plant in Ranier, Oregon. The Eugene Board owns 30% of the
Trojan plant. The Eugene Board's claims were dismissed on May 17, 1995 pursuant
to a settlement with the Corporation. After reflecting this settlement, the
remaining damages for this case approximate $270 million.
c) As previously reported, the Corporation is defending consolidated suits in
federal court in Maryland by the Equal Employment Opportunity Commission
("EEOC") and former employees of the Corporation's Electronic Systems Group
with respect to alleged age discrimination and discriminatory employment
practices in connection with reductions in force necessitated by the federal
government's cancellation of all contracts pertaining to the carrier-based A-12
aircraft program. The suits seek back pay, interest, liquidated damages,
reinstatement of employment, court costs, and any other relief that may be
deemed appropriate. At the start of the case, there were 388 employees in the
EEOC action, but during the past several months, 125 of the employees have
consented to the dismissal of their claims, and two of these employees have
also consented to the dismissal of their individual suits. The court adopted a
case management plan for the remaining claimants involving a series of trials
centered on separate divisions within Electronic Systems. The first trial has
been postponed until January 1996, and no other trials have been scheduled.
d) The Corporation also has been named as one of the multiple defendants in
about 50 asbestos cases, and as a third-party defendant in about 2,100 more
such suits that have been consolidated in the Baltimore City Circuit Court. In
the course of a 1994 trial focusing on five representative plaintiffs whose
claims involved defendants other than the Corporation, the jury determined that
two Westinghouse products were defective due to their asbestos content, and due
to the Corporation's alleged failure to provide adequate warnings of the health
hazards associated with those products. These findings may be binding on the
Corporation in future proceedings in the consolidated litigation with
plaintiffs who have asserted claims against the Corporation; however, each
claimant would have to prove that he developed an asbestos-related disease,
that he was exposed to a Westinghouse product, and that this exposure was a
substantial factor in the development of the
-29-
<PAGE> 30
disease. Any award of compensatory damages would be apportioned among the
defendants found liable, and would be subject in large part to the
Corporation's insurance coverage. The court exonerated the Corporation in June
1995 from liability for punitive damages on the grounds that there was
insufficient evidence that the Corporation knew its products posed a risk of
harm. The plaintiffs are expected to appeal the ruling on punitive damages.
In addition to the Baltimore litigation described herein, the
Corporation is a defendant in other asbestos lawsuits which have been brought
in this and other jurisdictions.
e) As previously reported, the Corporation is one of several defendants in a
fraudulent conveyance action by the Official Committee of Unsecured Creditors
of Phar-Mor, Inc. arising out of an August, 1991 Phar-Mor tender offer in which
the Corporation received about $30 million, and an additional $20 million from
the tender of Phar-Mor stock by the DeBartolo Family Limited Partnership
("DeBartolo") pursuant to a prior Westinghouse loan to DeBartolo that was
collateralized by DeBartolo's Phar-Mor holdings. The fraudulent conveyance
action was transferred from bankruptcy court in Cleveland to the Western
District of Pennsylvania and consolidated with about 50 other cases involving
Phar-Mor. Trial is scheduled to begin in September 1995.
Included in the consolidated cases is an action by the Corporation
seeking damages in connection with loans to, and equity investments in,
Phar-Mor. On May 2, 1995 the Corporation concluded a settlement in this
litigation with Phar-Mor's chief executive officer and controlling shareholder
and certain other parties, which has resulted in the dismissal of all
cross-claims and third-party complaints as between the Corporation and these
parties. The action is now limited to the Corporation's claims against Coopers
& Lybrand ("Coopers"), Phar-Mor's former accountants, for securities
violations, fraud, negligent misrepresentation, and breach of contracts to
which the Corporation was a third-party beneficiary. Coopers obtained a
summary judgment on the negligent misrepresentation claim, and on some of the
breach of contract claims. The Corporation has moved for reconsideration of
the summary judgment order. Trial is scheduled to begin in the action against
Coopers immediately following the conclusion of the fraudulent conveyance
action.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in the above matters, and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described above, and management believes
that the litigation should not have a material adverse effect on the financial
condition of the Corporation.
-30-
<PAGE> 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Corporation was held on
April 26, 1995.
(b) The following matters were submitted to a vote of the shareholders
at the annual meeting:
(i) In connection with the election of eleven directors, the
following votes were cast for or withheld from the following
candidates:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Frank C. Carlucci 278,363,192 6,291,114
Robert E. Cawthorn 278,486,578 6,167,728
Gary M. Clark 278,784,776 5,869,530
George H. Conrades 278,796,589 5,857,717
William H. Gray III 278,349,862 6,304,444
Michael H. Jordan 278,805,447 5,848,859
David T. McLaughlin 278,469,987 6,184,319
Richard M. Morrow 278,417,579 6,236,727
Richard R. Pivirotto 278,364,346 6,289,960
Paula Stern 278,540,840 6,113,466
Robert D. Walter 278,881,662 5,772,644
</TABLE>
(ii) A management proposal regarding the election of Price Waterhouse
as independent accountants was presented at the meeting and
279,336,340 shares of common stock were voted for, 3,329,954
shares were voted against, and 1,988,012 shares abstained in
connection with the adoption of this resolution, the text of
which is set forth on pages 29 and 30 of the Corporation's Proxy
Statement dated March 10, 1995, and incorporated herein by
reference.
(iii) A management proposal concerning approval of an amendment to the
Corporation's Deferred Stock and Compensation Plan for Directors
was presented at the meeting, and 254,703,438 shares of common
stock were voted for, 25,386,873 shares were voted against, and
4,563,995 shares abstained, in connection with the adoption of
this proposal, the text of which is set forth on pages 30 through
34 of the Corporation's Proxy Statement dated March 10, 1995 and
incorporated herein by reference.
(iv) A management proposal concerning approval of an amendment to the
Corporation's 1993 Long-Term Incentive Plan was presented at the
meeting, and 259,996,046 shares of common stock were voted for,
19,928,770 shares were voted against, and 4,729,490 shares
abstained, in connection with the adoption of amendments to the
1993 Long-Term Incentive Plan, the text of which is set forth on
pages 34 and 35 of the Corporation's Proxy Statement dated March
10, 1995, and incorporated herein by reference.
(v) A shareholder's resolution concerning tying compensation to the
dividend was presented at the meeting and 27,976,232 shares of
common stock were voted for, 165,196,178 shares were voted
against, 8,246,852 shares abstained, and there were 83,235,044
broker non-votes in connection with this resolution, the text of
which is set forth on pages 35 through 37 of the Corporation's
Proxy Statement dated March 10, 1995, and incorporated herein by
reference.
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<PAGE> 32
(vi) A shareholder's resolution linking compensation to the dividend,
terminating all bonuses, and capping executive compensation at
one million five hundred thousand dollars was presented at the
meeting and 32,645,719 shares of common stock were voted for,
160,794,017 were voted against, 7,979,526 shares abstained, and
there were 83,235,044 broker non-votes in connection with this
resolution, the text of which is set forth on pages 37 and 38 of
the Corporation's Proxy Statement dated March 10, 1995, and
incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of the Corporation are incorporated
herein by reference to Exhibit 3(b) to Form 10-Q for the
quarter ended March 31, 1994.
(b) The Bylaws of the Corporation, as amended January 25, 1995,
are incorporated herein by reference to Exhibit 3(c) to Form
10-K for the year ended December 31, 1994.
(4) RIGHTS OF SECURITY HOLDERS
Except as set forth below, there are no instruments with
respect to long-term debt of the Corporation that involve
securities authorized thereunder exceeding 10% of the total
assets of the Corporation and its subsidiaries on a
consolidated basis. The Corporation agrees to provide to the
Securities and Exchange Commission, upon request, a copy of
instruments defining the rights of holders of long-term debt
of the Corporation and its subsidiaries.
(a) Form of Senior Indenture, dated as of November 1, 1990,
between the Corporation and Citibank, N.A. is incorporated
herein by reference to Exhibit 4.1 to the Corporation's
Registration Statement No. 33-41417.
(10) MATERIAL CONTRACTS
(a*) The Annual Performance Plan is incorporated herein by
reference to Exhibit 10(a) to Form 10-K/A for the year
ended December 31, 1992.
(b*) The 1993 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(b) to
Form 10-Q for the quarter ended March 31, 1995.
(c*) The 1984 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(b) to
Form 10-Q for the quarter ended June 30, 1993.
(d*) The Westinghouse Executive Pension Plan, as amended, is
incorporated herein by reference to Exhibit 10(d) to
Form 10-K for the year ended December 31, 1994.
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<PAGE> 33
(e*) The Deferred Compensation and Stock Plan for Directors,
as amended, is incorporated herein by reference to
Exhibit 10(e) to Form 10-Q for the quarter ended March 31,
1995.
(f*) The Advisory Director's Plan is incorporated herein by
reference to Exhibit 10(k) to Form 10-K for the year
ended December 31, 1989.
(g) The Director's Charitable Giving Program is incorporated
herein by reference to Exhibit 10(g) to Form 10-K for the
year ended December 31, 1994.
(h*) The 1991 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to
Form 10-K for the year ended December 31, 1994.
(i*) Employment Agreement between the Corporation and
Michael H. Jordan is hereby incorporated by reference to
Exhibit 10 to the Corporation's Form 8-K, dated September
1, 1993.
(j*) Employment Agreement between the Corporation and
Fredric G. Reynolds is incorporated herein by reference to
Exhibit 10(j) to Form 10-K for the year ended December 31,
1994.
(k) 364-Day Competitive Advance and Revolving Credit Facility
Agreement dated as of August 5, 1994, among the Corporation
as borrower, the Co-Agents and Lenders named therein, and
Chemical Bank, as Administrative Agent is incorporated herein
by reference to Exhibit 10(r) to Form 10-Q for the quarter
ended June 30, 1994.
(l) Three-Year Competitive Advance and Revolving Credit Facility
Agreement dated as of August 5, 1994, among the Corporation
as Borrower, the Co-Agents and Lenders named therein, and
Chemical Bank, as Administrative Agent is incorporated herein
by reference to Exhibit 10(s) to Form 10-Q for the quarter
ended June 30, 1994.
(m) Agreement and Plan of Merger among Westinghouse Electric
Corporation, Group (W) Acquisition Corporation and CBS, Inc.,
dated August 1, 1995.
* Identifies management contract or compensatory plan or arrangement.
(11) Computation of Per Share Earnings
(12)(a) Computation of Ratio of Earnings to Fixed Charges
(12)(b) Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Dividends
(27) Financial Data Schedule
b) REPORTS ON FORM 8-K:
None.
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<PAGE> 34
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 8th day of August, 1995.
WESTINGHOUSE ELECTRIC CORPORATION
Fredric G. Reynolds
-----------------------------
Executive Vice President and
Chief Financial Officer
-34-
<PAGE> 1
Exhibit 10(m)
Conformed Copy
AGREEMENT AND PLAN OF MERGER
AMONG
WESTINGHOUSE ELECTRIC CORPORATION,
GROUP W ACQUISITION CORP.
AND
CBS INC.
dated August 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . 3
2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Payment for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . 7
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . 7
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Authority; No Violations; Consents and Approvals . . . . . . . . . . . . . . 9
(d) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 11
(f) No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . . . . . 11
(g) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(h) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . 11
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(k) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(n) Board Recommendation; State Takeover Statutes . . . . . . . . . . . . . . . 15
(o) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . 15
(p) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(q) FCC Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Representations and Warranties of Parent and Sub . . . . . . . . . . . . . . . . . . 15
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Authority; No Violations; Consents and Approvals . . . . . . . . . . . . . . . 16
(c) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Interim Operations of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) FCC Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) Financial Covenant Compliance . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Third-party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Sufficient Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(i) No Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(j) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(k) Certain Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(l) Indebtedness; Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(m) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(n) Tax Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Preparation of the Proxy Statement; Company Shareholders Meeting. . . . . . . . . . 23
5.2 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 Indemnification; Directors' and Officers' Insurance . . . . . . . . . . . . . . . . 26
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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(c) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.8 Conduct of Business of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.10 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 FCC Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . 32
(a) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) No Injunctions or Restraints . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Conditions to Obligations of Parent and Sub . . . . . . . . . . . . . . . . . . . . 33
(a) Representations and Warranties; Performance of Obligations . . . . . . . . . . 33
(b) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1 Effectiveness of Representations, Warranties and Agreements;
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership. . . . . . . . . 39
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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9.7 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Terms Defined in Section
------------- ------------------
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Additional Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
BCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(e)
Commitment Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(d)
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Company ERISA Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
Company Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(i)
Company Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(h)
Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
Company SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Company Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Company Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
Company Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(e)(i)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7(c)
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Eligible Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(b)
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(d)
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7(c)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(d)
Gains and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
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HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(c)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(ii)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(l)(ii)
Material Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Multiple Employer Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)(i)
Notice of Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)(ii)
Option Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Parent Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Payment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
SAR Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
SERPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(b)
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Stock Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . preamble
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(e)(ii)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Time Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(b)
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(ii)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated August 1, 1995 (the "Agreement"), among
Westinghouse Electric Corporation, a Pennsylvania corporation ("Parent"), Group
W Acquisition Corp., a New York corporation and a wholly-owned subsidiary of
Parent ("Sub"), and CBS Inc., a New York corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent, by means of the merger
of Sub with and into the Company, upon the terms and subject to the conditions
set forth in the Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company as set forth below (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of common stock, par value
$2.50 per share, of the Company (the "Shares" or the "Company Common Stock")
(excluding shares owned, directly or indirectly, by the Company or any
Subsidiary of the Company or by Parent, Sub or any other Subsidiary of Parent
and Dissenting Shares (as defined in Section 2.6)), shall be converted into the
right to receive the Merger Consideration (as defined in Section 2.2); and
WHEREAS, Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Business Corporation Law of the
State of New York (the "BCL"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.3). At the Effective Time, the
separate corporate existence of Sub shall cease, and the Company (i) shall
continue as the surviving corporation and an indirect wholly owned subsidiary
of Parent (Sub and the Company are sometimes hereinafter referred to as
"Constituent Corporations" and, as the context requires, the Company is
sometimes hereinafter referred to as the "Surviving Corporation"), (ii) shall
succeed to and assume all the rights and obligations of Sub in accordance with
the BCL, and (iii) shall continue under the name CBS Inc.".
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1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., New York time, on the second business day after satisfaction or waiver of
the conditions set forth in Article VI (the "Closing Date"), at the offices of
Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153, unless
another date, time or place is agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") with the New York Secretary of State, as
provided in the BCL, as soon as practicable on or after the Closing Date. The
Merger shall become effective upon such filing or at such time thereafter as is
provided in the Certificate of Merger (the "Effective Time").
1.4 Effects of the Merger. (a) The Merger shall have the effects set
forth in the applicable provisions of the BCL, including Section 906 thereof.
(b) The directors of Sub and the officers of the Company immediately prior
to the Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified, or until their earlier death,
resignation or removal, in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of Sub as in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until duly amended in accordance with the terms thereof
and the BCL.
(d) The Bylaws of Sub as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by applicable law or the Surviving Corporation's Certificate of
Incorporation or Bylaws.
(e) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well
as of a private nature, and be subject to all the restrictions, disabilities
and duties of each of the Constituent Corporations; and all and singular
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, as well as for
stock subscriptions and all other things in action or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations; and the title to any
real estate vested by deed or otherwise, in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property
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of either of the Constituent Corporations shall be preserved unimpaired; and
all debts, liabilities and duties of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts and liabilities had been incurred by it.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
Company Common Stock or the holder of any capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of Common Stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock and all other shares of capital stock of the Company that
are owned by the Company and all shares of Company Common Stock and other
shares of capital stock of the Company owned by Parent, Sub or any other
wholly-owned Subsidiary (as defined below) of Parent or the Company shall be
canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor. As used in this Agreement, the
word "Subsidiary", with respect to any party, means any corporation,
partnership, joint venture or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner; (ii) voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation, partnership, joint venture or other organization is held by such
party or by any one or more of its Subsidiaries, or by such party and any one
or more of its Subsidiaries; or (iii) at least 50% of the equity, other
securities or other interests is, directly or indirectly, owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
any one or more of its Subsidiaries.
2.2 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Sub, the Company or the holders of
any of the shares thereof:
(a) Subject to the other provisions of this Section 2.2 and Section 2.1,
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (excluding shares owned, directly or indirectly, by the
Company or any Subsidiary of the Company or by Parent, Sub or any other
Subsidiary of Parent and Dissenting Shares) shall be converted into the right
to receive the Merger Consideration (as defined below), in cash, payable to the
holder thereof, without any interest thereon, upon surrender and exchange of
the Certificates (as defined in Section 2.3(b)). As used in this Agreement,
the
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term "Merger Consideration" shall mean the sum of $81.00 and the Additional
Amount (as defined below). As used in this Agreement, the term "Additional
Amount" shall mean an amount equal to the product of (a) $81.00, (b) a
fraction, the numerator of which shall be the number of days in the period from
and including August 31, 1995 to but excluding the Closing Date, and the
denominator of which shall be 365, and (c) 6%; provided, however, that if the
Company continues to pay its regular dividend as permitted by Section 4.1(b) of
this Agreement, the Additional Amount shall be reduced by the amount per Share
of dividends declared after the date hereof with a record date prior to the
Effective Time (except that such reduction for the regular dividend immediately
succeeding the date hereof shall only be for the pro rata portion of the period
to which such dividend relates following the date of this Agreement).
(b) All such shares of Company Common Stock, when converted as provided in
Section 2.2(a), no longer shall be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each Certificate previously
evidencing Shares shall thereafter represent only the right to receive the
Merger Consideration. The holders of Certificates previously evidencing Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to the Company Common Stock except as otherwise provided
herein or by law and subject to the Surviving Corporation's obligation to pay
any dividends with a record date prior to the Effective Time declared in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time and, upon the surrender of Certificates in accordance with the
provisions of Section 2.3, shall only represent the right to receive for their
Shares, the Merger Consideration, without any interest thereon.
2.3 Payment for Shares. (a) Paying Agent. Prior to the Effective Time,
Sub shall appoint Chemical Bank (or if Chemical Bank is unwilling or unable to
act or to act upon commercially reasonable terms, any other United States bank
or trust company mutually acceptable to the Company and Parent) to act as
paying agent (the "Paying Agent") for the payment of the Merger Consideration,
and Parent shall deposit or shall cause to be deposited with the Paying Agent
in a separate fund established for the benefit of the holders of shares of
Company Common Stock, for payment in accordance with this Article II, through
the Paying Agent (the "Payment Fund"), immediately available funds in amounts
necessary to make the payments pursuant to Section 2.2(a) and this Section 2.3
to holders (other than the Company or any Subsidiary of the Company or Parent,
Sub or any other Subsidiary of Parent, or holders of Dissenting Shares). The
Paying Agent shall, pursuant to irrevocable instructions, pay the Merger
Consideration out of the Payment Fund.
From time to time at or after the Effective Time, Parent shall take all
lawful action necessary to make the appropriate cash payments, if any, to
holders of Dissenting Shares. Prior to the Effective Time, Parent shall enter
into appropriate commercial arrangements to ensure effectuation of the
immediately preceding sentence. The Paying Agent shall invest portions of the
Payment Fund as Parent directs in obligations of or guaranteed by the United
States of America or of any agency thereof, in commercial paper obligations
rated P-1 or A-1 from Moody's Investors Services, Inc. and Standard & Poor's
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Corporation, respectively, or in time deposits, certificates of deposit or
banker's acceptances of, or repurchase or reverse repurchase agreements with,
commercial banks whose commercial paper (or that of its holding company) is
rated P-1 or A-1 (collectively, "Permitted Investments"); provided, however,
that the maturities of Permitted Investments shall be such as to permit the
Paying Agent to make prompt payment to former holders of Company Common Stock
entitled thereto as contemplated by this Section. Parent shall cause the
Payment Fund to be promptly replenished to the extent of any losses incurred as
a result of Permitted Investments. All earnings on Permitted Investments shall
be paid to Parent. If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of shares of Company Common
Stock shall be entitled under this Section 2.3, Parent shall in any event be
liable for payment thereof. The Payment Fund shall not be used for any purpose
except as expressly provided in this Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall instruct the Paying Agent to mail to each holder
of record (other than the Company or any Subsidiary of the Company or Parent,
Sub or any other Subsidiary of Parent, or holders of Dissenting Shares) of a
Certificate or Certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates"), (i)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as Parent reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment therefor. Upon surrender of a Certificate for cancellation to the
Paying Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in respect thereof cash
in an amount equal to the product of (i) the number of shares of Company Common
Stock represented by such Certificate and (ii) the Merger Consideration, and
the Certificate so surrendered shall forthwith be canceled. Absolutely no
interest shall be paid or accrued on the Merger Consideration payable upon the
surrender of any Certificate. If payment is to be made to a person other than
the person in whose name the surrendered Certificate is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
surrendered Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.3(b), each
Certificate (other than Certificates representing Shares owned by the Company
or any Subsidiary of the Company or Parent, Sub or any other Subsidiary of
Parent) shall represent for all purposes only the right to receive the Merger
Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the Payment
Fund which remains undistributed to the holders of Company Common Stock for one
year after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II and the
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instructions set forth in the letter of transmittal mailed to such holder after
the Effective Time shall thereafter look only to Parent for payment of the
Merger Consideration to which they are entitled. All interest accrued in
respect of the Payment Fund shall inure to the benefit of and be paid to
Parent.
(d) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for any cash from the
Payment Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock such amounts as Parent is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.
2.4 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Paying Agent, Parent or the Company for any reason shall be converted into the
Merger Consideration, subject to the other provisions of this Article II.
2.5 Stock Options. At the Effective Time, each holder of a then
outstanding option to purchase Shares under the 1983 Stock Rights Plan (as
amended from time to time prior to the date hereof, the "Stock Rights Plan"),
whether or not then exercisable (the "Options"), shall, in settlement thereof,
receive from the Company for each Share subject to such Option an amount
(subject to any applicable withholding tax) in cash equal to the excess, if
any, of the Merger Consideration over the per Share exercise price of such
Option (such amount being hereinafter referred to as the "Option
Consideration"); provided, however, that with respect to any person subject to
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), any such amount shall be paid as soon as practicable after the first
date payment can be made without liability to such person under Section 16(b)
of the Exchange Act. Upon receipt of the Option Consideration, the Option and
any coupled SAR Unit (as defined in the Stock Rights Plan) shall be canceled.
The surrender of an Option (and any coupled SAR Unit) to the Company in
exchange for the Option Consideration shall be deemed a release of any and all
rights the holder had or may have had in respect of such Option (and any such
coupled SAR Unit). Prior to the Effective Time, the Company shall use its best
efforts to obtain all necessary consents or releases from holders of Options
under the Stock Rights Plan and take all such other lawful action as may be
necessary to give effect to the transactions contemplated by this Section 2.5
(except for such action that may require the approval of the Company's
shareholders). Except as
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otherwise agreed to by the parties, (i) the Stock Rights Plan shall terminate
as of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any Subsidiary thereof, shall be
canceled as of the Effective Time, and (ii) the Company shall take all action
necessary to ensure that following the Effective Time no participant in the
Stock Rights Plan or other plans, programs or arrangements shall have any right
thereunder to acquire equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof and to terminate all such plans.
2.6 Dissenting Shares. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by shareholders who
shall not have assented to the Merger and who shall have demanded properly in
writing appraisal for such shares in accordance with the applicable provisions
of the BCL (collectively, the "Dissenting Shares") shall not be converted into
or represent the right to receive the Merger Consideration. Such shareholders
instead shall be entitled to receive payment of the appraised value of such
shares of Company Common Stock held by them pursuant to the laws of the State
of New York, except that all Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares of Company Common Stock, in either case
pursuant to the BCL, shall thereupon be deemed to have been converted into and
to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration upon surrender
in the manner provided in Section 2.3, of the Certificate or Certificates that,
immediately prior to the Effective Time, evidenced such shares of Company
Common Stock. The Company shall give Parent (i) prompt notice of any written
demands for appraisal of shares of Company Common Stock received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with
respect to any such demands. The Company shall not, without the prior written
consent of Parent, voluntarily make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company represents
and warrants to Parent and Sub as follows (except to the extent set forth on
the Disclosure Schedule previously delivered by the Company to Parent (the
"Company Disclosure Schedule")):
(a) Organization, Standing and Power. Each of the Company and its
Material Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to conduct business in
each jurisdiction in which the business it is conducting, or the operation,
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<PAGE> 15
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not have
a Material Adverse Effect (as defined below) with respect to the Company. The
Company has heretofore made available to Parent complete and correct copies of
its and its Material Subsidiaries' respective Certificates or Articles of
Incorporation and Bylaws (or other governing instruments). As used in this
Agreement, a "Material Adverse Effect" shall mean, with respect to any party,
the result of one or more events, changes or effects which, individually or in
the aggregate, would have a material adverse effect on the business, results of
operations or financial condition of such party and its Subsidiaries, taken as
a whole. As used in this Agreement, "Material Subsidiary", with respect to any
party, means any Subsidiary of such party that constitutes a Significant
Subsidiary of such party within the meaning of Rule 1-02 of the Regulation S-X
of the Securities and Exchange Commission (the "SEC") and, in the case of the
Company, also shall include The CBS/Fox Company and Radford Studio Center Inc.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 100,000,000 Shares and 6,000,000 shares of
Preference Stock, $1.00 par value ("Preferred Stock"). At the close of
business on July 28, 1995: (i) 63,677,363 Shares and 320,000 shares of Series
B Preferred Stock were issued and outstanding, 1,106,400 Shares were reserved
for issuance pursuant to the conversion of the Series B Preferred Stock and
1,850,526 Shares were reserved for issuance pursuant to the Stock Rights Plan,
and, except for the issuance of Shares pursuant to the exercise of the Options,
there were no employment, executive termination or similar agreements providing
for the issuance of Shares; (ii) 17,485,230 Shares were held by the Company in
its treasury; and (iii) no bonds, debentures, notes or other instruments or
evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which the Company shareholders may vote ("Company Voting Debt") were
issued or outstanding. All outstanding Shares are validly issued, fully paid
and nonassessable and, other than as provided in the BCL, are not subject to
preemptive or other similar rights. Except as set forth in Section 3.1(b) of
the Company Disclosure Schedule, all outstanding shares of capital stock of the
Material Subsidiaries of the Company are validly issued, fully paid and
nonassessable and are owned by the Company or a direct or indirect Subsidiary
of the Company, free and clear of all liens, charges, encumbrances, claims and
options of any nature. Except as set forth in this Section 3.1(b), there are
not as of the date hereof, and there will not be at the Effective Time, any
outstanding or authorized options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which the Company or any
Subsidiary of the Company is a party or by which it is bound, in any case
obligating the Company or any Subsidiary of the Company to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. There are not as of the date hereof and there will
not be at the Effective Time any shareholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by which it is
bound relating to the voting of any shares of the capital stock of the Company.
Except as set forth in Section
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3.1(b) of the Company Disclosure Schedule, there are no restrictions on the
Company's ability or right to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and authority to enter
into this Agreement and, subject to the Company Shareholder Approval (as
defined in Section 3.1(c)(iii)), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the Company Shareholder
Approval. This Agreement has been duly executed and delivered by the Company
and, assuming that this Agreement constitutes the valid and binding agreement
of Parent and Sub, constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms.
(ii) Except as to which requisite waivers or consents have been obtained
and except as set forth in Section 3.1(c)(ii) of the Company Disclosure
Schedule and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (iii) of this Section 3.1(c)
are duly and timely obtained or made and the Company Shareholder Approval has
been obtained, the execution and delivery of this Agreement do not and the
consummation of the transactions contemplated hereby by the Company will not
(A) conflict with any provision of the Certificate or Articles of Incorporation
or By-laws (or other governing documents) of the Company or any of its Material
Subsidiaries, (B) conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets or property, or right of first refusal
with respect to any asset or property (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss, creation or right of
first refusal, a "Violation"), of any loan or credit agreement, note, mortgage,
indenture, lease, Company Employee Benefit Plan (as defined in Section
3.1(k)(i)) or other agreement, obligation or instrument, or (C) result in any
Violation of any Company Permit (as defined in Section 3.1(h)), concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets (collectively, "Laws"), except, with respect to
clauses (B) and (C), for any such Violations which would not have a Material
Adverse Effect with respect to the Company. The Board of Directors of the
Company has taken all actions necessary under the BCL, including approving the
transactions contemplated by this Agreement, to ensure that Section 912 of the
BCL does not, and will not, apply to the transactions contemplated in this
Agreement.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity"), is required by or with respect
to the Company or any of its Material
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Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, which if not obtained or made would have a Material Adverse Effect with
respect to the Company, except for: (A) the filing of a pre-merger notification
and report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or
termination of the applicable waiting period thereunder; (B) the filing with
the SEC of (x) a proxy statement in definitive form relating to a meeting of
the holders of Company Common Stock to approve the Merger ("Company Shareholder
Approval") (such proxy statement as amended or supplemented from time to time
being hereinafter referred to as the "Proxy Statement"), and (y) such reports
under and such other compliance with the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act and the rules and regulations
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby; (C) the filing of the Certificate of Merger
with the New York Secretary of State; (D) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws; (E)
such filings and approvals as may be required by any foreign pre-merger
notification, securities, corporate or other law, rule or regulation; (F) such
filings in connection with the New York State Real Property Transfer Tax, the
New York Real Property Transfer Gains Tax, the New York City Real Property
Transfer Tax or any other state or local tax which is attributable to the
beneficial ownership of the Company's or its Subsidiaries' real property, if
any (collectively, the "Gains and Transfer Taxes"); (G) such filings with and
approvals of the Federal Communications Commission or any successor entity (the
"FCC") as may be required under the Communications Act of 1934, as amended, and
the rules, regulations and policies of the FCC thereunder (the "Communications
Act"), including, without limitation, in connection with the transfer of
licenses in connection with the operation of the television and radio stations
owned and operated by the Company (the "Stations"); and (H) such other such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval necessitated by the Merger or the transactions contemplated by this
Agreement.
(d) SEC Documents. The Company has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since December 31, 1992 and
prior to the date of this Agreement (the "Company SEC Documents"), which are
all the documents (other than preliminary material) that the Company was
required to file with the SEC since such date. As of their respective dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted 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. The financial
statements of the Company (including, in each case, the notes thereto) included
in the Company SEC Documents complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a
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consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which were or are
expected, individually or in the aggregate, to be material in amount) the
consolidated financial position of the Company and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of the Company and its consolidated
Subsidiaries for the periods presented therein.
(e) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents, as set forth in Section 3.1(e) of the Company Disclosure
Schedule or as contemplated by this Agreement, since December 31, 1994 and
through the date of this Agreement, the business of the Company and each of its
Subsidiaries has been carried on only in the ordinary and usual course and
there has not been any material adverse change in the business, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole.
(f) No Undisclosed Material Liabilities. To the Company's knowledge,
except as set forth in Section 3.1(f) of the Company Disclosure Schedule or the
other Sections of the Company Disclosure Schedules, as of the date of this
Agreement, there are no liabilities of the Company or any Subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are reasonably likely to have a Material
Adverse Effect with respect to the Company, other than: (i) liabilities
reflected in any Company SEC Document; and (ii) liabilities under this
Agreement.
(g) Information Supplied. The Proxy Statement, at the time it is filed
with SEC or any other regulatory authority, on the date it is first mailed to
the holders of the Company Common Stock, or at the time of the Company
Shareholders Meeting (as defined in Section 5.1(b)), will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the Company Shareholders Meeting, any event with respect to
the Company or any of its Subsidiaries, or with respect to other information
supplied by the Company for inclusion in the Proxy Statement, shall occur which
is required to be described in an amendment of, or a supplement to, the Proxy
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the shareholders of the Company. The Proxy Statement will comply as to form,
in all material respects, with the provisions of the Exchange Act and the rules
and regulations thereunder.
(h) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except where the failure
to possess the same would not have a Material Adverse Effect with respect to
the Company and except as set forth in Section 3.1(h) of the
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Company Disclosure Schedule. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so
to comply would not have a Material Adverse Effect with respect to the Company
and except as set forth in Section 3.1(h) of the Company Disclosure Schedule.
Except as disclosed in the Company SEC Documents and except as set forth in
Section 3.1(h) of the Company Disclosure Schedule, the businesses of the
Company and its Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, including, without
limitation, laws relating to the environment, or any outstanding administrative
or judicial order which, in any case, is reasonably likely to result in a
Material Adverse Effect with respect to the Company. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect
to the Company or any of its Subsidiaries is pending or, to the knowledge of
the Company, threatened, other than those the outcome of which is not
reasonably likely to have a Material Adverse Effect with respect to the Company
and except as set forth on Section 3.1(h) of the Company Disclosure Schedule.
(i) Litigation. As of the date of this Agreement, except as set forth in
Section 3.1(i) of the Company Disclosure Schedule or disclosed in any Company
SEC Document, there is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary of the Company which (in any case) (i) questions the validity of
this Agreement or the Merger or any action taken or to be taken by the Company
or any of its shareholders under this Agreement in connection with the
consummation of the transactions contemplated hereby or (ii) is, individually
or together with any other suit, action or proceeding arising out of or based
upon the same or substantially the same facts or circumstances, reasonably
likely to have a Material Adverse Effect with respect to the Company, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any Subsidiary of the
Company which is reasonably likely to have a Material Adverse Effect on the
Company or prevent, hinder or materially delay its ability to consummate the
transactions contemplated by this Agreement.
(j) Taxes. Each of the Company and each of its Subsidiaries has filed all
material tax returns required to be filed by such party and has paid (or the
Company has paid on behalf of any such Subsidiary) all taxes shown due on such
returns, except to the extent that such failures to file or pay are not
reasonably likely to result in a Material Adverse Effect with respect to the
Company. All material deficiencies for any taxes which have been proposed,
asserted or assessed against the Company or any of its Subsidiaries have been
fully paid or are being contested and an adequate reserve therefor has been
established and is fully reflected in the most recent financial statements
contained in the Company SEC Documents, except to the extent that such
deficiencies are not reasonably likely to result in a Material Adverse Effect
with respect to the Company. The Company's federal income tax returns for all
of its taxable years through its taxable year ended December 31, 1990 have been
examined by the Internal Revenue Service (the "IRS"). The Company has
previously delivered or made available to Parent true and complete copies of
its federal income tax returns for each of the fiscal years ended December 31,
1991, December 31, 1992 and December 31, 1993. Except as set forth on Section
3.1(j) of the Company Disclosure
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Schedule, neither the Company nor any of its Subsidiaries is a party to or
bound by any agreement providing for the allocation or sharing of taxes with
any entity which is not, either directly or indirectly, a Subsidiary of the
Company. Neither the Company nor, to its knowledge, any of its Subsidiaries
has filed a consent pursuant to or agreed to the application of Section 341(f)
of the Code. The Company is not a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. For the purpose of
this Agreement, the term "tax" (and, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
(k) Employee Benefit Plans. With respect to all the employee benefit
plans (as that phrase is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") maintained for the benefit of
any current or former employee, officer or director of the Company or any of
its Subsidiaries) ("Company ERISA Plans") and any other benefit or compensation
plan, program or arrangement maintained for the benefit of any current or
former employee, officer or director of the Company or any of its Subsidiaries
(the Company ERISA Plans and such plans being referred to as the "Company
Plans"), except as set forth in Section 3.1(k) of the Company Disclosure
Schedule, as specifically provided in Section 5.12 or, in the case of clause
(i) below, as otherwise disclosed by the Company to Parent:
(i) none of the Company Plans is a "multiemployer plan" within the meaning
of ERISA;
(ii) none of the Company Plans promises or provides retiree medical or life
insurance benefits to any person;
(iii) none of the Company Plans provides for payment of a benefit, the
increase of a benefit amount, the payment of a contingent benefit, or the
acceleration of the payment or vesting of a benefit by reason of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement;
(iv) neither the Company nor any of its Subsidiaries has an obligation to
adopt, or is considering the adoption of, any new Company Plan or, except as
required by law, the amendment of an existing Company Plan;
(v) each Company Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS that it is so
qualified and, to the knowledge of the Company, nothing has occurred since the
date of such letter that could reasonably be expected to affect the qualified
status of such Company Plan;
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(vi) each Company Plan has been operated in all respects in accordance with
its terms and the requirements of all applicable law;
(vii) neither the Company nor any of its Subsidiaries or members of their
"controlled group" has incurred any direct or indirect liability under, arising
out of or by operation of Title IV of ERISA in connection with the termination
of, or withdrawal from, any Company Plan or other retirement plan or
arrangement, and, to the knowledge of the Company, no fact or event exists that
could reasonably be expected to give rise to any such liability;
(viii) the aggregate accumulated benefit obligations of each Company Plan
subject to Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Company Plan) does not exceed the fair market value
of the assets of such Company Plan (as of the date of such valuation); and
(ix) the Company is not aware of any claims relating to the Company Plans;
provided, however, that the failure of the representations set forth in clauses
(vi), (vii) and (ix) to be true and correct shall not be deemed to be a breach
of any such representation unless any such failure, individually or in the
aggregate (for this purpose assuming resolution against the Company of any
claim referred to in clause (ix) above of which the Company was aware when the
representation in such clause was made and which is reasonably likely to be
resolved) is reasonably likely to have a Material Adverse Effect.
(l) Intangible Property.
Except as set forth in Section 3.1(l) of the Company Disclosure Schedule,
each trademark, trade name and service mark listed in such Schedule, as well as
all registrations thereof, and each material license or other material contract
relating thereto (collectively, the "Company Intangible Property") is in good
standing in all material respects and is owned by the Company or its
Subsidiaries free and clear of any and all liens or encumbrances. Except as
set forth in Section 3.1(l) of the Company Disclosure Schedule, to the
knowledge of the Company, the use of the Company Intangible Property by the
Company or its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, service mark, or copyright
or any pending application therefor of any other person and there are no
pending claims and neither the Company nor any of its Subsidiaries has received
any notice of any pending claim or otherwise knows that any of the Company
Intangible Property is invalid or conflicts with the asserted rights of any
other person or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Company Intangible Property.
(m) Contracts. Except as set forth in Section 3.1(m) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or is bound by any employment agreement, television network affiliation
agreement, any credit
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agreement, mortgage or indenture, or any material talent, programming or joint
venture agreement which (x) provides that the terms thereof or any or all of
the benefits or burdens thereunder will be affected or altered (including,
without limitation, by means of acceleration) by, or are contingent upon, or
(y) will be subject to termination or cancellation as a result of, the
execution of this Agreement or the consummation of the transactions
contemplated hereby.
(n) Board Recommendation; State Takeover Statutes. The Board of Directors
of the Company, at a meeting duly called and held, has by the vote of those
directors present (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together, are fair to and in
the best interests of the Company and the shareholders of the Company and has
approved the same, and such approval is sufficient to render inapplicable to
the Merger, this Agreement and the transactions contemplated by this Agreement
the provisions of Section 912 of the BCL, and (ii) resolved to recommend that
the holders of the shares of Company Common Stock approve this Agreement and
the transactions contemplated herein, including the Merger. To the best of the
Company's knowledge, other than Section 912 of the BCL, no state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated hereby.
(o) Opinion of Financial Advisor. The Company has received the opinion of
Salomon Brothers Inc, dated August 1, 1995, to the effect that, as of the date
thereof, the Merger Consideration to be received by the holders of Company
Common Stock in the Merger is fair from a financial point of view to such
holders, a signed, true and complete copy of which opinion has been delivered
to Parent, and such opinion has not been withdrawn or modified.
(p) Vote Required. The affirmative vote of the holders of at least
two-thirds of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary (under applicable law
or otherwise) to approve the Merger and this Agreement and the transactions
contemplated hereby.
(q) FCC Qualifications. After due investigation, except for the matters
described in Section 3.1(q) of the Company Disclosure Schedule, the Company is
not aware of any facts or circumstances that might prevent or delay prompt
consent to the transfer of control applications and issuance of the FCC Order.
3.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows (except to the extent set forth
on the Disclosure Schedule previously delivered by Parent to the Company (the
"Parent Disclosure Schedule")):
(a) Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, has all requisite power and authority to
own, lease and operate its
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properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to conduct business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a Material Adverse
Effect with respect to Parent. Parent has heretofore made available to the
Company complete and correct copies of its and Sub's respective Certificates or
Articles of Incorporation and By-laws.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by each of Parent and Sub and assuming this Agreement
constitutes the valid and binding agreement of the Company, constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with its
terms.
(ii) Except as to which requisite waivers or consents have been obtained
and assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in paragraph (iii) of this Section 3.2(b) are duly
and timely obtained or made and the Company Shareholder Approval has been
obtained, the execution and delivery of this Agreement do not and the
consummation of the transactions contemplated hereby by each of Parent and Sub
will not (A) conflict with any provision of the Certificate or Articles of
Incorporation or By-laws of Parent or Sub, (B) result in any Violation of any
loan or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation or instrument or (C) result in any Violation of any Laws applicable
to Parent or Sub or their respective properties or assets, except, with respect
to clauses (B) and (C), for any such Violations which would not have a Material
Adverse Effect with respect to Parent.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Governmental Entity,
is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement by each of Parent and Sub or the
consummation by each of Parent or Sub of the transactions contemplated hereby,
which the failure to obtain or make would have a Material Adverse Effect with
respect to Parent, except for: (A) filings under the HSR Act; (B) the filing
with the SEC of such reports under and such other compliance with the Exchange
Act and the rules and regulations thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the New York Secretary of State; (D) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws; (E) such filings and approvals as may be required
by any foreign pre-merger notification, securities, corporate or other law,
rule or regulation; (F) such filings in connection with any Gains and Transfer
Taxes; (G) such filings with and approvals of the FCC as may be required under
the
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Communications Act, including, without limitation, in connection with the
transfer of licenses in connection with the operation of the Stations; and (H)
such other such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the Merger or the
transactions contemplated by this Agreement. Neither Parent nor any of its
Affiliates or Associates (as each such term is defined in Section 912 of the
BCL) is, at the date hereof, an "interested shareholder" (as such term is
defined in Section 912 of the BCL) of the Company.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the time it is filed with the SEC or any other
regulatory authority, on the date it is first mailed to the Company's
shareholders, or at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the Company Shareholders Meeting any event with respect to
Parent or Sub, or with respect to information supplied by Parent or Sub for
inclusion in the Proxy Statement, shall occur which is required to be described
in an amendment of, or a supplement to, such documents, such event shall be so
described to the Company.
(d) Financing. Parent has received executed commitments (including the
term sheet attached thereto, the "Commitment Letter"), copies of which have
been delivered to the Company, from one or more financial institutions to
provide, subject to the conditions specified therein, an aggregate of $2
billion of the funds required to consummate the Merger.
(e) Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
(f) Board Approval. The Board of Directors of the Parent, at a meeting
duly called and held, has by the vote of those directors present and voting
determined that the Merger is fair to and in the best interests of Parent and
has approved the same. At such meeting, the Board of Directors of Parent
received the opinion of J.P. Morgan Securities Inc., dated August 1, 1995, to
the effect that, as of the date thereof, the Merger Consideration to be paid by
Parent in the Merger is fair from a financial point of view to Parent, a
signed, true and complete copy of which opinion has been delivered to the
Company, and such opinion has not been withdrawn or modified.
(g) FCC Qualifications. Except as set forth in Section 3.2(g) to the
Parent Disclosure Schedule, (i) to Parent's knowledge, Parent and Sub are, for
purposes of obtaining the FCC Order, legally, financially and otherwise
qualified to acquire control of the Company and (ii) after due investigation,
Parent and Sub are not aware of any other facts
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or circumstances that might prevent or delay prompt consent to the transfer of
control applications and issuance of the FCC Order.
(h) Financial Covenant Compliance. After due investigation and in
reliance upon financial information and projections provided by the Company
with respect to the Company, Parent has no reason to believe that it will not
be able to deliver the pro forma financial statements required by, and satisfy
the condition set forth in, Section V(f) of the Commitment Letter on the basis
contemplated in such Section.
(i) Third-party Consents. Except as described in the exceptions to
Section 3.2(b)(iii), there are no governmental or other third-party approvals
necessary in connection with, or waiting periods applicable to, the Merger and
the Financing (as defined in Section 5.7(c)) contemplated by the Commitment
Letter.
(j) Sufficient Financing. Parent believes, as of the date hereof, that
the funds to be advanced to Parent pursuant to the credit facilities referred
to in the Commitment Letter would be sufficient for the Financing.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to the
Company and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, or to the extent that Parent shall otherwise
consent in writing):
(a) Ordinary Course. Each of the Company and its Subsidiaries shall carry
on its business in the ordinary course in substantially the same manner as
heretofore conducted.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it
permit any of its Subsidiaries to: (i) except for regular quarterly dividends
not in excess of $.10 per Share with customary record and payment dates,
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, other than cash dividends or distributions paid to the
Company or any wholly-owned Subsidiary on or with respect to the capital stock
of a wholly-owned Subsidiary; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) repurchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any shares of its capital stock,
except as required by the terms of its securities outstanding on the date
hereof, as contemplated by this Agreement or as contemplated by employee
benefit and dividend reinvestment plans as in effect on the date hereof.
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(c) Issuance of Securities. Except as set forth in Section 4.1(c) of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its Subsidiaries to, (i) grant any options, warrants or rights, to purchase
shares of Company Common Stock, (ii) amend or reprice any Option or SAR Unit or
amend the Stock Rights Plan, or (iii) issue, deliver or sell, or authorize or
propose to issue, deliver or sell, any shares of its capital stock of any class
or series, any Company Voting Debt or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, Company Voting Debt or
convertible securities, other than (A) the issuance of Shares upon the exercise
of Options granted under the Stock Rights Plan which are outstanding on the
date hereof, or in satisfaction of stock grants or stock based awards made
prior to the date hereof pursuant to the Stock Rights Plan or based upon any
individual agreements such as employment agreements or executive termination
agreements (in each such case, as in effect on the date hereof), (B) the
issuance of Shares upon the conversion of shares of Series B Preferred Stock in
accordance with the terms thereof and (C) issuances by a wholly-owned
Subsidiary of its capital stock to its parent.
(d) Governing Documents. The Company shall not amend or propose to amend
its Certificate of Incorporation or Bylaws.
(e) No Solicitation. (i) The Company, its Subsidiaries and their
respective officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its Subsidiaries) (collectively,
the "Company's Representatives") shall immediately cease any discussions or
negotiations with any party that may be ongoing with respect to a Competing
Transaction (as defined below). From and after the date hereof until the
termination of this Agreement, neither the Company or any of its Subsidiaries
will, nor will the Company authorize or permit any of its Subsidiaries or any
of the Company Representatives to, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information), or
take any other action to facilitate knowingly, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction or agree to or endorse any Competing
Transaction, or authorize or permit any of the Company Representatives to take
any such action, and the Company shall notify Parent orally (within one
business day) and in writing (as promptly as practicable) of all of the
relevant details relating to all inquiries and proposals which it or any of its
Subsidiaries or any such Company Representative may receive relating to any of
such matters and, if such inquiry or proposal is in writing, the Company shall
deliver to Parent a copy of such inquiry or proposal promptly; provided,
however, that nothing contained in this Section 4.1(e) shall prohibit the
Company or its Board of Directors from (A) taking and disclosing to its
shareholders a position contemplated by Exchange Act Rule 14e-2 or (B) making
any disclosure to its shareholders that, in the good faith judgment of its
Board of Directors, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), is required under applicable law; provided,
further, however, that nothing contained in this Section 4.1(e) shall prohibit
the
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Company from (1) furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes after the date hereof a
written, bona fide proposal unsolicited after the date hereof to acquire the
Company and/or its Subsidiaries pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction if (A) the Board of Directors of the Company, after consultation
with and based upon the advice of independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), determines in good
faith that such action is necessary for the Board of Directors of the Company
to comply with its fiduciary duties to shareholders under applicable law and
(B) prior to taking such action, the Company (x) provides reasonable notice to
Parent to the effect that it is taking such action and (y) receives from such
person or entity an executed confidentiality agreement in reasonably customary
form or (2) failing to make or withdrawing or modifying its recommendation
referred to in Section 3.1(n) if there exists a Competing Transaction and the
Board of Directors of the Company, after consultation with and based upon the
advice of independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary
for the Board of Directors of the Company to comply with its fiduciary duties
to shareholders under applicable law. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following (other than the
transactions between the Company, Parent and Sub contemplated hereunder)
involving the Company: (i) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all
or a substantial portion of the assets of the Company and its Subsidiaries,
taken as a whole, or of more than 25% (in the case of Section 5.4(b)(i) only,
50%) of the equity securities of the Company or any of its Material
Subsidiaries, in any case in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 25% (in the case of Section
5.4(b)(i) only, 50%) or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(ii) Except as set forth in this Section 4.1(e)(ii), the Board of
Directors of the Company shall not approve or recommend, or cause the Company
to enter into any agreement with respect to, any Competing Transaction.
Notwithstanding the foregoing, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), determines
in good faith that it is necessary to do so in order to comply with its
fiduciary duties to shareholders under applicable law, the Board of Directors
of the Company may approve or recommend a Superior Proposal (as defined below)
or cause the Company to enter into an agreement with respect to a Superior
Proposal, but in each case only after providing reasonable written notice to
Parent (a "Notice of Superior Proposal") advising Parent that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any Competing Transaction, it shall
concurrently with entering
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into such an agreement pay, or cause to be paid, to Parent the full fee and
expense reimbursement required by Section 5.4(b) hereof. For purposes of this
Agreement, a "Superior Proposal" means any bona fide proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
all or substantially all the Shares then outstanding or all or substantially
all the assets of the Company and otherwise on terms which the Board of
Directors of the Company determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized reputation) to be more
favorable to the Company's shareholders than the Merger.
(f) No Acquisitions. Except as set forth in Section 4.1(f) of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any material business.
(g) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed in Section 4.1(g) of the Company Disclosure Schedule; or
(ii) dispositions in the ordinary course of business consistent with past
practice which are not material, individually or in the aggregate, to such
party and its Subsidiaries taken as a whole, the Company shall not, nor shall
it permit any of its Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its assets.
(h) Advice of Changes. The Company shall cause its senior officers to use
reasonable efforts to promptly advise Parent of any change or occurrence
having, or which, insofar as reasonably can be foreseen, could have, a Material
Adverse Effect with respect to the Company and, to the extent permitted by law
(including FCC regulations), to meet on a regular basis with Parent's senior
officers to discuss the Company's business.
(i) No Dissolution, Etc. The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of the Company or any of its Subsidiaries.
(j) Other Actions. Except as contemplated by this Agreement, the Company
will not nor will it permit any of its Subsidiaries to take or agree or commit
to take any action that is reasonably likely to result in any of the Company's
representations or warranties hereunder being untrue such that the condition
set forth in Section 6.2(a) will not be satisfied.
(k) Certain Employee Matters. The Company and its Subsidiaries shall not
(except as contemplated in Section 4.1(k) of the Company Disclosure Schedule
(it being understood that Parent shall not unreasonably withhold its consent to
certain matters set forth therein as specified therein) and except as provided
in Section 3.1(k) of the Company Disclosure Schedule): (i) grant any increases
in the compensation of any of its directors, officers or key employees, except
for increases for officers and employees in the ordinary
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course of business; (ii) pay or agree to pay any pension, retirement allowance
or other employee benefit not required or contemplated by any of the existing
Company Benefit Plans or Company Pension Plans as in effect on the date hereof
to any such director, officer or key employee, whether past or present; (iii)
except as permitted by Section 4.1(1)(ii), enter into any new, or materially
amend any existing, employment or severance or termination agreement with any
such director, officer or key employee; or (iv) except as may be required to
comply with applicable law, become obligated under any new Company Plan, which
was not in existence on the date hereof, or amend any such plan or arrangement
in existence on the date hereof if such amendment would have the effect of
enhancing any benefits thereunder. The Company shall provide Parent with
copies of any amendments to any Company Plan prior to the Effective Time.
(1) Indebtedness; Agreements. (i) Except as set forth in Section
4.1(1)(i) of the Company Disclosure Schedule, the Company shall not, nor shall
the Company permit any of its Subsidiaries to, assume or incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of such party
or any of its Subsidiaries or guarantee any debt securities of others or create
any mortgages, liens, security interests or other encumbrances on the property
of the Company or any of its Subsidiaries in connection with any indebtedness
thereof, or enter into any "keep well" or other agreement or arrangement to
maintain the financial condition of another person.
(ii) Except as set forth in Section 4.1(1)(ii) of the Company Disclosure
Schedule, the Company shall not, nor shall the Company permit any of its
Subsidiaries to (x) enter into, modify, rescind, terminate, waive, release or
otherwise amend in any material respect any of the terms or provisions of any
(A) television network affiliation agreement for a television station in one of
the 50 largest markets (provided, however, that this Section 4.1(1)(ii) shall
be inapplicable to the ordinary course extension of affiliation agreements upon
expiration thereof), (B) intercollegiate, professional or other sports
television network programming agreement having an aggregate value over its
term greater than $100,000,000, (C) new employment or consulting agreement
which provides for compensation in excess of $250,000 per year (in the case of
corporate staff employees and consultants) or $750,000 per year (in the case of
entertainment division employees and consultants), or (D) Material Contract (as
defined below); or (y) modify, rescind, terminate, waive, release or otherwise
amend in any material respect any of the terms or provisions of the contract
referred to in subsection (z) of Section 4.1(1)(ii) of the Company Disclosure
Schedule; provided, however, that Parent shall not unreasonably withhold or
delay its consent to any of the foregoing matters. "Material Contract" means
any contract, agreement, commitment or arrangement to which the Company or any
of its Subsidiaries is a party or by which it or any such Subsidiary is bound
which would be required to be filed by the Company with the SEC as an exhibit
to its Annual Report on Form 10-K.
(m) Accounting. The Company shall not take any action, other than in the
ordinary course of business, consistent with past practice or as required by
the SEC or by law, with respect to accounting policies, procedures and
practices.
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(n) Tax Election. The Company shall not make any material tax election
(unless required by law) or settle or compromise any material income tax
liability except if such action is taken in the ordinary course of business and
Parent shall have been provided reasonable prior notice thereof.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Company Shareholders Meeting. (a)
As promptly as practicable following the date of this Agreement, the Company
shall prepare and file with the SEC the Proxy Statement. The Company shall use
its best efforts to respond to all SEC comments with respect to the Proxy
Statement and to cause the Proxy Statement to be mailed to the Company's
shareholders at the earliest practicable date. Parent shall furnish all
information concerning itself to the Company as may be reasonably requested in
connection with such preparation, filing and response.
(b) The Company will, as soon as practicable following delivery to the
Company of the executed Credit Agreement (as defined in Section 5.7(c)), duly
call, give notice of, convene and hold a meeting of its shareholders (the
"Company Shareholders Meeting") for the purpose of approving this Agreement and
the transactions contemplated hereby. At the Company Shareholders Meeting,
Parent shall cause all the shares of Company Common Stock then owned by Parent
and Sub and any of their Subsidiaries or affiliates to be voted in favor of the
Merger.
5.2 Access to Information; Confidentiality. To the extent permitted by
law (including FCC regulations) and subject to confidentiality agreements with
third parties, upon reasonable notice, the Company shall (and shall cause each
of its Subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of Parent reasonable access, during normal business
hours during the period prior to the Effective Time, to its properties, books,
contracts, commitments and records and, during such period, (a) the Company
shall (and shall cause each of its Subsidiaries to) furnish promptly to Parent
all other information concerning its business, properties and personnel as
Parent may reasonably request and (b) Parent shall have reasonable access to
members of senior management of the Company and its Subsidiaries, including the
Divisional Presidents or their designees. Parent agrees that it will not, and
will cause its representatives not to, use any information obtained pursuant to
this Section 5.2 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. The Confidentiality Agreement,
dated as of July 25, 1995, between Parent and the Company (the "Confidentiality
Agreement") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
5.3 Transfer Taxes. The Company and Parent 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,
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stock transfer and stamp taxes, any transfer, recording, registration and other
fees (including the Gains and Transfer Taxes) and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement (together with any related interest, penalties or additions to tax,
"Transfer Taxes"). Parent shall pay or cause to be paid, without withholding
from the amounts payable to any holder of any Shares, all Transfer Taxes.
5.4 Fees and Expenses. (a) Except as otherwise provided in this Section
5.4, all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense; provided, however, that all costs and expenses, including filing fees,
related to the printing, mailing or filing of the Proxy Statement or to any
other filing with any Governmental Entity in connection with the Merger, this
Agreement or any other transaction contemplated thereby or hereby shall be
borne equally by Parent and the Company.
(b) The Company agrees that if this Agreement shall be terminated pursuant
to:
(i) Section 7.1(f), if at or prior to the time of the Company Shareholders
Meeting a Competing Transaction shall have been commenced, publicly proposed or
publicly disclosed and if within one year after the Company Shareholders
Meeting the Company enters into an agreement with respect to, approves or
recommends such or any other Competing Transaction;
(ii) Section 7.1(g); or
(iii) Section 7.1(h);
then the Company shall (A) pay to Parent an amount equal to $100,000,000 and
(B) assume and pay, or reimburse Parent for, all reasonable documented
out-of-pocket fees and expenses incurred by Parent (including, without
limitation, the fees and expenses of its counsel, commercial banks,
accountants, financial advisors, experts and consultants) which are
specifically related to the Merger, this Agreement and the matters contemplated
by this Agreement; provided, however, that the Company shall not be obligated
to pay or reimburse more than an aggregate of $50,000,000 pursuant to the
foregoing clause (B).
(c) Parent agrees that if this Agreement shall be terminated pursuant to:
(i) Section 7.1(c) if at such time (A) the conditions set forth in
Section 6.1 shall have been satisfied and the other conditions in
Article VI were capable of being satisfied and (B) the condition set
forth in Section 6.2(c) shall not have been satisfied;
(ii) Section 7.1(d)(i);
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(iii) Section 7.1(d)(ii);
(iv) Section 7.1(e)(i);
(v) Section 7.1(e)(ii);
(vi) Section 7.1(d)(iii); or
(vii) Section 7.1(e)(iii);
then Parent shall (A) pay to the Company an amount equal to (x) in the case of
clauses (i), (vi) and (vii), $100,000,000, (y) in the case of clauses (iii) and
(v), $50,000,000 and (z) in the case of clauses (ii) and (iv), $25,000,000, and
(B) in any such case, assume and pay, or reimburse the Company for, all
reasonable documented out-of-pocket fees and expenses incurred by the Company
(including, without limitation, the fees and expenses of its counsel,
accountants, financial advisors, experts and consultants) which are
specifically related to the Merger, this Agreement and the matters contemplated
by this Agreement; provided, however, that Parent shall not be obligated to pay
or reimburse pursuant to the foregoing clause (B) more than, in the case of
clauses (i), (vi) and (vii), $20,000,000, in the case of clauses (iii) and (v),
$10,000,000 and, in the case of clauses (ii) and (iv), $5,000,000.
(d) Any payment required to be made pursuant to Section 5.4(b) or 5.4(c)
shall be made as promptly as practicable but not later than five business days
after the occurrence of the event giving rise to such payment and shall be made
by wire transfer of immediately available funds to an account designated by
Parent or the Company, as the case may be, except that any payment to be made
pursuant to Section 5.4(b)(iii) shall be made not later than the termination of
this Agreement by the Company pursuant to Section 7.1(h) and any payment to be
made pursuant to Section 5.4(c)(ii), (iii) or (vi) shall be made not later than
the termination of this Agreement by Parent pursuant to Section 7.1(d). The
amount of fees and expenses so payable under clause (B) of either Section
5.4(b) or 5.4(c) shall be the amount set forth in a written estimate delivered
by Parent or the Company, as the case may be, subject to upward or downward
adjustment (not to be in excess of the amount set forth in the foregoing
proviso) upon delivery of reasonable documentation therefor.
5.5 Brokers or Finders. (a) The Company represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finders fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except Salomon
Brothers Inc and Allen & Company, Incorporated, whose fees and expenses will be
paid by the Company in accordance with the Company's agreements with such firms
(copies of which have been delivered by the Company to Parent prior to the date
of this Agreement), and the Company agrees to indemnify and hold Parent
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on
the basis of any act or statement alleged to have been made by such party or
its affiliate.
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(b) Parent represents, as to itself, its Subsidiaries and its affiliates,
that no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's or finders fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except J.P. Morgan Securities Inc. and another
consultant previously identified to the Company, whose fees and expenses will
be paid by Parent in accordance with Parent's agreements with each of them, and
Parent agrees to indemnify and hold Company harmless from and against any and
all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
5.6 Indemnification; Directors' and Officers' Insurance. (a) The Company
shall, and from and after the Effective Time, Parent and the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of the Company or any of its
Subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees and expenses), liabilities or
judgments or amounts that are paid in settlement of, with the approval of the
indemnifying party (which approval shall not be unreasonably withheld), or
otherwise in connection with any threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director or officer of the
Company or any of its Subsidiaries at or prior to the Effective Time, whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the full extent a
corporation is permitted under the BCL to indemnify its own directors or
officers as the case may be (and Parent and the Surviving Corporation, as the
case may be, will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law). Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), (i) the Indemnified
Parties may retain counsel reasonably satisfactory to the Company (or to Parent
and the Surviving Corporation after the Effective Time) and the Company (or
after the Effective Time, Parent and the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (ii) the Company (or after
the Effective Time, Parent and the Surviving Corporation) will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company, Parent nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent, which
consent shall not unreasonably be withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.6, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, Parent and the Surviving Corporation) (but the failure so
to notify shall not relieve a party from any liability which it may have under
this Section 5.6 except to the extent such failure prejudices such party). The
Indemnified Parties as a group may retain only one law firm in any jurisdiction
to represent them with respect to each
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such matter unless such counsel determines that there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties, in which event such
additional counsel as may be required may be retained by the Indemnified
Parties.
(b) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its Subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous in any
material respect to the Indemnified Parties) with respect to claims arising
from facts or events which occurred before the Effective Time, provided that
Parent shall not be required to pay an annual premium for such insurance in
excess of 200% of the last annual premium paid by the Company prior to the date
hereof (which premium the Company represents and warrants to be $77,500 in the
aggregate), but in such case shall purchase as much coverage as possible for
such amount.
(c) The provisions of this Section 5.6 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her personal representatives and shall be binding on all successors and
assigns of Parent, Sub, the Company and the Surviving Corporation.
5.7 Best Efforts. (a) General. Each of the parties hereto agrees to use
its best efforts to take, or cause to be taken, all action and to do or
satisfy, or cause to be done or satisfied, all things and conditions necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including (i) cooperating fully with the other party, including by
provision of information and making of all necessary filings in connection
with, among other things, approvals under the HSR Act and of the FCC or any
other Governmental Entity, and (ii) obtaining (and cooperating with each other
in obtaining) any consent, authorization, order (including the FCC Order) or
approval of, or any exemption by, or making any filing with, any Governmental
Entity or other public or private third party, including the FCC, required to
be obtained or made by the Company, Parent, Sub or any of their respective
Subsidiaries in connection with this Agreement or the taking of any action
contemplated hereby. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of the Constituent
Corporations, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
(b) FCC. Each of Parent and Sub shall use its best efforts to take, or
cause to be taken, all action and to do or satisfy, or cause to be done or
satisfied, all things and conditions necessary, proper or advisable to obtain
the FCC Order and to satisfy all conditions and take all actions required
thereby, in each case so as to come into compliance with FCC requirements and
to consummate the Merger as promptly as practicable. The Company shall also
use such best efforts, but shall not be required to take any action that
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would be effective prior to the consummation of the Merger, except as set forth
in the penultimate paragraph of Section 5.11(a) to the Parent Disclosure
Schedule.
(c) Financing. Parent shall use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable (A) to obtain commitment letters to provide all of the financing
required by Parent to consummate the Merger, to refinance Parent's and the
Company's then-existing bank debt and to pay related fees and expenses on terms
not materially less favorable to Parent in the aggregate than the terms set
forth in the Commitment Letter and with conditions that are the same, except in
respects that do not adversely affect Parent's ability to obtain the Financing,
as those in the Commitment Letter (the "Financing") by no later than September
14, 1995 and (B) so that there is in effect, as promptly as practicable but in
no event later than October 4, 1995, one or more definitive credit agreements
(collectively, the "Credit Agreement") from one or more financial institutions
unaffiliated with Parent pursuant to which Parent shall have received
commitments to provide the Financing. Parent shall provide to the Company
copies of any such commitment letters and Credit Agreement and shall keep the
Company reasonably informed of the status of the financing process contemplated
by the Commitment Letter. The Company shall cause its senior management to
cooperate with all reasonable requests by Parent in connection with such
efforts by Parent, including causing such persons to attend meetings with
prospective members of and participants in any syndicate of financial
institutions being assembled to provide such financing.
5.8 Conduct of Business of Sub. During the period of time from the date
of this Agreement to the Effective Time, Sub shall not engage in any activities
of any nature except as provided in or contemplated by this Agreement.
5.9 Publicity. The parties will consult with each other and will mutually
agree upon any press release or public announcement pertaining to the Merger
and shall not issue any such press release or make any such public announcement
prior to such consultation and agreement, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange, in which case the party proposing to issue such
press release or make such public announcement shall use reasonable efforts to
consult in good faith with the other party before issuing any such press
release or making any such public announcement.
5.10 Notification of Certain Matters. Parent shall give prompt notice to
the Company, and the Company shall give prompt notice to Parent, of (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which would be likely to cause (x) any representation or warranty contained in
this Agreement, including the Disclosure Schedules, to be untrue or inaccurate
such that one or more conditions set forth in Article VI would not be satisfied
or (y) any condition contained in this Agreement not to be satisfied and (ii)
any failure of Parent or the Company, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder such that one or more conditions set forth in Article VI would
not be satisfied;
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provided, however, that the delivery of any notice pursuant to this Section
5.10 shall not in any manner constitute a waiver by any of the parties of any
of the conditions precedent to the Closing hereunder or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Without limiting the foregoing and notwithstanding that the representations and
warranties contained in Section 3.1(i) (i) disclose only matters existing as of
the date hereof, the Company shall promptly deliver to Parent any information
concerning events subsequent to the date hereof which is necessary to
supplement Section 3.1(i) of the Company Disclosure Schedule in order that the
information contained therein be complete and accurate in all material
respects. In addition, the Company will provide Parent with reasonable advance
notice of and consult with Parent with respect to, any material action proposed
to be taken by the Company with respect to the contracts described in Section
5.10 of the Company Disclosure Schedule.
5.11 FCC Matters. (a) As promptly as practicable following the date of
this Agreement, the Company and Parent and Sub shall prepare and file with the
FCC all necessary applications for approval of the Merger and the other
transactions contemplated by this Agreement. Without limiting the foregoing,
the Company, Parent and Sub shall submit to the FCC an application to be filed
on FCC Form 315 pursuant to the Communications Act and an application for
certain waivers pursuant to the Communications Act, as described in Section
5.11(a) to the Parent Disclosure Schedule. In no event shall such parties, in
making such application, or shall Parent or Sub, in seeking the FCC Order,
apply for waivers, except if each party to this Agreement consents thereto in
writing (which consent shall not be unreasonably withheld or delayed) or except
as otherwise set forth in Section 5.11(a) to the Parent Disclosure Schedule.
In no event shall the obtaining of any waivers be a condition to consummation
of the Merger.
(b) Parent and Sub, on the one hand, and the Company, on the other hand,
further covenant that from and after the date hereof until the Effective Time,
without the prior written consent of the Company or Parent, as the case may be,
neither Parent nor Sub, on the one hand, nor the Company, on the other hand,
shall, except as otherwise set forth in Section 5.11(b) to the Company
Disclosure Schedule or Section 5.11(b) to the Parent Disclosure Schedule, take
any action that could in any way adversely affect, or delay or interfere with,
obtaining the FCC Order or complying with or satisfying the terms thereof,
including, without limitation, acquiring any new or increased attributable
interest, as defined in the FCC rules, in any media property, which property
could not be held (without the need for a waiver) in common control by Parent
or the Surviving Corporation following the Effective Time.
5.12 Employee Benefit Plans.
(a) Maintenance of Benefits. For not less than two years following the
Effective Time, Parent shall maintain or cause to be maintained the Company
ERISA Plans, other than severance plans and the CBS pension plan and the
Midwest Communications pension plan (together, the "Company Pension Plan") and
related supplemental and excess retirement plans (the "SERPS"), maintained by
the Company and its Subsidiaries as of the
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Effective Time ("Benefit Plans"), with respect to employees of the Company and
its Subsidiaries eligible for coverage under such Benefit Plans as of the
Effective Time who remain employed by the Company or its Subsidiaries or by any
broadcasting unit owned by either Parent or its Subsidiaries. The Company
shall amend its nonqualified 401(k) plan prior to the Effective Time to permit
termination or amendment of such plan two years after the Effective Time. For
not less than one year following the Effective Time, Parent shall maintain or
cause to be maintained the Company's and any Subsidiary's existing severance
plans (including the plan set forth in the CBS Personnel Policy Manual) as of
the Effective Time with respect to employees of the Company and its
Subsidiaries eligible for coverage under such plan or plans as of the Effective
Time.
(b) Pension Plan. With respect to all employees of the Company and its
Subsidiaries eligible for coverage under the Company Pension Plan as of the
Effective Time who remain employed by the Company or its Subsidiaries or by any
broadcasting unit owned by either Parent or its Subsidiaries ("Eligible
Employees"), (i) for the two-year period following the Effective Time for all
Eligible Employees, (ii) for the five- year period following the Effective Time
for all Eligible Employees who have attained the age of fifty and who have not
attained age fifty-five at the Effective Time and (iii) without limitation for
all Eligible Employees who have attained age fifty-five at the Effective Time
(each respective time period being referred to as the "Time Period"), Parent
shall maintain or cause to be maintained the same benefit accruals, including
the determination of final average compensation, benefit options and early
retirement eligibility and early retirement subsidies and any other provision
relating to the calculation and payment of, and eligibility to receive,
benefits (except as otherwise provided below with respect to GATT interest
rates), but only with respect to benefit accruals for the period through the
end of the applicable Time Period, as are provided under the Company Pension
Plan as of the Effective Time. Parent may change or cause to be changed any
aspect of the calculation and payment of benefits for Eligible Employees
effective as of the end of the applicable Time Period for accruals thereafter
and shall have no obligation to adjust accruals through the end of a Time
Period for subsequent changes in final average pay. Parent may change or cause
to be changed the actuarial assumptions for the calculation of lump sum
benefits immediately after the Effective Time pursuant to GATT, all to the
extent permitted by applicable law. In addition, the accrual formulas and
other applicable provisions of the SERPS with respect to the benefits protected
above in the related Company Pension Plan shall be continued with respect to
Eligible Employees for their respective applicable Time Periods to the same
extent that accruals and other applicable provisions are continued under the
Company Pension Plan. Parent shall not by amendment reduce the accrued
benefits under the SERP, including in respect of early retirement subsidies and
lump sum options (other than to include GATT assumptions), of an Eligible
Employee for any period prior to the end of the Time Period. Nothing provided
herein shall prevent Parent from causing the merger of the Company Pension Plan
with any other pension plan maintained by Parent or its Subsidiaries, subject
to the merged plan providing for the payment of benefits as described in this
Section 5.12(b).
(c) Service. For purposes of determining eligibility to participate,
vesting, entitlement to benefits and in all other respects where length of
service is relevant under any
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Parent benefit plan or arrangement (including for severance but not for pension
accruals except to the extent provided in Section 5.12(b) insofar as applicable
to any successor plan to a plan described in Section 5.12(b)), employees of the
Company and its Subsidiaries as of the Effective Time ("Employees") shall
receive service credit for service with the Company and its Subsidiaries to the
same extent such service was granted under comparable plans of the Company and
its Subsidiaries. In no event shall service credit granted result in any
duplication of benefits.
(d) Applicability. Notwithstanding anything set forth above, any Company
ERISA Plan including the Company Pension Plan, SERPS and any severance plan
(the "Plans") may be amended to the extent required to comply with applicable
law. Parent and its Subsidiaries shall not be required to incur a cost
increase to comply with applicable law except to the extent attributable to
automatic increases in compensation or benefit limitations as applicable to
"qualified plans" under the provisions of the Internal Revenue Code, but in
such event corresponding adjustments shall be made in the SERPS. The
restrictions set forth in this Section 5.12 herein shall not be applicable to
employees of the Company and its Subsidiaries as of the Effective Time once
they are transferred (through the disposition of a subsidiary, division or
business unit) to a party not controlled by Parent, except to the extent
otherwise required under applicable law, unless such transfer occurs in
connection with the disposition of all or substantially all of the assets of
the Company, in which case the restrictions in this Section 5.12 shall continue
to apply to the extent applicable.
(e) Employees Covered by Collective Bargaining. With respect to Employees
represented for purposes of collective bargaining and eligible to participate
in any plan the subject of Section 5.12(a) through (d) ("Union Employees"),
after the Effective Time the Company shall expeditiously offer to each
collective bargaining representative of each Union Employee the application of
Section 5.12 to such Union Employee as proposed amendments to the applicable
collective bargaining agreement, but only with respect to plans that at the
Effective Time are provided to such Union Employee under the applicable
collective bargaining agreement; provided, however, that such offer shall not
be deemed a reopener of, or request to reopen, any such agreement. This
Section 5.12 shall not be applicable to any Union Employee until and unless the
applicable collective bargaining agent and the Company have signed a collective
bargaining agreement, or amendment thereto, incorporating the applicable
provisions of this Section 5.12.
(f) Third Party Beneficiary. This Section 5.12 is intended to be for the
benefit of and shall be enforceable by each Employee, other than a Union
Employee (but only with respect to those provisions applicable to such
Employee), and his heirs and personal representatives and, except as provided
in Section 5.12(d), shall be binding on all successors and assigns of Parent,
the Subsidiaries and the Company. To the extent that any provision of Section
5.12(a)-(d) shall be reflected in a Company ERISA Plan or its successor, the
exclusive remedy of each such Employee with respect to such provision or
request for a related benefit provided by such plan shall be the claims
procedure under such plan.
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(g) Annual Incentive Plan. Discretionary awards under the Annual Incentive
Plan for 1995 shall be limited to the amount set forth in the last paragraph of
Section 3.1(k)(iv) of the Company Disclosure Schedule.
5.13 SEC Filings. Each of Parent and the Company shall promptly provide
the other party (or its counsel) with copies of all filings made by the other
party or any of its Subsidiaries with the SEC or any other state or federal
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Company Common Stock.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction (an "Injunction") preventing the consummation of the
Merger shall be in effect; provided, however, that prior to invoking this
condition, each party shall use its best efforts to have any such Injunction
vacated.
(d) FCC Order. The FCC shall have issued the FCC Order and any condition
or action required to be satisfied or taken to legally effect the Merger in
compliance with the FCC Order shall have been so satisfied or taken (provided,
that in no event shall the foregoing require the satisfaction of any condition
or the taking of any action that could under the terms of the FCC Order be so
satisfied or taken subsequent to consummation of the Merger). As used in this
Agreement, the term "FCC Order" means an order or decision of the FCC which
grants all consents or approvals required under the Communications Act for the
transfer of control of all FCC licenses held by the Company to Parent and/or
Sub and the consummation of the Merger and the other transactions contemplated
by this Agreement, whether or not (i) any appeal or request for reconsideration
or review of such order is pending, or whether the time for filing any such
appeal or request for reconsideration or review, or for any sua sponte action
by the FCC with similar effect, has expired or (ii) such order is subject to
any condition or a provision of law or regulation of the FCC. For purposes of
this paragraph, the "FCC" shall mean the FCC or its staff.
32
<PAGE> 40
6.2 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Parent and Sub:
(a) Representations and Warranties; Performance of Obligations. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and the Company shall have performed all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, except to the extent the failure of such representations and
warranties to be true and correct or the failure to perform obligations
hereunder would not, in the aggregate, have a Material Adverse Effect with
respect to the Company. Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and by the chief financial
officer of the Company to such effect.
(b) No Material Adverse Change. Since the date of this Agreement, there
shall not have been any material adverse change in the business, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, other than changes relating to the Company's industry or the economy
in general and not specifically related to the Company or any of its Material
Subsidiaries. Each of Parent and Sub acknowledges that there may be
disruptions to the Company's business as a result of the announcement of the
Merger and any changes attributable thereto shall not constitute a material
adverse change.
(c) Funding. Parent shall have received the funds pursuant to the
Financing.
6.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the condition,
which may be waived in whole or in part by the Company, that the
representations and warranties of Parent and Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and Parent and Sub shall have
performed all obligations required to be performed by them under this Agreement
at or prior to the Closing Date, except to the extent the failure of such
representations and warranties to be true and correct or the failure to perform
obligations hereunder would not, in the aggregate, have a Material Adverse
Effect with respect to the Company. The Company shall have received a
certificate signed on behalf of Parent by the chief executive officer and by
the chief financial officer of Parent to such effect.
33
<PAGE> 41
6.4 Closing Deliveries. The parties hereto shall deliver or cause to be
delivered to one another such opinions, certificates and other documents as
shall be reasonably requested.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of the Company or Parent:
(a) by mutual written consent of the Company and Parent, or by mutual
action of their respective Boards of Directors;
(b) by either the Company or Parent (i) if there has been a material
breach of any representation, warranty, covenant or agreement on the part of
the other set forth in this Agreement which breach has not been cured within 30
days following receipt by the breaching party of notice of such breach, in any
such case such that the conditions set forth in Section 6.2 or Section 6.3, as
the case may be, would be incapable of being satisfied by August 1, 1996, or
(ii) if any permanent injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have become final and
non-appealable;
(c) by either the Company or Parent, if the Merger shall not have been
consummated on or before August 1, 1996; provided, that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any party
whose breach of this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date;
(d) by Parent (i) on September 14, 1995 if executed commitments from one
or more financial institutions to provide the Financing shall not have been
entered into and continue in full force and effect on the date Parent exercises
such termination option; (ii) at any time on or after November 3, 1995 but on
or prior to November 20, 1995 if the Credit Agreement shall not have been
entered into and continue in full force and effect on the date Parent exercises
such termination option; or (iii) at any time subsequent to November 20, 1995,
if the Credit Agreement no longer is in full force and effect on the date
Parent exercises such termination option;
(e) by the Company (i) at any time on or after September 15, 1995 but on
or prior to October 4, 1995 if executed commitments from one or more financial
institutions to provide the Financing shall not have been entered into and
continue in full force and effect on the date the Company exercises such
termination option; (ii) at any time on or after October 5, 1995 but on or
prior to November 20, 1995 if the Credit Agreement shall not
34
<PAGE> 42
have been entered into and continue in full force and effect on the date the
Company exercises such termination option; or (iii) at any time subsequent to
November 20, 1995, if the Credit Agreement no longer is in full force and
effect on the date the Company exercises such termination option;
(f) by either Parent or the Company, if this Agreement and the Merger shall
fail to receive the requisite vote for approval and adoption by the
shareholders of the Company at the Company Shareholders Meeting;
(g) by Parent if (i) the Board of Directors of the Company shall withdraw,
modify or change its recommendation of this Agreement or the Merger in a manner
adverse to Parent or shall have approved or recommended to the shareholders of
the Company a Competing Transaction; (ii) the Company shall have entered into
any agreement with respect to any Competing Transaction; or (iii) the Board of
Directors shall resolve to do any of the foregoing; or
(h) by the Company in connection with entering into a definitive agreement
relating to a Superior Proposal in accordance with Section 4.1(e)(ii), provided
it has complied with all of the provisions thereof and has made payment of the
full fee and expense reimbursement required by Section 5.4(b) hereof.
7.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on
the part of Parent, Sub or the Company or their respective affiliates,
officers, directors or shareholders except (i) with respect to this Section
7.2, the second and third sentences of Section 5.2, Sections 5.4 and 5.5 and
Article IX, and (ii) to the extent that such termination results from the
willful breach by a party hereto of any of its representations or warranties,
or of any of its covenants or agreements, in each case, as set forth in this
Agreement, except as provided in Section 9.7. Notwithstanding anything to the
contrary set forth in Section 7.1(d) or 7.1(e), Parent or the Company, as the
case may be, may not exercise its right of termination thereunder if the
commitments or Credit Agreement, as the case may be, has been entered into and
continues in full force and effect at the time of such party's intended
exercise of such right.
7.3 Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent, Sub and the
Company at any time prior to the Effective Time with respect to any of the
terms contained herein; provided, however, that, after this Agreement is
approved by the Company's shareholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be delivered to the
shareholders of the Company.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto; (ii) waive any inaccuracies in the representations and
35
<PAGE> 43
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions 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 a written instrument signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
TENDER OFFER
8.1 Tender Offer. (a) If (i) there is a bona fide proposal made by a
person other than Parent or any affiliate thereof to effect a Competing
Transaction or (ii) the FCC will otherwise permit the filing and grant of an
application for special temporary authority, Parent shall have the right, in
its sole discretion, upon no less than five days' notice to the Company, to
commence a cash tender offer to purchase all the outstanding Shares (with a
66-2/3% fully-diluted minimum condition, which cannot be waived without the
written consent of the Company) at a price equal to or in excess of what would
have been the Merger Consideration (assuming that, for purposes of calculating
the Additional Amount, the Closing Date was the date Shares are accepted for
payment under such tender offer). There shall be no conditions to the
acceptance of Shares pursuant to such tender offer except (x) such conditions
as are expressly set forth in Sections 6.1 and 6.2 of this Agreement, (y) grant
or approval by the FCC of special temporary authority pursuant to the
Communications Act to consummate the offer and (z) the additional conditions
set forth in Section 8.1 of the Parent Disclosure Schedule.
(b) Notwithstanding Parent's exercise of such option to commence such a
tender offer, this Agreement shall remain in full force and effect and, to the
extent applicable, the provisions hereof shall apply to such tender offer
(including, without limitation, that the payments required to be made at the
Effective Time under Section 2.5 and as provided in Section 3.1(k) to the
Company Disclosure Schedule shall be made upon the acceptance of Shares in the
tender offer) and subsequent merger. Without limiting the foregoing, the
parties hereto agree to amend this Agreement to include customary provisions
pertaining to cash tender offers, including, without limitation, provisions
relating to the extension of any such offer, the preparation, filing and
dissemination of such documents as shall be required under applicable law in
connection with tender offers (and the provision of information required to be
included therein), the recommendation of the offer by the Company's Board of
Directors and the appointment by Parent (or the trustee referred to below) of
directors to the Company's Board of Directors. Any Shares not purchased by
Parent in such tender offer shall be, as promptly as possible, acquired by
Parent at the same purchase price paid for Shares accepted in such tender
through a short-term merger (if available) or a long-form merger, subject to
any required approval or order of the FCC.
(c) Parent or Sub, as appropriate, will enter into a voting trust
agreement with respect to the Shares purchased pursuant to the offer with one
or more voting trustees acceptable to the FCC, and the Company will cooperate
with the trustee, Parent and
36
<PAGE> 44
Sub to effect a sale of the Shares if Shares must be sold pursuant to the
voting trust agreement.
(d) The Company agrees that it will, at the time after commencement of the
tender offer, enter into a loan agreement with Parent pursuant to which the
Company will lend to Parent, during the period from the consummation of the
offer until the sale of all the Shares held by the trustee as a result of the
FCC Order not having been obtained, the Company's excess cash flow (which will
have the meaning, to be set forth in the loan agreement, customarily ascribed
to such term). The terms of any such loan (which will be unsecured) will be
based upon market terms for loans of this nature.
(e) Each of the parties hereto represents that all necessary corporate
action has been taken to duly authorize the consummation of the transactions
contemplated by this Section 8.1.
ARTICLE IX
GENERAL PROVISIONS
9.1 Effectiveness of Representations, Warranties and Agreements;
Confidentiality Agreement. None of the representations, warranties and
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time, except for the agreements contained
in Article II, this Article IX and Sections 5.6 and 5.12 hereof. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement and the Effective Time or any termination of this Agreement, and the
provisions of the Confidentiality Agreement shall apply in all respects as if
set forth herein in full, including, without limitation, with respect to all
information and material delivered by any party hereunder.
9.2 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed
to be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
37
<PAGE> 45
(a) if to Parent or Sub, to:
Westinghouse Electric Corporation
11 Stanwix Street
Pittsburgh, PA 15222
Attn: Louis J. Briskman, Esq., General Counsel
Telephone: (412) 244-2000
Telecopy: (412) 642-5224
with copies to:
Westinghouse Broadcasting Company
200 Park Avenue
New York, New York 10166
Attn: Martin P. Messinger, Esq., General Counsel
Telephone: (212) 885-2600
Telecopy: (212) 885-2787
and
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Dennis J. Block, Esq.
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
(b) if to the Company, to:
CBS Inc.
51 West 52nd Street
New York, New York 10019
Attn: Ellen O. Kaden, Esq., General Counsel
Telephone: (212) 975-4321
Telecopy: (212) 975-7292
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attn: Samuel C. Butler, Esq.
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
38
<PAGE> 46
9.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. All references herein to days
are to calendar days, except where business days are expressly referred to
herein.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
This Agreement (together with the Confidentiality Agreement), including the
Disclosure Schedules, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and, except as provided in Section 5.6 or
as set forth in Section 5.12, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
9.7 No Remedy in Certain Circumstances. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way
be affected or impaired thereby, unless the foregoing inconsistent action or
the failure to take an action constitutes a material breach of this Agreement
and would give rise to a failed condition under Article VI or makes the
Agreement impossible to perform in which case this Agreement shall terminate
pursuant to Article VII hereof. Except as otherwise contemplated by this
Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall incur no liability or obligation unless such party did not in good
faith seek to resist or object to the imposition or entering of such order or
judgment.
39
<PAGE> 47
9.8 Assignment. 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 (and any purported assignment shall be void), except that Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any newly-formed direct or indirect wholly-owned
Subsidiary of Parent. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ Michael H. Jordan
--------------------------------------
Name: Michael H. Jordan
Title: Chairman and Chief Executive
Officer
GROUP W ACQUISITION CORP.
By: /s/ Louis J. Briskman
--------------------------------------
Name: Louis J. Briskman
Title: President
CBS INC.
By: /s/ Laurence A. Tisch
--------------------------------------
Name: Laurence A. Tisch
Title: Chairman, President and
Chief Executive Officer
40
<PAGE> 1
EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
EQUIVALENT SHARES:
Average shares
outstanding 358,545,020 354,018,900 357,980,371 353,488,409
Additional shares
due to:
Stock options 4,619,587 3,884,843 4,488,900 3,583,638
Series C preferred
shares 36,000,000 36,000,000 36,000,000 15,926,267
----------- ----------- ----------- -----------
Total equivalent
shares 399,164,607 393,903,743 398,469,271 372,998,314
=========== =========== =========== ===========
ADJUSTED EARNINGS
(in millions):
Net income from
Continuing Operations $ 59 $ 75 $ 74 $ 111
Less: Series B preferred
stock dividends 12 12 25 25
------- ------- ------- -------
Adjusted net income from
Continuing Operations $ 47 $ 63 $ 49 $ 86
======= ======= ======= =======
EARNINGS PER SHARE:
From Continuing Operations $ 0.12 $ 0.16 $ 0.12 $ 0.23
------- ------- ------- -------
Earnings per share (a) $ 0.12 $ 0.16 $ 0.12 $ 0.23
======= ======= ======= =======
</TABLE>
(a) For earnings per share using an alternative treatment for the Series C
Preferred Shares, see note 9 to the condensed consolidated financial
statements included in Part I of this report
-35-
<PAGE> 1
EXHIBIT (12)(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $ 128 $ 183 $ 157
Less: Equity in income (loss) of 50 percent
or less owned affiliates - (1) (5)
Add: Fixed charges excluding capitalized interest 134 109 212
----- ----- -----
Earnings as adjusted $ 262 $ 293 $ 374
===== ===== =====
Fixed charges:
Interest expense $ 119 $ 92 $ 177
Rental expense 15 17 35
Capitalized interest - - -
----- ----- -----
Total fixed charges $ 134 $ 109 $ 212
===== ===== =====
Ratio of earnings to fixed charges 1.96x 2.69x 1.76x
===== ===== =====
</TABLE>
-36-
<PAGE> 1
EXHIBIT (12)(b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
($ in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $ 128 $ 183 $ 157
Less: Equity in income (loss) of 50 percent
or less owned affiliates - (1) (5)
Add: Fixed charges excluding capitalized interest 212 169 369
----- ----- -----
Earnings as adjusted $ 340 $ 353 $ 531
===== ===== =====
Combined fixed charges and preferred dividends:
Interest expense $ 119 $ 92 $ 177
Rental expense 15 17 35
Capitalized interest - - -
Pre-tax earnings required to cover
preferred dividend requirements (a) 78 60 157
----- ----- -----
Total combined fixed charges and preferred dividends $ 212 $ 169 $ 369
===== ===== =====
Ratio of earnings to combined fixed charges
and preferred dividends 1.60x 2.09x 1.44x
===== ===== =====
</TABLE>
(a) Dividend requirement divided by 100% minus effective income tax rate.
-37-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 466
<SECURITIES> 0
<RECEIVABLES> 1,569
<ALLOWANCES> 56
<INVENTORY> 1,582
<CURRENT-ASSETS> 5,036
<PP&E> 4,216
<DEPRECIATION> 2,479
<TOTAL-ASSETS> 10,824
<CURRENT-LIABILITIES> 3,808
<BONDS> 1,566
<COMMON> 393
12
0
<OTHER-SE> 1,415
<TOTAL-LIABILITY-AND-EQUITY> 10,824
<SALES> 4,320
<TOTAL-REVENUES> 4,320
<CGS> 3,216
<TOTAL-COSTS> 3,216
<OTHER-EXPENSES> 853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 128
<INCOME-TAX> 49
<INCOME-CONTINUING> 74
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
